Signia Wealth Ltd v Vector Trustees Ltd & Ors [2018] EWHC 1040 (Ch)

“Salary – first year: Commence 1 January 2010 - £200k basic / £200k bonus. Bonus to be paid for achievement of £250 million AUM. First £100k bonus to be paid month after achievement of target. Remaining £100k bonus to be paid month following end of year. If needed, a 12 month period for bonus qualification to be extended by 3 months. Salary – second year: Full bonus to be paid for a PBT breakeven performance, and to be paid in the month following the 12 month period. Shares Nathalie to invest £200k for 5% class A shares. Gautam to invest £100k for 2.5% class A shares. Rest of shares taking total shareholding to 40% to be on a linear scale in line with final company valuation, between £75 million base price and £175 million target, so that the intention is that both ND and GB will end with 20% each in total of class A and B shares, provided that target is achieved. 9% of shares to be available to motivate new Managers coming into the business. Should the £175 million target be achieved and no extra shares given away, then the 9% will revert equally back to ND and GB. JC to make a loan of up to £6 million interest accruing at 3% over 3 month libor, accruing until the business is cash flow positive, or will make a loan of £6.5 million interest to be paid quarterly. Some of the above loan will actually be made as share capital and not interest bearing, and at the time of writing it is thought this would have to be equivalent to 3 months worth of overheads. Good leavers and share treatment: Good leaver events: Death. Serious illness and permanent disability. A leaver who leaves amicably. Share treatment: Class A shares valued at fair market price. Class B shares are calculated at fair market price x 20% (to a maximum of 100%) for each year of service, excluding the first 2 years. Bad leaver and share treatment less than 2 years employment: Bad leaver events: All others. Share treatment: Class A shares paid at investment value or fair market price whichever is the lower. Class B Shares nil value. Bad leaver and share treatment more than 2 years employment: Bad leaver events: All others. Share treatment Class A shares paid at investment value or fair market price whichever is the lower. Class B shares are calculated at fair market price x 25% (up to a maximum of 100%) for each year of service, excluding the first 3 years. These values will be calculated at the point of employee termination and will be paid upon the sale of the business or earlier if the Board plus JC decides to. Fair market valuation will be determined by the shareholding Board plus JC. If the departing employee does not agree with the valuation, a valuer may be appointed completely independent of both parties and his cost shared 50/50. JC investment The business to take over the Coutts investment portfolio and it is expected that this investment will remain for several years, but will be subject to performance. No management fee to be charged for the first 2 years. Performance fee will be considered.”

“Further explanation following our conference call If a business makes a loss, this must be deducted from the Share Capital immediately before this capital can be assessed against the Regulatory Capital requirement. Conversely, if the business makes a profit, this can only be included as Regulatory Capital once it has been externally verified – i.e. after an audit. It is not possible for Signia to meet its Regulatory Capital requirements with Share Capital and Long Term/Short Term Subordinated Loans alone. The business initially makes a loss, which must be deducted from the Share Capital before it can be assessed against the Regulatory Capital requirement. To qualify as Regulatory Capital, even Subordinated Loans have restriction on their values. These restrictions are based upon fixed percentages of the Share Capital, so, as the Share Capital is reduced by the business’ losses, any loans are also reduced proportionately. The certain outcome therefore is that if a business is making a loss and its Share Capital is reducing accordingly, in time there is a breach. Solution It is necessary to charge a 45bp management fee on the £350m seed capital in order to prevent the business from making a loss in the initial months (Note: the above bulleted reductions to the business’ costs have reduced this from 50bp). This preserves the £612k Share Capital for assessment against the Regulation Capital requirement. As you are aware, the Requirement itself is one quarter of your first year’s fixed expenses – which are £3,206k – making the Requirement £802k. A further capital injection is therefore needed in addition to the £612k Share Capital to cover this shortfall. This capital injection can either be in the form of Long-Term or Short Term Subordinated Loan and it must be at least £190k. We would recommend that a buffer of one month's expenses was added to this figure and that the actual amount of Subordinated Loan that was placed in the business as Regulatory Capital was £350k. The loans maturity can either be Long-Term or Short-Term – the major difference being that the latter offers more flexibility. We understand that your seed investor intends to put more capital into the business than the £962k (Share Capital of £612k + £350k Sub Loan) that is required to meet the Regulatory Capital Requirement. An additional amount can be put into the business at your discretion, and as a loan if this is preferable based on the legal and tax advice you receive, but we would not recommend that it be put in as Regulatory Capital (i.e. further Share Capital and/or Subordinated Loans) as this would place restrictions on its subsequent removal and future flexibility of the business.”

“David Please find below, the solution we found to fund the business. We aimed for John to put as little as possible cash and as max as a loan. However, we needed to find a solution that will meet the Regulatory requirement for the FSA (the issue is that any losses is added to the capital requirements so in order to reduce the loss we needed to produce additional income to the business). So the following proposed solution should satisfy John and the FSA. The requirements based on this solution is £802k which could be funded as below: £612k Share Capital (including my £200k and £100k from Gautam) which should make easy the capital structure. As the requirement itself is £802k and to avoid putting additional cash, the difference of £190k can be put as a Subordinated loan (I did ask to increase the amount of capital that was supplied through a loan but FSA regulations restrict the amount of permitted regulatory capital that can be met through a loan to 250% of the Share Capital and, as the share capital is reduced by the losses on a monthly, the corresponding amount of capital allowed as a loan is also reduced until such a point as the regulatory capital requirement is breached). However see below they recommend that a buffer of one month’s expenses was added to this figure and that the actual amount of Short term (more flexible) Subordinated Loan that was placed in the business as Regulatory Capital was £350k. However that solution of £802k is based on finding additional income to cover the losses to comply with the regulator. Therefore, we have found the solution of charging [Mr. Caudwell’s] portfolio 45bp management fee based on his £350m we discussed. The only key downside for you is that the fees invested in the business cannot be recovered as easy as a piece of senior debt. On the business front, it would allow us to market our business without mentioning of side letters/special deals on fees or explaining why [Mr. Caudwell] has a different treatment. Second, it would help substantially with the clarity of the track record and the generation of an audited investment record. The only downside is that VAT will be payable on the management fee (unless we manage his funds offshore as it will avoid VAT but Gautam and I would prefer to use the Vestra platform in the UK as it is robust). The remaining amount can be put into the business as a loan. For clarification, I assume the £6.5m we agreed included interest payable on the loan and excluded the money that Gautam and I were putting in the business. Please find attached the proposed split based on all the above assumptions.”

“4.6 The Strategic Report (dated 24 April 2015) in the financial statements explains the loss after tax as being due to a decline in turnover in 2014 predominantly caused by a reduction in secondary income, accompanied by an 8% increase in operating expenses, and a “number of challenges”

“The only key downside for you is that the fees invested in the business cannot be recovered as easy as a piece of senior debt.”

“Speak to David Canfield regarding a management fee”

“Further to conversations between Nathalie and John last week, John has confirmed that Nathalie shall be entitled to a bonus of £300,000 every year from 2014 going forward. The remaining terms of her employment contract will remain unchanged.”

“David, see attached, it is self-explanatory. I do not want another issue, but Tim [Maycock] should be respectful when he calls my team, about me or any members of the team. The mess he has created at Barclays is not great. Let’s move on, but I find it unacceptable and my friend has lost is [sic.] suspended as a consequence…”

“See below a copy of a text conversation with Kate Cooper last night and this morning. The bare faced lies are staggering.”

“Hi John, Thank you for your email last week and sorry for the late reply. I think in general it would be best if we discussed this in person, I will ask Michele for a meeting in London on Wednesday if that works for you. I also fully appreciate your concern and disappointment around the business – I am in the same position and do not find anything more frustrating than this, especially taking into account where this business could be with the right leadership. A new team will get this business to the next level, I am absolutely sure. Please be not concerned about the expenses – Mike and Jatomi’s CFO Nigel have had a very hard lid on this and I can vouch for Nigel’s integrity. My reaction was based on your loss of trust and, in hindsight, myself being embedded in the business is probably the key reason for that, as it might have felt too close for you. Please be assured that I always had my best interest in mind with this investment and that I believe that it has all the potential to become a big success story under the right management.”

“Dear Konrad, Firstly, the information I have on the expenses is that they have been frivolously treated at best. Secondly, I had no loss of trust in you. I sent Michael because the business was in such a serious mess to give me a second opinion. … When he asked to see the expenses apparently you became very irrational and emotive which, of course, raises the question why? Given your significant financial commitments, I find it very peculiar that you would so irrationally give up your income. This suggests you have already found another job? … I hope you can put my mind at rest, but at the moment what I am seeing is not very pretty.” 217. Mr. Stoebe forwarded this email chain to Ms. Dauriac on the same day: “Now he has overstepped it. Very simply – you will cancel the dinner on Wednesday and secondly I will find you a buyer.”

