Marco Maximilian Elser v Andrea Mandel-Mantello & Ors [2025] EWHC 1558 (Ch)

[2025] EWHC 1558 (Ch)

Case No BL-2023-001007

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

CHANCERY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 23 June 2025

Before

Mark Anderson KC, a Recorder sitting as a judge of the High Court pursuant to section 9(1) Senior Courts Act 1981

Between

MR MARCO MAXIMILIAN ELSERClaimant

MR ANDREA MANDEL-MANTELLO (1) ADVICORP PLC (2) MANAGEST B.V. (3) GALDAM LIMITED (4)Defendant

Adam Chichester-Clark (instructed by Blake Morgan LLP) for Claimant

Alec McCluskey (instructed Solomon Taylor & Shaw LLP) for Defendants

Hearing Hearing dates: 1, 2, 3, 4, 7, 9 & 10 April 2025

Approved Judgment

This judgment was handed down remotely at 10.30am on Monday 23 June 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

.............................

Mark Anderson KC:

[1]The claimant Marco Maximilian Elser and the first defendant Andrea Mandel-Mantello met as teenagers in Rome in the 1970s. Both went on to careers in finance, Mr Elser in capital markets and Mr Mandel-Mantello in corporate finance. In 2002 they combined their businesses in Advicorpplc, of which they became equal shareholders. Although there are corporate defendants, I will refer to Mr Elser and Mr Mandel-Mantello as the Parties.

[2]Advicorp’s senior employee was Mr Jonathan Chia Croft, who worked with Mr Elser in capital markets. At some point the Parties agreed that Mr Croft should have a 5 per cent stake in Advicorp in recognition of his work over a long period. No one was certain as to when this was agreed, but the parties’ chronology puts it in 2011 or 2012. However, although he was recognised as having a 5 per cent equity stake, no shares were allocated to him, so he did not have voting rights.

[3]In 2016 the Parties separated their businesses out of Advicorp (the Demerger). Mr Elser and Mr Croft left to set up their own business. Advicorp’s assets were distributed 47.5 per cent to Mr Elser and 5 per cent to Mr Croft, whereafter Advicorp, with 47.5 per cent of its former assets remaining, was wholly owned by Mr Mandel-Mantello.

[4]Advicorp is now the second defendant. The third and fourth defendants, Managest BV and Galdam Limited, are companies also wholly owned by Mr Mandel-Mantello.

The Acquisition

[5]In 2011 Advicorp acquired a 90 per cent stake in an Italian trichology business called Cesare Ragazzi Laboratories (CRL). Cesare Ragazzi was a well-known TV personality who founded the business. By 2011 it had been through an insolvency process from which it had been acquired by investors who had lost interest, and were looking to sell. It was partly a franchise business, but also made sales in its own right. Its senior managers were Stefano Ospitali, Angelo d’Andrea and Angelo Spalluto. Mr Spalluto died in 2013. I will refer to these as the Managers, to include Mr Spalluto when he was alive.

[6]Advicorp established an Italian subsidiary, AdvihairSRL, to acquire CRL for €1.2m (the Acquisition). The shares were initially acquired by Advicorp as to 99 per cent, Mr Elser taking 1 per cent as nominee for Advicorp, because Italian law confers limited liability only where there are two or more shareholders. The acquisition price of €1.2m was contributed €1,080,000 (90 per cent) by Advicorp, the Managers contributing the remaining 10 per cent between them, €40,000 each. The shares were redistributed in proportion to these financial contributions, though Mr Elser retained 1 per cent as nominee for Advicorp, 89 per cent being held by Advicorp in its own name and 10 per cent by the Managers.

[7]These holdings changed over time: i. In 2017 the two surviving Managers were given an incentive scheme to acquire further shares from Advicorp. This came to fruition in 2020, reducing Advicorp’s holding to 79 per cent and increasing the two Managers to 10 per cent each. ii. In 2024 Mr Ospitali left, and his shares were acquired by Advicorp and Mr d’Andrea in proportion to their existing holdings, with the result that Advicorp now holds 88 per cent and Mr d’Andrea 11 per cent. Mr Elser still holds 1 per cent as nominee for Advicorp.

[8]Advicorp’s initial investment of €1,080,000 was financed by €300,000 from existing funds, €100,000 each from the Parties by way of capital contributions to Advicorp, and two loans of €290,000 each from companies associated with Mr Elser (Watersfield and Carlisle), at 15 per cent annual interest. Mr Croft did not contribute.

[9]Advicorp did not take on primary liability for Advihair’s debts, but in August 2012 gave a guarantee to Advihair’s bank in the sum of €2m. It also lent money to fund Advihair’s business needs from time to time. Advihair took on liability for CRL’s debts to the tune of €3.8m.

[10]The Acquisition was reflected in Advicorp’s 2011 year-end accounts, signed by Mr Elser on 20 April 2012 and filed in September of that year. It was recorded in the balance sheet as an investment of €1,209,000. The directors’ report said that “The acquisition of the trichology and hair restoration business of Cesare Ragazzi from Coop Nord 2000 which, in turn, had acquired the business from a court receiver, represents a new development for the firm as it branches out into private equity”. This reflected the fact that the acquisition of a distressed business with a view to rebuilding it to profitability was not the sort of venture that either of the Parties had previously undertaken.

[11]Advicorp employed the services of FSPG, chartered accountants, and in particular Mr Paul Maurice. Mr Maurice was also the company’s auditor. It is common ground that in late 2012, Mr Maurice advised that ownership of Advihair caused a regulatory problem for Advicorp. None of the witnesses could remember the precise details of the problem, and I was not referred to any regulations that might explain it, but there is broad agreement that the poor financial state of Advihair would cause the FSA to regard Advicorp as inadequately capitalised. I will refer to this as the Maurice Advice.

The Issues

[12]This dispute concerns the beneficial ownership of the 88 per cent of Advihair now held in Advicorp’s name. Mr Elser says that Advicorp holds half of these shares on trust for him, which Mr Mandel-Mantello denies. Where I refer to “the Shares”, I mean Advicorp’s holding from time to time (first 89, then 79, now 88 per cent); or, depending on the context, Mr Elser’s claimed half of it.

[13]The dispute does not extend to the 1 per cent held by Mr Elser. Mr Elser does not allege that the beneficial ownership of this 1 per cent followed the beneficial ownership of the Shares. The 1 per cent belongs beneficially to Advicorp.

[14]Both Parties, and Mr Croft, say that Advicorp divested itself of the beneficial ownership of the Shares. Their recollections differ as to when this happened, and why, and who benefitted. I will refer to this as the Ownership Issue.

[15]The three witnesses to the Ownership Issue each gives a different version of events. Mr Mandel-Mantello says that in response to the Maurice Advice, given at a meeting on 20 December 2012 attended by him (in person) and Mr Elser (by phone), but not Mr Croft, it was agreed that Advicorp would hold the Shares as nominee for Managest. Managest later transferred its interest to Galdam, and Galdam later transferred it to Advicorp, which now holds the Shares as legal and beneficial owner.

[16]Mr Croft says that in response to the Maurice Advice, given at a meeting in late 2012 or early 2013 attended by him and Mr Mandel-Mantello (in person) and Mr Elser (by phone), the Parties agreed that Advihair would be transferred to Managest but that this would not affect Mr Elser’s beneficial interest. His Shares would be held on trust for him.

[17]Mr Elser agrees with Mr Croft’s version of the meeting, the important difference between them being that Mr Elser says that Advicorp had already divested itself of the Shares by agreeing to hold them as nominee for the Parties, before the Maurice Advice. He says that shortly after the Acquisition, the Parties agreed that Advicorp would hold the Shares for their personal benefit in equal shares. Mr Elser did not remember the date of this conversation, though he was certain that it was after the Acquisition, and fairly certain that it was before the Maurice Advice.

[18]My approach to the Ownership Issue will be first to summarise the relevant documentary evidence generated at around the time of the Maurice Advice (up until February 2013), then to consider the recollections of Mr Elser, Mr Mandel-Mantello and Mr Croft about the Maurice Advice and what was agreed in response to it, before going on to summarise the remaining evidence, both documentary and from witnesses, about events after February 2013.

[19]There are three issues in addition to the Ownership Issue: i. Did Mr Elser give up any right to the Shares by signing a disclaimer when resigning as a director of Advicorp in 2016? ii. Is this claim barred by laches? iii. If the claim otherwise succeeds, is Mr Mandel-Mantello entitled to an equitable allowance for having worked so hard, and taken risks, in getting Advihair to its current position of success?

Documents generated at around the time of the Maurice Advice

[20]Not many documents survive from before 2014. Mr Mandel-Mantello explained that his computer was hit by a virus which deleted most of his emails. I was initially sceptical about this, because the emails which have survived are those which support Mr Mandel-Mantello’s case that Mr Maurice devised a scheme for Advicorp to give its beneficial interest in the Shares to Managest. As will be seen, the scheme that Mr Maurice devised was never fully implemented, but no emails survive which shed light on the reason for this. However I was told that Mr Elser did not make any application to challenge the defendants’ disclosure, I have seen no evidence about the virus issue and it was not put to Mr Mandel-Mantello that he had deliberately suppressed relevant documents. I do not think it would be fair in these circumstances to draw any adverse inference from the absence of relevant documents, nor to question the genuineness of the virus. I set scepticism aside and do my best to decide the case on the basis of the documents which I have seen, whilst bearing in mind that others are missing.

[21]Mr Mandel-Mantello’s diary shows that he had a meeting with Mr Maurice on Thursday 20 December 2012. On Sunday 23 December Mr Maurice sent an email to Mr Mandel-Mantello (not copied to anyone else), which included the following: It was good talking with you and Marco last week. I understand that the transaction relating to Advihair, although acquired by Advicorp legally was a transaction beneficially on behalf of Managest BV. I further understand that although part of the transaction was paid for by Advicorp directly some of the funds (approximately 50% of amount paid by Advicorp directly) was on behalf of yourself and Marco.

[22]Mr Mandel-Mantello replied The content of your email is correct. Please keep Marco copied in all future correspondence relating this this subject.

[23]On 3 January 2013 Mr Maurice emailed both Parties: I am … currently sitting with Khurram to go through the changes to the Advicorp accounts and then to ensure that Managest accounts reflect the correct information in respect of its various investments. I now want to make sure we are showing the transaction correctly. … So as far as the accounts of Advicorp is concerned they were simply acting as nominee on behalf of Managest. The accounts of Advicorp for 2011 would only show the loan of 300,000 Euros to Managest. … There are a couple of documents that we need to consider.a. There are promissory notes in place between Advicorp and two of the lenders for 5 years. There needs to be a cross document signed by all parties stating that Advicorp is acting as nominee for Managest.

b. The acquisition is also shown in Advicorp's name and again we need to do a suitable document. I can probably get HCLS (the legal firm Andrea sometimes uses) to do the documents. They are quite cheap and I can explain it easily to them. Let me know. In the meantime we are going to amend the accounts to reflect the above and will email copies to you in the next day or so. There will be a change to the figures since the promissory interest was reflected in the P&L account and this needs to be taken out, as it now belongs to Managest. There will be a little more corporation tax to pay.

[24]Mr Mandel-Mantello’s reply, copied to Mr Elser, said Your note reflects the facts. Just a small integration: outside funders provided €580K. This is interest bearing. Managers provided €120K. This is not interest bearing as it is effectively equity - 10% of the company.

[25]Mr Maurice replied to ask if Mr Mandel-Mantello wanted him to get HCLS to draft the documents, and Mr Mandel-Mantello instructed him to ask for a fee quote. Later the same day (3 January), Mr Maurice emailed the Parties: Have met with Mark Traube and there are 4 agreements that need to be done. I have beat him down to £1500 plus vat. Let me know ASAP so they can start.

[26]Mr Traube was the solicitor at HCLS. He duly prepared Draft Agreements. There turned out to be six, of which only three need be mentioned here. The first provided that Advicorp would hold 99 per cent of Advihair’s shares as nominee for Managest with effect from 7 July 2011. Two further drafts to be signed by Carlisle and Watersfield recorded that Advicorp had borrowed €290,000 from each of them as agent of Managest, and that Managest would be liable to repay them, not Advicorp.

