Caliendo & Anor v Mishcon De Reya (a firm) & Anor [2016] EWHC 150 (Ch)

“All work undertaken in relation to the acquisition Of further shares in [QPRH] (includes liaison with Companies House, legal counsel representing Bill Power, Lloyds Register, Inland Revenue (Stamp Duty office), meetings With legal counsel representing Bill Power. Review of statutory documentation pertaining to QPR, Agreements relating to the sale, issue of share certificates Completion and submission of stock transfer forms.”

“… We had hoped that funds of £500k would have been received by now to cover the final few weeks of the season before season ticket income begins to flow into the club. I understand that the monies due from Carlos Dunga are tied up in fixed depoits that would entail high penalties to release. The current level of exposure is as high as the Bank would wish to have on an unsecured basis and as such I would suggest that the best way forward would be to arrange for a Bank guarantee from Carlos Dunga’s bankers in Monaco in favour of ourselves to cover the additional £500k overdraft that you are looking for in the short term. … ”

“Barclays – funds received from Directors 2004/05”; “Barclays – funds received from Directors 2005/06”; “Barclays – funds received from Directors 2006/07”; “Royal Bank of Scotland – funds received from Directors 2005/06”; and “other funds received from directors 2005/06”

“The availability of the management of information is problematic. There is no initial balance sheet, nor a budget or cash flow forecasts. There are additional issues regarding the level of support available in the accounting office. The legally established audit may contain a qualification or request confirmation on the support in progress by the directors/shareholders. Deloitte & Touche focussed on the immediate outflows of cash flow that the club was facing and identified significant additional debts. The cash flow forecasts prepared by Deloitte & Touche were not in accordance with the bank position that resulted in excess or being potentially in excess. … There is no certainty regarding the forecasts beyond just the next two weeks. Despite the valued contribution of £1 million by the directors, the last cash flow forecast indicated a significant need beyond £1.575 million and currently we are working on this with no possibility of addressing this deficit. During the last meeting in December, [Mr Paladini] indicated that the outstanding account would be remunerated by the end of January. The forecasts show that there will be a significant need for funds of £2,300,000 by the end of May 2007. Given the need for funds equal to £2,300,000, it appears at this stage that there is no evaluation regarding how the probable deficit would be met in the next season and on what may be requested from the bank for a probable provision of [facilities]. Ideally it may be hoped that overdraft is set which is proportional in measure and nature for this business which fluctuates wildly. In addition, it would be required for there to be an appropriate guarantee level which covers and is established prior to any use.”

“We understand that as part of your statutory and professional obligations as auditor of the above companies that you have to satisfy yourselves that it is appropriate to prepare the financial statements for the year ended 31 May 2005 on a going concern basis. We are aware that currently there is a recurring deficit of income necessary to cover the overheads of the companies, and that this deficit can only be covered by the sale of players or by an injection of finds from the directors. On advice from the bank, and to identify the extent of this shortfall, Deloitte & Touche LLP have been engaged to prepare a detailed week by week cash-flow forecast to the end of May 2007. This is to be extended to the end of July 2007. It is not our preferred policy to be forced into selling any of our players during the transfer windows in order to cover the funding deficit, but we are of the opinion that the quality of our football squad gives the club a sizeable realisable asset should it be necessary to sell one or more players. We are aware of the need to reduce the size of the overheads of the companies, and this will mainly be achieved by not renewing a significant number of players’ contracts which fall due at the end of this season. We confirm that to date we have loaned QPR Holdings Ltd £3.85m. These loans are neither repayable on demand, or are secured against the companies assets. We further confirm that we personally guarantee for a minimum of the next 12 months from the date of this letter to support the companies by providing the necessary funding to ensure that they are able to meet their debts as they fall due and thereby cover any funding shortfall.”

“The Directors continually monitor the financial position of the Group, taking into account the latest cashflow forecasts and the ability of the Group to generate cash. The Directors have prepared the financial statements on a going concern basis having regard to detailed cashflow projections for the period to 31 May 2007, and beyond. Additionally the directors have committed themselves to continue to support the Group by making available any necessary funds. The Directors have also considered the impact of player trading, which in an integral part of the Group’s activities, and the cash flows associated with this trading activity. While there will always be some inherent uncertainty the Directors remain confident that sufficient funds will be forthcoming and, therefore, it is appropriate to draw up the financial statements on a going concern basis.”

“In forming our opinion we have considered the adequacy of the disclosures made in note 1 to the financial statements, relating to the financial requirements of the Group. Due to the significance of this matter, we draw your attention to it, but our opinion is not qualified in this respect.”

“Liquidity - notwithstanding the recent shareholder injection, there is a further cash need from March. Anticipating a ratcheting down in the overdraft requirement as bank guarantees expire, a further £1.8 million (on top of the monies recently advance[d] or already agreed) may be required by July. This increases to £400k as a result of our sensitivities reflecting unconfirmed event income. The key variances to the previous cashflow (which showed no new money requirement) relate to Parrett (sold for £1.2m less than originally forecast) and a VAT payment of c £300k due in June which was omitted from the previous version of the forecast. Management information - notwithstanding the steps taken to bring the information up to date, the lack of current management account information, a forecast for the rest of this financial year and budgets for next year, together with an overall strategy for the Group represent the next biggest issue facing the Group. Since without these tools the Board will be entirely reactive to the shocks which the Group is likely to face in seeking to achieve a turnaround in financial performance.”

“The Group has been subject to significant change in Management over the past few years. Gianni Paladini is currently fulfilling the roles of Chairman and CEO. The Group has been without a COO since October ‘06. … Mr Paladini has advised that there is no intention to fill this role as he and Mr Caliendo are currently involved with the business on a daily basis. However, we understand that 3 additional non-executive directors (with legal backgrounds) are shortly to be appointed.”

“The absence of a finance team between December ’05 and July ’06 created significant problems for the Group which have still not been fully resolved. There remains a considerable backlog of reconciliations to be prepared and regular monthly management accounts have not been produced since May ’06.”

“Managements’ current ambition is to see the Group break even during FY08. However, no detailed strategy has been developed to achieve this. While there are plans to reduce the size of the playing squad, the anticipated savings appear minimal in the context of the turnaround required. … relegation from the Championship would likely reduce turnover by circa £1m due to much lower Football League awards, lower average attendances, and reduced sponsorship and marketing opportunities. Against this background, the Club is presently at risk of relegation, being in 22nd position in the Championship, and the Group is continuing to require additional funds over and above normal trading income (the exact level of losses cannot be estimated without management account information). At present this is being met by a combination of additional shareholder loans and player sales. The ability of the current shareholders to continue to fund the business is uncertain and based on the current squad there are only three or four players that would garner significant transfer revenues. However, any player sales need to be balanced carefully against maintaining Championship status.”

“Notwithstanding significant cash injections from the Directors by way of loan funding and player sales, the Group’s funding position is forecast to worsen as the overdraft facility is ratcheted down. There may be a funding gap of £1.5m at July, after taking into account £2.2m season ticket receipts relating to next season. The Group overdraft facility is currently £1.575m, which is supported by a number of bank guarantees. …. The initial cash flow by Management identified a significant funding gap (>£3.6m). Management have partially addressed this through a combination of further shareholder loans (£2.5m, of which £1.75m has been received) and player sales (principally £1m excl VAT for Dean Parrett). These items are incorporated into the forecast. However this stills leaves a deficiency of £1.8m over the anticipated overdraft facility limit. Additional funds, over and above those already agreed with the Directors, are required from March ‘07. This funding has arisen only recently as a result of a reduction in the proceeds from the sale of Dean Parrett. The initial consideration for Parrett was anticipated to be £2m (plus VAT). However, the final terms agreed mean that only £1m (plus VAT) was received up-front with future amounts being contingent on a subsequent transfer fee (in excess of £2.5m) being received by Tottenham Hotspur, which is unlikely to occur in the short to medium term in view of the player’s age (15). We have assumed for the purpose of the cash flow forecast that the overdraft facility limit will be reduced as and when the existing other bank guarantees provided to the Bank expire. It is currently uncertain whether further shareholders funds will be forthcoming to support the excess over the anticipated facility limit, although to date shareholders have been prepared to support the Group financially when required. May to July receipts are highly dependent on ‘Early Bird’ season ticket sales (estimated at £2.2m relating to next season’s games). As a substantial portion of this is likely to be paid by credit card, these funds may only be available if the release of the monies can be agreed with BMS [Barclays Merchant Services] through the use of a suitable insurance policy or if alternative security is provided.”

“We have identified risks within the forecast relating to the HMRC claim and a number of unconfirmed fixtures which mean that the overdraft may rise to £2.8m by the end of July.”

“The Group faces a trade off between retaining key players to enhance on field performance and hopefully guard against relegation and cash constraints which make such sales an attractive solution to the current funding deficit. … Based on FY06 performance the Group may currently be losing £1.5-£2.0 million per annum and at present this is being met by a combination of additional shareholder loan injections and player sales. The ability of the current shareholders to fund this level of losses is uncertain, although action has recently been taken to reduce the costs of the playing squad. Furthermore, based upon the current squad there are only three or four players that would garner significant transfer revenues.”

“During the course of our work the Directors agreed to inject an additional £2.525m to meet cash flow requirement. As at the date of this report £1.75m has been received by the Group. We understand the balance will be received in March. We understand that the initial loans granted to December ’05 totalling £950,000 have an option enabling them to be converted into equity in the period to March/April 2010 (interest at 7.5%). We understand that the terms for the other loan advances (including details of interest and repayment provisions) have yet to be formally documented. Although we understand that these will be on the same basis as the convertible loans noted above.”

“At this stage Mr Caliendo has confirmed that if your clients wished to purchase an interest in the club today they would have to pay 7 pence per share if they purchase the shares owned by Mr Dunga, Mr Caliendo and Mr Zanotti whose total shareholding would come to 47.4% of QPR Holdings ….”

“The Directors continually monitor the financial position of the Group, taking into account the latest cashflow forecasts and the ability of the Group to generate cash. The Directors have prepared the financial statements on a going concern basis having had regard to detailed cashflow projections for the period to 31 May 2008, and beyond. The directors are currently in the process of refinancing the [ABC Loan] … and also obtaining additional funds to pay outstanding debts due to [HMRC] and other creditors. Additionally the directors have committed themselves to continue to support the Group by making available any necessary funds, until the new financing is in place. While there will always be some inherent uncertainty the Directors remain confident that sufficient funds will be forthcoming either through new financing or Director funding and, therefore, it is appropriate to draw up the financial statements on a going concern basis.”