“Dear Nathalie, This dispute between Kam and you is getting increasingly out of hand. Whilst I can agree with lots of things that you say, you then lose my support arguing about a point that has been my life time’s work, buying cheap and selling dear. There is no reason on earth why somebody should not buy for £5 million and sell for £7.5 million in a sort space of time, and that is a fact. Whether there was some corrupt activity is another point, but you should not use the uplift in value as an indication that this has happened, only as an indication that it could have happened. It is not helpful to you or anybody else to argue points that are irrelevant and not justifiable, and this does tend to detract from the main issues. I am now even more concerned about this whole thing, but have just had information on another matter that has really worried me. Some weeks ago when the newspapers were getting involved in Signia you told me that John Moulton had not resigned, but may not be very active. He rang David up yesterday to make it crystal clear to David that he had resigned, but had allowed his photograph to remain. Furthermore, you told me a few weeks ago, at the same time, when the newspapers were talking about high staff turnover that only one person had left in the last 12 months. I am now told that 15 people have left in the last year. I have no way of knowing whether this is true at the moment but, needless to say, I am very worried about these two pieces of information.”

“An employee fed me the remarkable allegation that [Ms. Dauriac’s] assertions about Cambridge University education on the web might be a little expansive – alleged to be Summer School in Cambridge, but not a University course.”

“…the reality is that, according to her CV (which I have), she achieved a post grad diploma in management studies at the Judge Institute Cambridge. That’s not ‘Finance’ and also not, as the website seems to seek to suggest, an Oxbridge degree. Her degree is from somewhere in Bordeaux. Interesting!”

“Given my focus on the expenses process at Signia at this time, I asked Ms. Degruttola to initiate a review of all my expenditure on the company credit card, as well as those items of business expenditure which I had spent on my personal credit card and for which I had then claimed reimbursement.”

“In the late afternoon of 16 July 2014, I met with Mr. Hayes in London. We met at a pub off Oxford Street. Subsequently, Mr. Hayes sent me a full copy of [Ms. Dauriac’s] expense claims on a USB stick and I gave these to Mr. Maycock for analysis.”

“…David resigned to Nathalie on the morning of Thursday 16 October 2014. At that meeting, she told him he was to go home straight away and not to come into the office unless he was asked to. (I am not sure she confirmed that he was on gardening leave, she just said he was not to come in until we called.) On Saturday 18 October 2014, he came into the office and accessed the expenses folder for 2013. On Monday 20 October 2014, Martin [Wilson] and I met David on the second floor and confirmed with him that he was not to speak to clients or staff unless it was to handover on projects. He was on gardening leave and he was to provide Martin with a list of the projects he was working on. I followed this up with an email stating that although he was on gardening leave he was to simply state that he was out of the office until an official line was agreed about his departure. I am not sure it was clear enough to him that he was on gardening leave when he accessed the file on Saturday, nevertheless it is weird that he would come into the office on a Saturday and print off all these documents which have nothing to do with him.”

“That’s great, Dan, please make sure you have secure and independent copies of all those claims and if possible an electronic copy of the 2013 and 2014 accounts with all the historical detail. Thanks again for your assistance, it is appreciated. David.”

“John, it has been very hard over the last few weeks and I would really ask you for all the years we had together to just give me an hour to understand what I have done wrong. I am not sure if it is about Kam, or Claire, or the business, but I cannot think what it is. As far as I know, I have been the most loyal person and love you with the bottom of my heart. Please let me know when you can meet today or please call me. I am just asking for an hour, just the 2 of us. It means so much to me. With all my love xxx thank you for tonight.”

“Ho, David. It’s getting impossible now. We have to act soon with whatever we have. J.”

“This one has every claim sheet – it is a bigger file, but should allow you to print the lot in one go. Big file, so might take some time to come over the server.”

“Hi Nathalie, Hope you are well. We have recently undertaken an in-depth review of the level, nature and appropriateness of the business expenditure being incurred within one of the companies under John’s ultimate ownership and this has identified some quite serious issues regarding the governance and financial control being exercised within this organisation; particularly in relation to travel and subsistence and entertainment expense. In light of that we are now broadening this review out to all the entities under John’s family’s control, including of course Signia Wealth. We’ll be in touch in due course to organise this review with you but in the meantime and in anticipation of your meeting with John which I understand is taking place on Thursday, we would like to start with a review of the expense claims of the key personnel within the business. As a matter of priority can you therefore please arrange for someone to send us electronic copies of your personal and corporate card expense claims and those of the members of the Executive Committee (including those who have left in the last 12 months) for the past 2 years, being 2013 and 2014 to date. I assume these will already be held electronically on file so hopefully this doesn’t present a logistical difficulty. Any problems, please let me know. It would be preferable to have this to early timescales and well in advance of Thursday’s meeting.”

“Don’t speak about it to anyone, I need you to please print off every single expense form there is, put a post-it note on each of them, with the month, year and whose it is, and then also printoff every single expense form there is for Nathalie personal expenses and I need them also asap please”

“I would mention that as part of the expenses process, Nathalie makes a separate payment for her own personal expenses not payable by the firm and she reimburses this on an annual basis. For 2014, this payment will be made in December. As you know, she entertains at her house on a regular basis and does not make any allowance for additional cleaning costs, providing accommodation to employees and clients who would otherwise be charged to the firm.”

“Janet, I’m running out of time, can you please send me the residue of these claims asap. If you need to prioritise please send me Nathalie's first. Thanks, David”

“Dear Nathalie As you know, you asked me to look into your expenses two weeks ago to ensure that all expense for trips with John Caudwell etc were paid on your personal card and not your corporate card and that if for any reason a trip for John had been paid on your corporate card we needed to reimburse you and to make sure that all of your expenses were detailed correctly cross referenced with your diary. When Janet informed me that they were reviewing all expenses I told her about our conversation and that I had started pulling out all expenses for trips with John Caudwell and putting them into a separate spreadsheet for 2013 and 2014 in which you needed to reimburse. I told her that you had asked me to go through your expenses again and make sure that all of the entries added up to what was in your diary. As the receptionists do expenses (not myself) and we have had so many of them over the past two years, the entries were not all correct with what you had in your diary therefore I was asked to match them to your diary. Yesterday when yourself and Janet told me that all of your expenses needed to be sorted out before the end of the day as Janet and Martin needed to sign them and send them off I had a few hours to complete over two years’ worth of expenses. You told me to go through your diary and match them to trips/clients/events that you were at, at the time of the expense and then give to Janet/Martin to look through and sign, therefore I did not go through the receipts to see what was what I just matched them to your diary as I thought you wanted me to. You also reminded me that there should be nothing in your expenses that relates to trips with John Caudwell. David mentioned this morning that there are now some entries that are different to the statements that we have as I only went through your diary to find what they could have been for, as you asked me to do. As I had so many to do over such a short amount of time yesterday, there may have been some silly mistakes with the details of the entry. Some of the flights expenses were changing to flight to XXX with XXX rather than the full details as I did not have time to dig through the receipts and check everything precisely with only a few hours to complete all of these. I would however like to confirm that although some of the descriptions of the expense have been amended were necessary none of the numbers (prices of the expense) were changed at all, as I was only asked to make sure that the descriptions were correct. I am so very sorry that this may have been a miscommunication from you to myself as I only did what I thought you wanted me to and I was so shocked and upset in the meeting with David this morning that this may have all been wrong down to a miscommunication. I always try my hardest to do everything that I am asked to do, to the best of my ability and take my job very seriously.”

“John To clarify what has occurred today as I now understand it and as explained to David and Tim, around two weeks ago my PA Kelly told me that she booked flights to New York to see Rebecca as a corporate expense as I asked for the cost. I asked her why she had done this and she said that all Caudwell expenses are charged as client expenses. As you are a client, the team has always put expenses they booked on corporate as they do for all other clients, to be clear I was not aware about this and in good faith I told Kelly at the time that I would like to bear the cost myself. I therefore asked Kelly to go back and remove all Caudwell expenses onto a separate spreadsheet, which I would reimburse. She started creating notes of those expenses and “play” with the expenses form and did a statement spreadsheet summarising it yesterday from her notes when she must have panicked as we were asked in a rush for expenses and did not have more than a few hours whilst working. To be clear, I never checked or signed the reimbursement spreadsheets and did not have the time to go through it yesterday. As David will confirm she gave him the forms when he arrived in the office first thing. With some time I would have gone through it line by line which I intended to do. She then took your name literally out of all expenses without my knowledge, to be clear it is my mistake. To reaffirm I did not check what Kelly had done. You need to realise that I have paid personally more than a lot of expenses out of my own money, hosted staff at home, did dinners at home…over the years and never claimed anything. I simply asked them to take your name out and reimburse due to our relationship when I found out. There was also instances when other PAs did not check who meetings were with and put your name down or another family member. They have not been matched correctly to my diary and the descriptions were over-simplified. I have never looked at it as no-one can take funds out and she puts expenses through. I do not look at expenses in detail and have never done and have asked the compliance team to look at it a few months ago and take responsibilities. Then this week as you know we received an email from David asking for all my expenses for 2013/2014. I didn’t even know what had been put on these expenses as I do not have time to check this, so I asked Kelly to go through all my expenses and make sure that she matched them up against my diary. Kelly simply looked back at my diary and reconciled this against the dates in the expense forms. She did not manage to check the receipts and therefore a discrepancy has occurred between what was originally itemised on the expense forms versus the changes Kelly made by going through my diary. We often book flights and trains and other expenses in advance so the date of booking and the date of the event do not match. The amounts, however, remain the same and no money has been taken from the company. I should have checked the changes made as I was in meeting most of the day and the girls were under pressure to send the forms through to David immediately so did not notice this discrepancy and I was in meetings most of the days. I have agreed with David and Tim that they may have full access to [Signia’s] expense records and can liaise with Dan our Finance Controller for any other information they need. I am sure they will see that after reviewing the receipts that no money has been taken from the company. To be clear, there was no bad intend on anyone’s part, we are guilty of not having a proper process but have changed this and review has been and will be undertaken of all staff. My expenses had not been reviewed and the team did not feel it necessary to prioritise mine first as I am always out with prospects and clients and I pay many of those expenses myself. Please see below Kelly’s statement who just go very scared this morning. She is one of our best members of staff and had no intention to do anything wrong. I fully support her and it is my mistake but may I say that had one of you called me yesterday and told me what it was about, I would have taken the time to do it properly. There was no bad intention on anyone’s part and could have been dealt differently. More importantly you will have understood that I or the team had no intention of wrong doing, the business is 4 years old and is not perfect but everyone has been trying to do the right thing. I guess we will need to discuss what to do from there. Please give me a call when convenient.”

