“I guess the Japanese would call it a keiretsu, a group of companies with interests and trusts with similar interests, commonalities but separate shareholdings and they do absolutely work with each other and I encourage that.”
“The existence and subject matter of this document are strictly confidential to the parties, as is the involvement of Eric Watson (either directly or indirectly) in the business, other than as lead investor. This duty of confidentiality applies in all respects unless disclosure to any person is authorised in advance by Eric Watson.”
“The business will operate primarily as an Asset Management company and the partners will share a pro-rata (relative to their shareholdings / interests as stated above in the Management carry achieved on all deals).”
“(i) NMC will commit, on an in-principle basis subject to final discretionary approval of specific transactions originated by Management Co, a minimum of£100m of equity within 12 months of the formal legal agreements; and (ii) The Founder Investors have the right to participate in up to 20% of the Asset and Project Co capital contributions, (together “Affordable Housing Commitment”)”
“Subject to Mancap closing I am looking to invest 50m Pounds in this venture – and subject to our due diligence.”
“IF – after we do the current deal I put in a further PDS50 million would the following be acceptable: 1. Glenn or his interests to receive 40% of the management company. 2. You to put up as much as you wish and take up a percentage equal to my proposal on the same formula but be a part of the 40% eg. If we both put up PDS25 million each we get 20% each-pro rata Apart from our agreement on the first deal and your kind offer to watchdog my investments I would seek to appoint a Director to the management company’s Board.”
“Had a chat with David about a UK govt housing deal you can participate in if you want. It is very good.”
“is this really him or is he selling down some of his equity? If so we need to know asap for bank and jersey kyc etc, also the IM Miles had is not for Investors but was a bank memo, it would have to be edited and full disclaimers added before it could go anywhere. We also have some confidentiality issues.” (the reference to “kyc” or KYC being to know your customer checks). Mr Gibson’s response was that he would have to check with Mr Watson about the 20%. He then e-mailed Mr Leahy (copying in Mr Watson) saying he would need to have some sort of answer for Mr Astor when he called him that night. Mr Astor also e-mailed Mr Leahy on 10 January asking him to confirm that they were not intending to circulate the IM to any external third parties, as the information was highly confidential and they would need to have very strict confidentiality agreements signed beforehand. Mr Leahy’s immediate response was that he was not 100% sure on Mr Watson’s intentions, and later that: “I have confirmed this is just for internal use – Cullen and Cullen’s lenders/advisors.”
“Key story to Will Astor and Co. is Eric is simply looking to raise some debt capital off the vehicle he is using to invest in this opportunity and that there are no other equity investors coming in. No need to mention O. Glenn etc – not relevant.”
“This document records the key terms regarding the arrangements described below. The parties each agree to use good faith, best commercial endeavours to seek to agree, execute and deliver as soon as possible long-form documentation necessary to provide for those arrangements. Such documentation will not include terms inconsistent with the terms set out in this document except where the parties otherwise mutually agree. In any event the provisions set out in this document relating to the foregoing and to parties & interest, future assurances, confidentiality, costs and governing law are legally binding.”
“I have read the paperwork on the new venture in East London--some concerns 1. I am putting in a dis-proportion amount of the investment for only 50% of the return. I would like to discuss a proportionist formula into an investment in Soul’s and/or the Warriors… 3. What happened to the other property venture with Bill Astor—ie Govt and Uni properties. The return was much better and quicker with the added blue chip guarantee of the properties”
“If Owen does invest, then I think it is bound to come out over time your involvement in the Management Company, and it should probably be covered off sooner rather than later, with a take it or leave it on this basis…don’t you agree?”
“3/ This is the evolution of the deals with Astor, ground rents and govt properties. This deal is the first of the govt/local authority residential property deals. HWL (Hutchison Whampoa listed hk group market cap$40 b) have committed to fund the equity for the rollout. Oxford University funds are funding the capital for the ground rent investments. I have a right to co invest in both, and given the quality and pipeline of deals and co investors plus, the fact that all the equity and debt is arranged I am very keen to do so. We also have a small stake in the management carry for pulling the deal together.”
“The parties wish to enter into a Funding Arrangement and Equity Arrangement in relation to Project Edsel. Details of Project Edsel are set out in the documents attached to this document.” (4) Under “Funding Arrangement”: “KIL will provide funding to Copperstone Property Investments Ltd (“CPIL”) equal to 20% of the total transaction equity, currently anticipated at [£5.3m ] (“Funding Amount”). KIL will receive a preferred return amounting to an 8.0% annual interest rate, calculated quarterly and compounded. The funding will be secured over the CPIL shares. The Funding Arrangement will only become repayable as CPIL receives income or capital profits from Project Edsel. KIL will be funded 90% by its corporate parent or nominee and 10% by CT or nominee. Should a shortfall arise on repayment in relation to the Funding Arrangement between KIL and CT it will be deducted off the CT or nominee share in the first instance.” (5) Under “Equity Arrangement”: “KIL will have an effective 50% participation in the net equity of CPIL post repayment of the Funding Arrangement. Any payments under the Equity Arrangement will only become payable if the Funding Arrangement has been fully repaid and CPIL receives additional income or capital profits from its participation in Project Edsel.” (6) Under “Future Assurances”: “The parties agree that the structure of the investment is not yet finalised. Subsequent to the signing of this document and to further the subject matter hereof, they will each engage in good faith endeavours to agree the ultimate structure for the business.” (7) Under “Other Terms”: “The long-form documentation will include other terms which are not included in this document but which are necessary or desirable to the parties.”
“you may or may not be aware, that as part of the deal, Eric Vehicle will contribute 10% of the equity required for the investments into “Atlantic Regeneration Investment 1 LP”, and it has been proposed that this come in at the “Kea Investments Limited” level. Kea will invest 100% into Copperstone Investments Limited.”