“Without qualifying our opinion, we draw attention to note 1 in the financial statements which indicates that the directors are currently in the process of obtaining additional funds to pay outstanding debts to [HMRC] and other creditors. It also states that the directors have committed themselves to continue to support the cashflow of the group by making available any necessary funds until the new financing is in place.”

“To cut a long story short, the club needs the account just to be able to receive payments from season ticket holders for their new tickets from the coming season. Not being able to do this now is a major problem – in effect we may not be able to pay the VAT man in time. Season ticket money is the biggest tranche of money a football club like this receives in any given year. If the fans are put off because we cannot take credit card payments it could be disastrous, financially, to the club. I was hoping that you might be able to pass this email onto the appropriate person to facilitate the account being reactivated. The club urgently needs [to] take credit card and switch card receipts from today onwards. I understand that this is something of an emergency for the club…”

“The Board has been doing everything it can to try and meet these liabilities before any proceedings are made public or actually go to Court. Unfortunately the Monaco investors have put in the limit of the monies they are able to put in – millions of pounds without which the Club would not have remained in existence over the past years. Gianni Paladini and the Board have been working tirelessly to attract new investors and new sources of finance. Given season ticket sales and the increase in Sky revenue new year, we are confident that QPR will be in an improved financial position next year. We will also be continuing to seek new investors to take QPR to the next level. In the meantime, we are moving heaven and earth to avoid the winding up proceedings. … Despite pressures from some quarters to go into voluntary administration or sell players for under value, the Board is determined to keep the Club out of administration and keep hold of our team. It makes no sense for anyone for QPR to go into administration. …”

“The club will definitely be in a position to satisfy the whole amount of the debt by 31 August 2007 at the latest and at the same time fulfil any additional liabilities which have been identified up to that date. This is due to a firm offer being received for one of the club’s players in the sum of £3.5 million …”

“QPR chairman Gianni Paladini says the club’s Italian owners are ready to sell up for about £4m. Paladini says he will sell his stake for the £650,000 he paid for it when he joined the board in 2004. Fellow investors Antonio Caliendo and Franco Zanotti are also believed to be prepared to accept the price they paid for their larger stakes. Paladini said: ‘We've taken the club as far as we can and don't have the money to take it further.’ Between them, Paladini, Caliendo and Zanotti owned about 62% of the Championship club. Paladini added: ‘We need new investment and new people to take QPR forward. …’ … Caliendo has loaned the club a substantial amount in order to prevent it from going into administration. Paladini insists that this money will only be repayable should QPR make a profit by reaching the Premiership, and should not be a barrier to a takeover. But any new owner would have to deal with ongoing losses and 11.59% interest payments on a £10m loan the previous regime at Loftus Road arranged to take the club out of administration in 2002. ‘When we came here the club was in a very bad position’, Paladini added. ‘Things are better now but we’ve done all we can and someone else is needed to take things forward. …’”

‘We need new investment and new people to take QPR forward. …’

“The Directors considered the Documents carefully. The directors were advised that the Company had received advice that the directors should give approval to the Company entering into the Documents and the transactions contemplated by the Documents only if they were satisfied that it was in the best interests of the Company, the Company’s shareholders and the Company’s creditors to do so. … It was noted that no other source of funds was immediately available to the Company. Accordingly, the directors resolved that it was in the best interests of the Company for the Company to accept the Loan on the terms on which it was offered …”

“Fulham saved West London rivals Queens Park Rangers from administration when they paid £2.5million for winger Lee Cook, it has emerged. The deal allows the debt-ridden club to repay a £1.3m loan from Panamian-based money-lenders, the ABC Corporation, which is secured against Loftus Road. … The money from last week’s Cook transfer will allow the club to pay off the short-term loan and give chairman Gianni Paladini more time to find new investors. Rangers director Nick De Marco said: ‘QPR were faced with a winding-up order in July. If the club had not found a substantial sum of money to pay off before 4 July, the club would have been put in administration. Faced with that risk, and the need to pay various other debts and on-going costs, the club had no alternative than to seek a short-term bridging loan. Nobody was prepared to lend the club the sums required in time, apart from ABC. It’s not a great agreement for QPR but it was a choice between that and administration. QPR are able to repay the loan now, in part from the proceeds of sale of Lee Cook.’ …”

“The major events that have happened, or are planned for are as follows: June – We took out a £1,300,000 loan with ABC, taking the total up to £11,300,000. June – We paid off £300,000 to ABC to catch up on Interest Arrears … June – We paid £1,000,000 to [HMRC]. July – We paid £200,000 to Simon Blitz. July – We paid £200,000 to [HMRC]. July 31st – We expect to pay a further £250,000 to [HMRC]. Lloyds bank will help us here, setting it off against Lee Cook money. August 10th – We expect to receive £2,500,000 after reductions from the sale of Lee Cook. August 10th – Pay Simon Blitz £300,000. This will lift the current Player registration embargo against us, so we can sign 2 more players we need… August 15th – We will pay off £1,300,000 ABC loan. Lee Cook money covers this. Bringing it back down to £10,000,000 with all interest paid up to date, and able to get out of it any time we can, but we have to fully pay it by the 31st July 2008. August 19th – We will pay [HMRC] £400,000. Lee Cook money covers this. August 31st. [HMRC] demand £960,000.We currently cannot cover this. So we have to get something in place. September 30th. [HMRC] will take the balance of what we owe….”

“I am very concerned to hear rumours that Mr Caliendo and the shareholders that he represents are proposing to take a course of action which can only be to the detriment of the Club. When I sold my shares to Mr Caliendo I only did so after you and he had promised me that he would act at all times in the interests of the club, that he would make sure that sums were available to invest in the team and that he would place the club’s interests ahead of his own. It now appears that I was fraudulently induced to sell my shares and I require you to pass this e mail to Mr Caliendo and warn him that if he makes any attempt to resile from his promises to me I shall sue him and his companies and seek recovery of my shared.”

“I stated that it would be necessary for me to speak directly to the financial partners. They are persons with an international reputation. I explained that the transaction was being negotiated by a third party however, I would sign the contract. I can confirm that the representative of these persons has carried out due diligence of the Q.P.R. financial situation. Yesterday afternoon, I was informed by a representative of the Q.P.R. Board, Kevin Steele that you were negotiating to sell your shares or a majority of your shares to a Portuguese/Russian partnership. Furthermore, a representative of these persons wanted to meet with Nick De Marco at 5.30pm this evening. I am sure that you will understand that I am a very serious person in honouring my obligations. I cannot therefore ask people of eminence to confirm agreement to buy shares and to forward the necessary funds to Mishcon de Reya when I may be unable to deliver the relevant shareholding. Under the circumstances, I remain available to discuss this matter after you have decided what you wish to achieve.”

“I am writing to you in confidence, having learned that Harold’s offer to purchase the shares held by the Monaco investors has been withdrawn, or is about to be withdrawn. Harold has established that the Club have debts in excess of £28,000,0000 [sic] including the ABC loan. Only ABC are secured, so that in the event of the club going into administration only ABC would be protected. Other creditors would receive only a small fraction of what they are owed, some would probably recover nothing. The club would receive a 10 point penalty. Some season ticket holders might cancel their season tickets. They would then have to be repaid I do not know if Gianni, Antonio and Franco are aware of how bad the position is, but something has to be done very quickly, even if it means they do not recover the monies they have lent the club. In fact they are better off accepting a deal to sell their shares now, whilst preserving the right to be re-paid their loans if the Club are promoted, rather than doing nothing. If they do nothing, all will be lost. This should be discussed with Gianni, Antonio and Franco as a matter of urgency.”

“Many thanks for this information. It confirms my worst fears. I am also concerned that any new buyer purchasing over 29.9% of the shares would have to make an offer to all shareholders which would take a few weeks. I suggest, if you have time, that you convert this email to a letter and send it urgently to the Board of QPR. Please feel free to say you have discussed the contents with me and I agree with you.”

“Please can you email Bruno@gp2series.com containing the following information for a letter of intent: £2.5 Million offered to Mr Antonio Caliendo for his shares in QPR, £2 Million Bonus given to Mr Antonio Caliendo upon QPR reaching the Premiership [sic] League.”

“Please can you email Bruno@gp2series.com containing the following information for a letter of intent: £2.5 Million offered to Mr Antonio Caliendo for 17,520,061 shares and Mr Franco Zanotti 19,900,000 shares in QPR, £2 Million Bonus given to Mr Antonio Caliendo upon QPR reaching the Premiership [sic] League.” £2 Million Bonus given to Mr Antonio Caliendo upon QPR reaching the Premiership [sic] League.”

“We act for [QPRH] (‘QPR’). We understand that your principal proposes to purchase the shareholding of Mr Antonio Caliendo (17,521,061 shares) and Mr Franco Zanotti (19,900,000 shares) for a combined price of £2,500,000, with Mr Caliendo personally being paid a further £2,000,000 in the event QPR are promoted to The Premier League. We should be grateful if you would confirm that this is the case, in order that we may take matters further.”

“I confirm [to] you that we are willing to buy the mentioned shares for 2.5m pounds sterling and that subject to Mr Callendo [sic] waiving the debts the company has towards him upon sell [sic] of the shares he will be paid 2 M pounds if the club gets promoted. My principal wants as well to have the control of the board and will proceed to a cash injection to the company by the way of a capital increase. Let me know how you want to proceed.”

“Many thanks for your response. Please let me know the names and registered offices of the companies which will be acquiring the shares, and the proposed shareholding for each. The two departing shareholders each have one member on the board, and they will resign. Please let me know if you would like me to prepare the sale documents, or, if you have UK lawyers, their name and address.”

“Given the number of shareholders, the Panel is likely to rule that the Code applies in full to this transaction. This means that anyone that acquires more than 29.9% of the target company must make an offer to acquire all the shares in the company at the same price or highest price paid in the last 12 months by the offeror and its concert parties….”

“The full story is in The Times and has been on the radio. Ecclestone is said to be furious but has not withdrawn his bid. The content of the Times article has detail in it which only Jason and I knew about, and on that basis alone I believe the leak could not have come from here. However the Mail say that they and The News of The World obtained the story from a woman who either works here, or has a husband who works here. …”

“Thank you for your email that I received by Gianni concerning the offer of Bruno Michel. About this subject could you please let me have copy of the contracts that you have prepared? I must estimate the proposal together with my partners. ….”

“I don’t like the ‘I must estimate the proposal together with my partners’ bit.”

“Just spoke to Gianni. He is less concerned about this as if Antonio was not interested he would say so or just not reply. So all looks good still. Gianni said if you can prepare a draft contract (albeit with some blanks) setting out terms of Bruno’s offer and send it to Antonio today it would speed things up.”

