Beddow v Cayzer [2006] EWHC 557 (QB) (20 March 2006)

Neutral Citation Number: [2006] EWHC 557 (QB) Case No: HQ 0007193 IN THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION Royal Courts of Justice Strand, London, WC2A 2LL 20th March 2006 B e f o r e : MR JUSTICE TUGENDHAT ____________________ Between: ROBERT BEDDOW Claimant - and - NIGEL CAYZER Defendant ____________________ Mr Nigel Jones QC & Mr Colm Nugent (instructed by A R Legal) for the Claimant Mr Stuart Adair (instructed by SJ Berwin) for the Defendant Hearing dates: 13-17, 20th and 22nd February 2006 ____________________ HTML VERSION OF JUDGMENT ____________________ Crown Copyright © Mr Justice Tugendhat : It is a truism that in the City of London agreements are made by word of mouth. In 1997 Mr Beddow ("the Claimant"), a former stock broker, and Mr Brunnock, a former fund manager, made an agreement by word of mouth to join together as partners in a venture. The project was to raise money to acquire veterinary practices through of a company which they would form or acquire, and which would, in due course, be floated on the Stock Exchange. In this action the Claimant claims that he and Mr Brunnock together made a further agreement by word of mouth in February 1998 (or if not in February, then in July). This agreement was with Mr Rupert Galliers-Pratt and his brother Mr Nigel Cayzer ("the Defendant"). The Claimant alleges that Mr Galliers-Pratt and the Defendant agreed to participate in their joint venture. There is no doubt that work was done by all four to bring this plan to fruition. The Claimant's and Mr Brunnock's and Mr Galliers-Pratt's activities were mainly in the period up to the beginning of August 1998. The Defendant's activities overlapped, but were mainly from the end of July 1998 onwards. Eventually in March 1999 a financial backer was found (Nash Sells & Partners Ltd ("NSP")), albeit much later than originally anticipated, and not the sort of investor originally anticipated (NSP are venture capitalists). On 17th May 1999 a company was formed in the name of CVS (UK) Ltd ("CVSUK"). The Claimant and Mr Brunnock were each offered the opportunity to subscribe for shares representing 1½% of the ordinary share capital of that company. They each considered that this was a breach by the Defendant of the agreement they allege was made. Mr Brunnock reluctantly accepted, and took up the shares. Mr Galliers-Pratt was also offered an opportunity to acquire shares, but declined to do so. The Claimant rejected the proposal and sues the Defendant in this action. The Defendant's case, in summary, is that there was no agreement in February or July 1998, or none to which he was a party, and that the relationship between himself and the Claimant was one in which they each participated in the venture independently and at their own risk, and without any obligation or commitment to the other parties. The Defendant always recognised that the Claimant and Mr Brunnock had introduced to his brother (and to himself) a very good idea, and that each of the two of them had a moral claim to acquire shares in CVSUK when it was formed. It was never his intention to cut them out. His case is that their claim was no more than moral, and that he did all that was required of him by arranging for them each to have the opportunity to subscribe for 1½% of the shares. He himself had the opportunity to subscribe for 10%. Those shares were in fact subscribed for by a Panamanian corporation, Perth Business Corporation, represented by lawyers practising in Liechtenstein. The Defendant denies having any beneficial interest in those shares, and says he does not know who the beneficiaries are. He also says that he could not have done better than he did for the Claimant, because NSP would not have agreed to provide the finance in circumstances where the Claimant and Mr Brunnock had the shareholding they claim to be entitled to. Other individuals were also able to subscribe for shares in May 1999, and the Claimant claims that the Defendant could, and by law should, have arranged for him to have a proportion of the available shares equal to that of the Defendant. But even if that could not have been achieved, the Claimant's case is that it makes little difference. The result would be that he held and holds such shares (or such interest in, or entitlement to, shares as he did hold) on trust for the Claimant to the extent necessary to give effect to the Claimant's rights under the agreement he alleges. The Claim Form was issued in December 2000. There was a stay for mediation ordered on 8 th November 2001. The mediation did not succeed. After nearly four years the stay was lifted on 27 th July 2005. So the matter has come on for trial eight years after is alleged that the oral agreement was made in February 1998. The trial bundles amounted to twelve lever arch files, and the number of pages referred to amounted to one thousand or more. But most of these documents, and much of the oral evidence, relate to what was done in the period after the alleged agreement was made, and to what was done to bring the venture to fruition. THE PARTNERSHIP BETWEEN THE CLAIMANT AND MR BRUNNOCK The Claimant was in his late thirties at the time of these events in 1998. He describes himself as a stockbroker by trade. He had last been employed as a Marketing Director for Inter Sec Research Corp. in 1996. The original idea for the project arose out of his involvement in 1996 with a project for consolidating dental practices. This had been introduced to him by a friend whose brother in law was a dentist. The Claimant's role was to raise funds for which he was to be remunerated with a percentage of the sum raised. At that time Mr Brunnock was the Small Companies Fund Manager at Global Fund Management ("GFM"). GFM which is a subsidiary of Metropolitan Life, one of the very largest international insurance companies. He was UK and Special Situations Vice President of GFM. GFM was a asset management business. Mr Brunnock was running the UK main market. This involved him meeting some 250 small companies a year and investing in them. Small companies and their brokers would come to him to try to persuade him to invest in them. He is now a private investor and director of Tescom UK (the UK subsidiary of AIML a listed Israeli Company) and a director of SJBL Ltd, which acts as consultants and advisors to smaller companies. The Claimant and Mr Brunnock had known each other for over ten years. They had met frequently on business in that time. Mr Brunnock was interested in the dental project. A business plan was prepared. In summary the scheme was to set up a company, Oasis Health Care PLC, to acquire dental practices within the UK. It was envisaged that dentists operating in that way would benefit from a number of advantages including professional management, economies of scale, branding and the like. The plan was to raise £2 million pounds funding to acquire five to ten practices prior to obtaining a listing on the London Stock Exchange. It was then planned to expand by acquiring other dental practices nationwide. It was expected to raise £20 million on the flotation of the company. Through Mr Brunnock GFM invested £200,000 at that stage. The balance was quickly raised elsewhere. In January 1997 Oasis was floated on the OFEX market, and The Claimant's friend obtained a substantial benefit. That gave the Claimant the idea to look himself for opportunities for consolidation within a mature industry. In that way he thought he would make more money than as the fundraiser that he had been for Oasis. With his experience as an institutional stockbroker he believed he could find such an opportunity, and would be able to raise the necessary funding, and so acquire a significant share holding himself. The idea of forming such a project in relation to veterinary practices came to him in May 1997 when he took his puppy to the vet. The Claimant made enquiries at the Royal College of Veterinary Surgeons ("the RCVS") and was advised that at that time it was not possible for a veterinary surgery to be owned by anyone other than a veterinary surgeon. However it seemed likely that the position might change. In June 1996 an article had appeared in the RCVS written by Mr John Gripper BSc, MRCVS ("Mr Gripper") discussing whether veterinarians should be able to incorporate. Mr Gripper had been Treasurer of the RCVS, and plays an important part in this case. The idea of consolidating veterinary practices was not itself new. There were by 1998 at least four such groupings, and there were companies associated with them in some way. That was possible because they were owned by vets. Goddard Veterinary Group was formed in 1985, Companion Care some years before 1998, Veterinary Practices Initiatives Ltd ("VPI", a company that figures prominently in this case) in January 1996 and Medivet Group Ltd in December 1997. But as Mr Gripper explained, Goddard and Medivet were not strictly corporate owners of veterinary practices. None of them could have been, so long as the RCVS was interpreting its rules as it did before November 1997. This information also appears in the Private Placing Memorandum dated 1 st September 1998, in which these groupings are identified as the competition. What was novel about the Claimant's plan, so far as the UK was concerned, was that the initiative was to come, not from a vet, but from non-vets with access to capital, who would use it to acquire veterinary practices. This had happened in recent years in the USA, two such companies being Vet Centres of America and Pets Choice America. The Claimant realised that since he himself had no knowledge of veterinary practice, if his plan was to work, he would have to find vets, or others with relevant knowledge and experience, who would manage the company. On 6 th November 1997 the Claimant again spoke to the RCVS and learnt that at a meeting that day the Council had approved a report which concluded that the RCVS had no power to prevent incorporation of veterinary practices or non-veterinary partners. This was the news he had been waiting for. He asked for the names of veterinary consultants and was given the names of Mr Gripper, Mr Wright and Mr Sheridan B. Vet Med, MRCVS. Mr Gripper was a director of Anval Ltd ("Anval"). Mr Wright BVMS was managing director of Vet Direct Business Agency. Mr Sheridan was a director of Anicare Group Services. The Claimant immediately approached all of these expressing an interest in acquiring a veterinary practice. Anval required him to sign a Confidentiality Statement by which he undertook to treat any information from Anval regarding a practice for sale with confidentiality. The Claimant wrote to Mr Wright setting out his aim to purchase approximately ten veterinary practices for the purpose of consolidating them in the manner which had been achieved in the past in relation to retail chemist outlets and dental practices. Anval and Anicare wrote that they would provide him with information about practices for sale. The Claimant received details of veterinary practices from Vet Direct and Anval. These confirmed his view that incorporation would be financially viable. It appeared to him that the practices were valued on a basis which was significantly lower than the valuation that would be put upon them if they were owned by a company which was quoted on the stock market. He considered that the difference in valuation was substantial and would be attractive to investors. The Claimant was in touch with Mr Brunnock at the time and he discussed his project with Mr Brunnock. Mr Brunnock was aged about forty at the time. The investment he had made for GFM in Oasis, which was the maximum proportion of the shares of the company which GFM were permitted to acquire at that time, had been a good investment from the point of view of GFM. In January 1998 Mr Brunnock had recently been made redundant. He wanted a break from being a fund manager and to put a business together himself. He and the Claimant agreed to become partners in the Claimant's veterinary project. They agreed to set about obtaining management, to produce the preliminary business plan, to obtain what they called "an anchor practice". By this they meant the first veterinary practice of the series they proposed to acquire. This would prove the principle that such practices could be bought at the low multiple of profits, which was one of the assumptions on which the project was based. Companies quoted in the UK at that time were valued at multiples of 20 times or more of profits, and if veterinary practices could be acquired at multiples below these, and consolidated, the difference between the purchase multiple and the stock market multiple would be attractive to investors. The Claimant and Mr Brunnock aimed to raise a minimum of £2 million and felt confident that they would be able to do that. They realised that finding investors to back the project financially would depend upon finding a practice to buy at the low multiple which the project assumed, and people with the relevant veterinary knowledge to manage the company, and vice versa, so that their searches for each of investors, a practice to buy, and managers to manage the company, would have to be pursued contemporaneously. The Claimant and Mr Brunnock would expect to be non-executive directors and shareholders in the company. In addition to his recent experience, Mr Brunnock, in his first job after leaving university, had been a trainee investment analyst at the Norwich Union. Together they had the necessary skills, experience and contacts to bring such a plan to fruition. To raise the money they would seek high net worth individuals and small institutional investors. £2 million pounds would suffice to acquire three to four practices. When they had done that they would approach a broker to raise a further £4 to £5 million pounds and then float the company. That was the plan. THE APPROACH TO MR GALLIERS-PRATT One of the individuals who Mr Brunnock was to approach was Mr Rupert Galliers-Pratt. In a Private Placing Memorandum drafted in July 1998 Mr Galliers-Pratt is described as follows: "Mr Galliers-Pratt has wide experience of corporate life serving on the board of directors of a number of companies including Oriel PLC, a UK listed company engaged in international insurance broking. In October 1992 he founded and became chairman of Petersburg Long Distance Inc, which provides local, long distance and international telecommunication services in the former Soviet Union. In February 1995 he stepped down as Chairman of Petersburg Long Distance Inc to become Executive Chairman of Princess Resources Ltd a natural resources company which is listed on the Vancouver Stock Exchange". Mr Galliers-Pratt and Mr Brunnock had met when Mr Brunnock was at GFM. Mr Brunnock understood Mr Galliers-Pratt to be a man of substantial personal wealth some of whose forebears had achieved prominence and success in the business of engineering. Mr Galliers-Pratt was in his mid-forties in 1998. He and the Defendant, who is two years younger, also had forebears on their mother's side, the Cayzer family, who were prominent in the City. Both Mr Galliers-Pratt and Mr Cayzer had very good connections in business, and access to substantial capital themselves. Mr Galliers-Pratt had not previously had experience of starting up a new company. GFM had invested in Petersburg Long Distance Inc and the investment had proved profitable. Mr Brunnock had also personally invested in Princess Resources. He and Mr Brunnock had known each other at that time for some three years and spoke regularly over the telephone. While they came from very different backgrounds, the evidence that each gave in court was that they trusted one another, and clearly each had respect for the other. Mr Brunnock did not know the Defendant in January 1998, but it is convenient to set out here the description of the Defendant given in the financial documents drafted in the summer of that year. It is as follows: "Mr Cayzer is the Chairman of the Board. Mr Cayzer has been chairman of Oriel Group PLC from 1989 to June 1998. He is also Chairman of the Oryx Fund Limited. Oryx Joint Investment Account and of the Oryx International Growth Fund Limited and a non executive director of Caledonia Investments PLC. He started work in 1973 for L. Messel &Company, before joining Anthony Gibbs and Sons in 1976. In 1984 he started Entertainment Completions Inc and in 1988 he established EFL Holdings Limited which acquired Film Finances Limited and became its chairman. Film Finances Limited was acquired by Dominion International Group in 1988 for whom he acted as a non executive director until his resignation in 1989". As appears from these descriptions, the two brothers both served as directors of Oriel Group PLC ("Oriel"). They had also had some other business activities in common, but by no means all their activities were together. One of the issues in this case is whether, in February 1998, Mr Galliers-Pratt was representing the Defendant as well as himself. In late January 1998 Mr Brunnock met Mr Galliers-Pratt at the offices of Princess Resources Ltd in St James Street. In the course of that meeting, which involved discussion of other matters, Mr Brunnock mentioned his proposal with a view to inviting Mr Galliers-Pratt to invest £100,000. There is no contemporaneous record of that meeting and Mr Galliers-Pratt has little if any recollection of what transpired, other than that the meeting took place and he suggested that they should meet again to explore setting up a company to operate veterinary practices. Mr Galliers-Pratt was clearly very interested in the idea although he describes it as vague at that stage. The earliest documentary reference to the meeting was later in the year, 21 st December 1998, when Mr Brunnock was formulating a statement which he and the Claimant later provided to the Defendant in March 1999 in support of the claim that he and the Claimant were then making to be entitled to a shareholding in the company which was then about to be formed. After referring to the approach for £100,000, Mr Brunnock wrote: "Rupert phoned after the weekend and stated with his brother Nigel Cayzer they would underwrite the project with an Omani investor group for £5,000,000. He stated that the initial idea '…would not be worth considering unless all parties had at least 7% of the equity each'". In the form in which that document was sent to the Defendant, there are added the words "consequently committing to an oral contract". Mr Brunnock gave evidence that he had never before heard Mr Galliers–Pratt as excited as he was during that telephone call. Mr Brunnock states that he did on the phone say what Mr Brunnock records in his note, and that he reconfirmed it at the meeting on 11 th February with the Claimant. Mr Galliers-Pratt's recollection of these events was very poor by the time he came to give evidence, eight years later. But he agreed that Mr Brunnock's account of their first meeting and the subsequent telephone call might well be right, and that he was interested in the project, and suggested that they meet to discuss it further. He had no recollection of the proposal that he invest £100,000 which Mr Brunnock had made to him, no doubt because his interest from the start was in raising all the necessary capital, and raising more than the £2 million which Mr Brunnock had in mind. I readily accept the evidence of Mr Brunnock as to the enthusiasm of Mr Galliers-Pratt for the project. As appears from the fax Mr Galliers-Pratt sent on 19 th March 1998, at that date he saw the project as one that would turn £5 million into many millions over a period of four years. While the project was only presented to him in outline at the first meeting, what he saw as its potential was apparent to him in general terms from the start. Whether he said to Mr Brunnock what Mr Brunnock recorded in his chronology of December 1998, and stated in his evidence, is one of the main issues in the case, and I shall return to make my findings on that after reviewing all the other evidence in the case. There is no dispute that the idea of consolidating veterinary practices and floating a company on the Stock Exchange was not one that had ever occurred to Mr Galliers-Pratt or the Defendant before the Claimant and Mr Brunnock raised it. That is not to say that either of them was unfamiliar with the general concept of what Mr Galliers-Pratt called "roll-ups". The concept of consolidating businesses in that way was not new to them. What was new, and what they both acknowledge was the interesting idea, was doing it with veterinary practices. At least before they gave evidence orally, they, and other witnesses called by the Defendant, made a number of statements minimising the significance of what the Claimant had thought up. It is true that the Claimant brought no knowledge of the veterinary world to the idea, and that another person could have done what he did do, calling on the RCVS, meeting with prominent vets, and putting them together with investors. It had not in fact been done before, because the opportunity had not been available for non-vets to own practices. I am told that it has been done since, although I have not been shown any detailed evidence relating to any other corporation owning consolidated veterinary practices, in particular whether such a corporation was put together by persons who were not themselves vets. What cannot be doubted is that the project was initiated and put together to a large extent by the Claimant and Mr Brunnock, and that neither Mr Galliers-Pratt nor the Defendant would ever have been involved in such a project but for the work put in by these two. Three of the other people who became involved were vets (Mr Foster BVMS, Mr Gripper, Mr Parkin BVMS MRCVS) who had not in fact initiated a consolidation project (although no doubt they could have done so, if they had been willing to look for the finance). Mr Pound and Mr Robinson were not themselves a vet, although they had specialist veterinary knowledge which was required for the purposes of this project, because of their employment within the group of Solvay SA, who were one of the largest veterinary pharmaceutical companies in the world. Mr Pound was an Honorary Member of the Society of Practising Veterinary Surgeons. He was approached to join this project both by Mr Parkin and by Mr Gripper. Before that Mr Pound had considered setting up a similar business of his own when he became free, which he had anticipated would be in late 1998 to early 1999. Both Mr Galliers-Pratt and the Defendant deny that Mr Galliers-Pratt was representing the Defendant at that stage, or at all, in the discussions with Mr Brunnock and the Claimant. They say that they did not discuss Mr Brunnock's project together in January or February 1998. Mr Galliers-Pratt did discuss it with the Defendant at some point before 19 th March (that became common ground during the trial). In the first half of 1998 the Defendant was heavily engaged in preparing the disposal of Oriel which was finalised in June 1998. At some time before June (I shall have to consider when), Mr Galliers-Pratt and the Defendant discussed the Defendant becoming involved in the way he later did, because the Defendant would have time to devote to it once Oriel was disposed of. Meanwhile the Claimant had arranged a meeting with Mr Sheridan of Anicare. This took place on 5 th February 1998. The purpose of the meeting was for the Claimant to find out more about the working of veterinary practices. Neither he nor Mr Brunnock had any such knowledge and they considered it vital that they should have a consultant for the scheme who might assist in forming the board of directors which would be required for the company. The Claimant kept a note of the meeting. Mr Sheridan gave the Claimant and Mr Brunnock advice as to the book from which they could learn more. He told them about the success of the corporation of veterinary practices in the United States. He advised them on property ownership, remuneration for veterinary surgeons, profitability and other sources of information. He told them of other groupings of veterinary practices organised by vets themselves, naming Companion Care, Medivet, Goddard and another. To the surprise of the Claimant and Mr Brunnock, Mr Sheridan then informed them that he himself was engaged in a project similar to their own and that it was at the more advanced stage at which he was about to sign a deal with a venture capital trust. The three men then agreed that they would consider whether they might work together and whether the Claimant and Mr Brunnock might make an investment proposal. Mr Sheridan's project was VPI. Mr Brunnock states that Mr Sheridan told them that he was on the verge of signing with a Venture Capitalist. In preparation for the meeting with Mr Galliers-Pratt that was to take place on 11 th February 1998 the Claimant and Mr Brunnock did some research. The results of that research were set out in a document prepared by Mr Brunnock covering four pages, which he faxed to Mr Galliers-Pratt on 10 th February. The document starts with a section headed, "Business Model". It set out an example of some of the main financial details that might apply to a practice with a turnover of £500,000. He concluded that such a practice might make a profit of £72,600 and that the figures produced a price/earnings ratio of 3.8. He noted that the good will element of a practice is worked out from a multiplier of the net adjusted profits, and that multiplier tends to be low that is about 1.2 times. What happened at that meeting is one of the central issues of fact in this case. The Claimant kept a note of the meeting. It does not record anything about the agreement that he said was reached at that meeting between himself and Mr Brunnock on the one hand and Mr Galliers-Pratt on the other. Nor is there any reference to the meeting in the document prepared by Mr Brunnock in March 1999. What the Claimant's note does record is a proposal to arrange a meeting with Mr Sheridan, that is the three of them, Mr Galliers-Pratt, the Claimant and Mr Brunnock, and one other unnamed person. The Claimant suggests with hindsight that the unnamed person must have been the Defendant. The note includes various financial matters which imply that some form of arrangement was made between the three of them to proceed with a project involving investment of money, as they very shortly did proceed. The evidence of the Claimant is that the project was explained to Mr Galliers-Pratt at the meeting, in particular the central facts that veterinary practices could be bought at multiples below 10 and floated at multiples in excess of 15 times earnings, that they were looking for people to manage the company, and what Mr Sheridan had told them about VPI. The Claimant states that Mr Galliers-Pratt was very excited and said that he could obtain £5 million to fund their project which would be underwritten by himself and his brother. He states that Mr Galliers-Pratt said that he and his brother had substantial physical assets and that he could raise substantially more than VPI. He said that he could raise between £5 and £10 million of debt finance. Mr Galliers-Pratt said that investors he found might be prepared to take only 50% of the business and in any case they all agreed that no investor would take 70% of the business. I interpose to say that at no stage in the subsequent months was it ever proposed that any investor should take more than 70% of the company, and NSP did not take as much themselves. The Claimant states that the three of them agreed that there would be not less than 30% of the company to be divided between the four of them, that is Mr Galliers-Pratt, his brother, the Claimant and Mr Brunnock. The Claimant's evidence is that Mr Galliers-Pratt sold his involvement to the Claimant and Mr Brunnock. He states that he and Mr Brunnock knew that they would be able to raise money for the project relatively easily. What was attractive about this was that Mr Brunnock