[27]There are no signed versions of any of the Draft Agreements. Neither has any record of any communication about them survived, beyond the emails which I have already quoted (Maurice Emails).

[28]The email quoted in [23] said that Mr Maurice or his colleague Khurram was going to re-draft Advicorp’s 2011 accounts to present the new position that Advicorp held the Shares as nominee for Managest. That was duly done, and the amended accounts were signed by Mr Mandel-Mantello on 25 February 2013. The amended directors’ report omitted any mention of the acquisition of CRL, and the balance sheet no longer included the investment of €1,209,000 which had been shown in the original version. The notes contained a related-party declaration that Advicorp was owed €305,000 by Managest. That is consistent with Mr Maurice’s email of 3 January 2013, which said that the accounts would show a loan of €300,000 to Managest. That reflected the €300,000 which Advicorp had contributed from its own reserves towards the Acquisition, now shown as a loan to Managest. The amended accounts did not mention Advihair.

[29]The same email mentioned the need “to ensure that Managest accounts reflect the correct information in respect of its various investments”. However that was never done. Mr Mandel-Mantello disclosed no financial statements of Managest for any period, but the claimant’s solicitors obtained a company profile report from the Chamber of Commerce, which included a balance sheet for 31 December 2014. This showed that Managest had no assets except for share capital of €18,151, and a liability of €82,401. It follows that no shares in Advihair were in its books in 2014 and neither was any debt to Advicorp. There is no evidence that Managest’s accounting records in subsequent periods were any different. And after 2018, when Mr Mandel-Mantello says that Advihair had become a subsidiary of Galdam, Galdam’s accounts similarly contained no mention of its ownership. This persisted until after this litigation had begun.

[30]In oral evidence Mr Mandel-Mantello said that in 2016, after the Demerger, Managest made a payment to Advicorp in respect of Advihair. He was unable to say how much. There is no other evidence of such a payment, but, assuming it was made, it occurred when Managest and Advicorp were both 100 per cent beneficially owned by Mr Mandel-Mantello. It does not alter that Managest did not recognise its ownership of the Shares in its own books.

The witnesses to the Maurice Advice

[31]I heard evidence about the Maurice Advice from Mr Elser, Mr Mandel-Mantello and Mr Croft. Mr Maurice himself was unavailable because of ill health.

Mr Elser

[32]Mr Elser’s witness statement says that after the Acquisition, the Parties agreed that Advicorp would hold the Shares for their personal benefit in equal shares. Mr Elser did not remember the date of this conversation, though he was certain that it was after the Acquisition.

[33]The statement went on to say that Mr Elser remembered a meeting with Mr Maurice in late 2012 or early 2013, which he attended by phone, at which Mr Croft and Mr Mandel-Mantello were present in person. Mr Maurice said that it could be a problem for Advicorp if Advihair remained as a group company, because Advihair was in a poor financial state and this would pose a problem for Advicorp's FSA licence. Mr Maurice proposed a solution, that Advihair be transferred to Managest. Mr Maurice told him that it would make no difference to his interest in Advihair. He recalled that Mr Maurice said something to the effect that Advihair would still be held on trust for him and Mr Mandel-Mantello.

[34]Mr Elser’s witness statement said that he was “fairly certain” that the agreement mentioned in [32] above was before the meeting with Mr Maurice. According to Mr Elser’s recollection, therefore, Advicorp parted with beneficial ownership to the Parties before the Maurice Advice, and not in response to it.

[35]This recollection gives rise to the question of why the agreement was made. When asked in cross examination, Mr Elser said that it was commonplace for Advicorp to hold positions as nominee for clients, and this was such an arrangement. But that does not answer why such an arrangement was necessary or desirable in circumstances where he and Mr Mandel-Mantello were not clients of Advicorp, but its owners.

[36]Mr Elser explained that the Parties made the arrangement to exclude Mr Croft from any benefit (Mr Croft had a 5 per cent stake in Advicorp, but had not contributed to the acquisition price of Advihair). When asked why that explanation was not in his witness statement, Mr Elser twice stated that he did not understand the question, and then said there was no need for the evidence to be in his statement. When pressed he attempted to avoid the question by saying that Mr Croft never received his 5 per cent, and then, after a long pause (prompting me to ask if he wanted to finish his answer) said “I am not going to say anything, because [counsel] made a supposition and I cannot comment on a supposition”. When I gave him another opportunity, he repeated that he had not previously understood the question, and his final answer was that the explanation was so obvious that he did not need to put it into his witness statement. This led me to conclude that he only thought of it contemporaneously with giving it.

[37]Equally difficult for Mr Elser’s recollection is why Mr Maurice would have advised that Advicorp should hold the Shares on trust for Managest if it already held them on trust for the Parties. When Mr Elser was asked about this, the following exchange occurred: Q. Why don't you say to Mr Maurice, "Don't worry, Paul, this isn't a problem because Advicorp doesn't actually own this, Andrea and I do"? A. But that would be … incorrect. Q. Why is it incorrect? Because Paul Maurice when he discovered this, the owner, the formal owner, of Advihair at the time in 2012/13 and still today has always been Advicorp. There is no reason why I could have told Paul Maurice, “This is -- they are not Advicorp's. They are for the benefit of us.” Paul Maurice said they could not be held in Advicorp's name. We had to find a solution, so Andrea proposed Managest and I said, “Fine, as long as my interests aren't affected”. Q. Did you tell Mr Maurice that you had already agreed with Andrea that Advihair was held for your benefit and his? A. Did I tell Mr Maurice? Q. Yes. A. I'm sorry, rephrase the question. Q. That you had already agreed with Andrea that Advihair was held for your benefit and his. A. Well, Paul Maurice knew that. Q. How did he know that? A. Andrea, I'm sure, told him, because we had never made such a big investment. Andrea is somebody who is very braggart and went in the press and papers and everything to talk about this. We were photographed together at events. Articles were written about us. A book was written with a chapter on us; courageous captains, people trying to resuscitate the Italian economy which had floundered … Q. Why doesn't it say in your witness statement that Mr Mandel-Mantello told Mr Maurice that you and he had agreed that Advihair would be held on behalf of you and he personally? A. How could I tell -- put in my witness statement something that I wasn't privy to? I don't know what conversation that took place between Mandel-Mantello and Paul Maurice, especially 13 years/12 years ago.

[38]The upshot was that Mr Elser did not explain why Managest needed to be involved if the facts were as he remembered, and was unable to explain why he did not tell Mr Maurice of those facts at the time. His evidence that Mr Maurice said that the Shares could not be held in Advicorp’s name is also inconsistent with the agreed fact that the Shares were, and have ever since been, in Advicorp’s name.

[39]Mr Elser signed Advicorp’s 2011 accounts in September 2012. Mr Elser’s witness statement said that the accounts “describe the purchase of the CRL business which I read at the time which agreed with my understanding”. In fact the accounts not only described the purchase of CRL, they also showed the investment as belonging beneficially to Advicorp, which contradicts Mr Elser’s recollection that he and Mr Mandel-Mantello agreed that Advicorp would hold the Shares as trustee for the Parties. Mr Elser said in oral evidence that he did not read the accounts carefully before signing them. Immediately afterwards he said that he did not remember whether he had read them or not. When reminded that his witness statement said that he had read and agreed with them, he replied that he stood by it. In the end he provided no explanation of why he signed accounts which did not reflect what he now recollects as the true position.

Mr Mandel-Mantello

[40]Mr Mandel-Mantello’s witness statement said that in response to the Maurice Advice given in late 2012, the Parties “reversed” the Acquisition to protect Advicorp’s share capital from Advihair’s growing liabilities, in particular to the Italian tax, VAT and social security authorities. The decision was to remove Advihair from Advicorp’s ownership. Mr Mandel-Mantello says that he proposed splitting the Shares equally between his and Mr Elser’s family companies, but Mr Elser did not want to have shares in a company that was in negative equity and was failing to meet its obligations to the state. Consequently, Mr Elser agreed to give up any interest in Advihair, with the result that the Shares were transferred to Mr Mandel-Mantello’s company, Managest.

[41]Mr Mandel-Mantello’s witness statement did not mention a specific meeting at which the Maurice Advice was given. In cross examination he said that after making his witness statement he found a diary entry scheduling a meeting with Mr Maurice for 20 December 2012 (mentioned in [21] above). He said that this had helped him to remember that he had attended a meeting, which must be the one mentioned in Mr Maurice’s email of 23 December 2012. He now remembered that meeting, and remembered that Mr Croft had not been present. He agreed that Mr Elser was present on the phone but said that he and Mr Maurice were the only persons present in the room. He said that Advihair was a private matter that did not involve Mr Croft “since he was not a shareholder nor a board member of Advicorp”. When asked to clarify whether his evidence was that he specifically remembered a meeting at which Mr Croft was not present, or only that he would not have been present because the issue was none of his business, he said “I remember that there was a meeting and that he was not present”. He was then asked if this meeting was the first occasion when the problem of having Advihair on Advicorp’s books had been raised by Mr Maurice, to which he replied that he did not remember. However he later said that he had a clear memory of the relevant events and their sequence, and had held that memory even before he looked at the Maurice Emails:

“I remember clearly the events and the sequence of events and I then confirmed my memories by looking at the emails … They are very important events and, therefore, I couldn’t have forgotten them”

. The problem with that is that he had read the emails before making his statement, but did not mention any recollection of a specific meeting in the statement.

[42]Mr Mandel-Mantello said that he printed and signed the Draft Agreements, “and sent them to Paul by post or courier for further handling. I believed Paul would handle the finalisation and ensure all necessary parties signed the documents”. However the Draft Agreements, as disclosed, do not bear any signatures. Mr Mandel-Mantello explained that his computer virus must have deleted the email sending the signed version to Mr Maurice.

Mr Croft

[43]Mr Croft, called on behalf of Mr Elser, gave evidence of a meeting with Mr Maurice and Mr Mandel-Mantello at FSPG's office in Bedford Square in late 2012 or early 2013, with Mr Elser joining by phone. He explained that he was a client of Mr Maurice in business ventures of his own, had been at such a meeting before Mr Mandel-Mantello arrived, and stayed on to discuss Advicorp’s business. He recalled that Mr Maurice said that it would not be sustainable for Advicorp to continue to include Advihair in its group accounts because the poor financial state of Advihair would pose a problem for Advicorp's FSA regulated status. Mr Maurice proposed that Advihair be transferred to Managest but told Mr Elser that this would not affect his beneficial interest in Advihair, because the Shares would be held on trust for him.

[44]So Mr Croft’s evidence about the meeting coincides with that of Mr Elser, but Mr Croft did not support Mr Elser’s recollection that he and Mr Mandel-Mantello had already agreed, before that meeting, that Advicorp would hold the Shares on trust for the Parties. Mr Croft knew nothing of any such agreement.

[45]Mr Croft was not involved in the Acquisition and did not participate in managing CRL. He had been a director of Advicorp until all the directors, except the Parties, resigned in 2008. He said that discussions about CRL nevertheless arose during management meetings of Advicorp which he attended from time to time. He thought it was a risky investment because the amount of cash that Advicorp put in exceeded any other investment it ever made.

[46]In cross examination Mr Croft was asked if he might be mistaken in his apparently clear recollection of the meeting. He said that he was not mistaken: I was present and I remember it. As I say, I had a meeting with Paul Maurice and he, for whatever reason, a coincidence, had a follow-on meeting with Mr Mandel-Mantello and so I was in Paul Maurice's office, FSPG's office, at 21 Bedford Square when Mr Mandel-Mantello arrived. Q. And I am going to suggest that 12 years ago or so, you can't remember accurately the words that you say were used by Mr Maurice about the beneficial interest in Advihair. A. Well, I do recall. It was just one line and I'd never heard the name Managest before, so that's why I think I remember it. Q. Even if you remember a mention of Managest, Mr Croft, I put it to that it doesn't follow that you recall the subtlety of who the beneficial interest in Advihair was owned by. A. As I say, it was one line. It was an explanation to Mr Elser, who was on the telephone, joined the meeting by telephone.