“I am forwarding you under separate cover draft contracts. The Buyer has not yet seen these. They have told me the price and offer is non-negotiable. I am so pleased that you and Franco have been able to sell the shares because I have been worried that if the Club did not pay the Revenue the Club would go into administration and everyone would lose everything. Now, when the deal goes through you will all be great heroes to the QPR fans.”

“I attach the contracts. The buyers also require a letter confirming that you personally agree to cancelall loans made to QPR and any subsidiary or associated company of QPR.”

“Deal seems 100% back on. With the proviso that Antonio must sign in the next 48 hours and by Monday at latest. Sellers insist on this because news already leaked. I know a bit more will have to be done on the contracts, but can you stress to Antonio that this is the final and only offer and the sellers require his agreement and signature by Monday and before if possible otherwise they will withdraw it.”

“In terms of who Mishcons are acting for, are we acting for the Company or the selling shareholders? There are 2 distinct interests here, and we need to be careful about who is being advised. …”

“Thanks for your e-mail. Can you explain why we need two companies to acquire the shares and if we can take offshore companies. Can you please prepare the sale documents, and also prepare an agreement for the waiving of the debts from Mr Callendo [sic] for a consideration of 2 M£ if the club gets to premiership. Can you also prepare an agreement with Mr Palladini [sic] where he gives us his shares and then he will get 5% of the shares after we increase the capital of the company and in which we have an option to buy his shares after 2 years for 500,000£. We also need an employment agreement with him for 3 years at the same conditions as now. As to the board, we wish to have the resignation of everyone except Palladini [sic] and let me know how many numbers we need. …”

“It is better if two companies buy the shares. If one company buys more than 29.9% of the shares in another company, the buyer must offer to buy all shareholders’ shares at the same price. The two purchasers may be offshore and ought really to be unconnected. …”

“The bidders offered £1,500,000 for the Monaco shares and £1,000,000 for the directors loans. GP refused. 2 The offer was increased to £2,000,000 for the Monaco shares, £2,000,000 for the directors’ loans IF the club was promoted and £500,000 for GP’s shares 3 GP said to pay £2,500,000 for the Monaco shares and the bidders could have GP’s shares free, as GP was being ret[a]ined for three years after the sale 4 GP then asked for an additional £250,000 for the directors’ loan[s]. Bidders refused 5 Bidders now say they will pay no more than what has been offered Holdings MUST pay £400,000 by this Friday and about £1,600,000 by the end of the month OPTIONS 1 Accept bidders[’] offer 2 Find better offer (but no time) 3 Try and raise funds until end of month. Ask Antonio and Franco. There is no time to raise new share issue as 32 days clear notice must be given to the shareholders. Going forward the Club needs circa £900,000 per month to survive 4 Call in KPMG as administrators BUT ABC may call in their own Receiver. This has possible DTI implications and fall out amongst fans”

“Can you confirm [to] me that the debt owed to Mr Caliendo by the club (I understand between 6.5 and 7 millions £) is being waived totally by Mr Caliendo in consideration for the promotion in Premiership. This should not be in this agreement which should be only this agreement which should be only the purchase of 62.2% of the shares for 2.5m£. … And we will need a separate agreement for this. I will need also in the share purchase agreement a total guarantee from the sellers on any undisclosed liabilities.”

“The total of the loans, excluding interest, is £6,581,328. I can provide a detailed breakdown if you wish. I propose that Mr Calliendo [sic] signs a letter of discharge of the debt, in consideration of the payment being made if the Club is promoted….”

“I asked Ilario last night if he wanted to look at the sale agreements, as so far Antonio has only seen the first draft. He said not at this stage”

“Can you confirm [to] me that the company is subject to the take over panel, and if this is the case, what should we do because it seems that buying from 3 different companies does not make a difference. Otherwise, would we have to make an offer to the other shareholders?”

“Renault chief Flavio Briatore will complete a £19 million deal for Queens Park Rangers next week, saving the club from going into liquidation. Gianni Paladini, who will stay as chairman, said: ‘This saves the club from liquidation. Mr Briatore wants to do for QPR what Mohammed Fayad has done for Fulham and turn us into a Premier League club. It is a dream come true for all the fans.’ Billionare Briatore will wipe out QPR’s debt of £17m and invest in the club that has been out of the top flight since 1996 and beset by debt and boardroom rows. …”

“Further to our conversation, I agree that the Panel are being a pain, but they are clearly pressing us right now. I have checked the Code and they do have the power to apply to Court to stop the takeover if we breach the Code. … I agree with you Gianni that we should not do anything until after you have met with Antonio so as not to jeopardise things. Surely we can tell the panel we are just waiting for a meeting of the Board members before we are able to agree an announcement, I am sure they will be satisfied with this. But once you have met within [sic] Antonio then I am sure you can agree with him just to issue a statement on the website saying ‘the Board confirms that talks with new investors are taking place and we hope for an announcement next week.’ ….”

“QPR Holdings Limited was AIM listed until 2004. There are 100mill issued shares. 62% are owned by three investors who acquired them in 20003 and have been since that date operating as a concert. No Panel clearance appears to have been obtained at that date. It is proposed to sell the 62% to Briatore and two Italians. Briatore would acquire 27%, the other two 20% and 15% respectively. Briatore would then increase the share capital and pay for the club to expand 26% of the shares are held by about 6 different companies and individuals who welcome Briatore’s involvement. The remaining 12% are held by 5,100 separate shareholders. Views are unknown, but no hostility is expected. The sale needs to take place this month as the sellers are unprepared to provide further finance and payments to creditors are to be met by the end of the month. Complying with the Code will be too time consuming and expensive.”

“Gianni has had further conversation with Flavio Briatore who is going to acquire the Barnaby shares. Another party, an Italian with a background in football is going to buy the shares held by Zanotti in his company, Wanlock. The price in both cases is 5p per share, but in the case of Barnaby Antonio will be paid £2 million if the club are promoted to the premiership, in consideration for which he will waive repayment of the loans made to the Club. Briatore will arrange for the ABC loan, currently £11 million and 11% per annum, to be paid off and replaced by a cheaper loan at an interest of 6.5%. Gianni is to donate his shares to a third company who will pay him £500,000 within two years if the share capital has increased but will pay him to remain as chairman for three years. I explained to Gianni that the Takeover Panel had been in contact alleging that someone had offered to purchase all the shares in QPR. Gianni said this was not true. The shares that have been purchased were the shares from the so-called ‘Monaco’ investors who had purchase[d] shares in 2004. It seems obvious to me that that purchase constituted a concert party for the purposes of the Takeover Code but nothing was done about at it at the time. Gianni said the panel received about 200 letters of complaint from shareholders owning two or three shares each.”

“Further to your conversation with Gianni I should be grateful if you would let me have the names and addresses of the three companies. The current non-executive directors are resigning today as previously mentioned.”

“I asked Gianni again whether there had been any enquiries from the Panel as to what had occurred in 2004 when the Monaco investors acquired their shares. He replied that they had not. The shares had simply been transferred at the then market price of about 6p per share. Effectively Caliendo spoke for Zanotti, Zanotti put no money in at all and was effectively a silent partner. There is one other company loan of some £700,000 and monies lent by the Winton family, which will be repaid by Briatore. … I said to Gianni that unless it can be demonstrated that the three purchasers are entirely unconnected there will be a concert party and the panel have various powers in respect of that. His point is that the Club has no time: there is a petition from [HMRC] to which the Winton family has joined, wages must be paid this week and other sums fall due to be paid on or before 31 August 2007. It is a question of new finance from Mr Briatore or putting the Club into administration. If that happens there will be an automatic 10 point reduction, players may have to be sold and ABC may enforce their loan.”

“Mr Crawshay of the Takeover Panel then phoned at about 3pm. He asked whether there had been a takeover bid i.e. an offer to purchase all of the shares. I told him there had not and I explained the background to the three shareholdings of the Monaco investors. I explained that the Panel had shown no interest in 2004 when that had occurred and that the three investors were now seeking privately to sell their shares to third parties. I explained the financial imperatives behind the sale: if the Club did not have a fresh injection of cash imminently it would face administration. It was in a position of financial jeopardy. He said on that basis the Code did not apply.”

“Formula One team boss Flavio Briatore has moved a step closer to completing a takeover at Queens Park Rangers after the club’s current board of directors tendered their resignations. Board members Nick De Marco, James Ferrary and Kevin Steele has all stepped down with immediate effect as Briatore – the team principal of Renault – moves closed to completing a reported buyout at Loftus Road. ‘We are delighted to be able to tender our resignations in order to assist in the changes set to take place this week,’ read a joint statement from the outgoing trio. ‘We would like to thank Gianni Paladini in particular for attracting this important new investment and we are delighted he will stay on as chairman. …’”

“As from 12th October 2004 until the recall of the guarantees favour Barclays Bank London on 28th of March 2007, outstanding debt interests to be paid amount to 198,161.89 GBP to be credited on account 103314 Redhill Overseas Ltd.”

“SUBJECT: BANK GUARANTEE Despite your continual assurances, at the time being my bank didn’t receive the refund of the bank guarantee to [QPRH] on 28th March 2007 corresponding to: - £250,000.00 … paid at first demand to the Barclays Bank. - £14,870.00 … regarding accrued interests. For a total of £264,870 …”

“21 August Anna Howard asked if Bernie Ecclestone was buying [illegible word] the shares. No.”

“Further to our telephone conversation yesterday I confirm that we have agreed, in principle, as follows: 1. You will have duly signed by two directors or a director and secretary as appropriate the sale contracts from Barnaby and Wanlock which I handed to you yesterday. 2. You will have the stock transfer form signed by the appropriate officers of both companies by the appropriate officers of both companies. 3. You will send the above two documents to me with the share certificates which I undertake to hold STRICTLY to your order. 4. You will send me the bank account details of both Wanlock and Barnaby. 5. When you have received the monies from the purchaser the documents mentioned above will be released and I may have them dated, executed by the buyer and certified. I will send you certified copies. If there is anything I have missed from this email please do not hesitate to contact me.”

“In order to avoid falling foul of the takeover panel the transaction has to be revised so that Antonio and Franco sell their shares for 1 penny each, with the balance of the £2,500,000 being paid to Antonio to cancel his loans. The bonus payment of £2,000,000 is unaffected. This means Antonio will have to account to Franco for the monies Franco will lose on the reduced share price, but the end result is the same.”