“For the record, I just sent that to John: John, Tim just told me that he has finished his investigation this evening. He just confirmed to me “that what he has seen is bad housekeeping but nothing malicious”

“Dear Tim Further to our meeting and the outcome of your investigation, I can confirm that we will be taking the following action today: 1. As you know, a few weeks ago, Nathalie asked Kelly to amend her expenses and remove expenses in relation to [Mr. Caudwell], as she told us she wanted to pay this herself. Staff handling these expenses always assumed that as [Mr. Caudwell] is a client it should be a corporate claim. Kelly started removing those items and noting them down and as stated in our meeting, neither Nathalie nor I had time before sending on Wednesday to check them line by line. As you have seen, unless there have been mistakes due to time constraints, those items have been transferred to a separate reimbursement spreadsheet and send you a signed version. 2. We will go through all Nathalie’s corporate and personal expenses and itemise on a separate spreadsheet all those entries that have been changed and the reason why Kelly provided clarification/amendment or change (accepting that there has been no change to financial amounts). 3. Kate is checking the regulatory aspect and will come back to you, however, we understand that this should not be an issue. As I stated in my previous email to David last Wednesday, there are many occasions where Nathalie would be entitled to expense items such as additional costs for dinners and events held at her home, accommodating clients and prospects at her home and these are not claimed. We will send all the above to you by close of business today so that you can complete your report.”

“Hi Janet, As you know, I have reviewed the old and new expense claims from 2013 and 2014 in conjunction with the credit card statements and receipts where available. I will be issuing a report based upon the findings from this period in due course. If there is further information required as I go through this process, I will make a formal request. Please can I ask that no further records are changed in the meantime. Separately, as per David’s email of 11 November, we intended to undertake a full review of all business expenditure. The personal expenses piece has taken centre stage for obvious reasons, however I would like to start lining up the next steps, so, as a start, can you please let me have details of all salary and bonus payments made to all ‘employees’ (and for employees I include not only those on employment contracts but anyone, be it an employee, relative of an employee or associate whose services are perhaps retained on a part-time, ad hoc or consultancy basis) over the past two years, i.e. 2013 and 2014 to date. This should include all payments made to offshore entities/accounts and payments from all Signia-related accounts whether UK or offshore (not sure if the latter is relevant but if it is we need to see it). As you might imagine, this is primarily, but not exclusively, focussing on whether we have any tax non-compliance weaknesses and control breaches. I imagine this information will have to come from Dan, so please ask him to make contact directly should he require further detail.”

“Entry can be found on 2014 reimbursement spreadsheet as Nathalie wanted to refund this claim.”

“[Willingness of senior staff members to sign-off re-stated expense claims without any evidence and proven knowledge of the rationale behind the changes indicates an issue with the moral standing of senior client staff and/or the level of control exercised by Nathalie.]”

“Hi Kate, Apologies for not being in contact yet, I am aware you have called twice. I am still on a conference call regarding an unconnected matter, and will be for some time to come. I will let you know as soon as I can whether I will be coming to Signia tomorrow or not.”

“From what I can gather there seems to have been an awful lot of effort being expended to legitimise Nathalie’s expenses and I don’t need to preach to someone with your experience that this shouldn't be necessary. I’m sure Nathalie believes this to be some form of personally motivated witch hunt but it certainly isn’t Paul. As you may be aware we had already begun an urgent financial review of a number of our businesses as a consequence of apparent chronic underperformance and, as I mentioned when we spoke on Monday evening, in the specific case of Signia, we are also responding to very extensive and broad ranging information provided to us by a “whistleblower” acting “in the best interests of the business”

“I’ve taken the time to collate a sheet showing all the data I need and the questions to be answered for the next step. Mainly for information, but there might be some questions that spring to mind.”

“No chance, Tim, we should tell her to swivel. Fair’s fair, they were supposed to provide this yesterday, then it became this morning, now it’s tomorrow etc. I suggest we wait until it arrives and then say Thursday's off as we won't have time to review in depth. Being utterly selfish, I need to plan for whether I'm coming back or not tomorrow evening. What do you think?”

“…Going through Wilsons at the moment, some juicy ND stuff in there, apparently he had coffee with me on 29/8/14. Twat must have been in Cyprus then?! Did Dan send you the reconciliation of claims to payments that he promised? My spy tells me Wilson has denied all charges, guess what his excuse is… the girls have fucked it up!”

“Kel can you prepare two sets of files with all docs and exchange of emails (including dates) and request of the check the expense and findings today. We need everything including all correspondence thx.”

“There were no email exchanges for checking the expenses when I was originally asked as you asked me not to put anything to do with it on email?” 379. Ms. Dauriac responding, saying that “I regret that as it would have proved our case”

“To me, I have been asked by Kelly Degruttola on Tuesday 2 December 2014 at approximately 11:40am to sign a formal statement that an email that was sent from my mailbox regarding John Caudwell. I don’t understand why I have to sign something like that. It was sent from my mailbox so the email was real. I know there are problems in the company with corporate expenses, that Nathalie Dauriac (CEO) was accused of stealing money from clients. There is an ongoing investigation regarding all corporate expenses regarding John Caudwell. As a PA I have been told to do the corporate and personal expenses. 3 of October 2014 Kelly Degruttola asked me to change all of the expenses regarding John Caudwell and to delete his name from all the spreadsheets from 2010 till today (that was October 2014). A week later she said we have to add John Caudwell to all of them again. I am worried now that I will be accused of something. I was only doing what I was asked and I didn't know what Kelly did later on.”

“David On the loan front, could you send me the updated version of the amount, including interest, we owe John? As Kirin should have told you, Martin is suspended and Tim and I are due to discuss the numbers and forecast for next. Please bear with me as I am not an accountant and do not fully understand how you and Martin did it in the past on the numbers front. Could you give me a call to discuss how you and Martin agreed the drawdown of the loan over the last years?”

“What was Nathalie referring to in terms of she almost fell off her chair when she found out, because I don’t understand that. As I said, I am sure she was aware, but I don’t actually understand the risk in that.”

“This is my main sheet, the columns should be self-explanatory, but give me a call if there is anything that doesn’t make sense. The yellow lines are the most interesting ones.”

“…a girl called Katie Lee is asking around to recruit someone to look after John’s personal assets. Michael got a call. Do you know what it is about? It is not best for Signia’s brand and panicking the team.”

“I still think this represents a significant compromise relative to what we could do (and hopefully she will appreciate that by complying) but I understand why we are taking this approach. The situation with Martin Wilson may still have an impact, particularly as he was involved in the cover up and he may seek to use that to his advantage. I also understand through a contact still in Signia that Nathalie is actively obtaining legal advice regarding her position in terms of her rights under a constructive and unfair dismissal scenarios, so I suspect we might have a fight on our hands. It would be good to get your agreement/views on this before Paul talks to Nathalie – although I suspect he already has if she is taking legal advice. I can obviously talk at your convenience.”

“Why did you not come to me?”

“You need to look at yourself in the mirror, Nathalie, and find something which you think is not right, because Mr. Caudwell is not going to accept it otherwise, and you will lose everything you built for four years”

