Wirecard Bank Ag & Anor v Scott & Ors [2010] EWHC 451 (QB)

[2010] EWHC 451 (QB)

Case No TLQ/08/0877

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

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

Date 10/03/2010

Before

THE HONOURABLE MR JUSTICE TUGENDHAT

Between

(1) WIRECARD BANK AGClaimants

(2) WIRECARD TECHNOLOGIES AGClaimant

(1) Allen Thomas ScottDefendants

(2) Gerardus Petrus Paulus van Meel (3) Terence ShepherdDefendant

Mr Anthony Trace QC and Mr Benjamin John (instructed by Osborne Clarke, Solicitors) for Claimants

Mr Craig Orr QC and Mr Craig Ulyatt (instructed by Davies Arnold Cooper, Solicitors) for Second Defendant

Mr Jonathan Crystal for Third Defendant

Hearing Hearing dates: 15 to 19 February 2010

Judgment

[1]The First Claimant is a bank based in Munich. The Second Claimant is a subsidiary of the First Claimant. I shall refer to them as the Claimants. In November 2007 they entered into an agreement (“the Contract”) with Xclusive Leisure and Hospitality Ltd (“Xclusive”) for the provision of credit card processing facilities. The form of agreement was signed by Mr van Meel for Xclusive on 14 November, and facilities were provided by the Claimants to Xclusive from 19 November. The agreement was not signed for the Claimants until 9 April 2008, but nothing turns on this delay. Faced with a rising number of claims for refunds originating from customers of Xclusive, the Claimants terminated the Contract on 4 August 2008.

[2]Xclusive had been incorporated on 22 September 2006. Its business was the sale of tickets for sports and entertainment events which were to be obtained by it otherwise than from the promoters of the event. This is referred to as the secondary market. The Beijing Olympic Games (“the Olympics”) started on 8 August 2008. In respect of the Olympics, from October 2007 until July 2008 Xclusive purported to sell in advance tickets to the value of about US$7.5m in sterling, in euros and in US dollars. It did not deliver a single ticket for the Olympics.

[3]The purchasers of the tickets paid for them largely with credit cards. When they did not receive the tickets as expected the purchasers made claims for a refund from the issuers of their personal cards. By arrangements between the banks and other financial institutions involved, Xclusive received payments for the tickets from the Claimants, subject to the payment of fees and arrangements for retentions. But the retentions were insufficient, and in due course the Claimants received demands for reimbursement of the repayments other banks had made to the purchasers. The Claimants were entitled to re-imbursement from Xclusive. There were agreed arrangements for this referred to as “chargeback”. However, Xclusive was unable to repay the Claimants, and a liquidator was appointed on 9 September 2008. Figures prepared in schedules on behalf of Mr van Meel (which I understand not to be final figures) show indebtedness of Xclusive to the Claimants in the sums of £666,010.70, US$1,728,939.14 and €127,961.09.

[4]The main reason why Xclusive were unable to repay the Claimants was that most of the money it had received from the Claimants was paid out in cash very shortly after Xclusive had received it from the Claimants. A subsidiary reason was that online traders depend upon attracting customers through search engines, and Xclusive had also paid large sums for advertising in this way.

[5]The First Defendant (“Mr Scott”) is the registered holder of all but one of the shares issued by Xclusive. For all but the first few weeks after its incorporation, that is from 16 October 2006, he was the only director. He remained such until Xclusive was put into liquidation on 9 September 2008. The Second Defendant (“Mr van Meel”) held a single subscriber share in Xclusive. He was a director for the few weeks until 8 November 2006, and was the Company Secretary from that date until 31 March 2008. The Third Defendant (“Mr Shepherd”) was, according to the Defendants, first a consultant to Xclusive and later an employee. It is the Claimants’ case that Mr Shepherd was the moving force behind Xclusive.

[6]Mr Shepherd and Mr van Meel worked together in a number of companies in the ticketing business from 1998 (with a two year interval between 2004 and 2006 in the case of Mr van Meel). There is evidence, which I accept, that Mr Shepherd had a lifetime of experience in the hospitality and ticketing business. There is no such evidence in relation to Mr Scott or Mr van Meel. Mr Shepherd and Mr van Meel both purported to leave Xclusive at the end of March 2008, from which point they worked together again in another company in a similar line of business, Online Ticket Exchange Ltd (“OLTE”). All of these ventures failed, as has OLTE.

[7]OLTE was wound up in the public interest about two weeks before the trial before me, that is on 28 January 2010. The other ventures failed in some cases after Mr Shepherd and Mr van Meel had ceased to be associated with them. Although I heard evidence about OLTE, I prefer to make few findings about it, since there are likely to be other proceedings in which the evidence may be different and fuller than the evidence before me.

[8]Mr Shepherd has been disqualified under the Company Director’s Disqualification Act 1986 (“CDDA”) from acting as a company director on two occasions. These disqualifications arose out of his association with Sports Mondial PLC, which later became Sports Mondial Ltd (“Sports Mondial”). That company was incorporated on 5 March 1998, placed into administration on 5 September 2005, and into liquidation on 1 September 2006. Mr Schaverien was a director until 1 April 2003. He is an accountant whose name is associated with a number of other companies with which Mr Shepherd and Mr van Meel are also associated. Mr van Meel was a director of Sports Mondial from 23 November 1999 to 10 February 2004. On 29 April 2003 Mr Shepherd was granted permission to participate in the management of Sports Mondial, and on 13 May Mr Shepherd became a director of Sports Mondial. From 4 July 2003 to 10 February 2004 Mr van Meel was Company Secretary of Sports Mondial.

[9]The first disqualification of Mr Shepherd had taken effect from 10 March 2003 for a period of 3½ years, and so expired about 10 September 2006, or just before the incorporation of Xclusive. The reason for the first disqualification is not explained by Mr Shepherd, and no documents are before the court relating to it. But while so disqualified he had been granted leave to sign company cheques over £1,000 on condition that he was not the sole signatory. He breached that condition for a period of about nineteen months from 12 February 2004 until the administration on 5 September 2005 during which he signed such cheques alone.

[10]The second of the two disqualifications was on 13 December 2007, about a month after the Claimants had agreed with Xclusive to provide card processing facilities to it. That disqualification was for two grounds. Sports Mondial had been allowed to trade to the detriment of HM Revenue and Customs and Mr Shepherd had acted in breach of the terms of the first disqualification.

[11]It is to be noted that if a person acts in contravention of a disqualification order or undertaking, he commits an offence under s.13 of CDDA. A contravention does not just give rise to civil liability under s.15.

[12]Xclusive had a subsidiary Xclusive Tickets Ltd. Mr Scott was the director and Mr van Meel also the Company Secretary from 30 January 2007. It is of no significance in this case.

[13]The Claimants make claims against the Defendants under three heads.

[14]The first head of claim is in the tort of deceit. It is alleged that the Defendants are joint tortfeasors. The Claimants claim that they were induced to enter into the agreement with Xclusive in November 2007 by fraudulent misrepresentations made orally and in writing (in an e-mail dated 14 November 2007), and suffered losses as a result. The e-mail was sent by Mr van Meel, and subsequently resent in a form bearing his handwritten signature. The contents of the e-mail had been discussed by him with Mr Scott and Mr Shepherd before he sent it and approved by them. The Claimants’ case is that the Defendants never had any intention of supplying tickets to the Olympics. Alternatively, if they did have that intention, they were reckless in representing that they were in a position to do that, or in representing that they believed they were or would be in a position to do that.

[15]The second head of claim is the tort of conspiracy to injure by unlawful means. The claim is that the Defendants were party to a conspiracy to defraud the Claimants by unlawful means. A number of unlawful means are alleged, in addition to the deceit which is the subject of the claim in deceit. The other unlawful means relied on include breach of the contract between the Claimants and Xclusive, breach of fiduciary duties owed by the Defendants to Xclusive, alternatively of fiduciary duties owed by them to the Claimants, and breaches of CDDA.

[16]The third head of claim is under CDDA s.15 (personal liability for company’s debts where a person is involved in the management of that company either(i) while he is disqualified or

(ii) where he acts or is willing to act on the instructions of a person he knows to be disqualified). The Claimants allege that all three Defendants were involved in the management of Xclusive while Mr Shepherd was disqualified, and that Mr Scott and Mr van Meel knew this, but nevertheless acted and were willing to act on instructions from Mr Shepherd.

[17]The Defence of Mr Scott has been struck out.

[18]The substance of Mr van Meel’s Defence is that he was no more than an administrative employee who was not involved in the management of Xclusive. He believed what he said and wrote to the Claimants, because he reasonably relied on what Mr Scott and Mr Shepherd told him, and because of what he had learnt by experience. He was not a party to any conspiracy, or to any unlawful acts.

[19]The substance of Mr Shepherd’s Defence is that he was not involved in the management of Xclusive. Mr Scott was solely responsible for the management of Xclusive, and in particular for the buying and selling of tickets for the Olympics. He believed in the truth of what he authorised Mr van Meel to say and write to the Claimants in November 2007. He was not a party to any conspiracy, or to any unlawful acts.

[20]Both Mr van Meel and Mr Shepherd submit that, properly construed, what Mr van Meel said and wrote to the Claimants does not amount to a misrepresentation, and, if it did, then the Claimants did not rely upon it, and it did not cause any loss to the Claimants. Further, they both submit that no debts were incurred for which they can be liable under CDDA s.15.

[21]The trial is in relation to liability only. Issues of quantum are to be tried separately, if they arise.

[22]Much of the disputed evidence relates to the involvement of Mr van Meel and Mr Shepherd in the companies that failed in the period from 1998 until their joint involvement in Xclusive.

[23]The credit card processing service provided by the Claimants was on the four-party model which is explained in OFT v Lloyd’s TSB

[2007] QB 1

[5] and [6]. The details are relevant to only one of the issues to be determined in this judgment (whether debts were incurred to which CDDA s.15 applies), and I shall address it in connection with that issue below. For present purposes it is sufficient that it was the Claimants that made to Xclusive the payments due in respect of the purported sales of tickets by Xclusive to its customers, and that when the customers demanded refunds, it was ultimately the Claimants that bore that liability, subject to its entitlement to re-imbursement from Xclusive.

[24]The Claimants have brought proceedings against Xclusive in Germany under the Contract. I have been told that there are criminal proceedings relating to these matters. Neither of these facts has any direct impact on the strength or otherwise of the claims of the Claimants in the present proceedings.

PROCEDURAL HISTORY

[25]This is the second hearing of the trial. The first hearing, which was in February 2009, could not be completed.

[26]On 8 August 2008, which was the opening day of the Olympics, the Claimants obtained a freezing order without notice against Mr Scott and Mr Van Meel. They issued their claim form on 13 August.

[27]On 18 September 2008 the Claimants obtained a further freezing order without notice, this time against Mr Shepherd, whom they applied to add as a Defendant. He applied to set aside the freezing order and swore his third affidavit dated 13 October 2008 in support of that application. His application was dismissed and he was joined as a Defendant on 3 November 2008.

[28]On 17 October 2008 Mr Scott served a Defence settled by counsel.

[29]On 26 November 2008 the Defendants together with Mrs Shepherd and another person were arrested by the Serious Fraud Office in connection with an investigation relating to Xclusive’s failure to deliver tickets for the Olympic Games and for other events. The SFO obtained Restraint Orders under the Proceeds of Crime Act 2002 against Mr and Mrs Shepherd and Mr Van Meel.

[30]On 15 January 2009 Mr Alan Schaverien was arrested by the SFO as part of their investigation into the affairs of Xclusive. Mr Schaverien had acted as the accountant for that company, and for other companies in which Mr Shepherd has been involved. On 23 and 27 January Mr Van Meel and Mr Shepherd served Amended Defences.

[31]On 30 January 2009 the Defence of Mr Scott was struck out pursuant to an unless order made on 16 January 2009. Mr Scott was in breach of that order in that he failed to provide standard disclosure by 5pm on 30 January. On 24 February 2009 the trial commenced before Plender J. On the same date the Claimants were given permission to re-re-amend the Particulars of Claim (“the Particulars of Claim”). One substantive re-amendment was the addition of the claim under CDDA s.15.

[32]The hearing continued over four days that week, and for a fifth day on 2 March 2009. Plender J heard evidence from the following witnesses who are employees of the Claimants: Mr Santner, Mr Nebelung, Ms Ender, Ms Christlein and Ms Titsch. In addition he heard evidence for the Claimants from their solicitor Mr Boyce. On 26 and 27 February and 2 March he heard evidence from Mr van Meel, Mr Brocado and Mr Shepherd. When Mr Shepherd’s evidence was completed the hearing was adjourned. On 16 March the Second and Third Defendants filed closing submissions. These consisted of 203 pages in the case of Mr Van Meel and 40 pages in the case of Mr Shepherd. On 30 March the Claimants’ closing submissions were filed in a document of 154 pages. On 21 May 2009 the court was due to resume for the hearing of oral closing submissions. However, shortly before that date Plender J became unable to sit and he has not been able to resume hearing the case since that date.

[33]On 17 December 2009 Eady J ordered that there be a re-hearing of the parties’ opening submissions, witness evidence and closing submissions with a time estimate of 5 days to start on 15 February 2010. Over 3 days I heard evidence from the same witnesses as had given evidence in 2009 except for Ms Titsch, Mr Boyce and Mr Brocardo. It was agreed that the evidence given in 2009, which was available in the form of a transcript, should stand as evidence at the trial before me in addition to the evidence that I heard orally. After a short adjournment I heard closing submissions on the Thursday and Friday of that week. In preparation for that hearing the Claimants had prepared a written argument covering some 90 pages and Mr van Meel’s counsel had prepared a written submission covering some 95 pages. Mr Shepherd had in the meantime lost the representation by Mr Crystal QC which he had enjoyed in 2009. But very shortly before the hearing resumed before me he obtained representation by Mr Jonathan Crystal. Mr Jonathan Crystal had signed the Defence of Mr Shepherd but had not been otherwise involved in the meantime.