“As discussed the amount that was invested in the first traunche, pro-rata with HWL was£1,901,546.80 broken down as follows: A Limited Partner£1,894,501.81 B Limited partner£7,045.00 ”
“A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.” (b) In Arklow Investments Ltd v Maclean[2000] 1 WLR 594 at 598G, Henry J, giving the judgment of the Privy Council, said: “the concept encaptures a situation where one person is in a relationship with another which gives rise to a legitimate expectation, which equity will recognise, that the fiduciary will not utilise his or her position in such a way which is adverse to the interests of the principal.” (c) In F&C Alternative Investments (Holdings) Ltd v Barthelemy (No 2)[2011] EWHC 1731 (Ch) at [225], Sales J said: “Fiduciary duties are obligations imposed by law as a reaction to particular circumstances of responsibility assumed by one person in respect of the conduct of the affairs of another.” (d) In another case involving Ross River Ltd, Ross River Ltd v Cambridge City Football Club[2007] EWHC 2115 (Ch) (cited by Lloyd LJ in Ross River at [56]-[58]), Briggs J referred at [198] to: “well known badges or hallmarks of a fiduciary relationship, such as … [if] the plaintiff entrusts to the defendant a job to be performed, for instance, the negotiation of a contract on his behalf or for his benefit.” (e) In Ross River at [51]-[52] Lloyd LJ cited with approval a passage from Bean, Fiduciary Obligations and Joint Ventures (1995) (itself referring to Finn, Fiduciary Obligations (1977)), which is too long to set out in full but the essence of which is as follows: “[Fiduciary] office holders are entrusted with power to act for the benefit of another, but are not under the immediate control and supervision of the beneficiary… Finn’s rationale is that the fiduciary who has freedom to determine how the interests of the beneficiary are to be served requires the supervision of equity. Indeed, it is the fiduciary’s autonomy in decision-making that requires equity’s supervision and this is required whether or not the autonomy is created under a contract between the parties or is inherent in the office.” (7) Without in any way attempting to define the circumstances in which fiduciary duties arise (something the courts have avoided doing), it seems to me that what all these citations have in common is the idea that A will be held to owe fiduciary duties to B if B is reliant or dependent on A to exercise rights or powers, or otherwise act, for the benefit of B in circumstances where B can reasonably expect A to put B’s interests first. That may be because (as in the case of solicitor and client, or principal and agent) B has himself put his affairs in the hands of A; or it may be because (as in the case of trustee and beneficiary, or receivers, administrators and the like) A has agreed, and/or been appointed, to act for B’s benefit. In each case however the nature of the relationship is such that B can expect A in colloquial language to be on his side. That is why the distinguishing obligation of a fiduciary is the obligation of loyalty, the principal being entitled to “the single-minded loyalty of his fiduciary” (Mothew at 18A): someone who has agreed to act in the interests of another has to put the interests of that other first. That means he must not make use of his position to benefit himself, or anyone else, without B’s informed consent. (8) This analysis also explains why fiduciary duties will not readily be found in commercial settings. In commercial dealings the relationships are (usually) primarily contractual; and it is of the essence of commercial contracts that each party is (usually) entitled, subject to the express and implied constraints of the contract, to seek to prefer his own interests, and is not obliged to put the interests of the other party first. (9) So far as joint ventures are concerned, fiduciary duties may in particular be found to arise where one party has control of assets which are to be exploited for the joint benefit of both. Thus for example in John v James[1991] FSR 397 at 433 Nicholls J said of a publishing agreement: “The copyrights were to be assigned to the publisher, and to become its property, but with the intention that they would be exploited by the publisher, which would have complete control over the method of exploitation, not for its benefit alone but for the joint benefit. Thus, commercially, the arrangement was in the nature of a joint venture, and the writers would need to place trust and confidence in the publisher over the manner in which it discharged its exploitation function.”
“the general principle that the court should be very slow to introduce uncertainty into commercial transactions by over-ready use of equitable concepts such as fiduciary obligations and equitable estoppel. That applies to commercial negotiations whether or not they are expressly stated to be subject to contract.”
“Yes, I am promoting deals, selling deals, recommending deals to them, yes.”
“This document outlines the specifics of a proposal in which an Owen Glenn Investment Vehicle (“OGV”) will partner with an Eric Watson Investment Vehicle (“EWV”) in a Funding and Equity Arrangement in relation to Project Edsel.”
“KIL will have an effective 50% participation in the net equity of CPIL post repayment of the Funding Arrangement.”
“A. My Lord, I meant that Fladgate would be handling the escrow instructions to further invest or to further place those monies in the investment vehicles. Q. Right, so you regarded it as an escrow account? A. Er ‐‐ Q. You use the word “escrow” throughout the rest of your ‐‐ A. Yes, I noticed that they had used that word. I believe they would have had a client escrow account. Q. What do you mean they used that word? A. In correspondence I had seen that word used in the Fladgate correspondence. Q. Right. Now, you see paragraph 97 has been drafted to make it look as if you were saying you were intending to transfer property in the money to Copperstone at the point where you transferred it to Fladgate, but that’s not right, is it? A. No, we were just looking to get our funds into the project on time. Q. Yes, so you sent it to Fladgates on the basis that they would use it for the purpose of the termsheet that you had signed ‐‐ A. Yes. Q. ‐‐ and if the transaction fell through for some reason that they would give it back to you? A. That’s correct.”
“Q. …I just want to check that you are not suggesting there that you thought that Kea was paying for Mr Watson to make a payment in respect of his share in the management carry, whatever that was; you thought you were paying his share in the investment? A. It is related to the investment.”
“if the trustee purchases assets for his own benefit wholly or partly out of trust money, and the assets increase in value, the trustee cannot free the assets from the beneficiary’s claim to beneficial ownership or a proportionate share in them by restoring the trust money wrongly applied in their purchase after the purchase has been made and the assets increase in value.”
“Clearly enough the estate was entitled as against W. H. Scott to seek an order for sale to enforce its lien and upon any such sale the profit would have been realized. It is true, no doubt, that if the property had not increased in value the trustee, in his lifetime, might have chosen to avoid a sale by repayment of the amount for which the lien subsisted. But no such choice can be said to have been open to him in this case for he could not be allowed to escape his liability to account merely by repayment of the amount of trust moneys misapplied.”
“if we are going down this route I think we probably have to have the presentation build up what you are contributing to the JV a little more than it currently does.”
“We could actually up the purchase value of Abacus even further – something to consider?”
“Project Spartan (“Spartan”) is an established property investment opportunity, owned 50-50 between Eric Watson (“EW”) and another partner (“NR”), which is focused on building a substantial portfolio of UK and European property investments delivering superior risk-adjusted returns.”