“Following our meeting yesterday, This was a reference to the meeting on 10 December 2014. I have reflected on our conversation and wanted to address the various points we discussed. At a personal level, I have to say that it was incredibly hard for me to hear the message you delivered yesterday, and I’m sure it was equally difficult for you to deliver. We have always had an open and honest personal relationship and whatever the outcome, I want you to know that my respect for you and dedication to you and your family has always been unconditional and I would like to reassure you that this has not changed. I give you my word that I remain dedicated to ensuring your best interests are always at the forefront of everything I do. I know I had made errors in the past but for what it is worth, I am willing and able to accept this and learn from my mistakes. However, at times this exercise has felt like a personal witch hunt which is very hurtful. For what it is worth, I really love you and always will. I know you felt I showed a lack of remorse or emotion yesterday and that you were surprised by that. But hopefully by now you know that I only ever got over-emotional about you and our personal relationship, nothing else. After dealing with all the personal attacks this year, as I am sure you must have experienced in your career too, I feel I have grown up and am now better equipped to deal with the challenges I expect to face in the future. I have felt very alone these last few months but in hindsight I think that may be a good thing, I can now face anything. Before I address the issue of my expenses, I firstly want to clarify some key points about the business, as I understand you discussed these with Paul during your private conversation. Yes, I admit that the business is at a loss of over £2m this year and, to be clear, this is £800k more than we forecasted. That said, we will start 2015 with almost £1m of booked profit which is much higher than our forecast, based on the assets booked at the end of 2014. Please remember that the business is only 4 years old and that realistically I have done it on my own and handling 95% of the clients of the firm, albeit with your support. In case the point on staff turnover has been raised (although I will not apologise for losing the middle quality people, to be clear we have lost one person since inception I did not want to lose) – the £1m profit is based on the same amount of people as 2014, as we have replaced all the critical roles. More importantly, we now have a best-in-class investment team. 3 years ago, the business underperformed due to having the wrong investment team in place, but I have spent the last 2 years turning that around and today our results are better than ever. In the hedge fund world, we are best of class and in the long-only world, we are in the top 30% which is very good. We have only lost one client this year (Jon Moulton) and taken on 28 new clients. I think we have a morale issue in the team, due to the issues with Kam and Rupert which I take responsibility for, but we need to turn the morale around following these events plus the expenses investigation. Unfortunately, I spent far too much of my own time on the Kam and Robert issues (to be clear, Rupert is my mistake and you have been nothing more than supportive). I am confident that I would have been able to raise substantially more funds and introduced new clients to the business if I hadn’t been focussed on these ongoing issues. You have asked me to hire a strong COO/CFO and I fully agree and support this. I always planned and tried to bring in this person, but it is very hard to find the right individual. In general, although it is often interpreted differently, I really want you and your team’s help, as I fully believe in this business and welcome your team’s productive input to make it successful. Secondly, it is important for me to make the point that I have always acted in the best interests of you and Signia. Yesterday you suggested that I used your money to fund my social life and this really hurt me. This is factually untrue and I think it is an unfair statement to make. You do not just approach clients like ours. It takes time to get to know them and for them to develop a trusting relationship with their managers. Please remember that I started Signia from scratch. This approach distinguishes our business from any other bank and makes Signia different and therefore a unique player. Without this relationship of trust, we would never have been able to keep all the clients we have. To be clear, a lot of these relationships are not personal friends – on the contrary, I have lost many of my real friends over the last few years because I have only been focussed in spending 100% of my time, including that of my family, on building business relationships. Please understand the key importance of entertainment and relationship building for our business. To be absolutely clear, entertaining and socialising is purely business driven and it built Signia’s brand today. Now to turn to the expenses and the accusations made in our meeting. I have thought about it and would like to offer a full apology for my actions. I have let you down and can only say how sorry I am for this. With regards to the £26k of expenses we discussed yesterday, to be clear my team were never asked to lie or cover anything up as David and Paul got confirmed by Kate yesterday. The vast majority of these are mistakes, but I will admit there are a number of occasions over the last year when items (although linked to a client event) should have been paid for personally and were instead settled as a business expense. To be clear, John, I was upset at that time of our meeting as you refused to pay me my bonus again, same as last year. It has been 5 years now and I have lost so much money compared to what I could have earned in the past, and I have given my life for this business and found your rationale for not wanting to pay me after what I did and the dedication and efforts very unfair. I am also guilty for not calling you myself when I found out about the flight bookings. For that, I am sorry as you are right you have always picked up my calls and I am guilty there and can only apologise. You have also told Paul that I need psychological help. To be clear, I do not John, but it is correct that over the summer I felt let down and I was emotional. Today, I am stronger after all that has happened, and I believe I can deal with anything going forward. To conclude, on a personal level, I am sorry you have been put through this and more importantly that our friendship has been so negatively affected. John, I love you and despite everything which happened yesterday, I will always feel that way. All I ask is that if these past years have meant anything to you, please realise that what I have done, I have done for you and have always been loyal. Yes, I have made mistakes and I am paying for this both financially and emotionally for it now and I do apologise for them. I have written the truth here and hope you will accept this. I truly think we have gold with the business but the internal structure needs to be improved, as I have already done on the investment front. I believe in Signia, and would not fight so hard for it while giving up my family life if this wasn’t the case. I would like to suggest that I reinvest this bonus in the business but I will ask you to honour our loan agreement. I will focus on refunding the loan which should be approximately £10/£12m (I have asked David again today for the full amount, which he will give me) and if you want to get out in the future, we will find someone to buy your shares, or I will raise the money myself to buy your stake next year. John, again I love you and for what it’s worth I have never intentionally wanted to let you down.”

“I’m very conscious that we need to move forward with the Signia/Nathalie situation but of course we can only do that if and when the letter I provided (a copy of which is attached), or an acceptable version thereof, is signed and I understand she may be finishing for her holidays within the next few days so sounds like time is of the essence. We also of course need Nathalie to very quickly acknowledge the steps we are taking with regard to her taking financial responsibility for the 2014 loss as we are in a very parlous position as Directors given the implications for the Company’s regulatory capital position, which formally should be addressed as soon as it becomes evident there is an problem. As I mentioned, we already have Karen actively looking for candidates for the new COO (or whatever title we decide upon – MD may be more appropriate_ and I’ll obviously share these with you once she starts sending through CVs. In the meantime, and in the spirit of our agreement, we should immediately implement a process whereby all key business decisions and, in the short term, specifically those regarding bonuses or changes to remuneration packages are agreed by you, John and I. Perhaps not entirely coincidentally, the question of bonuses and remuneration was raised by Ms. Cooper a few days later, which caused Mr. Canfield to express concern. We agreed we would cap client entertaining and T&S generally at a sensible level but I assume you will, as indicated, be reviewing and approving Nathalie’s expenses from here on in. We also said we would jointly talk to Kate and Janet (not sure re Kirin?) about their conduct during this debacle and particularly their roles in the cover up which ensured – let me know when would be a good time to do that…”

“Further to our discussions, I thought it worth clarifying the position as I see it. Obviously, we have dictated a number of stipulations under which Nathalie could conceivably continue in her role (albeit with significantly diluted responsibilities) and under which John would perhaps continue to support the business. As you commented earlier, we seem to be regressing from where we (clearly over-optimistically) believed we were following your discussions with Nathalie last week and I think, based on our earlier very frustrating conversation, it is fairly obvious that she is unlikely to cooperate with what we have asked for even at the most basic level. We have already expended way too much energy on this matter and meanwhile the business is stagnating, we are losing good people (as you will have seen from Tim’s analysis) and our reputation will undoubtedly be suffering. If we are to move forward positively (if that is possible from this position) we therefore need to bring this to a head one way or another very very soon. I’ve spoken again to our lawyers this afternoon and they have provided further advice. Suffice to say that they believe that as Directors, we are in a parlous position and may already have allowed this matter to drag on too long. The simple fact is that, despite our wishes at the outset to avoid an unnecessary situation, we may therefore have no option but to refer this matter to the FCA and possibly the Police. I’m telling you this because as Chairman I believe you have some influence over Nathalie and am hopeful that you can perhaps make her see that she is not going to negotiate her way out of this with a series of inconceivable explanations and quite ridiculous smokescreens. In a different company, anyone who had done what she has done would be given absolutely no opportunity to cover up and no chance to repay; and I doubt you will disagree that her defence, for what it’s worth, would be laughed out of court if it ever came to it. The bottom line is that we have to now draw the line on this and I think it is appropriate to put a deadline in place as we have already lost a further week. I would therefore suggest that unless by close of play tomorrow we have Nathalie’s response regarding her intentions with regard to the funding of the regulatory capital gap, together with an acceptable written acknowledgement that her actions in relation to her expense claims were deliberate and wrong, we should commence a formal disciplinary process and move to take the necessary steps with regard to reporting the matter to the responsible authorities. John is fully in agreement with this but I would appreciate your views.”

“Paul, please see below, can I have your feedback? (Even if you speak badly of me behind me:))) xxx Dear John, Following our discussion last night, please find attached the letter which I believe is correct and should give you comfort that I am sorry for the way I handled expenses. I understand that you are upset and I am sorry. But I will ask everyone in your team to act in the best interest of the business and the clients and to realise that the way in which this investigation has been handled scared the team very much. The business is our people and they are seriously worried and I ask that this week we concentrate on performing business as normal for them. I also think the way I have been treated and how this investigation has evolved around me could have been done in a more collaborative and open way which would have allowed to have a more efficient discussion around the allegations, and would have resolved many of the questions faster and without some of the issues which occurred. To be clear on what happened yesterday, David told me that unless I sign the letter drafted by him and fund or find funding for the funding gap, the business will be put into liquidation and I will potentially be reported to the FCA. To be clear, we have consulted an FCA consultant and they have confirmed that there should be no case for allegations. You have asked me yesterday night to make a proposal on how to move things forward. As you know, we have a loan agreement, which allows the business to draw up to GBP 18 million to fund its expansion. Again, it is clear that 2014 will show an underperformance compared to the plan for all the reasons we discussed previously. That said, our forecast for 2014 always showed a negative number of GBP 1.2 million and showed a profit of GBP 500k for 2015. Against this forecast, we will now start off 2015 with a positive result of more than GBP 1 million of booked profits. As you know we have turned around the performance and have grown significantly in terms of AUM during the course of 2014. Again, please remember the business is only 4 years old and we will start our 5th year in March. I believe we have turned the corner to profitability. However, again, we need to be very careful about how the next days are handled with the team and the reputation in the market. Having thought about it overnight, if you still do not want to honor the loan agreement, I would like you to consider the following options: Option 1: I waive my bonus as set out in the letter and you honor the loan as per our agreement. I will stay in the business and commit to work as hard as before for it in future and hopefully you and I will find a way to resolve our differences on a personal level, which I very much hope for. Option 2: I waive my bonus as set out in the letter and you honor the loan as per our agreement and we define a period of time you give me to find someone who will buy your shares through repaying your loan. Option 3: I waive my bonus as set out in the letter, you provide me with an unsecured loan at a practical interest rate to fund the business for 2014; at repayment, your loan ranks first, my loan second. To be clear, I will stay in the business and commit to work as hard as before for it in future and hopefully you and I will find a way to resolve our differences on a personal level, which I very much hope for; otherwise, as under option 2, we define a period of time you give me to find someone who will buy your shares through repaying the loans. John, you mentioned that if we do not agree on any of the above you will put the business into liquidation. If this is the case, I would urge you to give me a couple of weeks to find an alternative source for the funding needed to fill the 2014 gap and repay your loan (for regulatory purposes, I believe we only need to solve this by mid-January) which would be a much better option for everyone from a reputational level but also for you commercially. Please note that during this time your money is managed well and the team is world class. I need, though, David’s and his team’s support to run the business properly over the coming weeks. John, I have made some mistakes in the business, but I have worked 24/7 over the last years, raising two children in the middle. The business is turning the corner now and had two years of good investment performance which gives us investment credibility in the market. I will, of course, do anything to make this happen but it will never be done without having the best interest of our business, our clients, our team and on a personal basis my children in mind. I really hope we find an elegant way to resolve our issue and start 2015 on a positive note.”