XCLUSIVE AND ITS BUSINESS

[34]Xclusive operated from premises at 202 Blackfriars Road, London SE1. The premises were on four floors. There were about twenty employees. There is no suggestion in this case that all the business of Xclusive related to the Olympics. There were numerous other events for which Xclusive supplied tickets, and about which there was no complaint from customers or anyone else. Mr van Meel and Mr Shepherd emphasise this aspect of the case, and the Claimants do not dispute it. It is the business in relation to the Olympics that is at issue.

[35]The business of Xclusive in relation to the Olympics was described by it on the website “beijingticketing.com” (“the Beijing website”) through which it invited the public to buy tickets. While there are no copies of the site which were printed out in 2007, it has been possible for those advising the Claimants to recover the text displayed on the site. There are before the court print outs of the Terms and Conditions as they were on 11 October 2007 and of other pages as they were at 29 January 2008. It is probable that these pages describe the business in terms that were for practical purposes the same as the terms that the representatives of the Claimants saw when they looked at the website in November 2007. It has not been suggested otherwise.

[36]The Terms and Conditions include the following: “[Xclusive] are a worldwide brokers of event tickets. We specialize in obtaining hard to get tickets to sold out events. Through our many sources we are able to get a wide variety of seats to almost any event in any city. Due to these efforts and costs involved, all seats are sold at above face value… Tickets are despatched between one (1) – 6 weeks before the event (subject to change) …[Xclusive] is an independent, privately owned company engaged in the service of finding and providing tickets for admission to events worldwide.[Xclusive] is not affiliated to any box office… All sales are final. [Xclusive] will purchase tickets on behalf of the customer. When an order is placed we will then make a financial outlay to source the tickets”.

[37]The other pages of the website made specific references to events at the Olympics, and firm promises to the customer to deliver the tickets. For example, there are the following: “Archery Competition Sun, 10 Aug 08. Get the Best Archery Tickets on the Locations. The Archery Competition In Beijing National Stadium…Buying tickets from Beijing Ticketing will protect your purchase from frauds…We assure 100% guaranteed tickets delivery”.

[38]There was a meeting in Munich between the Claimants’ representatives and Mr van Meel on 12 November 2007. Mr van Meel referred the Claimants’ representatives to Xclusive’s website, including the Beijing website. In addition Mr van Meel described the business of Xclusive. At the request of Mr Santner, Mr van Meel confirmed what he had said at the meeting in an e-mail of 14 November 2007. This is one of the central documents in the case. It reads as follows:

“As discussed on Monday, I would give more background information about our Company, its subsidiaries and websites specializing in various types of events. In principle the 3 URL’s that we run with Xclusive Leisure & Hospitality are: - Xclusive Ticket.com …. 2008.com, and Beijing Ticketing.com Xclusive Ticketsells Sports and Music Events in and outside the UK. We do not sell Football nor Rugby in the England and Wales, as this is illegal! However there are certain International Rugby Games, that we sell with the Hospitality Packages. In those cases the Tickets are bought from the officially registered agents acting on behalf of the RFU (Rugby Football Union). They sell part of their allocation to us, for which they invoice us. We sell these packages on to our clients for an increased package price including our commission. These agent are for instance: Events International and Mike Burton, and from past events I could send you copy invoices, if need be. Whenever, there is an international Football event, we sell the event as it takes place outside the UK, and the legislation only covers England and Wales and not Europe! However, to avoid any confusion we are in the process to register both Xclusive Leisure and Beijing Ticketing in the US. I am going over there on the 21st of this Month to finalize the incorporation and registration. We will have an (small) physical office there and equally US bank accounts for these 2 Incorporations. When you put Football on an American website there is no legal problem whatsoever, but the sales must be done over an American Website, and the monies taken in the US! Euro 2008 Ticketing Is not really active, in the sense that we do not advertise on Google, or do any other search engine Marketing yet, But we will start selling for this prestigious Football Event in the new Year. As you might know this event takes place in Switserland and Austria and there are no legal implications for us to sell mostly hospitality packages. The tickets come from Football Federations all over the world who get allocation regardless of their interests/or location. Needless to say that countries in the former Russian Republic or any African Nations are [not] keen on European Football and therefore will be actively trying to sell their allocations. It is from those sources that we acquire our tickets. Beijing Ticketing This site is already up and running, and gets quite a bit of traffic, both through Google advertising and organic sales. Again the tickets are supplied by main sponsors trying to recover some of the enormous outlay of money they had to make in order to become an official sponsor. Beijing Ticketing has its own bank account, and the all sales revenue will go towards that special dedicated Account. (I have already supplied the bank details) Since my return from Munich, I have spoken to Newcastle Football club, and they have agreed to put an principle decision in writing to us about their authorization to our Company to sell their season tickets etc., and to become their official agent. This following the example form Viagogo who have become agents for Chelsea Football Club. I have seen our accountant this morning, who will send me the share certificates for Xclusive Leisure & Hospitality. As soon as I have this 88.2 Form, I will forward it. This Certificate will be sent by separate e-mail, forwarded by our Accountants. If you have any further queries, please do not hesitate to call. Kind Regards Geert van Meel”

Euro 2008 Ticketing Beijing Ticketing Kind Regards Geert van Meel”

Kind Regards

[39]Mr Shepherd also described the business in evidence. He had discussed the e-mail of 14 November with Mr van Meel. When asked to explain the contents of the e-mail Mr Shepherd said the following. For any major event worldwide a great deal of the tickets issued to sponsors would come to the open market. But a ticket broker such as Xclusive could not get a contract with a sponsor for the supply to it of the sponsor’s tickets. Mr Shepherd said he thought that the sponsor would lose its contract with the promoter if it made such a contract, because they are not allowed to resell. That is the reason that when they do resell they do it for cash. Another source is from the allocations made to smaller countries which do not have the numbers to take up their allocations. Although the source of the tickets acquired by Xclusive is the sponsors and others who resell their allocations, Xclusive would not expect to acquire the tickets directly from those sources.

[40]It was not suggested to me that there was any illegality involved in obtaining tickets from a sponsor or other person who had been allocated the ticket on terms that he should not resell them. The only exception to that relates to certain football matches, with which this litigation is not concerned. I was told that there is a view that a restrictive clause of that kind would not be legally binding. I proceed on the footing, which all parties before me accepted, that there was nothing illegal in trading in or buying tickets on the secondary market, except in certain specific instances, which did not include the Olympics.

[41]A feature of the business of Xclusive which is important, and may distinguish Xclusive from other similar traders, is that Xclusive had no capital of its own. So it could only buy tickets using the funds that it received from its bank, which in turn derived from money which the customers had paid, or agreed to pay, to their banks. The business described on the Xclusive websites and by Mr Shepherd, is a speculative business. Xclusive agrees to supply to the customer a ticket, and guarantees delivery of it, before Xclusive has acquired any ticket of that description and in circumstances where Xclusive has no agreement or arrangement under which it is entitled to receive any ticket of that description. It is selling short.

[42]There is nothing wrong in principle with selling property which the seller does not possess, and has no legal entitlement to possess. But to do so involves a risk. When the seller is trading on his own capital, then that risk falls on the seller, and it is a risk that he is entitled to take. But when he is trading with the use of funds which he will be liable to repay if he is unable to deliver the tickets he has sold, then the risk falls on the bank which has advanced the funds, in this case the Claimants. Anyone is entitled to risk his own money on a speculative deal. The extent to which those managing the affairs of a company are entitled to risk the company’s money may be a different matter. And the position may be different again if the company has no funds of its own, and for practical purposes what is at risk is the creditors’ money, and in particular the bank’s.

[43]Arrangements with a bank for the processing of payments by credit card are obviously essential for a business which trades online. When they were working through an earlier business, ATC.com (“ATC”), Mr van Meel and Mr Shepherd had had in place arrangements for processing credit card payments with Optimal Payments Ltd (“Optimal”). It also had a relationship with American Express, but that is not material to this action. Mr van Meel states that the arrangements with Optimal were similar to the arrangements made in November 2007 with the Claimants. Those arrangements, originally made with ATC, had subsequently been re-arranged to apply to Xclusive.

[44]In 2007 problems arose with Optimal when tickets sold by Xclusive for the Rugby World Cup Final were over sold. Xclusive’s liability to Optimal for chargebacks exceeded the amount of the reserve retained by Optimal. Optimal terminated the arrangement with Xclusive on 4 December 2007. When Optimal’s solicitors wrote to Xclusive on 7 March 2008 they stated that the amount of the deficits was €97,436 and £130,928. According to that letter Xclusive had in January 2008 agreed to pay off this debt in four monthly instalments starting in February 2008. But they stated that Xclusive did not pay the first instalment on time. Xclusive did not pay the remaining instalments. In his statement Mr van Meel says that a lot of business was lost by the restrictions placed by Optimal on the amount that Xclusive could trade.

[45]In documents obtained from Xclusive’s files headed “Weekly Sales to Bank Reconciliation” it is recorded that in the period 17 to 23 October 2007 Xclusive sold tickets for the Olympics in the sum of £6,375, the equivalent of about 10% of total sales. This is the first record in the documents of such sales. Other tickets are recorded as sold in the same period, including for the Rugby World Cup at £15,948.54. For the period 5 to 11 December 2007 the figure attributed to the Olympics is £71,500 (the equivalent of about 60% of total sales). The sales of tickets for the Olympics as recorded in these Reconciliations, continued to represent a similarly high proportion of the sales of Xclusive, generally of the order of half to two thirds: 27 February to 4 March £93,525 out of £143,228; 30 April – 6 May £72,784 out of £226,876; 14-20 May 2008 £59,427 out £1444,208; 18-24 June 2008 - £43,664 out of £57, 291.

[46]It was against the background of the dispute with Optimal that Xclusive went back to a Mr Ben Felczer who had introduced Optimal, and asked him to find another credit card processor. He introduced the Claimants. The situation was critical. Without a credit card processor, Xclusive could not trade at all.

MR SCOTT, MR RICKY SMITH AND PETERS TICKETING

[47]Mr Scott’s Defence has been struck out, and he has not been called as a witness. But there are allegations of fraud, and Mr Scott is said by Mr van Meel and Mr Shepherd to have played an important part in the relevant events. In his Defence Mr van Meel alleges that Mr Scott, together with Mr Shepherd, was responsible for purchasing tickets. Mr Shepherd’s case is that he had no responsibility for, or involvement in, tickets for the Olympics. That was the responsibility of Mr Scott alone. So there is some contradiction between the defences of Mr van Meel and Mr Shepherd.

[48]I therefore record what Mr Scott has verified as true in his Defence, what is said about Mr Scott by others, and what appears concerning him in the contemporaneous documents. I have looked at his Defence and witness summary, which are not strictly evidence in the case, to ensure that I do not leave out of consideration anything that might be of assistance to the case of each of the Defendants.

[49]I have referred to the position of Mr Scott in relation to Xclusive, as recorded at Companies House. Other contemporaneous documents referring to Mr Scott are as follows.

[50]Most of the instructions to Barclays for the withdrawal of cash are signed by Mr Scott. The others are signed by Mr van Meel.

[51]Another document found amongst the papers of Xclusive is an e-mail dated 20 June 2008. It is addressed to both Mr Scott and Mr Schaverien and sent by Mr Cyril Gold. Mr Gold is an insolvency practitioner. That e-mail reads as follows:

“Allan [Scott]/Alan [Schaverien] I refer to our meeting yesterday A few things. Firstly I will be emailing you, Allan separately later today five pro-forma invoices, four at £4,000 plus VAT and one at £5,000 plus VAT to cover ATC.Com, World Hospitality Company Limited. Tradeandbid.com, Rugby World Cup 2007 and Xclusive Leisure and Hospitatlity Limited. Separately (in a few weeks time) John Paylor (or another IP) will invoice £5,000 plus VAT in respect of Xclusive tickets. The “other” £12,000 can be dealt with over the next few weeks. I trust the above is agreed and clear? I think, for the sake of both your file on Xclusive Tickets and the paperwork in the eventual Liquidator’s file it would be helpful to make sure that you have the following to hand:- 1) First the letter from Peters Ticket to Xclusive around the middle of May advising that they are, following various telephone conversation able to supply the various August Music Festival tickets as agreed. 2) A reply letter (18/19 May) from Xclusive to Peters Tickets advising of the likely capacity requirement (perhaps detailing the various Festivals and likely amount of tickets required. 3) One from Peters early on (7th/10th June) “All OK but tickets will not be available till end July ish” …….and follow up final festival letter week commencing 14 July that they are very sorry, but regrettably despite substantial efforts are NOT going to be able to supply ANY Festival tickets. 4) Perhaps separately a more detailed letter from Peters Tickets to Xclusive somewhere around 16th, 17th or 18th July advising that the Tickets for the Olympics are or will be shortly available but regrettably are not of the quality or initial specific requirements initially requested and …… further that due to their (Peters Tickets) current financial difficulties they will have to cease trading and take steps to close the company down or wound-up. (By the way…. Are they a limited company or a sole trader, trading as?) 5) The email that you need then or shortly after to send to all the “Festival “creditors (20/21st July) explaining regrettably the various difficulties being experienced due to the fact that the major ticket supplier to Xclusive has failed and they have only just become aware of it etc. (Xclusive extremely surprised and disappointed by the turn of events as they had used this particular supplier of tickets many times before without any problems whatsoever) and that regrettably the client would not be supplied with their tickets. They should immediately take steps to obtain a refund by way of their credit card facility …… and due to this and other external causes Xclusive tickets will be taking steps to take some form of Insolvency procedure advice….. I note that there are 11 Music Festivals in August commencing with The Big Chill,… Loch Lomond,…. Edinburgh …. V etc. Which specifically was Xclusive selling tickets to? Cyril”

I refer to our meeting yesterday Cyril”

I refer to our meeting yesterday

[52]Documents in almost exactly the words set out in the e-mail of 20 June 2008 were also found in the files of Xclusive. It is clear from that document that from 20 June Mr Scott and Mr Schaverien knew that no tickets for the Olympics would be delivered. But Mr Scott continued to procure the payment out of Xclusive’s bank account of sums in cash totalling £418,072. The payments vary in amount from £85,000 paid out on 24 June down to £1,000 paid out on 9 July 2008.