“What about my due diligence?? Eric tells me yesterday this investment could be worth billions -- Someone should take the time and effort to explain and not slap it on me at the 11th hour That’s your job David”
“Project Spartan … is an established property investment opportunity, owned 50-50 between Eric Watson (“EW”) and an additional partner (“PT”)…” (2) On page 4 of the 1 April presentation under the heading “What is in Spartan” (also in the 29 March presentation under the heading “Strategy”): “Spartan has a number of existing assets and opportunities…”
“Existing Ground rent portfolio… Exclusive right to continue to work with Long Harbour Ltd on all future ground rent portfolios…[ie the LH Investment Right] …the right to participate in up to 20% of all equity … in all future Affordable Housing projects… [ie the Ladoga Investment Right] Opportunity to seed the first residential property fund and take share in the Fund Management Company… [identified on page 25 as a 33% stake] Homeground – (66% stake). LH and Spartan have invested heavily …”
“Kea has agreed to purchase a 50% shareholding in SREL from EW Entity on the basis described in this terms sheet.”
“Can this be worded slightly clearer upfront that the cash is not going back to “EW Entity” but will be going to buy out an existing partnership in the Real Estate assets?”
“Spartan is a business owned 50% by EW interests and 50% by existing Partner. The suggested deal is for the New Partner to take out the existing Partner by investing PDS 22.5 mil in the business (business then pays out existing Partner) and for the New Partner to provide PDS 50 mil in financing (3 year term at 8%) for start up financing.”
“I have given my approval to proceed with the purchase of the existing partners shares and the initial note for the PDS50m”
“£22.5 mn equity invested in order to buy out PT” (2) The same diagram in each case showed an arrow from the box marked Spartan to a box marked “PT Vehicle” with the legend: “£22.5 mn paid out” (3) On page 9 of the 1 April presentation (and also of the 29 March presentation): “Current discussions suggest PT’s 50% can be acquired for ˜£22.5 mn”
“Current ownership: 50% EW; 50% PT Valuation:£45 mn NP to buy out PT for£22.5 mn resulting in a 50-50 JV with EW” the implication being that the£22.5m was an appropriate price to pay for half an interest in a business worth£45m . It is also supported by a statement in a cash flow break down on page 7 that refers to the£22.5m as: “Equity required to purchase 50%”
“˜60% discount to the NPV value at a 10% discount”
“is the exit really there at 25x”. (4) After the presentation to Sir Owen, Mr Watson and Mr Leahy brought in Mr Flay and Mr Bruce Armitage of Cullen in New Zealand to assist with documenting the deal. On 5 April Mr Flay asked Mr Leahy how the Berryblue loan was to be dealt with as part of the buyout of Mr Richardson, and what the current balance was. Mr Leahy replied that the loan was£5m and now around£7.2m with interest, and that it was “included in the£17 mn we have estimated to take NR out of the deal”
“Yes it can. His 5m plus my 5m plus 2.2 pref plus his share of profit 5m = 17m+”
“Hi Bruce – sorry this is quite complicated! No OG doesn’t purchase the loan but we are eliminating this loan as part of this transaction. So, the£22.5 mn will buy: A) NR’s 50% ownership in the ground rent business B) Will payback NR for the loan eric currently has outstanding to him. C) The balance we need to use to buy out NR from his position in the american apparel loan and use up the rest in fees etc. (Need to think about this). The real challenge with this is that although we want to pay back NR his loan out of the funds from OG (hence eliminate [EW’s – it reads “OG’s” but I accept this must be a mistake for “EW’s”] liability), this should be irrelevant and separate to OG – we simply want him to see 22.5mn being paid out to buy NR’s 50% share and we then use those proceeds to buy NR out, clean up the Abacus loan and American apparel loan etc.”
“As mentioned previously, deal with NR is YOUR deal, he can’t know that OG is involved and said you and I would figure out how to structure this so NR doesn’t realise.”
“If the total business is valued at PDS 45 mil and PDS 20 mil is recouped in year 2 then the hypothetical goodwill in the business is about PDS 25 mil, of which your 50% share would be PDS 12.5 mil.” (I do not need to consider if Mr Miller was right to refer to the “goodwill in the business”; as this illustrates, in the context of Project Spartan “goodwill” was used to refer to what Kea would be paying for over and above existing assets, and in effect consisted of the right to access the various other opportunities which were presented as part of the Spartan business.) Mr McCaughran said that that would obviously raise a question as to why all the goodwill payment was to be paid to the existing partner if it was known that the goodwill was made up of discounted cashflow values attributed to all three classes of investment (ground rents, affordable housing and residential), and that the existing partner did not own 50% of all the rights and opportunities to invest in those classes. He said that Mr Miller knew as at 1 April that not all the rights were jointly owned by Mr Watson and his existing partner as he knew that the Ladoga Investment Right was owned by Mr Watson and not his partner. I accept that the so-called goodwill was based on the£45m valuation which was itself based on discounted cashflows from all three asset classes; but I do not accept that Mr Miller understood at the time that Mr Watson’s partner had no rights in relation to the affordable housing. Admittedly in his witness statement he said that the right to participate alongside HW in affordable housing projects was a right which Mr Watson owned (rather than being jointly owned with his existing partner) but his oral evidence on this point was a good example of how different his actual recollection was from what he had put his name to in his witness statement. He first accepted that he understood that Spartan, a 50/50 business between Mr Watson and his partner, had the right to participate alongside HW; then that he took the presentation as it had been presented; and then when it was put to him that he did not know that Mr Watson himself owned one of the rights, namely the right to co-invest with HW, said: “Only because I didn’t really understand what the relationship was between Mr Watson and his existing partner. They were both operating out of offshore companies and structures, and to try and pin this down to this exact point, it was a grey area.” “Only because I didn’t really understand what the relationship was between Mr Watson and his existing partner. They were both operating out of offshore companies and structures, and to try and pin this down to this exact point, it was a grey area.”