“Thanks for sending us the sale contract for our perusal. We await to receive the Side Letter and Escrow agreement for our perusal as discussed on the phone today. With regard to the wording of the main contract you sent us, and after discussion with the client, we would have the following comments: clause 1. … Please can you kindly clarify this point, who are the other members of QPR referred above? Please note that Barnaby/Wanlock can sign only what is strictly relating to their own obligations for the transaction; the contract cannot be made conditional to obligations on the part of other QPR members. clause 2. (Barnaby) it does not specify a deadline within which the £2 mil is due. We understand from the client he wishes this to be paid within 30 days of the club being promoted to the Premiership. What happens if the club is promoted by the Buyer does not pay? What other guarantees/undertakings are in place to safeguard Barnaby? … After speaking to the client, he is suggesting to include in the contract that, should the Buyer sell the holding to a third party, Barnaby should have the option to buy back the shares from the Buyer at the same price offered by the third party. We also take note of the latest changes in the share transaction price and await to receive the revised contract for our perusal, as this fact does also affect the wording of the Powers of Attorney that Barnaby/Wanlock are authorised to issue in your favour for signing the contract (instruction from the clients yesterday did specify the previous purchase price). We also understand from the client that a separate agreement will now be necessary as the repayment of the loans would be made to Mr Caliendo personally as the loans were effect by him as Chairman and not by Barnaby. Can you pls kindly confirm this is indeed the case. As we understand time is of the essence for the client, we look forward to finalising the above.”

“Having discussed it with Charles Stanley, the preferred structure is now to sign up the shares of [Barnaby], [Moorbound] and [Wanlock] immediately and trigger a mandatory rule 9 offer.”

“We refer to the Transactions [defined as ‘Purchase of shares in [QPRH] by [Mantee] and waiver of debts by Antonio Caliendo] in which we act for [Barnaby], Antonio Caliendo, [Wanlock] and [Moorbound]. We undertake that upon receipt of [£ ] in our client account we will hold such amount to your order, returnable to you upon demand together with any interest accrued thereon, pending completion of the Transactions.”

“As per the QPR Cash flow, the amount of £304,850.15 [is] for supplier payments. Throughout the month an Excel spreadsheet is compiled with a list of all the Creditors chasing for payment of their invoices. Towards the end of the month, the list is presented to the directors with a view to gain authorisation to pay depending on the cash flow and available funds. This list is not set in stone and any suppliers not paid for that particular month gets rolled into the next month.”

“The Company has been loss making for several years and the May 2007 accounts are likely to show a balance sheet in a negative equity position. Antonio Caliendo … is no longer willing to continue supporting the Company by making funding available (having already advanced approximately £6.6 million). If external funding is not introduced by 31 August 2007, the Company is unlikely to be able to meet certain liabilities, including those to HMRC, and the Company is expected to be forced into administration.”

“Accompanying the share purchase agreement between Mantee and [Barnaby], Mr Caliendo has agreed to waive the £6.7 million loan to the Company in consideration for £2,025,789 and an extra £2,000,000 should QPR return to the Premier League within the next 5 seasons. Mr Caliendo will therefore agree to write off a minimum of approximately £2.7 million and a maximum of £4.7 million. We do not believe that this will constitute a special arrangement under Rule 16 of the Code as Mr Caliendo, whose debt is repayable on demand by virtue of having no formal loan documentation in place, will be suffering an immediate write off of at least £2.7 million, which cannot be seen as ‘favourable’ towards Mr Caliendo.”

“Contrary to my previous letter, Mr Caliendo has agreed to waive £4.78 million of the £6.7 million loan to the Copan for no consideration on the signing of the share purchase agreement. Mr Caliendo will therefore be left with an outstanding debt of £2 million in the Company. It is anticipated that he will be treated like all other creditors and could expect to have his debt repaid by the Company at some point in the future. There are no special arrangements to treat Mr Caliendo preferentially, and we therefore understand that this will not constitute a special arrangement under Rule 16 of the Code.”

“It seems to me that without this bid succeeding the Club will fold. We have tried to attract new investment from other sources and have failed. We are saddled with a £10 million loan and an 11% interest rate. We have struggled to pay off historic debts owed to [HMRC]. At present the Club has unsecured creditors of over £2 millions. The directors are owed some £7 million. The shares are virtually worthless. They will become worthless if the club goes into administration. If the Club goes into administration there will be a 10 point deduction and the team might be relegated.”

“The difficult issue, and one which must be kept secret, relates to Mr Caliendo’s loan. The bidder is proposed to buy his shares and the loan for £2.5 million. It is doing this by paying him a penny a share, with the balance (circa £2.3 million) as consideration for the write off of the loan. The Panel might try and argue that this is no more than a device to reduce the share price from what it would otherwise be (5 pence per share) to 1 penny per share. However this has been done before. Ceri may wish to run this past a corporate finance officer at the bank.”

“Discussions are well developed and due to the fact that QPR is in financial difficulty, it is imperative that any deal is concluded by 29 August, being the last day in which funds must be available to the club in order for them to purchase certain players before the close of the transfer window on 31 August.”

“Attached is a Word document based on an excerpt … of the last audited accounts (31 May 2006) of [QPRH]. As you can see, there appear to be a number of unsecured loans to [QPRH]. We have received from [QPRH] loan documentation in relation to some of them: • Loan from Antonio Caliendo is loan A; • Loan from Antonio Caliendo is loan B; • Loan from Antonio Caliendo is loan C; • Loan from Carlos Dunga is loan H; We have, however, received no loan documentation for loans D, E, F and G; Additionally, we have received loan documentation for two loans from Antonio Caliendo (one for £1,000,000 and another for £350,000) copies of which are attached this email. Please can you confirm, with supporting evidence, that these loans have been repaid. Please can you also clarify the status/history of these loans. To the extent that these loans have not been repaid, we should be grateful if you would confirm that a waiver for each will be signed so that none of these loans will be outstanding on completion of the deal.”

“I refer to our telephone conversation. I act for [Barnaby] and [Wanlock]. My clients intend to sell their shareholdings in an English company and in due course we shall require letters of comfort as to the good standing of the American companies and legal opinion confirming their ability to execute various documents relating to the sale. In this regard my clients propose to grant powers of attorney to the beneficial owners of the two companies to enable them to execute the documents as deeds. This latter point causes me some concern… ”

“The historical problems are that when the company came out of administration in 2002 it was only able to do so with the benefit of a loan of £10 million from [ABC], a Panama based company believed to be beneficially owned by three Italian restauranteurs. The interest rate was 10% per annum, the loan term 10 years. The loan contained a term entitled [ABC] to increase the interest rate in the fifth year of the term which was earlier to this year (to 11.59%). The burden of the ABC loan has contributed to the company making financial losses, year on year (e.g. financial year 2005/06 showing a loss of £3,344,000). The majority shareholder, [Barnaby], beneficially owned by Mr Antonio Caliendo, has supported the company through making a series of director’s loans. These total on aggregate £6.5 million. Last November he announced he was not prepared to make any further loans to the Club. This coincided with demands from [HMRC] for unpaid PAYE and VAT, in some cases in respect of sums due as far back as 2002. Accordingly the then directors of the company decided to seek equity investment and a replacement lender to ABC. Enquiries were made to all the main high street banks, as well as a number of other financial institutions. Whilst there was some initial interest no offers of refinancing were made. The common theme to the rejections the company received was that football was regard as a volatile market and the company’s major asset (the ground) was not considered a readily saleable asset in the even of default. This is due to the fact that there is a restrictive covenant on the title which prevents the ground from being used for any other purpose. The Board of the Company also approached various venture capitalists, both here and in the USA. They were either uninterested in an equity injection or made offers which were unacceptable to the potentially outgoing shareholders. The present difficulty is compounded by the fact that on 30 April [HMRC] presented a winding up position against the company. A programme of repayments was negotiated with the solicitors acting for [HMRC] but £980,000 is due to be paid pursuant to that programme before the end of this month. There are other pressing short-term creditors of approximately £1.1 million. In the absence of continued support from the majority shareholders, the company is in danger of entering into administration for a second time. This would lead to the Football League imposing a penalty of a 10 point deduction which would probably lead to the Football Club being relegated. That in turn would lead to a further fall in income: reduced gate receipts, reduced money from the television companies and reduced sponsorship. In addition the shareholders would lose everything.”

“I have just returned your 2 calls, but the receptionist just informed me that you were in a meeting. I have just been pulled out of a client meeting as Mr Caliendo has called into out offices this morning and left a message to contact him or youself in relation to documentation that you were waiting from us. As per his last conversation with Mr Andrea Primicerio, Mr Caliendo was politely reminded that under no circumstances would we be in a position to release a photocopy or original of the powers of attorney prepared, unless we received from your firm the documentation requested namely the side letter and the escrow agreement. I take the opportunity to remind you that the contracts for the sale of the shares can only be signed by the directors of the companies and your firm and/or the clients do not have have any authority to sign the documents, unless they have been granted specific powers to do so by the directors. Furthermore, please note that my colleague Laura has given Mr Caliendo (by hand) only photocopies of the share certificates and that the originals are kept in our safe. I look forward to receiving the agreed documentation and kindly ask you to contact me should you require further clarification.”

“Further to our telephone conversation today, I have taken a look at our file notes taken during the meeting between Laura, the clients, and yourself at your premises during which which you were instructed by the client to prepare a ‘side letter’ which states that the sale of the shares of the club are conditional on the buyer undertaking to settle all debts of the club including but not limited to Accountrust Limited’s fee note number FN00338 dated 21.08.07 for £48,082.86 and that you will not release the signed documents nor the share certificates to the buyer until the payment has been credited to the companies’ bank account and Accountrust has received settlement of its fees. I understand that we are no longer expecting an escrow agreement from you, as the buyer will be settling the consideration amount directly to bank accounts indicated by the two companies. I would be grateful, however, if you could let me have the revised contracts for sale for the directors’ perusal as the directors are asking for an update on the situation. …”

“The documents cannot be signed under powers of attorney - they must be signed by directors. Please forward me your bank details and I will TT you the money to pay your fees on sight of the following - executed deeds of sale by the directors. These will be tt’ed to you tomorrow. They are not for comments and are subject to the Takeover Rules - proof of good standing and capacity of the companies. Upon receipt of the same I want an undertaking from YOUR SOLICITORS that the share certificates will be released to [me].”

“I have attempted to telephone you on a number of occasions today. Whilst I have no doubt that the file notes that you have read accurately recall what Laura requested, they do not accurately recall the true position, which is as follows: 1. The transaction is due to complete on Friday. 2. The Club has agreed to pay your feees, your fees have been included within the list of debts due to be paid by the buyer (which is a private and confidential document and not for your eyes) and I have confirmed this with the solicitors acting for the buyer. 3. Laura has already approved the documentation. You appear ignorant of the requirements of the Takeover Panel which do not permit indiscriminate disclosure of documentation. 4. I require documentation to be signed by the directors of Barnaby and Wanlock and for opinion letters to be obtained as to the good standing of both companies and as to the correct attestation (i.e. signature) of the documents by the directors. The opinion letter has to come from an American attorney and I expect the same to be available tomorrow afternoon, as Laura was made aware of this at the meeting it is referred to in the draft documents. 5. If the directors want an update on the situation they can ask Mr Caliendo who is, as I understand it, waiting outside your office. 6. I am instructed that TNF Ltd’s conduct is seriously threatening to jeopardise this transaction. Please review your position very carefully and reply by return.”