[53]Mr Orr submitted that this document assisted the Defendants’ cases in that it appeared to show that it was not until 20 June 2008 that Mr Scott consulted Mr Gold, and so that it was not until that date that he knew that the tickets would not be delivered. I draw no such inference from this document. It is clearly evidence of a conspiracy to pervert the course of justice, and the subsequent payments out of cash are evidence of fraudulent trading on the part of Mr Scott. I draw no inference that it was only on 20 June 2008 that Mr Scott realised that there were to be no tickets. It may be that a well organised fraudster would have procured the fabrication of these documents at an earlier date. But there is no presumption that fraudsters are well organised, and there is evidence that Mr Scott was not well organised. All that I infer from this document and the subsequent cash withdrawals is that Mr Scott is dishonest, and that nothing he is recorded as having said is to be trusted unless supported by independent evidence.

[54]There are references to “Peters” in the nominal ledger of Xclusive. This records a large number of payments attributed to “Peters”. Some are quite small amounts and are explained. An example is £5,000 dated 16 July 2007 to “20 x VIP Reading Festival…” Others are very large with an uninformative explanation. Examples of these are one dated 30 September 2007 in the sum of £393,388.01 attributed to “Provision for tickets purchased” and another, on the same date, the sum of £393,478.02 “Payment for invoices July August”. There are a number of entries dated on and between 3 October 2007 and 28 December 2007, all but one for sums between £17,000 and £78,000 attributed to the Olympics with descriptions such as “Opening Ceremony” and “Cat B Opening”. There is no evidence as to how these entries came to be made in the form in which they appear.

[55]Mr Orr refers to a number of e-mails and an invoice which appear to relate to a journey that Mr Scott made to Beijing in March 2008. Mr van Meel gave evidence that Mr Scott did go to China then to set up an office. That was one reason why he had no reason to believe that tickets would not be supplied. Mr van Meel also gave evidence that he had been asked in early 2007 to investigate the possibility of setting up an office in Shanghai.

[56]The Particulars of Claim are verified by Mr Nebelung who, of course, had no direct knowledge of the internal affairs of Xclusive. In para 1.5 the shareholdings in Xclusive are pleaded as they appear in the Companies House records. There is added the words “So far as is necessary, it is averred that Mr Scott is the controlling mind and will of [Xclusive]”. It is also pleaded that Mr Scott and Mr van Meel have a close business and/or personal association with Mr Shepherd. Those averments appeared before Mr Shepherd was joined as a defendant. After Mr Shepherd was joined, there was added the averment that Mr Shepherd was “a moving force behind the Defendants’ unlawful conspiracy and joint enterprise”.

[57]Mr van Meel in his witness statement says that he was introduced to Mr Scott by Mr Shepherd in autumn 2006, and that he did not know him, or of him, prior to this introduction. He states that Mr Shepherd introduced Mr Scott as someone who would source tickets with contacts in the industry. Mr van Meel said that he was informed by Mr Shepherd and Mr Scott that Mr Scott had a few County Court judgments against his name which made it difficult for him to obtain credit. Most other references in the witness statement to Mr Scott are coupled with references to Mr Shepherd. For example Mr van Meel states he was asked by Mr Scott and Mr Shepherd to write cheques. Mr van Meel gave no evidence, whether in his statement or orally, either about the experience of Mr Scott, or of any specific actions of Mr Scott relating to the acquisition of any tickets. As to that, Mr van Meel stated that in so far as the sale of tickets was concerned, Mr Scott took decisions “in conjunction with Mr Shepherd acting as a consultant with specific responsibility for sourcing tickets.”

[58]One significant piece of evidence that Mr van Meel did give about Mr Scott was in response to a question as to why it was Mr van Meel who negotiated with the Claimants in Munich on 12 November 2007. Mr van Meel replied: “Let me put it like this, Mr Scott is not the most well spoken. Mr Scott has a slight drinking problem. Mr Scott doesn’t speak a word of German. If you are desperate to get your business back on track with credit card processing and you really need this getting done quickly, who would you send, someone who can speak German, who can express him[self] or someone who is probably already half drunk when he comes from the airport? … I was at that point the only person within the organisation who was … [a] suitable person to deal with it”.

[59]At another point Mr van Meel said he was disgruntled at the end of 2007 about how Xclusive was run and the directorship of Mr Scott. He said Mr Scott was chaotic and had a slight drinking problem and was pretty sloppy in how he managed the business.

[60]Another significant piece of evidence that Mr van Meel gave about Mr Scott was in relation to Ricky Smith. If Ricky Smith exists, he is the central figure in the case. According to Mr Scott, he, or Peters Ticketing (they are said to be the same entity) was the person who undertook to obtain the tickets for the Olympics. In his witness statement Mr van Meel refers to a statement by Mr Scott at the Creditors’ Meeting on 9 September 2008 to the effect that Mr Scott said that Mr van Meel had met Ricky Smith on many occasions. Mr van Meel stated that that is simply not true. Mr van Meel could not recall any occasion on which Ricky Smith was introduced to him or identified to him. He states that it is not true that he, Mr van Meel, was present when money was handed over to Ricky Smith.

[61]The Defence of Mr Scott is, I am told, signed by Mr Scott. It also bears the name of counsel and solicitors then instructed by him. This Defence includes the following affirmative case:

“[Xclusive’s] business was legitimate (and therefore honest), involving the sale of genuine tickets, which [Mr Scott] honestly believed to be the case; … the chargebacks arose due to [Xclusive] being unable to send out tickets. The reasons for this are as follows: (a) [Xclusive] had agreed with Mr Ricky Smith, trading as Peters Ticketing, that he would provide [Xclusive] with the tickets it needed for the Olympics; (b) [Xclusive] had previously used Mr Smith for the supply of tickets for other events and it had found him to be an experienced and reliable supplier; (c) to obtain the tickets for it, [Xclusive] provided Mr Smith with approximately £1,960,000 and cash was withdrawn for this purpose. Additionally, [Xclusive] expended approximately £1,000,000 on advertising on internet search engines; (d) [Xclusive] was informed that the tickets would not be available until some two to three weeks before the commencement date of the Olympics…”

[62]There is a document headed “Witness Summary of Allan Scott on behalf of the Third Defendant pursuant to CPR 32.9”. It is not signed by Mr Scott. It bears the name of Mr Shepherd’s solicitors. There is no information before me as to who drafted it, or as to the source of the information and allegations that it contains, that is to say, whether they came directly from Mr Scott or through some other person.

[63]CPR 32.9 provides that a party who is unable to obtain a witness statement may apply for permission to serve a witness summary instead. CPR 32.9(2) provides that “A witness summary is a summary of (a) the evidence, if known, which would otherwise be included in a witness statement…” It follows that a party applying for permission to serve a witness summary does so on the basis that it is evidence which he knows that the intended witness would include in a witness statement.

[64]Permission was sought to serve the witness summaries of Mr Scott, and of six other witnesses, and was granted by order dated 4 February 2009. The five other witness summaries in the bundle were prepared by solicitors for Mr Shepherd, but again there is no information as to the source of the information and allegations they contain. The contents of these five documents appear to have little if any significance to the issues I have to decide.

[65]The witness summary for Mr Scott repeats the allegations about the person referred to as Ricky Smith which are included in the Defence. It also includes the following statements: “10… [Mr Scott] was entirely responsible for the Beijing Olympic ticket sales and responsible for the acquisition and delivery of tickets to purchasers…15… it did not occur to him that he might get into a position where he would be unable to procure the Beijing tickets because he had always historically been able to come up with tickets for all previous events he had ever sold tickets for… 16 .. [Mr Shepherd] did not know about problems in obtaining Beijing Olympic tickets because he not involved in organising tickets for that event … 71. … a big problem from the start of the tickets becoming available was that everyone had to have photo ID contained within their tickets and that this applied to everyone except major corporations who did not know who they were going to invite in advance. 72 … The photo requirement was later relaxed for everyone because for a fee of 15 chinese dollars [sic] you could put the ticket into the name of anyone else, but I fear it was this unforeseen requirement that led to a secondary market ticket problem in Beijing”.

[66]Mr Shepherd gave evidence to the same effect as paras 10 and 16 of Mr Scott’s witness summary. But no witness or contemporaneous document gave evidence or other support to any of the contents of paras 15, 71 or 72 of Mr Scott’s witness summary. I infer from the fact that Mr Scott attended court in February 2009, but was not called as a witness for Mr Shepherd, that he would not have been willing to give evidence in the terms of his witness summary.

[67]Mr Scott had answered questions at the Creditors Meeting on 9 September 2008. On that occasion he is recorded as saying that he and Richard Smith had known each other for ten years, and that Richard Smith had never let him down before. But no details were apparently given.

[68]Mr Shepherd says nothing about Mr Scott in his two page witness statement. In his affidavit of 13 October 2008 Mr Shepherd said that “prior to my employment with Xclusive I had not had a formal business association with Mr Scott, although I had done some ticketing transactions with him over the years”. What those deals were, or whether Mr Scott was buying or selling, was not made clear to me. Mr Shepherd did give one instance of Mr Scott obtaining tickets, but he gave little detail. At one point Mr Shepherd said that the whole office was involved in selling tickets for the Rugby World Cup and added “Me along with Alan Scott walking in one day with two carrier bags full of tickets … yes we were all involved in procuring tickets for these events”. But later he attributes that incident to Mr Scott alone, saying “And he went away one day, Mr Scott, as I told you, and come back with two carrier bags full of tickets, and I believed – well I know that’s where he got them [referring to Peters Ticketing]”.

[69]Mr Trace put to Mr Shepherd that the Peters Ticketing invoices were fabrications made on his instructions. He denied it and asserted that he knew that Peters Ticketing supplied many tickets, including for the Rugby World Cup and various events “that Mr Scott used to deal with all on his own”. But Mr Shepherd did not say how he knew that Peters Ticketing existed or had supplied tickets. Mr Trace also put to him that Ricky Smith did not exist. Mr Shepherd said that he had said hello in the office to a man who Mr Scott called Ricky Smith. But Mr Shepherd said he never discussed anything with Ricky Smith. At the 2009 hearing Mr Shepherd said he had had somebody trying to look for Ricky Smith. He referred to his financial constraints, but said a friend was paying. He said “we are still trying to this day to get him because I realise it affects me”.

[70]There is a six page witness statement by Mr Nicholas Brocardo dated 4 February 2009. He gave evidence on 27 February 2009. He had been a salaried employee of Xclusive. The gist of his witness statement is that Mr Scott was the boss of Xclusive, and had total and exclusive control of the tickets available for sale at any given moment. He states that Mr Scott was secretive about the sources of his ticket stock. He states that “In relation to the tickets for the Olympics, I assumed that Mr Smith was the supplier for those tickets on account of the regularity of his attendances and visits to Mr Scott”. He gives a description of the offices and of the man he refers to as Mr Ricky Smith.

[71]In cross-examination Mr Brocardo stated that he had met with Mr Shepherd’s solicitor for about an hour to prepare the statement. He denied the suggestion that Mr Shepherd was the moving force behind Xclusive. He said that if Mr Scott was not in the office, and he needed to pay for something, then he would go to someone in authority, and that explained why in an e-mail dated 10 September he had referred to Mr van Meel as his director.

[72]In his statement Mr Brocardo said that Mr Scott had an office upstairs and Mr Shepherd downstairs. But in cross-examination, he gave evasive answers. When Plender J pressed for a clear answer, he agreed that Mr Scott and Mr Shepherd had a common office in which they customarily worked, and that they had meetings together several times a week. He also accepted that he had never seen Mr Scott pay any money to the man he refers to as Ricky Smith, and that the sum total of his evidence on this point was that there was a man called Ricky Smith whom he saw talking to Mr Scott on occasions. He also accepted in cross-examination that at the time he gave evidence Mr Brocardo was working for Mr Shepherd at the Online Ticket Exchange, a fact that he had not disclosed in his witness statement. He did not return to give evidence before me.

[73]Mr Brocardo gave no reason why he claimed to be in a position to give evidence that Mr Scott was the boss of Xclusive, and had total and exclusive control of the tickets available for sale at any given moment. The rest of his evidence suggests to me that he had no knowledge of the responsibilities of Mr Scott and Mr Shepherd, and that his evidence on these matters is worthless, except on one point, namely that he regarded Mr van Meel as a person having authority to give him instructions, as his director. I accept that as the truth.

[74]It follows that there is no evidence before me from any source as to any experience Mr Scott, or Ricky Smith, may have in obtaining tickets, or of any steps that Mr Scott might have taken to obtain tickets, or as to the identity of any payee of any payments in cash by Mr Scott, or as to any arrangements pursuant to which such payments were made.

[75]The only reference to Ricky Smith made by Mr van Meel in his Defence is in response to that part of the Particulars of Claim which refers to an allegation of Mr Scott concerning Mr van Meel. Mr Scott alleged that cash had been paid to Ricky Smith and Peters Ticketing for tickets. Mr van Meel denies that he caused payments to be made to Ricky Smith.