“The existing Ground Rent portfolio will likely be subject to a bond refinance in next 12 months at a ˜26x valuation, resulting in the release of ˜£20 mn to the Spartan investors”
“Current offers on the table to securitize cash flows into a bond at 25-28x multiple Proceeds will … deliver£20 -23mn cash proceeds to Spartan partners”
“LH’s team can acquire and consolidate assets at ˜19x income and securitize the cash flows into a 60-year bond at 25-30x”
“Affordable Housing: ► Execute on£450m of projects over next three years – substantial opportunity to increase this” and the statement on page 19 of the 1 April presentation (also in the 29 March presentation) under “Affordable Housing – asset overview” that: “Longer term opportunity to expand commitment from HW or build larger fund”
“Spartan will seed an initial acquisition with ˜£25 mn of equity …” and the statement on page 23 of the 1 April presentation (not in 29 March presentation) under “Project Royal Key statistics”: “► Equity required of ˜£23 -£25 mn”
“Basically Axa is a 50 yr bond at 22.5x exit but we keep reversion. M&G is 25x but we lose reversion.”
“On the REIT funding – Will has sent me a little more information on this existing portfolio but the equity needed is£35 mn – this takes our capital needs a little too high and I don’t think it will generate a great return as the JV only gets the expected 10% IRR on that money and is topped up with 50% of the REIT Mng.Co. I haven’t used these numbers in this presentation – just gone with a seed 25mn financing into REIT.”
“Assume we spend£100 per annum for the next 3 years (we have already spent£80m this year)… This will only be a 3 year opportunity.”
“What scale you comfortable on the Affordable? Over and above Edsel, it is currently at 100mn of projects a year for three years (30mn of Hutch equity) – could we up that to 150mn or is that also not supportable?”
“Ok, I will up that to an additional 150mn a year as opposed to 100mn – helps the numbers a bit.”
“Q: Why does it say PT’s 50% can be acquired if what you really mean is: we can buy him out of all his interests, including a note? A. I think we felt at this point in time this was a simple way of presenting the way the deal was going to pan out, which was that 22.5 million had to go to Neil Richardson. Q: But it is not for his 50%, is it? A. It is to enable Kea to come to a position that they have 50% in this overall package of opportunities. But the payment itself, you’re right, effectively an element of it was going towards paying down a liability, which had to also be bought out in order to get Kea to be a 50% partner in this venture going forwards.”
“Investors should not rely on the information contained in this document as various forward looking statements are based on internally completed analysis and real results could vary materially from those presented in this document. No warranties of any kind are given with respect to the accuracy, appropriateness or completeness of information contained herein. All investors should conduct their own due diligence as appropriate for an investment of this type. No person or entity shall have any liability relating to or resulting from the use of the information contained in this presentation. Only those representations or warranties which are made in a final definitive agreement regarding an investment in Spartan when, as and if executed, and subject to such limitations and restrictions as may be specified therein, will have any legal effect.”
“Per discussions with vendors, balance of value, which amounts to a total of£13.1 mn, has been agreed to be paid to Berryblue as part of the JV’s purchase of 50% share in GR portfolio (“Goodwill Payment”), on the basis that value can be returned to appropriate parties through alternative means – ie Berryblue to receive£4.9 mn +£13.1 mn =£22.5 mn in cash.”
“Due to ongoing circumstances, JV is unwilling to pay EW-associated vehicles any goodwill for any assets”
“We have convince JV trust that BB’s [ie Berryblue’s] interest in GR and HG [ie Ground Rents and Homeground] are worth£22.5 mn”
“general message that we probably have the ability to get NR across line in doing this deal in relation to our assistance on the structuring side”
“NR is happy with our proposal and we need to discuss 2 parts of it...: 1. The paydown of the Gaucin to Berryblue loan – approx.£7.5 mn – needs to be done as step one, I think. Need to think about whether this occurs post transferring the note out and settling into another vehicle or if we settle into B.blue and then it dividends out the cash? 2. Purchase of Berryblue by Park Trust. NR has some tax planning considerations as to how this is structured.”
“use its best endeavours to acquire the shares in Berryblue … for a total amount of£22.5 million ”
“4. Newco will buy the Berryblue Assets from Berryblue for£22.5M .”
“I have got some good news re. the M&G deal on the ground rents — looks like it was finalized over the weekend - an agreement to purchase Abacus assets at 27x as well as substantial commitment of capital for more ground rents in the future which will deliver significant value into the Long Harbour ground rent management company, which Spartan will have the right to buy in at a substantial discount. I think this also delivers the opportunity to substantially simplify the Spartan deal and I am working on laying out exactly how I think that might work today — result will hopefully be less DD, simpler structure, less tax but same commercial outcome. Slight irritating flip side of all this is that it might change the structure of the Spartan term sheet a bit (not commercially, just how things move around). As such — I think best if you meet with Eric and me tomorrow, before you meet with DMM, to discuss how we think the deal should now be structured before you meet with DMM to finalize a term sheet which will likely move around. After we have our meeting tomorrow, you and I can both go and meet DMM together (either later on Tuesday or on Wednesday) to lay out how the new structure will work and we can get the new term sheet finalized whilst you are here.”
“OG will want the flexibility to buy GRs through Spartan also – need to manage this” and he also referred (under “More detailed discussion points”) to: “General discussion around the actual ability / process in which LH could continue to buy GRs for the existing LLP partners (Spartan, post deal with M&G)” and to: “Timing of M&G versus OG – how can we manage this…Cannot really sign M&G up for exclusivity if we want to do a deal with OG?”
“These guys are very ready to go. If we do the m&g deal, I reckon we could get them to buy 40% of LH GR management business at a 12mn valuation, if you wanted them to.. That would be almost 5mn off the table. Peter is excited about this.”
“Get big institution to bring on board and sell earlier + take a share in management company.”
“We could see if we can get this across the line – would you do the deal?”
“It really is critical that we have this in an agreed form by Monday [ie 28 May] … as we need to sit down with Peter in order to try and re-hash the Spartan deal in light of M&G.”
“Think we can get you and James your 1mn each, without selling more shares.”
“Please find attached the proposed draft Term Sheets for the Spartan transaction (now split into 2). Things have moved around a little bit because a deal with M&G to acquire the Abacus GR assets (which were originally going to be sold to Spartan first) has materialized a little earlier than expected — as such, it has now been decided that the proceeds of this sale, as opposed to the assets themselves, will be invested into Spartan (this saves cash basically moving in a circle and also saves stamp duty tax issues that existed prior to this). The commercial elements of what was proposed still remain the same, once all is completed.”