“Dear Kate, Janet, Kirin and Kelly, During a conversation with Nathalie and Paul yesterday, it was suggested by Paul that you would like an opportunity to talk to me regarding your respective roles in the expense investigation. I do, of course, acknowledge that you deserve to have your views heard, so I’m more than happy to meet with you. I’m in London at John’s house (Ancaster House) in the morning, so would be grateful if you wouldn’t mind coming there. Can I suggest that I see Kate and Kirin at 11.00am and then follow up with Janet and Kelly at 12.30pm?”

“Concerns Expenses Suspicions that expenses had been changed before being sent to David in order to conceal what expenses had been put through on the corporate card. Kelly was asked to make some of the changes by Nathalie, they weren’t all PA error. Nathalie coached her PA to say it was her error in the first place. Blame was being directed on Kelly, a tactic to divert attention from the original wrong doing. The team were manipulated into believing that no wrongdoing was done, and Nathalie believed that this really was the case. Nathalie was aware that her corporate card was being used for these expenses. Too much of a coincidence that she asked Kelly to reimburse Caudwell expenses after Konrad was questioned over the same point. Blame for reimbursements were deflected to Kelly, it was stated that Nathalie said that Kelly was responsible for her cheque book and refunds took place regularly. Events were changed on the forms to cover up personal events with friends. The team were manipulated into feeling responsible for her cheque book and refunds took place regularly. Events were changed on the forms to cover up personal events with friends. The team were manipulated into feeling responsible for the team and loss of jobs. Kelly was coached into saying that she wasn’t made to lie. Process needs to be looked at and tightened. Corporate governance changes. Reputation. Turnover of staff. Staff don’t ever leave on good terms anymore. Clients are beginning to question turnover. Litigation. Culture: no-one trusts anyone any more. Clients. Will lots of clients leave if Nathalie isn’t there anymore. Will the business survive if they go? What support will there be to the business from John.”

“Further to our discussion on 18 December 2014, and in line with what we both agreed, please find below the official statement which will be used in the event that we receive any enquiries from employees, third parties, clients or press.”

“I have been thinking about the overall situation the whole night and I have to say that I am very confused and I don’t really know who to trust anymore at all. Over the last weeks, I have been asked to sign a document that I was allegedly corrupt, asked to mortgage my house to John to fund the business loss when we had a loan available, threatened to be take to the police and the FCA or put the company into liquidation, and now the girls have been bullied into telling lies about me, although I have never asked them to lie and you know it and tried to protect them as realistically they are the ones who did not do their job properly. I also tried to raise money to buy him back and almost [got] there and then was suspended from my company by you for expense claims which, as you confirmed to me, were ridiculous. I am at risk of losing everything I built for nothing and it feels so unfair and I cannot understand how you can accept that. The business may also not survive it. It also feels to me not like an orderly process, but a dirty war against me for no reason. You have been extremely supportive as a chairman and friend, but over the last weeks I feel that you are somehow not telling me something I am being accused of, as I cannot understand why you are not helping me, and push John more. What they did is not human. I feel like [I am] sitting in the dark without being able to defend myself and I honestly also feel threatened from the experience I had so far. They could come up with all sorts of lies and allegations through pressure on the team which I am not able to respond to in a fair and honest way. I would need to understand what exactly was sent to the FCA, and please note that as far as I know I am still a director of the business and still employed. I know that you told everyone that I resigned as a window dressing but at the end we need a sensible solution quickly for everyone. Paul, don’t get me wrong, but I feel that you are somehow backing John in this process, and that makes me feel so bad because, first, I cannot understand why and how anyone can let someone be [treated] like this and then I cannot really trust anyone any more and need to start to defend myself in a way I never wanted to…”

“Investigation into Expenses Discrepancies – Nathalie Dauriac-Stoebe Summary Investigation and Conclusions – TIMOTHY MAYCOCK Date 11/01/2015 Investigations: Timothy Maycock (TM) (reviewed documentation and conducted interviews) David Canfield (reviewed documentation and conducted interviews) In October [2014], a whistleblower with access to Nathalie Dauriac-Stoebe’s (ND) expense records submitted these records to David Canfield in his role as director of Signia. The whistleblower was concerned over the amounts being claimed, and the appropriateness of some of those claims. I have reviewed these expenses and found them to contain substantial amounts reclaimed that were not considered to relate to activities wholly and exclusively undertaken in the course of Signia’s business. In order to confirm the authenticity of the documents provided by the whistleblower and protect the identity and activity of the whistleblower, a formal request for the expense records for the whole executive committee was made by DC on 11 November 2014. Expense claims for Nathalie were submitted via email to DC on the 12 November 2014 by Janet Tarbet. On receipt, these claims were compared to those received [from] the whistleblower and found to contain both deletions of expense records and alterations to the description of the amount claimed. Many of the claims deleted or changed were found to be for amounts considered to relate to non-business activities. By coincidence, ND arrived at [Mr. Caudwell’s] home in Mayfair on the evening of the 12 November and found DC and JC together. ND was confronted with the early findings of my comparison and a heated exchange took place. It was agreed that DC and TM would meet ND at Signia’s office at 7:30am on the 13th November. On the 13 November, ND was presented by DC and TM with the results of the comparison of the 2013 and 2014 records for claims made on the corporate credit card provided to ND by Signia. The explanation given for these changes was not found to be sufficient to explain their existence and it was agreed that further investigation as to their validity would take place performed by TM at Signia. The investigation has concluded there is sufficient evidence of discrepancies in ND’s expenses, as follows. For the disciplinary procedure to be commenced. 1. ND has used the corporate credit card and claimed back amounts paid personally for expenditure not wholly and exclusively incurred in the course of business in direct contravention of Company Policy and ND’s contract of employment. A full listing of these items is attached. 2. ND has made numerous claims without the supporting receipts or mileage declarations, in direct contravention of Signia’s policy. 3. ND herself and via instruction to her personal assistant made extensive changes to her expense records to conceal the personal nature of the claims due to her becoming aware that DC would be reviewing expense claims via a related party. The explanation put forward by ND for the changes made has been found to be untrue. A full listing of the changes made to the forms is attached. 4. The changes made to the expense claims broadly fall into the following categories: i. Virtually all expenditures relating to John Caudwell, whether legitimate business expense or personal in nature have been changed to either just state “client”, been removed completely or been changed to another client name. ii. Virtually all claims relating to ND’s family, of which the majority relate to travel costs, have either been removed or the description amended to remove the previously stated family member’s name. iii. Expenses for entertaining friends known by DC were changed to other legitimate client names.”