“Lastly, we will review the documents attached in your email titled ‘Project – Tiger Updated Documents’ and will revert shortly under separate cover. Laura nor T&F has ever received these documents before today and therefore the same have not been approved by the Directors of the Company.”

“Please note that Mr Steele is asking for good standing certificates from the US, which we will request today, but will take approx 48-72 hours to be issued by the State Department; I presume that Mr Steele would want some form of undertaking from us regarding this, but I would be grateful if you could advise further. Furthermore, please note that our fee note did not include costs related to the issue of 2 good standing certificates and they will need to be billed to QPR separately; the cost for the certificates will be £150 per certificate … In the meantime, I will arrange, for your compliance purposes, the necessary identification documents related to [T&F SA I’s] Directors.”

“I am surprised not to have heard from you given that this matter is due to complete tomorrow as I have not heard from you I have arrange for New York lawyers to prepare opinion letters on Barnaby and Wanlock, although they have complaieed that without knowing details of the officers of the companies they may not be able to proceed. Do you have current certificates of good standing? We also need draft board minutes from Barnaby and Wanlock approving the sale. Drafts of these are urgently required. Finally I need your bank details, as previously requested, and those of Barnaby and Wanlock.”

“3. ‘Laura had already approved the documentation’ – what documentation??? Side Letter we never received – Sale contracts received was version with previous sale price and we sent Mr Steele an email on 22/8 with AP [i.e. Mr Primicerio] & client comments on this, for the client’s protection, however AP said that it would be up to them/the client whether they wish to act upon or not. This does not mean that we had ‘approved’ the contract. 4. ‘Laura was made aware of this at the meeting’ and ‘it is referred to in the draft documents’: never mentioned a GSC at meeting: it was never mentioned in Steele email of 22/8 with draft dox; and never mentioned in draft sale contract received on 22/8 either!”

“I’ve finished looking at the contracts that Mr Steele sent yesterday afternoon. … One major puzzle is that there is no draft Share Sale Agreement relating to the shares owned in QPR by Barnaby whilst in other cases, there are missing documents for Wanlock such as the Deed of Waiver and Deed of Irrevocable Undertaking. I willl query this with Mr Steele. There are some minor amendments to be made on the documents, in respect of the registered Address of Wanlock/Barnaby. I will notify Mr Steele of this and also [various other fairly minor amendments and actions required]. There is one schedule contained within the Share Sale Agreement which is the Vendor’s Deed of waiver (attached); I can arrange for this to be signed, but I kindly ask you to look at it carefully as we will be waiving any rights or claims against QPR etc if we submit these to Mishcon before receiving any payment from the client. …. I will also be contacting the clients this morning, as I will need to obtain from them a written instruction to sign any and all documentation received from Mishcon de Reya in relation to concluding the sale of shares. I will notify Mr Steele that we require these before the documents are released. Lastly, I have asked Mishcon to let me have a template of the minutes to be signed Barnaby/Wanlock …”

“Please note we have incorporated some of your comments. Those we have not, we do not agree. In relation to whether QPR bears the legal costs of the loan documentation, we are taking instructions, but have left your amendment in for the time being.”

“9. In the Schedule to Mr Caliendo Deed of Waiver of Schedule 2 of the agreement, neither companies have appointed Accountants, nor auditors.”

“I am awaiting these from AC’s and FZ’s tax advisors who, unhelpfully, have gone home. I have faxed your office a POA in my favour from AC and will be armed with a FZ POA tomorrow morning.”

“Please see attached. please prepare the required letters from Wanlock and Barnaby. Do you have any letters from anyone confirming Banrnaby [sic] and Wanlock are solvent, of good standing and are able to execute the … de[e]ds? If not, can you please prepare one?”

“I have conveyed your request to the bidder. My gut feel is they will not wish to acquire shares at 6.5p, because Baker Tilly have valued them at less than a penny each, on the basis [that] the ground is worth 10mill, net of ABC, there are other loans and liabilities of circa 10m, and asets (the players) worth about 5m. Their other points are - they are pumping money into the club and need absolute control to protect the investment - without them the club goes bust and the shares are worthless anyway I am pleased to say everything else appears to have been resolved”

“Lest I forget, how is it intended to document the £2m bonus to Caliendo should the Club be promoted.”

“Given the sensitivity of the Panel to the Caliendo loan and our recommendation relating to it, could both Mishcon and Withers please confirm that there are no other agreements or arrangements between Mr Caliendo and the offeror, or any other connected party, in regards to the Caliendo loan other than those which relate to the loan acknowledgment and the [SSA].”

“I should be receiving the resignation letters shortly which I will send to you by email. I’ve taken a look at the statutory records of both companies which my Swiss office has sent to me and the directors have full power and authority to sign the agreements and I was wondering whether a goodstanding certificate prepared by an English solicitor would serve your purpose. …”

“Withers cannot give a formal confirmation of this fact. This will have to come from Mishcons/the club/Caliendo. There will be a waiver of claims by him today, as attached. We are aware of the Dunga loan for £250k, a copy of which was included in the documents uncovered yesterday by Bakers (see attached). We are told by the club that that loan has effectively been subsumed within the Caliendo loan and is therefore no longer outstanding to Dunga himself. However, we have seen no waiver by Dunga or other evidence of this.”

“Please confirm that the Dunga loan is a part of the monies lent by Antonio. When Gianni was at Withers yesterday, was the bonus to Antonio mentioned?”

“I think he’s getting at the bonus payment of 2m if the Club are promoted.”

“I’ve taken a look at the contracts sent this morning and I have the following comments: … 2. I note that we will now be using your client account to receive the monies on behalf of Wanlock LLC; as you will be receiving and transferring the funds on behalf of Wanlock LLC, the Directors of the company would need some sort of letter which formalises the relationship between Wanlock and Mishcon with specific regards to your obligations. Please let me have a draft template to send to the Directors in this regards. … 5. I note that you have appointed yourself as agent for service of documents. We have asked for [T&F SA I] to be appointed. Please amend. Most importantly in Schedule 2 (Mr. Caliendo Deed of Waiver), you have stated that we act as Mr. Caliendo’s Accountants; I will need to check this with the partners as I do not believe that T&F has been appointed as his accountants and I will revert to you on this matter shortly.”

“£13m debt figure was built up as follows: • ABC loan £10m • Caliendo loan (post waiver) £2m • Sundry loans (Winton/McGrath/Ehmer) £1m The sundry loans figure was clearly an estimated provision before waivers or partial waivers of these loans are obtained. To say the least, this has been a moving feast but at the time it was difficult to be precise.”

“As discussed in our telephone conversation, Mishcon de Reya has again changed the terms of the contract suggesting that the client account is used to receive the funds generated by the transaction. Therefore these funds will then be transferred directly indicated in the attached letter. Accordingly, we have prepared a new letter of instruction which you will find attached which we would ask you to kindly sign. Please could you send us this letter via fax … and send the original by express post or courier.”

“Subject to clause 3.3 below, the Lender [Mr Caliendo] indemnifies the Purchaser [Sarita] and Mr Ecclestone as to the amount by which the Completion Net Assets determined pursuant to the schedule to this Deed are less than £3,000,000, such amount to be paid as to 85% to the Purchaser and 15% to Mr Ecclestone.”

“… 2 I suggest you appoint me as your agent for the purpose of collecting money and accounting to you. I would expect my accounting to you to discharge any obligations I might owe to Wanlock. … 5 Isn’t it better I am appointed as there will be a delay in sending documents to Switzerland? If you disagree please amend by hand when the originals arrive. … Schedule 2 is important to remain as is because if there is a disagreement, and the final completion account figure is £3million, then you will be able to act for AC and, if necessary, appoint your own auditors.”

“The bonus to Antonio CANNOT be put in writing as it will conflict with the Code. Antonio will have to rely on FB’s goodwill after the event and the fact there is enough documentation to show that he has been promised such a bonus. Can you let Antonio know. If required I’ll explain to Ilario.”

“… 2. I will prepare a short mandate which I will forward to you for signature … 5. noted Schedule 2: I’m having difficulty tracking the partners regarding this matter. In any case, for the avoidance of doubt, T&F Limited and [T&F SA I] are not Chartered Accountancy firms. ….”

“Our cut-off-time for bank payments is about 2:30pm today. Please confirm when you are in a position to complete, following this morning’s call, as we are obviously getting very close to that deadline. I also attach the form of declaration required from the directors, as discussed re no more convertibles and no o/s debts to Dunga (and the 2 others for completeness).”

“We do not act for Moorbound at all and I do not know who you would need to refer to for this Company. I will revise the draft and ask the Directors to issue for Barnaby/Wanlock.”

“Please note that attached is a copy of the original share certificate in our possession (the original is in a safe). The other original share certificates owned by Barnaby and Wanlock are in the hands of Mr Antonio Caliendo. Please refer to him directly for these.”

“As we are sure Mr McGrath appreciates, given the financial predicament of the club, it will enter administration if this deal is not completed.”

“How many other undocumented loans are there? The Caliendo loans were at least documented in the accounts. Can it be proven that these were loans and what the terms were. The Panel has already flagged up their disquiet at possible preferential treatment.”

“We can only go on what we have seen through the DD documents produced to us by the club and what Kevin [i.e. Steele] has told us. If you have any further questions of your client, please speak to Kevin/Gianni, thanks. They will no doubt have evidence of the 100k payment to the club. …”

“Richard, we have had confirmation from Kevin Steele, need your confirmation, then all we will require is sight of the signed [SSA]. ….”

“I act for Antonio Caliendo, Franco Zanotti and Gianni Paladini They have instructed me to confirm that save as already disclosed there are no outstanding convertible loans to [QPRH].”

“A company search shows that Gianni is NOT a director or secretary of the above. I am not sure why he has therefore signed the document for Moorbound. The sole director appears to be Olga Paladini; the secretary is Mr Malik. If you have a valid attorney for Moorbound, then perhaps you can re-sign the attached, or obtained the 2 signatures from the above-mentioned officers today and return the originals to me by hand.”

“Actually, I recall someone saying that the Leigertwood fee had been paid on Friday (hence why he was able to play), so the amount re Leigertwood is to put the club back in funds (I understand that the funds were paid to the League out of a hastily arranged overdraft). Please can someone confirm.”