“Implied goodwill being paid by Spartan -£24 mn (50% to be paid in cash and 50% in form of EW ownership in Spartan)”
“2. Separate out Goodwill and purchase that separately – avoids potential stamp duty issues with attaching Goodwill to Berryblue and Gaucin purchases (Risk that HMRC attributes total value to assets as opposed to some to goodwill as a result of ‘market value’ approach) 3. “Project South Sea” – deal papered to grant the right to buy into LH GR Company at substantial discount to future value along with incremental rights to continue Ground rent deals post M&G capital is deployed 4. Spartan to buy South Sea from holders for the goodwill component of the original proposal…” and under “Do not buy Abacus 1, 2 and 3 – why?” it referred among other things to: “Buying Berryblue assets for£22.5 mn (including the goodwill price) potentially creates a ‘stampable’ purchase price for the assets of 22.5mn instead of the rightful true asset value (excluding goodwill) of£10.5 mn… Before selling something to Spartan for 45.0mn and then essentially sell for 20.0mn – aesthetically doesn’t look great. Now goodwill attached to purchase of Project South Sea – far more robust structure for beneficiaries.”
“1 Form Newco (BVI) – owned by Park + another Will have in it Ladoga co-invest + new JV Agreement (right to buy up to 40% of Long Harbour Ground rent co for up to£8M ) Kea 12.5M loan (terms as 10M) 2 Spartan acquires Newco from Park + another for£45M less net received consid by Gaucin & Berryblue from M&G – prob about£25M – 50% cash + 50% outstanding [?] as a loan”
“Park vends in its half of Newco for 12.5mn also, left in as vendor loan.”
“2. The consideration for the acquisition of the Newco Shares or the Newco Assets by Spartan will be satisfied in two equal parts; one will be cash paid by Spartan and the other will be a loan made by one of the owners of Newco to Spartan (“Vendor's Loan”).”
“given the size of the transaction, EW wants to spread the value of these between two entities of which he is the Settlor. Through Park Trust and Munil Developments Inc.” (3) He then suggested: “Given timing, and wanting to show consistency of EW JV partner throughout the transaction, I believe it best that the initial company is set up as 50% Park Trust and 50% Munil held in EH&P Nominee company. Once the rights are vested into the entity, and EW JV partner has his structure sorted, the balance of the shares are sold to EW JV partner.” (4) He then set out the 4 steps which he envisaged. Step 1 was that EH&P set up the new entity with 50% for Park and 50% for an EH&P nominee on behalf of Munil, giving the explanation: “(require anonymity of Munil in the transaction at time of sale in step 4 below)” (5) Step 2 was for the new entity to acquire the rights in LHRF. (6) Step 3 was: “Munil will sell 50% to EW JV partner for circa US$12m , with loan back to Munil (or EH&P Nominee for Munil).”
“...but needs a Training Contract with a Law Firm to commence Year 2. I would be most appreciative if you could help in any way with this.”
“It was getting embarrassing as Eric had promised to deliver a training contract, as he would with any friend or business partner, and a man of influence who can’t manage to get a training contract at two or three law firms, it was rather embarrassing.”
“Please note, due to outside circumstances I purposely avoided some harsh/contentious questions that should eventually be asked should we decide to proceed.”
“Have you carefully studied the investment opportunity offered by Spectrum? Since I have been excluded from any involvement I caution you to protect Trust funds The “Voltaire” investment as referred to needs to be examined carefully I have only had a 10 minute conversation with Eric Watson and on face value I would not proceed without thorough due diligence. I am concerned”
“I think because of what was going on with Owen we were aware there were potential issues there and we wanted to get the capital safe, yes.”
“If we feel that Richard is conflicted then Richard will step out and David Way will run with Owen as a client.”
“Eric’s point of view is that as you represent him in the property deals that the trust is investing in – they will likely use this factor to withdraw.”
“must include the key transactions set out in Schedule 2, which have been agreed between the parties involved in Project Spartan.”
“It is further intended that Newco will acquire or own the benefit of a joint venture agreement to be entered into by Newco with a company (Long Harbour Subsidiary) to be established by the owners of Long Harbour Limited, which joint venture agreement will include certain rights relating to deployment of capital and the right for Newco to acquire up to 40% of Long Harbour Subsidiary for up to£8 million .”
“based on the value of the existing ground rent portfolio plus a proposed value for the pipeline deal-flow, or goodwill, which Park / Novatrust (through Mr Watson and his net work of connections) would bring to Spartan (“the Goodwill Value”)” and that: “Although not all explicitly spelled out in the original proposal, from Novatrust’s and Mr. Watson’s perspective the original proposal had been premised as follows: Corona acquiring 50% of Spartan for a loan of£22.5 million , with it separately lending Spartan£50 million for investment purposes. The value of the existing ground rent portfolio was around£20 million . Accordingly, the original deal had Corona / Kea paying£10 million for 50% of that portfolio, with the balance of the£22.5 million (£12.5 million ) being an agreed payment for its 50% share of the Goodwill Value which Novatrust (through Mr. Watson and his network of connections) was bringing to Spartan.”
“The consideration for the acquisition of Rygen by Spartan from Park and Munil was to be£45 million less the price paid by The Third Party Purchaser for the acquisition of the existing ground rent portfolio (£20 million ). That is, Spartan would pay Park£25 million . The net effect of these Schedule 2 Transactions was therefore that Park would still receive its approximately£12.5 million Goodwill Value payment.”
“Neither Mr Watson, Novatrust, or any Watson entity, expected to receive any part of the purchase price (whether that was£22.5 million , or any other figure) paid to Mr Richardson in respect of Berryblue or its assets: in the event that Kea had invested in Project Spartan on the basis anticipated in the [1 April presentation], all monies it invested would have been paid to Berryblue. No profit, secret or otherwise, would have been received by Novatrust, or Mr Watson, or any entity associated with either of them.”
“it had been clear from the Spartan Term Sheets that the “Newco” to be purchased would “initially be owned by the Park Trust”
“through the revised wording of the Spartan Term Sheets.”