The other witnesses

[47]Three other witnesses were called, Mr Stefano Ospitali on behalf of Mr Elser, Mr Angelo D’Andrea and Ms Patrizia Valentina Navarroli on behalf of Mr Mandel-Mantello. Mr Ospitali and Mr D’Andrea were respectively the CEO and COO of CRL from before the Acquisition until 2023, when Mr Mandel-Mantello dismissed Mr Ospitali and promoted Mr D’Andrea to replace him. Ms Navarroli was another senior employee of Advihair. None of these witnesses gave evidence about the discussions of Advicorp’s or Managest’s or the Parties’ ownership of the Shares. I will mention their evidence where it assists to shed light on what subsequently happened. Events after February 2013 Before the Demerger

Events after February 2013

[48]The period from 2013 onwards saw increasing tension between the Parties, not least because Advihair did not perform well, and was forced to delay payments to the government of VAT, social security payments and employees’ income tax. It also faced difficulties with some franchisees who were buying products from other suppliers.

[49]Mr Croft’s relationship with Mr Mandel-Mantello was also under strain. He had been promised a 5 per cent stake in Advicorp but the shares were not allocated and he felt that Mr Mandel-Mantello was reneging on the promise. Mr Mandel-Mantello acknowledged in evidence that he was reluctant to dilute his own shareholding from 50 per cent to 47.5 per cent, since that would enable Mr Elser and Mr Croft to outvote him.

[50]The emerging problems are evidenced by an email sent by Mr Croft to Mr Elser on 2 September 2013, reporting that Mr Mandel-Mantello had suggested that he might close the corporate finance arm of Advicorp and resign. The email suggested that Mr Mandel-Mantello was prepared to “shipwreck” Advicorp, “and CRL is his lifeboat that he hopes to leave on – leaving the rest of us drowning”. Resignation of Mr Elser as a director of Advihair

[51]Mr Elser resigned as a director of Advihair on 29 September 2013. In oral evidence Mr Elser said that one of the reasons was that Advihair was not paying its taxes. He said that he takes tax obligations very seriously. His resignation email to the Advihair management team, and other communications around that time, confirm the poor financial position of Advihair. A week earlier Mr Mandel-Mantello had complained to the Managers, in an email describing the situation as out of control, that EBITDA was minus €268,000, and that there had been a massive increase in debt. Mr Mandel-Mantello responded to Mr Elser’s resignation by associating himself with Mr Elser’s negative comments about the performance of the business.

[52]The parties are not altogether agreed as to what role Mr Elser played in Advihair after resigning as a director, but there is some common ground. He continued to receive weekly emails from Mr Ospitali with reports on Advihair’s business, and sometimes attended meetings on Monday mornings with the Managers and Mr Mandel-Mantello. There was disagreement as to whether these were “management meetings”, and about the frequency of his attendance, but it was agreed that he was invited to them. Mr Elser agreed with Mr McCluskey that the list of things he did was “pretty trivial”, and that it was Mr Mandel-Mantello who reshaped the business over many years. October 2013 to February 2014

[53]On 24 October 2013, shortly after resigning as a director, Mr Elser reported to Mr Mandel-Mantello that he had been approached by someone who might be interested in acquiring a stake in Advihair. Mr Elser’s email said “Do we have an interest in talking to him? From the conversation, he appears to be interested in taking it over or at least a significant stake. I told him that it was premature but we would engage in a conversation with him as we believe that CRL's international potential is significant.” Mr Mandel-Mantello’s reply said “Happy to talk to anyone but I do think like you that it may be a little premature.”

[54]This exchange is notable because Mr Elser asked if “we” have an interest in talking to the potential investor, rather than “you”. I will come back to that. The exchange is also notable in that Mr Elser showed hostility to Advicorp funding Advihair’s marketing expenses. Mr Mandel-Mantello was in San Francisco on Advihair business. Mr Elser asked “Please let me know how the SF conference is going and confirm to me that ADVI is not spending (not even advancing) one cent of this trip for all those attending”. Mr Mandel-Mantello replied “I can confirm that Advicorp is not advancing any cash … Conference in sf is going well as are business development initiatives in the rest of the US”.

[55]Mr Croft responded to Mr Elser’s email (excluding Mr Mandel-Mantello), “I think you were being diplomatic by saying premature. If I were the creditor (which in a sense we all are) I would be seeking to take measures to, at the very least, sell an equity stake in CRL.” This email suggests that Mr Croft was concerned about the level of Advicorp’s financial commitment to Advihair. I think it a fair assumption that he believed that Mr Elser would share that view.

[56]This theme appeared again in an email of 4 February 2014 from Mr Elser to Mr Mandel-Mantello: We are owed nearly €500,000 from Advihair and this is untenable. If there needs to be any further (even the most minute) funding of Advihair, we will have to write down all of the current capital of Advihair. Using the numbers that were given out at last Friday's meeting … we had EBIT of MINUS 1.2 myn and in 2013 we had EBIT of MINUS 660K (versus a budget of -88K). Advihair's capital as far as I am concerned is wiped out. I want to have a meeting with you asap so that we can discuss this and decide what to do. I think that Paul Maurice needs to be informed of this as well as the FCA.

[57]Mr Elser agreed in oral evidence that the reference to the FCA meant that Advicorp’s balance sheet (and hence its compliance with capital requirements) would be impacted if Advihair defaulted on its debts.

[58]These communications contribute to the impression that Mr Elser was frustrated at the performance of Advihair and had lost enthusiasm for it. This fits with his email of 24 October 2013 ([53] above), conveying to Mr Mandel-Mantello a potential opportunity to sell Advihair or a stake in it, which would have released funds to enable Advicorp to recover some or all of what it had put into Advihair.

[59]One week later (11 February 2014) Mr Elser renewed his attempt to interest Mr Mandel-Mantello in the potential sale of the business that he had mentioned on 24 October. Mr Elser informed Mr Mandel-Mantello that the potential offer had now been quantified at “€400k for all of CR. Is it of interest to you? They would take on all the liabilities. Apparently, he knows all the numbers”. Mr Mandel-Mantello replied “I think it’s not an attractive offer. If you are interested in selling your share I will see if I can find someone to take it on.”

[60]Later that month, on 28 February, Mr Mandel-Mantello emailed Mr Elser in the following terms: During the last few weeks I have tried to collect my thoughts on our current situation and have written them in a note to you which I attach to this email. I have tried to be as balanced as possible. I very much would like us to find some common ground to ensure that we make Advicorp a success. Let me know when you would like to get together to discuss.

[61]The accompanying note was 7 pages long and included the following: The Investment in Cesare Ragazzi … was made from own funds and external borrowings with the full agreement and support from all Directors. The investment has not yet been the success that we were all hoping it would be. In addition it has drained financial and management resources (AMM’s mainly) from the firm. This has been corrected and the Company is no longer a drain on Advicorp's resources. There is still an exposure which has recently been reduced. The company is now on a stronger footing and despite still being heavily in debt, is growing at home, in the US and elsewhere. It would be important, however, to understand whether this investment is no longer of interest to MME as a solution would need to be found.

[62]This note was prepared with some care over “the last few weeks”. It concluded, This is all a lengthy summary of the company history, recent events and possible solutions. It was written in the hopes of presenting the information in an objective and neutral way in which all parties involved take responsibility for both their shortcomings as well as their successes. If we continue to turn on each other and dissipate our energies with infighting, we will not be able to achieve our goals in the business world. Advicorp’s 2013 financial statements

[63]Advicorp’s amended 2011 accounts, and its 2012 accounts, had not mentioned Advihair. However its 2013 accounts, signed in April 2014, stated During the year company invoiced Advihair SRL for an advisory services in the amount of €84,560 (2012: €102,706). At the year end Advihair SRL owed €462,970 (2012: €304,728) to the company). Advihair SRL, a company registered in Italy, is a subsidiary undertaking of Managest B.V., a company registered in Netherlands. Managest B.V. is owned by A G Mandel-Mantello.

[64]Similar declarations were made in Advicorp’s accounts for 2014 to 2017 and thereafter, but substituting Galdam for Managest. Further communications about Advihair 2014-2015

[65]On 10 April 2014 a finance report was circulated for Advihair. It showed EBITDA of minus €119,000, with a negative deviation from the budget of €162,000 and from the previous year of €182,000. Mr Elser’s reaction to this report, sent to Mr Mandel-Mantello alone, was Unless I am reading this backwards, the news here is AWFUL... This is FYI...I think we should ‘svalutare’ our stake in CRL asap...

[66]The email was otherwise written in English but used the Italian word ‘svalutare’, meaning ‘devalue’. When asked why Mr Elser would refer to “our” stake in CRL, Mr Mandel-Mantello said I think Mr Elser was well aware that Managest was the owner of the beneficial interest of Cesare Ragazzi, except that he evidently forgot from time to time because he not only would -- you know, wrote this email, but others again panicking on the fact that the capital of the company had dropped to a point that we would need to report it to the FCA. So he was very confused, in my opinion.

[67]A further example of Mr Elser communicating (to Mr Mandel-Mantello’s knowledge) on the basis that he had a saleable interest in Advihairwas on 18 June 2015, in an email sent by Mr Elser to two persons who had expressed an interest in investing in Advihair. It said Thank you very much for your visit the day before yesterday to discuss a possible purchase of my participation in Advihair (CRL)... As I have already mentioned, I do not think that now is the right time to discuss this seriously... I think things could change in eighteen months when we see the fruit of our investment in the foreign market. I know that you also talked to Andrea who reads us in copy.

[68]When asked why he did not challenge this implicit assertion of ownership by Mr Elser, Mr Mandel-Mantello said that he did not want to be distracted by entering into a debate with Mr Elser about ownership of Advihair at this time, because it would have been a distraction from the Demerger negotiations.

[69]The final pre-Demerger communication to which attention was directed at the trial is an email from Mr Croft to Mr Elser on 21 December 2015: I do find it typical of Andrea to quietly remove the optionality of CRL from Advicorp as Advicorp splits. Would he care to hand back his share of [redacted] on a similar basis? What happened to the Israeli PE units? I am not particularly aggrieved but I don't want to forget that he still didn't sign the contract (5%) and at the last point when you declared 2.5% was worth around $40,000 Andrea still had to chime in that there might still be some adjustments - thus delaying and contract/payment after four years! Would he care to hand back his share of [redacted] on a similar basis? What happened to the Israeli PE units?

The Demerger

[70]The Demerger agreement was made in January 2016, following lengthy negotiation. Its effect was summarised in an email from Mr Mandel-Mantello on 17 May 2016: In the Demerger we agreed that the split would be done 50/50 and that we sort out the financial aspects of Jonathan’s 5% after completion of the Demerger. I have never denied his position … The accountants have suggested that Jonathan be paid in cash at the net worth value of AdviCorp resulting from the Demerger. I am open to other ideas.

[71]So the Demerger resulted in Mr Elser and Mr Croft leaving Advicorp, Mr Elser taking 50 per cent of its value but with the Parties agreeing to pay Mr Croft the value of his 5 per cent thereafter. Mr Elser transferred his shares in Advicorp to Mr Mandel-Mantello and resigned as a director. Mr Croft was duly paid out as agreed. Apart from Mr Elser’s letter of resignation as a director (to which I shall return), neither Party suggests that they agreed anything about ownership of the Shares at the time of the Demerger. The professional valuation of Advicorp (upon which the Demerger agreement was based) included €1,000 as the value of Advicorp’s investment in Advihair. That was the nominal value of the 1 per cent held for Advicorp in Mr Elser’s name. The value of the Shares was not included.

[72]However the Parties did agree that they would each assume personal liability for one half of the outstanding loans to Carlisle and Watersfield, relieving Advicorp of those liabilities. The final agreement was that Mr Elser took on the Carlisle loan and Mr Mandel-Mantello took on Watersfield. I was not told how much was outstanding at the date of the Demerger but I have seen emails suggesting that Watersfield was still owed €200,000 and interest of around €70,000.