“…to be honest, I am really not coping very well at the moment. I feel completely pressurised by David and his team into giving statements on this whole issue with Nathalie and I feel like I’ve been manipulated to make statements which are not entirely accurate as I was under so much pressure. All of this pressure is starting to affect my health and I really don’t know whether I’m coming or going at the moment…”

“Given the issues you have raised, to ensure independence the Company has appointed an independent HR consultant to conduct the disciplinary hearing. The consultant is Steve Bolton, HR Consultant at Eversheds LLP. Steve will be accompanied by Tim Maycock who will attend the meeting in order to provide any necessary points of clarification. There has been an investigation into anomalies in the expenses you have claimed and charges to your company credit card, and there is evidence to support allegations that: 1. You dishonestly, in breach of contract and in breach of your fiduciary duty to the Company, submitted expense claims for reimbursement for charges incurred for expenditure that was personal and which was not wholly and necessarily incurred by you in the proper course of your duties as an employee of the Company. Particulars of dishonesty and breach of fiduciary duty It has been identified that you have: • Used the Company corporate cards to pay for personal meals, travel, gifts and other expenses for yourself and your family; • Filed expense claims for reimbursement of personal expenses without production of a valid receipt or evidence of actual expenditure; and • Disregarded your duties as a CF1 and CF3 person and have failed to fully record details of gifts or hospitality either received or given on the Company’s gift register. You are alleged to have done this on multiple occasions; dates and details of which are set out in the attached spreadsheet labelled Spreadsheet A. 2. Upon being informed that your expenses were to be the subject of a formal review, in order to cover up your actions and to justify the use of the company card and the claims for reimbursement, you dishonestly, in breach of contract and in breach of your fiduciary duty to the Company, made and encouraged other employees to make changes to your expense records. Particulars of dishonesty and breach of fiduciary duty It has been identified that you have: • Instructed and/or coerced junior colleagues to assist you in amending your expense records in a deliberate attempt to conceal illegitimate claims; • Used your position of influence to exert undue pressure on junior colleagues to prevent them being fully transparent and from disclosing key facts or information to investigating officers during this investigation; • Falsely represented to the Company Shareholder and an Investigating Officer on 12th November 2014 that you routinely reimbursed the Company for personal expense you incurred. You are alleged to have amended multiple expense forms which had already been submitted into the Company system and then caused these amended forms to be submitted to the Investigating Officers. Spreadsheet B sets out the changes made between the original expense forms held on record and the amended forms submitted by you or on your behalf to the Investigating Officers. If either of these allegations is found to be proved, it will constitute gross misconduct. You should be aware that one of the possible sanctions for gross misconduct is immediate dismissal… … You are entitled to bring a colleague or trade union representative with you to this meeting. Please inform us at least 24 hours in advance of this meeting who you would like to attend with you so that we can make arrangements for you to contact this individual. Should you wish us to consider any additional documents, including any written representations or response to the documents now provided to you, please provide these at least 24 hours before the disciplinary hearing. A copy of the company’s Disciplinary Procedure is also annexed to this letter, and you should read this carefully.”

“Dear Nathalie We understand from your lawyers that you have chosen not to take the opportunity to answer the disciplinary allegations that we have raised and, instead, chosen to resign with immediate effect. We are disappointed by the above and do not accept any suggestion that the Company has committed any act placing it in breach of your contract of employment (whether of a repudiatory nature or otherwise). Your decision to resign without notice, in fact, places you in breach of your obligations to us. We could insist you remain employed and continue the disciplinary process but, as you have made clear you will not participate, there is no point in doing so and we accept your repudiatory breach ending your employment today. In view of the above, the hearing scheduled for tomorrow is cancelled.”

“51 In giving the judgment of the Court of Appeal, Brooke L.J. said: “It follows that in civil proceedings, as opposed to criminal proceedings, the first question to be asked is whether the similar fact evidence is admissible. To be admissible it must be logically probative of an issue in the case, and the first part of the House of Lords’ test in P must be applied to exclude evidence which is not sufficiently similar to the evidence in the case before the court.” “It follows that in civil proceedings, as opposed to criminal proceedings, the first question to be asked is whether the similar fact evidence is admissible. To be admissible it must be logically probative of an issue in the case, and the first part of the House of Lords’ test in P must be applied to exclude evidence which is not sufficiently similar to the evidence in the case before the court.” 52 I am inclined to think that, far from this test being too lenient a test of admissibility in civil proceedings, it was too restrictive. The test of admissibility of similar facts against a defendant in criminal proceedings, as propounded in Director of Public Prosecutions v. P and in the 2003 Act, requires an enhanced relevance or substantial probative value because, if the evidence is not cogent, the prejudice that it will cause to the defendant may render the proceedings unfair. The test of admissibility builds in protection for the defendant in the interests of justice. It leads to the exclusion of evidence which is relevant on the ground that it is not sufficiently probative. So far as evidence of bad character that the defendant wishes to adduce against a police witness, the test of admissibility in both Edwards and section 100 of the 2003 Act requires an enhanced relevance in order to ensure that the ambit of the trial remains manageable. 53 I can see no warrant for the automatic application of either of these tests as a rule of law in a civil suit. To do so would build into our civil procedure an inflexibility which is inappropriate and undesirable. I would simply apply the test of relevance as the test of admissibility of similar fact evidence in a civil suit. Such evidence is admissible if it is potentially probative of an issue in the action. 54 This is not to say that the policy considerations that have given rise to the complex rules of criminal evidence that are now to be found in sections 100 to 106 of the 2003 Act have no part to play in the conduct of civil litigation. They are policy considerations which the judge who has the management of the litigation will wish to keep well in mind. CPR 1.2 requires the court to give effect to the overriding objective of dealing with cases justly. This includes dealing with the case in a way which is proportionate to what is involved in the case, and in a manner which is expeditious and fair. CPR 1.4 requires the court actively to manage the case in order to further the overriding objective. CPR 32.1 gives the court the power to control the evidence. This power expressly enables the court to exclude evidence that would otherwise be admissible and to limit cross-examination. 55 Similar fact evidence will not necessarily risk causing any unfair prejudice to the party against whom it is directed. It would not have done so in Metropolitan Asylum District Managers v. Hill. It may, however, carry such a risk. Evidence of impropriety which reflects adversely on the character of a party may risk causing prejudice that is disproportionate to its relevance, particularly where the trial is taking place before a jury. In such a case the judge will be astute to see that the probative cogency of the evidence justifies this risk of prejudice in the interests of a fair trial. 56 Equally, when considering whether to admit evidence, or permit cross-examination, on matters that are collateral to the central issues, the judge will have regard to the need for proportionality and expedition. He will consider whether the evidence in question is likely to be relatively uncontroversial, or whether its admission is likely to create side issues which will unbalance the trial and make it harder to see the wood from the trees. He will have well in mind the considerations that concerned this House when contemplating the effect of the admission of the disputed evidence in Metropolitan Asylum District Managers v. Hill. 57 For these reasons I would reject the appellant's submission that similar fact evidence is only admissible in a civil suit if it is likely to be reasonably conclusive of a primary issue in the proceedings or alternatively if it has enhanced relevance so as to have substantial probative value.”

“67 The law relating to these matters is now relatively straightforward. The judge applied the principles set out in the judgments of this court in O’Brien v. Chief Constable of South Wales [2003] EWCA Civ 1085 Although the Chief Constable appealed, the House of Lords made the principles for admissibility even simpler when it dismissed his appeal (see the report at [2005] UKHL 26 ; [2005] 2 WLR 1038 ). There is a two-stage test: (i) Is the proposed evidence potentially probative of one or more issues in the current litigation? If it is, it will be legally admissible. (ii) If it is legally admissible, are there good grounds why a court should decline to admit it in the exercise of its case management powers? Lord Bingham suggested at para. 6 three matters that might affect the way in which a judge exercised his/her discretion in this regard: (i) That the new evidence will distort the trial and distract the attention of the decision-maker by focussing attention on issues that are collateral to the issues to be decided; (ii) That it will be necessary to weigh the potential probative value of the evidence against its potential for causing unfair prejudice; (iii) That consideration must be given to the burden which its admission would lay on the resisting party. The first two of these considerations were said to be particularly potent when trial was to be by jury. In relation to the third of these matters, Lord Bingham referred at para 6 to: “the burden in time, cost and personnel resources, very considerable in a case such as this, of giving disclosure; the lengthening of the trial, with the increased cost and stress inevitably involved; the potential prejudice to witnesses called upon to recall matters long closed, or thought to be closed; the loss of documentation; the fading of recollections.” 68 He ended by saying: “In deciding whether evidence in a given case should be admitted the judge's overriding purpose will be to promote the ends of justice. But the judge must always bear in mind that justice requires not only that the right answer be given but also that it be achieved by a trial process which is fair to all parties.”” (see the report at [2005] UKHL 26 ; [2005] 2 WLR 1038 ). There is a two-stage test: (i) Is the proposed evidence potentially probative of one or more issues in the current litigation? If it is, it will be legally admissible. (ii) If it is legally admissible, are there good grounds why a court should decline to admit it in the exercise of its case management powers? Lord Bingham suggested at para. 6 three matters that might affect the way in which a judge exercised his/her discretion in this regard: (i) That the new evidence will distort the trial and distract the attention of the decision-maker by focussing attention on issues that are collateral to the issues to be decided; (ii) That it will be necessary to weigh the potential probative value of the evidence against its potential for causing unfair prejudice; (iii) That consideration must be given to the burden which its admission would lay on the resisting party. The first two of these considerations were said to be particularly potent when trial was to be by jury. In relation to the third of these matters, Lord Bingham referred at para 6 to: “the burden in time, cost and personnel resources, very considerable in a case such as this, of giving disclosure; the lengthening of the trial, with the increased cost and stress inevitably involved; the potential prejudice to witnesses called upon to recall matters long closed, or thought to be closed; the loss of documentation; the fading of recollections.” “In deciding whether evidence in a given case should be admitted the judge's overriding purpose will be to promote the ends of justice. But the judge must always bear in mind that justice requires not only that the right answer be given but also that it be achieved by a trial process which is fair to all parties.””

“Insofar as there is a dispute about Ms. Gehlan and Ms. Burger’s performance, it is not suggested that the Court should resolve it. The parallels between Ms. Gehlan and Ms. Burger’s treatment are striking, and remain relevant whether the performance allegations were or were not ill-founded. These events at Pure Jatomi show similar fact evidence of the formation of a conspiracy to get rid of employees before they cashed in on some sort of entitlement following a breakdown in relations.”

“David, I would appreciate you re-schedule our call today [i.e. on 5 February]. Unfortunately, I have been kept in hospital. I’m sure it’s nothing serious, and I will be home and well Sunday.”