“Review of overall Spartan transactions left to complete – in particular the purchase of Newco and the fact that Park/EW entities were now the ultimate beneficial owner of all the cash proceeds being paid by Spartan for the purchase of Newco etc., given that Berryblue and former EW partners are now no longer part of these transactions. Peter and David understood this… …both Peter and David seemed excited to pursue all the opportunities we had on the table and were comfortable with all the remaining transactions to be completed including re-allocation of goodwill to EW entities.”
“Most notably this section addressed the fact that the shareholders of Berryblue are no longer part of the deal and that a diagram in the new agreement clearly explained the flow of Goodwill back to Newco owners, which are part of the Park group.”
“The Spartan structure and key transactions (as set out in Schedule 3) have evolved significantly since originally being presented in early 2012. Substantial changes have occurred relating to what assets may be purchased, the partners involved, the structure of the transactions required to establish Spartan and the final structure of the vehicle itself. Primarily these changes are that: 1. the Loan facility has increased from£50m (fifty million pounds) to a total of£113m (one hundred and thirteen million pounds); 2. Spartan is no longer buying Gaucin or Berryblue, as originally contemplated. As a result, the original partners in the form of Berryblue and its shareholders are no longer part of the structure or transactions; 3. Park has now delivered access to ground rent investments through the purchase of Rygen by Spartan. ... Chart 1 below summarises the structure of Spartan post all transactions completing, including those currently described in Schedule 3.”
“Mr Dickson was provided with full disclosure of all matters in relation to the Transaction in [November] 2012…”
“We are strengthening the Shareholders Agreement to make it more difficult to freeze or attack Spartan and its business in view of certain current litigation by Mr Glenn against DJM and potentially against the Trust that owns Kea Investments Ltd.”
“Yes I think the team would have set out a way of putting together a structure that enabled Mr Watson to have a negotiation around that price…”
“did not want to put that loan into the presentation precisely because he thought it would upset the negotiation position with Owen.”
“Once it is proved that a false statement was made which is “material” in the sense that it was likely to induce the contract, and that the representee entered the contract, it is a fair inference of fact (though not an inference of law) that he was influenced by the statement, and the inference is particularly strong where the misrepresentation was fraudulent.”
“If it was intended to bring the matter within the maxim “De minimis non curat lex,” it was necessary for the plaintiff’s counsel to shew by re-examination that the amount was trivial; but that was not done.”
“ii) The law recognises that some gifts or benefits are too small to create even a real possibility of a conflict of interest and so too small to be treated as a bribe. The defendants say that some benefits that Mr. Nikitin is said to have provided to Mr. Skarga and Mr. Izmaylov were of insufficient value to be bribes, and were only what Gorell Barnes J called in The “Parkdale”,[1897] P 53 , 58–9 “a little present”
“The remedy is not confined to cases where the agent has taken a bribe or secret commission in the strictest sense. It is available whenever, without his principal’s knowledge and consent, the agent has put himself in a position where his interest and duty may conflict. A principal is entitled to the disinterested advice of his agent free from the potentially corrupting influence of an interest of his own. Any such private interest, whether actual or contemplated, which is not known and consented to by his principal, disqualifies him.”
“If you undertake to act for a man you must act 100%, body and soul, for him. You must act as if you were him. You must not allow your own interest to get in the way without telling him. An undisclosed but realistic possibility of a conflict of interest is a breach of your duty of good faith to your client.”
“Many many thanks for all you have done to support me in this period of turmoil” to which Mr Watson replied: “We have and are a winning team.”
“certain rights relating to deployment of capital” and: “the right for Newco to acquire up to 40% of Long Harbour Subsidiary for up to£8 million .” “the right for Newco to acquire up to 40% of Long Harbour Subsidiary for up to£8 million .”
“they trusted Eric to go out and do the best job he could to negotiate that with Long Harbour.”
“Subject to this section, a director of a company, in exercising his powers or performing his duties, shall act honestly and in good faith and in what the director believes to be in the best interests of the company.”
“A director shall exercise his powers as a director for a proper purpose…”
“Alternatively the execution of the July 2012 Agreements was carried out contrary to the best interests of Kea and the Corona Trust and for an improper purpose namely to provide an unjustified benefit to Mr Watson and/or Novatrust and/or Munil alternatively to secure personal benefits for Messrs Miller and Dickson…”
“YOU did not earn this money. It is tatamount to stealing. Shame on you David”
“Better to move now BEFORE anything comes against the trust directly.”
“On the subject of the Trust investment in the property project, you agreed to keep me advised on the close of legal proceedings. I have heard nothing. I am taking action to petition the court to freeze assets and stop any investment initiatives until a full audit is completed.”
“Legal proceedings are still bouncing around…Rome was built more quickly! We feel as much pressure as possible has been applied and the deal is at risk.”
“this might also help Peter and David get comfortable, seeing as DMM is not reviewing”
“For bridging the purchase of this portfolio Spartan expects to secure ˜33% stake in the property fund Management Company”
“Chaumont (Directors) Limited will be authorised to sign any legally binding documentation solely on behalf of the Company, however prior to this, Peter Dickson must confirm that he has reviewed and approved the documentation for signing.”
“release, waive, discharge and relinquish any and all claims, demands, obligations and causes of action of any nature whatsoever, whether in tort, contract, under or by way of statute or any other theory of recovery, whether in law or equity, under any law or legal principle of any nation, foreign or domestic, arising anywhere in the World, for whatever form of remedy or relief, including without limitation, for actual, consequential, compensatory or punitive damages, equitable relief or otherwise, and whether now known or unknown, suspected or unsuspected, having accrued or which may accrue, no matter where any such claim, demand, obligation or cause of action may have arisen or accrued, and no matter where jurisdiction might lie, foreign or domestic, from the beginning of time to the Effective Date, which any of the Sir Owen Releasing Parties have or may have against the MDP Releasing Parties, or which any of the MDP Releasing Parties have or may have against the Sir Owen Releasing Parties, relating in any way to or arising from the Nevis Action, the California Action or under any other matter related in any way to Sir Owen’s Estate…”
“any trust, settlement, estate, entity or asset owned directly or indirectly at any time by Sir Owen or any trust, settlement, estate, entity or asset affiliated with him, or which was held at any time for the benefit of persons or entities that included Sir Owen or any member of Sir Owen’s family…”
“There seems no reason to me why the principal should not be able to make his position clear in this regard, in that there are two distinct but connected contractual relations.”