“1) The re-signed original irrevocable and deed of waiver from Moorbound (see earlier email). Gianni does not appear to be a director or secretary so signature by you as attorney in fact or by the existing sole director and secretary. … 3) Copies of your appointments as attorney by (1) Wanlock (2) Barnaby (3) Moorbound (4) Zanotti …”

“Richard, you are going to give us some comfort on the Caliendo Loan, as previously outlined.”

“I think we are just going to have to live with the directors not being appointed yet. However, this means that Zanotti and Caliendo cannot resign as of 1.9.07 because there is a quorum of 3 directors for board meetings. Kevin - this means the resignation letters and accompanying minutes will need to be revoked and resigned/dated to be agreed. Please therefore do not file any forms 288b.”

“Until today we didn’t receive any communication concerning the payment established at the signature of the sale promise of the shares. It has appear to us that the established payments (that you can see in the attached file) to be made within the 31st August 2007 weren’t done. My partners, with which I had a meeting yesterday from both Barnaby and Wanlock, would like to receive an answer concerning all the payments established and to be made. … We would like to receive the confirmation on how and when all this payments will be done as well as the invoice of the bills to be paid within the 31.08.2 that were a part of our agreement.”

“The schedule of Caliendo loans totals £6,581,328 – which is the same figure include in the draft [SSA] we have. Looking that the latest management accounts received (and particularly the Balance sheet at 31 August 2007), long term loans (other than the ABC Loan) are included as £6,574,193.84. Which is the correct figure? Furthermore, my understanding is that the Caliendo Loans totalling £6.5 million have now absorbed the Carlos Dunga loan of £250,000, but what of the Valentin Ehmer loan of £500,000? …”

“Queens Park Rangers Football and Athletic Club (the ‘Club’) We have a client who has expressed a very serious interest in the acquisition of the above. We are appreciative of the fact that the Club is already under offer and that unless any offer form our client either equalled the current offer or was to exceed the same; an approach at this stage is not likely to be of interest. The current offer has been reported to be in the region of £14- 18 million; and includes the sum of £11 million to discharge the ABC Loan plus accrued interest thereon. If you are interested in receiving new offers in respect of the Club, we should be grateful if you would please provide us with your Non Disclosure and Confidentiality Agreement… When returning a finalised NDA and Confidentiality Agreement, we shall provide to you a bank reference in respect of our client confirming a net worth of £100,000,000.00.”

“I personally became involved in advising the company in July 2006 and am not aware of any efforts made prior to that date to attract new investment. To the best of my knowledge it was only in July 2006 that the Monaco investors first started to intimate a willingness to dispose of their shares, coupled with the determination to reduce any further investment into the Club. With Gianni we had a two stage strategy first, we sought to replace the ABC loan with a loan from another party on more beneficial terms; secondly we sought equity investment. Dealing first with our efforts to have the ABC loan refinanced, I can confirm that we spoke to all the major lending institutions, none of who were interested in providing the necessary finance. The nearest we came was following a meeting we had with the Club bankers, Lloyds TSB. Their relationship manager explained to us that none of the major banks were interested in lending money to football clubs because of the perceived risk of the clubs defaulting on loans. The banks were wary of the potential adverse publicity of seeking to foreclose on loans made to football clubs. There was also the hard economic fact that most professional football clubs in England and Scotland were heavily in debt. On the equity side we approached a number of people and organisations. You will appreciate that in each case we asked them to sign confidentiality agreements. Some refused, so discussions were taken no further. By way of example, a senior director at Citibank intimated a willingness to purchase the Monaco shares, but immediately lost interest when he found out about the ABC loan. The most promising approach came from Simon Blitz in February this year. He had a controlling interest in Oldham Football Club. He was seeking to divest himself of that interest and invest instead in QPR. We met with him and his lawyers. He was aware of the fact that he was unable to have an interest in two football clubs at the same time, and told us that he anticipated being in a position to sell all of his interests in Oldham Football Club by June 2007. However our due diligence revealed that be was awaiting a planning permission which was unlikely to be granted until this November, without which he was unable to sell out. The talks with him collapsed. Gianni and I then met with a venture capitalist (Steven Galvin) who undertook some routine due diligence before indicating, at the end of April this year, that he was interested in making an offer. No offer washforthcoming. As far as we were able to gather he was of the view that the Club required significant financial investment, which he was unable to provide. Thereafter Gianni met with a consortium led by Ronny Rosenthal. Rosenthal was an ex international footballer. There were several discussions with him, but nothing was put in writing, and no offer was made. Shortly before the current offer was made I identified a consortium led by Brian Kerr, in Eire. Whilst much interest was expressed, the ABC loan proved to a problem. It was a common theme of those that gave reasons for pulling out of talks that they were concerned that ABC had a strangle hold over the Club. I am aware of your views that in a liquidation the shareholders might be in a better position than under the current offer, but in a liquidation control of the sale of the ground would pass to ABC, Technically, they could legally be obliged to try and sell (as mortgagees) at the highest price. But in practice our suspicion was that they would have sold at a conveniently low price to a friendly developer. That would have left the liquidator with no recourse against ABC, a foreign corporation of unknown resources. Put simply the fear was that ABC would sell the ground at a pittance, pocket the cash and disappear. That would leave the only assets as the playing staff. They have not been valued. But on the basis that the best player was recently sold for £2.5 million our view, not contested by any of the shareholders to whom we spoke, was that on a good [day] the playing staff might realise £5 million in transfer fees. That ignores the legal argument that had the Club entered liquidation the players could argue they were discharged from their contracts of employment and became free agents. I should add that the discussions I have mentioned above with potential investors took place against a background where the Club received a letter before action from the solicitors acting for HM Revenue & Customs on 17 April 2007. The letter before action claimed that the Club owed £1,598,181 in unpaid VAT and tax. This figure was disputed. The Club hired an independent consultant to advise. He negotiated with the Revenue. The negotiations were unsuccessful. On 30 April 2007 the Revenue presented a petition. We were successful in stalling the petition until this October. That was on the basis of payments being made under an agreed programme which the Club was able to adhere to. However the raw problem was that a substantial payment was due on 31 August and the Monaco investors were not prepared to make that payment. Even if they had made that payment, it was our view that they would merely have been postponing the inevitable.A further payment was due to the Revenue in the first week of this month, the Winton family were owed £860,000 and had applied to be joined to the petition and there were other pressing creditors.”

“Work done yes/no Costs OK yes/no Pay yes/no Add to disburs. Yes/no Date Signature ”

“and please note my point yesterday about the discrepancy in the offer as to the loan balance of £2m being repayable in 2011 and what the SPA provides.”

“… we have checked and the date is 2011 (being the latest date as laid out in the loans schedule of the accounts too.”

“Agreed, but not consistent with the SPA which seems to contemplate payment after any dispute about the completion accounts (otherwise it’s unfair as Caliendo could be obliged to pay damages under the SPA if the accounts go against him, but otherwise has potentially to wait for repayment of the loan if the accounts go for him.”

“This money will not be touched because we don’t understand why you didn’t send us all the payments despite our several and continous assurances and despite also all the documents that we signed further to your requests. We are really astonished for this behaviour … P.S. Kevin, I think that you’ll enforce all established agreements, including the payments which must be settled within last 31st August. Please confirm by return the receipt of this e-mail message. Please arrange as soon as possible the payments regarding me, Mr De Riu and Credit Suisse, as per the files attached.”

“…arrange for the Directors to read the statements and then send me a reply email confirming that the Directors have read and agreed with the information contained in the statements.”

“As well as needing the confirmation of the directors’ addresses for sign off, and as per Alan Mackenzie’s request over the weekend, there needs to be comfort that the Directors are happy with the document (as they are responsible for it). The most efficient way would probably be for either Mishcon or Gianni to email it to Antonio and Franco, with them emailing back their confirmation that they are happy with it, and willing to be responsible for it. Whilst you have power of attorney to sign on their behalf, it does not necessarily mean that they have read/approved the document.”

“The only problems are that I am not sure where Franco is at the moment and neither he nor Antonio speak good English. They’d need it translated and that could take days.”

“The cash offer (the ‘Offer’) by Sarita Capital Investment Inc (‘Sarita’) for [QPRH] (‘QPR’ or the ‘Company’) We refer to the offer document by Sarita proposed to be dated 25 September 2007 (the ‘Offer Document’). Paragraph 1 of Appendix III of the offer documented [sic] sets out a responsibility statement by the QPR directors. We have discussed the offer document with the directors and confirm that the responsibility statement has been made after due and careful enquiry.”

“We confirm that we act for QPR Holdings Ltd, which has been a client at this firm for over a year. We further confirm that Mr Antonio Caliendo (who was also a client of this firm) is ordinarily resident at 35 BL Larvatto Monaco 98800 and that Mr Franco Zanotti is ordinarily resident at Le Riviera 5 Rue Des Lilas Monaco. We confirm that we have seen utility bills addressed to both the above mentioned gentleman at their ordinary residences, and that such utility bills were produced and shown to us at Loftus Road Stadium … in or about July 2006.”

“Further to our yesterday’s meeting please can you confirm that you talked with Mark [Cooke] that the three payments will be made?”

“I received from Ilario several documents that you gave to him, but I cannot understand their meaning. The only thing that I need to understand is the following: 1. The agreement drawn up at the beginning foresaw a payment of £2,500,000 at the signature and £2,000,000 to be paid at the promotion of the team in Premier League, plus the payment of the three invoices that were indicated. 2. Has something change [sic] concerning these terms since the signed agreement? I wait urgently for your kind reply.”

“Is he stupid or playing games?”

“I think there is some confusion. The agreement drew up at the beginning was superceded [sic]. It did not have the approval of the purchaser (I drew it up) and it was in breach of the Takeover Code, as we later found out. So we could not use that agreement and the purchasers then told us of their terms for the deal and said they would draw up the agreement. The purchaser then drew up a new agreement, which you also signed. That agreement is the one Ilario has and you may remember that when you and he were here you queried the section dealing with Tax. I explained that that only dealt with Tax matters which had been disclosed and that everything had been disclosed.”

“I am delighted to learn that we are to receive payment for the outstanding debts. Thank you for your assistance.”

“I’d like to run the reply past Mark because Antonio is completely confused as - he signed an agreement admitting no interest was payable. - when did the purchasers undertake to pay the three interest payments?”