[73]The Demerger did not see an end to all association between Mr Elser, Mr Mandel-Mantello and Mr Croft. The leavers retained their advicorp.com email addresses and used them to communicate with Mr Mandel-Mantello about positions which had not been divided or demerged. Mr Elser’s witness statement lists three such investments (ATE, Lonsin and Cirio). On his case, CRL was another example. Post Demerger 74. Franchise acquisition - Campania

Post Demerger

[74]On 1 February 2016, a few days after the Demerger documents had been signed, Mr Ospitali circulated his business report for January. He included Mr Elser. The report mentioned an urgent situation in Campania, where a franchisee was selling three centres and there was a threat of a loss of a large amount of business in the region. Mr Ospitali proposed acquiring the centres in a separate company. The up-front investment was a relatively modest €50,000 for each centre and was contributed 40 per cent by Mr Mandel-Mantello’s wife, 40 per cent by Mr Elser, and 10 per cent by each of the Managers. Mr Croft’s discussion with Mr Mandel-Mantello 20 July 2016

[75]The Demerger took time to implement. Mr Croft conducted some of the ongoing discussions with Mr Mandel-Mantello on Mr Elser’s behalf, including a discussion about CRL, reported in an email from Mr Croft to Mr Elser on 20 July 2016: He said also that your shares in CRL cannot be in your name but are no trust with him - but he said he had not signed anything to that effect - I see a pattern here.

[76]It is clear that the word “no” is a mistake for “on”. The sentence does not make sense without correction, and none other has been suggested that makes the sentence work.

[77]On Friday 22 July 2016 Mr Elser wrote to Mr Mandel-Mantello: With regards to my 45% shareholding in CRL, I would like it be registered in my name (the holding in the 3 branches in Campania bought earlier this year should already be in my name, at least on a written contractual basis)... I understand that Advicorp has given a comfort letter to CRL's lending banks, but it does not prevent me from having the shares issued in my name. Moreover, with the new FATCA regulations, I cannot prove to the IRS that I actually own shares in CRL (for tax purposes) and at the same time renounce to my shares in Advicorp.. This is a conundrum that you have to solve.

[78]Mr Mandel-Mantello replied “If you are around this weekend we can discuss all outstanding CR matters directly. If not I propose to do it after the 15th of August when I expect to be in Rome again.” Later emails show that they did not meet that weekend, but both sides agree that they did discuss the issue. There is no documentary evidence of the content of those discussions, to which I will return. Franchise acquisition - Modena and Piacenza

[79]A further opportunity arose in November 2016 to acquire Advihair franchises, this time in Modena and Piacenza. The transaction value was €369,000 but only €50,000 was required up front from the investors. Mr Ospitali’s email of 1 December 2016 attached a proposal that a new company be established to take on the investment, with contributions of 40 per cent each from the Parties, and 10 per cent each from Mr Ospitali and Mr D’Andrea. In the event the share proposed for Mr Mandel-Mantello was taken by his wife. Mr Elser took his share in his own name. Mr Elser’s involvement in Advihair after the Demerger

[80]Mr Elser continued to be included in weekly business updates by Mr Ospitali, and to participate in weekly telephone meetings. He says that he participated in “many hundreds” of such meetings overall, but gives no details specific to the post-Demerger period. Mr Ospitali says that both Parties attended the weekly meetings less frequently after from 2017 or 2018. Mr D’Andrea says that Mr Elser “over time … increasingly took part less and less, until there was a period when he was absent”. Ms Navarroli says Mr Elser’s attendance reduced significantly over time, starting with his resignation from the Board and even more so after the Demerger of Advicorp. She does say, however, that he frequently excused his absence for the fact that he was abroad.

[81]There does not seem to be much distance between the witnesses on the level of Mr Elser’s involvement, given that Mr Elser accepted Mr McCluskey’s suggestion that his contribution was trivial.

[82]However, he did participate in one very significant event. On 26 March 2017 the Managers wrote a note to the Parties proposing a change to their remuneration structure whereby they would receive additional shares, increasing their stake to 10 per cent each, if, over the next 4 years, EBITDA reached €6m. The proposal said “If the objective were reached, it would mean that the structure of Advihair Srl would be composed of 80% you - 10% [Mr d’Andrea] - 10% [Mr Ospitali]”. This email was addressed to both Parties (“Cari Soci”), and the plural “voi” was used to designate the proposed owners of the 80 per cent.

[83]Mr Mandel-Mantello responded to the Managers’ proposal the following day as follows: Marco and I have discussed your proposal and we share it. We would therefore ask you to proceed …

[84]The proposal was implemented, and the upshot was that in March 2020 the Managers each became a 10 per cent shareholder in Advihair.

The dispute

[85]The dispute emerged in late 2021 and early 2022, by which time Advihair was successful and valuable. It is an important aspect of Mr Mandel-Mantello’s case that this success, as stated in the reamended defence, “came at considerable effort, cost, risk and stress to the First Defendant, not least because … he was repeatedly prosecuted by the Italian authorities in relation to Advihair's failure to make timely payment of its liabilities to those authorities”. That was a reference to criminal prosecutions of Mr Mandel-Mantello based on the company’s failure to pay employee tax liabilities, which had resulted in acquittals only after the liabilities had been paid.

[86]On 13 December 2021 Mr Elser emailed Mr Mandel-Mantello to ask that they go together to a notary to arrange for the transfer of half the Shares into Mr Elser’s name. Mr Mandel-Mantello replied “I think that before we go to the notary we have to conclude the discussion that started a few months ago about which you never gave me a definitive answer, I am available all week”. Mr Mandel-Mantello explained that he had offered Mr Elser a small shareholding in recognition of the role he had played in the early days. Mr Elser’s case is that Mr Mandel-Mantello demanded an enhanced shareholding for all the work and risk he had invested.

[87]On 21 January 2022 Mr Elser emailed Mr Mandel-Mantello again, including the following: When you and I split in 2015, both FSPG and TMF prepared lengthy documents that evidenced the details of the financial distribution of Advicorp's assets. Amongst them, you signed a document stating that half of Advicorp's shares in Advihair (if I recall correctly, at one point you put them in the name of a Dutch company for fiscal reasons), were being held for the benefit of me, verbally adducing to complications. Currently, an extract of the Camera di Commercio (enclosed), shows that Advicorp owns 79% of Advihair. Half of these are mine. Pursuant to the agreement of more than ten years ago, I am asking you for the last time to have the shares (39.5% of Advihair) put in my name. … Your demands for the work (undoubtedly good) you did for Advihair over the last years cannot be directed to me as a shareholder. I am not aware that you have asked Ospitali or D’Andrea for part of their shares as compensation. The request for compensation for the time you spent (all of your expenses were paid by Advihair) working for the company should be directed to THE COMPANY and NOT its shareholders...

[88]It is common ground that there was no document stating that half the Shares were being held for Mr Elser. He had misremembered that detail. However, the second paragraph of the quotation related to more recent discussions between the Parties, and I think provides a reliable guide to those discussions. I will come back to this .

[89]Finally, in February 2022 the Parties met in Rome, when Mr Mandel-Mantello made clear that he had no intention of transferring any shares into Mr Elser’s name, or recognising his right as an owner of Advihair. These proceedings were issued on 20 September 2022.

[90]In August 2023 Advihair’s constitution was changed so that it became a Società per Azioni (SpA), having previously been a Società a Responsabilità Limitata (Srl). This is a step on the way to being listed on a stock exchange. Discussion and conclusion on the Ownership Issue The witness evidence

Discussion and conclusion on the Ownership Issue

[91]My attention was of course drawn to Gestmin SGPS SA v Credit Suisse (UK) Limited

[2013] EWHC 3560 (Comm)

at [22] and Simetra Global Assets Ltd v Ikon Finance Ltd

[2019] 4 WLR 112

at [48], and also to Popplewell LJ’s 2023 extra-judicial lecture “Judging Truth from Memory”. I also remind myself of the appendix to Practice Direction 57AC which at paragraph 1.3 says that human memory(1) is not a simple mental record of a witnessed event that is fixed at the time of the experience and fades over time, but

(2) is a fluid and malleable state of perception concerning an individual’s past experiences, and therefore

(3) is vulnerable to being altered by a range of influences, such that the individual may or may not be conscious of the alteration.

[92]This case provides many clear examples of these dangers. I concluded that although they were both honest witnesses trying to do their best, neither Mr Elser nor Mr Mandel-Mantello has any useful independent recollection of the conversations in 2011 and 2012, including the December 2012 meeting. Mr Elser’s account raised more questions than he was able to answer, and his attempts to do so were self-contradictory and evasive. I summarised his written evidence about the meeting with Mr Maurice in [33] above. However in cross examination he admitted that he did not have any specific recollection of the meeting, and said he was not sure whether Mr Croft was present or not. I accept that evidence.

[93]My impression of Mr Mandel-Mantello’s recollection is similar to that which I formed of Mr Elser’s. He was honest, having persuaded himself of the truth of the version to which he testified, but in reality he had no reliable recollection of the relevant conversations. His memory shifted from not remembering a specific meeting when he wrote his statement to remembering a specific meeting which Mr Croft did not attend, and remembering in detail what Mr Elser said at it. I am unable to rely on his memory in deciding the details of what was agreed.

[94]I accept Mr Croft’s unchallenged evidence that he had other business interests for which he engaged the professional services of Mr Maurice. I therefore accept his evidence that he would meet with Mr Maurice from time to time to discuss various business affairs, not always concerning Advicorp. I was impressed by the detail that he had been at such a meeting with Mr Maurice on other business when Mr Mandel-Mantello arrived for a meeting at which Advicorp’s ownership of Advihair was discussed and Managest was mentioned for the first time in Mr Croft’s hearing.

[95]I take into account that Mr Maurice’s email of 23 December was not copied to Mr Croft, but neither was it copied to Mr Elser, who was present at the meeting. The email says “It was good talking with you and Marco” and does not mention Mr Croft, but that can be explained by the fact that Mr Croft’s interest in the matter was very much less than that of the Parties.

[96]For these reasons I think it more likely than not that Mr Croft was present at the meeting at which Advihair and Managest were discussed. Mr Mandel-Mantello’s insistence that he was not present appeared to be based entirely on Mr Mandel-Mantello’s view that Advihair was none of Mr Croft’s business because he was not a director of Advicorp. I do not accept that. It is unlikely that Mr Croft would have been excluded if he was already present when Mr Mandel-Mantello arrived, as I accept he was. He was a senior employee of Advicorp and Mr Mandel-Mantello did not dispute in oral evidence that he already held a 5 per cent stake in it by the time of the meeting. Advihair’s presence in its balance sheet was a problem for Advicorp and Mr Croft was interested financially in Advicorp.

[97]However I agree with Mr McCluskey that accepting his presence at the meeting does not mean accepting his recollection of what was agreed. Mr Croft was a colleague of Mr Elser in the capital markets side of Advicorp. They left together in 2016 and continue to work together today. Mr Croft is bound to feel loyalty to Mr Elser and none to Mr Mandel-Mantello. Although there is no evidence that he has a personal stake in the outcome of this claim, it is likely that he would prefer that Mr Elser wins it, and there is a risk that this is reflected in how he remembers events. I have no doubt that he has discussed the issue with Mr Elser from time to time, and that, too, is likely to have impacted on what he remembers. Although his evidence withstood cross examination more successfully than that of the Parties, a good performance in giving evidence is not a reliable indicator of a sound recollection. For these reasons I would not base my findings on Mr Croft’s memory alone. However I was left with no reason to doubt that he was an honest witness.