“1. Whether Kea or Sir Owen succeed on any of the claims which they have brought to set aside the various agreements on any of the bases alleged (ie deceit, inducements, want of authority, breach of Mr Watson’s fiduciary duty) (this to include the issues of affirmation)”
“2. Whether Mr Watson owed a fiduciary duty to Kea or Sir Owen and if so what duty or duties and whether that duty or those duties were breached in relation to both Spartan and Edsel”
“3. What the consequences of those breaches of duty were”
“4. Whether Mr Watson is potentially liable in knowing receipt of sums received from Munil, subject to the question (not for decision in the judgment) whether Kea can trace the Munil monies through Munil.”
“The recipient’s state of knowledge must be such as to make it unconscionable for him to retain the benefit of the receipt.”
“5. Whether the amendment in relation to equitable compensation is necessary and if so should it be allowed 6. Whether equitable compensation should in principle be awarded”
“Insofar as any of the above sums claimed by way of proprietary or restitutionary claim or by way of account of profits or by way of personal claim against parties as constructive trustees cannot be recovered together with interest, then to the extent that Sir Owen and/or Kea has suffered loss Sir Owen and/or Kea are entitled to equitable compensation from Mr Watson in respect of his breaches of fiduciary duty. Sir Owen and Kea reserve the right to amend their pleading in this regard once further information has been received from the Defendants.” (5) Finally there is a claim for interest pleaded (in paragraph 266) as follows: “The Claimants are entitled to compound, alternatively simple, interest pursuant to the court’s equitable jurisdiction and/orsection 35A of the Senior Courts Act 1981 on the sums found to be due to them at such rate as would have been obtained by Kea by investing in proper trustee investments, or at such other rate and for such period as the Court considers appropriate.”
“But if the other victims of the fraud can trace their money in equity it must be because, having been induced to purchase the shares by false and fraudulent misrepresentations, they are entitled to rescind the transactions and revest the equitable title to the purchase money in themselves, at least to the extent necessary to support an equitable tracing claim.”
“The reason for that, my Lord, is it has always been obvious that Spartan is insolvent. That is why it is no good getting an order for 129 million plus interest against Spartan, because it hasn’t got it. That is why the equitable compensation has always been in there: to recover from Mr Watson anything that couldn’t be recovered from other parties.”
“the Court adopts a broad brush. For practical reasons it will not make an enquiry into the claimant’s actual loss; nor will it enquire or speculate as to what the claimant would have done with the money had he not been deprived of it.”
“it would be neither practical nor proportionate (even in a case involving as large sums as these) to attempt a minute assessment of what will precisely compensate the recipient. In particular, the courts do not have regard to the rate at which a particular recipient of compensation might have borrowed funds. This policy is adopted in order to control the extent of the enquiry to ascertain an appropriate rate…the court will, however, consider the general characteristics of the recipient in order to decide whether to assess interest at a rate that is higher or lower than is conventional.”
“7. Whether the amendment to claim damages for deceit is allowed. 8. If so, whether damages should in principle be awarded for deceit.”
“9. Whether the Claimants are entitled to interest at anything higher than BBR plus 3% either by way of damages or by way of equitable compensation. If so, at what rate”
“10. Whether Mr Leahy has received at least$363,566 from the Munil Money”
“11. Whether Kea is entitled to the B share in Edsel on the basis that its money was used to acquire it. 12. Whether Kea is entitled to claim a 50% share in the Edsel B share on the basis of the Edsel Term Sheet (including whether any such right was given away by the terms of the long form agreements) 13. Whether any claim in relation to Edsel has been lost by virtue of affirmation”
“14. Whether Kea is only entitled to allocate monies paid to it under the Novatrust Settlement to claims against Spartan and Novatrust which would have been likely to succeed”
“But granted for the moment that there may appear to be a question of apportionment of the sum between claims which are good, claims which are bad, and claims which are not concurrent, the mere fact that this may not be altogether straightforward does not, to my mind, absolve the Judge from attempting the task. It is said that the burden lies on the defendant to show that a part of the claim against him has already been satisfied, and to demonstrate the extent to which recovery has already been completed by the plaintiff; and reliance is placed on the decision in the case of The World Beauty[1970] P 144 . Allowing this, however, it seems to me that that initial burden is discharged when the defendant shows acceptance of a payment in, in respect of causes of action where there are concurrent claims against him. If it is to be said that the payment in relates to some claims which are not concurrent, or which could not succeed against the defendant, the only person capable of providing that guidance is the plaintiff himself, who has accepted the payment. That the payment has to be taken into account in some way seems to me to be beyond doubt, and it is, of course, always open to a plaintiff who wishes to accept a payment in or thinks that its acceptance may cause him some embarrassment in the matter of apportionment to request an amendment of the notice of payment in to apportion the sum paid among the causes of action in respect of which it is paid. In the ordinary way that would, I think, solve any difficulty, though I would like to reserve the position — which of course does not arise here — where there may be grounds for asserting that the apportionment is collusive or is not made bona fide . Where, however, the party who has to bring the money into account himself provides no material to show how any apportionment should be made (or, as in this case, invites the Judge to deal with it in a particular way) the Judge has to do his best with what material he has, and the only material that he had in this case was the claims themselves. What he had to ascertain was what the plaintiffs had lost, and to what extent that loss had been mitigated or satisfied by what had been received. There was really no other reliable way of doing this except by assessing the true value of the plaintiffs’ claims against Laings, and comparing it with the£30,000 received.”