had dealt with Mr Galliers-Pratt in the past, that he and his brother would be underwriting the investment personally, so that the Claimant and Mr Brunnock could from then on concentrate on putting together a board of directors, knowing that they had the financing in place and that their shareholding had been agreed. He states that there was a binding agreement. They would not have agreed to let Mr Galliers-Pratt join their project, which they knew to have enormous potential, without some form of guaranteed financing, in this case the agreement to underwrite, and an agreement as to their shareholding. The Claimant said Mr Brunnock and he had discussed previously having a minimum shareholding of 15% each on the proposal to raise £2 million. But Mr Galliers-Pratt was offering them the opportunity to raise £10 to £15 million, and 7% of the company would be worth more than 15% of the company financed as they had first envisaged. He states that Mr Galliers-Pratt emphasised that the project would not be worth doing if they did not each receive a shareholding of at least 7%. The Claimant states that he asked Mr Galliers-Pratt directly if that meant that they could proceed on that basis, and he replied that he and his brother would obtain the finance and that Mr Brunnock and the Claimant would be guaranteed a minimum of 7% of the business and that in any case all four would receive the same shareholding. Mr Galliers-Pratt then said "You have got the money, it's your baby, run with it". He also suggested that should they be interested in bettering the terms of the Venture Capital offer to VPI, and should this offer be accepted, then the same terms would apply. According to the Claimant they then discussed the matters relating to VPI which are recorded in his note. He states that he did not need to write down what had been agreed with Mr Galliers-Pratt. The note includes references to Ernst & Young, who were VPI's accountants, various matters relating to financing, including mention of a Private Placement Memorandum, $5 million tranches (the note refers to US dollars), 8% Convertible Preference Shares and the question: "What deal does Sheridan want?" It refers to an Internal Rate of Return of 35% (a figure that recurs in a number of the documents in this case), a meeting with another vet, Mr Beddall of Animus, and acquisition targets and figures. Mr Brunnock's evidence is substantially to the same effect. There are differences. The Claimant recalls that Mr Galliers-Pratt named his brother, whereas Mr Brunnock does not recall that. Mr Brunnock also states that about this time he was offered a job at a salary of £150,000 per year which he turned down in view of the opportunity that he had of owning a minimum of a 7% shareholding in this venture. Mr Brunnock returned to this point a number of times during his evidence, without ever being challenged upon it. He stated that he would not have turned down such a salary if he had not had an agreement with Mr Galliers-Pratt, in particular that he would get at least 7% of the shares, and that £5 million was available underwritten by Mr Galliers-Pratt. And he was convinced that if he had not had that agreement with Mr Galliers-Pratt they would have got what they needed from other investors. He said he totally believed he had a contract. He repeated the much quoted phrase, "My word is my bond". Mr Brunnock stated in evidence that they discussed having the meeting with Mr Sheridan because they had the money. Otherwise it would have been a waste of time. VPI already had a board of directors and was ready to go. Mr Brunnock and the Claimant recalled that as they left the meeting the Claimant asked whether they should draw up a contract setting out the terms of their dealings with Mr Galliers-Pratt. Mr Brunnock said that that was not necessary; he was a man of honour. At one point in cross-examination Mr Brunnock said that what he and the Claimant had said about the shareholding was wrong, and that they had got the 30% to 70% split of shares the wrong way round, that is to say, that he, the Claimant, Mr Galliers-Pratt and the Defendant were expecting the 70%. On the strength of this Mr Adair, counsel for the Defendant, said that the explanation for the 7%, namely about one quarter of 30%, fell away, leaving that part of their evidence unexplained and improbable. I do not find there to be an inconsistency. They spoke of the 7% as a minimum. And as will appear, during the period March to May Mr Galliers-Pratt was suggesting to a potential investor in Oman (Mr Habib) that that investor would acquire one third of the company, leaving two thirds of the shares available. Mr Brunnock explained that with the guarantee of Mr Galliers-Pratt and the Defendant, an investor could not expect more than one third. Mr Brunnock stated that the effect of what Mr Galliers-Pratt was saying was that obtaining the investment was a question of rubber stamping, once they had a board of directors and a business plan. He understood that Mr Galliers-Pratt had to put the project to investors, but because he, Mr Galliers-Pratt was underwriting it, it was a done deal so far as the Claimant and Mr Brunnock were concerned. The effect of the deal was that it was the job of the Claimant and Mr Brunnock to get the board together and find a practice to acquire, and Mr Galliers-Pratt and the Defendant were to get the money. Mr Brunnock appreciated that documents would have to drawn up, but he trusted Mr Galliers-Pratt on the basis of their previous dealings, he did not need to know who Mr Galliers-Pratt was going to raise the money from. Mr Adair also made the point in cross-examination that the evidence in chief of the Claimant and Mr Brunnock says nothing about whether and if so what they would be required to pay to acquire the shares they talked of. Mr Brunnock stated that he was expecting to subscribe a nominal amount, par value of 1p per share. He had had experience of setting up a company on that basis in January 1998. Mr Adair also cross-examined Mr Brunnock on the differences between the account set out in the chronology he prepared in December 1998 and the much fuller account in his evidence, as well as on the references in March 1999 by Mr Brunnock to claims for shareholdings of less than 7%. Mr Brunnock responded that by the time those documents were prepared the relationship was different. By then he felt that he and the Claimant had been sidelined, and the project stolen, as he put it. What he was trying to achieve then was not his legal rights but the best of a bad job, or some solution in new circumstances. By that time, Mr Brunnock said, the 7% was not available to all of them, but that was because Mr Galliers-Pratt and the Defendant had failed in obtaining funds from investors. There is in fact an important difference between the circumstances in early 1998 and those at the end of 1998 and into 1999. I find that in early 1998 it was not in the contemplation of the Claimant, Mr Brunnock and Mr Galliers-Pratt during their discussions that the money would be raised from Venture Capitalists. The whole basis of their approach to VPI, recounted below, was that they had the ability to make a better offer to Mr Sheridan than Venture Capitalists had made. In any event, neither the Claimant nor Mr Brunnock had any need of Mr Galliers-Pratt to approach a Venture Capitalist in London, and that was not the proposal they had formulated. They were looking for a different kind of investor. The recourse to Venture Capitalists that the Defendant had in the autumn of 1998 arose only because of the unexpected failure to raise funds in Oman. Mr Brunnock referred to two types of investor other than Venture Capitalists. There were institutions from a number of which the required funds might be raised, and there were the sort of investors to whom Mr Galliers-Pratt had been referring (in the event Omanis who were approached, and whom Mr Galliers-Pratt mentioned, although he also mentioned European investors). In early 1998 the Claimant and Mr Brunnock did not want to go to Venture Capitalists. Mr Brunnock and the Claimant were also much pressed in cross-examination on their evidence that Mr Galliers-Pratt had agreed to underwrite the investors. They both insisted that he did. Mr Brunnock said that in reality he was taking little risk by doing so. Given the amount of cash produced by a veterinary business, and the multiples of earnings referred to in his calculations, Mr Brunnock expressed the view that veterinary practices were a business that could not fail. Mr Galliers-Pratt's written witness statement is not a long or a detailed document. For a case involving so many documents and events over some six months it is not very informative. He mentions nothing specific about the discussions before 11 th February, other than that he suggested that he and Mr Brunnock have that meeting to discuss what he refers to as a vague idea of Mr Brunnock's to set up companies to operate veterinary practices. There are attached to his witness statement a number of documents. The first five pages are pages faxed to him on 10 th February which he refers to as "general information". He states that Mr Brunnock and the Claimant were unable to produce anything which could constitute a business plan, but that he told them, in general terms, that he may be able to assist in procuring finance for such a venture and that he may well have mentioned in passing at the meeting that his brother may also be able to assist (although he did not recall this). But he states that he certainly did not have authority to conclude an agreement on the Defendant's behalf, and did not hold himself out as having any such authority. The evidence of Mr Galliers-Pratt in cross-examination is that all the matters referred to by the Claimant and Mr Brunnock probably were discussed. He could not remember, but he thought it probable that every option was discussed. He accepted that underwriting might have been discussed. But he was firm in his evidence that there was no agreement reached, and that he did not say that he was speaking for his brother, and he was not speaking for him. He said there was no reason why his brother should have been involved. He (Mr Galliers-Pratt) had a lot of experience talking about prospective investments. He would not have known in January or on 11 th February 1998 where he might raise money. He said he had contacts with private equity people in the UK and with Omani investors. He also knew funds in Switzerland and Germany. He appreciated that if he, Mr Galliers-Pratt, said No to Mr Brunnock, then Mr Brunnock would try to talk to someone else. He was fully aware of Mr Brunnock's considerable experience in projects like the one in question, and thought that Mr Brunnock, while at Metropolitan Life, would have looked at them every day of the week. He said that he did have recourse to substantial assets at that time, and that Mr Brunnock would have been aware of that from their previous dealings. If he had had to obtain £5 million he could have done so, but that is not to say that he would have offered to do so. He would have discussed different percentages of equity, but he would not have committed himself. He said you cannot predict things in advance and you try to get the best deal you can. In his witness statement Mr Galliers-Pratt says nothing about any mention of VPI at the meeting. In cross-examination he said he thought it might have come up. He described the Claimant's account of the agreement he alleges was made as a fairy story. The difficulty that Mr Galliers-Pratt had with recalling events was vividly illustrated. There are attached to his witness statement 14 pages of the documents faxed to Mr Habib and the Defendant in March, May and June, as set out below. Before being shown these documents Mr Galliers-Pratt was asked generally about views such as are expressed by him in them. He would not accept that he would ever have expressed such views about the prospects of this investment. It was clear that he had no recollection of having expressed those enthusiastic and optimistic opinions, and no recollection of the documents themselves. Nor could he recall other documents attached to his witness statement, including the document sent to him by Mr Brunnock on 8 th March, as set out below. The evidence of the Defendant on the events of January and February is short. He states that the project was mentioned to him by his brother in March 1998 (the date of the earliest document referring to him), but not before, and even in March he was too heavily engaged in the Oriel disposal to give it any consideration. When it was put to him that the first discussion with his brother was earlier, in January and February, he responded that that would be pure speculation. By way of background, the Defendant explained that he had started his business career at the age of 18, and his first business at the age of 22. He had been involved in 15 to 20 businesses or more. He knew nothing about the ownership or operation of veterinary practices. The first reference to him in the documents is the fax dated 19 th March, and he recalled no involvement or conversation prior to that, although he thought he might have discussed it a few days prior to that date. He had nothing to do with Princess Resources, and he did not know either Mr Brunnock or the Claimant. The two brothers are on close terms, talking to each other a lot, and staying with one another. Before making any findings on this conflict of evidence, it is necessary to review the subsequent events. THE APPROACH TO VPI On 4 th March 1988 there was a meeting at the offices of Princess Resources with Mr Sheridan which was also attended by Mr Galliers-Pratt, Mr Brunnock and the Claimant. It was decided to pursue a possible project together. With the benefit of his contemporaneous note the Claimant could recall the financial matters that were discussed with a view to himself, Mr Galliers-Pratt and Mr Brunnock making an offer to VPI. They asked for financial information and discussed entering into a confidentiality agreement. They discussed the veterinary business generally, including competitors such as Goddard, and other veterinary consultants, in particular Geeling Ltd, Mr Parkin's company. Mr Sheridan stated that he expected to spend £7m over five years and that he expected a debt to equity ration of fifty fifty. He asked for a letter to pursue the dialogue. They agreed to meet again well before the beginning of April. Mr Brunnock's evidence is that Mr Galliers-Pratt asked them to prepare a fuller business plan for the benefit of his brother. Mr Galliers-Pratt's written witness statement refers to what appears to be either this meeting or the meeting of 12 th March, although he can attribute no date the meeting he describes. He states, in agreement with the Claimant and Mr Brunnock, that the initial plan was to seek to buy out or invest in VPI, as it had already acquired various veterinary practices. He states that it was to this end that he approached Mr Habib (as set out below). On 8 th March 1998 the Claimant and Mr Brunnock prepared a document of some four or five pages setting out the background of their project, the key investment criteria, the business strategy and a section headed "Financials". Under this heading they referred to this being a window of opportunity and stated that to move forward with credibility the minimum initial draft of money on a draw down basis should be US$5,000,000. There is again mention of the goodwill element being purchased generally at a multiple of 1.2 times net adjusted profits and to the low level of bad debts and the strong cash flow. Figures are set out for a typical practice, which are a little different from those set out in the earlier document. The price/earnings ratio is calculated at 6.3 times. There is a section headed "Business Model". This gives monies raised as £3 million and a price/earnings ratio of 6.7 times. This is a figure which recurs through the documents into 1999. The conclusion is that a veterinary group can thus be constructed on 6.7 times earnings. The document then has a section headed "Exit Strategies". Two are suggested namely flotation and a trade sale. The document then records the following: "The Group would be a prime candidate for flotation because of its growth potential and cash flow characteristics. The UK stock market is trading currently on over 18 times earnings. The Group would offer underlying earnings growth potential whilst being in the vanguard of a consolidating industry, which would appeal to both institutions and private clients alike and could justifiably trade on a premium rating. … In conclusion there are two alternative exit strategies, flotation or a trade sale. The comparable companies command multiples in excess of 40 x earnings and recent trade buyers in the UK Dental sector acquired companies at multiples in excess of 35 x". This document is attached to the witness statement of Mr Galliers-Pratt. He states that he cannot recall when it was given to him, and that he did not consider it was capable of attracting financial investments. This is difficult to reconcile with the faxes that he was shortly to send to Mr Habib. On 10 th March 1998 the Claimant met with a veterinary consultant Mr Beddall, who was associated with VPI. As the Claimant's note of the meeting records, there was discussion of the figures for turnover, earnings and profits of a typical practice of four to five vets, the discussion primarily focuses on carrying forward a project independently of VPI. Mr Beddall gave advice on who might be a credible member of the board of such a company and offered his help in finding such a person. He too offered to identify possible acquisitions to advise on product purchasing and on a person to act as a figure head for the company. On 12 th March 1998 there was a meeting with Mr Sheridan and a Mr Ashley Cooper also of VPI. Mr Galliers-Pratt, Mr Brunnock and the Claimant were at the meeting. They learnt that VPI were negotiating a £2.5 million revolving debt facility on an 8 year term with draw down linked to acquisitions. Their goal was seventy clinics in five years. They were already talking to twenty clinics. The funding was expected from a venture capitalist identified as a bank captive. Various aspects of the deal were discussed. Mr Galliers-Pratt, the Claimant and Mr Brunnock pointed out the benefit of them all joining together, suggesting that they might be able to offer a better deal. They said they would carry out their project anyway, but that a project with VPI was their first choice. On 13 th March 1998 Mr Galliers-Pratt, Mr Brunnock and Mr Cooper and the Claimant met again at the offices of Princess Resources to discuss proposals. On 16 th March 1998 Mr Brunnock sent to Mr Galliers-Pratt by e-mail and fax a proposal relating to VPI. The three page document headed "Proposal to Veterinary Practice Initiative" starts with the following paragraph: "Stephen Brunnock, Robert Beddow and Rupert Galliers-Pratt, henceforth 'BBG', will take advantage of the consolidation within the veterinary market place by offering a well financed alternative to the partnership regime". The document then summarises the terms of the proposal already made to VPI from the venture capitalist company. Next it sets out the terms of what is referred to as "BBG Proposal to VPI". The proposal includes: "1. An initial investment of £4 million with an 8% coupon, will be made available. The investors are overseas domiciled and are 'Bank of England Approved'. The VPI management will own 47% of the 'new' VPI. 2. A management committee of BBG and VPI will allow fluid access to monies …" There is then a section headed "the BBG/VPI Joint Venture Advantage". Under this head various calculations are made. It is said that the value of VPI management stake would be £11.75 million under this proposal compared to £2.13 million under the venture capital proposal. A list of eleven advantages concludes with "there is no guarantee of secondary funding from the venture capitalist" implying that there is from the BBG proposal. It is said that the BBG/ VPI can be floated at 15 times earnings, which is compared to the UK stock markets current historic multiple of 22 times. This is said to be conservative as BBG/VPI would be a non-recessionary growth business. There then follows a calculation of the structure of the joint venture in its fourth year. The total value of VPI is given at £52,267,000 compared to its present value given at £33,451,000. This is the calculation of the venture capitalist proposal. The figures for the BBG/VPI are given as £84,704,400 distributed as to £13,286,000 to external investors (giving them a 35% capital return) £39,810,800 to VPI management and £31,607,600 to BBG. It is concluded that VPI management will have a 20% uplift in value with a joint venture and the flexibility to realise this potential and a broader base of expertise. This is one of the documents attached to the witness statement of Mr Galliers-Pratt. What he says about it is this: "I continued to have meetings with Beddow and Brunnock and with various third parties…. I understand from [the Defendant] that Beddow claims that he continued to spend time and skill on the development of the alleged joint venture (which did not exist) and in dealing with and following through matters arising from meetings. I do not recall seeing any evidence of this and although Beddow and Brunnock did send me various documents from time to time [and he refers specifically to the documents dated 16th and 17 th March covering seven pages] none of these documents assisted me in progressing the proposed business" The Defendant states that he did not see these faxes. I am thus left in the position where there is on the Defendant's own evidence a proposal made to VPI on behalf of "BBG", with no explanation at all about it, or even any acknowledgement that it existed. It is plain that there would be no sense in making such a proposal, and experienced businessmen such as Mr Galliers-Pratt, Mr Brunnock and the Claimant would not contemplate making such a proposal, unless they believed that they had access to the £4 million referred to sufficiently promptly to complete the deal proposed before the time at which the competing proposal from the Captive Venture Capitalist was due to be completed (which they had been told was imminent). It is apparent that specific investors were in mind because they are referred to as overseas domiciled and Bank of England Approved. On the next day 17 th March Mr Brunnock faxed to Mr Galliers-Pratt a half page spread sheet which he described as painting a "compelling picture". It sets out the figures for the four years 1998-2001 for the project with VPI. The price/earnings ratio is given at 15 times producing the figure for the fourth year as already set out above namely £84,690,000. On 18 th March 1998 a fax bearing the address of the offices in St James's was sent from the office of Mr Galliers-Pratt to Mr Cooper. The senders are identified as the Claimant and Mr Brunnock. It is a two page document headed "Proposal to Veterinary Practice Initiative". It reads as follows: "The proposal is as follows: Structure VPI management invest £300,000 for 40% of the equity. Our Group invest £450,000 for 60% of the equity and subscribe for 3.55 million pounds unsecured Subordinated Loan Stock 2005. Coupon: Y1 8% 2 8% 3 10% 4 10% 5 15% 6 15% 7 15% This proposal is subject to the following conditions: Approval of the Business Plan we would enter into a Confidentiality Agreement. Confirmation of the £2.5m revolving debt facility. A satisfactory Shareholder Agreement. Two board seats. Operating committee for approval of acquisitions". There then follows a section headed "the Joint Venture Advantage" which makes a number of other references to "Our Group". There are thirteen paragraphs of advantages. The tenth paragraph repeats as before: "there is no guarantee of secondary funding from the venture capitalist" implying that there is in this proposal. The section of the proposal headed "Coupon" with the three different interest rates ratcheting up on the third and fifth years was, as it was agreed in oral evidence, a proposal that came from the Defendant. It was not in the document of 16 th March. The purpose of the ratcheted interest rates was to provide a financial incentive to an early flotation. The oral evidence relating to this proposal is as follows. The Claimant and Mr Brunnock, cross-examined on the difference between this proposal and the agreement sued on, state that there were two structures and that they were pursuing the two in tandem. Mr Brunnock states that the fax was sent by Mr Galliers-Pratt's secretary. This fax dated 18 th March 1998 is not one of those attached to the witness statement of Mr Galliers-Pratt, and he says nothing about it. One of the issues in this case is whether the Defendant first met the Claimant and Mr Brunnock at about this time, or whether it was not until about three months later that they first met him, as the Defendant says. The Defendant first identified the date as 30 th June, but later corrected that to 25 th June, which is a date of a meeting recorded in Mr Galliers-Pratt's diary. The Claimant and Mr Brunnock each stated that he did meet the Defendant at a meeting which he originally placed on or around 12 th March, but at a date he could not specify. The oral evidence relating to this issue is as follows. They each state that it was a meeting to finalise the proposal to VPI. Mr Brunnock and the Claimant recall the Defendant walking in and asking who they were, and the Claimant recalls his dog being excluded from the meeting. He recalls the Defendant appearing well informed about the proposal to VPI. During the course of the trial Mr Galliers-Pratt produced a diary which did record a meeting with Mr Brunnock on 18 th March. I find that the Defendant probably did attend the meeting of 18 th March 1998. This is consistent with his having made the suggestion about the ratcheting percentages, and it is consistent with what happened next. The next day 19 th March 1998 Mr Galliers-Pratt sent two faxes. The first, of three pages in all, is to the Defendant. The second of four pages is to Mr Mohammed Habib with a fax number in Oman. The fax to the Defendant includes the whole of the document headed "Proposal to Veterinary Practice Initiative" referred to above, that is the passage quoted together with the further passage headed "the Joint Venture Advantage". There is no text explaining the attachment. There is just the document and a cover sheet. I infer he had already discussed the contents with the Defendant. The fax to Mr Habib is a cover sheet, a one page memorandum of the same date from Mr Galliers-Pratt to Mr Habib, and the part of the proposal to Veterinary Practice Initiative quoted above (that is, without the section "The Joint Venture Advantage"). There is no explanation in either fax of what is meant by the words "Our Group". The text of the memorandum to Mr Habib reads as follows: "Dear Mohammed I am attaching a very brief summary of the proposal which we have submitted to the management of VPI (the veterinary business). I also attach the financial projections for the next five years. The management of VPI have already identified the first twenty acquisitions. These are all established veterinary business located in the principle cities of southern England. Because they are all private businesses, they can be acquired on a PER of 4/5 but once consolidated into a group could be sold or listed on a PER of 15. If we proceed with an investment of £4 million pounds divided into £3.55 million of unsecured loan stock and £450,000 of equity, the projections will be accelerated by one year i.e. in the first full year the company should make circa £800,000 and in the fourth year the company should make circa £8 million (all pre tax). The analyst who has been working on this transaction on our behalf believes that the business will be worth at least 15x earnings in