“There is a misunderstanding. The buyers agreed to buy your shares for 1p each. They agreed to buy your loans for £2,500,000. To meet the legal requirements of the takeover panel you signed an agreement not to charge interest. Ilario witnessed the agreement. To meet the requirements of the talkever [sic] panel there is no mention in the documents of you being paid if QPR are promoted. Again, that is because if the panel knew you would be in serious trouble as receiving preferential treatment as a former shareholder. Please send me copy of the undertaking you received and I’ll find out the position from the club.”

“I understand £2,000,000 cannot be mentioned in the principal contract you’ve signed on my behalf (I do imagine you’ve signed it since I didn’t received any copy till now!) I’d like to know where and which are the possible guarantees concerning the agreed amount of £2,000,000 if QPR will be promoted in Premier League.”

“We have still not been able to speak about QPR. Mr Caliendo and his associates are particularly anxious to understand the position both regards repayment of the loans and any repayment on promotion. You will appreciate that Mr Caliendo speaks little English; he is confused as to the deal which has been done and which, I understand, was signed under the power of attorney given to you. He needs matters to be resolved failing which he will have little choice but to call into question the validity of the whole transaction. In the circumstances a meeting might be helpful.”

“KS informed us that he was appointed by QPR a year ago to raise finance in view of their difficult position regarding restrictions on use of the stadium and onerous terms of the loan owed to ABC. In the middle of 2007 [HMRC] issued a petition. Antonio Caliendo did not want to pay and at that point wanted to sell his shares. KS negotiated an instalment payment programme with [HMRC] which still left the sum of £600,000 due on 31 August 2007 with no possibility of further time. …. QPR had other problems … In August Bruno Michel on behalf of Flavio Briatore came along with a deal on a ‘take it or leave it’ basis. There were further problems. … Gianni and AC fell out. AC claimed there a better offer for the club than from Bruno Michel. KS had a number of meetings with AC but he never produced any evidence of this better offer. The deadline of 31 August to pay the balance to [HMRC] was crucial. KS says he advised AC to speak to T&F about Barnaby and Wanlock. When AC went to T&F he got arrested over an outstanding invoice. Ilario is Antonio’s interpreter but he has a business background. … As far as AC’s loan is concerned, the loans were for a total of £6.m. They were originally repayable in March 2011 (for tax reasons?) Baker Tilly found the loan agreements when they were doing the company’s accounts. AC claimed that the repayment date had been varied but no-one could find any documentary evidence of this. The Takeover Panel did not know about the £2m promotion payment deal. The minority shareholders had complained to the Panel about the 1p share price so this was a very hot issue. The Panel suspected that the loan repayment was a device to get a higher share price for AC. … Withers refused to restructure the deal so that the loan was waived to a lesser extent. KS personally thought that the club would in fact go into liquidation. KS acted for the club. He thought T&F advised AC (although he admitted that he knew T&F were refusing to advise AC because the outstanding invoice). KS claimed he persuaded the club to pay T&F. … Gianni and AC have now made up. Briatore knows AC well. ... The bank debts are apparently news to KS. KS got a list of debts from the club and these bank debts were not included. AC had agreed to make the £6.5m loan interest free (he signed a document on 30 August). KS showed AC the list of agreed debts. He told him AC needed to speak to the club’s finance director, Mark Cook[e], and that if the debts were genuine then he would be paid. KS suspects that the debts are AC’s interest payments on the loans. … Mark Cook[e] said he would look into the debt[s]. He has not been able to find anything supporting them yet. Gianni thinks it is a try on. … The future payment to AC (i.e. £2m now and £2m on promotion) are in Gianni’s gift. Gianni says he wants to pay AC as soon as possible to get him off the balance sheet and to stop him causing trouble. KS was given a list of creditors by the club including T&F and this was paid. He was keen to pay as they were not advising AC because of this debt. The list did not include AC bank debts. AC produced his own list of club debts. KS gave it back to him saying he was not acting for him. AC said the buyers are going to pay these bank debts. If so that is a matter between AC and the buyers. It may have been kept quiet on purpose by Flavio Briatore and AC. … KS said he does act for AC and is currently preparing a claim against Andrea Primicerio for commission as a result of a Brazilian footballer deal a year ago. It is ongoing but has stalled. … In answer to my prepared questions: 1. There is some justification for AC believing that KS was acting for him. It does [n]ot appear that KS told AC to get separate legal advice. 4. The £2m is to be paid off the record when the dust settles. It should be shortly after the meeting on Wednesday. The payment for the shares will be made in the proper way. KS has already told Maria that he would rather the share payment goes direct to T&F. … 6. He says AC knows that the £2m on promotion is a gentleman’s agreement and is not enforceable. ARM do not know about it. Withers do know about it. 7. QPR have not seen the invoices for the bank debts. They are concerned that they relate to interest that has been written off. If they relate to proper debts they should be supported by evidence and will be paid. …”

“… I also want to express my apologies for chasing you at points throughout the transaction for certain things – I only realized when it was pointed out at the EGM that your services were provided in your own time and holiday. … ”

“Yesterday I spoke at length to the lawyers for the new owners. As I have previously explained the deal they did was based on accounting figures prepared by Mark Cooke as as the end of May. The deal obliged the accountants for the new owners to use all reasonable endeavours to verify the May figures by the end of November. As you will recall they did this because they were concerned that they may have been unknown deficits which were not properly reflected in the accounts. You will also recall that this was partly reflected in the tax warranty which they asked you to give and which I explained to you. Part of the problem was that the new owners were worried that the sums due to [HMRC] had been understated … The difficulty is that the accountants have not finished the exercise. They have told me they do not expect to finish it this month. I have told them that you will find this unacceptable as it is holding up repayment of your loan. They have simply said that they were under a duty to use reasonable endeavours to conclude the exercise and they are actually doing their best. …”

“Everything began about two years ago when you called me to propose, as a friend, that I participate with you in a great deal that you were finishing up in England. You explained to me that this was something exception and that you were offering it to me, as a friend, therefore giving me a great opportunity. I immediately and enthusiastically accepted even if I was afraid, given that the requested investment represented a lot for me even if perhaps it wasn’t much to you. Therefore I also involved my father so that he could guarantee me his support, which he provided given the trust that both of us have in you. At a certain point I tried to formalize a written agreement between us, with the collaboration of Liam. This almost annoyed you and therefore our agreements remained those ‘sealed with a handshake’. Obviously I had faith in you and therefore you remained my guarantee. I certainly would not have ventured into such a demanding situation without a written guarantee if I had not had the certainty of feeling protected by your word. Always to support you, and certainly not in my own interest, I agreed to serve as the Director of QPR. This came with serious responsibilities but without any remuneration or reimbursement for any of the costs incurred. The only compensation was seeing a few games and in fact I must admit I did have fun. During this period, I permitted myself to make a few suggestion such as, for example, to assign the position of Chief Accountant to a person to be hired, Italian and trusted by you. I also suggested assigning the position of Company Secretary to Liam Davies We also could have assigned the task of legal support to Crown Agents but even this didn’t go over well with you and we therefore ended up in the hands of Kevin Steele… I have to say that although I don’t understand much about football affairs if you had listened to my advice we would have fewer problems. Now we find ourselves facing the prospect of fighting in order to try not to lose the first 2 million and the minimum objective for me is to recover my money, which is 350.000 GBP which represents the 420,000 GBP initially put forward and the interest that the bank charged me, minus the 100,000 GBP that I have already received. This is vital for me. Then, with the subsequent payment (that from the promotion) I would expect to have something more so that I can actually feel that I made an investment and did not make a blunder. …”

“Nobody matters to you and you didn’t even ask if the writer of this letter despite the enormous loss he must have sustained (alone), given that you disregard the amounts that were paid in order to support the investments that were supported only by me and by Dunga, while you backed out altogether with Zeno, without wanting to throw in a penny to help us get out of a situation that was falling apart due to lack of funds. Even your father despite the fact that he was asked for a loan of 30 days of £250,000 telling us that he was practically ready to lose everything just to avoid risking more money. Despite the guarantee that I would have provided him to return the amount at 30 days with a post-dated title. If you want to know over 7 million sterling were earmarked between me and Dunga …”

“… we had been instructed by Mr Caliendo to request a meeting with you without delay. The purpose of such meeting is to obtain clarity on all faces of the above referenced transaction, including on your professional contribution as Mr Caliendo’s advisor and solicitor, which contribution has not, in our client’s opinion, sufficiently protected his position and interests as a vendor.”

“As far as I am concerned I did everything I was instructed to do to protect Mr Caliendo’s position, in circumstances where his company’s investment in the club was imperilled by a statutory demand for non-payment of tax and the imminent threat of insolvency. At all relevant times Mr Caliendo met here (with me and his other advisors and translator) to review the important papers. He did not disagree with any of the main terms of the sale agreement. He was not, as a gesture of goodwill, charged for our services. At all relevant times he was accompanied at those meetings by Mr Paladini and Mr de Marco. They can confirm what I have said and what I advised. Messrs Primicerio were also present at one meeting and were sent the relevant documents. The position he is now is in as a result of how the accounts have been presented – not by reason of anything I have done or not done…. Since the sale was concluded I have met with Mr Caliendo here on a number of occasions, again without charge, and have presented his agent (Ilario) with a complete set of papers which were, he told me, to be handed to Mr Caliendo in Monaco. Meanwhile Mr Caliendo owes us money for a barrister’s fee relating to another matter where he has instructed us. …”

“Many thanks for your e-mail of 18 [sic – this appears to be an error] June 2008. We understand that you have acted both in a professional capacity as Mr Caliendo’s solicitor and and you also owe him fiduciary and other duties as his agent under a general power of attorney dated 28 August 2007. Our client believes that after execution of the contractual documentation regarding the QPR matter you have failed to reply to his enquiries, have not returned calls and messages, timely or at all, and have generally been unapproachable. …”

“I do not accept the points made in the second paragraph of your letter …”

“Apologies – I was referring to the third paragraph of your e mail in my earlier e mail”

“I have received the attached documents and I was wondering whether, and if so where, these transactions have been recorded in the accounts.”

“Please find attached the two agreements in relation to the loans made by Carlos Dunga to [QPRH]. I could not find them in the ledgers but I was wondering if you had come across them in your review.”

“The 2007/2008 statutory accounts for [QPRH] detail all of the outstanding long-term loans and no loan from Carlos Dunga is included in the accounts. As you may be aware, [QPRH] came under new ownership in November 2007 and it is my understanding that any outstanding loans due from Carlos Dunga were cleared prior to this date. In fact our records include a signed deed from the previous owners’ directors confirming that at the time of the takeover there were no outstanding loans between QPR and Carlos Dunga.”