[76]I refer above to the evidence of Mr van Meel to the effect that he never met Ricky Smith, contrary to what Mr Scott had said at the Creditors’ Meeting. At the Creditors’ Meeting Mr Scott also said that Ricky Smith lived in Barnet, but no one had seen him for 6 weeks, and that he had vanished. He also said that there was a relationship between Ricky Smith and Mr Shepherd.

[77]The only other evidence that Mr van Meel gave in his witness statement about Ricky Smith or Peters Ticketing was that he recalled seeing batches of invoices from Peters Ticketing at various points in time on either Mr Scott’s, or the bookkeeper’s desks.

[78]Mr Shepherd makes no mention of Ricky Smith or Peters Ticketing in his Defence, or in his affidavit of 13 October 2008. In his witness statement Mr Shepherd states that he never withdrew cash from the bank in relation to Beijing tickets, nor did he ever meet with Mr Smith in order to give him cash.

[79]A number of documents purporting to be invoices or correspondence from Peters Ticketing were found in the files of Xclusive. On 12 December 2008 the Claimants gave notice under CPR 32.19 requesting the Defendants to prove the authenticity of these documents. No evidence was adduced in 2009 or before me to prove these documents. The Claimants had good reason to serve that notice. I have described above the e-mail of 20 June 2008, and the inferences that I draw from it.

[80]Another document produced to the court is dated 21 January 2010. It is a print out of a page from an official website and is headed “VAT Validation Response”. It states that a VAT number, which is set out, is a valid number and is attributed to “Peter Charles Beasley !! Peters Ticketing”. And it gives an address in Islington. The evidence that a VAT number has been officially attributed to a name is not evidence that the named person exists. So this document takes the matter no further.

[81]There are also references in the files which appear to show that Xclusive accounted for VAT. Mr Orr submits that it is not credible that all these documents should be bogus. He submits that there are many tickets for events about which no one complained which appear in the books with a reference to Peters Ticketing. I accept that that is so. But the fact that such tickets were supplied, as I infer that they were, does not mean that Peters Ticketing were in truth the supplier. I recall that the accountant to Xclusive was Mr Schaverien who did not give evidence, and who is one of the addressees of Mr Gold’s e-mail.

[82]The Liquidator, and solicitors for the Claimants, investigated Peters Ticketing, as described by Mr Boyce in his sixth witness statement. The only telephone number that responded to a call was that of a business centre. The agent said that they had started to provide services to Peters Ticketing in January and finished in July 2008. They had dealt with a person who identified himself as Peter, and not with anyone called Ricky Smith. They had not had a call for Peters Ticketing in a long time. Mr Orr criticises this evidence. The agent was not called as a witness. There may have been others in the business centre who could have given evidence.

[83]However, I note that one of the witness summaries which Mr Shepherd obtained leave to serve was that of a Mr Spurdens. He was not called, but the summary states that he is a private investigator who was instructed by Mr Shepherd to locate Ricky Smith. His evidence would not have assisted the Defendants.

[84]The role attributed by Mr Scott to Ricky Smith and Peters Ticketing is difficult to reconcile with the description of Xclusive’s business given on its website, and given by Mr van Meel and Mr Shepherd. Mr Scott told the Creditors’ Meeting that all the cash had gone to these two names. In his Defence he alleges that they are the same entity. But the evidence of Mr Shepherd as to the business of Xclusive and of those dealing in secondary tickets, including himself, is that this business is one that requires considerable experience and the knowledge of where tickets may be bought and at what price. The Beijing website refers to Xclusive having “many sources” for its tickets. In his statement Mr van Meel said that the business depended on personal contacts. He said that if a particular event was being sold, and Mr Scott and Mr Shepherd did not have direct contacts with primary sources, they would know other agents who did have those contacts and would liaise with them.

[85]The role attributed to Ricky Smith and Peters Ticketing appears to imply the delegation to him of the whole responsibility for obtaining tickets for the Olympics, leaving nothing for Mr Scott or Mr Shepherd to do in this regard. And the explanations given for the need to pay in cash do not appear to apply to Ricky Smith and Peters Ticketing. It is not alleged that they are sponsors, and it is not explained what they stood to lose if they received payment through the banking system from Xclusive.

[86]I find that it is unlikely that there is a person called Ricky or Richard Smith, or any one else trading under the name Peters Ticketing, who ever agreed, or intended, to find tickets for the Olympics. They are names invented, or misused, to deceive the creditors and the liquidator of Xclusive. The invention or misuse was by Mr Scott at least. One of the questions I have to decide is whether either or both of the other Defendants was involved in that invention or misuse. I also find that the purported invoices and other documents purportedly sent by Peters Ticketing are fabrications.

[87]Since Mr Scott’s Defence has been struck out, the Claimants ask for judgment against him. It is clear that the Claimants are entitled to judgment against Mr Scott on liability, and I shall grant it. The amount of the claim has not yet been finally quantified, and I shall hear submissions on any further order to be made in respect of Mr Scott.

MR VAN MEEL’S ROLE IN XCLUSIVE

[88]As already noted, Mr van Meel became a director of Xclusive on incorporation for about six weeks. The explanation that Mr van Meel gave for this as follows. He said that Mr Scott, not Mr Shepherd, was going to be the director who would run the company. A bank account was required for the company. There was a fast track procedure that was then available with Barclays Bank. But it was clear that only someone with no County Court judgments against them would pass Barclays’ tests. Mr van Meel could pass the tests. Therefore he became a director for that short period of time in order to open the bank account. When that had been done he resigned and Mr Scott was appointed. At that point Mr Scott also took his 999 shares.

[89]Mr van Meel was cross-examined as to why he was willing to go into business with two people, one of whom was disqualified and the other subject to County Court judgments. Mr van Meel replied as to the former that it was Mr Scott who was to be the director. And as to the County Court judgments he said the judgments might relate to no more than £45 for non-payment of a television licence. In my judgment this was an example of Mr van Meel deliberately turning a blind eye in order not to find out what the judgments related to.

[90]Mr van Meel continued as a signatory (as set out below), and was described on the cheques as a Director. Barclays continued to write letters to Mr van Meel addressing him as Director. Xclusive did not keep within the limits of its facilities and cheques were sometimes unpaid. Barclays wrote many letters in relation to this. Mr van Meel did not tell Barclays that he was not a director until 18 March 2008, when he notified it of his resignation. Mr van Meel said that he had not expected to remain a shareholder, and that it was by an oversight that he did so.

[91]Mr Trace suggested to Mr van Meel that that was a deception upon Barclays. Mr van Meel did not agree. In my judgment it was a deception. It was dishonest. According to Mr van Meel, Mr Scott was the person who would run the company, but he would not be able to obtain banking facilities for the company on account of the County Court judgments against him. So according to Mr van Meel, he deceived Barclays into believing that he was to run the company. When the deception had succeeded, Mr Scott was added to the mandate.

[92]Mr Shepherd and Mr van Meel had also previously worked together with TheOnlineTicketShop.com UK Ltd (“OLTS”). That company was incorporated on 29 May 2003 and had a business similar to the business of Xclusive. Mr van Meel became a director on 5 June 2003, and Company Secretary on 6 October 2003, resigning on 10 February 2004. After OLTS went into administration in 2005, the administrator sold the business to Xclusive. Mr van Meel was not involved in that sale. He was abroad at the time. Subsequently it was sold on, so as to remain with Mr Scott and Mr van Meel, as recounted below, although no money was ever paid.

[93]Mr van Meel was paid a salary by Xclusive. It was £3,750 per month. Mr Trace draws attention to the fact that that was more than the salary paid to Mr Scott, which was £2,916.67 per month.

[94]Mr van Meel set out in his witness statement his responsibilities at Xclusive. He said they included human resources issues, making payments through and withdrawals from the bank, preparing the payroll, managing the premises, handling customer complaints and refunds, liaising with HM Revenue and Customs and with suppliers of goods and services other than tickets, and general administration. Mr Shepherd also stated in his affidavit that Mr van Meel was not involved in the ticketing side of the business.

[95]In 2007 and 2008 Mr van Meel was involved in the making of substantial payments by Xclusive. His case is that he made these on the direction of Mr Scott, although at times the direction came from Mr Shepherd, who Mr van Meel considered to be acting on authority from Mr Scott.

[96]The nominal ledger of Xclusive records thirteen debit and five credit entries under the heading “Directors Loan Acc: Geert van Meel” for the period 10 April 2007 to 30 September 2007. The debit entries amount to £79,985, and the credits to £93,692. The credits all refer to Google and advertising. Mr van Meel was funding the cost of advertising on the internet search engine out of his own pocket, and claiming reimbursement from Xclusive. According to this record, he used his personal credit card to do this.

[97]In cross-examination Mr van Meel explained that the reason he made these payments personally was because he wanted the company to succeed. If he had not done so, the cash flow position was such that they could not have paid for advertising.

[98]Mr Shepherd was not a signatory to the Barclays bank account of Xclusive, but Mr van Meel was. He remained a signatory after he resigned as a director, and continued to sign cheques which had been printed to bear the name of Xclusive and the word “director” above and below the space for the signature. Mr van Meel signed numerous cheques. Some of these were to cash, for example, cash withdrawals of £14,000 and £20,000, both on 8 January 2008, and three withdrawals totalling £42,000 on 9 January 2008, three withdrawals totalling £54,000 on 12 February 2008 and, the next day, three withdrawals totalling £21,000.

[99]In cross-examination Mr van Meel said he was not alarmed at the payment out of these sums in cash. He said that he had seen cash handed over for tickets, and he had seen invoices. But he is not in the ticketing side of the business, and very often there was not a receipt. So it was difficult for him to know if the cash was paid for tickets. He accepted that he made these payments on instructions from Mr Shepherd, although he said he also had instructions from Mr Scott.

[100]Other cheques drawn on Xclusive’s account by Mr van Meel were made out to Mr Shepherd and his wife (e.g. £8004 on 28 November 2007, £8005 on 12 December 2007, £8006 on 26 December 2007 and £8007 on 9 January 2008). These cheques were then endorsed over to Jabac Finances Ltd (“Jabac”). I refer to this arrangement in more detail in relation to Mr Shepherd. Mr van Meel states that although he had not seen the agreement with Jabac, he was aware it existed. He understood it was to help the cash flow of Xclusive. And he was given a short explanation by Mr Shepherd and felt comfortable with that.

[101]Mr van Meel signed cheques payable to others to whom Mr Shepherd requested that they be paid to meet his personal obligations. These included Peachdrive Properties (e.g. £20,000 on 7 and 31 December 2007) and HM Revenue and Customs (£6,881 on 22 December 2007). Mr van Meel said Mr Scott instructed him to sign the cheques payable to Peachdrive. He also said that Mr Shepherd gave him a short explanation about them and he was satisfied. And he said that in most cases he would go along with what Mr Shepherd told him to do. I find that he was instructed to sign by Mr Shepherd and accepted those instructions from him.

[102]These payments were not the only financial arrangements involving Xclusive with which Mr van Meel assisted Mr Shepherd and accepted instructions from him. Mrs Shepherd drove a Porsche car. At the request of Mr Shepherd, Mr van Meel entered into the lease of this car in his own name. He explained that he would pay the instalments and then be reimbursed by Xclusive two days later under a direct debit arrangement. When asked by Mr Trace how he considered this to be proper, Mr van Meel said that he assumed that Mr Shepherd was entitled to enter into this arrangement as part of his remuneration from Xclusive. Mr van Meel did not ask Mr Shepherd whether this assumption was correct. He said he wrote pay cheques for Xclusive, and had not seen a payment to Mr Shepherd. He was not in a position to verify whether this was part of Mr Shepherd’s remuneration package.

[103]In his witness statement Mr van Meel said that he was not involved in decision making at Xclusive on matters of importance. He would have weekly meetings with Mr Scott and some of these were also with Mr Shepherd. He said he was tasked to deal with the Claimants.

[104]Mr van Meel was cross-examined as to the decision to task him to visit the Claimants in Munich. He said that was not what he would qualify as a decision. He saw there was a problem with Xclusive being in e-commerce no longer having a credit card processor, and therefore a solution has to be found. He was in touch with Mr Felczer, and so he went to the processor that Mr Felczer recommended. He said he had spoken to Mr Scott and Mr Shepherd and they had said to go ahead with what Mr Felczer recommended. In my judgment that was clearly a decision. It was a decision to which Mr van Meel was at least a party, if he did not make it on his own. In evidence before me he said he had not been tasked, but had taken responsibility for doing it. He said one of the reasons for his role in the company was that he took things upon himself without being specifically asked.

[105]In his witness statement Mr van Meel gave an explanation for his wish to leave Xclusive. He said that he was unhappy with the way in which his role had reverted back to being administrative, instead of development of the model planned for ATC. He was also unhappy about having to deal more and more with requests for refunds and complaints by customers. He says that these were not increasing, but that he was increasingly required to deal with them. On occasions Xclusive failed to supply tickets and had to make refunds. Many thousands of tickets were supplied. But the problems arose with the Rugby World Cup, where 70 tickets were not supplied. It was this that led to the breakdown of the relationship with Optimal. There were also cash flow difficulties which he attributed in his statement to advertising costs.

[106]In December 2007, barely a month after the arrangements he had made with the Claimants, Mr van Meel went on holiday for two weeks and returned having decided to leave Xclusive. He states that he discussed his disillusionment with Mr Shepherd and Mr Scott and that Mr Shepherd was also disillusioned with the way Xclusive was working out. It was in those circumstances, said Mr van Meel, that he set up OLTE on 4 February 2008.