year 4 which will give a total value of circa £84 million. VCA (Veterinary Centres of America), which is listed on AMEX trades on a PER of forty times earnings. Our group would earn 60% of the business which means that our shares could be worth £48 million pounds within 4 years". The "financial projections for the next five years" is a reference to the document that Mr Brunnock had faxed to Mr Galliers-Pratt on 17 th March and Mr Brunnock is the person who is referred to as "the analyst who has been working on this transaction on our behalf". Absent any explanation, Mr Habib could hardly be expected to understand that "our group" referred to BBG (although the proposal had been made to VPI by the Claimant, Mr Brunnock and Mr Galliers-Pratt jointly). As appears below, the expression "Our Group" was also used in information sent to Mr Habib to refer collectively to Mr Habib, Mr Galliers-Pratt and the Defendant. In cross-examination Mr Galliers-Pratt and the Defendant did not accept that it had to be read that way. They both said "we" included the Claimant and Mr Brunnock. As stated at the start of this judgment, it has never been the Defendant's case that the Claimant and Mr Brunnock should have no shares, rather that they had no legal entitlement. It is difficult to understand the use of language in this fax on that case. Mr Habib's name continues to be associated with this project through to September 1998. There is a Private Placing Memorandum, first drafted in July 1998 and sent in its final form to Oman bearing the date 1 st September 1998 and headed "Consolidated Veterinary Services Limited". It relates to a proposed issue of £4 million to £6 million pounds 8% Convertible Loan Stock with a Coupon of 6% commencing 30 th June 1999 and 8% commencing 30 th June 2001. On page 10 of the document Mr Habib is described as follows: "Mr Habib is Chairman of Allowance Housing Bank SAOG, Oman United Insurance SAOG, Shell Oman Marketing SAOG and several other companies in the Sultanate of Oman. He is also a director of the Orex International Growth Fund Limited. Mr Mohammed H G Habib (an Omani National) is a fellow of the Chartered Association of Certified Accountants UK. He was the Chief Executive of the Oman National Insurance Company, the largest national insurance company in Oman and has brought financial and managerial experience, having served on the boards of several banks, manufacturing industries, hotels and financial institutions in Oman and overseas for the last fifteen years ". Mr Habib is a friend of the Defendant with whom he has worked closely over recent years. The Defendant said in evidence that he had known Mr Habib for about six or seven years at that time. The Defendant had assisted Mr Habib in founding a bank in Oman which floated the previous year. Mr Habib had raised a sum equivalent to £20 million. Mr Habib was a man of substance and well thought of in the Middle East. They had set up more than one business together. Up to 1998 Mr Galliers-Pratt had done no deals with Mr Habib, although Mr Galliers-Pratt knew him because, like Mr Galliers-Pratt and the Defendant, Mr Habib was also a director of Oriel. The Defendant stated that it was unlikely that Mr Galliers-Pratt would have approached Mr Habib without referring to the Defendant. The Defendant said that it would have been impossible for himself to be involved in detail with the veterinary proposal. The Oriel transaction was being conducted with Omanis at that time, and there was a limit to what he could discuss with Omanis at one time. The Defendant would have wanted to know whether a proposal which Mr Galliers-Pratt was intending to put to Mr Habib was a suitable one. In the event the veterinary project was put to the National Bank of Oman in September. Mr Galliers-Pratt said that he would probably have spoken to the Defendant about the faxes to Mr Habib before sending them. He also said this about the fax of 19 the March 1998 in his witness statement: "While I did seek to interest [the Defendant] by sending him various documents in relation to the proposal in the interim period [and he refers to the faxes dated 19 th March, 27 th May, 8 th June and 29 th June] he did not get involved at all until the end of June 1998". The Defendant in his witness statement says this: "While [Mr Galliers-Pratt] had mentioned [a proposal that to set up a company to acquire, own and operate veterinary practices] to me in around March 1998 and had sought to get me involved at that stage, I was then too heavily involved in the sale of another business to give the proposal any consideration at all. Nevertheless, [Mr Galliers-Pratt] had sent me various documents [the faxes of 19 th March, 27 th May and 8 th June]. By the end of June 1998, the sale of the other business had been completed and, when [Mr Galliers-Pratt] informed me that he had become too busy to take this proposal forward, I agreed to step in". I cannot accept this, in so far as the Defendant states that he did not give the proposal any consideration at all. The Defendant was not the author of the faxes to Mr Habib, but his name is on the cover sheets sent to Mr Habib. They are both addressees. Given the close association between Mr Habib and the Defendant, and the respect in which the Defendant held Mr Habib, I am sure that he would not have allowed his name to appear in this way on such documents without his having fully considered and approved the content of the document. His evidence that "there was a limit to what he could discuss with Omanis at one time" is the explanation why he does not appear jointly with Mr Galliers-Pratt as making the proposal. I find that the Defendant did get involved before 19 th March. He would have wanted to meet the Claimant and Mr Brunnock before the fax was sent to Mr Habib. The question is how much earlier he was involved, that is whether he was involved as early as 11 th February. On 20 th March 1998 Mr Galliers-Pratt sent a fax to Ernst & Young including the whole of the document headed "Proposal to Veterinary Practice Initiative". Ernst and Young were advising VIP. There is no text to explain the document faxed. I infer that Mr Galliers-Pratt knew that Ernst & Young did not need to have it explained to them because he was sufficiently involved in the discussions to know that either he or someone else had informed them. The next communication between Mr Galliers-Pratt, the Defendant and Mr Habib is not until 27 th May 1998. There is no evidence as to how the faxes of 19 th March and 27 th May1998 came to be formulated and sent as they were, to the Defendant and to Mr Habib, or what passed between Mr Habib, Mr Galliers-Pratt and the Defendant in the meantime. On 15 th April 1989 the Claimant received a call from Mr Cooper of VPI informing him that they had accepted the Venture Capitalist offer. He immediately rang Mr Galliers-Pratt who told him that he was "chasing after dreams". He appeared to be about to abandon the project. However, they agreed to continue with the project. As Mr Galliers-Pratt puts it in his witness statement, he was still of the view that this was a viable business opportunity, and it was decided to move forward independently, and, as he says, to seek finance. The Claimant continued his efforts to find practices for sale. On 15 th April 1989 he had a discussion with Mr Wright of Vet Direct to that end. This is confirmed by fax to the Claimant of that date. MOVING FORWARD INDEPENDENTLY OF VPI On 20 th April the Claimant and Mr Brunnock met Mr Gripper of Anval at his house in Oxfordshire. They explained that VPI had turned them down and sought his advice on a number of issues as to the way forward. They agreed that they should meet again and that Mr Gripper should meet Mr Galliers-Pratt. On 21 st April 1998 the Claimant and Mr Brunnock had a meeting with Mr Wright of Vet Direct at his offices in Newcastle. They were seeking advice on finding practices to buy. On 20 th April the Claimant had rung Mr Beddall to ask for his assistance. He said that because he was a part of VPI he could not help directly but advised the Claimant to speak to Geoffrey Parkin, a director Geeling Ltd of Wakefield. On 21 st April 1998 Mr Brunnock wrote to Mr Parkin. Referring to a conversation that the Claimant had had with Mr Parkin, Mr Brunnock set out the gist of the project. He said that they were to consolidate small animal practice surgeries with an initial capital of between £4 to £8 million. They were looking to employ, with the probable title of Chairman, a very well respected member of the profession who feel incorporation is the way forward and wants to be part of a strongly capitalised group. He asked if Mr Parkin knew of a suitable person for the role of Chief Executive. He also mentioned the alternative possibility of working in partnership with a group which wished to take advantage of incorporation but lacked both finance and financial expertise. He set out the backgrounds of himself, the Claimant and Mr Galliers-Pratt. He describes Mr Galliers-Pratt as "a financier that has specialised in providing the seed capital for early stage companies and taking them to the stock market" he attaches his own curriculum vitae, and included a brief description of Mr Galliers-Pratt as given above. On 28 th April 1998 the Claimant and Mr Brunnock went to see Mr Parkin in his offices in Wakefield. They explained to Mr Parkin they were looking for a board of directors and Mr Parkin agreed to meet Mr Galliers-Pratt in London. Mr Parkin considered that if the Claimant and Mr Brunnock had the funding he could get the necessary people for the management. Mr Parkin states that they told him that they had the funding, that the Claimant came along promising a big purse. Mr Parkin had in mind Mr Foster and Mr Pound. When he spoke to Mr Pound, Mr Pound introduced the name of Mr Robinson as a suitable Chief Executive Officer. Mr Robinson had succeeded to Mr Pound's position at Solvay. The Claimant continued to receive correspondence from Anval and Vet Direct about possible practices for sale. On 9 th May 1998 Mr Wright wrote directly to Mr Galliers-Pratt. Attached was an eight page document on the veterinary market, market potential, strategy for the project staff and management functions and some detailed financial spreadsheets including profit and loss forecasts. On 13 th May 1998 there was a meeting at the offices of Princess Resources between Mr Parkin, Mr Galliers-Pratt, Mr Brunnock and the Claimant. The Claimant arranged this meeting, so that Mr Parkin could meet the financiers. The meeting turned out to be very important for the future of the project. Mr Parkin introduced the two new names, Mr John Foster, the senior partner of a veterinary hospital in Canterbury who, he said, was looking to sell. He also mentioned Mr Brian Pound, an executive of Solvay, who he said might be interested in joining the project. Mr Parkin recalls that Mr Galliers-Pratt was very forceful at the meeting and asked who he was going to bring on board. Mr Robinson was not mentioned at that time because he had not yet agreed to leave his present employment. Mr Parkin recalls that Mr Galliers-Pratt mentioned that he had Middle Eastern backers whom he identified (either at that meeting or another) as Omani. He told Mr Parkin that it had better work as his neck was on the line. Mr Parkin's understanding was that Mr Foster would be involved in the clinical side of things. Mr Pound would be the Managing Director and he had Mr Robinson in mind for Chief Executive Officer. No agreement was reached with Mr Parkin as to the financial arrangements with himself. The Claimant assured him that he would be taken care of and his expenses would be met. Mr Parkin regarded it as a gentlemen's agreement and no more. Mr Parkin also recalls the Claimant saying that if Mr Galliers-Pratt did not get his act together, he, the Claimant, would raise the money himself. On 14 th May 1998 Mr Galliers-Pratt wrote to Mr Wright referring to a telephone conversation they had had and listing the subjects they would like to discuss. These included financial information on "the initial list of veterinary businesses which you believed we could acquire", the strategy and role out plan for the company which "we are forming to acquire these businesses" what role Mr Wright might envisage and on what terms and the advantages and disadvantages of bringing in other veterinary consultants from the outset. The letter ends "please could you let me know when we could get together so that we can move this forward." On 20 th May there was a meeting at the offices of Princess Resources between Mr Foster, Mr Galliers-Pratt, Mr Brunnock and Beddow. Mr Foster advised that he was resigning from his practice at the end of December. Mr Brunnock and the Claimant agreed to visit Mr Foster at the Hospital in Canterbury for further discussions. On the same day Mr Brunnock, the Claimant and Mr Galliers-Pratt met Mr Gripper in Mr Galliers-Pratt's office. Mr Galliers-Pratt was introduced as the man who was going to provide the finance, and Mr Gripper was asked if Anval would willing to prepare the business plan for Princess Resources which they needed to present to their investors. They spoke to Mr Gripper of Middle Easter investors. That day Mr Parkin contacted Mr Pound. He confirmed a conversation that they had had together and confirmed that he had also spoken to Mr Galliers-Pratt's office to advise of Mr Pound's interest. He gave contact details for each of Mr Pound and Mr Galliers-Pratt to the other. Mr Brunnock arranged with Mr Pound to attend a meeting on 2 nd June at the offices of Princess Resources. On 26 th May 1998 Mr Wright responded to Mr Galliers-Pratt's letter with a letter of his own. The letter set out a proposed basic strategy. In relation to his own role Mr Wright states that it is probably financially not viable for him to run the proposed company but proposes discussions for a role for himself in purchasing planning and other matters. On 27 th May 1998 Mr Galliers-Pratt sent another fax (referred to above) to Mr Mohammed Habib and to the Defendant. It includes a one page memorandum and three pages of text for inclusion in a business plan describing a Mr Harry Hyman and Mr Colin Spencer. The text of the memorandum reads as follows: "I have instructed S J Berwin to form a company which will be called Consolidated Veterinary Services. The initial shareholders will comprise the interests of the three of us. Please let me have the name of the entity in which you would like your shares to be held. We have started to put together a business plan and private placement memorandum these should be completed by the end of June so that funding can take place during the month of July as planned. In order to achieve the above, I have retained the services of one of the leading financial consultants to the veterinary industry (John Gripper). Harry Hyman, who is chairman of Nexus has agreed to undertake all the financial modelling and will serve as finance director to the company. Colin Spencer who is the IT consultant that we have used over the last two years, will undertake all the IT and systems management. S J Berwin will undertake the legal work. I do not have a complete estimate of the costs which we will incur in order to produce the business plan and placement document. I would estimate that it would be somewhere in the region of US$30,000. I suggest that we split these costs between the three of us. Please confirm to me that you agree." The accompanying text states that Nexus Management Services Ltd offer corporate clients outsourced management services, principally in accountancy, administration and company secretarial services. These documents were not copied to Mr Brunnock or the Claimant. What little Mr Galliers-Pratt and the Defendant have told me about this fax has already been set out above. The document raises the question as to how SJ Berwin could have been instructed to form a company of which the initial shareholders would comprise the interests of Mr Habib, Mr Galliers-Pratt and the Defendant without Mr Brunnock or the Claimant. In cross-examination the Defendant stated that he would expect to be a shareholder in a venture involving Mr Habib, and Mr Galliers-Pratt accepted that the Defendant must have been involved by this time (that is to say that he must have spoken to the Defendant earlier than he had previously thought). If Mr Galliers-Pratt was raising money in Oman, the Defendant considered it would have been on their joint behalfs. He and Mr Galliers-Pratt were each asked whether the reference to an entity related to a vehicle such as Perth. Business Corporation Mr Galliers-Pratt said it related to both the Defendant and Mr Habib. He said people often put forward trusts and the like in such circumstances. The Defendant said that he would not have thought of that, it referred to Mr Habib. The Defendant was surprised to see the funding was expected take place during the month of July, because in his experience Omanis were on holiday at that time, but Mr Galliers-Pratt, he said, was not as familiar as he was with raising money in the Middle East. On the same day, 27 th May, Mr Brunnock faxed to Mr Galliers-Pratt the information that Mr Pound had provided about himself to Mr Brunnock. Mr Brunnock arranged a meeting with Mr Pound for 5 th June. He told Mr Pound that Mr Galliers-Pratt could not attend because he would be out of the country on business for the next two weeks. Mr Pound met Mr Brunnock, and Mr Pound gave advice, including that there was little scope for cost savings in purchases which would significantly affect the earnings of a practice. On 8 th June Mr Galliers-Pratt sent a further three page fax to the Defendant and Mr Habib it attaches a document headed "Investment in Veterinary Practices", which reads: "The investor group (Rupert Galliers-Pratt/ Nigel Cayzer/ Mohammed Habib) has formed a limited company in the UK called Consolidated Veterinary Services. Over the past few months the investor group led by Rupert Galliers-Pratt has undertaken a considerable amount of research into the opportunities which exist in the UK for acquiring groups of veterinary practices. This due diligence review has included a study of the financial performance of specific veterinary practices, methods of operation in the veterinary business, purchasing strategies for medicines and other raw materials, systems and controls. As a consequence of the work that has been undertaken (described above) the investor group are completing a business plan (and private placement memorandum). The target veterinary practices for acquisition will have the following characteristics: - Well established business with a proven track record of profitability for a minimum of five years. - Typically comprising between two and six veterinary partners. - Average purchase price per practice £500,000 to £1,000,000. - Price earnings ratio on purchase to be between 4 and 6 times. - In built compound future growth rate 8/9%. The company will raise £5m from new investors by issuing a convertible debenture which will pay a coupon of [8] %. This debenture will entitle the holder to convert into 50% of the equity of the company. The company will also negotiate an additional line of credit from a UK lending institution of up to £10m so that total funds available for the acquisition of veterinary practices will be circa £15m. Once the funds have been utilised it is anticipated that the company will own a group of well managed, established veterinary practices in the UK producing earnings (after tax) but before debt service of the circa £3m. In the prevailing market conditions this company could be listed on the London Stock Exchange at a price earnings multiple of circa 20 valuing the company at £60m. From this should be subtracted a £10m bank debt which would leave a net valuation of £50m. The debenture holders would convert into 50% of the equity. Their equity would be worth £25m as compared to an original cost of £5m. It is anticipated that this whole exercise could be accomplished within 18 months. The company would adopt the same model as Veterinary Corporation of America, a company listed on the NASDAQ which currently trades on a PER of 42. VCA was incorporated in the United States to acquire groups of veterinary practices. The UK company would follow exactly the same model. It is possible that the business could be sold to VCA as an alternative to seeking a UK listing". This is the first document I have been referred to which states that a company called Consolidated Veterinary Services Ltd had been formed. I have been shown no documents relating to the formation of such a company, or its directors or shareholders, if indeed it was formed. It nevertheless figures prominently in the story and I shall refer to it as CVS. This document was not provided to the Claimant or Mr Brunnock. What little the Defendant and Mr Galliers-Pratt said about this in their witness statements has been set out above. The Defendant said that this fax was sent within a few days before the making of the announcement concerning the disposal of Oriel. He said that he was working so hard at that time with Mr Terry Smith of Collins Stewart that he referred to it as being "joined at the hip". He would not have worded the fax in this way, and had little opportunity to consider it. With hindsight he did not agree with the highly optimistic forecasts. But he agreed that the proposal was made on his behalf. He repeated that he could not be more involved, partly due to constraints on his time and partly because he was in discussion with Omani investors and his other business, Oriel. Mr Galliers-Pratt accepted that the figures in this fax probably were discussed at the February meeting, and that, with hindsight, he had probably got carried away in setting out these very ambitious targets. He claimed that the discussions with vets are what distinguished the position in June from that in February. While there had been discussions with vets, as set out above, I find that these discussions added little to the financial side of the project beyond what Mr Brunnock had put forward in February. THE DEFENDANT'S APPROACH TO OMANI INVESTORS On 9 th June 1998 Mr Gripper set out the terms of his engagement for assisting in the preparation of a business plan to be completed by the end of June 1998. The letter was addressed to Mr Galliers-Pratt, Chairman, Princess Resources and countersigned on 10 th June by Mr Galliers-Pratt. On the same day there was a meeting at the offices of Princess Resources attended by Mr Galliers-Pratt, Mr Parkin, Mr Gripper, Mr Gunn (a colleague of Mr Gripper), Mr Peter Gripper (Mr Grippers son and a director of Anval), Mr Hyman, Mr Brunnock and the Claimant. Mr Hyman was introduced to the meeting as a potential finance director. The business plan was commissioned from Anval at that meeting. Mr Galliers-Pratt stated that the purchase negotiations on the first practice would be finished before 1 st September 1998. He also informed the Claimant of the name of the company Consolidated Veterinary Services, which the Claimant had not heard before, and stated that it had been incorporated. Mr Hyman and Mr Galliers-Pratt explain Mr Hyman's his involvement as follows. Mr Hyman had known Mr Galliers-Pratt since 1985 when he was the Group Finance Director of Baltic PLC. He had met the Defendant at about the same time. In May 1998 Mr Galliers-Pratt had approached him in connection with the project involving the establishment of a company to acquire and operate a number of veterinary practices as a consolidated group. Mr Hyman was interested. Mr Galliers-Pratt asked if he would assist in particular with financial modelling and structural and strategic matters. On 9 th June 1998 Mr Hyman wrote thanking for the opportunity to get involved in what "looks like being an exciting project". He attached some notes for the headings for the Information Memorandum. This is a one page document listing thirteen items and attributing responsibility for each of them. Mr Brunnock is named together with Mr Galliers-Pratt, Anval, Nexus and Mr Spencer for IT. Mr Hyman appears to have been unaware of the involvement of Anval for the previous months, because he states that, "with my input [Mr Galliers-Pratt] also commissioned a report and a business plan from Anval Ltd". He states that he was aware that the Claimant and Mr Brunnock had initially approached Mr Galliers-Pratt with what he calls "an undeveloped idea about purchasing veterinary practices" but states that their input was "minimal". The next day, 10 th June 1998 Mr Galliers-Pratt's secretary sent to Mr Habib a copy of the document which had been faxed on 8 th June with the explanation, "Please find attached Rupert's note as discussed this morning". There are also fax cover sheets of the same date from Mr Galliers-Pratt to Mr Habib and the Defendant which I infer resent copies of the same document. From that point on Mr Galliers-Pratt had little further time to devote to this project and the Defendant stepped into his shoes. Mr Galliers-Pratt did not agree that Mr Brunnock and the Claimant were eased out of the deal. He said that he had told the Defendant that they had come up with the idea and that it was because of Mr Brunnock having been at Metropolitan Life that he took it seriously. He could not explain why, after this point, his name continued to go forward as a director, as it did in the Private Placing Memorandum that was about to be drafted. On 12 th June 1998 the Claimant and Mr Brunnock visited the Barton Hospital in Canterbury on a fact finding mission and to discuss further with Mr Foster the potential acquisition. They were shown the hospital and formed the view that it was an ideal candidate for the cornerstone acquisition provided that it could be purchased at the right price. On 25 th June 1998 there was a meeting between Mr Galliers-Pratt and Mr Brunnock and the Claimant at which the Defendant was present. This is the meeting at which the Defendant states that he first met Mr Brunnock and the Claimant. As I have found, he had in fact met them first on 18 th March. Nothing of significance occurred at this meeting. On Saturday 27 th June 1998 Mr Gripper wrote to Mr Galliers-Pratt enclosing copies of the business plan which had been commissioned. He also enclosed his invoice number 2055. Since it features further in the case it is necessary to state that the invoice is addressed to Mr Galliers-Pratt, Princess Resources Limited, at the offices in St James's Street. It sets out the time and disbursements as agreed in his terms of engagement letter, resulting in a total bill for the services provided of £8,853.40p, plus VAT at £1,549.35p, giving a total of £10,402.75p. The business plan in its final form came to be in two parts each of eighteen pages, the second part being added later as set out below. In the introduction it is stated: "this report has been prepared solely for Rupert Galliers-Pratt, Chairman and Chief Executive Officer of Princess Resources Limited for the purpose of developing Consolidated Veterinary Services. It is based on the aims and objectives provided to Anval Limited by Mr Galliers-Pratt at a meeting on 9 th June 1998… additional information had been provided to J Gripper during two informal meetings and telephone conversations all prior to 9 th June 1998". On 29 th June 1998 Mr Galliers-Pratt faxed to the Defendant a copy of the first section of the report. On the same day Nexus faxed to Mr Galliers-Pratt six pages of spread sheets which had been sent by Mr Peter Gripper in respect of the project, which Nexus stated they would be using for their model. The next day a lady at the Nexus office sent to Mr Galliers-Pratt draft profit and loss account and cash flow spreadsheets for the "Vets Project" showing debt finance of £3.25m being required in total. She stated that these were subject to approval of Mr Hyman. On 30 th June 1998 Mr Galliers-Pratt telephoned Mr John Gripper querying the statistical information behind the valuation information given on