“From around the second week of August 2007, Mishcon, through Mr Steele, was retained to act, and did act, on behalf of the Claimants, Wanlock and Zanotti in relation to the proposed sale and/or disposal of the interests of the Claimants and Wanlock in [QPRH], namely the Transaction …”

“50. The sale of my shares in QPRH was not the first time that I had instructed Mishcons to act on my behalf. … 59. It is not, therefore, surprising that I instructed and believed Mishcons to be acting for me for a month or so later in August 2007 in relation to the QPRH sale. I never for a minute doubted that Mr Steele was acting for me/the shareholders (Barnaby and Wanlock) in the sale of the Club. Indeed, Mishcons never sought to make it clear to the contrary that they were not acting for me and/or were only acting for QPRH in the Transaction. … 84. Following [a meeting in the beginning of August 2007 at which Mr Giraudo introduced Mr Paladini to Mr Briatore and Mr Briatore expressed interest in acquiring QPRH], I had various discussions about this potential deal with Mr Steele and Paladini. … 85. I instructed Mr Steele/Mishcons to act for me, Barnaby, Wanlock and Zanotti in relation to this potential investment in the Club …”

“It is quite plain that no formal or express retainer was ever given by him to them; but that was not necessary, for although no such express retainer has been given, the relation may subsist, and its existence may be inferred from the acts of the parties. If any authority for that proposition be required, it will be sufficient to refer to the decision of the Court of Appeal in the case of Bean v Wade 2 Times LR 157.”

“1014. An implied contract is one that is inferred from the conduct of the parties. However, such a contract must still satisfy the other pre-requisites to contractual formation, including an intention to create legal relations. 1015. As stated by Mance LJ in Baird Textiles Ltd v Marks & Spencer plc [2001] EWCA Civ 274: ‘61. An intention to create legal relations is normally presumed in the case of an express or apparent agreement satisfying the first requirement: see Chitty on Contracts (28th ed.) vol. 1 para. 2–146. It is otherwise, when the case is that an implied contract falls to be inferred from parties’ conduct: Chitty, para. 2–147. It is then for the party asserting such a contract to show the necessity for implying it. As Morison J said in his paragraph 12(1), if the parties would or might have acted as they did without any such contract, there is no necessity to imply any contract. It is merely putting the same point another way to say that no intention to make any such contract will then be inferred. 62. That the test of any such implication is necessity is, in my view, clear, both on the authority of The Aramis [1989] 1 Ll.R. 213, Blackpool and Fylde Aero Club Ltd. v. Blackpool B.C. [1990] 1 WLR 1195, The Hannah Blumenthal [1983] AC 854and The Gudermes [1993] 1 Ll.R. 311 cited by the Vice-Chancellor, and also a matter of consistency. It could not be right to adopt a test of necessity when implying terms into a contract and a more relaxed test when implying a contract — which must itself have terms." 1016. Necessity in this context generally requires demonstrating that the parties have acted in a way which is consistent only with an intention to make a contract. If they would or might have acted the same way in the absence of such a contract then necessity is unlikely to be established. In The Gudermes [1993] 1 Ll.R. 311 at 320 the Court of Appeal approved the following direction given by the Judge (Hirst J): ‘In my judgment no implied contract can be inferred unless it is necessary to give business reality to the transaction, and unless conduct can be identified referable to the contract contended for which is inconsistent with there being no such contract; and it is fatal to the implication of such a contract if the parties would or might have acted exactly as they did in the absence of such a contract..’” ‘61. An intention to create legal relations is normally presumed in the case of an express or apparent agreement satisfying the first requirement: see Chitty on Contracts (28th ed.) vol. 1 para. 2–146. It is otherwise, when the case is that an implied contract falls to be inferred from parties’ conduct: Chitty, para. 2–147. It is then for the party asserting such a contract to show the necessity for implying it. As Morison J said in his paragraph 12(1), if the parties would or might have acted as they did without any such contract, there is no necessity to imply any contract. It is merely putting the same point another way to say that no intention to make any such contract will then be inferred. 62. That the test of any such implication is necessity is, in my view, clear, both on the authority of The Aramis [1989] 1 Ll.R. 213, Blackpool and Fylde Aero Club Ltd. v. Blackpool B.C. [1990] 1 WLR 1195, The Hannah Blumenthal [1983] AC 854and The Gudermes [1993] 1 Ll.R. 311 cited by the Vice-Chancellor, and also a matter of consistency. It could not be right to adopt a test of necessity when implying terms into a contract and a more relaxed test when implying a contract — which must itself have terms." ‘In my judgment no implied contract can be inferred unless it is necessary to give business reality to the transaction, and unless conduct can be identified referable to the contract contended for which is inconsistent with there being no such contract; and it is fatal to the implication of such a contract if the parties would or might have acted exactly as they did in the absence of such a contract..’”

“148. While the interests of a company are normally identified with those of its members, the interests of creditors can become relevant if a company has financial difficulties. In West Mercia Safetywear Ltd v Dodd (1988) BCC 30, Dillon LJ (with whom Croom-Johnson LJ and Caulfield J agreed) endorsed (at 33) the following statement of Street CJ in Kinsela v Russell Kinsela Pty Ltd (1986) 4 NSWLR 722: ‘In a solvent company the proprietary interests of the shareholders entitle them as a general body to be regarded as the company when questions of the duty of directors arise. If, as a general body, they authorise or ratify a particular action of the directors, there can be no challenge to the validity of what the directors have done. But where a company is insolvent the interests of the creditors intrude. They become prospectively entitled, through the mechanism of liquidation, to displace the power of the shareholders and directors to deal with the company’s assets. It is in a practical sense their assets and not the shareholders’ assets that, through the medium of the company, are under the management of the directors pending either liquidation, return to solvency, or the imposition of some alternative administration.’ 149. The interests of creditors can ‘intrude’ even when a company may not strictly be insolvent. For example, in Colin Gwyer & Associates Ltd v London Wharf (Limehouse) Ltd [2002] EWHC 2748 (Ch), [2003] BCC 885 Mr Leslie Kosmin QC (sitting as a deputy High Court Judge) put the position as follows (at [74]): ‘Where a company is insolvent or of doubtful solvency or on the verge of insolvency and it is the creditors' money which is at risk the directors, when carrying out their duty to the company, must consider the interests of the creditors as paramount and take those into account when exercising their discretion.’ (The emphasis has been added.) 150. Recent Australian authority is to similar effect. For example, in Kalls Enterprises Pty Ltd v Baloglow [2007] NSWCA 191, (2007) 25 ACLC 1094, Giles JA (with whom Ipp and Basten JJA agreed) said (at [162]): ‘It is sufficient for present purposes that, in accord with the reason for regard to the interests of creditors, the company need not be insolvent at the time and the directors must consider their interests if there is a real and not remote risk that they will be prejudiced by the dealing in question.’ This passage was quoted with apparent approval in Bell Group Ltd v Westpac Banking Corporation [2008] WASC 239 and, on appeal, Westpac Banking Corporation v Bell Group [2012] WASCA 157. At first instance, Owen J, having quoted from Kalls, said (at [4445]): ‘The basic principle is that a decision that has adverse consequences for creditors might also be adverse to the interests of the company. Adversity might strike short of actual insolvency and might propel the company towards an insolvency administration. And that is where the interests of creditors come to the fore.’” ‘In a solvent company the proprietary interests of the shareholders entitle them as a general body to be regarded as the company when questions of the duty of directors arise. If, as a general body, they authorise or ratify a particular action of the directors, there can be no challenge to the validity of what the directors have done. But where a company is insolvent the interests of the creditors intrude. They become prospectively entitled, through the mechanism of liquidation, to displace the power of the shareholders and directors to deal with the company’s assets. It is in a practical sense their assets and not the shareholders’ assets that, through the medium of the company, are under the management of the directors pending either liquidation, return to solvency, or the imposition of some alternative administration.’ ‘Where a company is insolvent or of doubtful solvency or on the verge of insolvency and it is the creditors' money which is at risk the directors, when carrying out their duty to the company, must consider the interests of the creditors as paramount and take those into account when exercising their discretion.’ (The emphasis has been added.) ‘It is sufficient for present purposes that, in accord with the reason for regard to the interests of creditors, the company need not be insolvent at the time and the directors must consider their interests if there is a real and not remote risk that they will be prejudiced by the dealing in question.’ This passage was quoted with apparent approval in Bell Group Ltd v Westpac Banking Corporation [2008] WASC 239 and, on appeal, Westpac Banking Corporation v Bell Group [2012] WASCA 157. At first instance, Owen J, having quoted from Kalls, said (at [4445]): ‘The basic principle is that a decision that has adverse consequences for creditors might also be adverse to the interests of the company. Adversity might strike short of actual insolvency and might propel the company towards an insolvency administration. And that is where the interests of creditors come to the fore.’”

“In a situation such as the present where (to the knowledge of both parties) a solicitor is retained by one party and there is a conflict of interest between the client and the other party to a transaction, the court should be slow to find that the solicitor has assumed a duty of care to the other party to the transaction, for such an assumption is ordinarily implausible.”

“98. Questions of assessment of damage … have to be distinguished from questions of causation. These issues are discussed at length in the decision of this court in Allied Maples. As the court there explained, in the context of causation, some hypothetical questions (‘what would have happened if ...’) do fall to be decided on the balance of probabilities. Thus (see Stuart-Smith LJ at page 1610 D-H) where the breach of a duty consists of an omission, for example to provide safety equipment, and the question is what the claimant himself would have done had the breach of duty not occurred – a question of causation - the claimant has to prove the matter on the balance of probabilities. He does not get a percentage award if he falls just short of the threshold, and he does not suffer a discount if he passes it. 99. Stuart-Smith LJ went on to explain that in many cases the causation of the claimant's loss may depend on the hypothetical action of a third party, either in addition to the claimant himself or independently of him. In those cases the court does not demand that the claimant establish his case of causation on the balance of probabilities: see Allied Maples at 1611 A-C. All the claimant has to show in such cases is that the chance is a real or substantial one. Having done so he must still show, on the balance of probabilities that the defendant’s act has caused the loss of the chance (see to this effect per Lord Nicholls in Gregg v Scott [2005] UKHL 2, [2005] 2 AC 176 at [17]). Once the claimant has shown on the balance of probabilities that he has lost the relevant chance, the valuation of the chance is a question for the quantification or assessment of damages. 100. I would have thought that, applying those principles to the present case, it would be plain that, whilst WP would need to show on the balance of probabilities that, but for the negligence complained of, they would have opened a US office (a question of causation dependent on what the claimant would have done in the absence of a breach of duty), the actual loss which they claimed to have been caused by the defendant was dependent on the hypothetical actions of a third party, namely Nomura. Accordingly, in line with well established principle, the chances of Nomura deciding to award the mandates to WP would have to be reflected in the award of damages.”