[107]In cross-examination Mr van Meel said his leaving Xclusive was the result of his discovery that Mr Shepherd was disqualified. He said that the discovery was a bombshell and six weeks later he had left Xclusive. Mr Trace then asked him why, in that case, he had continued to work with Mr Shepherd in OLTE. Mr van Meel responded that OLTE had a different business model. This answer is beside the point: it was not the business model that was the point, it was the fact that Mr Shepherd was disqualified, as Mr van Meel then knew. He said he was not entering business with Mr Shepherd, but Mr Shepherd was going to be doing what he is good at, he was going to be the supplier of tickets.

[108]Mr van Meel’s resignation from Xclusive took effect from 31 March, but it is not disputed that the last day he spent in the office was 18 March. It is his case that he had no involvement with Xclusive after that day, except occasionally to respond to queries from the staff at Xclusive.

[109]On 18 March Mr van Meel e-mailed the Claimants. He chased up the Contract, a copy of which had still not been signed by the Claimants. And he told the Claimants that he was resigning as a Director and taking on a new role in a different building. He said the man in charge was already a director, a reference to Mr Scott. He said nothing about Mr Shepherd.

MR SHEPHERD’S ROLE IN XCLUSIVE

[110]Mr Shepherd stated in his affidavit that Mr Scott approached him to ask him to act as a consultant for a new business Mr Scott was setting up, that is Xclusive. They agreed that Mr Shepherd would receive commission at the rate of 5% to 15% on sales of tickets, depending on the tickets being sold.

[111]Mr Shepherd described his role in Xclusive in his affidavit of 13 October 2008. He said his role was strictly limited to acting as part of the sales team. He was not involved in the day to day running of the business. He dealt principally with his own corporate contacts and continued to acquire tickets for them from his contacts. He gave as examples the Six Nations Rugby, Cheltenham and Ascot.

[112]Mr Shepherd states that, with minor exceptions, he was not involved in any telephone sales or acquisitions of tickets for the Olympics. This was not something that he knew about, and it was not something that his corporate clients expressed an interest in. The exceptions were a few occasions when there was no one else in the sales department to answer queries from customers. He closed no deals and received no commission on the Olympics. He states that it never entered his mind that tickets sold for the Olympics might not materialise.

[113]Mr van Meel also stated in his witness statement that Mr Shepherd was a consultant to Xclusive. Mr van Meel also said Mr Scott and Mr Shepherd shared an office on a different floor from his own. He was aware that several times a week Mr Scott and Mr Shepherd met in what he referred to as the Boardroom. But he was not present. In cross-examination Mr van Meel accepted that Mr Shepherd was the moving force behind Xclusive.

[114]Mr Shepherd states that, as he had agreed with Mr Scott, he was retained by Xclusive as a consultant from October 2006 until March 2007 and received the sum of £50,589 gross for his services. He states that on 1 March 2007 he became an employee and remained in that capacity until 31 March 2008. He states that he was paid for this period the sum of £156,000 gross plus repayment of a car loan of £20,000, making a total remuneration for thirteen months of £176,000. He states that he was never a director or shareholder, and never took part in the management of Xclusive, and that he has no responsibility for any actions or inactions allegedly involving Xclusive after 31 March 2008.

[115]Mr Trace noted that £156,000 was very much higher remuneration than that recorded as paid to Mr van Meel and Mr Scott. He submits that that shows the true relative importance of these three individuals in the management of Xclusive.

[116]In cross-examination before me Mr Shepherd gave a more confused picture of his remuneration. He said the £20,000 was related to the arrangements with Jabac referred to below. He was unclear as to whether or not Mrs Shepherd was paid by Xclusive.

[117]There is a director’s loan account for Mr Shepherd in the ledgers of Xclusive. For dates in 2006 and early 2007 it shows many payments in five and six figures to Google. Mr Shepherd said that he and his wife made payments to Google for advertising and that Xclusive reimbursed them. Overall they amounted to £212,000.

[118]One matter which involved both Mr Shepherd and Xclusive is the arrangement with Jabac. Mr Shepherd explains that Jabac is a small finance company. Mr Shepherd in his affidavit recounted three such arrangements.

[119]Mr Shepherd stated in his affidavit that in September 2007 Mr Scott told him that Xclusive was having cash flow difficulties. Mr Shepherd stated that as a result he was concerned that he might not get his commission on sales of tickets for the Rugby World Cup. So he introduced Mr Scott to Jabac. Jabac agreed to advance money to Xclusive on condition that Mr and Mrs Shepherd acted as guarantors. Xclusive provided cheques payable to Mr and Mrs Shepherd which they endorsed over to Jabac. A total of £119,500 was advanced in this way, and all but a small sum (£137.35) was repaid.

[120]On 20 November 2007 (the day after the Claimants had commenced provision of their services to Xclusive) there followed a further similar arrangement under which Jabac advanced £50,000 to Xclusive. Mr Shepherd states that in consideration for this Xclusive would repay a loan which Jabac had made to Mr and Mrs Shepherd in the sum of £20,000 as deposit for a car.

[121]At the end of March 2008, after Mr Shepherd states that he had left Xclusive, Mr Shepherd agreed a third arrangement involving Jabac. He states that Mr Scott asked for a further loan of £60,000. Mr Shepherd states that of that sum, £43,432.64 was not paid, and he and his wife were liable for it under the guarantee. He states that repayment was made to Jabac from Mrs Shepherd’s bank account.

[122]This arrangement with Jabac is relied on by Mr Shepherd. He argues that he would not have done that if he had known that Xclusive was about to become insolvent. If I were otherwise persuaded that Mr Shepherd was a candid and reliable witness, I would attribute weight to this point. As it is, it does not seem to me to be a factor of great weight. The whole arrangement is obscure and irregular, like all of Mr Shepherd’s financial arrangements with Xclusive. I am unable to understand this particular one. What these arrangements do suggest to me is that the role of Mr Shepherd in Xclusive was not simply that of a consultant or employee, as he claimed. They are more consistent with him being the person behind that company.

[123]Mr Shepherd stated in his affidavit that the payments to Peachdrive referred to above were in respect of salary or commission due to him. Peachdrive had made a loan to him. A further payment of £10,000 made to on 22 April 2008 was also, he said, in respect of salary due to him for the period before he had left Xclusive.

[124]Mr van Meel said in his witness statement that when he spoke to Mr Shepherd in early January 2008 about his own disillusionment with Xclusive, he learnt that Mr Shepherd was also disillusioned with the way Xclusive was working out.

[125]Mr Shepherd in his affidavit states that he left Xclusive because he was not making enough money and thought that he could make more if he joined Mr van Meel who was setting up OLTE.

THE OTHER VENTURES OF MR SHEPHERD AND MR VAN MEEL

[126]The other businesses which Mr Shepherd had been involved in with Mr van Meel are pleaded in the Particulars of Claim in support of the allegation that Mr Scott and Mr van Meel were involved together in Xclusive as part of a fraudulent scheme. The Claimants alleged that in these ventures Mr Shepherd was involved in scams. Mr Shepherd denies this. There has been no finding in any other proceedings that these ventures were fraudulent. I am not myself in a position to make such a finding. I am trying this case only. But the events that did occur in relation to the other ventures do assist me in arriving at my conclusions in the present case.

[127]Mr Shepherd gave little if any disclosure in relation to these ventures. The evidence was initially in the form of documents, the authenticity of which is not in dispute. These documents were collected for the Claimants by its solicitors and produced by Mr Boyce, who gave evidence in 2009. His evidence was relevant to the investigations carried out, in so far as this did not appear from the documents. The evidence in relation to these earlier businesses was supplemented by the witness statement of Mr van Meel, and his oral evidence. Mr Shepherd does not refer to these matters at all.

[128]Mr Shepherd states that he has been involved in the ticketing and hospitality business for 25 years and that during this time he has supplied thousands of tickets. He has built up a loyal following of corporate clients. He gave some well known names. He accepts that a number of the businesses through which he supplied these tickets have failed in circumstances where tickets were not supplied. He refers to this as being an unfortunate matter, involving a limited number of tickets.

[129]The previous and subsequent ventures to which the Claimants refer were in relation to the following companies: i) In 1998: International Championship Management Limited (“ICM”), Mall Corporate Events Limited (“MCE”) and Pall Mall Limited (“PM”); ii) In the period 1999 to 2005: Sports Mondial; iii) From 2003: OLTS; iv) 2006: ATC and Tradeandbid.com Ltd (“T&B”); v) From early 2008: OLTE.

[130]PM was incorporated on 17 February 1992. Mr Shepherd was a director and Company Secretary until 22 October 1999. It was placed into liquidation on 11 March 2003. MCE and ICM were incorporated on 23 January 1997 and 20 November 1997 respectively, and placed into liquidation on 15 July 1998. The liquidation of ICM and MCE was caused by their failure to deliver a number of hospitality packages to the 1998 Football World Cup in France. The Liquidators brought misfeasance proceedings against Mr Shepherd. On 3 September 2007 (that is two months before the agreement between the Claimants and Xclusive) Mr Shepherd and his co-defendants settled these claims by a payment of £270,000. They made no admissions of wrongdoing. Mr Shepherd gave evidence that he was let down by his suppliers.

[131]Mr Trace submits that there are a number of points of similarity with the present case which are important. The ones that appear significant to me are that Mr Shepherd was a shadow director of ICM, as he accepted in evidence in 2009. (His directorships of MCE and PM were formally recorded at Companies House). In evidence Mr Shepherd explained why he was a shadow director. He said it was “strictly for competition”. ICM and MCE on occasions bid for tickets in competition with one another. Sellers of tickets might investigate who was behind companies bidding for tickets, and if they saw that the same people were behind both companies, they might not accept a booking.

[132]Mr van Meel first met Mr Shepherd when he took employment with PM as a member of the sales team. Within three months he states that he was virtually running the sales office. Mr van Meel accepted in evidence that in respect of PM, Mr Shepherd was one of the directors from whom he accepted instructions.

[133]Sports Mondial is referred to in para 8 above. The Directors’ Report for the year ended 31 March 2002 records that Mr Shepherd had been a shadow director during that period. Mr van Meel was also a director, and he signed this Report. Mr Shepherd held some of the shares in his own name, but other shares held in the name of Mr Schaverien were held as nominee for Mr Shepherd. He was the majority shareholder.

[134]Sports Mondial was a more substantial company than others which are referred to in this judgment. It had directors who had independent experience in the travel business.

[135]When Sports Mondial went into administration in 2005 the Administrator’s Report stated that the directors considered that the failure to supply tickets resulted in a loss to that company of £500,000.

[136]In his affidavit Mr Shepherd accepts that the failure was in circumstances where it failed to supply tickets. Mr Shepherd stated that this was a huge disappointment to him and cost him a vast sum of money. He had mortgaged his family home for a loan of about £1.5m to support this company.

[137]Mr van Meel gave evidence of how he too was involved in Sports Mondial. He followed Mr Shepherd from PM to Sports Mondial. Mr van Meel said that he was unaware at the time of the problems that led to the liquidation of Sports Mondial.

[138]In the period 1999 to 2006 Mr van Meel was at different times director of nine other companies operated by Mr Shepherd. Four of them were under the Mondial name, and were ticket agencies working in the secondary market. In respect of these companies Mr van Meel said in his witness statement that he had no active role.

[139]Mr van Meel said that Mr Shepherd was the moving force behind Sports Mondial. Mr van Meel gave evidence that he was working as the operations manager. He was responsible for recruitment, training and deployment of up to 50 personnel, for human resources issues, employment contracts and working standards, introduction of disciplinary rules and staff assessments and appraisals. He worked both in London and in New York, where Sports Mondial also had an office. Mr van Meel states that he was sent to New York to reorganise that office. He was not involved in buying or selling tickets. He states that that side of the business was Mr Shepherd’s responsibility.

[140]Mr van Meel was cross-examined both in 2009 and before me as to why he had become a director of Sports Mondial. It was suggested to him that he was asked to do this because of the impending disqualification of Mr Shepherd. In 2009 he answered after some hesitation that “Mr Shepherd wanted me to be a director because he had other constraints”. He was asked what those constraints were. He did not give an answer. He said he could not remember. He would not accept that the constraints were related to Mr Shepherd’s disqualification, but neither could he identify any other constraint. He agreed that Mr Shepherd worked full time at Sports Mondial. I find that the constraint was the disqualification.

[141]OLTS was another company that went into liquidation. It is referred to in para 92 above. In October 2005, while OLTS was in administration the administrator sold the business of OLTS to Xclusive for £50,000. But that sum was never paid. It too had problems arising out of failure to deliver tickets. Mr Shepherd states that he lost a considerable amount of money, and that again, it was in circumstances where the company was unable to supply tickets.

[142]In his witness statement Mr van Meel stated that he had no active role in the operation of OLTS. He said that he was unaware at the time of the problems that led to the liquidation.

[143]Mr van Meel was crossed examined as to his role at OLTS. He said he was a “paper director”. He was asked to explain that phrase. He said he had no day to day practical involvement in OLTS whatsoever. In the trial in 2009 Mr van Meel accepted that at this time he knew that Mr Shepherd was disqualified, and that it was likely that that was the reason why he, Mr van Meel, was appointed a director. In the trial before me he did not accept that he became a director because Mr Shepherd was disqualified. He said he became a director in the hope that that would result in higher remuneration. But it did not. Mr van Meel did accept that Mr Shepherd was the person who was behind OLTS. He said he became a director without knowing what the role of a director was, and he did not ask Mr Shepherd what the role was.

[144]In February 2004 Mr van Meel’s partner died. For nearly two years, until the end of 2005, Mr van Meel had no involvement in any of Mr Shepherd’s companies, and very little contact with Mr Shepherd.