page ten of the business plan. That had included: "It has been assumed that the purchase price of practices approximates to 0.9-1.2 x turnover and the freehold property accounts for nearly 50% of the purchase price". In his letter of 1 st July Mr Gripper stated that the directors of Anval did not agree with the assertion that under present market conditions veterinary practices can be purchased to show a 20% profit return on total investment. st July 1998 is the provisional date written on a draft of the Confidential Private Placing Memorandum one final version of which was dated 1 st September 1998 (a later version is dated 28 th September). There is also a reference to Consolidated Veterinary Services (Holdings) Ltd, a company incorporated in Bermuda. I have heard no evidence as to this company either, if it was ever formed. It is from this that the biographical details of Mr Galliers-Pratt, and the Defendant were quoted above. The draft defines "CVS" as "Consolidated Veterinary Services Limited, a company incorporated in England and Wales". In the Executive Summary it states that the directors have commissioned a report from Anval Limited and that CVS proposed "to raise £5m via a placing of convertible loan stock and up to £10m from an acquisition finance term loan from a bank to fund the acquisition of a number of veterinary practices". The next section of the document, under the heading "The Business Opportunity and Market Trends", is said to be drawn from information provided by Anval. The Directors are named as the Defendant Mr Galliers-Pratt and Mr Hyman, and their biographical details are given. Mr Hyman is described as a chartered accountant, then aged 41, with directorships of a property investment company, other investment companies and a restaurant group. The reference in relation to the Defendant in that he ceased to be chairman of Oriel Group Plc in June 1998 is significant. As already noted, that was in June, the date on which the Oriel Group was sold. In order to put figures in perspective, the Defendant and Mr Galliers-Pratt were asked about the scale of the profits they made on the sale of their shares in Oriel. While significant, the figures are modest compared with the profits that were being discussed in the faxes sent to Mr Habib in March, May and June concerning the CVS project. The draft document was not at this stage shown to either the Claimant or Mr Brunnock. It contains no reference to them. Even though they did not, at this time see the document, it was clear by this time that the Claimant and Mr Brunnock were aware that the money needed for this project was not then and there available. So, as was put to them, if Mr Galliers-Pratt had said in February what they say he said, then by this time they knew that these statements were not true. Mr Galliers-Pratt did not have the money and was not in fact underwriting the investment. Neither the Claimant nor Mr Brunnock protested at this stage. The Claimant explained that he still thought that the money would be raised quickly, whatever else the Memorandum said, once the investors saw the level of arbitrage. On the same day, 1 st July 1998, Mr Hyman was expressing a similarly optimistic view to that held at the same time by the Claimant. He wrote to Mr Galliers-Pratt referring to "one of my development capital contacts" who had told him "about a company of individual South African vets called MediVet who own 20 practices in the UK and who are interested in doing a roll-out in the UK". He suggests a meeting to discuss the possibility of acquiring their twenty practices. He wrote that his "contact confirmed that this was an exciting area and he would be interested in investing" He asked: "Would we be interested in raising more than the £5 million that we are seeking to raise from your Omani friends?" I infer that Mr Hyman had not been told that the Claimant had learnt of MediVet from Mr Sheridan five months earlier. Again on the same day Mr Galliers-Pratt forwarded to the Defendant the letter of 1 st July from Anval Limited concerning valuation. On 4 th July Mr John Gripper forwarded to Mr Galliers-Pratt, at his request, three pages describing Anval and its director's qualifications. I infer that this was for incorporation into the Private Placing Memorandum. This was all forwarded to the Defendant. On 6 th and 7 th July employees of Nexus faxed to the Defendant projected balance sheets for five years and other financial calculations they had prepared. None of this is addressed to Mr Galliers-Pratt. On 8 th and 9 th July 1998 the same employee of Nexus faxed nearly thirty pages of spreadsheets to the Defendant. On 8 th July 1998 the Claimant and Mr Brunnock continued to communicate with Mr Galliers-Pratt. They sent what they described as their initial thoughts on the points that needed to be included in a memorandum to Mr John Gripper. They were critical of his business plan, describing it as lacking in depth. They stated that the memorandum needed to be worded to emphasise, "our strengths, and also demonstrate the knowledge we have gained in the last six months". They raised ten points. In one of them they stated that there were no cash flow figures, and "this is obviously predicated on the financial terms of the monies raised". In his written witness statement the Defendant is less generous to the Claimant and Mr Brunnock than he was in his oral evidence. In the written statement he states that he did not consider their letter of 8 th July to be of any assistance at all. He states that the Claimant and Mr Brunnock made no contribution at all to the obtaining of the Anval report. In fact, as I find, they had introduced Mr Gripper from the very beginning. He also states: "I personally paid for the report which had been addressed to [Mr Galliers-Pratt] as no one else was prepared to do so. Beddow and Brunnock made no contribution at all". Mr Galliers-Pratt says the same in his written witness statement. The Defendant claimed on a number of other occasions to have personally paid for the report, and on that basis he was re-imbursed the expense by CVSUK on incorporation. But it was not correct that he had personally paid for it. As Mr Gripper's witness statement revealed, Gulf Securities Corporation ("GSC") in Liechtenstein had paid for it. And during his evidence the Defendant recalled that he had not reimbursed GSC when he himself was reimbursed by CVSUK. Moreover, the complaint that no one else was prepared to pay for the report, by which he meant neither the Claimant nor Mr Brunnock, is difficult to reconcile with the Defendant's case. Whether or not there was a contract or agreement (which is now the main issue), the Defendant recognised that the moral claim of the Claimant and Mr Brunnock arose from their having brought the interesting idea to his brother, and that the role of his brother and then himself was to raise the money. Later in his written witness statement the Defendant says of their ideas: "none of these 'ideas' were of any use or benefit to the proposal. I would not have induced Beddow and Brunnock to invest their time and skill in the project because, in my view they simply did not have the skills or experience necessary to assist in moving this project forward… as far as I am aware, no significant steps were ever taken by Beddow in progressing this proposal… although [Mr Foster, Mr Parkin and Mr Pound and Mr Robinson] were mentioned to Beddow who in turn may have mentioned them to [Mr Galliers-Pratt] (and/or me), [Mr Galliers-Pratt] (and I) would have 'found' them independently of him. Further the Claimant most certainly did not secure their services". In fact it was the Claimant and Mr Brunnock who had persuaded Mr Parkin and Mr Pound to take an interest in, and to help with, the project. They had introduced Mr Foster, with whom Mr Brunnock and the Claimant then made personal contact on 12 th June. Mr Pound also introduced Mr Robinson, and as will appear, it is a ground of complaint by Mr Brunnock and the Claimant that they were not able to meet Mr Robinson. Later in his written statement, referring to 1999, the Defendant is more generous, saying that "I considered there was a moral obligation to offer Beddow and Brunnock some equity in the company to recognise the fact that the original idea was theirs, although they had not had the money or the necessary contacts to sell or exploit the idea". But this too is incorrect. While they did not have the money (hence their approach to Mr Galliers-Pratt), they certainly did have the contacts to raise money from others, and they did make all the contacts with the vets and Mr Robinson. The suggestion by the Defendant that he or Mr Galliers-Pratt would have found those contacts independently has no basis in fact. Neither he nor his brother ever took any such initiative. The Defendant makes a similar remark about the Barton hospital, saying: "I am sure that there were various other practices which we could have acquired at the time; Barton just happened to be the first one". This too has no basis in fact. There is no evidence of any other practice being available for acquisition by the Defendant before the share subscription agreement in 1999. The fact that Barton hospital was going to be for sale had not been advertised publicly. I accept Mr Parkin's unchallenged evidence that it was not information in the public domain, and that the Barton hospital enjoyed a very high profile in the veterinary world, being one of the most respected of these institutions, of which there are only about ninety. On 15 th July the Claimant met with Mr Foster, Mr Parkin, Mr Brunnock and Mr Galliers-Pratt at the offices of Princess Resources. The Claimant arranged this meeting to discuss the acquisition. They agreed to have a further meeting on 27 th July 1998. On 18 th July 1998 Mr Foster sent to Mr Brunnock copies of the Barton Veterinary Hospital accounts asking him to keep these details confidential and for the purposes intended. The Anval bill had not been paid, and on 21 st July 1998 Mr John Gripper sent a reminder to Mr Galliers-Pratt, at the same time confirming a meeting at his offices on 4 th August. Mr Galliers-Pratt's secretary replied stating that he was overseas at the moment and the meeting on 4 th August would be with the Defendant. On the same day Mr Brunnock sent to Mr Galliers-Pratt an approximate valuation for the Barton Veterinary Hospital, based on his understanding. He asked for a copy to be forwarded to Mr Hyman and the Defendant. According to his valuation the freehold property was worth £280,000, and equipment and vehicles £49,048. On the basis of a goodwill valued at 1.2 times the total valuation he said was £419,404 giving a price earnings multiple of 5.3 times. On a goodwill valuation of 1.5 times the total valuation he gave was £498,768, giving a PE multiple of 6.3 times. He concludes: "Although these figures are not produced with the rigour of John Gripper, they are an approximation of his methodology. Even using a 1.5 x multiplier it can be seen that the Barton Veterinary Hospital could be purchased on a P/E multiple of below 7x. …. Could you please fax this information to both Harry and your brother"? th JULY – THE DEFENDANT TAKES OVER On 27 th July 1998, in preparation for the meeting later that day, Mr Brunnock asked Mr Galliers-Pratt's secretary to forward to the Defendant the criticisms of the Anval report which he had previously sent and she did that. At the meeting on 27 th July their were present in the offices of Princess Resources the Claimant, Mr Brunnock, the Defendant, Mr Foster, Mr Parkin and Mr Hyman. There is an issue between the parties as to whether, as the Claimant contends, when he first arrived the Defendant stated that he was "taking over from his brother on the same terms", or words to that effect. The Defendant's evidence is that he did say something to the effect that his brother no longer wished to be involved and had asked him to be. But he states that he does not believe that he used words such as "the deal is the same", or "on the same terms", because, as he says, there was no deal and no terms of which he had any knowledge. The Claimant kept a note, and Mr Brunnock and the Claimant referred to the meeting, albeit not by date, in the chronology they prepared and sent on 23 rd March 1999 at paragraph 12. According to that document the Defendant said "that as he had sold off his business he would take over Rupert's role as liaison with the Omani investor group". The note makes no mention of words such as "on the same terms". No person other than the Claimant or Mr Brunnock recalls having heard any such words used. Mr Brunnock and the Claimant were pressed strongly on this point in cross-examination. It was suggested to Mr Brunnock that he was only saying what he did to support the Claimant, it being made clear that he was accused of fabricating this evidence. This point is linked to the question whether Mr Brunnock had reached an agreement right at the start with Mr Galliers-Pratt. I shall return to the issue. At the meeting there was discussion on various matters of general significance such as the size of the veterinary market, the number of practices and vets, the number of hospitals and such matters. There was discussion of how costs might be saved on drugs and vaccines. There was then discussion of the project itself, including the date of 31 st August 1998 which, according to the Claimant was the date on which the Defendant stated that due diligence would be completed. He has noted that in his notes. In addition the Claimant states that the Defendant stated that the money would be raised by the beginning of September and the cheque would be received for the Barton acquisition by the end of September. The Defendant accepts that he may have mentioned his contacts in Oman. He also accepts that he may have said that the end of September was a reasonable target date by which funds might be available, but not that they would be available. He states that there were no commitments made at the meeting. The next day Mr Brunnock e-mailed Mr Pound to set up a meeting on the 4 th August, which it had been agreed should take place. Mr Brunnock wrote "Nigel is now taking a very active interest in the project and is the prime driver regarding the financing. Rupert is now less involved given his brothers position. Consequently Nigel is available in the morning of 4 th August and would very much like to meet you if this is still convenient". Mr Pound agreed. On the same day 28 th July the Defendant wrote one of the two communications appearing in the bundle which was addressed by him to Mr Brunnock. There are none addressed to the Claimant. He and Mr Hyman, he said, had been looking at the valuations in the document that Mr Brunnock had prepared. It seemed to them that that valuation assumed that the vets would be prepared to take a substantial salary cut if the acquisition took place. While the calculations were not explored in any detail at the trial, the Claimant and Mr Brunnock both state in their witness statements that the effect of Mr Brunnocks calculation was a valuation of Barton Hospital in the sum of £824,716. That that is what the document meant was not challenged in cross-examination. As will appear it is very close to the figure which the Defendant finally agreed. On 4 th August 1998 there was a further meeting at the offices of Princess Resources. It was attended by Mr Brunnock and the Claimant, the Defendant Mr Pound and Mr Hyman. The Claimant arranged the meeting to see whether Mr Pound would be interested in the post of Chief Executive. He was not interested but he recommended the name of Mr Bruce Robinson as recorded in the notes of that meeting. Mr Robinson was at the time the managing director of a subsidiary of Solvay. Mr Pound knew Mr Robinson from having worked with him in the Solvay group. The Defendant stated that he would meet Mr Robinson in the first instance then there would be a further meeting at which Mr Robinson would be present with Mr Brunnock and the Claimant. As will appear, the Defendant did meet Mr Robinson but Mr Robinson did not meet Mr Brunnock or the Claimant. Later in his evidence the Defendant returned to the theme of how little the Claimant and Mr Brunnock had done to move the project forward by the time he took over from his brother. He said that the one thing that was missing was any management. Mr Hyman had been engaged, but there was no expert veterinary management. That was true only to the extent that Mr Robinson had not by then been contacted. But as I have found, Mr Robinson's name was mentioned on 4 th August, and not as a result of anything done by the Defendant. What the Defendant did was to proceed to meet Mr Robinson, and agree to his terms of engagement. It is true that Mr Robinson required to be paid. But since the Claimant and Mr Brunnock were responsible for Mr Robinson being identified as a candidate, it cannot be said that they lacked the skills or experience necessary to move the project forward to the stage of engaging expert management. On the same day, 4 th August, at the offices of Princess Resources there was a further meeting attended by Mr Brunnock, the Claimant, the Defendant, Mr Parkin, and Mr Gripper and Mr Gripper's son. The purpose of that meeting was for Anval to present their business plan. As already noted, Mr Brunnock and the Claimant had been critical of the report when they had first seen it. In his witness statement Mr Gripper describes how both the Defendant and the group present at the meeting with him were dissatisfied with the business plan which they did not consider met their expectations. They did not agree with the profitability forecast in the Anval report which was more pessimistic than that prepared by Mr Brunnock and the Claimant. Mr Gripper describes how he said the Defendant was very hostile at the meeting and stated that he would not pay for the report. Mr Gripper describes the Defendant as being very much a dominant figure at the meeting. Mr Gripper agreed to re-examine the financial projections and to prepare a further report on risk factors for no extra charge. As will appear, he did this, and submitted the new material a few weeks later. The next day 5 th August 1998 the Defendant, Mr Brunnock and the Claimant travelled by train into Canterbury to visit the Barton Hospital. They met Mr Foster and went to his accountant's offices to discuss the terms of the acquisition of the Barton Hospital. Mr Foster estimated that the property equipment and cars were worth £346,000, which is a little higher than the figure estimated by Mr Brunnock and the Claimant. He estimated that the goodwill and the business were worth £562,000 making a total of £908,000 that is significantly higher than the figure produces by Mr Brunnock and the Claimant. The offer put forward to Mr Foster at the meeting was £820,000. Either then or later it was increased to £830,000 subject to contract. On the return train journey Mr Brunnock got off at some point leaving the Claimant and the Defendant together. In his witness statement the Claimant says that the Defendant told him that the Defendant expected to meet Mr Robinson the following week and that he was extremely pleased with the way that the negotiations had gone with Mr Foster that evening. The Claimant says that the Defendant congratulated him both on his original concept and on the work that he and Mr Brunnock had done. The Claimant states in his witness statement that he asked what shareholding the Defendant expected himself and Mr Brunnock to receive in the company, given that they had an agreement of at least 7%. The Claimant explains that at that point he thought the project was close to completion and expected the financing to be in place shortly. He says that the Defendant replied that without knowing the exact terms of the financing it was difficult to say but that the Defendant confirmed that it would certainly be no less than 7% each, and then said something along the lines that they would all be equal shareholders. The Claimant states that the Defendant confirmed that he would be seeing the Omanis at the beginning of September, as they were away during the summer, to "rubber stamp the deal". The Claimant said at the end of the journey the Defendant shook his hand and said "well done". The Defendant's evidence as to the conversation in the train is that all the things the Claimant referred to might have been discussed, but that no agreement was reached (nor is it suggested by the Claimant that there was an agreement concluded on that occasion). The Defendant told me that he did congratulate the Claimant. This was the only conversation between just the two of them of any significant length or content throughout 1998. The Defendant accepted that, if the Claimant did ask whether, or that, the equity split be equal, then he would probably have said that it would be equal. He agreed that it was possible that such an exchange did happen. That would have been his view then, he said, because they had worked for six months, and he had only worked for one month, at that time. He knew nothing of any deal with Mr Galliers-Pratt although, he said, he had asked Mr Galliers-Pratt what deal he had made, and says the Defendant, Mr Galliers-Pratt told him there was none. The Defendant did not ask the Claimant or Mr Brunnock. Asked when his view of the equity split changed, the Defendant stated that it was when he assumed more of the risk. He had already "volunteered" (as he put it) to pay the Anval bill, and at this point in his evidence he said that he arranged for the Omanis to pay this bill. Shortly after this he said that his role became much more than introducing the finance, it was he who ran the project. There is no dispute that that is what did happen. The issue is whether that was a case of him shouldering the burden, as was his case, or whether he sidelined Mr Brunnock and the Claimant and stole their idea, as they say. It is at this point that the relationship between the parties began to breakdown. THE RELATIONSHIP BREAKS DOWN On 6 th August 1998 the Defendant met Mr Robison and on 7 th August 1998 wrote to him enclosing information he had requested. On 10 th August 1998 Mr Gripper wrote to the Defendant at the address of Princess Resources. In a letter he set out his position on the complaints made about Anval's work and his embarrassment at the failure to settle the account. On 14 th August 1998 Mr Pound met with Mr Robinson to discuss "Consolidated Veterinary Services Limited" (as the note records it to be) and their interest in Mr Robinson managing the business from an operational point of view. They discussed the Anval business plan. They, too, shared concerns about it, but considered that an interim payment should be made. They discussed how the acquisition of Barton Hospital should proceed, in particular in relation to due diligence and staff issues. Mr Robinson required some clarification of the proposed structure of the company and of who would have responsibility for what. He said he needed to understand the roles of Mr Parkin, Mr Foster, and Mr Hyman as well as himself. The note at the meeting includes: "Finally what will be the roles if any of Rupert [Galliers-Pratt], Steve [Brunnock] and Robert [Beddow]?" There was then discussion of his salary and other proposed benefits and Mr Robinson indicated that he was currently being courted by two major corporations talking of figures for remuneration according to his expectations (which were then high five figure sums). On 17 th August 1998 Mr Pound sent to the Defendant the detailed notes he had taken of his meeting with Mr Robinson. On the same day the Defendant faxed Mr Gripper, attempting to arrange a telephone conversation, and asking for his bank details to arrange a 2/3 payment of the fees to be remitted later in the week. The Defendant also asked Mr Gripper to address all future correspondence to the Defendants personal address in Rutland Gate instead of to Princess Resources. In the course of the trial the Defendant found on an old computer, and printed out, a fax that he had sent at about this time to Mr Gripper. The original date is no longer ascertainable but I infer that it must have been sent on about 18 th August 1998. It reads as follows: "Further to my conversation this morning with Mrs Gripper my Omani associates have asked if the invoice can be issued to one of their companies who will be paying the bill without VAT. The name of the company is Gulf Securities Corporation… [an address is given in Vaduz Liechtenstein]. If you could re issue the invoice and send it to me I would arrange for it to be passed on. In the meantime they are wiring you the balance of the money in the sum of £1,734 which is minus the VAT payment. If this is a problem please can you call me… " Naturally, Mr Jones QC, counsel for the Claimant, asked the Defendant a number of questions about this document. He asked how it could be proper for an invoice in respect of work commissioned by Mr Galliers-Pratt, to be paid without VAT by a company from Liechtenstein which had hitherto not been identified as having any role in these matters. Moreover, when Mr Jones QC came to ask the Defendant questions about the identity of Perth Business Corp, and those individuals who signed on behalf of that corporation to subscribe for 100,000 shares, 10% of the issued share capital of CVSUK, it became clear that the Defendant was not then saying that GSC was a company of his Omani associates. By the time the subscription agreement came to be entered into the Omanis had long ceased to be regarded as a source of possible funding. It was not true that "Omani associates … asked if the invoice can be issued to one of their companies". Moreover, that company's name, GSC, appears again on 27 th July 1999 when the Defendant faxed Mr Galliers-Pratt asking him to transfer to it the sum of £17,142.80. The Defendant's evidence in answer to these questions was not satisfactory. He appeared to me to be uncomfortable about them himself. He said that he had been a consultant to GSC for some years, at a substantial remuneration. He dealt with Dr Batliner and another person he identified. I accept this evidence. He said he could not say if GSC was the only shareholder in Perth Business Corporation, although he thought that it was. He explained the payment by GSC of Anval's bill on the basis that his role was introducing business to GSC and he might have asked them if they would mind paying it. There was nothing in writing. Asked if he was acting for GSC on 27 th July, the Defendant replied that it would be difficult to characterise it quite like that. He did not ask GSC to pay Mr Robinson's salary, which he paid himself in the period up to incorporation of CVSUK. Nor did he ask GSC to pay Arthur Andersen. If he had asked Arthur Andersen to work for GSC, they would have wanted to check GSC and that would have been complicated. It was at this point he said he was embarrassed that he personally was reimbursed by CVSUK for the Anval bill paid by GSC. He concluded that it was too strong to say that he was acting on GSC's behalf. He had mentioned the project to them, which is why they paid the Anval bill. Mr Brunnock remained in telephone contact with the Defendant in August and September and the Defendant gave him to understand that the Omani money would be available on or around October 1998, but that is as far as communication went between the Defendant on the one hand and Mr Brunnock and the Claimant on the other. There was no direct contact with the Claimant. However, the Defendant did continue with the arrangements for the acquisition of Barton Hospital and the engagement of Mr Robinson. He communicated with the others but not Mr Brunnock or the Claimant. On 20 th August 1998 the Defendant sent to Mr Pound draft letters to be sent to Mr Foster and Mr Robinson asking for his comments. The letter to Mr Foster was to confirm in writing that "Consolidated Veterinary Services Limited" would like to acquire Barton Veterinary Hospital for the sum of £830,000 payable in cash upon completion, subject to a number of conditions. The letter concludes: "This offer is subject to the successful completion of the financing and it is anticipated that this will be completed by mid October …" The draft letter to Mr Robinson also dated 20 th August 1998 confirms conversations the previous day and the offer to him of position of Managing Director of Consolidated Veterinary Services Limited with effect from the end of his notice period with his present employers, a company in the Solvay Group. The letter listed the annual salary and other benefits to which Mr Robinson would be entitled. The letter includes "we would make available to you share options and allow you to subscribe to the initial capital of the company the level of these to be agreed between us". The Defendant also sent copies of this correspondence to Mr Galliers-Pratt and Mr Hyman. The Defendant agreed to pay Mr Robinson's remuneration, and was re-imbursed by CVSUK. Neither the Claimant nor Mr Brunnock was consulted about this. On 26 th August 1998 the Defendant invited Mr Pound, Mr Robinson and Mr Hyman to meet with him at his home address. This is the first meeting recorded in the papers about the future of the project to which Mr Brunnock and the Claimant were not invited. The letter drafted for Mr Foster was sent to him. On 30 th August he replied in detail in terms which he said he hoped would give grounds for confidence. The negotiations had achieved agreement on the salary levels which Mr Brunnock had assumed in his valuation, and which had caused concern on the part of the Defendant as noted above. On 11 th September 1998 Mr Hyman wrote to the Defendant in response to an invitation to set out the proposed charges of Nexus to the project. The implication clearly is that both the Defendant and Mr Hyman, like the Claimant and Mr Brunnock, believed the project to be very close to fruition. Mr Hyman made various proposals as to how he and Mr Choong, an employee of Nexus, might assist CVS in various capacities in the future. He set out the charging arrangements he proposed. It appears that by that stage the Defendant had offered him a position as Non-Executive Director because the letter continues as follows: "With regard to non-executive fees, I would rather like to charge a fee that was commensurate with the other fees paid to other Non-Executive Directors. Finally to compensate us for considerable amount of work that we have done and for our commitment to the transaction, I would like to propose that we receive an equity carrier equivalent to that being granted to the Managing Director of 3% of the Company's equity". There had not previously been any suggestion of, or commitment to, equity participation for Mr Hyman, nor any agreement on the terms of engagement of Nexus. Naturally Mr Hyman expected that some reward would be agreed for his firm's work. Mr Brunnock and the Claimant were not consulted on these matters. On the same date Mr Hyman sent by e-mail to Mr Pound a revised version of the confidential Private Placing Memorandum, still bearing the draft date of 1 st September 1988, and bearing the name of CVS. The persons lifted under the heading Directors in this draft are the Defendant, designated Chairman, Mr Galliers-Pratt designated a non-executive director, and Mr Hyman also designated as a non-executive director, Mr Pound, Mr Habib and Mr Robinson (unnamed, but identified as Managing Director). On 11 th September 1998 Mr Gripper wrote to the Defendant confirming that Anval's additional comments on the business plan had already been sent out. He wrote that he had been sending details of practices for sale to the Claimant at his private address, but that he would like to regularise this situation and have them sent direct to the Defendant at his address. He enclosed blank forms of Confidentiality Statement to be signed by the Defendant to regularise the situation. He also enclosed his account recording that the sum of £6,666 had been paid out of the original invoice total of £10,402.75 leaving a balance of £3,736.75. In other words, the statement included VAT, and the idea of GSC not paying VAT was not pursued. The final printed version of the Confidential Private Placing Memorandum bears the date 1 st September 1998 and appears to have been produced in mid September. It is headed "Issue of £4 million to £6 million 8% Convertible Loan Stock; maturity 31 December 2003; coupon 6%, interest paid semi-annually commencing 30 th June 1999, 8% interest paid semi-annually commencing 30 June 2001; security, unsecured; convertible into ordinary shares of CVS to represent up to 30% of the issued share capital of the company". Under "Directors and Management" there are listed as Directors: the Defendant, the Managing Director (unnamed, but meaning Mr Robinson), Mr Hyman, Mr Pound, Mr Habib and Mr Galliers-Pratt. The Executive summary records that the objective was to acquire a number of veterinary practices operating in the United Kingdom, and that once acquired, economies of scale relating to purchasing, improved management and the benefits of unified marketing were believed to enable the profitability of each practice to be improved. There is reference to the report of Anval. It is said that the directors had commissioned this report and "have spoken to a number of senior sources in the veterinary profession". That must be a reference mainly to the conversations which the Claimant and Mr Brunnock had had earlier in the year and to a lesser extent Mr Galliers-Pratt, and perhaps Mr Pound. There is no evidence that any of the other persons identified as Directors had any such conversation as might be referred to here. The text goes on to say that the directors believed that practices could be purchased at attractive multiples of earnings. It states that exit could be achieved by way of a trade sale of the business, or a listing on the London Stock Exchange or the Alternative Investment Market, or reversal at the earliest opportunity once critical mass had been achieved. It states that the company proposed to raise between £4 million and £6 million via a placing of convertible loan stock, and up to £10 million from an acquisition finance term loan from a bank, to fund the acquisition of a number of veterinary practices. Projections are referred to for exit valuation after five years which would give an Internal Rate of Return of between 35% and 39% for holders of the convertible loan stocks. It is said that the section headed "Business Opportunity and Market Trends" had been drawn from the information provided by Anval. Under the heading "Purchase Proposals" it is stated that: "It has been assumed that the purchase price of practices approximates on average to 1 times turnover and that the freehold property accounts for nearly 50% of the purchase price… Based on a capital outlay of £15 million and an average practice purchase price in the region of £940,000, over a five year period this will amount to the purchase of 24 practices. The Company has agreed terms to acquire a leading veterinary practice located in the South East. The practice has four partners with annualised revenues of approximately £750,000 and a net profit before partners drawings of £300,000. A cash price of £830,000 has been accepted subject to contract by the vendors. Included in this is a property worth £350,000. This represents a purchase p.e of six times fully taxed earnings". There is a page headed "Exit Valuation and IRR Calculations". These are based on a multiple of 15 times, which is the multiple put forward by Mr Brunnock and the Claimant in the document headed "Proposal to Veterinary Practice Initiative" back in March. The project is essentially the same project with substantially the same financial assumptions. THE OMANI FUNDING FAILS No money was raised in Oman. Quite when it became apparent that this would be the case is not clear on the evidence. I infer it must have been in early October. Some of the following dates differ from the dates given by the witnesses, but they represent what I find to be the most probable sequence of event. On 29 th September 1998 Mr Hyman sent to the Bank of Scotland a further version of the Confidential Private Placing Memorandum this time dated 28 th September 1998. Mr Galliers-Pratt's and Mr Habib's names are omitted from the list of Directors in this version. The Bank replied on 1 st October indicating interest and attaching an Outline Terms and Conditions Schedule which did not constitute an offer of facilities. The Bank asked for a copy of the Anval report. Mr Hyman sent a copy to the Defendant. The proposed facility was a £6 million loan for the purpose of acquisition funding. On 2 nd October 1998 the Defendant faxed to Mr Terry Smith of Collins Stewart a copy of the letter from the Bank of Scotland to Mr Hyman. The Claimant had a friend who was a partner at Collins Stewart, Mr Poole. He had informed Mr Poole of his project since its conception. Mr Poole had received a copy of the prospectus and noted that the Claimant's name was not mentioned in it. He telephoned the Claimant. It is at that point that the Claimant says in his witness statement that he realised "that the Defendant may not be an honourable man". A copy of the Confidential Placing Memorandum was given by Mr Poole to the Defendant namely the version dated 1 st September 1998. The Defendant turned to Arthur Andersen for help. Evidence as to this was given by the Defendant and by Mr Millar. Mr Millar is a chartered accountant currently a principle in the Corporate Finance Team of Deloitte and Touch LLP. In October 1998 he was employed in the Reading office of Arthur Andersen. He was a director junior to a Mr Gillespie in the corporate finance team. He learnt from Mr Gillespie that the Defendant was a long standing client of one of the tax partners in Arthur Andersen's London office. He first met the Defendant on 13 th October 1998. The Defendant told him that he was seeking funding to set up a company, the business of which was to be the acquisition and operation of groups of veterinary practices. He told Mr Gillespie and Mr Millar that he had already tried to obtain funding for the project including from contacts of his in the Middle East but had been unsuccessful. He was interested in exploring how Arthur Andersen might assist with raising funds. Mr Millar said that he felt from his experience that investors would view the quality of the management team as a key factor in any decision to invest. The Defendant told him that Mr Robinson was to become the Managing Director having been recommended by Mr Pound. The Defendant also mentioned Mr Hyman as an accountant who had been asked to prepare business models for the project. The Defendant told him that the first acquisition target was the Barton Hospital, identifying Mr Foster as an advisor to the company. The Defendant told the meeting that the initial idea for the project had come to him via two other men. He referred to them as "introducers" of the idea. Mr Millar does not recall having become aware of the names of the Claimant and Mr Brunnock until February 1999. He understood from the Defendant these two men had no intention of being involved in the day to day running of the business but they did have an expectation of an opportunity to invest in the project if funders could be found. The meeting ended with Arthur Andersen agreeing to take a preliminary look at the financial models of the project and to meet Mr Robinson in order to assess the viability of the scheme as regards to putting proposals to private equity investors. On 14 th October 1998 the Claimant had learnt that the Omani funding had failed. He telephoned the Defendant who gave him an explanation along the lines that the Omanis did not understand the concept of veterinary services. The Claimant found this unconvincing and so do I. If that were the reason, I would have expected it to become apparent at least by March or thereabouts. I do not know what the reason is for the failure of the Defendant to obtain the funding he so clearly expected from Oman. However, as was put to the Claimant in cross-examination, the Claimant did not then allege then that there had been any breach of an agreement, any more than he had done so at any earlier stage. What he did was, as he says, to say to the Defendant that they should keep the team together and that he, the Defendant, was "still part of our team". Shortly after the meeting of 13 th October, and certainly no later than 17 th October 1998, Mr Hyman had sent some financial documentation prepared by Nexus to Arthur Andersen. Arthur Andersen did not consider these to be suitable for their purposes, and the Arthur Andersen team therefore began work on their own financial documentation. I make no finding as to whether Arthur Andersen were right or wrong in the view they took of the documents prepared by Nexus. The relevance of the involvement of Mr Hyman and Nexus is that Mr Hyman was permitted to subscribe for shares. So a comparison of his role with that of the Claimant and Mr Brunnock may assist in deciding whether the Defendant is correct when he submits that the shares offered to Mr Brunnock and the Claimant were the most that NSP would permit and represented all that they could reasonably claim Mr Gillespie and Mr Millar met Mr Robinson on 19 th October and were very impressed by him. Over the next few months they had many meetings with the Defendant and Mr Robinson. They worked only for a very short time at the start with Mr Hyman, since their work really took over from what he had been doing. As Mr Millar stated, the Defendant and Mr Robinson had not encountered Private Equity Funding prior to this project. Both Mr Gillespie and Mr Millar felt that private equity investors were the most likely type of funder who would be interested in the project. They were prepared to take greater risks than most investment fund managers, but in return they expected to have a great deal of control over the management and direction of a company in which they invested. The Arthur Andersen team explained at the outset that the venture capitalists would insist on significant management participation in the equity of the company to ensure that they felt sure they had a stake in the project and thus an incentive to make the project a success. The consequence of this would be that there might be very little equity remaining for anyone who was not on the management team. On 20 th October 1998 Mr Gillespie sent a fax to the Defendant about the project. The document includes the following: "The equity structure will be a significant factor for the venture capitalists may consider it not unreasonable for [Mr Robinson] to have at least as large an equity stake as any other investor. I know that this is a sensitive point for you which we will need to discuss further". Mr Millar did not write this letter, but he had had a conversation the previous day with the Defendant, and he was aware that the Defendant was hoping for a reasonable equity share for himself and the two "introducers". It was not Mr Millar's impression that there was a contractually binding agreement as regards shares in the company between the company and the two introducers. But his information came from the Defendant and he had no personal knowledge. Mr Millar expressed his views on the practicality, or as he would say the impracticality, of any such agreement given that he share of equity available for any person outside the day to day management of the company would have to be negotiated with any private equity investor. But that view is premised on the assumption that any such agreement between the "introducers" and the Defendant had been made in contemplation of seeking funding from venture capitalists. That was not the position in this case, as I have stated above. Before October 1998 there had not been any discussion between the Defendant (or Mr Galliers-Pratt) and the Claimant and Mr Brunnock, of seeking of funds from venture capitalists. By this time the Claimant and Mr Brunnock were becoming seriously concerned. On 26 th October 1998 they wrote an email to Mr Pound. It read as follows: "As you know myself and Robert have instigated and been involved for over a year in this project. Rupert and Nigel's involvement with this idea was on their assurance of their and their Middle East contacts sourcing easy finance. Given Nigel's failure to raise the funds from Oman, and their lack of recent experience in raising monies in London we're concerned the project will fail through the time constraints that Venture Capitalists operate under if they are not approached at the right level. Our financiers have known about and expressed great interest over the past year in the Corporate Veterinary Market. They were not officially approached on Nigel's insistence and because of his confidence in Oman. Also because of this we have not even met Bruce or seen a full business plan except for the failed prospectus. We would like to be in the position to present both Bruce and yourself to these investors and have the business model available to shorten the due diligence process. In order to facilitate the raising of the required monies we need a meeting as soon as possible. We fully appreciate your involvement and now just wish to see it completed and profitably go forward. I look forward to hearing from you. Regards Steve and Robert" Mr Pound responded an hour later by email addressed to Mr Brunnock and the Claimant: "Due to the way this was presented to me at the beginning it appeared that Rupert (whom I have not met) and Nigel were controlling the fund raising efforts. It became difficult for us to deal with anyone other than Nigel who had apparently taken over. However, Bruce and I are interested only in a viable project and Bruce has been offered a package by Nigel on that basis. My inputs (not inconsiderable) have been in an effort to get this project up and running in time to acquire the Barton practice. Currently Bruce is dealing with Nigel's contacts at Arthur Andersen. I have some experience with this organisation and they are not cheap although apparently very effective. The questions we need to address are these: 1. Is the AA project going to raise the cash in the required timeframe? 2. What is the position with Bruce in respect to his package and his future role? He has put a lot of personal effort into the business plan but all through Nigel and therefore the plan is Nigel's. Bruce has given freely of his time so his inputs are his copyright but there are other elements to the plan. It contains information on financing which neither Bruce nor I would claim any competency in. The background of the plan is based on Anval's input which was commissioned and paid for by Nigel. Whilst I am aware that you two initiated this process, we need be cautious about how we proceed to be sure we do not alienate Nigel or indeed breach his trust. 3. Bruce is reluctant to make any investment in this project himself. He is taking a risk with his career by not taking a secure position with a PLC (he has a number of offers). Do your financiers expect him to put up much of his own cash? 4. How quickly can you put the financing together? 5. Where will Nexus sit if you proceed on your own question? (we do have our own financial controller available). Bruce has been in further discussions today so we may have some movement. I am happy to meet up with you and I am sure that if it is the most secure way forward Bruce will be happy to join our discussions whilst respecting his role with Nigel. Give me a call tomorrow". In October it was reported in the Veterinary Press that VPI started trading, financed by Nat West Development Capital and the Bank of Scotland. In October and November 1998 it is clear that Mr Pound felt himself in a difficult position. On 4 th November he emailed Mr Brunnock saying that he did not think it would be appropriate to use what he had for any fund seeking purposes. He added: "Bruce tells me that he has worked with Arthur Andersen to prepare a better quality document and I have suggested to him that he ensures that he has a minimum of shared copyright to it as he has put a great deal of effort into its preparation. If AA are not able to raise the funds quickly then we could use this document for presentation to A N Other". On 10 th November 1998 Arthur Andersen wrote to the Defendant. They said they had promised on 20 th October to report back regarding a "go/no go decision on CVS", and this is what they did. The answer was Go. Much of the letter is concerned with the terms under which they would be interested in taking the project further. The deal would be treated as raising £10 million pounds of funds. At a rate of 2%, which they refer to as the market rate, Arthur Andersen were asking a fee of £200,000 fixed. Most of this would be payable on completion with some consideration to the timing of drawdown. But if a venture capitalist were not to support the proposal they required what they called an abort fee, which would equate to the lower of £20,000 and the amount of time expended to date. Arthur Andersen had indicated that they had had exploratory discussions with two venture capitalists both of whom wished to meet the management to determine for themselves the attractiveness of a deal. One of these firms was NSP. At the start of the letter they identified a number of key issues one of these was maintaining Mr Robinson's commitment to the deal. The second is as follows: "We are still concerned that the [venture capitalists] will be very uncomfortable that the original quote "introducers", non operating management, who are no longer associated with the transaction, should participate to such an extent in the sweet equity. I understand you need some mechanism to reward them and this could comprise of some form of shares but at a much lower level, a "finders fee" or cash bonus on exit. I believe the principle I raised in my earlier fax, that of Bruce receiving not less than any other members of the management team is still valid. Obviously you will want to behave absolutely correctly in proposing any arrangement to the original introducers. Before posing a particular solution, it would be helpful to understand the basis of any agreement in place, and what elements are negotiable. The nub of the matter is that if the [venture capitalist] will not back CVS (or leave sufficient "room" for it to be attractive to you, Harry and Bruce) then the introducers will get nothing anyway". This fax clearly demonstrates two things. First, the Defendant was concerned to reward the Claimant and Mr Brunnock. Secondly, Arthur Andersen had been given to understand, as I find by the Defendant, that they were no longer associated with the transaction, whatever that might mean. Unfortunately, the suggestion made by Arthur Andersen in that letter was not taken up: the Defendant did not himself investigate the basis of the agreement which Mr Brunnock and the Claimant alleged to be in place, or what elements if any were negotiable. If he had done this, or if he had communicated to Mr Brunnock and the Claimant the discussions he was having with Arthur Andersen about their reward, the subsequent dispute might not have become as bitter as it has. The Defendant sent a copy of Arthur Andersen's fax to Mr Hyman, but not to Mr Brunnock or the Claimant. Mr Hyman's negotiations with Bank of Scotland were not making good progress. On 12 th November 1998 they enclosed an amended summary Terms and Conditions which again did not constitute an offer or representation that facilities would be available. The figure had been reduced to £3 million. The Defendant responded on 17 th November to the Bank stating that the letter was most helpful. On the same day the Defendant wrote to Mr Terry Smith at Collins Stewart. He was still hopeful that Collins Stewart might be prepared to undertake raising funds with a number of institutions. At about this time in November 1998 Mr Brunnock and the Claimant requested a meeting with the Defendant and were invited to his home. The purpose of that meeting was to discuss new avenues of financing on which they had ideas. The Claimant states that he mentioned a couple of stockbrokers including Collins Stewart. The Claimant states that he told the Defendant not to go to Collins Stewart because they were already aware of the project through Mr Poole. The Claimant states that it was subsequent to this meeting that he received the call from Mr Poole saying that Mr Poole had seen the Confidential Placing Memorandum dated September 1 st 1998. It seems to me likely that the meeting with the Defendant was therefore somewhat earlier than the Claimant recalls. The date itself is not significant. The Claimant and Mr Brunnock state that at the meeting the Defendant said "I have got Robinson and that is an end of it". They say they were shocked and went out to discuss the matter together over a coffee. They understood that expression to mean that the Defendant was saying that the relationship with Mr Robinson was a relationship with himself, and that in effect gave him control of the project. The cross examination of the Claimant and Mr Brunnock proceeded on the footing that they should have been pleased to hear what the Defendants said because what it meant was that the Defendant had secured the services of Mr Robinson, which should have been good news. That seemed to me to be unrealistic. As the e-mail of 26 th October show, they knew Mr Robinson's services had been secured. Their concern at this stage was, amongst other things, that they had not met him, and were not in a position to introduce him to investors. The Defendant said in evidence that Mr Robinson was a free agent, but that he would have said at the meeting that he was paying Mr Robinson. The Defendant agreed that from a practical point of view, he was firmly in the driving seat. On 17 th November 1998 there occurred the second communication direct from the Defendant to Mr Brunnock in writing. It is an email enclosing a spreadsheet. Mr Brunnock replied on 26 th November. The printout of his email reply is missing some text. He expresses the hope that meetings have gone well with the two Venture Capital Houses, so he had by that time been told of NSP and 3i having expressed interest. But he had also indicated to the Defendant that he was contemplating alternative investors, because he says "before a list of alternative investors can be introduced to the project we require more……" He then raised a number of questions in respect to the spreadsheets he had been sent. It is clear that the spreadsheets relate to venture capitalist holdings and so that they were a version, at least, of something prepared by Arthur Andersen. He asked questions about Arthur Andersen's expectations and assumptions in relation to certain matters. One question is "what is the shareholding structure on a given VC/management split of say 50/50". There is more than one version of what Arthur Andersen prepared in the trial bundle. I have not been asked to consider any of them in detail. They appear to me to set out the project in generally similar terms to the way it had been set out from the start. The presentation, of course, is quite different in appearance and in detail. The first acquisition is identified as Barton with an effective PE multiple of 6.7. It is said that the model assumes that the acquisition PE multiple of 8 will be achieved in subsequent cases. The exit at 5 years is still the same "planned trade sale or floatation at attractive exit multiple". That is on anticipated turnover of £38 million and operating profits of £5 million by that time. The source of some of the figures continues to be identified as Anval. On 8 th December 1998 Arthur Andersen wrote a letter setting out their terms of engagement and addressed it to the Defendant, Mr Robinson and another person, whose name does not recur, and who was expected to be the finance director. Mr Robinson was concerned at the liabilities he was expected to undertake if the terms proposed by Arthur Andersen were accepted and these were negotiated by the Defendant with Mr Millar. By 21 st December Mr Brunnock and the Claimant were becoming seriously concerned. Mr Brunnock met a friend of his, a solicitor, to discuss a matter in which he had just made a substantial investment at this time. He took the opportunity to mention the vet of project, and set out what he called the "chronological basis of the undertaking". This is the first draft of the document from which paragraphs 5 and 12 have already been quoted. The last three paragraphs referring to the Defendant read as follows: "He then stated the monies would not be underwritten but would definitely be available by 1 st October 1998 after his visit to Oman, this did not happen and communication deteriorated further. Using [Mr Foster's] surgery as a template he approached Arthur Andersen to produce a business plan without [our] knowledge or approval. He has ignored repeated phone calls and emails and has refused to answer any of our questions. Furthermore we have been consistently promised the AA report but have never received it even though we were willing to raise the monies on our project". On the same day 21 st December 1998 Mr Brunnock sent an email to Mr Pound. It read as follows: "We are having a major communication problem with Nigel Cayzer, he has consistently failed to provide information he has promised. I was wondering if you could send a copy of the presentation material and the shareholding structure. I hope the meeting with 3i goes well and wish you a very Merry Christmas…" At about the same time the Claimant spoke to Mr Pound by telephone. Mr Pound replied promptly to Mr Brunnock on the same day suggesting that he have a word with the Claimant. He added "I am aware of the difficulties with Nigel but I also have a problem because he is actually paying up front for part of the Andersen costs". On 23 rd December Mr Pound wrote again by email to Mr Brunnock. The meeting with 3i had been disappointing. The email continues: "As I told Robert I have now received a copy of the full plan but as Nigel has paid for some of AA's costs and has committed to the rest it is difficult to send you a copy (talk to Robert!!). However Nigel is expecting to get a firm offer any day and when he does I will put pressure on Nigel to get together with all the team (you and Robert plus Geoff [Parkin] and John [Foster]) to discuss the way ahead." I would keep pressing him for the report. In fact if I was in your shoes I would put your request in writing reminding him of the fact that this initiative is yours. Then if he refuses you have something tangible to act upon. I will be ringing Robert later to bring him up to date with yesterday's meeting". On 14 th January 1999 the Claimant received some information. To do so he had to sign the following document, which was witnessed by Mr Pound: "1. I hereby acknowledge receipt of the "Financial Model" and "Business Plan Presentation" for Consolidated Veterinary Services Limited (herein after called CVS). I understand that I have been made privy to these documents in good faith as a founder member of the team who initiated the establishment of Consolidated Veterinary Services Limited and in that capacity will use the documents only for my own information (except and insofar as agreed under (2) below). I hereby not to disclose either the whole or any part of these documents to a third party without the express agreement of either Nigel Cayzer Esq., or Arthur Andersen Corporate Finance Group. 