[98]The remaining three witnesses gave evidence of peripheral matters. Mr Mandel-Mantello said that Mr Ospitali deeply resented his dismissal. Mr Ospitali responded that he felt no resentment, and added that he was not particularly interested in the outcome of this case. However not only was he dismissed, but also fell into a shareholder dispute with Mr Mandel-Mantello and took legal action in Italy. They also fell out about the price which Mr Ospitali was to receive for his shares in Advihair. Given these recent disputes I am cautious of Mr Ospitali’s claim to be neutral about the outcome of this litigation, even though he gave evidence with apparent disinterest, albeit through an interpreter whose professionalism might have contributed to this appearance. Mr Ospitali is no longer commercially associated with Mr Elser, but his dismissal and the subsequent dispute about his shares may nevertheless provide reasons for him to prefer that Mr Elser succeeds. I therefore treat his evidence with caution. Similarly, Mr d’Andrea and Ms Navarroli are still in business with Mr Mandel-Mantello and their evidence betrayed an obvious desire to disparage Mr Elser and to support Mr Mandel-Mantello. I think they were honest but I would be cautious about accepting their evidence on central issues without other support.

The contemporaneous documents

[99]Mr McCluskey submitted that the contemporaneous documents show that Advicorp was divested of the beneficial interest in the Shares in favour of Managest in late 2012 in response to the Maurice Advice. Mr McCluskey argued that if it had been agreed on 20 December 2012 that Mr Elser would retain a beneficial interest, Mr Maurice would have said so in his email of 23 December ([21] above), and would have instructed the lawyers to draw up an agreement to that effect, yet no such draft exists. Mr McCluskey also makes the point that Advicorp’s financial statements for 2013 and later declared that Advihair was a subsidiary of Managest. He points out that the financial statements were audited by Mr Maurice, who must have known what the parties had agreed.

[100]I agree that the contemporaneous documents suggest that the scheme involved divesting Advicorp of the beneficial interest in the Shares in favour of Managest alone. However the contemporaneous documents present what is known to be a false picture, at least in some respects. The Maurice Emails and Draft Agreements suggest that Advicorp acquired its interest in Advihair in 2011 as nominee of Managest. That does not reflect reality, since it is common ground that Managest was not involved in the Acquisition. Similarly the Draft Agreements falsely recorded that Advicorp had borrowed money as agent of Managest in 2011. It appears that these agreements were intended to be backdated to 2011, as if made at the time of the Acquisition, which they were not. The amended 2011 financial statements were similarly false in that they recorded that an arrangement involving Managest had been implemented in July 2011, and that Managest owed a debt of €305,000 to Advicorp from 2011 onwards.

[101]The contemporaneous documents are also incomplete. They do not include any communications after that quoted in [25] above. Such emails are bound to have existed, and must have fallen prey to Mr Mandel-Mantello’s email-deleting virus. This is of particular concern, because the scheme was not implemented as planned. I accept that Mr Mandel-Mantello may have signed the Draft Agreements, as he recalls, but there is no evidence that they were signed by anyone else, and in a Part 18 response Mr Mandel-Mantello said he did not believe that Mr Maurice had sent them for signature to anyone else. This, and the fact that Managest never recognised the transaction in its own books, leads me to conclude that the Draft Agreements never came into force. I do not accept Mr Mandel-Mantello’s suggestion that this was due to negligence. It is far more likely that some problem was encountered which made it impossible or undesirable to proceed. The absence of communications that would have explained what prevented the scheme from being completed undermines the value of the communications which have survived.

[102]I am not much impressed by the point that Advicorp’s accounts stated that Advihair was owned by Managest. That was stated in the context of a declaration that Advihair was a related-party debtor of Advicorp, which would not be falsified by Mr Elser’s interest, which was irrelevant to what was being reported.

[103]The fact that the Maurice Emails do not mention that Mr Elser is to have a beneficial interest is a point in Mr Mandel-Mantello’s favour, but for reasons I will set out below, I find that the apparent position as portrayed by the contemporaneous documents is inconsistent with inherent probabilities, later documents and known events.

Inherent probabilities

[104]The investment in CRL was speculative and risky, and by late 2012 the business was not yet profitable. It is not unusual for investors to pull out at a loss, even at an early stage before the investment has had chance to mature. Sometimes people just change their mind or lose their appetite for the risk. So the idea that Mr Elser wanted Advicorp to dispose of its investment in CRL is not in itself unlikely. However I do think it unlikely that Mr Elser would give up the investment without trying to salvage anything from it. Looking behind the corporate veil, it is Mr Mandel-Mantello’s case that Mr Elser gave his half of the investment to Mr Mandel-Mantello for nothing, declining Mr Mandel-Mantello’s suggestion to split the investment between them. That does seem unlikely, in the absence of a cogent explanation.

[105]I think Mr Mandel-Mantello recognised this in his witness statement, which portrays Mr Elser’s alleged decision as an irrational abdication of responsibility, which … was not unusual; MME made irrational decisions with no regard for the potential consequences. Ultimately these series of actions led me to lose all trust in him and to pursue the Demerger.

[106]He developed this theme in cross examination, saying that Mr Elser was happy to be rid of Advihair because he “would no longer bear any shareholder risk for being a shareholder in Advihair at a time when Advihair was in a difficult financial situation.” He also claimed to recall that Mr Elser said that he did not want anything to do with Advihair “as a shareholder” as opposed to “as a director”. It was a pervasive theme of Mr Mandel-Mantello’s case that the investment in CRL was a heavy burden which only he had the strength of character to shoulder, Mr Elser being too weak to assume his fair share of the risk.

[107]However it is difficult to identify the “shareholder risk” that Mr Mandel-Mantello was referring to. I can understand that there were risks in being a director. Directors have personal responsibility to see that the company meets its payment obligations to the government and can be made personally liable. Bur the existence of “shareholder risk” was not explained to my satisfaction. Mr McCluskey put it to Mr Elser that he did not want to have to disclose his shareholder interest in Advihair in directors’ questionnaires under US Securities and Exchange Commission regulations. Mr Elser denied it, and I was not shown any regulations to enable me to decide whether such a declaration would have been required. In any event in 2016 Mr Elser asked for the Shares to be registered in his name, which seems to contradict this explanation.

[108]Mr Elser did not resign as a director of Advihair until September 2013. If he had been so keen to dissociate himself from Advihair as Mr Mandel-Mantello says, to the point of giving away his stake in late 2012, he would also have resigned as a director at the same time. Mr Elser said in cross examination that he resigned as a director partly to avoid the risk of personal liability, and because he did not want to be associated with companies that have problems with overdue tax liabilities. I accept that, and think it inconceivable that he would have remained as a director if he so wanted to dissociate himself as to give away his interest in the Shares. I reject Mr Mandel-Mantello’s claimed recollection that Mr Elser said that he did not want anything to do with Advihair “as a shareholder” but did not mention the burdens of being a director. That would have made no sense.

[109]Mr Mandel-Mantello said that the investment was burdensome in that a great deal of time and effort was needed to manage the business and cause it to grow and to become profitable. This was emotionally challenging and highly stressful. I accept that, but it was Mr Mandel-Mantello rather than Mr Elser who shouldered most of the management responsibilities from the outset. In late 2012, there was no suggestion that Mr Elser was going to have to assume a greater share of that burden. So the time, effort and emotional commitment associated with the investment did not change in 2012 and cannot explain why Mr Elser would walk away.

[110]Neither did Mr Mandel-Mantello make good his assertion that the business was worthless at the time of Maurice Advice. It was established that Advihair had debts to its bank (€2m in 2016), to the government (peaked at €5m in 2014/15), to its former owner (€1.8 at the time of the Demerger), to Watersfield and Carlisle (c. €500,000) and to Advicorp itself (€500,000 in February 2014). The Parties expressed negative views to each other about the performance of the business from time to time, such as the emails quoted in [51] and [56] above, but in February 2014 Mr Mandel-Mantello refused to engage with an offer of €400,000 on the ground that it was not attractive (see [59] above). In the absence of a cogent analysis based on performance figures (and such other information as might be relevant) I cannot conclude that the business was worthless by late 2012, and the fact that Mr Mandel-Mantello continued to invest so much time and effort in it suggests that he did not think so.

[111]Advicorp invested €1,080,000 in Advihair in mid-2011. I can see no cogent explanation of why Mr Elser would have given away his interest in this investment which had been so recently acquired. The fact that Mr Mandel-Mantello intended to carry on his efforts to turn the investment round provided a strong disincentive for Mr Elser to give it up.

[112]I appreciate that it is Mr Mandel-Mantello’s position that Mr Elser was a man given to acting irrationally, and I acknowledge that Mr Mandel-Mantello knew Mr Elser over many years whereas I do not know him at all. I must also bear in mind that the improbable sometimes turns out to be the truth. So my conclusion that Mr Mandel-Mantello’s case is improbable must be provisional, and must be tested against other available material. Later documents and known events 114. Before the Demerger

[113]There are five communications before the Demerger which in my judgment can only be explained on the basis that Mr Elser had a beneficial interest in the Shares. i. The emails of 24 October 2013 mentioned in [53] and [54] above. Mr Elser’s email suggests that Mr Elser would have participated in talks with investors, which in turn suggests that he had something to sell. Mr Mandel-Mantello explained that Mr Elser’s interest in Advihair was as a shareholder in Advicorp, which was a creditor of Advihair. However that would not have entitled Mr Elser to participate in talks about selling an interest in Advihair which belonged exclusively to Mr Mandel-Mantello. ii. 11 February 2014 ([59]). The final sentence of this email (“If you are interested in selling your share I will see if I can find someone to take it on”) is the clearest possible recognition that Mr Elser owned a share of Advihair. iii. 28 February 2014 ([60] to [62]).The passage quoted in [61] is inconsistent with Mr Mandel-Mantello’s case that Advicorp had divested its beneficial interest in the Shares in favour of Managest. If that had happened, the final sentence (“It would be important, however, to understand whether this investment is no longer of interest to MME as a solution would need to be found”) would have made no sense. When this was put to Mr Mandel-Mantello, he replied “It may suggest that, but that is not what it was intended to say … I possibly phrased it wrongly …” But the note itself declared that it had been some weeks in preparation (see [62]). I take it as a careful statement of the position as Mr Mandel-Mantello understood it to be. In another attempt at explaining this note and his email of 11 February, Mr Mandel-Mantello said that he was trying to persuade Mr Elser to “come back on board”. He said that Advihair had heavy debts and he wanted Mr Elser to take responsibility for them. “My idea was to again invite him to change his mind and share both risks and rewards until the company was going to be put right.” I did not find this persuasive. The communications were not invitations for Mr Elser to come back on board. They acknowledged that he was on board but wished to disembark. iv. 10 April 2014 ([65] to [66]).Mr Elser again used a pronoun (“our”) suggesting that he and Mr Mandel-Mantello shared an interest in Advihair which they might agree to sell. I cannot accept Mr Mandel-Mantello’s suggestion that Mr Elser “evidently forgot from time to time” that Managest had been gifted Advicorp’s investment. If that had happened in late 2012, it is improbable that Mr Elser would have forgotten it so quickly. v. 18 June 2015 ([67]). This communication was copied to Mr Mandel-Mantello and shows that Mr Elser had been in discussion “about a possible purchase of my participation in Advihair”. Again, this could not be clearer as an assertion that Mr Elser had an interest to sell. Mr Mandel-Mantello did not contradict him.

Later documents and known events

[114]Mr McCluskey makes the point that Mr Elser’s communications, such as those summarised in [51] to [59] above, suggest that his attitude to Advihair was that of a creditor rather than as a shareholder. I accept that the concern he expressed in those emails was that Advihair repay its debt to Advicorp, showing no aspiration beyond that for the future success of Advihair, which he wanted to sell. But that is not inconsistent with him being a beneficial owner of Advihair, and does not displace the clear evidence of ownership provided by the five communications mentioned in [113].

[115]I should mention two communications by Mr Croft, relied on by Mr McCluskey but which I did not find helpful in reaching my decision. i. Mr McCluskey argued that Mr Croft’s email of 2 September 2013 ([50]) implied that the “lifeboat” of CRL would be available to Mr Mandel-Mantello alone, showing that Mr Croft did not consider Mr Elser to still be an owner. That is one possible interpretation, but there are others. As Mr Croft himself suggested, it could equally mean that CRL would provide Mr Mandel-Mantello with gainful employment (a lifeboat) if he closed down the corporate finance department, “leaving the rest of us drowning” meaning that the capital markets division would not survive as a standalone business after Mr Mandel-Mantello’s departure. Being susceptible of different interpretations, I do not find this email helpful in deciding the Ownership Issue. ii. Mr McCluskey also relied on the email from Mr Croft of 21 December 2015 ([69]), which said “I do find it typical of Andrea to quietly remove the optionality of CRL from Advicorp as Advicorp splits”. Mr Croft said he thought he had used the wrong word in that “optionality” should read “shareholding”. However he did not claim to remember what he meant, and said he was looking at the email for the first time since he wrote it (it was not one of the documents listed in his statement as having been shown to him). Unfortunately there is no context for the email in the sense of earlier or later emails in a chain. It stands alone. I find its meaning and context unclear.