[145]ATC was incorporated on 7 February 2006. Mr van Meel was a director from that date until 13 February 2006. He became Company secretary on 21 February 2006. Mr Scott was appointed a director on 6 May 2008 and ATC went into liquidation on 12 August 2008. He stated in his witness statement that Mr Shepherd contacted him and invited him to return to work. ATC was to be on a different model. It was not a ticket agency, but was to bring buyers and sellers together through a website. It was to make money by charging a commission. Mr van Meel called it the Stub Hub model.

[146]T&B was incorporated on 22 December 2006 and Mr van Meel was a director from then until 23 December 2007. From 15 January 2008 until 31 March 2008 he was Company Secretary. On 23 April 2008 Mr Scott became director and Company Secretary. The agreement for the sale of theonlineticketshop.com website (“TOTS”) by T&B to OLTE was made on 1 June 2008, and signed by Mr Scott and Mr van Meel respectively.

[147]Mr van Meel stated that ATC was funded by Mr Shepherd. Mr Shepherd denied this and said it was Xclusive that funded ATC.

[148]Mr van Meel accepted that he was aware at this time that Mr Shepherd was disqualified, but he was willing to participate in it because it was not in the business of secondary ticketing. Mr van Meel accepted that Mr Shepherd was guiding the commercial direction of ATC’s business, steering the project and helping with the development of the website. He said:

“My understanding was that he [Mr Shepherd] was involved in the management of the company”

. He also accepted that he was involved in the management of this company.

[149]In 2009 Mr Shepherd accepted that Mr van Meel became a director of ATC because he, Mr Shepherd was disqualified. Before me he denied that.

[150]Mr Shepherd asked Mr van Meel to be responsible for administration, including finding office premises, securing leases and other contracts needed to run a business, including to secure a bank account. He found the premises at 202 Blackfriars Road. No English bank was willing to offer credit card processing facilities. So Mr van Meel contacted Mr Felczer, who had sourced a provider for Sports Mondial.

[151]It took longer than expected to launch ATC, and the premises at 202 Blackfriars Road were underused. In fact, ATC was never to trade. It was in these circumstances that Mr Shepherd introduced Mr van Meel to Mr Scott. It was arranged, so Mr van Meel said, that Mr Scott would operate a new ticket agency business from the same premises, that is to say Xclusive. ATC never did succeed in entering the business planned for it, and it was relaunched as a ticket agency under the name T&B.

[152]On 4 February 2008 (while still at Xclusive) Mr van Meel set up, and was appointed director of OLTE. He found new premises for that company, started work at it on 1 April, and had the business running in June 2008. OLTE acquired TOTS. This was one of the websites formerly owned by Xclusive for which the Claimants provided credit card processing services. It was acquired by OLTE shortly after Mr van Meel and Mr Shepherd left Xclusive, in April 2008.

[153]As noted above, Mr van Meel said he was not entering business at OLTE with Mr Shepherd, but Mr Shepherd was going to be doing what he is good at, he was going to be the supplier of tickets.

[154]Mr Shepherd, on the other hand had said in 2009 that he was operating the business of OLTE with Mr van Meel. Mr Shepherd’s account is to be preferred on this point. Mr van Meel made a third witness statement dated 11 February 2010. From that it is clear that whatever the forms, there had been no change in the substance of the relationship between Mr van Meel and Mr Shepherd, and in the relationship of Mr Shepherd with companies with which he was involved. Mr van Meel states that Mr Shepherd was a consultant to OLTE, but in reality I find that Mr Shepherd remained in charge.

[155]Mr van Meel describes how he went on holiday in March 2009. When he returned from holiday there was someone new in the OLTE office, a Mr Triphook. Mr van Meel said he asked Mr Shepherd about Mr Triphook and was informed that he was a friend of Mr Shepherd, who worked for Mr Shepherd in the past, and was now working on a ticketing website unconnected with OLTE. Mr van Meel states that he was not happy that Mr Shepherd had someone working in OLTE’s office, but not on OLTE’s business. Mr van Meel complained, but there was little he could do. Mr Shepherd was the principal source of tickets for TOTS and OLTE and Mr van Meel could not operate without him. Mr van Meel duly completed forms appointing Mr Triphook as a director of OLTE and sent them to Companies House. From then on Mr van Meel states that he had no involvement in the day to day running of OLTE, and he resigned with effect from 1 June 2009.

[156]Mr van Meel attributed the failure of OLTE to the strain of this litigation, which prevented him from devoting to the business the time and thought that it needed.

OTHER CONSIDERATION RELATING TO MR VAN MEEL

[157]Mr van Meel gave evidence, which was not challenged, that he had spent his early working life in retail business. He listed three companies, two of them very well known companies, for which he had worked in sales and management in the period following 1988. These were in France. Mr van Meel is a gifted linguist, able to work in five languages, Dutch, English, French, Spanish and German. He moved to England in 1996 and worked for a ticket agency. He was responsible for day to day management of the office, including recruitment, training and development of the telesales staff. His role was operational, and not in the purchase or sale of tickets. It was from this company that he moved to PM.

[158]Mr van Meel states that on the sudden death of his partner he inherited a house in Chelsea now worth about £2m. Although the dates given above for the offices he held were the dates recorded at Companies House, in fact he had no active role in any company from his partner’s death on 9 February 2004 until the end of 2005. In the course of the proceedings relating to the freezing of assets no evidence has come to light that Mr van Meel received any financial benefit from the wrongdoing alleged against him.

[159]Mr Orr places much emphasis on the fact that Mr van Meel is independently wealthy. He submits that Mr van Meel had no motive to be involved in the wrongdoing alleged against him.

[160]Mr van Meel is clearly an intelligent and highly articulate person. His witness statement is lengthy. Mr van Meel was criticised by Mr Trace with some justification for his lack of candour in describing his relationship with Mr Shepherd, and in understating the importance of the roles that he played in different companies. He was at times evasive. As I have noted above, he was ready to turn a blind eye to what he did not want to know about (such as the judgments against Mr Scott). He was ready to deceive Barclays and others, by accepting appointment as a director while disclaiming the responsibilities which attach to that office. At both trials his stance was that the directorships did not really represent his true responsibilities, which were much less. That is what he meant by expressions such as being a paper director.

[161]Mr Trace referred me to a number of instances where Mr van Meel’s evidence before me differed from the evidence he had given in 2009. Some inconsistencies would not be surprising. Time has passed and memories fade. But I accept there are a significant number of differences, which I do not need to set out, and which give me serious doubts as to the extent to which Mr van Meel was trying to help the court.

[162]I also take into account the matters set out below relating to Mr van Meel’s communications with the Claimants.

OTHER CONSIDERATION RELATING TO MR SHEPHERD

[163]As set out above, Mr Shepherd’s arrangements for his remuneration by Xclusive are unclear. There is no dispute that he was paid considerably more than Mr van Meel, who in turn was paid more than Mr Scott. But it is not clear exactly how and what Mr Shepherd was paid, or how it was calculated.

[164]Mr Shepherd’s financial affairs were the subject of disclosure orders in the freezing injunctions. Mr Shepherd apparently has no bank account in his own name. Mr and Mrs Shepherd have the use of expensive houses and cars, but none of them are in Mr Shepherd’s name.

[165]Mr Shepherd was a poor witness. As already mentioned, although he had the benefit of very experienced advisers in 2009, the witness statement prepared for the trial is a mere two pages, supplemented by an affidavit prepared for an application to discharge the freezing order. These documents do not address the issues raised on the pleadings in a manner which is to be expected of a person facing allegations as serious as those made against Mr Shepherd. In addition he has made little disclosure.

[166]In oral evidence Mr Shepherd was argumentative and dismissive. He frequently responded to questions with his own question, although warned against doing so, both in 2009, and by me. I formed the view that he had little interest in assisting the court.

FINDINGS ON THE ROLE OF MR VAN MEEL AND MR SHEPHERD IN XCLUSIVE

[167]In my judgment Mr Scott was not managing the business of Xclusive. He was put forward by Mr Shepherd as the manager in order to conceal his own role. Mr Shepherd had effective management of Xclusive, together with Mr van Meel. The role of Mr van Meel was subsidiary to that of Mr Shepherd, but it was a role involving management responsibility.

[168]There is in my view no alternative to a finding that Mr Shepherd was controlling Xclusive. There is evidence that Mr Shepherd had the experience and knowledge of the sources of tickets to run such a business, and he had run Sports Mondial and other similar businesses in the past. But he had good reason not to appear to be controlling the business, because of his history of disqualification. There is no evidence that Mr Scott ever had any relevant experience. And there is evidence that Mr Scott was a chaotic person with a drink problem. So he is an unlikely candidate. There is no evidence that Mr van Meel had the experience or knowledge of sourcing tickets that was required for managing that part of the business, which is the main part of the business, of Xclusive. On the other hand Mr van Meel had demonstrated through his involvement in a number of Mr Shepherd’s other ventures that he had the ability to manage the other parts of Xclusive’s business.

[169]In addition, Mr Shepherd was paid at least £156,000 a year on his own evidence, and received the benefit of numerous payments made by Xclusive. His financial affairs are mixed up with those of Xclusive in a manner which strongly supports the inference that he regarded the company as his own. There is no indication that Mr Scott received any benefit other than a salary which would be modest for the responsibilities which Mr van Meel and Mr Shepherd attribute to him, and which was less than either of them were paid.

[170]The implications of this finding for this trial are very significant. It means that Mr Shepherd and Mr van Meel have been attempting to deceive the court by putting forward Mr Scott as the person really in charge of Xclusive, when he was not.

[171]So far as Mr Shepherd is concerned, his evidence was so poor that I accept it only when it is undisputed or confirmed by contemporaneous documents. So far as Mr van Meel is concerned, I do accept as true those parts of his evidence which do not exculpate himself. I reject those parts of his evidence which do exculpate himself. When his evidence differed from that of Mr Shepherd, I generally preferred the evidence of Mr van Meel. The evidence from Mr van Meel provides me with some material upon which to arrive at my finding that Mr Shepherd was in control of Xclusive, while at the same time I reject Mr van Meel’s evidence that Mr Scott was in control.

[172]In my judgment Mr van Meel was not candid with this court as to the true level of his responsibilities, in particular with Xclusive. They were ones which were commensurate with his appointment as a director. I refer to all the responsibilities he himself described, to his funding of the advertising costs of Xclusive, and of Mrs Shepherd’s car out of his own money, and to his participation as signatory to the very large payments in cash, and the payments for Mr Shepherd’s personal expenses, made out of Xclusive’s Barclays account. Also in his becoming a director for six weeks, there was deception. He deceived Barclays into believing that he was a director, when he had no real intention of accepting that appointment for any period beyond the minimum required to satisfy Barclays. His resignation as a director did not reduce his responsibilities. His responsibilities were real, and at least as great as those of Mr Scott, who became a director.

THE CONSPIRACY CLAIM

[173]The evidence of Mr Shepherd was that he was not involved in running the business of Xclusive, and in particular he was not involved in any acquisition of tickets for the Olympics. He said that he never attempted to acquire any tickets for the Olympics. And the clear implication is that he never intended to. It is equally clear that it was never part of the responsibility of Mr van Meel to acquire such tickets, and that he never intended to do so. So the question arises: who might have intended to acquire the tickets?

[174]The only third candidate was Mr Scott. But I have found that he did not attempt to acquire any tickets. In my judgment he never intended to do so. The fabrications about Ricky Smith and Peters Ticketing were deployed by him in an attempt to explain that someone intended to obtain the tickets. But I have rejected that version of events. It was in any event not a version of events that was put forward in evidence by or on behalf of Mr van Meel or Mr Shepherd. The fact that in March 2008 he visited China, apparently to establish an office, is a very small factor to weigh against the other factors I have referred to. In any event, I have no evidence as to what he was in fact doing on that visit.

[175]The answer to the question posed above can only be that no one on behalf of Xclusive intended to acquire tickets for the Olympics. In my judgment the claim in conspiracy is made out.

[176]This conclusion is supported by a consideration of the circumstances. Shortly before November 2007, Mr Shepherd had settled the misfeasance claim in the liquidation of MCE at a cost of £270,000. Mr Shepherd was also facing further disqualification proceedings, and was in fact disqualified as from 13 December 2007. Xclusive was in default with Optimal, and was facing the discontinuance of its credit card processing facilities from Optimal. The situation was dire for Mr Shepherd. According to his disclosures of assets, while he had significant assets at his disposal, he also had a very costly lifestyle. He had a history of working as a shadow director for companies which traded on the secondary market in tickets. Whether or not any of these earlier ventures had involved dishonesty on his part, he was well aware that the selling of tickets which were not in fact supplied could give rise to large losses. He had been accustomed to pass these off as business mishaps of a kind that occurs all the time. At one point he compared this to the well known practice of airlines which over book passengers. He omitted to take into account that airlines actually have seats to sell, whereas Xclusive never had a ticket for the Olympics. It is also the case that generally airlines have sufficient resources to be able to pay the refunds out of their own money, rather than out of that of their creditors. If they do not, then those responsible for their management may be in the same position as Mr Shepherd himself in these proceedings.

[177]The timing of the purported departure of Mr van Meel and Mr Shepherd from Xclusive is also important. I accept that they agreed to leave in January 2008. That was the point at which Mr van Meel accepts that he knew that Mr Shepherd was once again subject to disqualification under CDDA, and he knew what that meant. That was a few weeks after the Claimants had commenced providing the facilities (although the Claimants had not yet signed the agreement). Mr van Meel and Mr Shepherd knew that tickets for the Olympics were being sold by Xclusive. They told the Claimants that in the e-mail of 14 November 2007, and it appears on the company’s documents from October 2007 that sales were taking place. Mr Scott was not going to acquire the tickets. Mr Shepherd knew that because that was the arrangement he had made with Mr Scott, as I find.