2. Notwithstanding (1) above as a founder of the CVS team I am at liberty to discuss the contents of the documents with other founder member Steve Brunnock but will not make any additional copies and will undertake to ensure that the proprietary rights over this documents namely those of Nigel Cayzer and Arthur Andersen, are fully respected and protected." Arthur Andersen were the authors of the documents, and the terms of engagement of Arthur Andersen (finalised on 12 th January 1999) had incorporated a confidentiality clause, by which it had been agreed by the parties to that contract that any advice was provided by Arthur Andersen solely for the purposes of the project and was not to be used or relied on for any other purpose, or disclosed to any other person, without prior written consent. It is not clear what "proprietary right" the Defendant might have been entitled to claim against the Claimant. On 30 th January 1999 Mr Pound e-mailed Mr Brunnock and the Defendant. He reported on a telephone call he had had with the Claimant. The Claimant had reported to Mr Pound that he and Mr Brunnock had talked to Collins Stewart through one of the Claimant's contacts. Mr Pound was concerned that there was a lack of co-ordination in these approaches that might cause confusion. THE PROJECT COMES TO FRUITION On 5 th February 1999 there was a breakthrough. NSP wrote to Mr Robinson submitting terms and conditions upon which funds managed by them would be prepared, subject to due diligence, to invest up to £4 million in "a new company (CVS)" to fund the acquisition and development of veterinary practices in line with the business plan dated 8 th December 1998. Subject to contract, NSP were prepared to subscribe £4 million in the form of a secured subordinated loan stock and preferred ordinary shares, the terms of which they set out. The shares were to be convertible into Ordinary shares representing 65% of the full diluted share capital upon sale or floatation. It was assumed that management would invest a total of £250,000 in CVS and, inclusive of any share option scheme, would be entitled to 35% of the ordinary share capital. The letter in particular stated "We need to clarify the size, nature and terms of Nigel Cayzer's investment and role in the company particularly with that of the executive management team". NSP were looking for an internal rate of return of 35%. From 5 th February 1999 the Defendant emailed Mr Pound saying: "Will you please talk to me before passing on any further information to Brunnock and Beddow". The Defendant explained in evidence that this was because the Arthur Andersen report was confidential. It may have been confidential to Arthur Andersen, according to their conditions of engagement. But the suggestion that that precluded disclosure of it to Mr Brunnock and the Claimant fits poorly with the acceptance that they were members of the team, with an entitlement (albeit only moral) to a share of the equity. It also fits ill with the point made on a number of occasions, for and by the Defendant, that if they were not satisfied they should have introduced a funder themselves. It is hard to see how they could do that (short of starting a wholly new project) without being in a position to tell the prospective funder what the current position was. In any event, with the relationships within the team promoting the project as strained as they had now become, it was not reasonable to expect the Claimant and Mr Brunnock to invite a new funder to look at the project. On 8 th February 1999 Mr Pound replied to the Defendant as follows: "I note your request for me to talk to you before passing information to Brunnock and Beddow. I am entirely happy for you to communicate all information to these two and for me to stay out of the loop. However, they are pursuing me constantly because they claim to receive no information from you at all. As you will recall, my involvement in CVS came through Brunnock and Beddow. I met you some time later. I can understand why they expect to be kept informed of progress. I am very aware that but for you this project would not have succeeded. Both the energy and cash you have expended have got us to the present position. Last week I spoke to Brunnock, who is much more the professional of the two and reminded him of what you have done. This is probably what prompted his email to you. I also asked him to keep a lid on Beddow's who was getting very excited about being kept in the dark. I think we need to be very careful. We cannot afford to have them creating a storm with any of the potential investors. Beddow is the risk and I find him very difficult to handle. I am almost tempted to suggest that we ignore them and proceed under "UDI". However, there are two risks. The first is the reaction of the investors if they find out we have a skeleton in our cupboard and the other is with Barton. John Foster was also brought in by Brunnock and Beddow and it was they who initiated the discussion about purchasing his practice. John is an honourable man and he is in regular contact with Beddows (as is Parkin). For the sake of peace all round we must handle this professionally. I will not be informing them of any further progress but I would like this matter resolved once you get back". On 17 th February 1999 Mr Hyman wrote to the Defendant about his fees as follows: "With regard to our fees: we performed a great deal of the modelling work and co-ordinated the production of the information memorandum. We have also introduced BOS as a funding partner. I would like to suggest a fee payable in cash and equity in the new company for the modelling work and preparing the prospectus a fee of £25,000 and for the introduction of BOS a fee of £50,000 (approximately 1% of funds raised). If these amounts were acceptable then we would take up to one third of the fee as equity in CVS". On 18 th February 1999 Arthur Andersen received a letter from a second financial institution expressing enthusiasm to support the CVS project. On 19 th February 1999 Arthur Andersen responded to NSP's letter of 15 th February. Under the heading "equity terms" they wrote that they had received offers of support from two other equity providers on the basis of which they made a counter proposal to NSP. This included: "Opening equity split of 55% Nash Sells, 45% Management/ Investors Once Nash Sells has achieved a target IRR on funds invested of 35% additional equity alone or for shareholders will be split in a ratio of 40% to Nash Sells, 60% to Management Team". The letter included in the same section the following passage: "Based on the financial model and an exit in year 5 these equity terms represent an IRR of 50.2% to Nash Sells, with a final equity split of 46.4 % to Nash Sells and 53.6% to management. Funds returned to Nash Sells on exit are c. £19.4 million … "Investors" includes Nigel Cayzer, Harry Hyman and some small involvement for two individuals who generated the idea initially". On 26 th February 1999 NSP prepared a draft proposal. Under the heading "Board Composition" this provides that the board should include Mr Robinson, Managing Director, Mr Pound, Finance Director, Mr Nash as Non-Executive Chairman, a Non–Executive Director representing NSP and a non-executive director as an "investor" representative. "Investors" again is defined as before, namely the Defendant, "Mr Hyman and the two individuals who generated the idea initially". This proposal was put forward formally on 1 st March 1999. On 2 nd March 1999 Arthur Andersen wrote to NSP about a number of matters including pre-incorporation expenses. They wrote that such expenses had been incurred both by the Defendant and Harry Hyman, and that they would expect that reasonable costs incurred should be reimbursed on completion. The Defendant notified a total of £46,448.89. This was made up as to £10,402.05 by Anval, £2,000 paid to the person who had been intended to be Finance Director, and all but a small part of the balance remuneration paid to Mr Robinson up to March 1999. Also on 2 nd March 1999 Mr Hyman wrote to the Defendant thanking for the offer letter which he had been sent from Nash Sells. He ended the letter saying: "In addition once you have returned from Muscat I think we should sit down and agree the level of fees that Nexus will be entitled to following our previous fax and how the sweet equity is going to be divided". At about the same time Mr Hyman put forward a draft proposal headed "Veterinary Investment Properties Limited". This was to be a specialist property company to be set up to acquire on a capital purchase and leaseback basis the properties associated with veterinary practices which were going to participate in the consolidation of the industry through corporate entities. On the relationship with CVS the draft states that VIP has negotiated the right of first refusal the purchase and leaseback of all the veterinary properties acquired by CVS or occupied by veterinary practices acquired by CVS. On 9 th March 1999 Mr Hyman wrote to the Defendant again, referring to the work done on the business model and the introduction of the Bank of Scotland. The letter continues: "As discussed we would like to take up any 'sweet equity' and we are quite comfortable with the notion of our fee being capitalised in this respect. On the numbers which we discussed yesterday which I, of course, understand are only first indications at this stage a 4% stake could be made available to Nexus Structure Finance Limited which would involve a cost of £28,000. On the basis that our fees for preparation of the model and the introduction came to at least that, we would be happy to proceed. We would also wish to be represented on the board as a non-executive director and although I understand the position with regard to fees here, I share your view that the company should not get free access to substantial amounts of my time without paying for it". On 26 th February 1999 revised terms subject to contract were agreed for the acquisition by CVS of Barton Veterinary Hospital, although the consideration remained at a figure of £830,000. At about this time the Defendant invited Mr Brunnock at Wilton's restaurant in Jermyn Street. Mr Brunnock describes it as a relaxed pleasant lunch at which various matters were discussed. No one suggests that any agreement was reached. According to Mr Brunnock, the Defendant stated to him that he was still not sure what the final shareholding was to be, but that it would be equitable. According to the Defendant, he made it clear to Mr Brunnock "that the allocation of equity was a matter for NSP, … a lot of water had passed under the bridge since I had first spoken to him and Beddow in June 1998 and that their position was not strong… that I would do what I could to obtain some equity for them". I accept both of these two accounts of the lunch. On 18 th March a meeting was convened at the offices of Arthur Andersen. Present were the Defendant Mr Hyman, Mr Gillespie and others from Arthur Andersen, the Claimant and Mr Brunnock. The Defendant informed Mr Millar before the meeting that he had informed the Claimant and Mr Brunnock of the substance of the heads of terms that had been agreed (or were close to being agreed) with NSP and that his indication of the equity to be received by them had been received badly. At the meeting one of the Arthur Andersen team explained what had been agreed with NSP but most of the conversation was between the Defendant and the Claimant. There is no dispute that the Claimant was very angry and upset indeed. He was told that he would be receiving a shareholding of between 2 and 3% to be shared between himself and Mr Brunnock. Mr Brunnock was also very upset. He considered this to be contrary to their agreement. Mr Brunnock thought that there might be room for manoeuvre by negotiation. But he could not afford to fight the matter through the courts and felt he was trapped. The Claimant, on the other hand, said he would consult his lawyers, or sue, or words to that effect. The meeting was highly confrontational and ended with no conclusion reached. Mr Brunnock wrote a note of the points at the meeting. His bitterness at the share of the equity offered is apparent. The note, which is brief, includes a number of the matters in respect of which he and the Claimant had contributed to the project going back to 1998. There is a paragraph which reads as follows: "Rupert's statement that it would not be worth considering unless we received 6 – 7% each, the only reason that Nigel is involved is because of my connection to his brother and the "promise" that the Oman Investment Group would write a cheque and would be underwritten". On 22 nd March the Defendant wrote to Mr Foster confirming an invitation to him to join the Veterinary Advisory Board of CVS. In addition to other remuneration the letter offers to make available to him one half of 1/2 % of the initial share capital of CVS at a price of £3,780. On 22 nd March 1999 Mr Brunnock emailed to Mr Pound a statement of his and the Claimant's regarding CVS inviting his comments before Mr Brunnock contacted the Defendant. They claimed to have an oral contract which they required to be honoured. Attached was a letter to Mr Pound which sets this out. It reads as follows: "A new issue/new business, particularly in a start up relies on consolidation, is basically enabled by five undertaking: (1) The idea. (2) A board of directors to implement the business strategy. (3) The first acquisition that enables the proof statement of the business plan. (4) The business plan. (5) Capital raising. What can be seen by the chronological order of events in the appendix is that Robert and I were responsible for the majority of criteria needed to successfully launch a new business. This is not adequately rewarded by a 1- 1½% position each, as obviously we would not have been prepared to give away the project for 3%. Furthermore we were both more than willing after completing the first three stages to be actively involved with the final two stages, particularly as we had open commitments to raise monies, but after the instigation of the deal we were effectively snubbed. The crux of our position is thus to have our oral contract honoured and be put on an equal footing, particularly as Nigel, his brother, and Harry Hyman [were] more than willing to walk away from CVS twice through not understanding the dynamics of the industry. I realise that this puts you in a difficult position, but would appreciate any help in arguing this position with Nigel before taking any other action." The appendix attached is substantially the document which Mr Brunnock and the Claimant had prepared and shown to his solicitor friend in December. One change is the addition to paragraph 5 of the words "consequently committing to an oral contract". The chronology sets out the Claimant's involvement with the dental project in which Mr Brunnock on behalf of GFM. It refers to the Claimant's approaches to the RCVS, to their joint decision to raise £2 million and to purchase up to four surgeries, and Mr Brunnock's approach to Mr Galliers-Pratt to back the project for £100,000 that is paragraphs 1 to 4. There is an account of the approaches to Mr Sheridan, to Mr Galliers-Pratt becoming cold to the project when that approach failed, and to the considerable time spent by the Claimant and Mr Brunnock going around the country meeting vets to target a new board of directors with the aim of implementing the business. The chronology notes that this was achieved and introduction was effected to Mr Foster through Mr Parkin, who also introduced Mr Pound through whom Mr Robinson was found. The note records that the monies that Mr Galliers-Pratt stated were "underwritten" were not raised, that the Defendant then took over as liaison with the Omani Investor Group, that he met Mr Robinson, agreed that there would be a meeting between Mr Robinson, Mr Brunnock and the Claimant, but that this did not happen. Despite repeated requests no meeting occurred "although Bruce agreed to join our project" (emphasis original). Mr Brunnock and the Claimant record that it was they who had arranged the meeting at Barton on 5 th August and it was their calculations and valuations, not the more pessimistic ones of Anval, which had proved the basis of the acquisition of that practice. The note goes on to mention that the Defendant had then stated that the monies would not be underwritten but would definitely be available by 1 st October after his visit to Oman, but this did not happen and communication deteriorated further. The Defendant offered to stand down from the deal but he and the Claimant decided it would be equitable to let him continue as part of "our team". The note states that the Defendant then took the unilateral decision after the Omani failure to retain Mr Robinson even though he and the Claimant could have put forward corporate financiers who were prepared to take the risk. He refers to the production by Arthur Andersen of a capital Business Plan without his or the Claimant's approval and his difficulties in obtaining a copy. He concludes by recording that at the lunch with the Defendant they were promised an equitable position. On 22 nd March, that is the same day, Mr Pound replied. He wrote to Mr Brunnock that he was unaware of some of the history set out. He continued as follows: "I recommend that you extend the report to give a breakdown of how you would expect the equity to be split. I believe the total available to us is 42.5 % not the 45% I said because we have to use some for our share options for the senior people in each acquisition. Bruce's share is 13.5 % not the 12.5 % I thought. A further 11% or thereabouts is earmarked for the other members of the Executive Management Team including Geoff Parkin and John Foster. The remainder is what I think you should refer to. Of course you can challenge the executive allocation but Nash Sells have been responsible for this allotment…something to do with concentrating our minds!! If you don't address the share split the document will read too much like a protest. I think that if you can keep the tone more factual than critical it will also encourage a more sympathetic… [illegible] For instance in 14 I would have worded it more like this…. Nigel Cayzer was doubtful that a deal could be financed based on a business model prepared in conjunction with Harry Hyman … [illegible] was based on a report commissioned from Anval. There was a lack of understanding about … [illegible] practices were priced which was corrected by us demonstrating our pricing model. A price for Barton was then agreed…. or something similar. I leave it up to you. Nigel is aware I have received a document but I have not discussed the contents. I have told him you will be sending it to him later today. Once he receives it I will talk to him about your comments". Mr Brunnock did alter the draft, and paragraph 14, in the way suggested and faxed it to the Defendant on 23 rd March 1999. Mr Brunnock's letter to the Defendant was also altered in accordance with Mr Pound's advice in that in the second last paragraph of the letter, referring to the oral contract, has added to it the words "that is a 50% share of the promoters allocation, thus 4.5% each", those words being added at the end of the paragraph. The letter from Mr Brunnock to the Defendant also includes in the main paragraph, after the reference to 3%, the words "we have given you all our information and contacts on the basis of our agreement". The last paragraph is quite different from the version to Mr Pound, it reads: "I realise that the relationship between you and Robert is 'difficult' but I am sure we can reach an amicable agreement. Furthermore we would be happy to introduce the project to our established contacts in the debt market". On 30 th March 1999 the Defendant e-mailed to Mr Pound a draft of the letter (which I have not seen) to be sent to Mr Brunnock. He was concerned as to whether it struck the right note and asked to discuss it. Mr Pound e-mailed back as follows: "I have read your letter to Brunnock. Did you have legal opinion and has it remained unchanged in that they have no 'legal' rights? Assuming this to be the case the only comment I would make is that they will contend that you have effectively kept them out of the development of the business over the past seven months. You and I both believe that they could have asserted their position if they had wished and sat on your doorstep if that was the only way to 'resume control'. Their isolation (their claim) is to some extent true but as you rightly said at the time there was little to talk to them about until funders were found. I think it might be better to focus on the absence of any well prepared business plan with exit strategy, five year projections and cash flow forecasts as a means of emphasising the weakness of their claim, thereby justifying the concentration by you and others in making up for this deficiency before we could obtain successful funding. You may wish to state that this was done without any input from them rather than imply that they were not active out of choice. .. " The letter that was in fact sent on 31 st January to Mr Brunnock was not from the Defendant, but from Mr Pound. It read as follows: "I am in receipt of your recent e-mail addressed to Nigel Cayzer setting out the chronology of the understanding of you and Robert in respect of the current project. While there is no denying that insofar as Nigel Cayzer and his brother Rupert are concerned, you introduced to them the idea of corporatizing the veterinary industry. As far as those of us who are involved in the business in particular myself and Bruce you partially played a role of marrying up an idea with people capable of executing it. In the case of Bruce Robinson he had two offers to become involved in the corporatization of the veterinary practices, one put to him by Nigel Cayzer and another by an existing listed company. You also undoubtedly helped in the introduction of the Barton Practice although all the negotiations have been done by Nigel subject to the meeting that took place in early August. What you have not been involved in is the enormous amount of work that has taken place over the last seven months from an idea into financial models, business plans and funding which has been done by the executive management team assisted by Nigel Cayzer and Arthur Andersen. The question of the scale of your participation in the company has been discussed by the management team and bearing in mind that Nigel feels there is a strong moral obligation to recognise your early contribution by offering an equity stake in the company, we believe that by making 4% (as opposed to 3% that was discussed at your meeting at Arthur Andersen) is both fair and equitable. We can see no basis on which we believe that you will be entitled to 9% and neither ourselves nor the venture capitalists would be prepared to countenance this. I hope that you will find this offer acceptable and I look forward to hearing from you". There is no direct response from the Defendant or Mr Galliers Pratt, to the claim made on 23 rd March 1999 by Mr Brunnock and the Claimant that there was an oral contract or agreement. A revised version of the NSP offer was set out in the letter dated 2 nd March which ultimately formed, subject to some hand written amendments, the agreement signed on 16 th April 1999. It refers to CVS. In the 2 nd March version of the proposal the reference to "investors" having board representation was removed. Mr Millar explains that this was done because NSP insisted that they did not want the "introducers", or any other person whom they had never met and would not be involved in the day to day management, to have any right to share in the running of the company through appointing a non executive director. However, the 2 nd March letter does name the Defendant and/or Harry Hyman as "non-executive director(s)". Mr Millar explains this as follows. He says that in contrast to the "introducers", the Defendant and to a lesser extent Mr Hyman had been involved in working on the deal and wanted to carry on participating in the management of CVS. NSP therefore ultimately agreed to the possibility of Mr Hyman or the Defendant being appointed a non-executive director. This does not seem to me to be a satisfactory explanation. By that I do not mean any criticisms of Mr Millar. He is not to know what had passed between the parties in February 1998, nor the extent to which the Claimant