[116]I think that the evidential value of both these communications is weakened by the fact that they came from Mr Croft, rather than one of the Parties. There are other emails in which Mr Croft expressed dissatisfaction at having been cut out of the CRL investment, and I think his communications reflect his own dissatisfaction more than saying anything about Mr Elser’s position. The Demerger

[117]I have given careful thought to the fact that the Parties did not expressly deal with ownership of the Shares at the time of the Demerger. The Shares were held in Advicorp’s name and Mr Elser was giving up his interest in Advicorp. Is it improbable that he retained an interest in the Shares after 2012, given that no such interest was recorded in the Demerger agreement? I think not. His interest in the Shares had been openly acknowledged by Mr Mandel-Mantello on two occasions in February 2014 ([59] and [61] above) and had never thereafter been challenged, even in circumstances where one would have expected a challenge if he had no interest ([66] and [67]). So Mr Elser had no reason to think it important to document his claim.

[118]In my judgment the way in which the Parties dealt with the Carlisle and Watersfield loans upon their Demerger also strongly supports Mr Elser’s case. The fact that Mr Elser assumed liability for the Carlisle loan suggests that he retained an interest in Advihair. He had already invested €100,000 of his own money plus €150,000 of shareholder value to fund the Acquisition. It is not credible that he would agree to take personal responsibility for a debt in the order of €200,000 incurred in connection with the Advihair acquisition, if he no longer had any interest in it. This also provides another reason, in addition to those identified in [117], why it is understandable that Mr Elser did not insist on recording his continued interest in CRL at the time of the Demerger: accepting liability for the Carlisle loan was itself a sufficient marker that the Demerger was on the basis that he had retained an interest in CRL.

[119]I have not overlooked that the Demerger left some potential liabilities for Advihair’s debts with Advicorp, based on the letter of comfort given to the bank in 2012. However I was not given enough evidence to enable me to assess how likely it was, in 2016, that this contingent liability would materialise. I think I would have seen such evidence if the likelihood had been significant. I would conclude that Mr Mandel-Mantello did not think it was. Participation in the franchise investments

[120]The same conclusion is suggested by Mr Elser’s participation in the franchise investments mentioned in [74] and [79] above. The debate at the trial was whether Mr Elser made his investment in these franchises because he was (beneficially) a shareholder in Advihair, or simply because it seemed like a good investment in its own right. I think that the answer is that Mr Elser would not have been approached if he had not been thought by Mr Ospitali to be a shareholder in Advihair, and would not have invested if he had not considered himself a shareholder. The invitation to invest by Mr Ospitali in his January report made clear that an important part of Advihair’s business needed to be rescued, and I think that Mr Elser’s investment was made on that basis. By the time of the Modena investment later in the year, it would also have been obvious to Mr Mandel-Mantello, as a result of Mr Elser’s email of 22 July 2016 if nothing else, that Mr Elser considered that he still had an ownership interest in Advihair. I therefore think that Mr Mandel-Mantello must have appreciated that that was the reason for Mr Elser’s investment in the Modena franchise. I think it important in this regard that Mr Elser took the same proportion of the investment as was offered to Mr Mandel-Mantello. Omitting to tell the Managers

[121]It is Mr Mandel-Mantello’s own case that he did not tell the Managers that Mr Elser no longer had an interest in Advihair following the Demerger. His evidence was that he said nothing to them (“they were not familiar with the ‘reversal’ of the Advihair transaction and later had no involvement with the Demerger”). Indeed he explained that the reason why Mr Ospitali invited Mr Elser to participate in the franchise acquisitions was that he did not know of the ‘reversal’. I can understand why Mr Mandel-Mantello might not have told the Managers about a change of beneficial ownership in 2012, because that might have put banking arrangements at risk, but I find it impossible to understand why he would not have made clear in 2016 that Mr Elser was no longer an owner of the business, if that was the case. I would have thought that Mr Mandel-Mantello would have had every reason to make clear to them that he was now in sole control of Advicorp’s 90 per cent of Advihair. That he did not do so, especially after Mr Ospitali continued to send management reports to Mr Elser and included him in the franchise investments, is inconsistent with Mr Elser having no stake. The meeting of 20 July 2016

[122]I find Mr Croft’s email of 20 July 2016 to Mr Elser ([75] above) to be particularly revealing. It contains a report of Mr Croft’s meeting with Mr Mandel-Mantello written on the day of the meeting, when it would have been fresh in his mind. Mr Croft had no reason to give Mr Elser an inaccurate report, and it was not put to him that he deliberately did so.

[123]I have considered the risk that even very shortly after the meeting, Mr Croft might have remembered it in a way that reflected his view of what Mr Mandel-Mantello ought to have said, or perhaps a subconscious desire to report a favourable outcome of the meeting to Mr Elser. However Mr Croft had no personal interest in the Shares, and anyway did not in fact report a particularly favourable outcome. Mr Elser wanted the Shares in his name, and that had been refused. I do not think that Mr Croft’s account of the meeting was infected with wishful thinking.

[124]I am conscious that this account of the meeting was not shared with Mr Mandel-Mantello, who therefore had no chance to put right any errors. However on 22 July 2016 Mr Elser wrote to Mr Mandel-Mantello, “With regard to my 45% shareholding in CRL, I would like it to be registered in my name …” That did give Mr Mandel-Mantello the chance to respond that Mr Elser had no such shareholding, but instead of doing that he specifically agreed to meet to discuss it. I also note that in his email of 22 July, Mr Croft said, “For my part I think there should be substantive action on both sides. Payments need to be made but contracts for assets held in trust should be executed rather than promised in email or verbally. Where possible there should be a balance of what gets held in trust, meaning not everything should reside with Advicorp just because Advicorp was in situ when the original investment was made.” The phrase “promised in email or verbally” was a reference to Mr Mandel-Mantello’s reply to Mr Elser, which had confirmed that another investment, ATE, was held 50 per cent for Mr Elser. But Mr Croft’s email mentioned “contracts for assets held in trust” in the plural, and I think was a reference to the meeting of 20 July. Mr Croft was saying that the Shares were held on trust, and that Mr Mandel-Mantello should allow Mr Elser to have them in his name rather than merely promising them verbally. Again, Mr Mandel-Mantello did not respond.

[125]I am therefore able to place a high degree of reliance on Mr Croft’s email of 20 July 2016 as an accurate account of what Mr Mandel-Mantello said at the meeting. On that basis I find that Mr Mandel-Mantello said to Mr Croft that Mr Elser’s shares in CRL could not be in Mr Elser’s name, that they were on trust with Mr Mandel-Mantello, but that he had not signed anything to that effect.

[126]I see no reason why Mr Mandel-Mantello would have said to Mr Croft that he held Mr Elser’s shares in CRL on trust, unless he thought that to be the true position. Mr Elser’s continued participation in the affairs of Advihair

[127]When the Managers made their proposal for a share incentive scheme in March 2017, they addressed the suggestion to Mr Elser as well as Mr Mandel-Mantello, and Mr Mandel-Mantello consulted with Mr Elser before responding (see [82] and [83] above).

[128]Mr Mandel-Mantello said in evidence (supported by Mr D’Andrea) that he consulted Mr Elser because of Mr Elser’s one per cent stake in Advihair. I do not accept that. Mr Elser holds that stake as bare trustee for Advicorp and did not need to be consulted in that capacity. He would have been required to waive the pre-emption rights that went with his one share, but that would have been a small issue to be addressed when implementing the proposal. It would not have necessitated consulting him about it when it was first made. I therefore reject Mr Mandel-Mantello’s explanation. It is more likely that he consulted Mr Elser because he held a 44.5 per cent stake, equal to Mr Mandel-Mantello’s own stake.

[129]I also take into account Mr Elser’s continued receipt of management reports from Mr Ospitali, on each occasion with an invitation to a meeting or an offer to answer any questions arising. Mr Mandel-Mantello and both his witnesses sought to play down the significance of these reports, but the fact that Mr Mandel-Mantello did not put a stop to Mr Elser receiving them is inconsistent with his case that Mr Elser was no longer a shareholder. The fact that Mr Elser had invested in some of the Italian franchises does not explain his receipt of information about the sales made by the business as a whole, including exports. Anyway his franchise investments were repaid in 2019 and his receipt of sales information continued until 2022. I reject Mr Mandel-Mantello’s explanation that it was merely an historical convention to include Mr Elser in the distribution list. Mr Mandel-Mantello knew that Mr Elser regarded himself as a shareholder (he had asked for the Shares to be in his name in 2016) and continued to encourage that belief in acquiescing in Mr Elser’s receipt of these reports. This is part of the wider point that Mr Mandel-Mantello never declared, until 2022, whether to Mr Elser or to anyone else, that Mr Elser was not a shareholder. I shall come back to this when discussing laches.

[130]Allied to the point that Mr Mandel-Mantello did not deny Mr Elser’s right to the Shares is the fact, as I find, that he (more than once) suggested that his proportion of the Shares should be increased at the expense of Mr Elser’s proportion. Mr Elser’s witness statement said that Mr Mandel-Mantello began to suggest that he should have an enhanced shareholding in 2018, though his oral evidence seemed to be that he said it in 2016. Mr Ospitali says that he heard Mr Mandel-Mantello make such a suggestion from 2017 onwards. Mr Croft’s evidence was that Mr Mandel-Mantello said a similar thing to him in September 2022. That Mr Mandel-Mantello made this demand is also documented in Mr Elser’s email of 21 January 2022, quoted in [87] above.

[131]The suggestion that Mr Mandel-Mantello should have a larger proportion of the Shares as a reward for his efforts and the risks he took would have made no sense if Mr Mandel-Mantello already owned all the Shares.

What interest did Mr Elser have, and what was its source?

[132]Having concluded that it was inherently improbable that Mr Elser would agree to Advicorp giving up its interest in CRL for nothing, and that the later documents and known events prove that Mr Elser retained some interest in CRL after the Maurice Advice, I must decide what that interest was and how he obtained it.

[133]I reject Mr Elser’s chronology that his agreement with Mr Mandel-Mantello predated the Maurice Advice. There is no satisfactory explanation of why the parties would have agreed that Advicorp hold the Shares on trust for any other entity before the Maurice Advice. That chronology is unsupported by any other evidence and does not fit with the 2011 accounts signed by Mr Elser in April 2012, the Maurice Emails, and the restated accounts signed by Mr Mandel-Mantello in February 2013, which together suggest that Advicorp was the beneficial owner of the Shares until December 2012 and that this only changed in response to the Maurice Advice. Mr Chichester-Clark appeared to accept this in opening the claimant’s case, asserting that the change of beneficial ownership was a response to the Maurice Advice and that it occurred in late 2012 or early 2013.

[134]I also reject Mr Mandel-Mantello’s evidence that Mr Elser refused his offer to transfer the beneficial interest in the Shares to their respective family companies, because Mr Elser wanted nothing more to do with CRL. I reject this account for reasons already given above: it is inconsistent with inherent probability and does not fit subsequent documents and events. I reject, in particular, the idea that there was a “shareholder risk” which Mr Elser wished to avoid. He resigned as a director because he did not want to shoulder the risk of that office. The fact that he asked for the Shares to be in his name in 2016 and thereafter shows that he did not regard being a shareholder as risky.