[178]Mr van Meel knew it too. Mr van Meel does not say that Mr Scott had any background in acquiring such tickets known to him (Mr van Meel), but he does say Mr Scott had a drink problem and a chaotic management style. It would be fanciful to suggest that such a person was ever going to acquire tickets to the value of millions of pounds. In and from January 2008 the money needed to buy such tickets was being paid out, at times over Mr van Meel’s signature, in cash and in circumstances where, as Mr van Meel admitted, he had no means of knowing what the payments were for, or how the money was to be spent.

[179]So the effect of Mr Shepherd and Mr van Meel leaving the company was bound to be that no tickets were ever likely to be obtained. A crash was inevitable. But it was a crash that need not occur until months later, in July. By that time very large sums of money would have been received from the Claimants in respect of tickets sold, and paid out in cash, leaving Xclusive unable to pay the chargebacks.

[180]Mr Shepherd was the only person who might ever have had the skill and contacts to acquire the tickets. In fact I have no evidence that the ticketing arrangements for the Olympics were such that tickets could ever have been sold on the secondary market. There is a suggestion in Mr Scott’s Defence that there was a photo requirement. That is not evidence. In spite of it, I have assumed in favour of the Defendants that tickets for the Olympics could have been acquired on the secondary market.

[181]If Mr van Meel and Mr Shepherd did not intend to defraud the Claimants, then the only possible course open to them in January 2008 would have been for them to tell the Claimants that they were leaving the company, and so that no tickets were likely to be acquired. The company would have had to cease trading immediately.

[182]It also follows, in my judgment, that the purported departure of Mr Shepherd and Mr van Meel from Xclusive in March was no such thing. It may be that at that date they may have ceased to provide to Xclusive all the services they had been providing to it up to that point: that is services in relation to the acquisition by Mr Shepherd of tickets for other events, and general management services by Mr van Meel. But Mr Shepherd remained the moving force behind Xclusive. At the end of the 2009 trial the Claimants had conceded that the departure of Mr van Meel and in March 2008 was genuine. They withdrew that concession before me.

[183]Neither Mr Shepherd nor Mr van Meel has made any suggestion as to where the cash withdrawn from Barclays might have gone. No attempt has been made to identify the number and value of tickets sold for other events, and then to associate those figures with the amount paid out of Xclusive’s bank account. I have simply been referred to a number of invoices for other events and e-mails relating to them. The figures in the documents that I have been referred to do not appear to me to be material.

[184]The Liquidator and the Claimants have not traced where the cash has gone. Neither Mr Shepherd nor Mr van Meel made an accusation against Mr Scott that he has taken the money for himself, and there is no evidence that he did.

[185]It is true that there is no evidence that Mr van Meel has received any money from the fraud. But absence of evidence that something has happened is not the same as evidence that it did not happen. I make no finding as to whether Mr van Meel has profited from the fraud or not. I do not have to find why Mr van Meel may have been motivated to conspire with Mr Shepherd to defraud the Claimants. But I find it is probable that he did.

[186]Before reaching this conclusion in relation to Mr van Meel I considered the date from which Mr van Meel was likely to have joined the conspiracy. It is a possibility that in November 2007 Mr van Meel might not have known that Mr Shepherd never intended to acquire any tickets for the Olympics. It is a possibility that that might not have occurred to him until January 2008, when he learnt that Mr Shepherd was intending to abandon Xclusive and go to OLTE with himself. In the event, that would make little difference, because the bulk of the sales of tickets, and so of the fraud on the Claimants, occurred after January. But I reject that possibility.

[187]I have found that Mr van Meel was willing to deceive Barclays, and to turn a blind eye to the credit record of Mr Scott. He is prone to dishonesty. At the very least he was consciously indifferent as to whether Mr Shepherd ever did intend to obtain tickets for the Olympics. He knew of Mr Shepherd’s history of inability to supply the tickets he had contracted to sell. He did not seek any assurances or explanations from Mr Shepherd as to how the tickets were to be obtained. He was in any event reckless. In my judgment it is just not plausible that Mr van Meel did not know of the intended fraud as at the date of his meeting the Claimants’ representatives on 12 November 2007.

THE DECEIT CLAIM

[188]The case for the Claimants in deceit is now confined to two alleged misrepresentations referred to respectively as “the main sponsors representation” and the “legitimate and honest representation”. Other alleged misrepresentations originally pleaded and advanced in 2009 have been abandoned in the light of the evidence adduced in 2009.

[189]The two representations are pleaded as having been made by Mr Scott and Mr van Meel (not Mr Shepherd). But it was in fact made at the hearing against all three Defendants. It is said that Mr Scott and Mr van Meel expressly or impliedly represented that: i) Their business, carried on through Xclusive, was a legitimate and honest business which involved amongst other things, the legitimate and honest sale of genuine official tickets for the 2008 Olympics; ii) They and/or Xclusive were/was entitled to receive genuine official tickets for the 2008 Olympics from “main sponsors” of the Games.

[190]Mr van Meel said that he had consulted Mr Scott and Mr Shepherd and received their approval for the form of the e-mail of 14 November. In evidence Mr Shepherd was unclear as to how much of the e-mail he had approved (he pointed to one phrase which he said was wrong and which he would not have approved, relating to football). But in substance he accepted that he had discussed and approved the part of the e-mail relating to the Olympics before it was sent. I find that both Mr Scott and Mr Shepherd gave their approval to the passages upon which the Claimants rely in support of this claim.

[191]The circumstances in which the e-mail of 14 November came to be written are as follows. As noted above, faced with the crisis in Xclusive’s relationship with Optimal, Mr van Meel approached Mr Felczer to ask him to introduce another credit card processor. On 7 November he sent to Mr Santner at the Claimants a number of documents relating to Xclusive, to Mr Scott and Mr van Meel which the Claimants needed to see for compliance purposes. On 9 November Mr Santner asked for more documents. Mr van Meel attended the meeting on 12 November. Present for the Claimants were Mr Santner, Ms Christlein and Ms Ender.

[192]The Claimants’ representatives worked as a team. Ms Christlein and Ms Ender were both in the Compliance Department, of which Mr Nebelung was the head. Ms Ender was formally in charge of the file, but she had only a few months experience in the job, and was working with the assistance of Ms Christlein. Ms Christlein was experienced, and described her role as being a tutor. The meeting lasted two hours. Beijing was one of the topics mentioned, but it did not figure largely in the conversation.

[193]After the meeting Ms Ender looked at the four websites and on 13 November she wrote to Mr van Meel raising points on them. The points are detailed changes which the Claimants required to be made, including changes to the Beijing website, and to the Terms and Conditions.

[194]Mr Felczer gave some estimates of minimum and maximum volumes for the four websites. For Beijing they were a minimum of US$ 350,000 per month, a total of US$ 5-6 million for the year, and an average ticket price of US$ 500. For Xclusiveticket.com and Theonlineticketshop.com the estimates were somewhat lower, and no estimates were given for the fourth site, Eurofootballtickets2008.com.

[195]In response to the e-mail with these estimates, Mr Santner told Mr Felczer that the Claimants required: “… agreements that Xclusive leisure already have of cooperation with partners (ie Newcastle, UEFA, viagogo) and a statement from Geert van Meel on where sales for the different types of sport (i.e. rugby/cricket tickets only in the US, not in the UK). Basically the topics we discussed”.

[196]It was in response to that request that Mr van Meel wrote the email of 14 November (para 39 above) to confirm what had been discussed at the meeting. So that e-mail must be construed in that context. This e-mail was an important one for the Claimants. On 15 November Ms Ender asked for it to be sent with Mr van Meel’s written signature by fax or scan. He duly sent it the same day. She also asked for a copy of the agreement with Newcastle which Mr van Meel had told them that Xclusive had been negotiating.

[197]Formal approval had to be given by directors of the Claimants. To obtain this approval Ms Ender drafted a document with a heading translated as Credit Protocol. It was signed by her and Mr Nebelung in the first instance, and signed by the directors who approved it on 16 November. It identifies the client as Xclusive and specifically identifies the four websites, including the Beijing website. Nothing else in the document refers specifically to the Olympics. Details of Mr Scott and Mr van Meel’s positions and shareholdings are set out.

[198]There is a summary of the business which (it is now accepted) is not an entirely accurate account of what Mr van Meel had said and written. The mistake is in the words “various special agreements with several football clubs in which Xclusive has been authorised to sell tickets”. The only club mentioned had been Newcastle, and Mr van Meel had not said there was an agreement yet in place with that club. There is an assessment of the risk, which is stated as being “the amount of paid but not honoured tickets, which have not been delivered or could not be honoured due to an event being called off”. There is a note referring to Optimal. Mr van Meel had supplied some history of that relationship in the form of documents which the Claimants’ representatives had studied.

[199]The facility was put into effect as from 19 November. There was an issue as to whether it was confined at that point to mail order and telephone sales, as the Claimants contended, or whether it also included online sales, which is how Xclusive operated it. But nothing turns on that.

[200]The Claimants decided to demand terms which Mr Shepherd said were much more severe than those available from English banks (when English banks are willing to deal at all). The Claimants required a retention of 5% for 180 days, and they contemplated increasing that to 10%. There was a monthly service fee of €29, a fee of 0.45€ per transaction, and a chargeback fee of €25, plus a discount fee of 3.80% flatrate.

[201]As to the main sponsors representation, the critical words in the 14 November e-mail are:

“Euro 2008 Ticketing Is not really active, …. The tickets come from Football Federations all over the world who get allocation regardless of their interests/or location. Needless to say that countries in the former Russian Republic or any African Nations are [not] keen on European Football and therefore will be actively trying to sell their allocations. It is from those sources that we acquire our tickets. Beijing Ticketing This site is already up and running, and gets quite a bit of traffic, both through Google advertising and organic sales. Again the tickets are supplied by main sponsors trying to recover some of the enormous outlay of money they had to make in order to become an official sponsor.”

(emphasis added)

Beijing Ticketing

[202]Mr van Meel and Mr Shepherd contend that all the e-mail meant was that the tickets would come from sources who had obtained them, directly or indirectly, from main sponsors who, in turn, had obtained them directly from the event organisers. What Mr van Meel was concerned to make clear is that Xclusive was not a primary ticket agency, but a secondary agency.

[203]So far as the legitimate and honest representation is concerned, the Claimants rely not only on the e-mail of 14 November, but also on the terms of the websites set out above which they had invited the Claimants to read and which Ms Ender did read, as set out above.

[204]Mr van Meel and Mr Shepherd stated in evidence that Xclusive was a legitimate and honest business and they believed that. Mr van Meel said that there had been (as I accept) discussion at the meeting as to the legality of secondary ticket sales, with a particular focus on sales of tickets for football matches in England, as to which there are legal restrictions. Mr van Meel and Mr Shepherd said that Xclusive was selling tickets for many different events and that it had every intention of supplying them all.

[205]Mr Orr submitted that the legitimate and honest representation does not add anything to the conspiracy claim. I agree. Having decided the conspiracy claim as I have, my approach to the deceit claim must be very different from what it would have been if the deceit claim was the only basis of the claim.

[206]There is in particular no need for me to consider the very careful and detailed analyses that each party gave of the alleged representations and their precise scope. So I shall address this part of the claim only in summary.

[207]It is plain that Mr van Meel was representing to the Claimants that Xclusive intended to supply the tickets that it agreed to sell. That was clearly stated in the websites to which he referred.:

“…Buying tickets from BeijingTicketing will protect your purchase from frauds…We assure 100% guaranteed tickets delivery”

[208]Such a representation would in any event be implied.

[209]But I have already found that in relation to the Olympics that representation was false.

[210]The main sponsors representation therefore can have little impact on the outcome of this case. But in my judgment, in the context of the discussion that had taken place, and the request in the e-mail set out in para 195, what Mr van Meel was representing was something more than that the tickets ultimately derived from a main sponsor who had received them from the event organiser. He was not representing that Xclusive was obtaining them, or was expecting to obtain them, directly from a main sponsor. But he was representing that there was an agreement or arrangement under which he had reason to believe and did believe that main sponsors of these Olympics would make tickets available. It was not just a statement that for all events all tickets on the secondary market probably came from main sponsors. Other potential sources of secondary tickets were mentioned in evidence in general terms. For some events players or athletes might also receive tickets from the organisers. But there was no evidence that was the case for the Olympics. Another possible source is members of the public who no longer can, or wish, to attend the event in question. These were not likely to be very large numbers of tickets. The representation was made in a context where very large volumes of tickets were expected to be sold. Where such large volumes were to be sold the risk of non-delivery would be high if the source was purely speculative.

[211]In cross-examination before me Mr van Meel said that in relation to some events there were official agents from whom Xclusive received tickets, and that he had not made any specific remarks about the Olympics. I cannot accept that that is a possible interpretation of his e-mail of 14 November. As far as the Olympics were concerned, he said he was speaking from past experience of other Olympics, such as the winter Olympics in Utah. But for the Olympics he accepted that as far as he knew there were no arrangements in place with any sponsors. He said that the e-mail is really referring to the future.

[212]I accept that in part the e-mail was referring to the future. But it was also referring to the existing business. It says the site is already up and running. There was no basis for making the statement in so far as it did refer to the future. By this time Mr van Meel knew that Mr Shepherd had been disqualified in the past. And Mr van Meel’s experience with past events involving Mr Shepherd was not one where tickets were always delivered. That was the very reason why he had to go to Munich. There had been recent problems of non-delivery of tickets which led to the breakdown of relations with Optimal. And he had turned a blind eye to whatever it was that had led to the judgments against Mr Scott, about which he knew, but chose not to enquire. Past experience was no basis at all for saying what Mr van Meel did say in the e-mail. He could not honestly rely upon the mere assurances that Mr Scott or Mr Shepherd may have given as to the source of tickets, and he does not identify any specific information they gave.