“…and returned home yesterday…”

“I then resigned my previous employment from Jatomi. I resigned from Jatomi by sending a letter of resignation to Mr. Caudwell by email which I sent through their work systems. I think I sent this to him at about 9:00am on 24th…I don’t know whether or not that email was ever received by him or what happened to it.”

“…[Ms. Dauriac]…was a Good Leaver within the meaning of [Limb A] of that defined term in the Articles because she gave notice on 21 January 2015 to terminate her employment, when not in breach…of her terms of employment and her notice, taking effect that day, expired more than 5 years after the start date of her employment on 9 November 2009. Alternatively…[Ms. Dauriac] was a Good Leaver within the meaning of [Limb B] because she was constructively dismissed when [Signia] had no right summarily to dismiss [Ms. Dauriac] without notice.”

“…[Signia] may terminate the Employment: … (b) without notice on grounds which merit summary dismissal. The following is an exhaustive list of the grounds which merit summary dismissal in the event of such a breach: … (2) You are guilty of a gross breach of any fiduciary duties owed by you to [Signia]. (3) You commit any act of gross misconduct.” … (2) You are guilty of a gross breach of any fiduciary duties owed by you to [Signia]. (3) You commit any act of gross misconduct.” (6) It is worth observing that the provisions of clause 15 are on their face limiting of the right summarily to dismiss. Signia is only entitled to terminate the Employment without notice “on grounds which merit summary dismissal”

“…it appeared that the charges for the arrangement had been made in order to enable [Signia] to meet its regulatory capital requirements (by eradicating a loss of about £1.7 million from [Signia’s] profit and loss account for the year ended 31 December 2013) rather than being a genuine charge for fees for services provided by [Signia]. Further, false invoices had been created for the £1.7 million payment which described the liability as one for “introducers fees” (which were not subject to VAT) instead of management fees at commercial rates, which Mr. Caudwell could have paid (but which were subject to VAT). Mr. Caudwell was the beneficiary of provisions whereby fees of any kind that he paid to [Signia] would be deducted from a loan facility provided by him and would be repaid to him once [Signia] had sufficient profits to do so. Hence, Mr. Caudwell would get his £1.7 million back no matter how the payment was attributed, but the benefit of giving a false description for the purpose of the payment would be avoidance of a substantial amount of unrecoverable VAT…”

“36. Ms. [Dauriac] communicated her concerns to Mr. Canfield and informed him during the two month period before she was suspended that she thought that [Signia] and Mr. Caudwell had acted unlawfully. Mr. Canfield stated (on that occasion and several subsequent occasions prior to her suspension) that the invoices were “okay”

“1 [Signia’s] liquidity has been supported by shareholder loans from Grecco and payment of fees by [Mr. Caudwell]. That was an entirely ordinary arrangement in a start-up wealth management firm; 2 [Signia] at all times met capital adequacy requirements pursuant to FCA regulations (and on the basis of professional advice). 3 [Mr. Caudwell] also placed some of his assets under management with [Signia]. Again, this was an entirely ordinary arrangement in a start-up wealth management firm (particularly as [Mr. Caudwell] was an investor in Signia from its foundation). Funding provided by [Mr. Caudwell] was made pursuant to FCA Regulations (and on the basis of professional advice). Funding was, in part, also to prevent insolvency and therefore reverting a regulatory capital deficit, which could have led to FCA sanctions if left unresolved. 4 As a consequence of [Mr. Caudwell] placing considerable assets under management, and his status as a founder and cornerstone investor, it was originally envisaged that [Mr. Caudwell] would not pay management fees for the first two years of the venture (but would pay performance fees); 5 As a consequence of regulatory capital obligations (of which Ms. Dauriac was well aware) [Ms. Dauriac] and [Mr. Caudwell] agreed that fees would be payable in order to allow [Signia] to meet these obligations. [Mr. Caudwell] and [Ms. Dauriac] (acting qua managing director of [Signia]) therefore agreed that [Signia] would charge management fees to Grecco and/or [Mr. Caudwell]. This arrangement was intended to allow [Signia] to manage those assets on commercial terms until it became profitable, or there was a disposal of [Signia]… 6 Until his dismissal for gross misconduct, Mr. Wilson held the position of Head of Wealth Structuring and was responsible for the financial management of [Signia]. He, alongside [Ms. Dauriac], was responsible for liaising with [Signia’s] auditors in order to arrange the transactions necessary to give effect to the arrangement set out above. [Ms. Dauriac] and Mr. Wilson were instrumental in devising and implementing the transaction now complained of [i.e. Invoices S01145 and S01146] and at all material times are that the transaction was an ordinary business transaction; 7 Accordingly, [Signia] supplied transactional services to [Mr. Caudwell] and charged him for those services. Such services are properly exempt from VAT under the applicable legislation. In January 2013, the invoices for the transaction were prepared and sent to [Mr. Caudwell] by Mr. Wilson. At Mr. Canfield’s request, Mr. Wilson also disclosed the details of the transaction to [Signia’s] auditors, who provided an unqualified opinion when signing off the accounts (which [Ms. Dauriac] also signed), as they had done in previous years. 8 Neither Mr. Wilson nor [Ms. Dauriac] ever made any contemporaneous assertion that the transaction was irregular or improper as now alleged. On the contrary, they were instrumental in the transaction being made.” 530. In my judgment, the position was as follows: (1) The manner in which Signia was funded was altogether more fluid than the Reply suggests. As I have described, Mr. Caudwell was in fact quite reluctant to fund Signia through the payment of fees for the management of his assets. His initial plan was to fund Signia through loans, and when the regulatory capital requirements made this either very difficult or impossible, he was prepared to fund Signia in other ways, including by way of management fees. But there was never a definite understanding that this was how Signia’s regulatory capital requirements would be met, year-in, year-out. See paragraphs 112 (Mr. Caudwell’s desire not to pay management fees), 115-119 (the Kinetic advice in relation to regulatory capital) and 149-152 (the approach to the funding of Signia). (2) This is reflected in the manner in which Signia was funded over time. See paragraphs 153-171 above. Although Mr. Caudwell paid some management fees, where (in any given year) there was a shortfall in regulatory capital, an ad hoc approach was taken to meeting that shortfall. But in neither 2012 and 2013 – when there was a regulatory capital shortfall – was this addressed by increasing the management fees paid by Mr. Caudwell. See, in particular, paragraph 158 above (in relation to 2012) and paragraphs 161-166 (in relation to 2013). (3) It is difficult – simply because her evidence was so vague and the evidence of others so unspecific – to be clear about what Ms. Dauriac knew and understood. In my view, she had an understanding, albeit not a particularly clear understanding, that there was a difference between Signia’s cash flow requirements (which could be resolved through loans) and Signia’s regulatory capital requirements (which could not so easily be resolved). I do not, however, consider that Ms. Dauriac immersed herself in all of the detail. She claimed to be very much a hands-on manager within Signia, See paragraph 73 above. and I have no doubt that when an issue caught her eye, she could be both obsessive and controlling in relation to that issue – as was the case with the Mayfair Project and Mr. Babaee. See paragraphs 182-194 and 220-221 above. But she was selective in what she engaged with and I find that the question of Signia’s compliance with its regulatory capital requirements was a matter she delegated and did not concern herself overly with. (4) In these circumstances, I find it improbable that Ms. Dauriac concerned herself greatly with the £1.7 million regulatory capital shortfall in 2013. I accept that she was aware of it and probably would have spoken to Mr. Wilson about this. But I do not consider that she would have told Mr. Wilson that a management fee invoice should be raised to deal with the shortfall. That, I consider, is not the sort of specific instruction Ms. Dauriac would have given or (given her level of engagement on this point) been capable of giving to Mr. Wilson. (5) It follows that, whilst I accept that Mr. Wilson was doing his best to recall what was said, I do not accept his evidence in this regard. The relevant evidence regarding an instruction to raise a management fee invoice is at paragraph 164(4) above. Ms. Dauriac would, as I find, simply have told Mr. Wilson to deal with the issue: she would not have mentioned management fees. (6) Mr. Wilson (with Mr. Canfield) then proceeded to deal with the issue in the manner I have described – by raising non-management fee invoices (Invoice S01145 and Invoice S01146). (7) This renders much more plausible Mr. Wilson’s account that he did not revert back to Ms. Dauriac when invoices having nothing to do with management fees were raised. In my judgment, had Ms. Dauriac told Mr. Wilson to deal with the regulatory capital shortfall in a particular way (i.e. by way of management fee invoices), and that approach was not then adopted, then I consider that Mr. Wilson would have reverted to Ms. Dauriac. By contrast, had Ms. Dauriac’s instruction been altogether vaguer, as I find it was, there would have been no reason for Mr. Wilson to revert. (8) That brings me to whether Ms. Dauriac “blew the whistle” in relation to the 2013 invoices late in 2014. I do not accept that she did, and I reach this conclusion for the following reasons: (a) The issue of a regulatory capital shortfall raised itself again late in 2014 in relation to 2014, Early December 2014: paragraph 382 above. and Ms. Dauriac raised an extremely general query with Mr. Canfield as to how matters had been handled in previous years. See paragraph 383 above. (b) It may very well be that the question arose sooner – although that would have been out of line with previous years – as Mr. Wilson suggested. Mr. Wilson suggested that the matter arose in October 2014, before his dismissal: Day 10/p.141 (cross-examination of Mr. Wilson). “…I’d also had a chance to review the advice in Kinetic Partners regarding to capital adequacy that actually said you should raise management fees and not one-off invoices. So it made me think perhaps we need to revisit capital adequacy for the current year. So at that time, I raised this point with Ms. Dauriac, and we then discussed how the invoices had been raised in 2013. At which point she seemed genuinely surprised that they had been done as lending invoices and not management fees.”