[135]The contemporaneous documents and the recollection of the main witnesses suggest that Mr Maurice advised that it was undesirable for Advicorp to beneficially own the Shares; and that in response, the Parties agreed with Mr Maurice that Advicorp would hold the Shares as nominee for Managest. No one has suggested that this revised version of the Acquisition was a mere sham intended to avoid having to report the true position to the FSA or other authorities. I am satisfied that the Parties intended Managest’s interest to be genuine. They probably gave no thought to the propriety of backdating the alteration, especially since Mr Maurice advised that it be done.

[136]One obvious feature of the change of beneficial ownership was that it was being switched from Advicorp, of which Mr Elser was an equal owner with Mr Mandel-Mantello, to Managest, owned by Mr Mandel-Mantello alone. That feature would obviously have been raised as part of the discussion of the scheme, as all three witnesses agree that it was. So I have no difficulty in finding that Mr Elser’s interest in the Shares was expressly discussed and agreed. The inherent probabilities and the subsequent documents and events prove to a high degree of certainty that the parties agreed that Mr Elser would retain a share of the investment. No one has suggested that, or any reason why, it would be anything other than a half share.

[137]The witness account which best fits with probabilities and known events is that of Mr Croft. Although his memory of what happened in 2012 is likely to have been influenced by later conversations and events, I accept it because it best fits with all the other evidence, including those later conversations and events. I have already concluded in [125] and [126] that on 20 July 2016 Mr Mandel-Mantello used the word “trust” to describe how he (meaning Advicorp, which he owned outright) held the Shares, and that Mr Mandel-Mantello genuinely thought that to be the true position. The most likely reason for him to think that was that it had been agreed in response to the Maurice Advice. Mr Mandel-Mantello’s use of the word “trust” on 20 July 2016 makes it likely, and I find, that the word “trust” was also used at the 20 December 2012 meeting. I find that there was an express agreement between the Parties, as recounted by Mr Croft, that Advicorp would hold the Shares as nominee for Managest subject to a trust for Mr Elser as to 50 per cent. In law that amounts to an agreement that Advicorp would hold the Shares for Managest and Mr Elser in equal shares.

[138]I do not find it surprising that that Mr Elser’s beneficial ownership was not documented in 2012. Mr Maurice’s solution to the regulatory problem was that Advicorp would hold the Shares as nominee for Managest. That was therefore documented. The agreement about Mr Elser’s interest did not need to be documented to deal with the regulatory problem. It was, in the most literal sense, an interest held on trust.

The pleaded case

[139]Paragraph 1 of the re-amended particulars of claim introduces the claim as follows:

“In or around late 2011 or early 2012, the Claimant, the First Defendant and the Second Defendant expressly agreed that the Second Defendant would hold the shares for and on behalf the Claimant and the First Defendant in equal proportions, as set out in paragraph 15 below. From around 2011, and in event by no later than around 2015, the Claimant and the First and/or Second Defendants held a common intention that the shares would be held on trust by the Second Defendant for the Claimant and the First Defendant, in equal proportions. In the premises, 50% of the shares are held by the Second Defendant for the Claimant: pursuant to an express trust, alternatively pursuant to an implied or constructive trust and/or contract (in respect of which the Claimant is entitled to specific performance).”

[140]Paragraph 15 alleges that “In subsequent conversations between the Claimant and the First Defendant in or around [the time of the Acquisition] (which took place in-person at CRL's premises and/or over the telephone), it was agreed that the Shares would be held by the Second Defendant on behalf of the Claimant and the First Defendant in equal proportions.” Paragraph 45I says, “The oral agreement referred to in paragraph 15 above gave rise to an express trust under which the Second Defendant would hold the Shares in equal numbers for the Claimant and First Defendant”. The date of the agreement is stated in paragraph 56.1 of the reamended reply to defence to have been “in about late 2012 or early 2013”, and Mr Chichester-Clark opened the claimant’s case on that basis.

[141]The facts that I have found depart from the claimant’s pleaded case. Although the date was changed in the reply, the particulars of claim pleads an express trust arising in or around late 2011 or early 2012 (paragraph 1) or at or around the time of the Acquisition (paragraph 15), whereas I have found that the express trust was agreed in late 2012 in response to the Maurice Advice. A further difference is that Mr Elser pleads a trust in favour of Mr Elser and Mr Mandel-Mantello, whereas I have found that Managest was Mr Elser’s co-beneficiary. Indeed in his reply to the defence, Mr Elser went so far as to say “It is specifically denied that the Claimant was a party to any agreement pursuant to which [Advicorp] would hold the shares for and on behalf of Managest”. That denial was made in the context of disclaiming any case that Advicorp agreed to hold the Shares on trust for the Parties afterit had already become nominee for Managest – in which case section 53(1)(c) of the LPA 1925 would have been engaged.

[142]These are not differences which disentitle Mr Elser to succeed. It does not matter that he pleads a trust in favour of Mr Mandel-Mantello, and specifically denied a trust in favour of Managest. The dispute is not about that part of the beneficial ownership. The important issue is whether there is a trust of which Mr Elser is beneficiary. It is not unfair to Mr Mandel-Mantello to find that there was a trust in favour of Managest, since that is his own case. The same goes for the date of the agreement: it is not unfair to Mr Mandel-Mantello to find that an express trust arose in late 2012, since he himself made that allegation. Disclosure, the witness statements, cross examination and submissions fully covered the issue of whether a trust was agreed in favour of Managest in late 2012 in response to the Maurice Advice.

Construction of the 2016 letter

[143]Mr Elser’s letter of resignation as a director of Advicorp, dated 26 January 2016, included the following paragraphs: I hereby resign from my office as a director of the Company with effect from the conclusion of the board meeting at which this letter is presented. I hereby acknowledge and confirm that I have no claim or right of action of any kind for compensation or otherwise against the Company or any of its officers or employees in respect of the termination of my office or (if applicable) employment or otherwise. To the extent that any such claim or right of action exists or may exist, I irrevocably waive such claim or right of action and release and forever discharge the Company, its officers and employees from all and any liability in respect thereof.

[144]It is argued on behalf of Mr Mandel-Mantello that this letter gave up the claim that is now made in these proceedings. I reject that submission.

[145]The beneficiary of an express trust does not have a “claim or right of action of any kind for compensation or otherwise” unless and until there is a breach of trust. There had been no breach of trust when Mr Elser signed this letter. He has rights under the trust, not aptly described as a claim or right of action. This is not a case like BCCI v Ali

[2002] 1 AC 251

, where there had been a breach of contract of which the plaintiff was unaware. This is a stronger case for the claimant than that, because when he signed the letter of resignation there was no cause of action in existence.

[146]Furthermore, the words “claim or right of action of any kind for compensation or otherwise” are qualified by the words “in respect of the termination of my office or (if applicable) employment or otherwise”. This was a letter of resignation as a director. Such resignations can sometimes give rise to a claim for loss of office or for unfair dismissal. That is what the parties would have had in mind, judged objectively taking into account the nature of the document and all the relevant background. No one could reasonably interpret this letter as foregoing rights under a trust which existed independently of Mr Elser’s status as a director. That would put on the second “or otherwise” more weight than it can bear. It would for example, not only deprive Mr Elser of his rights in Advihair, but would also have deprived him of his rights in the other positions which were not split on Demerger (see [73] above).

[147]For these reasons the defence based on the letter of resignation fails.

Laches

[148]Section 21 Limitation Act 1980 provides that “No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action … to recover from the trustee property … in the possession of the trustee …” There is therefore no limitation period applicable to this claim, and neither should I apply any statutory limitation period by analogy.

[149]However I have to consider the defence of laches. Delivering the opinion of the Privy Council in Lindsay Petroleum Co v Hurd (1874) LR 5 PC 221, Lord Selborne LC said at 239—240: Now the doctrine of laches in courts of equity is not an arbitrary or a technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or where by his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. But in every case, if an argument against relief, which otherwise would be just, is founded upon mere delay, that delay of course not amounting to a bar by any statute of limitations, the validity of that defence must be tried upon principles substantially equitable. Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.

[150]Having quoted that passage in Erlanger v New Sombrero Phosphate Co (1878) 3 App. Cas. 1218 at 1279, Lord Blackburn observed: I have looked in vain for any authority which gives a more distinct and definite rule than this; and I think, from the nature of the inquiry, it must always be a question of more or less, depending on the degree of diligence which might reasonably be required, and the degree of change which has occurred, whether the balance of justice or injustice is in favour of granting the remedy or withholding it. The determination of such a question must largely depend on the turn of mind of those who have to decide, and must therefore be subject to uncertainty; but that, I think, is inherent in the nature of the inquiry.

[151]I did not understand Mr McCluskey to argue the case as one of waiver. He did not mention that word in the context of the defence of laches. His argument was that Mr Elser left it too long to bring the claim, and that delay has caused prejudice to Mr Mandel-Mantello so that it would now be unjust to grant relief. The defence is pleaded in paragraph 5.1 of the reamended defence as follows: The Claimant’s claims are barred by laches. The Claimant has permitted many years to elapse since(i) the reversal of Advicorp’s acquisition of Advihair and

(ii) the Demerger before bringing his claims and now seeks impermissibly to benefit from the success of the venture (having chosen not to assert any claim to Advihair whilst it was a risky and poorly performing business). During that time the First Defendant has operated Advihair, devoting a substantial amount of time, skill and effort to its affairs without remuneration and accepting the consequent exposure to financial and legal jeopardy as a result of its initially parlous financial situation, including by causing Advicorp to guarantee its borrowing without security (in the light of the claims of the Italian state). For his part, the Claimant has shown no interest in the affairs of Advihair during that time and has made no contribution to its success. The length of delay

[152]That defence was pleaded in answer to a claim based on constructive trust and proprietary estoppel, beforethe claim to an express trust had been brought by re-amendment. This may explain the reference to the lapse of time after the reversal of the Acquisition and after the Demerger. However in view of my finding of an express trust I can see no reason why Mr Elser needed to take any action at those times. A claimant asserting a constructive trust might be expected to bring proceedings promptly after the relevant events giving rise to the trust, but there is no reason for the beneficiary of an express trust to sue as long as none of his rights is infringed.

[153]Mr Elser said in evidence that he had been asking for the Shares to be transferred into his name for 10 years, but he was exaggerating. He first asked for the transfer on 22 July 2016. Any arguable defence of laches can only be based on delay after this request was made and not complied with. The proceedings were issued in September 2022, just over six years after Mr Elser’s request was made. The reasons for the delay

[154]In response to Mr Elser’s request to have his Shares in his own name, Mr Mandel-Mantello’s email of 22 July ([77] above) proposed a meeting to discuss the issue. The parties agree that discussions took place, although they are unable to point to a specific meeting on a particular date. It is likely to have been within a month or two after 15 August 2016 (since the emails show that Mr Mandel-Mantello was unavailable until then).

[155]The parties differ as to the content of the discussions. Mr Elser said in oral evidence that Mr Mandel-Mantello demanded to have an enhanced shareholding to mark his superior contribution to the business, though that was not a version of the 2016 discussions contained in his witness statement. Mr Mandel-Mantello’s version of the discussion is that he offered to return to Mr Elser the Shares he had renounced in 2012, on condition that Mr Elser shared the burdens of ownership. That version cannot survive my finding that Mr Elser did not renounce the Shares in 2012.

[156]I have already found that Mr Croft’s email of 20 July 2016 is likely to be an accurate account of what Mr Mandel-Mantello said to Mr Croft on that day, and I can see no reason for thinking that Mr Mandel-Mantello’s position would have changed when he came to discuss the same issue with Mr Elser some weeks later. I therefore think it likely that Mr Mandel-Mantello did not dispute that he held the Shares on trust for Mr Elser, but refused to agree to transfer them into Mr Elser’s name, and pointed out that Mr Elser did not have the benefit of a written record of the trust. I would also have expected Mr Mandel-Mantello to complain that Mr Elser had left Mr Mandel-Mantello to shoulder the burden of managing CRL by himself. I think it is also likely that Mr Mandel-Mantello would have suggested that Mr Elser should give up some shares.