[213]The representation was false when Mr van Meel made it on 14 November. I would in any event have concluded that Mr van Meel made this misrepresentation recklessly, if it had stood alone. In the light of the finding I have made on the conspiracy claim, I find that he knew that it was false. He had no real expectation that any Olympics tickets were going to be made available to Xclusive whether directly or indirectly from any main sponsor.

[214]Much time was spent in cross-examination of the witnesses for the Claimants, and in argument, on whether the Claimants had relied on the representations, and if so, whether these were causative of any loss.

[215]I did not find this part of the Defendants’ case at all convincing, and I reject it. It is beyond argument that the Claimants relied on the legitimate and honest representation. In my judgment they also relied on the main sponsors representation. They were concerned to know the risk they were accepting.

THE CDDA CLAIM

[216]The CDDA claim was added by amendment. Had it been included in the original claim I have no doubt that this case would have been brought in the Chancery Division. It is a matter for regret that a judge in this Division should have to address the issues that arise on this point, which would be much better decided in that Division by a judge with experience of company law.

[217]Section 15 of the CDDA provides as follows: “15 Personal liability for company's debts where person acts while disqualified(1) A person is personally responsible for all the relevant debts of a company if at any time— (a) in contravention of a disqualification order or disqualification undertaking or in contravention of section 11, 12A or 12B of this Act he is involved in the management of the company, or (b) as a person who is involved in the management of the company, he acts or is willing to act on instructions given without the leave of the court by a person whom he knows at that time to be the subject of a disqualification order or disqualification undertaking ….

(2) Where a person is personally responsible under this section for the relevant debts of a company, he is jointly and severally liable in respect of those debts with the company and any other person who, whether under this section or otherwise, is so liable.

(3) For the purposes of this section the relevant debts of a company are— (a) In relation to a person who is personally responsible under paragraph (a) of subsection (1), such debts and other liabilities of the company as are incurred at a time when that person was involved in the management of the company, and (b) in relation to a person who is personally responsible under paragraph (b) of that subsection, such debts and other liabilities of the company as are incurred at a time when that person was acting or was willing to act on instructions given as mentioned in that paragraph.

(4) For the purposes of this section, a person is involved in the management of a company if he is a director of the company or if he is concerned, whether directly or indirectly, or takes part, in the management of the company.

(5) For the purposes of this section a person who, as a person involved in the management of a company, has at any time acted on instructions given without the leave of the court by a person whom he knew at that time to be the subject of a disqualification order or disqualification undertaking … is presumed, unless the contrary is shown, to have been willing at any time thereafter to act on any instructions given by that person.”.

[218]For reasons given above, I find that Mr Shepherd was involved in the management of Xclusive throughout the period during which the Claimants were providing services to Xclusive (and for that matter since the incorporation of Xclusive). From 13 December 2007 he was disqualified. So s.15 (1)(a) is satisfied in respect of Mr Shepherd. In my judgment Mr Shepherd took part directly in the management of Xclusive, as he and Mr van Meel described. But if that is wrong, he did so indirectly (s.15 (4)). The fact that he was not a director does not preclude this conclusion, given the terms of s.15 (4). See R v Campbell

[1984] BCLC 83

(CA).

[219]For reasons given above, I also find that Mr van Meel was involved in the management of Xclusive throughout the period during which the Claimants were providing its services to Xclusive (and for that matter since the incorporation of Xclusive). He was involved in the dealings with Optimal. These and his dealings with the Claimants in November 2007 amounted to involvement in the management of Xclusive. They preceded the disqualification but indicate his level of responsibility, which did not diminish after the disqualification took effect. His own description of his responsibilities set out in para 94 above also demonstrates that he had the degree of involvement required to satisfy the statute. He was also Company Secretary and signatory on the Barclays account.

[220]He also acted on the instructions of Mr Shepherd given without the leave of the court at a time when he knew Mr Shepherd to be disqualified. In relation to Xclusive that was clear from his numerous references to taking instructions from Mr Shepherd, including in particular in signing cheques in the period from January to March 2008. For example, he signed the cheque for £20,000 dated 31 December 2007 in favour of Peachdrive because Mr Shepherd instructed him to sign it. And he signed the cheques cashed on 12 February 2008. Mr Shepherd accepts that he knew of the disqualification from the end of January. Moreover, Mr van Meel continued to act on the instructions of Mr Shepherd when he purportedly set up OLTE. That is demonstrated by his own description of how he came to appoint Mr Triphook as a director of OLTE. In my judgment Mr van Meel was willing to act on Mr Shepherd’s instructions from the moment he learnt that Mr Shepherd was disqualified, just as he had been willing to do so before that date. So s.15(1)(b) is satisfied in respect of Mr van Meel.

[221]It follows that the presumption in s.15(5) applies to Mr van Meel as from the end of January when he knew that Mr Shepherd was disqualified. The contrary has not been shown in relation to any subsequent period. Mr Trace invited me to infer that he must have known of the disqualification earlier than the end of January. That is plausible, but there is no evidence that he did. It is not something Mr Shepherd might have been expected to speak about more than he had to. I do not draw this inference.

[222]The only issue of substance under this head is the scope of the debts and liabilities referred to in s.15(3). Three alternative cases have been put forward to me. But first I summarise the factual context in which the issue arises.

[223]The Claimants issued regular statements in each of the three currencies US$, Euros and sterling, setting out the state of the account, with the bottom line being the settlement figure. It shows the amount payable by the Claimants to Xclusive (or the other way round) after deduction of each of the agreed fees and the retention.

[224]Counsel for Mr van Meel has helpfully prepared a spreadsheet showing these figures on a weekly basis for the whole period during which the Claimants provided the service. It shows the settlement figure was in favour of Xclusive for sterling and Euros until 15 June 2008, and for US$ until 13 July 2008.

[225]Mr Jonathan Crystal adopted the written submissions of Mr Michael Crystal QC prepared in 2009. He submitted that there is no reported judicial consideration of this point in the UK.

[226]Mr Crystal submitted that the relevant debts and liabilities in the present case were incurred when the commercial arrangement was entered into which gave rise to the claim made. He identifies this as a date before the disqualification on 13 December, namely 19 November at the latest (the date on which the services were first provided).

[227]He cited two Australian cases. In Hawkins v Bank of China (19920 10 ACLC 588; (1992) 26 NSWLR 562 and Russell Halpern Nominees Pty Ltd v Martin (1986) 4 ACLC 393. In Hawkins the Court of Appeal held there that a debt was incurred on the date the company in question entered into a guarantee and not at either of the later times at which default occurred or the guarantor was called upon to meet its obligation under the deed. Kirby J said at p598:

“The act of ‘incurring’ happens when the corporation so acts as to expose itself contractually to an obligation to make a future payment of a sum of money as a debt. The mere fact that such sum of money will only be paid upon a future contingency does not make the assumption of the obligation any less the ‘incurring’ a ‘debt’”

[228]Mr Orr adopted Mr Crystal’s submission. In the alternative he submitted that the debt was not incurred until the settlement figure required payment to the Claimants, namely 15 June 2008. As appears from his spreadsheet, the chargebacks were for the most part made after March, and of those much the greater proportion were made in July. Until 15 June, he submits, they are to be treated as having been paid by set off. So, he submits, there were no relevant debts or liabilities during the period up to the end of March.

[229]This submission was made on the assumption that the court would find that Mr van Meel had left Xclusive at the end of March. In the event I have not found that he ceased to be involved in the management of Xclusive at that date. I have found that Mr Shepherd and Mr van Meel continued to control Xclusive after that date, since I find that Mr Scott was himself controlled by Mr Shepherd and not independent.

[230]Before turning to the submissions of Mr Trace, I observe that the claim under s.15 is not as independent from the other two claims as might at first appear. The attraction of a cause of action under s.15 for a claimant is that it is not necessary to prove dishonesty or conspiracy. In a case under s.15(1)(b) the claimant also benefits from the provisions of s.15(5). These are very favourable to a claimant and very onerous to a defendant.

[231]But when it comes to s.15(3), while dishonesty is still not a necessary factor, it is, if present, a relevant one. The reason is that the question when a debt or liability is incurred depends on the circumstances of the case, and on the nature of the liability. Enquiry is directed by the subsection to the relationship between the company concerned and those to whom it incurs a debt or other liability. If there is no dishonesty, ascertainment of when the liability arises may be different from an otherwise similar situation in which there is dishonesty. So here, it is one thing to enquire when the liability of Xclusive to the Claimants was incurred under the Contract. It is another matter to enquire when the liability in the torts of conspiracy or deceit arose. Rights to restitution, or under a constructive trust, would be another matter again. Although Xclusive is not a defendant to this claim in tort, there can be little doubt but that it would be liable to the same extent as its officers and employees.

[232]The written submissions of the parties were mainly addressed to an assumption that there was no dishonesty. If there is dishonesty, the claim under s.15 appears to add little. Since I have found that the claims in conspiracy and deceit succeed, submissions as to when the liability would have been incurred if there had been no dishonesty are on a hypothetical basis.

[233]In his written closing submissions in 2009 Mr Trace distinguished Hawkins. He submitted that both the statutory and the contractual framework were different in that case. I prefer to say little on this topic, which would be best left to another case. I also note that by clause 20 the Contract is governed by German law, and that it is the subject of proceedings before the German courts. This adds to my reluctance to embark upon the question of when any debt or liability arose under the Contract.

[234]On the facts as I have found them to be, Mr Trace has a further argument. It is pleaded in general terms in the Particulars of Claim (as one of the unlawful means for the purposes of the conspiracy) that the Claimants paid the monies it did pay to Xclusive under a mistake of fact, alternatively of law. It is pleaded that the payments were made on the basis that they were legitimate payments for tickets which Xclusive intended to supply to its customers. But because this was not the intention in fact (as I have held) it is further pleaded that the money paid to Xclusive was subject to a trust, resulting or constructive.

[235]That case is certainly a very plausible one. But it was not developed in the evidence before me. I heard no evidence, and was not taken in detail to the documents, to show how the demands for payment were made on behalf of Xclusive, or how a decision to make the payments was made on behalf of the Claimants. In these circumstances I do not think it right for me to uphold this submission.

[236]In the part of his 2009 written closing submissions relating to this part of the conspiracy case, Mr Trace referred to Neste Oy v Lloyds Bank plc

[1983] 2 Lloyd’s Rep 658

at 666 where Bingham J said that a constructive trust would be inferred from the time the money was received. He also referred to Re Farepak Food Gifts Ltd (in administration)

[2007] 2 BCLC 1

to similar effect. In his closing submissions before me, Mr Trace related these submissions to the timing of the liability that was incurred for the purposes of s.15(3).

[237]In the event that a decision of mine on this point becomes significant, I would reject the submission of Mr Crystal that the liabilities in this case arose on the making of the Contract on 16 November, and so before the disqualification. I would hold that no liability was incurred until at the very least the Claimants had made the first payment to Xclusive under the Contract, and that liabilities under the Contract arose, if at all, as each payment was made by the Claimants to Xclusive. I would therefore reject the submission that no liability arose at the time Mr Shepherd was disqualified.

[238]Since I have held that Mr van Meel and Mr Shepherd continued to be involved in the management of Xclusive after 30 March, it follows that nothing turns on whether the liabilities of Xclusive to the Claimants under the Contract arose before that date, or only in June and July 2008. Either way, they arose while Mr van Meel and Mr Shepherd were involved in the management of Xclusive. I understand it to be common ground that at the very latest the liabilities arose in June and July.

[239]When circulating this judgment in draft I stated that if, contrary to my understanding, the claim under s.15 of CCDA adds anything to the claims in tort which I have held succeed, I would hear further submission form the parties upon the issues that arise under s.15 (3) as to the date at which debts or other liabilities of Xclusive to the Claimants were incurred. Neither parties asked me to hear submissions on this point.

WRITTEN SUBMISSIONS AFTER JUDGMENT

[240]The order of Eady J provided for an adjournment between the end of the evidence and that speeches commence on 3 March. This was subject to any direction I might make. During the hearing Mr Crystal submitted that speeches should all take place within the same week as the hearing. He submitted that an adjournment would be unduly onerous for Mr Shepherd.

[241]I took the view that in the light of the very substantial written arguments that had been submitted both in 2009, and to me at the start of the hearing, there was unlikely to be a need for an adjournment to 3 March. But I did ask for a chronology of the dates to which Mr Trace had made particular reference. Another document submitted after the end of the hearing was one giving transcript references to points Mr Trace made in his closing speech relating to the oral evidence. No point arises out of the chronology which was supplied to me. Mr Crystal objected to the document with transcript references.

[242]Accordingly, I drafted my judgment without reading the document with the transcript references. When I had completed the draft I did look at that document. It appeared to me to be confined to documentary references to points which I had heard orally, and which I had already taken into account in my draft judgment. I did not find it necessary to alter the draft, and so the document has not affected the result.

[243]Subsequently counsel for the Claimants sent to me transcripts of two further authorities: In re Market Wizard Systems (UK) Limited Carnwath J (unreported 14 July 1998) and Hill v Secretary of State for the Environment Food and Rural Affairs

[2005] EWHC 696 (Ch)

. I read these, but have not altered my draft judgment as a result, and so have invited no further submissions from Mr Crystal.

CONCLUSION

[244]The claims in conspiracy and deceit, and the claim under s15 of CDDA, all succeed and judgment will be entered against all three defendants.