“[h]opefully there is still enough mileage in the expenses to allow John to hit again hard”; Paragraph 320 above. “[s]he is a sociopath in the strictest meaning of the word”; Paragraph 328 above. “…just wanting to appear as co-operative as possible, before telling them to sod off…”; Paragraph 359 above. and 823. are still willing to lie…”

“27.4 At various times over the course of 2013 and 2014, [Ms. Dauriac] submitted wrongful and/or dishonest and/or improper claims for reimbursement of expenses (the “Wrongful Expenses Claims”). The Wrongful Expenses Claims (and each of them) did not constitute claims for reasonable out-of-pocket expenses (including travel, subsistence and entertainment expenses) necessarily and wholly incurred by [Ms. Dauriac] in the proper performance of her duties and which were reimbursable to her pursuant to clause 9 of the Service Agreement (or at all). 27.5 As a consequence of the Wrongful Expenses Claims, [Signia] paid to [Ms. Dauriac] the sum of (approximately) £33,640. Particulars of the Wrongful Expenses Claims are appended as Schedule 4 to these Particulars of Claim. 27.6 Further or alternatively, [Ms. Dauriac] instructed a junior employee of [Signia] to alter documents to conceal the circumstances of the Wrongful Expenses Claims. [Signia] avers as follows: 27.6.1 In October 2014, [Ms. Dauriac] instructed her personal assistant, Ms. Kelly Degruttola, to amend her expenses forms to remove certain details (such as references to [Ms. Dauriac’s husband, daughter, nanny or friends or references to non-work activities). 27.6.2 In November and December 2014, [Ms. Dauriac] instructed Ms. Kelly Degruttola to amend further her expenses forms by altering the descriptions of the expenses claimed. 27.6.3 Thereafter, [Ms. Dauriac] sought to disguise the fact of the Wrongful Expenses Claims by preparing (or having prepared on her behalf) a schedule of proposed reimbursements. [Ms. Dauriac] (wrongly) sought to assert that she had always intended to make the proposed reimbursements (and thereby demonstrated a further lack of integrity). In fact, [Ms. Dauriac] had only reimbursed a total of £50 during her employment with [Signia]. 27.6.4 [Signia] appends as Schedule 5 particulars of the 133 expenses in respect of which [Ms. Dauriac] made or caused to be made by other employees alterations to expenses previously claimed by her.”

“9. Expenses The Company will reimburse you for all reasonable out-of-pocket expenses (including travel, subsistence and entertainment expenses) necessarily and wholly incurred by you in the proper performance of your duties, provided you claim such expenses and produce receipts or other evidence of actual expenditure.”

“Although a dishonest state of mind is a subjective mental state, the standard by which the law determines whether it is dishonest is objective. If by ordinary standards a defendant’s mental state would be characterised as dishonest, it is irrelevant that the defendant judges by different standards.”

“…When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.”

“Our dear friends!! Konie is growing up and we would like to invite you all for dinner on Saturday the 15th. Please let me know if you can join. Love lots The Stoebies.”

“…as determined between the Board and the Investor; save that where a Leaver indicates that he does not agree with such valuation, as determined by an Independent Valuer as at the date of the Transfer Event (such valuation to be on the basis of a willing buyer and a willing seller and shall not take any account of whether the Shares comprise a majority or a minority interest nor the fact that transferability is restricted by the Articles)…”

“…the Directors for the time being of [Signia] or (as the context shall require) any of them acting as the board of Directors of [Signia]”

“6.17 The market approach considers how the market views the business or asset concerned. As set out above, multiples derived from market benchmarks can be used in an income approach, and the income and market approaches are often intertwined. 6.18 A variation of this approach often used for asset and wealth management companies is to apply a market multiple to the AUM on the basis that the revenues and profits are generally earned by charging clients fees which are a percentage of their AUM. There is, therefore, in many cases, a predictable relationship between revenues and AUM… … 6.20 …I do not believe that I have reliable enough financial information suitable for valuation purposes for the year ended 31 December 2014 or particularly detailed forecasts in order to apply the income methodology. Because Signia has substantial and valuable AUM and few tangible assets the cost approach is also not appropriate. 6.21 Therefore, in common with many asset management companies I have adopted a multiple of AUM as my primary valuation methodology…This is, therefore, a method based on a market approach using a market-based multiple of the AUM.”

“3.9 The multiples method, on the other hand, is based on the idea that two comparable companies have similar values. In general, there are two ways to perform multiples valuation. • Comparable companies method: this involves (i) identifying publicly listed companies that are comparable to the subject company in terms of the nature of operations, risk profile, expected growth, etc; and (ii) applying the valuation multiples of these companies – e.g. the ratio of their observable market value relative to certain accounting measures of the companies – to the subject company’s accounting measure. • Comparable transactions method: this involves using valuation multiples of comparable companies involved in acquisitions/sales to value the subject company. 3.10 The multiples valuation method is relatively easy to implement, and is often considered as a shortcut to the DCF valuation because it does not require explicit forecasting of the subject company’s cash flows and estimating the company’s cost of capital. A key to obtaining a robust valuation estimate is to identify companies or transactions that are sufficiently comparable to the subject company to be valued. Moreover, as this method applies the estimated valuation multiples to accounting measures of the subject company, it is more suited for valuing companies that are in a stable condition so that the accounting measures reflect the likely future condition of the company.”

“3.15 The EV/EBITDA multiple is the ratio of the EV of a company to its EBITDA, which is a proxy for the company’s cash flows. Higher EV/EBITDA multiples are generally associated with companies with higher growth opportunities and/or lower risk levels, and vice versa. 3.16 As EBITDA of a company reflects the cash flows generated by the company, using the EV/EBITDA multiples of the comparators to value the subject company does not require the subject company to have similar operating efficiency as comparable companies; it only requires the assumption that companies with similar amount of cash flows (as proxied by EBITDA) have similar value. Therefore, using EV/EBITDA multiples of the comparator for valuing a company is more appropriate if the company’s profit margins are not in line with others in the industry. 3.17 …the EV/EBITDA multiples of the comparable companies should be applied to the expected steady-state level of EBITDA of the subject company in order to estimate the enterprise value of the company.”

“as determined by an independent valuer as at the date of the Transfer Event (such valuation to be on the basis of a willing buyer and a willing seller and shall not take account of whether the shares comprise a majority or minority interest nor the fact that the transferability is restricted by the Articles) and for these purposes giving an Enterprise Value of [Signia]”

“arm’s length price: the price at which unrelated sellers and buyers agree to transact a product or asset”. 537 At p.4. Another definition appeared in a publication by Deloitte on the Arm’s Length Standard 2013 in global transfer pricing:537 “The arm’s length principle requires that transaction with a related party be entered into under comparable conditions and circumstances as a transaction with an independent party. It is founded on the premise that when market forces drive the terms and conditions agreed to in an independent party transaction, the pricing of the transaction would reflect the true economic value of the contributions made by each party to the transaction. Essentially, this means that if two associated enterprises derive profits at a level above or below the comparable market level solely by reason of the special relationship between them, the profits will be deemed non-arm’s length.”

“While the valuer should consider future returns likely to be received from the business, as well as the often theoretical aspects of valuation (particularly fiscal factors), ultimately the business that is to be valued is the one that actually exists, or the one that could exist on a commercial basis as at the valuation date. The valuer therefore needs to account for the future expectations of operation on the business. These expectations may be based partly on actual historic performance and partly on a notional unachieved one. They will be those of the market participants as identified by the valuer, following appropriate research as to the business and outlook for the industry, and discussions with the operators of the business as to their expectations.”

“Steady-EBITDA needed to imply a positive value for Signia’s ordinary shares 3.42 Here I explore the level of steady-state EBITDA that a hypothetical buyer would have needed to assume in order to conclude that the value of Signia’s Ordinary Shares was positive. 3.43 As explained above, Signia’s Ordinary Shares would have been valued above zero only if Signia’s enterprise value exceeded the value of its net debt and Preference Shares. As it is difficult to pin down the value of the Preference Shares, for ease of exposition on this part, I make the conservative assumption that the value of the Preference Shares is zero. This means that Signia’s enterprise value needs to be greater than £1.4 million in order for its Ordinary Shares to have a positive value. 3.44 Using the EV/EBITDA multiple range of 5.0-8.4, in order for Signia to have an enterprise value of greater than £1.4 million, the hypothetical buyer would have needed to assume a steady-state EBITDA of more than £0.2 million - £0.3 million per annum… As Dr. Shi helpfully explains £1.4 million divided by the multiple of 5 to 8.4 gives £0.2 million to £0.3 million. Additional factors to consider 3.45 Even if the hypothetical buyer were to conclude that Signia’s future EBITDA would be in the range of £0.2 million - £0.3 million, other factors mean that the buyer is unlikely to have acquired the [Dauriac Shares] if the enterprise value were not significantly above £1.4 million.”