“If the appellants wished to appropriate the payment into Court against particular claims raised in their Statement of Claim, they could have required the payment into Court to be appropriated by Laings under the provisions of Order 22, rule 1, and then decided whether to accept the appropriated amounts or not. The effect of the acceptance of the payment into Court in satisfaction of all claims between the plaintiffs and Laings must raise a prima facie presumption that where those claims overlap claims made against another defendant, that the latter claims have also been satisfied. The presumption is rebuttable by evidence led by the plaintiffs, and is no bar to their pursuing their claims if they can establish that that part of the payment into Court attributable to the “concurrent claims” does not fully satisfy the damage they have suffered under this head. Of course, if the payment exceeds the aggregate of damage suffered by the plaintiffs under both heads, i.e. the “concurrent claims” and claims against Laings alone, then no problem arises; both the second and third categories have received full compensation under the payment into Court and, therefore, in respect of the second category, the plaintiffs must give credit for the full value and there is nothing more to claim. The plaintiffs’ claim must be restricted to damages claimed under the first category. Apart from the special cases where the Court orders trial on liability only or, having determined liability, orders an inquiry as to damages, in normal actions for recovery of damages it is for the plaintiff to prove both the liability of the defendants whom he sues, and the loss he has suffered. Qua the remaining defendant after the plaintiff has withdrawn, for whatever reason, his claim against a co-defendant, nothing has happened to alter this position. The plaintiff, in order to obtain a judgment for damages, must prove that there is still a quantum of damage which has not been satisfied by a previous recovery whether as a result of a payment into Court or a prior judgment, in respect of which he is entitled to recovery from the remaining defendant or defendants…. Where the previous recovery stems from the acceptance of a payment into Court made and accepted not only in respect of the claim for damages under consideration, but also in respect of other claims not relevant, the Court must decide, and it is for the plaintiff to establish, by how much that part of the payment attributable to the instant claim falls short of the total value of the claim itself. For my part I cannot see how this exercise can be done without an investigation of the other claims, unless it be for the Court to say that the plaintiff has failed to establish that there is any excess of damage suffered in respect of which he, the plaintiff, is entitled to continue his action for damages against the remaining defendant.”
“It is for the defendant to show, in the first place, a prima facie case that the plaintiff has been wholly or partially compensated for the loss he has suffered. In my opinion, however, once there is a prima facie case that the plaintiff has received a sum of money which reduces the loss he has suffered from that particular event, it is for him to show, if it be the case, that some part of that sum was for another, unrelated, cause of action. In this case, in my opinion, there can be no possible doubt that some part of the£30,000 paid into Court and taken out by the plaintiffs comprised damages which were for injuries for which damage was also being claimed against the defendant in this action. It was then for the plaintiff to show which, if any, parts of the£30,000 were not so attributable.”
“I am satisfied that Notcutt would have been held liable in full for the agreed costs if the matter had proceeded to trial against Notcutt. The principle appears to be that if a plaintiff who receives payment from one tortfeasor establishes an additional separate claim against that tortfeasor, the payment is allocated first to that claim, and credit must be given in favour of the second tortfeasor only for the excess necessarily referable to the overlapping claim. That seems to me the approach indicated by the Court of Appeal judgments in [Townsend] … and by the actual decision of the Court of Appeal in The Morgengry, The Blackcock[1900] P 1 , a decision which was not cited in [Townsend]. It also appears to me to be the approach which is required by an application of first principles.”
“In [Townsend] the Court of Appeal held that, once there is a prima facie case that the plaintiff has received money from a second tortfeasor which reduces his loss, it is for him to show that the payment relates to some separate claim against the second tortfeasor. That involves showing that the separate claim was sustainable on the facts and in law. In my judgment Chemical’s argument that they would have recovered against Notcutt the costs which were disallowed against Skandia ought not to succeed. I do not regard it as a reasonably foreseeable head of loss, and its recovery in an action against Notcutt is not demanded by the dictates of common sense or justice. It is too remote. In any event, Chemical have failed to discharge the burden of proving that this alleged separate claim would have been likely to succeed at a trial against Notcutt.”
“Keysers contends that they are entitled to appropriate the whole of their recovery under the Notcutt settlement to their loss under the first loan. If that is right, Keysers need give no credit at all to Skandia for money received under the Notcutt settlement. I am satisfied that Keysers’ claim in respect of the first loan would have succeeded against Notcutt if the action against Notcutt had not been settled. Indeed the contrary was not seriously suggested. Counsel for Keysers took his stand on the principle that a plaintiff is entitled to appropriate a recovery from one defendant to separate additional claims, giving credit to a second defendant only to the extent that recoveries are necessarily referable to overlapping claims. That is a proposition which is supported by the decision in The Morgengry and by dicta in [Townsend]. It is also consistent with first principles, and I have applied it in relation to an issue between Chemical and Keysers.”
“1116 …The real issue is the level of that threshold: must the court decide whether the claims would have succeeded at trial, or is some lesser scrutiny required? 1117 Mr Brindle for BFS pointed out that, in Banque Keyser Ullman, Steyn J gave the judgment from which I have quoted above at the end of a full trial. He already had a clear and informed view on the strength of the costs claims which were in issue. He was therefore able to decide without any need for further evidence that the claim for disallowed costs referred to in the second passage would have failed at trial. Mr Brindle distinguished Townsend on the grounds that there was there only one claimant; the court there had been given no material at all on which to base an appropriation; and that the payment there was a payment into court, which is made under a special procedure and which it may be more difficult for a claimant unilaterally to appropriate to particular claims. By contrast, the general rule, where a creditor is owed two debts by a debtor and receives a payment which is not appropriated between them, is that the creditor may appropriate the payment between the debts as he thinks fit. 1118 Mr Brindle suggested that Steyn J would be horrified if he were told that his ruling required me to hear the full case against the Coopers defendants, over the course of several weeks, purely in order to decide this point. I agree with him, and would be very reluctant to make such a finding unless authority compelled me to do so. I do not think either Banque Keyser Ullman or Townsend do so compel me. 1119 Banque Keyser Ullman is explicable on the grounds suggested by Mr Brindle. In Townsend the Court of Appeal stated that even a payment into court may be appropriated to particular claims, by the claimant requesting an apportionment in the notice of payment in. That would be conclusive, as long as the apportionment were not collusive or not made bona fide (per Oliver LJ at page 41). In the case of a negotiated settlement, it seems to me that the normal rule allowing appropriation by the recipient should apply (Halsbury’s Laws, 4th ed., volume 9(1) paragraph 956), subject to the sort of low-level threshold indicated by Oliver LJ. One of Mr Brindle’s formulations of that threshold was whether the claims were obviously unsustainable. That seems to me a preferable approach to his alternative approach, by analogy to theCivil Liability (Contribution) Act 1978 , which would pay no regard at all to the chances of the claimant making out his claim at trial.”