and Mr Brunnock had been involved in working on the matter, nor to what extent they wanted to carry on participating. Moreover, the implication that Mr Hyman's contribution was more important than theirs, (while understandable coming from Mr Millar) is not in point, given that the Claimant's and Mr Brunnock's claim was to have an agreement honoured, whereas Mr Hyman's claim was for remuneration, the terms of which had not been agreed. Moreover, the factual comparison seems to me to be questionable. I do not wish to cast any doubt upon the claim by Mr Hyman for remuneration, and I cannot form any view as to the value of the introduction to Bank of Scotland that he effected. It is clear that by 16 th April 1999 Bank of Scotland had refused to provide any funds before the full amount of that NSP were investing had been spent. In the light of this refusal the decision was taken to proceed with the deal without bank funding in the first instance. The handwritten alterations to the 2 nd March letter reflect this. What Mr Brunnock states, without challenge, is that he had spend nine months on the project when he could have been employed at a salary of £150,000 per year. That represents an opportunity cost at least as great as the figures being mentioned by Mr Hyman. I have been given no figures for the time spent by the Claimant, Mr Galliers-Pratt or the Defendant. And Mr Brunnock and the Claimant did wish to be involved, but were not being invited to do so. It is quite natural that all concerned in this project should have discussed the value of their respective contributions as they saw them. But only the Claimant and Mr Brunnock were claiming to be parties to a joint venture with the Defendant. Mr Hyman and the others who later subscribed for shares were not making any such claim. If the Claimant's claim is well founded, then his entitlement does not depend on the value of his contribution and is not comparable with the claims of others who were not parties to a joint venture. There was no discussion at this time as to whether or not the claims of Mr Brunnock and the Claimant were well-founded. The issue was not addressed by the Defendant. On 7 th May 1999 Mr Robinson wrote to Mr Brunnock. He said he had received the e-mail addressed to the Defendant setting out the chronology, that is to say the fax sent on 23 rd March 1999. The letter states that the Defendant himself is no longer in the management team. That was no doubt true. But it was never envisaged that the Defendant should manage the business. It had always been recognised that there was the need to recruit expert managers, such as Mr Robinson. And the Defendant has since become a director. The letter shows much misunderstanding of the role which Mr Brunnock and the Claimant had in fact played. This is not a criticism of Mr Robinson who (I infer) wrote what he had been told by the Defendant. The Defendant did not write the letter himself. The letter goes on as follows: "As for those of us who will be involved in the business, in particular Brian Pound and myself, you played a role in marrying up an idea with people who had contacts who could ultimately be capable of executing a plan. Both Nigel and Brian have put this point to Nash Sells and Partners (NSP) our potential funders in requesting equity investment from yourselves. NSP's response is quite explicit in that it is not their policy to award people who are not directly associated with their investment, unless specifically agreed with them in advance. As at no time during the negotiations with NSP have you been involved with them, their current position is that they are unwilling to consider any equity investment from you. For the same reasons, I tend to support NSP's view in that the current transaction is too distant and too far removed from any discussions Nigel may have been involved in some months ago. Also the concept cannot be claimed as an original idea…. Having said this and as the potential future Chief Executive of the company, it falls to me to divide up the available equity and in considering Nigel's view that there is a strong moral obligation to recognise your contribution by offering you and equity stake in the company, I will be pursuing negotiations with NSP to make 3% available, as I believe this to be both fair and equitable. I can see no basis to justify arguing for a larger holding. I am prepared to support this level of investment but in order not to waste valuable time I would appreciate your acceptance of this as a full and final settlement equity position, obviously subject to NSP's agreement. I need your answer by return prior to concluding negotiations with NSP and the final subscription agreements". So far as NSP were concerned, it may be that it fell to Mr Robinson to divide up the equity, but he did not, of course, have any status to decide the rights of the Claimant and Mr Brunnock as against the Defendant. The proposal to make 3% available "as a full and final settlement of the equity position" was not put forward as an offer made on behalf of the Defendant. Also on 7 th May 1999 NSP had written to Mr Robinson. The letter is headed CVS (UK) Ltd. It is the earliest document to which I have been referred which mentions that company. I have heard no evidence as to the reason for the use of this name. The letter states: "With regards to the discussion on promoters holding equity stake in the above company and in particular SJB Brunnock and R Beldons [sic], NSP have received no information or influence or had contact with them. It is not our policy to reward people who are not directly associated with our investment unless specifically agreed with us in advance. I have been involved in this project for over three months and my colleagues over five. At no time did we believe any of the efforts to convince NSP to become a Venture Capital partner in this project has involved them. I am therefore unwilling to consider an equity investment by them. I know Nigel had tried to convince us of their involvement but the current transaction is too distant and too far removed from any discussion he may have been involved in some months ago, in addition we have looked at similar propositions for different UK and US veterinary groups to make us know the idea is not proprietorial". There is no doubt that the Defendant had made some efforts. But these efforts had not extended to curing what appear to have been two important objections to Mr Brunnock's and the Claimant's claim, as viewed by NSP: the fact NSP did not have full information of their role, and had not met them. On the contrary, the Defendant had kept the Claimant and Mr Brunnock away from NSP. CVSUK was eventually incorporated on 17 th May 1999 with an issued share capital of 380,000 ordinary shares, 620,000 preferred ordinary shares, and 592,105 preferred shares, all credited as fully paid. The directors were Mr Robinson, Mr Pound, the Defendant, a finance director, and two nominees of NSP. Before incorporation a list was prepared of those who should subscribe to the 380,000, shares representing 38% of the ordinary shares, for which the subscribers were to pay £250,000. As at this time the percentages were as follows: Mr Robinson 12%, the finance director 4%, Mr Pound 5%, a Ms Waterman 1%, Mr Parkin ½ %, Mr Foster ½ %, Messrs Brunnock/Beddow 3%, Mr Hyman 2% and "promoters" 10%. Following the Claimant's rejection of the offer made to himself, the Subscription Agreement, Schedule 3, shows that the finance director ultimately subscribed to 4% (an additional 1%) and each of Mr Parkin and Mr Foster subscribed to ¾ % (an additional ¼ %). Articles of Association were drawn up by SJ Berwin. There appears to have been some pressure upon the Defendant. In a document prepared by Tina Waterman and e-mailed on 19 th July 1999 there is another equity split followed by the words "the Brunnock and Beddow fraction is still to be resolved but hopefully, Nigel will not allow them more than 3%". I have heard no evidence as to who Ms Waterman was, or what she had done to satisfy NSP that she should be a shareholder. On 20 th July 1999 Mr Robinson wrote to the Claimant a letter setting out much the same points as he had written in his letter to Mr Brunnock on 7 th May 1999. It is not an offer on behalf of the Defendant. The letter is headed "CVS (UK) Ltd" and concludes: "As far as your claims are concerned, it is the company's view that you do not have any legal entitlement to any equity in the company. Nevertheless, without prejudice to that contention, at the insistence of [the Defendant] and on the grounds that there is a moral obligation to recognise your initial contribution, I have persuaded NSP to permit you an allocation of 1.5% of the equity. In my view and that of the Board, this is more than fair and equitable. The proposal is a non-negotiable proposal and accordingly, I look forward to receipt of your acceptance of this offer in full and final settlement of your equity position by signing the attached document …" On 27 th July 1999 there is a fax from the Defendant to Mr Galliers-Pratt. Headed "CVS" it reads as follows: "In connection with the above will you please transfer the sum of £17,142.80 to: [and there is given the address of a Bank in Liechtenstein] Account name: Gulf Securities Corporation, Account number: … GBP Account. This can be done by telegraphic transfer or Swift Please let me know when this has been effected" The Defendant explained this as follows. He said that his brother rang him saying he would like some shares. The Defendant replied that that would be difficult but that he would have to pay for them. The Defendant said that getting money out of his brother was impossible, that Mr Galliers-Pratt has not paid, and that at the time the Defendant did not think that he would pay. The Defendant stated that he told GSC that they may have to sell some shares. He did not want to re-open matters with NSP to get their consent. If his brother did pay then he would have had to speak to NSP, but he was going to cross that bridge when he came to it. Mr Jones QC suggested to the Defendant that the shares were in the Defendant's gift. The Defendant did not accept that. He said GSC had agreed in August and had paid for the 10% of the shares to which they subscribed. Mr Jones QC pressed the Defendant for an explanation of how the participation of GSC was compatible with the policy of NSP (if it was indeed their policy) as expressed by Mr Robinson and in NSP's letter of 7 th May 1999. The Defendant was unable to give any explanation which I found satisfactory. There are no documents relating to the shares taken up by Perth Business Corporation. Again it seemed to me that the Defendant was uncomfortable about this evidence relating to Liechtenstein, as he had been when asked about the fax about GSC paying Anval's bill. The Defendant also failed to give what I consider to be a satisfactory explanation of the fact that Mr Hyman subscribed for shares. Again I intend no criticism of Mr Hyman. Not knowing what arrangement existed between the Defendant and Mr Brunnock and the Claimant, he was within his rights to ask the Defendant for remuneration for the services his firm had rendered, and to do so by means of shares. The question is why the Defendant agreed to his subscribing for shares, and how the fact that he did so is to be reconciled with the alleged policy of NSP. Mr Hyman's role, so far as the finances were concerned, had been superseded by Arthur Andersen, and the proposal that he be Finance Director was no longer live. His introduction of Bank of Scotland was not a basis for the funding by NSP. And in any event, I see no distinction between rewarding Mr Hyman with shares for introducing Bank of Scotland (assuming that that was considered to be have been achieved) and rewarding Mr Brunnock and the Claimant for introducing Mr Foster and Barton, which had definitely been achieved, and was fundamental to the project, not to mention their introductions which led to the appointment of Mr Robinson and the involvement of Mr Pound and the three distinguished vets. In his evidence the Defendant said it had always been agreed with Mr Hyman that he would have a share in the equity, but I reject that. It had not been agreed at all. I accept that in principle NSP did require that some managers, such as Mr Robinson, should have shares. Once it had been decided that the funding would come from NSP it was inevitable that there would be restrictions imposed by NSP as to who might subscribe for the 38% of the shares which they did not require to be available to themselves. NSP clearly did require shares to be available to people actually managing the business. But only up to a point. The fact that Mr Hyman was permitted by NSP to subscribe for 2% of the shares, although not involved in the management of the business, shows that NSP's policy was flexible. NSP did not require that shares be subscribed by Mr Hyman. Mr Brooks was employed by NSP between 1 st February 1999 and October 2005. He was called to give evidence by the Defendant. I accept what he said, to the effect that if an argument was put up, and there was enough space (that is enough shares available) NSP would listen to argument. Examples of NSP imposing their will were that the Defendant became a non-executive director, not Chairman as had been proposed. In so far as NSP made any decision about Mr Brunnock and the Claimant, it was on the basis of the information given by, or originating from, the Defendant, who (as stated above) did not seek to introduce them to NSP. NSP were uncomfortable with Perth Business Corporation as a shareholder and accepted it because the Defendant told Mr Brooks that it was the Defendant's vehicle. A side letter was agreed which I have not seen. The Defendant told me that the effect of it was that he was appointed to the board to represent the interests of Perth Business Corporation. By contrast, in his written witness statement the Defendant stated: "I myself am not a shareholder of [CVSUK]. I was offered equity but did not wish to purchase it. With the consent of NSP, shares offered to me were purchased by a contact of mine, the Perth Business Corporation. I do not have any legal or beneficial interest in the Perth Business Corporation or the shares that it purchased". The subscription agreement is dated 13 th August 1999 and is subscribed by the shareholders identified in the list referred to above with one notable substitution. The "promoter" is identified as Perth Business Corp subscribing to 100,000 shares or 10% of the ordinary share capital. That corporation is defined in the interpretation section of the agreement as follows: "Perth Business Corp., whose registered office is at Morgan and Morgan Swiss Tower… Panama". In clause 4.2 the agreement it is provided that Nigel Cayzer should execute and deliver to NSP and the company the side letter in the agreed form. The Defendant is also identified in the agreement as giving a warranty. The persons who executed and delivered the deed on behalf of the Perth Business Corp are identified as Dr Martin Batliner, Dr Gerard Batliner and Mr Hubert Lambert. None of them has given any evidence, nor is there any document emanating from them or addressed to them in the trial bundles. But the Defendant has been providing consultancy services to GSC through them for many years. There must have been some arrangement between the Defendant and Perth Business Corporation pursuant to which they stepped into his shoes as shareholder and he was appointed to the board of CVSUK. But there is no evidence of what this arrangement was. On 5 th August 1999 Mr Robinson wrote again to the Claimant referring to the proposal in his letter of 20 th July and setting a final deadline for return of the documentation duly completed. The Claimant did not sign. The documentation was a form of application for 15,000 ordinary shares of £0.01 in CVSUK for £12,857. Mr Robinson's proposal is made on behalf of CVSUK, and not strictly on behalf of the Defendant. There has been a suggestion that the Claimant could not in any event have raised the money. The Claimant is legally aided. Apart from that I have no information about his resources. Even if it were the case (and I make no such finding) that the Claimant did not personally have that sum of money to hand, it does not follow that he could not have raised the money. I reject the suggestion that he was unable to subscribe for the shares for financial reasons. THE CLAIMS IN THIS ACTION On 17 th August 1999 solicitors acting for the Claimant wrote a letter before action to the Defendant. These proceedings were issued on 21 st December 2000. The Particulars of Claim were amended on 13 th June 2001. They allege a number of causes of action. By the end of the trial there remained four alternative bases upon which the claim was still advanced. The first basis of the Claimant's claim is an agreement (set out in paragraph 18 of the Amended Particulars of Claim) made on or by 11 th February 1998, as follows: "The Defendant (by [Mr Galliers-Pratt] his agent) and the Claimant and [Mr Brunnock] agreed to engage in a join venture pursuant to their agreement ("the February agreement") whereby: (i) In return for the introduction to the Claimant's scheme and the Claimant's and [Mr Brunnock]'s continued involvement therein, [Mr Galliers-Pratt] and the Defendant would obtain £5 million which would be underwritten by them and would further obtain debt finance in the sum of between £5-10 million pounds (and were able to provide such investment); (ii) [Mr Galliers Pratt] and the Defendant would use a company as the vehicle to launch the Claimant's scheme, with the aim of floating the same on the stock market or trade sale, of which the Claimant and [Mr Brunnock] would be entitled to a one quarter share each of the equity available after the equity transferred to the investors, such shares not to be less than a 7% stake each: (iii) The Claimant and [Mr Brunnock] should continue to develop the scheme and assist in the establishment of a board of directors for the company". It is further pleaded that there were implied terms that all parties would act in the utmost good faith towards one another and that each would keep the other fully and accurately informed of progress and other matters. Also alleged is an implied term that if the available equity fell below 30%, the share available to both the Claimant and to Mr Brunnock might fall below 7%, but only with their express agreement. The second basis of the claim is, in the alternative, as pleaded in paragraph 21 of the Amended Particulars of Claim. It reads as follows: "If, which is not the Claimant's primary case, the February agreement fell short of a binding agreement to progress towards the establishment of a company with the shareholdings and investments set out above, then the parties nonetheless entered an agreement in the nature of a joint venture to the effect that each would work towards the development of the joint venture ("JV") and the establishment of such a company. There were implied terms in the February agreement to the following effect … [that is to the same effect as in the alleged February Agreement and]: (iii) each would hold confidential information of and about the JV…." At the start of the trial it appeared there had been some confusion on the part of the Defendant's advisers as to the agency that was being pleaded. In paragraph 15 of the Amended Particulars of Claim it had been pleaded that Mr Galliers-Pratt "who was the brother of the Defendant held himself out as his agent and as having the authority to speak for the Defendant". Mr Adair was confused as to whether the claim advanced was to be one of actual authority or whether it was one of ostensible authority. If it was the latter, of course, it was a defective plea because for ostensible authority there has to be a holding out, not by the agent, but by the principal. Accordingly Mr Jones QC applied for permission to re-amend. It was left on the basis that I would decide that in this judgment. The draft Re-amendment produced makes clear that the basis of the claim is actual authority. Facts and matters from which this is to be inferred are set out in the draft re-amendment. These include the assertion already pleaded at paragraph 15, that that is what Mr Galliers Pratt allegedly said, and there are a list of 9 other matters relied on. This application for permission to re-amend was opposed, but Mr Adair could not point to any respect in which the trial would have been conducted differently and I could see no possible prejudice to the Defendant in allowing the amendment. Accordingly I grant permission. The third basis of the claim is, in the further alternative, an agreement allegedly made on 27 th July 1998. The case is that the Claimant, Mr Brunnock and the Defendant agreed to implement the February Agreement and/or to pursue and establish a joint venture being the Claimant's scheme as it had by the developed together with the specific terms set out above ("the July Agreement"), including similar implied terms to those set out above. The fourth basis of claim is in equity by reference to Pallant v Morgan [1953] Ch 43, as most recently explained in Banner Homes Group plc v Luff Developments Ltd [2000] Ch 373. Claims originally made for misrepresentation, breach of confidence and other causes of action were not pursued. While denying that there was any such agreement made, the Defendant also contends that there was in any event no fiduciary relationship, that the amount of shares available to the Claimant was limited to the amount offered to him by reason of the decision of NSP, that the 1 1/2 % offered to him represented his full entitlement in law (if any), that by rejecting the offer made by CVSUK he failed to mitigate his loss or waived his rights, and that by acquiescing in the appointment of Arthur Andersen he is estopped from claiming that he has suffered any loss or infringement of his rights. HOW TO RESOLVE THE CONFLICT OF EVIDENCE At the end of the argument I indicated that unless I was invited to do otherwise (and I was not) I would approach the conflict of evidence on the main issues in accordance with the guidance given in the extra-judicial writing of Lord Bingham of Cornhill in a paper headed "The Judge as Juror: The Judicial Determination of Factual Issues". This is published in "The Business of Judging", Oxford 2000, pages 3 and following, where it is reprinted from Current Legal Problems, vol 38 Stevens & Sons Ltd 1985 page 1–27. The relevant passages start at page 5 and continue through to page 15. The following extracts assist me in the task I have to perform. "…Faced with a conflict of evidence on an issue substantially effecting the outcome of an action, often knowing that a decision this way or that will have momentous consequences on the parties' lives or fortunes, how can and should the judge set about his task of resolving it? How is he to resolve which witness is honest and which dishonest, which reliable and which unreliable? … The normal first step in resolving issues of primary fact is, I feel sure, to add to what is common ground between the parties (which the pleadings in the action should have identified, but often do not) such facts as are shown to be incontrovertible. In many cases, letters or minutes written well before there was any breath of dispute between the parties may throw a very clear light on their knowledge and intentions at a particular time. In other cases, evidence of tyre marks, debris or where vehicles ended up may be crucial. To attach importance to matters such as these, which are independent of human recollection, is so obvious and standard a practice, and in some cases so inevitable, that no prolonged discussion is called for. It is nonetheless worth bearing in mind, when vexatious conflicts of oral testimony arise, that these fall to be judged against the background not only of what the parties agree to have happened but also of what plainly did happen, even though the parties do not agree. The most compendious statement known to me of the judicial process involved in assessing the credibility of an oral witness is to be found in the dissenting speech of Lord Pearce in the House of Lords in Onassis v Vergottis [1968] 2 Lloyds Rep. 403 at p.431. In this he touches on so many of the matters which I wish to mention that I may perhaps be forgiven for citing the relevant passage in full: ''Credibility' involves wider problems than mere 'demeanour' which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person telling something less than the truth on this issue, or though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so has his memory correctly retained them? Also, has his recollection been subsequently altered by unconscious bias or wishful thinking or by over much discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part'. Every judge is familiar with cases in which the conflict between the accounts of different witnesses is so gross as to be inexplicable save on the basis that one or some of the witnesses are deliberately giving evidence which they know to be untrue….more often dishonest evidence is likely to be prompted by the hope of gain, the desire to avert blame or criticism, or misplaced loyalty to one or other of the parties. The main tests needed to determine whether a witness is lying or not are, I think, the following, although their relative importance will vary widely form case to case: (1) the consistency of the witness's evidence with what is agreed, or clearly shown by other evidence, to have occurred; (2) the internal consistency of the witness's evidence; (3) consistency with what the witness has said or deposed on other occasions; (4) the credit of the witness in relation to matters not germane to the litigation; (5) the demeanour of the witness. The first three of these tests may in general be regarded as giving a useful pointer to where the truth lies. If a witness's evidence conflicts with what is clearly shown to have occurred, or is internally self-contradictory, or conflicts with what the witness has previously said, it may usually be regarded as suspect. It may only be unreliable, and not dishonest, but the nature of the case may effectively rule out that possibility. The fourth test is perhaps more arguable… It is with this in mind that I have set out the facts in such detail. MY ASSESSMENT OF THE WITNESSES While the demeanour of the witnesses is not the first priority, it is right that I should set out my judgment on this. The class of witness Lord Pearce referred to as "those who are emotional, who think that they are morally in the right" undoubtedly includes the Claimant. He gave his evidence with emotion, at times amounting to anger, but always characterised by a clear sense of grievance. So far as it is possible to judge such things, it seemed to me that this was genuine and not contrived. But I bear in mind that that can lead to the conjuring up of legal rights that do not exist. Mr Brunnock was of the opposite disposition. He spoke softly and with the care and restraint characteristic of professional persons giving evidence objectively. I found him to be a shrewd and cautious. At times he showed impatience with the repeated suggestion that he was not telling the truth, and that he would have spent nine months of his life working with no agreement when he had available the alternative of a highly paid job. These events were eight years ago, and, as with all the witnesses, there were some inconsistencies and failures of recollection on his part. No motive was ever put to him as to why he might be giving false evidence. I find no motive. No doubt the Claimant and he had been partners and were on good terms, but their relationship was no more than a good business relationship. I find he came to court to tell what he believed to be the truth, although, of course, that does not preclude the possibility that he might have been mistaken. He was the main draftsman of the note, referred to as the chronology, first prepared