[157]However although Mr Mandel-Mantello acted in breach of the trust in refusing to transfer the shares, he did not deny the existence of the trust. I rely on the fact that he did not do so when he spoke with Mr Croft on 20 July 2016. I also rely on the matters mentioned in [127] to [131] above. It is particularly significant that Mr Mandel-Mantello consulted with Mr Elser about the Managers’ proposed share incentive scheme. Only a week after that, on 3 April 2017, Mr Mandel-Mantello signed an agreement on behalf of himself, Galdam and Advicorp by which he purported to sell the Shares to Galdam for €1m. In so doing, he purported to deal with the Shares as his own, and purported to bind Advicorp to holding the Shares as nominee for Galdam, which was inconsistent with the trust upon which it already held half of them for Mr Elser. He did this without telling Mr Elser, concealing a transaction which was inconsistent with Mr Elser’s rights in preference to openly challenging to those rights.

[158]Even as recently as February 2021, Mr Mandel-Mantello did not come out with his challenge to Mr Elser’s ownership when Mr Elser met with representatives of a fund called Aliante which was interested in acquiring Advihair. Mr Elser let Mr Mandel-Mantello know that he was having these talks. Mr Mandel-Mantello’s response was that Mr Elser was wasting his time, but he did not say that Mr Elser had no business entering such talks because he had no shares to sell. This failure, even then, to come out with a clear challenge to Mr Elser’s ownership of the Shares supports the view that he was biding his time.

[159]For these reasons I find that Mr Mandel-Mantello did not deny that Advicorp held the Shares on trust for Mr Elser when they discussed Mr Elser’s desire to have them transferred into his name in 2016, nor at any time thereafter until early 2022. He refused to transfer them, and pointed out that he had not signed anything, but he did not deny the existence of a trust.

[160]I do not think that Mr Mandel-Mantello’s observation on 20 July 2016 that he had not signed anything would have put Mr Elser on notice that Mr Mandel-Mantello intended to deny the existence of the trust. I think that observation would have been taken as meaning that Mr Elser could not enforce his demand to have the Shares transferred. As long as the Shares were not in his name, Mr Elser could not sell them without Mr Mandel-Mantello’s agreement, and neither was there any risk of Mr Elser aligning himself with the Managers to outvote Mr Mandel-Mantello. These were the advantages which Mr Elser would have understood Mr Mandel-Mantello to be denying him, not threatening that he might be excluded from the pay-out when the investment came to fruition.

[161]This was a similar position to that in which Mr Croft found himself between 2011 and 2016, being entitled to shares in Advicorp with Mr Mandel-Mantello refusing to register him as a shareholder. Mr Mandel-Mantello had honoured Mr Croft’s rights financially at the time of the Demerger despite the persistent refusal to register the shares for some 4 years before that. Mr Elser had every reason to see himself in a parallel position, being denied registration as a shareholder whilst having a realistic expectation, based on Mr Croft’s case, that Mr Mandel-Mantello would nevertheless honour his interest when the time to divide the profits arrived. This explains Mr Croft’s comment in his email of 20 July 2016 about a pattern (see [75] above).

[162]Not having made clear his own position that Mr Elser had no interest in Advihair, Mr Mandel-Mantello’s complaint that Mr Elser did not bring proceedings sooner becomes a complaint that Mr Elser omitted to sue to vindicate a right that he had never challenged. Mr Mandel-Mantello deliberately avoided the confrontation that he knew such a challenge would bring. He preferred to play a long game. The “nature of the acts done during the interval” – the prejudice to Mr Mandel-Mantello

[163]The fact remains that Mr Elser had a cause of action which he delayed in bringing for around 6 years. A trustee’s refusal to comply with the beneficiary’s legitimate demand to transfer the trust property is an important infringement of the beneficiary’s rights, even if, as here, the refusal is accompanied by an express recognition of the existence of the trust.

[164]However there is no rule that a beneficiary whose trustee denies his demand for transfer of the trust property is obliged to bring proceedings immediately. Delay can be justified for a variety of reasons. As Popplewell LJ observed in Recovery Partners GP Ltd v Rukhadze [2023] Bus LR 646 at [81], albeit in the different context of a claim for an account, It may be reasonable for a claimant to “wait and see” for a number of reasons. Those might well include whether the venture proves profitable —so that there is something to have a realistic dispute about—as well as other considerations …“Standing by” is not, as such, a defence or partial defence to a claim for an account. Relief could be only denied or restricted on account of delay when the circumstances are such that, taking full account of the strictness of the rule, it would nonetheless be inequitable to grant the full relief sought.

[165]That passage was unaffected by the appeal to the Supreme Court. It shows that delay is not in itself to be held against Mr Elser. Only delay making it unjust to grant the remedy is relevant.

[166]Mr McCluskey points out that the trust in this case is unusually onerous for the trustee, in that Advicorp guaranteed Advihair’s liabilities and Mr Mandel-Mantello took the risk of prosecution, as well as being required to expend time and effort in managing the business. This, says Mr McCluskey, made it especially important that Mr Elser bring this claim promptly. He relies on a dictum of Knight-Bruce LJ in Clegg v Edmondson (1857) 8 De GM & G 787 at 814, that where the subject matter of the dispute is an ongoing business, a claimant must “show himself in good time willing to participate in possible loss as well as profit, not play a game in which he alone risks nothing”.

[167]Mr McCluskey argued that Mr Mandel-Mantello suffered prejudice in that he continued single-handedly, during the period of delay, to invest risk, time and skill in making Advihair successful. If Mr Elser had advanced the claim sooner, he would have had to bear some of the risks and would have had to involve himself fully in management, obligations which he avoided through his delay. He says, also, that the delay has deprived Mr Mandel-Mantello of the chance to insist on being remunerated properly for his work, whether by salary or by insisting on share options. It also deprived Mr Mandel-Mantello of the chance to opt to sell the investment rather than to continue to work on it for nothing.

[168]However this is not a case, like Clegg v Edmondson, in which Mr Elser refrained from bringing proceedings because he did not want to share the risks of the venture until he was sure it had succeeded. He did in fact postpone proceedings until Advihair had in fact become successful, but I do not accept that he waited so as to avoid the risks. The first and most striking distinction between this case and Clegg v Edmondson is that Clegg stood by without putting any of his capital at risk. In this case Mr Elser invested an equal amount of capital as Mr Mandel-Mantello. If Mr Elser had brought and won this claim in 2016, he still would not have been required to invest any further capital or to assume any new risk. He would not have been obliged to become a director, and would not have been obliged to offer a guarantee of Advihair’s debts. He had already achieved beneficial ownership of the Shares free of those obligations. He had resigned as a director of Advihair without any protest from Mr Mandel-Mantello. He had achieved a Demerger agreement which required him to assume liability for the Carlisle loan, but without giving a cross guarantee for the contingent liabilities which Advicorp still retained.

[169]Mr Mandel-Mantello said in oral evidence that he would have to have been “barking mad to keep all of the responsibilities, all of the liabilities, both corporate, contingent, personal, criminal on myself while only having half the shares”. I think that view owes more to Mr Mandel-Mantello’s later ruminations than to the commercial realities at the time of the relevant events. He was happy to run this business with only trivial input from Mr Elser before they fell out. He was happy to carry on as a director after Mr Elser resigned. He did not stipulate for a cross guarantee of Advihair’s liabilities upon the Demerger. He is an experienced and intelligent man who plainly did not think the burdens to be as heavy, when he assumed them, as he has now persuaded himself that they were.

[170]I also reject that the delay deprived Mr Mandel-Mantello of the chance to be properly remunerated. I have not been given any evidence about Mr Mandel-Mantello’s rights to remuneration under Advihair’s constitution or under any other arrangement he may have made with the company. Neither have I seen transparent and comprehensive financial evidence to persuade me that Mr Mandel-Mantello received no remuneration “due to Advihair's losses, financial difficulties and prosecutions”, as is pleaded on his behalf. I would be prepared to accept that Advihair probably could not have afforded to pay Mr Mandel-Mantello for his services in the early days, but the defence of laches is concerned with the later period, after its financial performance had improved. Mr Mandel-Mantello did not present evidence to satisfy me that he could not have been remunerated in that period, even if some or all of his wages had been left outstanding as a director’s loan.

[171]I accept that Mr Elser’s position has always been that Mr Mandel-Mantello was entitled to be remunerated by Advihair, because it is an inherently credible position for him to take and is corroborated by his email of 21 January 2022 quoted in [87] above (“The request for compensation for the time you spent … working for the company should be directed to the company and not its shareholders”). So the delay did not deprive Mr Mandel-Mantello of the chance to be properly remunerated. That is a matter between him and Advihair. He thought that he should be remunerated by getting some of Mr Elser’s shares, and I have found that he did ask for that (see [130]). But he could not insist on being remunerated in that way, and any delay in bringing these proceedings did not change anything in this regard.

[172]I reject Mr McCluskey’s submission that Mr Mandel-Mantello was deprived of the chance to sell the investment rather than continuing to work for nothing in promoting its success. Mr Elser was all along in favour of selling, having brought opportunities to Mr Mandel-Mantello’s notice in 2013, 2014, 2015 and 2021. Mr Mandel-Mantello was not interested in selling, even though each time Mr Elser presented an opportunity he also implicitly or explicitly asserted his own claim.

[173]For these reasons I do not think that the risk, responsibility and effort that Mr Mandel-Mantello invested in the business between 2016 and 2022 can be said to be a detriment resulting from the delay in bringing proceedings.

[174]Finally, the witnesses had to give evidence of events which happened a long time ago, and the delay contributed to the difficulty which they had in remembering the relevant events. However it would not be fair to deny Mr Elser his claim on this ground, since Mr Mandel-Mantello contributed to the delay as I have already found. In any event it is impossible to discern whether and to what extent the delay between 2016 and 2022 contributed to a deterioration in anyone’s memory of a meeting in 2012.

Just allowance

[175]This part of Mr Mandel-Mantello’s case is pleaded in paragraph 5.2 of the reamended defence: If, which is denied, shares should be transferred or redesignated as sought by the Claimant, that must be on terms that(i) the Claimant gives full value for his interest in Advihair, and

(ii) a generous allowance in equity should be granted to the First Defendant for his skill, care and the risk taken by him in his operation of Advihair over many years, in circumstances where the First Defendant has received no remuneration during that time due to Advihair's losses, financial difficulties and prosecutions.

[176]That paragraph immediately followed the paragraph which I have quoted at [151] above and is related to the laches defence. Mr Mandel-Mantello’s position, as I understand it, is that if his unrewarded hard work and risk-taking do not result in the dismissal of the claim, they should at least be reflected in a “generous allowance”.

[177]Mr McCluskey developed this in oral submissions to say that Mr Mandel-Mantello, even if he is found to be a bare trustee under an express trust, is in a position analogous to that of a fiduciary who must account for profits. He took me to Recovery Partners GP Ltd v Rukhadze [2023] Bus LR 646 at [111] – [119] as showing that equity is sufficiently flexible to enable a court, when fashioning a remedy against an express trustee, to make an allowance for the skill, care and attention he had brought to bear in generating profits.

[178]I have already rejected the argument that Mr Mandel-Mantello was deprived of the chance to be properly remunerated by delay on the part of Mr Elser in bringing these proceedings ([170] to [171]). The considerations which gave rise to that conclusion apply equally here. Mr Mandel-Mantello’s contention also faces the problem that a trustee is not usually entitled to any remuneration.

[179]Furthermore, this is not a case where Mr Mandel-Mantello is being ordered to account for profits which would not otherwise be available to the claimant, and where the claimant might be unjustly enriched if he gets those profits without an allowance for the labour that won them. Mr Elser is not suing for an account of profits. He is suing for a declaration of his beneficial ownership. It is a claim to have what equity regards as already his. There being no account to be taken, there is no room for a just allowance.

[180]I am really being asked to award Mr Mandel-Mantello a sort of quantum meruit in circumstances where he diligently served as a director for no remuneration. That is a hopeless claim.

The additional shares

[181]Advicorp acquired 89 per cent of Mr Ospitali’s shares in 2024. Mr Elser claims 50 per cent of these, acknowledging that he must bear his fair share of the price which Advicorp paid. I expect that the parties will be able to agree about this issue, failing which I shall make such further findings and ruling as may be required after handing down this judgment.