on 21 st December 1998, altered (as to six words) following a meeting with a solicitor friend, and more substantially as advised by Mr Pound.. That document was not prepared as a lawyer prepares a witness statement, and its purpose was not so much to give evidence as to persuade the Defendant to meet his obligations. He was making the best of a bad job, in circumstances which had not been foreseen in early 1998. I do not draw adverse conclusions from the omission on the part of Mr Brunnock (or the Claimant) until the letter of 23 rd March 1999 to allege in terms that there was a breach of an agreement. They were seeking to have an obligation (on any view a moral one) performed, not seeking remedies for a breach. Mr Galliers-Pratt appeared to me in general to be a candid witness, who had almost no recollection of the events in dispute. In respect of some of the events in question, this in itself is not surprising. The project was one which attracted his enthusiastic support for a period of weeks or months. But it was never as important to him as it was to the Claimant or Mr Brunnock. I also accept the Defendant's description of his brother as a person who sees a glass half full rather than half empty. Although his evidence was given in terms tending to understatement, which he claimed to be his normal mode of speech on business matters, his faxes to Mr Habib are in a different style. When reminded of them he was embarrassed by the optimism he had shown. It is plain that he was capable of expressing himself in terms that he might subsequently regret. I also have one important reservation about his evidence. Notwithstanding my preceding remarks, I do find it surprising that Mr Galliers-Pratt's evidence, both written and oral, so signally fails to address the "BBG" proposal to VPI. I cannot accept that he could have forgotten as much about that as he might have about the meeting on 11 th February and the preceding telephone conversation with Mr Brunnock. Even for Mr Galliers-Pratt, an offer to make an imminent payment of sums of the order of £4m is not something forgettable. I conclude that he was telling me less than the truth on that issue. And he clearly had a motive to help his brother. In setting out the history of the matter above, there are certain issues where I have already found that I do not accept the Defendant's evidence, and I have been critical of parts of his evidence. His case has varied. As presented through the letters written by Mr Pound and Mr Robinson (as set out above) his case was that he was under a moral obligation, and that he recognised the contribution of the Claimant and Mr Brunnock. He nowhere in terms refutes the claim that was being made that there was an agreement, preferring to approach the matter on the footing that he, Mr Pound and Mr Robinson were discussing with the Claimant and Mr Brunnock who had contributed what. This is consistent with his case that there was no agreement, but it is odd to see no refutation of the claim that there was an agreement. In his written witness statement he puts his case on what the Claimant and Mr Brunnock had contributed impossibly high, and in oral evidence was forced to be more realistic and just to the Claimant and Mr Brunnock. The Defendant says he had a poor relationship with the Claimant in general, although they seem to have got on well enough on the trip to Canterbury. But the Defendant respected Mr Brunnock. Mr Brunnock's e-mails of 26 th October 1998 and again on 23 rd March 1999 are clear enough. The Defendant avoided the issue in his response to Mr Brunnock, giving no response, or a response through intermediaries who had not been involved in the events in question. In his oral evidence, on the other hand, the Defendant was at times very candid. For example, his acceptance of what had been discussed with the Claimant on the train back from Canterbury, and his owning up to not have passed on to GSC the £10,400 he had been re-imbursed by CVSUK for the Anval bill. The Defendant's initial response that he would not pay the bill, followed by the mean attempt to evade the VAT and the untruthful invention of a request from "my Omani associates" show a willingness to resort to exaggerated and improper methods of advancing his own interests. My conclusion is that the Defendant's evidence is not always reliable and I must approach it with caution. WAS THERE AN AGREEMENT ON 11 TH FEBRUARY 1998 In my judgment there was an agreement reached between the Claimant and Mr Brunnock on the one hand and Mr Galliers-Pratt on the other. I accept their evidence in preference to his about the meetings and telephone calls in January and on 11 th February 1998. Mr Galliers-Pratt said what is attributed to him in para 23 above. They agreed to participate in a joint venture, which in this case meant a partnership, just as Mr Brunnock and the Claimant had previously agreed between themselves. They had a project at an early stage to which they would bring in due course a veterinary practice to be acquired and people experienced in veterinary matters to manage. He would provide the funding. At the least it was an agreement for a partnership at will with equal shares for the partners: for carrying on business together with a view to profit. It is a common enough arrangement. It includes fiduciary duties. I was referred to Murad v Al Saraj [2004] EWHC 1235 (Ch) paras 326-7, 332, which in turn includes a reference to Goff & Jones on the Law of Restitution 6 th ed para 33-001 footnote 10. Examples are also given in Khan v Miah [2000] 1 WLR 2126 at 2127; [2001] 1 All ER 20 at p23. Of course, a partnership, or fiduciary duties may not arise from a joint venture, depending upon the terms of the agreement for the joint venture. Such was the case in Button v Phelps [2006] EWHC 53 (Ch), as appears from paras 59-60. In the present case it is not suggested that there is agreement precluding the partnership I have found to exist, with its attendant fiduciary duties. The Defendant's case is that he is not a party to an agreement at all. The joint venturers promptly embarked on the activity agreed upon by preparing and then making the BBG proposal to VPI. When that failed in April 1998, they embarked upon a variant (albeit the variant that had been discussed first, that is first after the proposal that Mr Galliers-Pratt invest £100,000 had been rejected). They carried that on together, with success on the side of the Claimant and Mr Brunnock, until Mr Galliers-Pratt's activities came to an end in June 1998. This is the second way the Claimant puts his case, the agreement alleged in para 21 of the Particulars of Claim. I reach this conclusion in the light of all the factual findings that I have made. The evidence of the Claimant and Mr Brunnock is the evidence which is most consistent with contemporaneous documents, the agreed facts, and the facts that I have already found. The Claimant and Mr Brunnock have not been wholly consistent in their references to what happened, but there are no such inconsistencies as cause me to doubt their evidence. A difficulty faced by the Defendant is that the contemporaneous documents, in particulars the faxes sent to him and Mr Habib in March, May and June 1998, appear on their face to tell a story which is neither the Defendant's case (ie that there was an arrangement with the Claimant and Mr Brunnock falling short of an agreement, but creating a moral obligation), nor the Claimant's case. On the other hand, the faxes in March, May and June do evidence the Claimant being party to a joint venture being carried on by himself with with Mr Galliers-Pratt and Mr Habib. On those documents, the real question is not whether the Defendant was carrying on a joint venture to incorporate veterinary practices, but who were the parties to that joint venture. The next question is whether it was an agreement in the terms set out in para 18 of the Amended Particulars of Claim. I accept the evidence of Mr Brunnock and the Claimant as to what was said. It may have been unusual, and perhaps unwise, on the part of Mr Galliers-Pratt to offer to underwrite so large an investment. But I find that he did. The question here is not what was said, but whether it amounts to a legally enforceable agreement. Mr Adair submits that an agreement to the figures of £5 million of equity funding plus £5-10 million of debt finance, and shares of 7% of the equity of an as yet unformed company, and the underwriting of an investment the terms of which had not yet been settled, are all too vague to be enforceable. I accept this submission. Once the BBG offer to VPI had been rejected, there was no agreement as to the date by which Mr Galliers-Pratt was to obtain funding. It was then contemplated that there would be a company formed, but the Articles of Association, and the terms of the proposed debt funding of £5-10m had not been agreed. These figures were discussed, and they were figures which the parties expected to be able to achieve, but they were not legally binding terms of the joint venture agreement. THE POSITION OF THE DEFENDANT ON 11 TH FEBRUARY When the Defendant gave evidence he accepted that he had become involved in the project by 19th March 1998, and would have expected to be a shareholder in any company of which Mr Habib was to be a shareholder. He also stated that he would have been involved in advance any approach by Mr Galliers-Pratt to Mr Habib to raise funds. At the end of the meeting of 11 th February 1998 there was, on my findings, an agreement for a joint venture with Mr Galliers-Pratt which included a plan to make the proposal to VPI that was in fact made on 19 th March 1998. Mr Galliers-Pratt had had time to prepare for the meeting of 11 th February, which had been arranged in the preceding telephone call. If the proposal to VPI was to be on the agenda at 11 th February, Mr Galliers-Pratt had to have a firm idea that he would be able to raise the money. While he could have raised the money himself (if he really had to), he was not expecting to raise it himself. His options remained open, but the likely source to be approached for the money was Mr Habib and Omani investors. That meant that the Defendant had to have given his approval in advance, and that the Defendant would expect to be a shareholder in the company that would in due course be formed. The fax of 8 th June 1998 states (rightly or wrongly) that he was in fact a shareholder in the company that is said to have been formed at that time. I accept Mr Brunnock's and the Claimant's evidence. I find that Mr Galliers-Pratt did say that he was acting on behalf of the Defendant, and that he was authorised by the Defendant to say that. Accordingly there were then four partners to the joint venture. Mr Adair submitted that the position in this case was the same as that in Murray v Yorkshire Fund Managers [1998] 1 WLR 953. In that case the plaintiff had been one of a team of six people who together had prepared a confidential business plan for the purchase, investment and future running of an existing company. He had the same rights to the confidential information as the other members of the team. But because there was no agreement between the six of them (p956D), when five of them decided to use the information and exclude the plaintiff, the plaintiff had no right to stop them. The confidential information was not an asset of a partnership between them (p956E). In the present case the claim originally made that the Claimant and Mr Brunnock imparted confidential information to Mr Galliers-Pratt and the Defendant in January and February 1998 was abandoned. Little was said about any other confidential information. But the information which the Claimant and Mr Brunnock later imparted to Mr Galliers-Pratt and the Defendant, for example the fact that Barton hospital was available for purchase, was confidential (compare p956B), and was a partnership asset. Because there was the joint venture agreement, as I have found, the Defendant was not free to exclude the Claimant and use the information for his own benefit. WAS THERE AN AGREEMENT IN JULY 1998? This issue no longer arises in the light of my findings on the preceding issues. However, having found as I have that the Defendant was a party to the agreement made on 11 th February 1998, I prefer the evidence of the Claimant and Mr Brunnock as to what was said at the meeting on 27 th July. I also think that their evidence is more probable in the sense that the substitution of the Defendant for Mr Galliers-Pratt obviously raised the question of the terms on which he was becoming involved. The Defendant said in evidence that he asked his brother what terms had been agreed and was told that none had been agreed. Whatever the truth about that exchanged, it demonstrates that the question was an obvious one to be addressed. In any event, from the time that the Defendant did become involved in the project in June 1998, he was engaged on carrying on the business with the Claimant and Mr Brunnock, that is the business of incorporating veterinary practices. WERE THE CLAIMANT'S RIGHTS AFFECTED BY THE EVENTS AFTER SEPTEMBER 1998? As Mr Jones QC submitted, where one party to an agreement breaks it, the general rule is that the injured party does not have to treat the agreement as being at an end. He has a choice to keep it alive or not. On the agreement I have found, the Defendant and Mr Galliers-Pratt had failed in obtaining the funding they had agreed to obtain (whether the agreement was legally binding or not). But the Claimant and Mr Brunnock could not have claimed that he in breach of the agreement at any stage up to at least the middle of August. For one thing, as already noted, there had been no date agreed by which the funding was to be available. I find that in August the Defendant did cease to act in accordance with his duties of good faith to the Claimant. In and after August, he excluded the Claimant and Mr Brunnock from meetings with Mr Robinson, and he kept from them for many weeks the information from Arthur Andersen that they were entitled to know. He excluded them from the negotiations with the potential funders, and from NSP, which they were entitled to participate in. He sought to lay down the law, to impose upon them his own decisions, as to their rights in relation to the joint venture. Finally, he dealt with the partnership assets and rights inconsistently with their rights. When this happened, the Claimant and Mr Brunnock made their objections as clear as they thought prudent, that is in terms such that the future of the whole venture was not to be put in jeopardy. They might have terminated the joint venture, but they did not. I next consider whether the approach by the Defendant to venture capitalists was outside the scope of the joint venture agreement made in February. I find that the agreement in February contemplated funding from overseas investors, such as the Omanis, or other individuals, but it did not include approaches such as were made to Arthur Andersen or venture capitalists. That was not discussed. It was implicitly excluded, for reasons which I hope are apparent from the findings made above. The Claimant and Mr Brunnock had no need of the Defendant or Mr Galliers-Pratt for any such approach, and Mr Galliers-Pratt and the Defendant had no particular qualification for making such an approach, although I recognise that the Defendant did assume liability for Arthur Andersen's abort fee. The Defendant had no links with Arthur Andersen's corporate department, his link being on the tax side. Mr Brunnock was in his own element in raising money from institutions in the City of London, as Mr Galliers-Pratt knew well. The Claimant had his own contacts with Collins Stewart (whom the Defendant was to approach after the Omani failure). The Defendant and Mr Galliers-Pratt had little to contribute to such an exercise which would justify them having an interest in the resulting company equal to that of the Claimant and Mr Brunnock. However, once the Claimant knew that Arthur Andersen and venture capitalists were being introduced, as they did at latest by November 1998, they did acquiesce in this. They accepted it as a way forward for the joint venture. It follows from this that such rights as the Claimant thereafter had in relation to the shares in the company to be formed were rights subject to such conditions as might be properly attached to the acquisition of the shares, in this case a payment upon subscription. I have found that there was no legally enforceable agreement as to the minimum shareholdings. But if I had found that there was a legally binding agreement made in February 1998 as to there being a minimum shareholding, then I would have found that the Claimant and Mr Brunnock agreed to vary, or waived, that provision, when they acquiesced in the approach to NSP. THE EFFECT OF THE CLAIMANT REJECTING CVSUK'S OFFER The offer was by CVSUK, not by the Defendant. It was a non-negotiable offer. The Defendant could have made an offer to the Claimant, just as he did to Mr Galliers-Pratt, but he did not in fact do so. In any event, the offer was conditional, and it would not have been reasonable to expect the Claimant to accept such an offer. If he had signed the document and paid, as proposed by Mr Robinson, I think it likely that the Defendant would have been contending that it represented some form of defence or bar to the claim the Claimant is now making. THE CLAIM IN EQUITY This does not arise, because I have found that there was an agreement. But I shall address it briefly, in case I am in error in the findings that I have made. In Banner Homes the Court of Appeal laid down the following principles, as enunciated by Chadwick LJ: "(1) A Pallant v Morgan equity may arise where the arrangement or understanding on which it is based precedes the acquisition of the relevant property by one of those parties to that arrangement. It is the pre-acquisition arrangement which colours the subsequent acquisition by the defendant and leads to his being treated as a trustee if he seeks to act inconsistently with it… (2) It is unnecessary that the arrangement or understanding should be contractually enforceable. Indeed, if there is an agreement which is enforceable as a contract, there is unlikely to be any need to invoke the Pallant v Morgan equity; equity can act through the remedy of specific performance and will recognise the existence of a corresponding trust. On its facts Chattock v Muller is, perhaps, best regarded as a specific performance case. In particular, it is no bar to a Pallant v Morgan equity that the pre-acquisition arrangement is too uncertain to be enforced as a contract - see Pallant v Morgan itself, and the Time Products case - nor that it is plainly not intended to have contractual effect - see Island Holdings Ltd v Birchington Engineering Co Ltd . (3) It is necessary that the pre-acquisition arrangement or understanding should contemplate that one party ("the acquiring party") will take steps to acquire the relevant property; and that, if he does so, the other party ("the non-acquiring party") will obtain some interest in that property. Further it is necessary, that (whatever private reservations the acquiring party may have) he has not informed the non-acquiring party before the acquisition (or, at the least, before it is too late for the parties to be restored to a position of no advantage/no detriment) that he no longer intends to honour the arrangement or understanding. (4) It is necessary that, in reliance on the arrangement or understanding, the non-acquiring party should do (or omit to do) something which confers an advantage on the acquiring party in relation to the acquisition of the property; or is detrimental to the ability of the non-acquiring party to acquire the property on equal terms. It is the existence of the advantage to the one, or detriment to the other, gained or suffered as a consequence of the arrangement or understanding, which leads to the conclusion that it would be inequitable or unconscionable to allow the acquiring party to retain the property for himself, in a manner inconsistent with the arrangement or understanding which enabled him to acquire it. … (5) That leads, I think, to the further conclusions: (i) that, although, in many cases, the advantage/detriment will be found in the agreement of the non-acquiring party to keep out of the market, that is not a necessary feature; and (ii) that, although there will usually be advantage to the one and co-relative disadvantage to the other, the existence of both advantage and detriment is not essential - either will do. What is essential is that the circumstances make it inequitable for the acquiring party to retain the property for himself in a manner inconsistent with the arrangement or understanding on which the non-acquiring party has acted. Those circumstances may arise where the non-acquiring party was never "in the market" for the whole of the property to be acquired; but (on the faith of an arrangement or understanding that he shall have a part of that property) provides support in relation to the acquisition of the whole which is of advantage to the acquiring party. They may arise where the assistance provided to the acquiring party (in pursuance of the arrangement or understanding) involves no detriment to the non-acquiring party; or where the non-acquiring party acts to his detriment (in pursuance of the arrangement or understanding) without the acquiring party obtaining any advantage therefrom." The property in question in this case is the shares in CVSUK which the Defendant could have acquired in his own name under the Subscription Agreement, or, if I am wrong about that, the shares that he did in fact acquire (as to which see below). If (contrary to my findings) the arrangements between the Claimant and the Defendant are not legally binding, then the condition in para (3) of Chadwick LJ's principles is satisfied. There is no dispute that there was an arrangement or understanding that at least gave rise to a moral obligation on the part of the Defendant. What Mr Brunnock and the Claimant did throughout 1998 was undoubtedly detrimental to them, in the sense that they spent a lot of time and effort and skill which they would not have done, except in reliance upon the arrangement or understanding. Their efforts in finding Barton hospital and introducing, directly or indirectly Mr Pound, Mr Robinson and Mr Foster to the board of CVSUK conferred an advantage upon the Defendant. Without that work the Defendant would not have obtained funding from NSP. But for the arrangement the Claimant and Mr Brunnock would have pursued their original idea to raise £2 million, with, as I find, good prospects of success. They refrained from doing that. The circumstances make it inequitable for the Defendant to retain the property for himself in a manner inconsistent with the arrangement or understanding on which the Claimant has acted. PERTH BUSINESS CORPORATION I form no view as whether it is true, as the Defendant states in his witness statement, that he does "not have any legal or beneficial interest in the Perth Business Corporation or the shares that it purchased". I am unable to form a view on this, because no disclosure of documents or other evidence has been given in relation to the point. But his description of Perth Business Corporation as "a contact of mine" is in my judgment less than the whole truth. The history of this matter (the payment of the Anval bill, the subscription for shares in CVSUK, and the fax sent to Mr Galliers-Pratt on 27 th July 1999) together with the unsatisfactory nature of the Defendant's evidence on this topic, have led me to the following conclusion. I find that the Defendant does in fact (de facto) have the power to give directions to Dr Batliner and his colleagues which they will in fact follow in relation to GSC and Perth Business Corporation, in so far as matters relating to CVSUK and its shares are concerned. On these findings of fact the Defendant's behaviour in relation to the Anval bill in August 1998 appears in a less bad light. On the basis that he was a principal behind the commissioning of the Anval report, the request to GSC makes more sense, although it would still not justify the reference to the Omanis in the fax to Anval, nor the proposal that no VAT be paid. And the Defendant's omission to re-imburse GSC when he himself was re-imbursed by CVSUK may be more understandable, although not justifiable. I must also consider what rights or opportunities in relation to shares in CVSUK the Defendant had acquired immediately prior to the Subscription Agreement. Whatever they were, these, like his power over the Perth Business Corporation Shares, are partnership assets. I have already found that before incorporation a list was prepared of those who should subscribe to the 380,000 shares, representing 38% of the ordinary shares, for which the subscribers were to pay £250,000. The percentages were as follows: Mr Robinson 12% the finance director 4%, Mr Pound 5%, a Ms Waterman 1%, Mr Parkin ½ %, Mr Foster ½ %, Messrs Brunnock/Beddow 3%, Mr Hyman 2%, "promoters" 10%. The figures for Mr Robinson, Mr Pound, Finance Director, Mr Parkin and Mr Foster total 22%. They were required by NSP to be subscribed, or at least available for subscription, by those persons. I have not seen any evidence relating to the 1% for Ms Waterman. In the circumstances I cannot make a finding that that percentage was available to the Defendant. I find that the 2% subscribed by Mr Hyman was available to the Defendant. As far as the Defendant was concerned, whether or not Mr Hyman had any claim to remuneration in that form, it was not a legal claim, and certainly not a claim that took precedence over the rights of the Claimant or Mr Brunnock. They were not consulted about the terms of Mr Hyman's engagement or remuneration, as they should have been, since he provided his services to the joint venture. As far as NSP were concerned, since they were prepared to accept Mr Hyman and Perth Business Corporation as shareholders, I find that they would have accepted the Claimant and Mr Brunnock as shareholders, if they had met them and if NSP had been informed of the relationship I have found existed between them and the Defendant, and if they had been informed fully of the role that I have found the Claimant and Mr Brunnock played in advancing the joint venture project. It follows that in my judgment 15% of the shares of CVSUK was available to the Defendant for sharing with the Claimant and Mr Brunnock. The rights that the Defendant had in respect of that proportion of the shares was an asset of the joint venture. It has not been argued that Mr Galliers-Pratt withdrew from the joint venture merely that the active part of raising funds was carried out after June by the Defendant. But this does not matter, because Mr Galliers-Pratt was offered the opportunity to take shares, and declined it. It follows that the 15% should have been made available in equal 5% shares to the Defendant, Mr Brunnock and the Claimant. In fact Mr Brunnock accepted 1.5% from CVSUK, with the result that the Defendant had at his disposal 13.5%. In my judgment the Defendant is liable to account for that in accordance with the joint venture agreement that I have found. The Claimant is entitled to an equal share of that of the 135,000 shares. The Defendant's duty to account carries with it the right to require payment of the sum per share that all subscribers to the shares were required to pay. CONCLUSION Accordingly, the Claimant is entitled to a declaration that the rights or entitlement which the Defendant held to subscribe to shares in CVSUK were, as to 67,500 shares, held on trust for the Claimant, and that such power as the Defendant has in relation to the shares subscribed for by Perth Business Corporation are likewise held on trust for the Claimant pursuant to the joint venture agreement. I shall hear argument as to the form of the declaration and as to other relief. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII