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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Quiet Moments Ltd, Re [2013] EWHC 3806 (Ch) (04 December 2013) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2013/3806.html Cite as: [2013] EWHC 3806 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF QUIET MOMENTS LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986

		Royal Courts of Justice Strand, London, WC2A 2LL
		4 December 2013

Stephen Jourdan QC:

Introduction

1. These proceedings relate to a company called Quiet Moments Limited ("QML"). There are 100 issued shares in QML. At the moment, they are all registered in the name of Jean-Paul Tolaini (often referred to in the documents as "JP"). There is a dispute as to the entitlement to those shares. One of the individuals who claims to be entitled to shares, Mr Alun Dufoo, seeks an order for the winding up of QML under s.122(1)(g) of the Insolvency Act 1986 on the ground that "the court is of the opinion that it is just and equitable that the company should be wound up".
2. QML has only one asset - a right to a share in the profits from the development of a building at 6 Upper Brook Street in Mayfair. 6 Upper Brook Street was purchased in October 2011 by Bridleway Limited, a company in the McLaren group of companies ("McLaren"), with a view to redeveloping it. McLaren was introduced to the property by a company called C Group Developments Limited ("C Group"), which in turn was introduced to the property by QML. There is an agreement between McLaren and C Group for C Group to receive a share of the profits from the development. There is also an agreement, dated 14 March 2012 ("the Profit Sharing Agreement"), between C Group and QML for QML to receive in turn a share those profits. The parties' estimates as to what the ultimate share of profit which will be paid to QML under the Profit Sharing Agreement have varied. However, clearly there has been thought to be enough money at stake for the right to share in it to matter a great deal to the parties.

The issues

3. QML was incorporated in May 2008, and either then, or at some point subsequently, the one subscriber share was issued to Mr Tolaini. On 7 September 2008, 99 shares with a par value of £1 each were issued, with 73 allotted to Mr Tolaini and 26 to Mr Dufoo. That left Mr Tolaini with 74 shares and Mr Dufoo with 26. They were both appointed as directors.
4. Mr Dufoo says that, before that happened, in early September 2008, he agreed with Mr Tolaini that Mr Dufoo would be allotted half the shares in the company, and he is therefore entitled, as against Mr Tolaini, to half the shares in QML. Mr Tolaini denies that. This is the first issue for me to decide ("the 50/50 Issue").
5. In January 2010, Mr Dufoo executed a stock transfer form, transferring his 26 shares to Mr Tolaini, and gave the form to Mr Tolaini. This was because Mr Dufoo thought he might separate from his civil partner, and wished to protect his assets. Mr Dufoo says he told Mr Tolaini to do nothing with the form. Mr Tolaini says he was asked to register the shares in Mr Tolaini's name and did so. Mr Dufoo now seeks an order transferring the 26 shares back to him. Mr Tolaini makes no claim to these shares himself. But he is concerned because of a claim to these shares made by the liquidator of a company called Morlan Limited ("Morlan"). This was Mr Dufoo's company - he owned all the shares in it. It traded as Hogarths. It went into creditors voluntary liquidation on 13 May 2010. Bernard Hoffmann and Ian Yerrill of Gerald Edelman were appointed joint liquidators. Mr Yerrill, one of the liquidators, has asserted that the 26 shares were paid for using Morlan's money, so the shares belong to Morlan. However, Morlan is not a party to these proceedings. What should be done about the 26 shares? That is the second issue for me to decide ("the Morlan Issue").
6. In March 2011, Mr Tolaini asked Mr John Pannell, the Third Respondent, to lend money to QML. Over the course of the next few months, Mr Pannell paid a total of £60,000 to QML, and he procured the trustee of his pension fund, DA Phillips & Co Limited ("DAP"), to pay £20,535.48. Mr Tolaini agreed to transfer 9 of his shares to DAP. On about 6 October 2011, a written shareholders' agreement was entered into by Mr Dufoo, Mr Tolaini and DAP ("the Shareholders Agreement"). This said that the 100 shares in QML were held as to 26 by Mr Dufoo, as to 9 by DAP and as to 65 by Mr Tolaini.
7. The third issue I have to decide relates to the terms on which that money was paid. Mr Pannell and DAP say that there was a binding agreement between Mr Pannell, Mr Tolaini and QML under which:

(a) QML is liable to repay the principal £60,000 to Mr Pannell and £20,535.48 to DAP.

(b) QML is liable to pay Mr Pannell one third of the amount payable to QML in respect of the development of 6 Upper Brook Street, less the principal of £80,535.48, with a guaranteed minimum amount payable of £130,000 (including the principal).

(c) QML and Mr Tolaini are jointly liable to ensure that this £130,000 is paid directly to Mr Pannell by C Group.

(d) DAP is entitled as against Mr Tolaini to require him to transfer 9 shares to DAP, and Mr Pannell is entitled as against Mr Tolaini to require him to transfer 26 shares to Mr Pannell, in both cases to be held as security for payment of the amounts specified above, and to be transferred back to Mr Tolaini on payment of the amounts due.

8. Mr Tolaini originally denied this. But shortly before the trial, he entered into a settlement agreement with Mr Pannell and DAP in which he accepted Mr Pannell and DAP's case on this point.
9. Mr Dufoo originally concurred with Mr Pannell and DAP's position on this issue. But on the first day of the trial he amended his pleadings, with my permission, to take up the position previously adopted by Mr Tolaini. He says that, although there were negotiations about terms of that kind, no binding agreement was ever reached. Therefore the money is repayable on demand, without interest. I have to decide whether there was a binding agreement between Mr Pannell, QML and Mr Dufoo as to the terms on which the £80,535.48 was paid and, if so, what those terms were and, if nothing was agreed, what the position is ("the Loan Terms Issue").
10. The fourth issue arises out of the Shareholders Agreement ("the Shareholders Agreement Issue"). I set out the terms of this below. It imposes obligations on the parties and, if a shareholder commits a material breach of those obligations, allows for the compulsory acquisition of their shares by the other shareholders if the defaulting shareholder fails to remedy the breach within 28 business days of notice to remedy the breach being served by all the other shareholders. Mr Dufoo says that Mr Tolaini committed material breaches of the Shareholders Agreement which entitle Mr Dufoo to require Mr Tolaini to transfer all Mr Tolaini's shares to Mr Dufoo at subscription value i.e. £1 per share. He accepts that no notice was served requiring breaches to be remedied. But he says the breaches were irremediable so no notice was needed. He says that, in any event, he is entitled to damages for the breaches. Mr Tolaini says that Mr Dufoo committed material breaches which entitled Mr Tolaini to require all Mr Dufoo's shares to be transferred to Mr Tolaini at £1 per share. He too accepts that no notice was served requiring breaches to be remedied. Neither party contends that the right to require shares to be transferred at subscription price is void as a penalty. Thus it is necessary to decide if there were material breaches on either side and whether the absence of a notice to remedy is fatal to the claims.
11. The fifth issue is this. In his closing speech, Mr Shaw, counsel for Mr Dufoo, applied for permission to amend Mr Dufoo's Points of Claim to allege that Mr Dufoo is entitled to 36 shares, based on evidence from Mr Tolaini that he had agreed, in early 2012, to transfer Mr Dufoo an additional 10 shares. Mr Tolaini opposed that application. I need to decide whether to permit that amendment and, if I do permit it, whether the claim is a good one ("the 36 Shares Issue").
12. The sixth issue is whether I should make an order for the winding up of QML ("the Winding Up Issue"). Mr Dufoo says that I should, because the shareholders do not trust each other, and it is desirable that an independent third party should have charge of getting in the money which will, in due course, be payable by C Group and distributing it. Mr Pannell and DAP are neutral on this issue. Mr Tolaini opposes the application because a liquidator will charge fees, which may be substantial, and he suggests that once the shareholding issue is sorted out, the parties will be able to agree between them on a method of collecting and distributing the money. It was accepted by Mr Tolaini that QML operated as a quasi-partnership between Mr Tolaini and Mr Dufoo and that, as a result, they owed each other duties of good faith. He also accepted that Mr Dufoo had standing to present the petition. Both of those concessions seemed to me right on the basis of the undisputed facts and the authorities cited.
13. At the trial, Mr Dufoo was represented by Mr Shaw, and Mr Pannell and DAP by Ms Den Besten and Mr Tilley. Mr Tolaini appeared in person. He had been represented by solicitors and counsel until about 3 weeks before the trial, but was unable to afford to pay for them to represent him at the trial.

The witnesses

14. The following witnesses gave oral evidence at the trial: Mr Dufoo, Mr Tolaini, Mr Pannell, Mr Longley, Mr Sole, Mr Spreyer, Mr Bates, Ms Turtle, Mr de Palma, Mr Mansoori. Three witness statements were put in under the Civil Evidence Act 1995 by Mr Tolaini. One was from Mr Coleman, to which no objection was taken, as his evidence was, for the most part, uncontroversial. The other two were from Mr Mycock and Mr Yerrill. As they were not available to be cross-examined, insofar as their statements deal with issues in dispute, I give their statements little weight.
15. As will become apparent when I summarise the facts, this is a case where the contemporaneous documents do not always give the reader a clear or consistent picture of what was happening. It is, therefore, very important to decide what weight to give to the evidence of those involved about their recollections of events.
16. As will be seen, Mr Dufoo has admitted to altering the text of two emails to support his case. Further, he maintained, for over a year, a denial in his pleadings, supported by a statement of truth, that he had made an alteration to one of them. He also wrongly claimed, for a long time, that his signature on a stock transfer form had been forged by Mr Tolaini. Only after an independent expert reported that the signature was genuine did he withdraw that allegation, at which point he then felt able to give detailed evidence about the circumstances in which he had signed the document which previously he denied signing at all. In cross-examination, he frequently avoided answering questions, instead making general complaints about Mr Tolaini. For those reasons, I am unable to place any weight on his evidence, save where corroborated by other witnesses or by the documents.
17. Mr Tolaini is clearly intelligent, but sometimes he does not express himself very clearly. For the most part, I formed the impression he was doing his best to answer the questions put to him carefully and honestly. However, in relation to his evidence on the 50/50 Issue, he was much more hesitant about answering questions on that issue than on other issues. I am not sure if this was because he was being careful not to give evidence harmful to his case, or simply because his recollection on the relevant events, which for the most part were further back in time than those relevant to the other issues, was hazy. Either way, it means that I give much less weight to his evidence on that issue than on other issues.
18. Mr Pannell gave his evidence in a very forthright, and even occasionally aggressive way. Sometimes he seemed to me to be more intent on arguing his case than on listening to the questions and answering them. However, as I shall explain, I consider that his evidence is entirely consistent with the documents, and I was quite satisfied that, despite his sometimes truculent manner, he was giving an honest account of his recollection.
19. All the other witnesses were, I am satisfied, doing their best to honestly recall what happened.

The chronology

20. In this section of this judgment, I set out the material facts in chronological order, based on the documents and oral evidence.

The agreement between Mr Dufoo and Mr Tolaini to go into business together

21. Mr Dufoo is an estate agent. His business is conducted through limited companies, which trade as "Hogarths", based in Earls Court. One of the companies which traded as "Hogarths" was Morlan.
22. In about 2005 or 2006, Mr Dufoo was introduced to two individuals, Mr Tolaini, and his friend Rossano Mansoori-Dara. They were involved in a development being carried out at 225 Earls Court Road and they needed an estate agent. Over the course of the Earls Court Road project, Mr Dufoo and Mr Tolaini became close friends. Mr Dufoo's civil partner, Mr Ronan McKenna, and Mr Dufoo socialised with Mr Tolaini and his girlfriend, and Mr Dufoo and Mr Tolaini stayed with each other on a number of occasions. Mr Mansoori-Dara was referred to by the parties as "Mr Mansoori" and I will do the same.
23. Mr Tolaini, who traded through limited companies using "Colony" as his trading name, had a number of development projects in the pipeline, in various locations around the world, including Bordeaux, Montenegro, Barbados, and Malaysia. There were a number of discussions between Mr Tolaini and Mr Dufoo, in which they agreed to go into business together to work on these various Colony developments and other development opportunities which they hoped would come to light.
24. Mr Dufoo's evidence was that the terms were agreed at the Rembrandt Hotel in Knightsbridge in or around early September 2008. His account was that Mr Tolaini said that, as an experienced estate agent, Mr Dufoo had contacts and the ability to bring deals in. Mr Tolaini had previously practised as a chartered accountant and would deal with the financing and administration of the venture. Mr Tolaini claimed that he had a "deal flow" himself of properties which he could bring to the table. They would be 50/50 partners in all Colony future ventures. Mr Dufoo agreed to pay £200,000 for his 50% of Colony Group. He was basically buying into a deal flow and understood that the £200,000 would go into the joint venture. Mr Tolaini was always short of money. He said that he did not have the funds at present to inject money into the Colony Group himself but that he would inject a corresponding amount for his 50% once he had funds available to do so and that in the meantime any dividends or returns would take account of the fact that Mr Dufoo had paid money in and he had not. As Mr Tolaini paid in his financial contribution, then Mr Dufoo's money would be paid back pro-rata to redress the imbalance of investment. Mr Tolaini gave him a spreadsheet with a breakdown of the £200,000 into monthly instalments. Mr Dufoo started paying in accordance with it but it was varied by agreement many times. Mr Tolaini was always saying that he needed more money one month or that the payments needed to change here and there, and Mr Dufoo went along with his requests without thinking about it too much.
25. Mr Tolaini could not remember any particular meeting at which the terms of the joint venture were agreed, but he did recall a series of discussions leading to an agreement that he and Mr Dufoo would go into business together. His evidence was that Mr Dufoo had agreed to pay £200,000 for a share of the Colony business. Originally it was to be 25%, but Mr McKenna had suggested it should be 26% and Mr Tolaini agreed to that. The allocation of a 26% share was on the basis that Mr Dufoo's share would be increased in the future, but with no definite time and nothing agreed categorically.
26. What is common ground is that they agreed that they would incorporate special purpose vehicles to carry out individual property developments, that Mr Dufoo was to pay £200,000 in instalments for his interest in the Colony business (whatever that interest was), and that Mr Dufoo was buying into a deal flow rather than buying a share of existing assets.
27. Mr Dufoo has produced schedules showing the payments made to Mr Tolaini, or to Romain Durandau who worked for Colony, which add up to £201,804, paid between March 2008 and April 2010, with one additional payment on 12 March 2012 which I think must relate to something else, as it was made after the present dispute began. Of those payments of £201,804, a total of £143,304, about 70%, came from a bank account in the name of Morlan. I did not understand Mr Tolaini to question the accuracy of these schedules.

The issue of the shares in QML in 2009

28. QML was incorporated on 21 May 2008. Either then or thereafter, Mr Tolaini acquired the one subscriber share and was appointed as a director.
29. In June-August 2009, Mr Tolaini wrote to Mr Paul Curtis, a company formation agent, and asked him to deal with the allotment of shares and appointment of directors. Mr Dufoo was allotted 26 shares and Mr Tolaini 73 shares, which with the one subscriber share meant that Mr Tolaini held 74 shares. Mr Dufoo was appointed as a director.
30. On 30 June 2009 Mr Tolaini sent Mr Dufoo an email which says: "As requested, a short note to confirm recent receipts of your purchase of 26% of Quiet Moments Limited, per our heads of terms". There then followed a list of payments made between 8 May and 23 June 2009. This supports Mr Tolaini's case on the 50/50 Issue.
31. Mr Dufoo said that, although Mr Tolaini and he had been talking on a regular basis about what was going on in relation to the "Colony Group" for nearly a year at this point, this email was the first mention of him only getting 26%. He said that Mr Tolaini explained that, although they had agreed 50%, initially he would only be able to give Mr Dufoo 26% of the shares in QML. He said something like "I've put it down as 26%" although he acknowledged to Mr Dufoo that the deal was 50/50, and that it would be adjusted once they had a deal agreed i.e. they had found a suitable property deal for the joint venture. He said on various occasions that Romain Durandau might have to be given some shares, depending on whether he brought in any deals to the Colony venture but made it clear to Mr Dufoo that he would look after Romain from his shareholding and that Mr Dufoo's share was definitely 50% and that would be sorted out formally in due course. He said that, whenever Mr Tolaini talked about business, there would always be some complicated back-story that he would skim over quickly and say it meant that things had to be done a particular way, but that Mr Dufoo should not worry because Mr Tolaini was an accountant and he would sort it all out and in the end it would be as agreed 50/50.
32. On 19 August 2009 Mr Tolaini wrote to Mr Curtis saying: "Pls send docs to Alun s office. Share holding is 26 Alun 74 Mr Dufoo for now. Thanks." Mr Dufoo says that "for now" supports his case on the 50/50 Issue, but it is wholly equivocal. It is equally consistent with Mr Tolaini's case.
33. There is no email or letter from Mr Dufoo at this time complaining about the fact he had been allotted 26 rather than 50 shares. If it was true that the real agreement was that Mr Dufoo was entitled to 50 shares, this is very surprising. I find it difficult to believe that Mr Dufoo, who is an estate agent, would not have ensured that there was a written record of his entitlement to an additional 24 shares if that is, indeed, what was agreed at this time.
34. On 20 August 2009, Mr Curtis wrote to Mr Tolaini and Mr Dufoo at Hogarths, saying that there was enclosed the final documentation for QML, with a list of the enclosed documents.
35. There are documents which record the transfer of the subscriber share to Mr Tolaini, the issue of 26 shares to Mr Dufoo and 73 shares to Mr Tolaini, and the appointment of Mr Dufoo and Mr Tolaini as directors. The dates on those documents do not match the emails referred to above, so that it appears that the company documents were backdated, but I do not think anything of importance turns on this.

The transfer of Mr Dufoo's 26 shares to Mr Tolaini in January 2010

36. In late 2009, Mr Dufoo experienced difficulties in his relationship with Mr Ronan McKenna, his civil partner.
37. Mr Dufoo said that Mr Tolaini suggested that Mr Dufoo should protect the shares in QML from any claim by Mr McKenna by putting them in Mr Tolaini's name. They were worthless at the time but they anticipated that the Colony Group would do well in the future and hence they would become very valuable. He said this idea was put to him by Mr Tolaini at a meeting with a solicitor at the offices of Horsey Lightly. Mr Tolaini then supplied a stock transfer form for Mr Dufoo to sign to transfer the 26 shares over to him. Mr Dufoo asked him again why he only had 26 shares in the company when they had agreed a 50/50 split and Mr Tolaini told some complicated story about how it was not possible at the time but that he would definitely "sort it out". Mr Dufoo then signed the stock transfer form, gave it to Mr Tolaini, and told him not to do anything with the stock transfer form unless and until told to.
38. Mr Tolaini said this was not right. Rather, Mr Dufoo asked Mr Tolaini to put the shares in Mr Tolaini's name and hold them as nominee for Mr Dufoo.
39. I accept Mr Tolaini's evidence on this. Mr Dufoo originally denied having executed a stock transfer form at all. Only when expert evidence established that he had, did he recall the circumstances in which he had executed it, as summarised above.
40. On 10 December 2009, Stephen Coleman, of Gerald Edelman, Mr Tolaini's accountants, sent an email to a colleague saying: "At present there are 26 shares issued to Alan Dufoo. These were transferred to Mr Tolaini on 1 April 2009. Please issue documentation to this effect and then update the annual return due 31 May 2009 to reflect the transfer." On 18 January 2010, Ms Hamill sent to Mr Coleman a stock transfer form transferring the 26 shares and said that Mr Dufoo needed to sign it and return it. There are then several documents dated 1 April 2009, but which were clearly signed in January 2010 and backdated.
41. There is a letter from Mr Tolaini which says: "Dear Alun, This is to confirm that I am holding 26 shares in Quiet Moments Limited on your behalf. I also confirm that we have agreed to allocate to you a further 14 shares, as soon as possible, bearing in mind your current situation." Mr Tolaini said that this was a receipt for the 26 shares, and said the agreement for the 14 shares referred to in the letter related to something to take place in the future. There were ongoing discussions about increasing Mr Dufoo's shareholding at the time, but nothing definite was agreed; Mr Dufoo wanted to know that he could increase his shareholding but there were no discussions about whether he would make any, and if so what, payment for doing so.
42. There is also the stock transfer form signed by Mr Dufoo transferring 26 shares to Mr Tolaini which I have already referred to, minutes of a meeting of the board of directors of QML, Mr Tolaini and Mr Dufoo, approving the transfer of the 26 shares, signed by Mr Tolaini, and a share certificate recording that Mr Tolaini is the holder of 26 shares.

The reconciliation between Mr Dufoo and Mr McKenna

43. Mr Dufoo then reconciled with Mr McKenna and moved back in with him in March 2010. After that, Mr Dufoo did not mention the stock transfer form again to Mr Tolaini. Mr Dufoo's evidence was that this was not a big issue in his mind, as Mr Dufoo had told Mr Tolaini not to do anything with the form and assumed he had not done so. Mr Dufoo said he then subsequently forgot about the stock transfer form. When this dispute began, in 2012, Mr Dufoo vehemently denied signing the stock transfer form, and accused Mr Tolaini of forging Mr Dufoo's signature on it.
44. On 27 April 2010 Mr Tolaini sent Mr Dufoo an email which stated as follows:

"For the avoidance of doubt, I write to confirm the position regarding the shareholding in the above company. I currently hold, on your behalf 26% of the Share Capital of QM Limited. This was in consideration for the £200,000 per our original agreement of which you have a signed copy. Furthermore due to several factors, we have agreed that you would receive up to 40% of the share Capital (including the 26%). The reasons include passage of time, monies injected (exact amount to be agreed for the purpose of bookkeeping) and just basically because we agreed this was fairer all round. As you know, we do have some minority shareholders we need to 'sort out', therefore, we have said all along we need to 'sit down and work it out'. Bearing in mind your other situations, this has gone to the bottom of the pile. One way or the other it is very close to 40%, as requested. The ratio between you and me WILL be 40/60 without a doubt, as agreed. It is a question of actual 'shares' that needs sorting. I am sorry if this has caused you anxiety, but the only reason this is such was to protect you, on two different occasions."

This clearly accords much more closely with Mr Tolaini's evidence on the 50/50 Issue than with Mr Dufoo's.

45. Mr Dufoo said that the email was bizarre and wrong, and that Mr Dufoo told Mr Tolaini, when he received it, that it should say 50% not 40%, and that Mr Tolaini had said he would adjust it, and not to worry, it would be 50/50. However, there is no email from Mr Dufoo in reply saying that, and I think it very likely that there would have been if it did not accurately reflect the position at the time. I regard this email as very important on the 50/50 Issue. It is a clear contemporary record of what had been agreed about Mr Dufoo's shareholding. Mr Tolaini had sold him 26 shares and subsequently had assured Mr Dufoo that he would end up owning about 40 shares. The wording of the email corroborates Mr Tolaini's evidence that the assurance that Mr Dufoo would get an additional 14 shares was an expression of Mr Tolaini's intention as to the future, with nothing definite agreed. In any event, Mr Dufoo has not made any claim that there was a binding agreement, made in 2010, that his shareholding would be increased to 40 shares.

Morlan goes into liquidation in May 2010

46. On 13 May 2010, Mr Dufoo, as sole shareholder of Morlan, passed a resolution that it be wound up, so that it went into creditors' voluntary liquidation and Ian Yerrill and Bernard Hoffmann were appointed as liquidators. The statement of affairs prepared by Mr Dufoo shows creditors totalling £252,112, of which HMRC made up £167,818, HSBC £60,000, and Mr Dufoo personally £14,000. The assets were shown as being £2,965. Mr Dufoo said that he spoke to David Murphy, Mr Yerrill's colleague, who was dealing with the liquidation on a daily basis on a number of occasions after it was put into liquidation and raised with him the implications of Morlan having paid money into Colony/QML. Mr Dufoo's evidence was that Mr Murphy had said more than once that he considered that the shares were worthless and the liquidators had no intention of making any claim to them, and that Mr Dufoo could do what he liked with them. There is no corroboration of this evidence.

The offer to purchase 6 Upper Brook Street in November 2010

47. On 29 October 2010, Mr Dufoo received an email from Francis Spreyer, one of Hogarths' property search specialists, about a leasehold property at 6 Upper Brook Street where a sale had fallen through at £8.1m. The seller's agents were Knight Frank. Mr Dufoo thought that the property offered the potential for profitable redevelopment and told Mr Tolaini, who agreed. They decided to make an offer to buy the property.
48. They realised that they could not raise enough money to buy the property themselves, and so they approached C Group, which is a company owned and controlled by Mr Mansoori and a business partner, Christopher Brown. The intention at that point was that a joint venture company, C Land Limited ("C Land"), would acquire the property. The shares in C Land would be owned 50/50 by C Group and QML. It was proposed that QML would raise its share of the purchase price from an undertaking called Future Capital, and that C Group would raise its share from McLaren, which was a construction and development company with which C Group had very close contacts, and which had been the contractor on the Earls Court Road project.
49. On 17 November 2010, Mr Spreyer sent an email to Knight Frank, the Vendor's agent, attaching a proof of funds letter from Future Capital Partners. It said: "I am forwarding a separate email in which you can see the profile of The Colony Group and the two equal partners Alun Dufoo and Jean-Paul Tolaini." The "profile of the Colony Group" was a brochure saying that the Colony Group had been founded in London in 2003 as a high end property developer, and listing two past developments and four current projects, in Mayfair, North London, Malaysia and France. The "team" was described as being Mr Tolaini, Mr Dufoo and Romain Durandau.
50. The statement in Mr Spreyer's email that Mr Dufoo and Mr Tolaini were "the two equal partners" gives support to Mr Dufoo's case on the 50/50 Issue. Mr Spreyer gave evidence, and said in his statement, and in his oral evidence, that this statement reflected what Mr Dufoo had told him, which I accept. So clearly by this point, in November 2010, Mr Dufoo regarded himself as an equal partner with Mr Tolaini.
51. The proof of funds letter was from Tim Mycock of Future Capital Partners, and said that Future Capital had:

"… been reviewing the proposal of the above project with Mr Tolaini and have a strong interest in developing this with the Colony Group, subject to the usual due diligence. We have known Mr Tolaini and his associates for many years and strongly believe they are the right individuals to complete this task. We are able to make sufficient funds available for this project, should we decide to take this project further. We also have very good relationships with Senior Lending institutions interested in developing this project with us, again subject to final reports etc."

52. A purchase (subject to contract) was then agreed with the sellers, and there was pressure to exchange contracts. QML instructed Solomon Taylor Shaw to act for them in relation to the purchase.
53. On 17 November 2010, Mr Tolaini wrote to Mr Dufoo asking: "Have you now formally acquired the shares from the liquidator of Morlan Ltd or do I need to chase up?" Mr Dufoo replied: "Need to chase" and Mr Tolaini responded: "Will do". On 18 November 2010, Mr Tolaini wrote to Mr Murphy, with a copy to Mr Dufoo, saying: "Please can you confirm that the shares in Quiet Moments Limited are now in Alan Dufoo's name. Morlan had acquired 26% of the A shares of the company. Please let me know what stage this process is at". I do not have any reply to that. This indicates that, in November 2010, both Mr Dufoo and Mr Tolaini regarded the 26 shares originally issued to Mr Dufoo as belonging to Morlan.
54. On 25 November 2010, Mr Tolaini wrote to Knight Frank in his capacity as a director of C Land, described in the letter as a joint venture between C Group and QML, offering £8 million for the lease of 6 Upper Brook Street. On 1 December 2010, Knight Frank wrote to Mr Dufoo saying that their client had accepted the offer.

Mr Sole's discussions with Mr Dufoo and Mr Tolaini

55. Starting at about this time, in late 2010, a Mr Giuseppe Sole, an accountant, was consulted by Mr Tolaini and Mr Dufoo in relation to a stamp duty savings scheme in connection with the proposed purchase of 6 Upper Brook Street. These discussions continued until early 2011. Mr Sole said in his statement that he had the majority of these discussions with Mr Tolaini alone, as he said he was dealing with the financial side as he was a former accountant himself, although there was also a meeting when both were present at Mr Dufoo's flat. Mr Tolaini and Mr Dufoo spoke to Mr Sole about 6 Upper Brook Street and said that this was something they were doing outside of Mr Dufoo's main business and would be the first of others. Mr Sole said that he understood from this and subsequent conversations that Mr Dufoo and Mr Tolaini were equal partners and were both shareholders in QML in their personal capacities. During numerous discussions which Mr Sole had with Mr Tolaini, Mr Sole's recollection was that Mr Tolaini always referred to the transaction being a joint investment between himself and Mr Dufoo on a 50/50 basis, through QML; that he and Mr Dufoo were equal shareholders in QML.
56. In cross-examination, Mr Sole said that he had prepared Mr Dufoo's tax returns for a number of years. He said that he had not recorded Mr Dufoo's interest in QML as this is not information required for a tax return; he was not aware that there had been any income from Mr Dufoo's 50% which would have needed to be referred to. He was not aware of any document recording Mr Dufoo's entitlement to 50% of QML.
57. Mr Tolaini said he could not remember having discussions with Mr Sole in which Mr Tolaini said that he and Mr Dufoo were 50/50 partners. He could not suggest any reason why Mr Sole would have formed that impression. The evidence of Mr Spreyer and Mr Sole makes it clear that, by this point, Mr Tolaini and Mr Dufoo had agreed to work on a 50/50 basis. However, what is not clear is if that was the result of a binding agreement, made at some point in 2010 after the email of 27 April 2010 referred to above, or whether the intention to work on a 50/50 basis was of the same nature as the intention recorded in that email, with Mr Tolaini agreeing that Mr Dufoo would get 50 shares in due course, but with no definite commitment as to when or in what circumstances. In any event, Mr Dufoo has not put forward a case that there was a new agreement at some point between May and November 2010 where, for valuable consideration, Mr Tolaini agreed to transfer to Mr Dufoo or hold for him an additional 24 shares.

The draft heads of terms relating to C Land in December 2010

58. In December 2010, draft heads of terms were prepared recording the proposed agreement between C Group and QML for the acquisition of the property in the name of C Land. These said that QML and C Group would both provide 50% of the overall equity, but that if one party did not provide its share of the equity funding, then a fee of 5% would be charged by the other party for raising the equity on their behalf, to be deducted from profits attributable to the paying party. Mr Dufoo said that he thought the financing, including negotiations with C Group, was mainly Mr Tolaini's department, but that Mr Dufoo expected Mr Tolaini to discuss the issues with Mr Dufoo and obtain his approval. He said that the draft heads of terms reflected what he understood was proposed.
59. At about this time, Mr Dufoo spent some time sorting out an issue about the status of the roof terrace, and which title it fell under. He said that this involved hours of meticulous searching through Westminster City Council's planning department's archives. Without this, he claimed, McLaren would not have been willing to proceed. Mr Tolaini did not dispute this, and it was confirmed by Mr Mansoori, who said that Mr Dufoo had done excellent work in enabling the project to go ahead.

The decision that the property would be purchased by McLaren in January 2011

60. By January 2011, the decision had been made that the purchase would be by a company in the McLaren group, and not C Land. On 25 January 2011, Mr Tolaini emailed Mr Mansoori, with a copy to Mr Dufoo, saying:

"Bearing in mind we are now using a McLaren vehicle to exchange the deal, Colony requires an undertaking from C Group that 50% of C Group's interest in this transaction is Colony's, subject to the heads of terms that governed the original agreement back in December 2010. Clearly we will need to formalize these but basically Management fees and Profit are split 50/50 between us, subject to an introduction fee on the equity, in the event that we do not bring at least 50% of the required equity to the deal. We expect to raise all the equity before completion."

61. On 28 January 2011, Mr Tolaini wrote to Mr Mansoori, with a copy to Mr Dufoo, saying that it had been agreed that:

"1 you have agreed terms from McLaren for the equity and that you will forward these to us for review asap;

2- we (colony /c group) have agreed terms on a strict 50/50 basis on everything, except equity raising 5% fee, but with a 25% 'collar' as detailed in my previous email of Wednesday and agreed by you;

3- we are going to instruct Scott [of Solomon Taylor Shaw] to exchange today;

4- that it is McLaren's wish to leave only a maximum of £2 Million equity in this transaction;

We intend to raise the £2.5 Million within 2/3 weeks, as discussed with Future Capital."

62. On 17 February 2011, Mr Tolaini sent an email to Mr Mansoori copied to Mr Dufoo, saying that a McLaren vehicle would purchase the property, and saying: "if either party raise more than 50% of the equity required, then a fee is charged at 5% of the 'extra' equity raised. In this case, assuming we raise our 50%, then you would charge a fee on half the equity. (I will provide illustration later)."
63. On 28 February 2011, Mr Tolaini wrote to Mr Dufoo saying the he had "renegotiated our deal to allow for 'equity fees' to come out of the JV 'pot' rather than our 'pot' this means we only pay half."
64. On the same day, he had an exchange of emails with Mr Mansoori on the topic, to which Mr Dufoo was not privy. These record an agreement that C Group would get a 5% fee on the equity committed, currently £4.75m, with a 50:50 split of the balance of profit between C Group and Colony.
65. It was Mr Dufoo's case that this change in the way that the equity fee was calculated was detrimental to QML, and initially it seemed to me that this was correct. Mr Tolaini attempted in his evidence to explain why it was not, and I am afraid at that stage I could not follow the explanation. However, in his closing submissions he clarified the explanation, in a way which satisfied me that the change made no difference. The point can be explained by taking sample figures. Assume that the equity is £4 million, that C Group raises £3 million and QML £1 million, and that the profit available for sharing is £2 million. Under the original proposed heads of terms, the calculation would be:

Profit	£2m
C Group's share:
Half the profit	£1m
Add equity fee for raising an extra £1m, at 5%	£50,000
Total to C Group	£1,050,000
QML's share
Half the profit	£1m
Less the equity fee due to C Group	-£50,000
Total to QML	£950,000

Under the new proposed terms, the calculation would be:

Profit	£2m
Less equity funding fee to C Group for raising £3m	£150,000
Less equity funding fee to QML for raising £1m	£50,000
Net profit for division	£1.8m
C Group's share:
Half the profit	£900,000
Add equity fee	£150,000
Total to C Group	£1,050,000
QML's share
Half the profit	£900,000
Add equity fee	£50,000
Total to QML	£950,000

So the change was simply one as to how the figures were to be calculated and made no practical difference.

66. My difficulty in understanding Mr Tolaini's explanation on this point when he gave evidence was symptomatic of a feature of his evidence. As I have said, my assessment of him is that he is intelligent, but sometimes does not explain clearly concepts which he has no difficulty understanding. This, I think, is what gave rise to the misunderstanding between him and Mr Pannell which I describe below.

Contracts are exchanged on 3 March 2011

67. Contracts to acquire the property by a McLaren company were exchanged on 3 March 2011. Completion was conditional on the seller using reasonable endeavours to obtain written agreement from the landlord to permit the continued use of a roof terrace and the reconfiguration of the property to provide up to 5 self-contained residential units. If such agreement had not been obtained within 6 months, the buyer could waive the condition and then completion would take place 6 weeks after waiver. Otherwise, the agreement could be rescinded by either party.

The initial discussion between Mr Tolaini and Mr Pannell in March 2011

68. In about early March 2011, Mr Tolaini asked Mr Pannell if he wanted to invest in the 6 Upper Brook Street project. Mr Tolaini told Mr Pannell that Mr Dufoo and Mr Tolaini had a company together, QML, which was entitled to a share of the profits of the Upper Brook Street development from one of Mr Mansoori's companies, C Group. Mr Pannell's recollection of the conversation was as follows:

"He asked if I was interested in putting £80,000 into the project in stages. I asked how much I would be getting back. He said that Quiet Moments was expecting to make about £150,000 profit on the deal, maybe more, and that we would split it 3 ways, so £50,000 (or more) each. Added to the, investment of £80,000, I would be looking at a minimum return of £130,000. I really wanted to pin [Mr Tolaini] down given the history and add a layer of protection so I made it a condition that I would get at least £130000 back and that [Mr Tolaini] would make sure it came directly from C Group to me. He told me that the plans for the property were not set in stone. Maybe it would be developed but what they were pushing for at that stage was to "flip" the property (i.e. sell the site on quickly) in which case I would probably only have to put in about £20,000 or £40,000 before the property was sold (depending on how many stage payments I had made) and Quiet Moments got its profit share. I said it sounded good but asked him to send my son an email with the details of what he was proposing so that I could think about it. I don't normally ask people to put things in writing but I was a bit suspicious about [Mr Tolaini] at this stage as so many things had gone wrong on Earls Court Road that I asked him to put something in writing in this case."

69. Mr Tolaini's recollection was different. He said that the proposal he put to Mr Pannell was that Mr Pannell would lend £80,000, to be paid in tranches. This would entitle Mr Pannell to be repaid £100,000, together with the same rate of return that McLaren would earn on their equity stake. So Mr Pannell would be entitled to be repaid £100,000, together with interest thereon at the same rate as the rate of return earned by McLaren on its equity investment in the property. The £130,000 was a payment on account of whatever was ultimately due to Mr Pannell – if he was due more, he would be paid more, if less, he would repay the excess.
70. On 10 March 2011, Mr Tolaini sent an email to Mr Pannell (at his son's email address), saying:

"As you know we have now exchanged on a new development at 6 Upper Brook Street, London WI. Total sales are around £16 million for the developed building. This will take around 18 months. McLaren Properties has committed all the equity, currently amounting to £4,5 Million. We have paid a deposit of £400,000 with a further £400,000 payable in a few months. McLaren cover all this.

As discussed with you, Colony needs working capital for ongoing expenses and we have discussed borrowing funds from on the following terms.

•      Initial advance of £20k now.

•      Further £10k ASAP (date to be confirmed)

•      Balance of £50k on or before 30 June 2011

•      This represents a total advance £80k.

•      This will give you £100,000 worth of equity 'in' the Upper Brook Street, at the same rate as McLaren.

•      This is forecast to return between £130,000 and £150,000 depending on a few variables in terms of senior bank funding and pre-sales etc.

•      The £80,000 is also guaranteed by Colony Group.

As you know, I need to sort the first payment ASAP as I need to keep many clogs oiled!

Please call to discuss. Thanks. JP"

71. Mr Pannell forwarded this email to the person he thought of as his accountant, Eric Longley. In fact, Mr Longley is not a qualified accountant, but he has substantial experience of tax matters and is a member of the Association of Tax Technicians. He prepares Mr Pannell's tax returns, and accounts, and gives him business advice from time to time. Mr Pannell asked Mr Longley to sort out the proposed deal with Mr Tolaini. Mr Pannell is a successful businessman, involved in the nightclub business. However, as both he and Mr Longley explained, he is not financially literate. For example, he could not read company accounts without assistance and would not know the difference between debt and equity finance. He relies on Mr Longley to protect his interests because he would not have the knowledge or ability to look after his affairs without professional help.
72. As will be seen, this was the first of a number of emails in which Mr Tolaini set out his understanding of the terms on which Mr Pannell's £80,000 was to be paid to QML in terms which accord with Mr Tolaini's recollection of what he agreed with Mr Pannell at the meeting in March 2011. All of the emails from Mr Tolaini consistently record that this was his understanding of those terms, and I have no doubt that it is what he understood those terms to be. However, having seen Mr Pannell give evidence, and having regard to other evidence which I will refer to below, I am equally sure that Mr Pannell came away from the meeting in March 2011 with the understanding I have set out in paragraph 68 above.
73. So the two men came away from that meeting with two different understandings of what was proposed. Mr Pannell thought that the proposal was that he would invest £80,000 in return for a one third share of the profits, with a minimum return of £130,000, to be paid to him direct by C Group. Mr Tolaini thought that the investment of £80,000 would entitle Mr Pannell to a minimum return of £100,000 plus interest on £100,000 at the same rate as the return on equity to McLaren. The £130,000 was to be a payment on account of the sum ultimately due to Mr Pannell, to be adjusted upwards or downwards depending on the actual amount due.
74. Mr Pannell does not allege that the discussion in March 2011 led to a binding agreement, and it is clear from Mr Pannell's own evidence that it did not. But there were no further discussions between them as to the terms on which the £80,000 was to be paid although there were, as will be seen below, discussions in July 2011 about providing security for the payments which were to be due to Mr Pannell.
75. Mr Dufoo said that, in about April 2011, Mr Tolaini told him he had been talking to Mr Pannell about him making a loan to QML. Mr Dufoo knew Mr Pannell's name because of his involvement in the Earls Court Road property. Mr Dufoo said that there was a possibility of Mr Pannell putting in £80,000 to be used for unspecified "operating costs" and that it was on the basis that he would put £80,000 in as a loan and get £110,000 back. His understanding of the deal with Mr Pannell, he said, remained the same thereafter. My assessment is that Mr Dufoo was told at the time by Mr Tolaini about the terms that Mr Tolaini thought he had agreed and that the evidence Mr Dufoo gave represents his imperfect recollection of those terms.
76. Mr Felix de Palma, Mr Pannell's financial consultant, was told by Mr Pannell, at about this time, that Mr Pannell had agreed to invest £80,000 in Upper Brook Street project in return for a one third stake. Mr de Palma said he knew no more about it than that at the time. That, of course, is entirely consistent with Mr Pannell's evidence.

Discussions about QML providing equity

77. At around that time, it was clearly still envisaged that QML might be able to raise some equity. On 14 March 2011, Mr Dufoo sent an email to Mr Tolaini saying: "It was always under agreement and in fact McLaren agreed directly with me that they were happy to reduce their input that they were happy to do this after exchange. I spoke to John Gatley during negotiations myself and he agreed that we would put in 50% after exchange". John Gatley was the managing director of McLaren.
78. On 8 April 2011, Mr Mycock of Future Capital sent Mr Tolaini indicative heads of terms providing for Future Capital to "source up to £3.5m equity in return for a pro-rata share of 65% of net profits", saying "these are not a formal offer".
79. It was Mr Dufoo's evidence that, McLaren decided, at about this time, that they wanted to provide 100% of the equity themselves. He said the reason given at the time was that they thought promotionally it would look prestigious for them to have the whole development credited to them. Mr Dufoo maintained that QML was ready willing and able to provide 50% of the equity through Future Capital, but McLaren did not want their money. Mr Dufoo said that what he had agreed with Mr Tolaini was that, in so far as QML or C Group fell short of raising its half of the equity and had to be "bailed out", so to speak, by the other side, then the reward for doing so was 5% of the extra finance raised. He said he did not expect, and would not have let Mr Tolaini agree on QML's behalf, for C Group to be rewarded for discharging QML' funding obligations in circumstances where QML was perfectly able to do so itself. I do not accept this and will give my reasons for rejecting this evidence later.
80. As between C Group and McLaren, there was, and is, an agreement that C Group would be entitled to 35% of the profit. Mr Mansoori said that this was not a binding agreement, but that he and his partner had a very close business relationship with McLaren and he was confident that it would be honoured. I did not understand this to be in dispute.

The attempt to negotiate the terms of the £80,000 payment in May-June 2011

81. From 8-19 May 2011, there was an exchange of emails between Mr Tolaini and Mr Longley about the terms of the proposed payment of £80,000 by Mr Pannell. Mr Longley asked questions, which Mr Tolaini attempted to answer, but Mr Longley was not satisfied with the answers.
82. While this exchange was taking place, on 16 May 2011, Mr Pannell received a phone call from Mr Tolaini asking for more money. Mr Tolaini said it was still the plan to flip the property but it would be about another month before this was done. Mr Pannell then paid a further £3,000 on 16 May 2011 to QML, taking the total paid to £10,000, in anticipation of terms being agreed.
83. There was a further email exchange between Mr Longley and Mr Tolaini on 26 May and 1 June 2011. In that exchange, Mr Longley said: "I am sorry I cannot advise John to go ahead with the funding." One of the reasons that Mr Longley gave was that there needed to be in place an agreement between QML, C Group and Mr Pannell that Mr Pannell got right of first recoupment of his investment.
84. That led to Mr Tolaini asking Mr Mansoori to write to Mr Longley about the right of first recoupment. On 2 June 2011, Mr Mansoori sent an email to Mr Longley (which Mr Longley then reproduced in his email to Mr Tolaini on 3 June 2011) saying:

"Further to telephone conversation, I write to confirm that, at your request, upon completion of the transaction of the development of 6 Upper Brook Street, London WI, C Group Developments Limited will pay Mr John Pannell directly the first £130,000 due to Quiet Moments Ltd, under the terms of the Heads of Terms we have agreed."

85. On the same date, 2 June 2011, Mr Tolaini sent an email to Mr Longley saying:

"I write to clarify my agreement with Mr John Pannell. John is to receive the same return on his money as the return on investment (ROI) that McLaren achieve on their equity in the deal. This is forecast to be around 35% p.a. i.e. circa 45% over 15 months. Clearly this is a matter between John and Colony rather than C Group and, subject to the deal itself, and the returns thereon. However, in order to facilitate this loan, I asked C Group to increase the 'priority' payment to John to £130k to provide some 'comfort'. If the above is not sufficient, please send me any wording you wish for me to use to explain this aspect of the transaction."

86. Mr Longley replied the next day, 3 June 2011, saying:

"I have received an email from Ross [Mr Mansoori] (see below). Can you let me have the email in letter form signed by Ross and sent to me I also need a letter from Quiet Moments Limited confirming that John Pannell is to be paid the first £130,000 due to the company and thereafter a profit share pari passu. Once I receive these I will have more formal agreements drawn up by John's lawyers for signature by yourself and Ross. Once I receive the letters (on company headed notepaper) I will inform John so that he can release the funds."

87. On the same date, 3 June 2011, Mr Tolaini wrote to Mr Longley on QML notepaper, clearly in response to Mr Longley's request for a letter from QML. The letter said:

"We write to confirm the position on the above loan and the associated repayment from our interest in the development known as 6 Upper Brook Street, London, W1. Quiet Moment has a 50% interest in the developer's profit in the transaction and our partners, C Group, have agreed to pay Mr John Pannell directly, the first £130,000.00 available to us from this transaction. The note from C Group was produced to simplify matters, at this stage. Quiet Moments limited has agreed with Mr Pannell that, in exchange for his £80,000.00 loan to Quiet Moment Limited, Mr Pannell will receive the following:

1 The first £100,000.00 of funds due to Quiet Moments Limited from the '6 Upper Brook Street' developer's profit.

2 Pro rata, the same return on the above £100,000.00 as received by the equity investors in the deal — currently McLaren Properties.

Latest forecast shows this should be circa 45%."

88. Also on 3 June 2011, Mr Mansoori wrote to Mr Tolaini, on C Group Developments Limited notepaper, repeating what he had said in the email referred to in paragraph 84 above.
89. The exchange of communications summarised in paragraphs 84-88 above records in writing the two different subjective understandings of Mr Pannell and Mr Tolaini about the proposed terms on which the £80,000 was to be paid to QML. Mr Longley had clearly been told by Mr Pannell that the terms were that Mr Pannell would get a one third profit share with a minimum of £130,000. And that is what Mr Longley recorded in his email of 3 June 2011: "John Pannell is to be paid the first £130,000 due to the company and thereafter a profit share pari passu". But Mr Tolaini made it clear in his email of 2 June and his letter of 3 June 2011 that this was not his understanding; he thought that the terms were that Mr Pannell would get £100,000 plus interest thereon at the same rate as McLaren's rate of return on their equity. The £130,000 was a payment on account of whatever sum was in fact due to Mr Pannell.
90. Mr Pannell said in his statement that, at this time, when he spoke to Mr Longley about the terms of the proposed loan, he was told that Mr Tolaini was impossible to tie down and that Mr Longley "had difficulty understanding what the terms of the agreement actually were". In the light of the above, that is not surprising. Despite this lack of clarity, Mr Pannell paid another £15,000 to QML in June 2011, taking the total amount paid to £25,000.

The subsequent discussion between Mr Tolaini and Mr Pannell in July 2011

91. At the beginning of July 2011, Mr Pannell had a telephone conversation with Mr Tolaini in which Mr Tolaini asked for more money. Mr Tolaini said the property was definitely not going to be flipped any more; they were going to go for the full development option, and that rather than this taking 18 months or so, it could take 3 or 4 years. Mr Pannell was concerned about this, and said he would only make up the £80,000 if it was backed by a transfer of a one third shareholding in QML. Mr Tolaini said words to the effect "let's not make it one third because that would be 33? shares; let's make it 35 shares because it's a round number". Mr Pannell agreed to that.
92. There was no discussion in the course of that telephone call about the terms on which the £80,000 was to be paid, only about the need for security for repayment of whatever amount was due to Mr Pannell. Pursuant to that conversation, Mr Pannell continued to make payments. He paid a further £5,000 on 11 July 2011, taking the total to £30,000.

The decision by Mr Pannell to use money from his pension fund

93. At this time, Mr Pannell was coming up to his 60^th birthday, which was on 27 July 2011. He had 2 personal pensions, and decided to use the money in them to complete the investment in QML. He talked to Mr de Palma and explained to him what he wanted to do. Mr de Palma said he could change the pension to a self-invested personal pension (a "SIPP") and then use the money to buy shares in QML. Mr de Palma then referred the matter to Mr Steve Bates, a pension transfer specialist, who put the paperwork together to change the pensions over.
94. Mr de Palma asked Mr Pannell for details about the company and this request was relayed to Mr Tolaini. On 27 July 2011, Mr Tolaini sent an email to Mr de Palma giving the company number, registered office, and current shareholding which was: "JP Tolaini 74. Alan Dufoo 26" which was forwarded to Mr Bates. That email supports Mr Tolaini's case on the 50/50 Issue. If there had been a binding agreement under which Mr Tolaini agreed that Mr Dufoo was entitled to 50 shares, the email would have said "JP Tolaini 50. Alan Dufoo 50".
95. In August 2011, Mr Pannell also made a personal loan of £5,000 to Mr Tolaini, which was quite separate to the £80,000.

The involvement of DAP and the background to the Shareholders Agreement September to October 2011

96. Mr Bates contacted DP Pensions Limited, a pensions administration company which specialises in administering SIPPs. DAP is a sister company of DP Pensions Limited, and DAP holds the assets which are the subject of the SIPPs. One SIPP which DAP holds is the Premier Trust, which is a master trust with approximately 2,000 members. Each member's assets are segregated and held for an individual member in their name. In Mr Pannell's case, his SIPP is administered under the name "The Premier Trust re JEV Pannell". Mr Bates arranged for £72,309 from Mr Pannell's two existing pensions to be transferred to that SIPP in two tranches, the first of £34,825 on 2 August and the second of £37,484 on 28 September 2011.
97. DAP required an unlisted shares application form to be completed. On 1 September 2011, Mr Pannell signed that form. It said Mr Pannell was to purchase 34 shares in QML. It said the current shareholders were Mr Tolaini with 74% and Mr Dufoo with 26%. It said the seller of the shares were Mr Tolaini and Mr Dufoo. This was sent to DAP.
98. At this time, Mr Tolaini was pressing Mr de Palma for the release of money. On 6 September 2011, Mr de Palma wrote to Mr Tolaini saying: "The purchase of the Quiet Moments Ltd shares should get approval tomorrow. I assume the seller of the shares will be both of the current shareholders i.e. JPT and AD. We will need to establish the number of shares to be purchased and the price per share. I would also expect that ordinary shares are the type of share that are being sold, and the total price will be the amount of funds that we are providing. Also confirm that JPT is the only Director. I am attaching a stock transfer form that needs to be signed by each shareholder that is selling shares and returned to me." Mr Pannell said in his oral evidence that Mr de Palma was acting with his authority.
99. On 7 September 2011, Mr Tolaini signed a stock transfer form transferring 34 shares to Mr Pannell. On the same day, Mr Tolaini wrote to Mr Longley, asking him to write to Mr de Palma saying that the profits attributable to QML from the 6 Upper Brook Street transaction were forecast to be circa £500,000, and that a 35% shareholding in QML was therefore notionally worth 35% of £500,000. The next day, 8 September 2011, Mr Longley wrote in those terms to Mr de Palma.
100. Also on 8 September 2011, Mr Tolaini signed a letter to Mr Pannell, which Mr de Palma had drafted at the request of Mr Bates, saying: "Following our meeting we are pleased to offer you 35 shares in Quiet Moment Ltd for the sum of £80,000 which equates to £2,281.72 per share." After his name were the words: "Quiet Moments Ltd T/A Colony Group". Also on 8 September 2011, Mr Bates wrote to Rebecca Weeks of DAP saying that the proposal was for Mr Pannell to buy £40,000 worth of shares via the pension scheme and a further £40,000 personally. The £40,000 worth of shares to be purchased by DAP would be purchased in two stages.
101. As is apparent from those emails, and as Mr Bates and Ms Turtle confirmed in their oral evidence, their understanding was that the proposed transaction was a simple one of purchase of shares. They knew nothing of the terms that had been discussed between Mr Tolaini and Mr Pannell.
102. At around this time, Mr Pannell made further payments to QML, taking the total he personally had paid up to £60,000. He was told by Mr de Palma that, since the pension trustees were now only going to pay £20,000 they could only have 9 shares in the fund. Mr Pannell said he assumed that meant the other 26 would be transferred to him automatically.
103. Ms Weeks then wrote to Mr Bates on 15 September 2011, saying that DAP required that a shareholders' agreement be entered into. Mr Bates relayed this requirement to Mr de Palma who passed it on to Mr Tolaini. He was unhappy about this requirement which he thought would cause further delays and costs.
104. Mr de Palma then purchased a draft shareholders agreement over the internet and, with the help of a solicitor friend of his, he adapted it for use for the proposed transaction. The draft shareholders agreement prepared by Mr de Palma was subsequently executed without any amendments.
105. Mr de Palma sent the draft to Mr Tolaini and asked him to get it signed by himself and Mr Dufoo. On 7 October 2011, Mr Tolaini wrote to Mr de Palma saying:

"Gents, is this a 'standard' shareholders agreement? Do I need to get it reviewed? Does it provide for John's exit? Should it not define its trade as restricted to 6 UBS rather than property development."

Mr de Palma replied on the same day saying:

"Hi JP, it is standard and in this case it is more for the benefit of the pension Fund trustees to be comfortable to make the investment. The real agreement is what you and Johnny have agreed. Once the 6 UBS is concluded we would sell back the shares to you for the agreed profit."

Mr de Palma did not discuss this exchange of emails with DAP.

106. Mr Dufoo said that, in early October, he recalled having dinner with Mr Tolaini. Mr Tolaini raised the topic of Mr Pannell's loan and said that the pension trustees had stipulated that the shareholders enter into a formal Shareholders Agreement, and he gave Mr Dufoo a copy, which Mr Dufoo signed. On 11 October 2011, Mr Tolaini sent him an electronic version of the Shareholders Agreement and the signature page.
107. On 7 October 2011, Mr Tolaini sent Mr Dufoo an email saying "Please note I transferred my shares to Mr Pannell for the sake of ease (rather than pro-rata you and I). Clearly we will incorporate a new 'colony' asap and attach 'our' shareholder agreement to it".
108. On 10 October 2011, Ms Turtle of DAP looked at the papers and said that the offer letter, which referred to 35 shares, did not match the shareholders' agreement, which referred to 9 shares. She said a revised offer would be needed. This requirement was relayed first to Mr Bates and then to Mr de Palma who arranged for Mr Tolaini to sign a further letter, addressed to "The Premier Trust, J Pannell". This said: "Following our meeting we are pleased to offer you 9 shares in Quiet Moment Ltd for the sum of £20,535.48 which equates to £2,28,1.72 per share." After his name were again the words: "Quiet Moments Ltd T/A Colony Group". This letter was dated 8 September 2011 but was clearly signed on about 13 October 2011. It was sent by Mr de Palma to Mr Bates and by him to DAP.
109. This letter was then passed to Ms Turtle and on 13 October 2011 she arranged for the shareholders agreement to be executed by herself and a colleague on behalf of DAP and for the £20,535.48 to be transferred to QML.
110. On 14 October 2011, DAP asked Mr Bates to arrange for them to receive a final signed version of the shareholders' agreement and a share certificate for the 9 shares. Mr Bates relayed this request to Mr de Palma. He said he would arrange for it, but did not do so, because, he said, he did not have access to a blank share certificate. He did not suggest he asked Mr Tolaini to arrange for a share certificate to be prepared and sent to DAP, nor did DAP chase for one.
111. Also on 14 October 2011, Bridleway, a McLaren company, completed the purchase of 6 Upper Brook Street.

The Shareholders Agreement

112. The Shareholders Agreement is dated 6 October 2011. The parties are stated in clauses 1.1 to 1.3 to be Mr Tolaini Mr Dufoo, "the Premier Trust JEV Pannell", and QML. It was executed by Mr Dufoo, Mr Tolaini and DAP.
116. Clause 4 recorded that Mr Tolaini and Mr Dufoo were, immediately prior to the agreement the existing shareholders, and that Mr Tolaini sold shares to The Premier Trust by an agreement with effect on 6 October 2011.
117. Clause 5 said:

"5.1 It is recorded that the Company was created with an authorised share capital of One Thousand Pounds made up by way of 1000 ordinary Shares of One Pound each. The said issued Shares in the Company are held as follows -

5.1.1 By Shareholder 1— 65 (65%)

5.1.2 By Shareholder 2 — 26 (26%)

5.1.3 By Shareholder 3 — 9 (9%)

5.2 No subsequent issue or transfer of Shares in the Company shall take place otherwise than in accordance with this Agreement."

118. Shareholder 1 was Mr Tolaini. Shareholder 2 was Mr Dufoo. Shareholder 3 was defined as "the DA Phillips & Co Ltd and J E V Pannell as Trustees of The Premier Trust- J E V Pannell referred to in clause 1.3 above".
119. Clause 7.2 provided that each shareholder could appoint one director. Clause 7.3 said that, unless otherwise agreed, Mr Tolaini should be the Managing Director.
120. Clause 15 provided:

"15.1 No Shareholder shall sell, transfer, assign, pledge, charge or otherwise dispose

of any share or any interest in any share in the Company except as permitted by this Agreement or with the prior written consent of the Shareholders.

15.2 A Shareholder wishing to transfer Shares (the "Seller") shall give notice in writing (the 'Transfer Notice") to the other parties (the "Ongoing Shareholders") specifying the details of the proposed transfer, including the identity of the proposed buyer(s) and the price for the Shares.

15.3 Within 28 Business Days of receiving the Transfer Notice, the Ongoing Shareholders shall be entitled to give written notice to the Seller stating their intention to:

15.3.1 Purchase a proportion of the Shares in the Transfer Notice, which the number of ordinary Shares held by him bears to the total number of ordinary Shares held by the Ongoing Shareholders at the price specified; or

15.3.2 Purchase a proportion of the Shares in the Transfer Notice which the number of ordinary Shares held by him bears to the total number of ordinary Shares held by the Ongoing Shareholders, but the price specified is too high."

121. There are then provisions as to what is to happen if a clause 15.3.2 notice is served, which I need not refer to.
122. Clause 16 is headed "Obligatory Transfer Events". Clause 16.1 provided that: "If anything mentioned in this clause occurs in respect of a Shareholder, it will be deemed an Obligatory Transfer Event and the provisions of clause 16.4 shall apply." Clause 16.6 divided the Obligatory Events into two categories those that made the Shareholder in question a "Good Leaver" and those which made him a "Bad Leaver".
123. There were two events which made a Shareholder a "Bad Leaver". First, that in clause 16.2.4, which applied where a Shareholder was an individual: "The Shareholder commits a material breach of any obligation under this Agreement and fails to remedy such breach within 28 (twenty eight) Business Days of notice to remedy the breach being served by all the other Shareholders." Second, that in clause 16.3.9, which applied in the case of a body corporate: "The party commits a material or persistent breach of this Agreement which, if capable of remedy, has not been so remedied within 28 (twenty eight) Business Days of the other party requiring such remedy."
124. Clauses 16.4 and 16.6 provided that a Shareholder subject to an Obligatory Transfer Event was deemed to have given a Transfer Notice in respect of the whole of his shareholding. In the case of a Good Leaver, the price payable for the shares was to be their "Fair Value" determined under clause 18. In the case of a Bad Leaver, the price was to be the subscription price paid by the Shareholder for the shares i.e. £1 per share.
125. Clause 28 provided:

28.1 The Shareholders shall at all times:

28.1.1 Display the highest degree of good faith towards each other in all matters relating to the Company; and

28.1.2 Make full disclosure to each other of all information relating to the affairs of the Company, including the furnishing of accounts and explanations and any information as to any matter concerning the Company which may be reasonably required of it by the other."

126. Clause 24.2 provided that the address for service of notices was that set out in Schedule 1. That schedule listed the parties and their shareholdings, in the same proportions as set out in clause 5.
127. Mr Pannell was not a party to the Shareholders Agreement, but he said in his oral evidence that it was signed with his authority, and that is clearly right, as Mr de Palma was acting for him and drew it up. There is no mention in the Shareholders Agreement of an agreement that Mr Pannell was to receive any shares, and any such agreement would have been inconsistent with clauses 5.2 and 15.1. Mr Pannell said that this was just an error. Mr de Palma said that he was trying to facilitate the investment by the pension scheme and that he should have told them that there was an agreement for Mr Pannell to get another 26 shares but did not. He was not sure if he had told Mr Pannell that he had not included provision for the 26 shares in the agreement, but he thought he had told him that, and that Mr Pannell had consented to that.

Further negotiations on the profit share agreement

128. Following completion of the purchase, Mr Tolaini made further efforts to get C Group to commit to the terms of a profit sharing agreement. He, Mr Dufoo and Mr Mansoori were broadly in agreement that Mr Dufoo knew the negotiations were going on, but that Mr Dufoo was not kept informed of the details of the negotiations. Mr Tolaini and Mr Mansoori said that Mr Dufoo was aware of the negotiations and had every opportunity to ask about the details if he wanted to know about them, and Mr Tolaini said he kept Mr Dufoo informed of the main points.
129. Mr Dufoo said that he was kept in the dark about certain important points that Mr Tolaini conceded in the course of the negotiations to the detriment of QML and Mr Dufoo, namely that C Group was to get an equity fee of 5% of the whole of the equity put in by McLaren, and a management fee of £200,000. Mr Dufoo was informed of the change in the basis for dealing with the equity fee: see para 63 above. I am satisfied that he knew that a management fee was to be paid to C Group, but I accept that he was not told the amount that Mr Tolaini eventually agreed with Mr Mansoori.
130. I will not summarise all of the many emails about the Profit Sharing Agreement and the various successive drafts of that document. It is sufficient, I think, to say that what the emails and drafts show is that Mr Tolaini was attempting to look after the interests of QML. Two examples will suffice. On 2 December 2011, he wrote to Colin Nahon at Solomon Taylor Shaw saying: "Colin should it say or 50% or any further % under the profit share. I am concerned to miss out if C group negotiate a deal where they get more than 50% of the profit??". On 3 January 2012, he wrote to Mr Nahon saying: "C Group have now agreed the final doc. Please can you 'double check' they haven't introduced any last minute amends".
131. On 12 December 2011, Mr Tolaini sent an email to Mr Spreyer, copied to Mr Dufoo, saying that there was agreed wording for the agreement, but it had not yet been signed and he expected it to be signed that day. Mr Dufoo did not ask for a copy of the agreement.

Confirmation of the terms of the Pannell loan November- December 2011

132. On 8 November 2011, Mr Tolaini sent an email to Mr Longley to "confirm the position re John's loan to Quiet Moments Limited re the 6 Upper Brook Street transaction". He described the terms of the loan in the way he always had done: Mr Pannell was entitled to repayment of £100,000 plus a return equal to the return that McLaren earned on its equity. There was no response from Mr Longley until about a month later when, on 6 December 2011, Mr Longley wrote expressing concern about the fact that Mr Pannell "has no leverage to ensure he gets paid/repaid except by recourse to the lawyers should C Group withhold payment for any reason". He did not take issue with the terms of the loan as set out in Mr Tolaini's email of 8 November 2011. By implication, therefore, Mr Longley, on behalf of Mr Pannell, accepted that those terms were as they had always been described by Mr Tolaini.
133. On 12 December 2011, Mr Tolaini sent an email to Mr Longley, saying:

"I personally own 64% of Quiet Moments Limited (although some is currently pledged to John as security for his advance). The Development project of Upper Brook Street is expected to return £1.5m for Quiet Moments Limited. Assuming a £200k (loan + Int) is repayable to john at the end of the cycle then, my 'share' is worth 64% of £1.3m £832k."

134. The reference to 64% is explicable only on the basis that, by this time, Mr Tolaini was treating Mr Dufoo as entitled to 36%. Mr Tolaini said in his statement that, in January 2012, Mr Dufoo demanded to increase his shareholding in the business from 26% to 36%, and Mr Tolaini reluctantly agreed to this. In cross-examination, he said he agreed to increase the shareholding based on his ongoing relationship with Mr Dufoo. He said it was not for him to say if the agreement was legally binding. In the light of that email, it seems clear that Mr Tolaini was treating Mr Dufoo as entitled to 36% at least 2 months earlier than January 2012.

The disputed document of 4 January 2012

135. Mr Dufoo said that, from about November 2011, a number of things started to come to a head which caused him to question his relationship with Mr Tolaini and his basic honesty. There was a suggestion that QML might not pay a fee to Francis Spreyer, who introduced 6 Upper Brook Street to Mr Dufoo. He said that he also found out from Mr Pannell that he had apparently negotiated a guaranteed return of the first £130,000 of QML's profit share from C Group. Mr Dufoo said that he found it astonishing that Mr Tolaini had never mentioned such a serious matter at the time of agreeing Mr Pannell's investment and sought his agreement. He did not say that he raised this matter with Mr Tolaini and it was not suggested to Mr Tolaini that this had been raised with him. I do not accept that Mr Dufoo was kept in the dark about the terms agreed between Mr Tolaini and Mr Pannell – my assessment is, as I have said, that Mr Dufoo was told about what Mr Tolaini thought he had agreed.
136. On 4 January 2012, Mr Tolaini sent Mr Dufoo a draft "Colony Group Shareholder's Agreement". On or shortly before that date, Mr Dufoo drew up his own document, which Mr Tolaini signed. The version in the trial bundle said:

"I hereby agree that the percentage of the Colony Group or any Colony Companies will be shared 50/50 with Jean-Paul Tolaini and Alun Dufoo. This will cover any companies set up under the Colony Group or umbrella of companies".

137. This document was the subject of close examination at the trial, because Mr Tolaini contended that the version of the document in the trial bundle had been altered by Mr Dufoo, to remove a handwritten addition and to forge Mr Tolaini's signature. Mr Tolaini said that, before he signed it, he had underlined the words "umbrella of companies", put two indentation marks on either side, and had written underneath "from hereon forth", so that it read as follows:

"I hereby agree that the percentage of the Colony Group or any Colony Companies will be shared 50/50 with Jean-Paul Tolaini and Alun Dufoo. This will cover any companies set up under the Colony Group or ^ umbrella of companies^".

from hereon forth

This was, he said, because when Mr Dufoo asked him to sign it, Mr Tolaini made it clear that the agreement was only to apply to future ventures and not to QML.

138. At the start of the trial, Mr Tolaini asked to see the original of this document. On examining it, he said he said that the handwritten words had been removed (although the indentation marks were still present) and also he thought his signature had been forged. He applied for permission to have the document examined by a forensic expert. I refused this, as there clearly was not time to allow for this to be done. I said I would allow him to give evidence and to cross-examine about the alleged alteration. This was with a view to considering, after the evidence, what the appropriate way to deal with this issue was.
139. My concern, which I raised with Mr Tolaini, was that the document had been included in Mr Dufoo's list of documents. CPR r.32.19 provides:

"(1) A party shall be deemed to admit the authenticity of a document disclosed to him under Part 31 (disclosure and inspection of documents) unless he serves notice that he wishes the document to be proved at trial.

(2) A notice to prove a document must be served—

(a) by the latest date for serving witness statements; or

(b) within 7 days of disclosure of the document,

whichever is later"

Mr Tolaini would not have known of this rule, but his solicitors and counsel, who acted for him until about 3 weeks before the trial, should have.

140. Mr Tolaini responded that he had not been aware of the significance of this document until he saw Mr Dufoo's witness statement, dated 18 September 2013 The point was also made that it was not until June 2013 that Mr Dufoo amended his case to claim that there had been an agreement that he was entitled to 50% of the shares. I will consider below whether I should dispense with the need for a notice to prove under r.32.19.

Further communications in January and early February 2012

141. On 6 January 2012 Mr Tolaini sent Mr Dufoo a copy of the email of 8 November 2011, explaining the terms of the loan by Mr Pannell.
142. In early February 2012, there was an exchange of emails between Mr Tolaini and Mr Mansoori, in which Mr Tolaini attempted to persuade Mr Mansoori to sign the profit sharing agreement, on the basis previously agreed, and Mr Mansoori resisted, saying that he had always tried to get a 75/25 split of the profit, on the basis that it represented a "very healthy introductory fee".
143. On 5 February 2012, Mr Tolaini sent Mr Dufoo a spreadsheet calculating the amount due to Mr Pannell. This showed the total advanced as £80,535.48 (the £60,000 from Mr Pannell and the £20,535.48 from DAP), and the total "grossed up advances" as £100,669.35, and interest thereon at an "assumed IRR" of 15%. This was, of course, entirely consistent with the way in which Mr Tolaini had always described his understanding of the agreement with Mr Pannell.
144. On 8 February 2012, Mr Dufoo wrote to Mr Tolaini asking what Mr Pannell's share of QML was and saying "He is not a Director is he???? Did you say he hasn't registered the shares yet? Who is registered as a director?" Mr Tolaini replied on the same day saying "Technically John has 8% of QM, but only as security for the £100k. This has NOT been lodged, and probably never will be. He is not a director." The reference to 8% was clearly an error and should have been 9%. In reply, Mr Dufoo expressed concern in case Mr Pannell registered his entitlement.
145. Also on 8 February 2012, Mr Tolaini wrote to Mr Mansoori about the profit sharing agreement. He attached the latest draft, and said that he had been assured by Mr Mansoori that, subject to Mr Tolaini signing on 225 Earls Court Road, Mr Mansoori would sign this version. Further emails followed, in which Mr Mansoori said he had agreed the draft in its current form, with "details to be reviewed by our lawyers".
146. Also on that day, Mr Tolaini wrote to Mr Coleman of Gerald Edelman saying: "Just to confirm that Mr Alan Dufoo owns 36% of the share capital" of QML. It is not clear what prompted this email, but it makes it clear that, at this time, Mr Tolaini regarded Mr Dufoo as entitled to 36 shares.

The dispute about the Earls Court Road property and the attempt by Mr Dufoo and Mr Pannell to suspend Mr Tolaini

147. In early 2012, a dispute blew up about some money in relation to the Earls Court Road property. There was quite a lot of evidence about this in the witness statements, but this case is not about that dispute. I did not, and do not, consider it proportionate to investigate the rights and wrongs of that matter. I mention it because it formed part of the backdrop to the events of March 2012, which is when this dispute erupted.
148. On 9 February 2012, Mr Dufoo attended a meeting at Mr Longley's offices with Mr Pannell, at Mr Pannell's request. Mr Pannell called the meeting because he was very concerned about the situation with Earls Court Road and was worried that Mr Tolaini might do something to prejudice QML. At this meeting, Mr Longley downloaded and showed Mr Dufoo and Mr Pannell an annual return for QML. It showed Mr Tolaini registered as the 100% shareholder in the company. Mr Dufoo and Mr Pannell were outraged about this. They both thought they should be shown as shareholders. Mr Dufoo thought he should be shown as registered as owning 50 shares and Mr Pannell as owning 35 shares. Mr Longley said that, under the Shareholders Agreement, Mr Pannell could be appointed a director by Mr Dufoo and that it would then be possible to hold a meeting at which Mr Dufoo and Mr Pannell could suspend Mr Tolaini as a director.
149. On 17 February 2012 there was a second meeting between Mr Longley, Mr Pannell and Mr Dufoo. Mr Longley produced a form appointing Mr Pannell as director of QML which Mr Dufoo signed. Mr Longley also produced a notice calling a meeting to pass a resolution to suspend Mr Tolaini as a director and said that this had to be served by post. Mr Pannell suggested it should be emailed, but Mr Longley said that the right thing to do was to post the documents.
150. Mr Dufoo communicated with Mr Tolaini and Mr Nahon subsequently, on 17 and 21 February, without mentioning that he was trying to get Mr Tolaini suspended.
151. On 26 February 2012, Mr Tolaini wrote to Mr Mansoori concerning the invoicing of the profit share due. He said that Mr Dufoo owned 36% of QML and "this is on record at Gerald Edelman".
152. On 5 March 2012, Mr Dufoo and Mr Pannell met and passed a resolution suspending Mr Tolaini as director until further notice, and other associated resolutions, including one to hold a meeting on 16 April 2012 to remove Mr Tolaini as a director. On the same day, Mr Tolaini discovered what Mr Dufoo and Mr Pannell were up to. He wrote to Solomon Taylor Shaw saying "The appointment of Mr Pannell is fraudulent and is being dismissed by companies house. I will revert ASAP. Please take no instructions from Mr Pannell or Mr Dufoo". On the same day, Mr Tolaini wrote to Mr Dufoo saying that he was no longer a director of QML, and he replied saying that Mr Tolaini had been suspended as a director.
153. The next day, Mr Tolaini then filed forms at Companies House in an effort to remove Mr Pannell and Mr Dufoo as directors. Also on that day, Mr Dufoo wrote to Mr Tolaini saying "You have never discussed that C group are looking for a £200,000 management fee? This was never agreed." He replied saying "You were copied in on the latest draft agreement, although it is still not yet signed." Mr Dufoo replied: "No agreement has been reached re management fees and Quiet Moments." Clearly, by that point, Mr Dufoo had found out about the proposed terms for the profit sharing agreement.
154. Mr Dufoo said in his evidence that £200,000 was beyond any reasonable or appropriate fee. He thought he had put in a huge contribution on behalf of QML in return for simply a share of the profits. There was absolutely no logical reason why C Group should get a large "management fee" as well, when they were essentially a middleman between McLaren and QML and had done nowhere near as much work as either. He thought that C Group's only significant contribution was in relation to the leasehold enfranchisement. He thought a reasonable fee was about £40,000.
155. The next day, 7 March 2012, Mr Tolaini wrote to Mr Longley saying: "Pannell is not a director of this company and I own the majority of the shares...I will be reporting you and your firm to the appropriate association for this clear breach of professional ethics with a view to wilfully taking over my company." On the same day he wrote to Gary Pickard of Field Fisher Waterhouse ("FFW"), who by now had been instructed to act for Mr Pannell and Mr Dufoo, saying that he, Mr Tolaini, had all the shares in QML in his name: "However, Mr Dufoo does have an economical interest in 36% of the company, Furthermore 8% was due to be transferred to Mr Pannell's pension fund, as security for his loan. I don't think this was done, and it is now irrelevant."
156. On 9 March 2012 FFW wrote to C Group, saying that they acted for "the controlling shareholders" of QML and asking what arrangements were in place for the profit share transfer. Mr Mansoori replied on 12 March 2012 asking for "evidence of your statement as to shareholdings in the first sentence of said letter. I think that is the starting point". FFW replied on 13 March 2012. They said that, when QML was incorporated, Mr Dufoo and Mr Tolaini owned 50% of the shares. Subsequently further shares were issued to Mr Pannell and his pension scheme. They said attached various documents to support that claim. One of these was an altered version of the email from Mr Tolaini to Mr Coleman dated 8 February 2012 which had been copied to Mr Dufoo. The original (see para 146 above) said "Mr Alun Dufoo owns 36% of the share capital". The version attached to FFW's letter had been altered by Mr Dufoo to say: "Mr Alun Dufoo owns 42% of the share capital". Mr Dufoo said in statement he could not remember why he had chosen 42, but in his oral evidence said that this was so that, when added to the 9 shares which should have been transferred to DAP, it added up to 51 shares, so making DAP and Mr Dufoo together the majority shareholders. He said he made the alteration because he was so frustrated with the situation, namely that Mr Tolaini had not properly recorded the correct shareholdings at Companies House and now he had no way of proving the right position, that he just felt entitled to put things right by altering the email. He said that he realised it was a foolish thing to do.
157. There is a profit sharing agreement between QML and C Group dated 14 March 2012 ("the Profit Sharing Agreement"), signed by Mr Tolaini on behalf of QML and by Mr Brown on behalf of C Group. It was Mr Dufoo's case that it was signed later and backdated. I did not find the reasons put forward to support this contention persuasive, and in any event I cannot see that it matters. The signed agreement provided for payment of three fees to C Group, and then the balance of any profits to be divided equally between QML and C Group. The fees payable to C Group were:

(a) An "Equity Funding Fee" of 5% of the equity funding provided by McLaren, up to a maximum of £250,000.

(b) Up to £100,000 for "planning consultancy services".

(c) £100,000 for "project development management services".

158. Mr Dufoo said that he could not see any genuine reason for Mr Tolaini agreeing to such terms, which were not at all in QML's interests. However, it was not suggested that Mr Tolaini did not have authority to sign on behalf of QML.
159. On 5 April 2012, FFW wrote to Adams & Remers, who by now had been instructed to act for Mr Tolaini. They said that Mr Tolaini had breached the Shareholders Agreement by removing Mr Dufoo and Mr Pannell as directors without calling a shareholders meeting and without a quorum of shareholders being present, by failing to act in good faith by filing annual returns showing himself as the only shareholder, and by "failing to make full disclosure regarding the affairs of the company to the other shareholders" although no particulars were given. They said that Mr Tolaini had failed to rectify the filings at Companies House, had provided no indication he would rectify the breaches, and that the breaches in relation to failing to act in good faith were not capable of remedy. They said that, as a result Mr Tolaini was deemed to have given a transfer notice and his shares were to be purchased by the other shareholders for £65. They enclosed a stock transfer form for Mr Tolaini to complete.

The course of these proceedings

160. On 17 April 2010, Mr Dufoo issued a petition for the winding up of QML.
161. On 27 April 2010, Mr Dufoo, Mr Pannell and DAP together issued an application for the transfer by Mr Tolaini to them of 65 shares in QML, with Points of Claim attached.
162. On 14 May 2010, directions were given for the exchange of pleadings, and further directions were given on 17 July 2012.
163. On 12 June 2012, Ronaldsons LLP wrote to Mr Tolaini and Mr Dufoo, among others, on behalf of Mr Yerrill, one of the liquidators of Morlan. They said that Mr Yerrill's investigations had led him to identify that between March 2008 and March 2010, payments totalling £177,500 had been made out of Morlan's bank account to Mr Tolaini, and Morlan's records included nothing to record the purpose of those payments. No explanation had been provided by Morlan's director, Mr Dufoo. Mr Tolaini had informed Mr Yerrill that the payments were for acquiring an initial shareholding of 26% of QML, subsequently increased to 36%, and that Mr Tolaini held those shares on trust for the true beneficial owners. The letter notified all parties of Morlan's interest as beneficial owner of not less than 36% of the issued share capital of QML and of Mr Yerrill's intention to pursue a claim for a declaration to that effect. The figure of £177,500 is higher than that shown in Mr Dufoo's schedule of payments.
164. On 21 June 2012, FFW wrote to Ronaldsons, saying: "We understand that the monies you refer to were paid by Morlan Limited to Mr Tolaini, but we do not understand how this has led to the conclusion that Morlan Limited bought shares in QML".
165. Ronaldsons then asked FFW for documents and information, but FFW refused to provide any, saying that as the claim made by Mr Yerrill was based on information from Mr Tolaini, they should ask Adams & Remers for the documents and information.
166. In May 2012, Mr Dufoo found the email dated 27 April 2010 which I have quoted in paragraph 44 above. He altered this to try and support his case and forwarded it to FFW:

"For the avoidance of doubt, I write to confirm the position regarding the shareholding in the above company. I You currently hold, on your behalf 26% of the Share Capital of QM Limited. This was in consideration for the £200,000 per our original agreement of which you have a signed copy. Furthermore due to several factor, we have agreed that you would receive up to 40% 50% of the share Capital (including the 26%). The reasons include passage of time, monies injected (exact amount to be agreed for the purpose of bookkeeping) and just basically because we agreed this was fairer all round. As you know, we do have some minority shareholders we need to 'sort out', therefore, we have said all along we need to 'sit down and work it out'. Bearing in mind your other situations, this has gone to the bottom of the pile. One way or the other it is very close to 40%, 50% as requested. The ratio between you and me WILL be 40/60 50/50 without a doubt, as agreed. It is a question of actual 'shares' that needs sorting. I am sorry if this has caused you anxiety, but the only reason this is such was to protect you, on two different occasions."

Mr Dufoo said in his evidence that he did this to reflect what he believed was the true position, for much the same reasons as he altered the email of 8 February 2012.

167. On 19 July 2012, Mr Dufoo attended the offices of Gerald Edelman to inspect the original stock transfer form dated 1 April 2009. Mr Dufoo said that he was convinced that the document was a forgery. The stock transfer form was then sent to an expert forensic handwriting analyst retained by Mr Dufoo, who concluded that the stock transfer was an original document with an original signature of Mr Dufoo's on it. Mr Dufoo said in his statement that he was in state of shock and complete disbelief when this was disclosed to him. Initially he simply refused to believe it as he had no recollection of signing it and was convinced that the document was a forgery. He said in his statement that he therefore had to think very carefully about how he could have come to sign such a document, and spent many hours going over other documents from around the time, and speaking to Mr McKenna about what they were going through at the time. By doing this, Mr Dufoo said, he was able to refresh his memory of the events surrounding the signature of the stock transfer form. I have summarised the evidence he gave on that subject above.
168. In December 2012, lists of documents were served.
169. By June 2013, Mr Pannell and DAP had fallen out with Mr Dufoo, and the petition and the pleadings were amended. The case put forward by Mr Pannell and DAP did not change materially. But Mr Dufoo's case did change materially. He now alleged, for the first time, that he was entitled to 50% of the shares based on an agreement made in 2008 that Mr Dufoo would acquire 50% of the shares in any joint venture vehicle.
170. Witness statements were exchanged in September 2013, only a few weeks before the start of the trial.

The settlement agreement between Mr Tolaini, Mr Pannell and DAP

171. About 3 weeks before the start of the trial, Mr Tolaini's solicitors ceased to act for him, although no notice of change was filed. Mr Tolaini said he could not afford to pay for legal representation at the trial, and that he had parted company with his solicitors on amicable terms.
172. On 19 September 2013, shortly after the exchange of witness statements, Mr Tolaini, Mr Pannell and DAP entered into an agreement in settlement of the disputes between them. This provided that:

(a) Mr Pannell and DAP would not seek relief against Mr Tolaini under the Shareholders Agreement or costs.

(b) Mr Tolaini would accept the case of Mr Pannell and DAP as to what was agreed between him and Mr Pannell concerning the loan, would not cross-examine Mr Pannell or any of his witnesses, would not claim costs from Mr Pannell or DAP, would repay the personal loan of £5,000, and would do all he could to procure the transfer of 26 shares from him to Mr Pannell and 9 shares from him to DAP.

The 50/50 Issue

173. This issue is difficult to resolve, because the documents do not tell a clear and consistent story, and none of the witnesses gave an account which explained the sequence of events in a way which satisfactorily fits with the documents and the evidence of Mr Sole and Mr Spreyer. I will first summarise here the pieces of evidence that bear on this issue, and the weight that I attach to each of them, and then set out my decision.
174. There are the 2009 documents recording the issue of the 26 shares to Mr Dufoo see paras 29-32 above. These support Mr Tolaini's case. I do not think that, if there had been an agreement from the beginning that Mr Dufoo would have 50 shares, that Mr Dufoo would simply have accepted 26 shares.
175. There are two documents from 2010. There is the January 2010 letter from Mr Tolaini to Mr Dufoo saying that that Mr Tolaini held 26 shares for Mr Dufoo and had agreed to allocate a further 14 shares "as soon as possible, bearing in mind your current situation": see para 41 above. Further, there is the 27 April 2010 email saying that Mr Tolaini held 26 shares, in consideration of the £200,000, and had agreed that Mr Dufoo would "receive up to 40% of the share Capital (including the 26%)": see para 44 above. These support Mr Tolaini's case. I did not find Mr Dufoo's explanation of these documents credible. I think that, if they had not reflected the true position, he would certainly have written to Mr Tolaini saying so. He is an estate agent and must be familiar, therefore, with the need to make a written record of the key terms of a transaction.
176. There is the email of 27 July 2011 from Mr Tolaini to Mr de Palma saying that Mr Dufoo had 26 shares: see para 94 above. That supports Mr Tolaini's case.
177. There is the Shareholders Agreement, which records that Mr Dufoo had 26 shares, and restricts further transfers of shares. Mr Dufoo signed that document. That supports Mr Tolaini's case. A party of full age and understanding is normally bound by his signature to a document, whether he reads or understands it or not: see Chitty on Contracts 31^st ed para 5-102. The Shareholders Agreement states clearly that Mr Dufoo owns 26 shares, and no more.
178. There is the disputed document of 4 January 2012: see paras 135-140 above. I need first to decide whether to dispense with service of a notice to prove. In my judgment, applying the overriding objective, it would be wrong to do so. The reason that CPR r.32.19 provides that notice must be given if a party wishes to dispute the authenticity of a document disclosed to him under Part 31 is to enable steps to be taken to properly investigate such disputes, if necessary by obtaining expert evidence. The 50/50 Issue was introduced into the case in June 2013, but it was not until the first day of the trial that Mr Tolaini sought to put in issue the authenticity of the document. He was legally represented until about 3 weeks before the trial. I think, in the circumstances, it would be unjust to Mr Dufoo to allow the authenticity of the document to be challenged at this late stage.
179. I will, therefore, treat the document as authentic. However, although I have refused to entertain Mr Tolaini's allegation that the document was forged, that does not mean I must also reject his evidence that he made it clear to Mr Dufoo, when signing it, that he intended it to apply to future Colony companies and not to existing ones. The language of the document looks to the future: "...the percentage of the Colony Group or any Colony Companies will be shared 50/50 with Jean-Paul Tolaini and Alun Dufoo. This will cover any companies set up…".
180. There are documents from late 2011 and early 2012, before the dispute began, in which Mr Tolaini said to third parties (Mr Longley, Mr Coleman and Mr Mansoori) that Mr Dufoo was entitled to 36% of the shares: see paras 133, 146 and 151 above. As I have said, Mr Tolaini's explanation for these was that Mr Dufoo had pressed him for some more shares, and he had agreed to give Mr Dufoo a further 10 shares. Those documents support Mr Tolaini's case. If he had made an agreement, intended to be binding, to give Mr Dufoo 50% of the shares it is difficult to see why he sent those emails saying Mr Dufoo was entitled to 36%.
181. There is the fact that Mr Dufoo did not, when he started these proceedings in 2012, assert that there was an agreement that he should have 50% of the shares. That allegation was only introduced by amendment in June 2013. That supports Mr Tolaini's case. Mr Dufoo's explanation was that there were other, more important things to think about. But I find that very unconvincing.
182. There is the evidence of third parties as to what impression they formed. Mr Spreyer and Mr Sole both formed the clear impression that Mr Dufoo and Mr Tolaini were 50/50 partners. Mr Sole's evidence is particularly important, as he said he gained that impression from Mr Tolaini. Mr Tolaini was unable to explain how they got that impression when, on his case, Mr Dufoo was only entitled to 26 shares with a later agreement to give him an additional 10 shares.
183. Against that is the evidence of Mr Mansoori. He said in his statement: "I always understood that Tolaini owned 74% of QML and therefore controlled the company". He was not cross-examined on that evidence. He was in regular contact with both Mr Tolaini and Mr Dufoo, and if they were 50/50 partners from the beginning, it is very difficult to see how he formed the impression he did.
184. As I have said, Mr Tolaini was unable to suggest any reason why Mr Spreyer and Mr Sole would have formed the impression they did unless it was accurate. But the same is true of Mr Dufoo. In Mr Shaw's closing submissions, he could not offer, on behalf of Mr Dufoo, any reason why Mr Mansoori would have formed the impression he did unless it was accurate.
185. Mr Longley said in his second statement that, from the time he first became involved with Mr Pannell's proposed investment in QML it was his belief that Mr Tolaini and Mr Dufoo were equal partners, each holding half of the shares in QML. However, in cross-examination, he said that this was just an assumption he had made, not something based on what he had been told. Accordingly, I attach no weight to that.
186. There are the inherent probabilities. Mr Shaw submitted that Mr Tolaini's case is commercially absurd. No rational person would have agreed to pay £200,000 to acquire 26% of a company without assets in the mere hope that Mr Tolaini would bring property deals to the company. However, that would not be the case if the various developments which Mr Tolaini was working on were seen, in 2008, as being very valuable. The brochure referred to in paragraph 49 above depicts the Colony business as one with a number of completed, current and prospective developments. I do not think it at all unlikely that Mr Dufoo was willing to pay £200,000 to participate in what he saw at the time as developments likely to be highly profitable. Mr Dufoo struck me as an emotional and impulsive man. That explains, but does not excuse, his alteration of the two emails. I do not find it improbable that he was swept along by Mr Tolaini's optimism about the future for the Colony developments and agreed to invest £200,000 in a 26% share of the future profits from them.
187. Doing my best to weigh these various pieces of evidence, I have come to the conclusion that the most probable version of what happened is as follows. In 2008, Mr Tolaini and Mr Dufoo agreed that Mr Dufoo would pay £200,000 for a share in the Colony property development business. It was agreed that initially he would have a 26% share, but in due course this would be increased, although nothing definite was agreed about that. That explains the documents in 2009 which record the issue of 26 shares to Mr Dufoo, and also the email of 19 August 2009 saying that Mr Dufoo would have 26 shares "for now".
188. As time went on, it gradually became apparent that the Colony development projects were not as valuable as Mr Tolaini and Mr Dufoo had thought, and £200,000 began to look excessive for a 26% share. Therefore, Mr Dufoo began pressing for a larger share. In early 2010, Mr Tolaini agreed to increase his share to 40%, as recorded in the letter dated 1 April 2009, but which was clearly signed in about January 2010, and the email of 27 April 2010. This was a statement of intention, and not a binding agreement, which explains why Mr Dufoo does not rely on this agreement as creating a binding obligation on Mr Tolaini to transfer 14 shares.
189. In October 2010, Mr Dufoo alerted Mr Tolaini to the possibility of acquiring 6 Upper Brook Street, which Mr Tolaini agreed looked like a very good prospect. I think that what happened at this point is that Mr Dufoo pressed for his shareholding to be increased to 50%. He had put in a great deal of money, and now he had introduced a good prospective project. I think that Mr Tolaini gave a general indication of agreement to that, in principle, albeit that I think it likely that his agreement would have been couched in fairly vague terms as something he agreed should happen and probably would happen, rather than as an acceptance by Mr Tolaini of an immediate obligation to transfer 50 shares to Mr Dufoo. That explains why Mr Spreyer and Mr Sole both formed the impression in late 2010 and early 2011 that Mr Dufoo and Mr Tolaini were 50/50 partners.
190. The email of 27 July 2011 from Mr Tolaini to Mr de Palma saying that Mr Dufoo had 26 shares, supports that version of events. If Mr Tolaini, by then, had accepted a binding obligation to hold 50 shares for Mr Dufoo, the email would have recorded that. Mr Dufoo also signed the Shareholders Agreement, in October 2011, which clearly records him as entitled to 26 shares.
191. I think that Mr Dufoo then put further pressure on Mr Tolaini to give Mr Dufoo more shares, and Mr Tolaini eventually agreed to give him an additional 10 shares immediately. That explains the emails in late 2011 and early 2012 from Mr Tolaini to Mr Coleman, Mr Longley and Mr Mansoori where he said (or implied) that Mr Dufoo had a 36% shareholding.
192. As to the disputed document of 4 January 2012, I think that Mr Dufoo drafted this to try and pin Mr Tolaini down to the assurances he had given in late 2010 that Mr Dufoo would be given a 50% shareholding. I think, however, that Mr Tolaini told him that he could only give him 36% at the moment, I think probably because Mr Tolaini was aware that he had to transfer shares to Mr Pannell and DAP. I do not think he told Mr Dufoo that the 50/50 arrangement would only apply to future Colony companies, but I do think he said that the 50/50 arrangement was one for the future, not the present.
193. So that is my assessment of the most probable version of events. If I have reached the wrong conclusion, then I am afraid Mr Dufoo has only himself to blame. For the reasons I have given, I have had to largely discount his own evidence, and therefore have had to do my best to deduce what happened from the evidence of other witnesses and the documents. As it is, I reject Mr Dufoo's claim to 50% of the shares.

The 36 Shares Issue

194. In the course of his closing submissions, Mr Shaw applied for permission to amend Mr Dufoo's Points of Claim to plead an alternative claim that, in around January 2012, Mr Tolaini agreed to transfer an additional 10 shares to Mr Dufoo, in order to compromise Mr Dufoo's claim against Mr Tolaini in respect of the latter's failure to invest monies on the joint venture.
195. The first question here is whether I should allow Mr Dufoo to amend his pleading to advance this case. Amendments in general ought to be allowed so that the real dispute between the parties can be adjudicated upon, provided that any prejudice to the other party caused by the amendment can be compensated for in costs, and the public interest in the administration of justice is not significantly harmed, the amendment is drafted with sufficient precision to enable the other side to know the case they have to meet, is supported by evidence, and has some prospect of success: Elafonissos Fishing v Aigaion Insurance [2012] EWHC 892 (Comm) at [11] per Gloster J. The Court will, however, not normally allow an amendment sought for the first time at the end of a trial to raise an entirely new issue against an individual litigant: see Ketteman v Hansel Properties [1987] AC 189, at 220. It is necessary to apply the overriding objective – as Stuart-Smith J put it in Arroyo v Equion Energia [2013] EWHC 3150 (TCC) at [12]: "Particular attention is often given to amendments that are brought forward "late", including those brought forward for the first time at trial. At this stage it is only necessary to point out that "late" is an elastic and relative term when applied to the timing of proposed amendments. What will matter when it is asserted that a proposed amendment is or is not "late" is whether or not the allowing of the amendment would have an adverse impact on the fairness of the proceedings. In many cases there will be a tension between the Court's instinctive wish to allow the real issues that exist between the parties to be brought forward for decision and its concern that to introduce an issue will be unfair, particularly where any disadvantage to the opposing party will be irremediable and cannot be remedied by an appropriate order for costs. In all such cases a balance must be struck."
196. In the present case, applying the overriding objective, I think that the interests of justice are best served by allowing the amendment. The amendment does not raise an entirely new issue; it is really a fallback version of the claim to 50 shares, based firmly on Mr Tolaini's own evidence. If the claim put forward by the amendment succeeds, it will give Mr Dufoo exactly that proportion of the shares that Mr Tolaini contended he was entitled to just before this claim was commenced. I do not think that allowing the amendment will cause any injustice. It was essential for Mr Tolaini to deal in his evidence and in cross-examination with the statements made by him that Mr Dufoo was entitled to 36 shares and that matter was thoroughly explored in the evidence.
197. Mr Tolaini's evidence was, as I have said in para 134 above, that in January 2012, Mr Dufoo demanded to increase his shareholding in the business from 26% to 36%, and that Mr Tolaini reluctantly agreed to this. I have accepted that evidence, although I think the agreement was made a little earlier. I think that, in context, this was not like his agreement to give Mr Dufoo 50% of the shares, which I think was never put forward by Mr Tolaini as an immediate binding obligation on him, but rather as an agreement in principle. I think Mr Tolaini, under considerable pressure from Mr Dufoo to increase his shareholding, did accept an immediate binding obligation to hold 36% of the shares in QML for Mr Dufoo. I accept the submission that this was in compromise of Mr Dufoo's claim that he was entitled to more shares, and that, therefore, there was consideration for the promise to hold 36% of the shares for Mr Dufoo. Subject to the Morlan Issue, I therefore allow Mr Dufoo's claim to 36 shares.

The Morlan Issue

198. As I have explained, at least 70% of the money paid to Mr Tolaini for shares in QML was paid from a bank account in the name of Morlan, there was correspondence in November 2010 in which both Mr Dufoo and Mr Tolaini treated Morlan as entitled to the 26 shares originally issued to Mr Dufoo (see para 53 above) and the liquidator of Morlan has made a claim in correspondence against Mr Tolaini and Mr Dufoo that 36 shares belong to Morlan.
199. Mr Dufoo's witness statement did not explain why, given that the money came from an account in the name of Morlan, he personally had a claim to the shares. His statement said, as recorded in para 46 above, that when Morlan went into liquidation, he spoke to a colleague of the liquidator and raised with him the implications of Morlan having paid the money, and was told that the liquidator considered that the shares were worthless and they had no intention of making any claim to them, and that Mr Dufoo could do what he liked with them.
200. When Ronaldsons wrote on 12 June 2012 on behalf of the liquidator, claiming the shares, FFW made no substantive response on behalf of Mr Dufoo.
201. Mr Tolaini served a witness statement from Mr Yerrill, which added nothing to the information in Ronaldsons' letter. Mr Yerrill did not attend to give evidence, but did write a letter to Mr Tolaini dated 9 October 2013, saying he was not aware of the Court listing until 7 October 2013 and had not been given any information about this case other than that it related to the purchase of shares in QML. He essentially repeated in that letter the points made by Ronaldsons in their letter of 12 June 2012.
202. The only evidence given at the trial to support Mr Dufoo's claim to the shares came in the course of his re-examination. He said he put a lot of money into Morlan's bank account, and that he used that account for personal transactions because it had internet banking, which his personal account did not. He said that he, and Mr McKenna, paid substantial sums into Morlan's account which were then used to pay Mr Tolaini.
203. During closing submissions, I explained my disquiet about the state of the evidence on this issue, and invited Mr Shaw to put in supplemental written submissions on the point, which he did, on 16 October 2013. With those submissions, he provided a schedule which identified, from the documents in the trial bundle, the payments made by Mr Dufoo, or Mr McKenna, to Morlan. The schedule showed that Mr Dufoo and Mr McKenna paid a total of £117,966 to Morlan between 25 January 2007 and 23 February 2010, and that Morlan paid Mr Tolaini £143,304 between 14 March 2008 and 12 March 2012.
204. With one or two exceptions, the schedule does not show any obvious connection between the two sets of payments. There are a few payments where one can see an identical amount being paid into Morlan's account and then out of Morlan's account for example, on 19 August 2008, Mr Dufoo paid £2,500 into Morlan's account, and on the same day, Morlan paid the same amount to Mr Tolaini. But there are few payments where this sort of direct connection can be seen.
205. Mr Shaw submits that, because Morlan is not a party to these proceedings, and has not issued its own proceedings, I should disregard its claim. The shares were originally issued to Mr Dufoo, and were transferred to Mr Tolaini at Mr Dufoo's request. Now Mr Dufoo wants them transferred back to him. Morlan has not issued proceedings, or sought to be joined in these proceedings.
206. I can see the force of the argument that the right course is for the Court to direct Mr Tolaini to transfer the shares back to Mr Dufoo, and for Morlan to then make any claim it wishes to against Mr Dufoo. The principal creditors of Morlan were HMRC and HSBC, and they were certainly able to put Mr Yerrill in funds to pursue a claim against Mr Tolaini and Mr Dufoo if they wished to.
207. However, there is an argument the other way, albeit not one put forward by any party to this litigation. At least 70% of the money used to pay for the shares was money which came from a bank account in the name of Morlan, so that the legal title to the money in the account was vested in Morlan. That, it can be argued, gives rise to a rebuttable presumption that the money belonged to Morlan. If Mr Dufoo, as director of Morlan, caused it to pay its money to Mr Tolaini to buy shares in QML which were issued to Mr Dufoo, then Mr Dufoo would hold the shares on constructive trust for Morlan, at least to the extent that its money was used to pay for the shares. When the shares were transferred to Mr Tolaini he, knowing that Morlan's money was used to pay for the shares, would also hold them on constructive trust for Morlan to the same extent. Morlan would have a claim that Mr Tolaini holds the shares subject to a constructive trust requiring him to hold the shares as to at least 70% (based on Mr Dufoo's figures) for Morlan and as to 30% for Mr Dufoo. In those circumstances, it would be wrong for the Court to direct Mr Tolaini to transfer the shares back to Mr Dufoo.
208. Mr Shaw said that I should give no weight to Mr Yerrill's assertions given that he had not appeared to give evidence. I reject that argument. Mr Yerrill has made a statement and written a letter, from which it is clear he has no personal knowledge about the matter. His evidence could not assist the Court. Mr Shaw also submitted that Morlan would not be able to assert a claim to the shares, having failed to make such a claim up to now. He said any such claim would be an abuse of the process. I do not think that is right. I can see no valid basis for criticising the decision by Mr Yerrill not to issue a claim and to wait and see what the outcome of this litigation was.
209. If I could be satisfied, on the evidence, that the money used to pay for the shares belonged beneficially to Mr Dufoo, there would be no problem. But the evidence put forward by Mr Dufoo to rebut the presumption that the money in Morlan's account was Morlan's money seems to me to be weak. In the absence of Morlan's financial records, there is little, apart from Mr Dufoo's oral evidence in re-examination, and a few payments where one can see a link between the money paid into to the Morlan account and the money paid out, to show that the payments made into Morlan's account by Mr Dufoo and Mr McKenna were made on the basis that Morlan held the money for Mr Dufoo, rather than to discharge debts owed by Mr Dufoo to Morlan. I cannot, therefore, dispose of this issue on the basis that I am satisfied, on the very limited evidence which addresses the issue, that the money did belong to Mr Dufoo.
210. Having considered the matters summarised above, I have decided that the right analysis is this. If (as to which I make no finding) the money used to pay for the shares was Morlan's money and Mr Dufoo held them on trust for Morlan then, when Mr Dufoo transferred the shares to Mr Tolaini, Mr Tolaini held them on trust for Mr Dufoo, who in turn held his equitable interest in the shares for Morlan. If I direct Mr Tolaini to transfer the shares back to Mr Dufoo, he will again hold them on trust as before. Morlan will be in no worse position than it was when the shares were issued. The transfer will take effect as a change of trustee back to the original trustee, but will not affect Morlan's beneficial interest. Morlan has not sought an injunction restraining Mr Tolaini from transferring the shares back to Mr Dufoo. Mr Tolaini has acted with perfect propriety in relation to the shares, and if the Court orders him to transfer them back to Mr Dufoo he could not be held liable to account to Morlan for knowing receipt of its property.
211. Accordingly, I consider that the right course is to order Mr Tolaini to transfer the shares to Mr Dufoo, and to also order Mr Dufoo to send a copy of this judgment forthwith to Mr Yerrill, so that he can consider whether he wishes to cause Morlan to make a claim against Mr Dufoo in respect of the shares in the light of the facts set out in this judgment.

The Loan Terms Issue

212. It is clear from the chronological summary I have given above that DAP had no idea that the £20,535.48 it was paying was intended to be a loan. It understood that the money was being paid to purchase the shares. All the communications to which DAP was a party consistently made that clear. Accordingly, as between DAP and Mr Tolaini, there was simply a contract for the purchase of 9 shares for £20,535.48.
213. The position as between Mr Tolaini, QML and Mr Pannell is less straightforward. There are two issues. First, what was agreed as to the terms of the loan? What return, if any, was agreed? Second, did Mr Tolaini agree to transfer 26 shares to Mr Pannell as security for payment of whatever was due?

The terms of the loan

214. As to the terms of the loan, I have set out above the discussions and correspondence which surrounded the making of the payments of £60,000 by Mr Pannell, and which led up to the Shareholders Agreement being signed in October 2011 and DAP paying £20,535.48 to QML. I have also explained that it seems clear to me, from the oral evidence and the documents, that Mr Pannell and Mr Tolaini at all times had a different subjective understanding as to the terms on which the money was being paid.
215. However, what matters is not their subjective understandings, but what, objectively, a reasonable person would understand the communications between them to mean. In my view, such a person would understand Mr Pannell to have agreed to the terms proposed by Mr Tolaini. I reach that conclusion because:

(a) In the period up to 2 June 2011, there was clearly no binding agreement.

(b) There was an exchange of communications on 3 June 2011: see paras 86-88 above in which Mr Longley first put forward Mr Pannell's understanding of what the terms were, and Mr Tolaini then replied with his understanding.

(c) There were then no further written communications on the subject of the terms of the loan until after the last payment had been made.

(d) A reasonable person, seeing that exchange, and seeing that Mr Pannell had made further payments after it, and had caused DAP to pay the £20,535.48, without questioning Mr Tolaini's letter of 3 June 2011, would understand that Mr Pannell had agreed to Mr Tolaini's proposed terms.

216. If that is wrong, then at the time the £20,535.48 was paid, there was no binding agreement between Mr Pannell and Mr Tolaini and QML as to the terms of the loan. The loan was, therefore, repayable on demand. However, on 8 November 2011, shortly after the Shareholders Agreement was signed, Mr Tolaini emailed Mr Longley with a further summary of the terms of the loan: see para 132 above. Mr Longley replied on 6 December 2011, not taking issue with that summary. In my view, the reasonable inference from that is that Mr Pannell, acting through Mr Longley, accepted Mr Tolaini's proposal as to the terms of the loan. There was an offer and an acceptance of those terms.

The 26 shares

217. I have accepted Mr Pannell's evidence that, in a telephone conversation at the beginning of July 2011, Mr Tolaini agreed to transfer 35 shares to Mr Pannell as security for the loan of £80,000. There was never any further discussion between them about the matter.
218. I have summarised what happened subsequently above. In essence, Mr Tolaini was told, by Mr de Palma, acting on behalf of Mr Pannell, that Mr Pannell wished to acquire the shares via his pension scheme. Mr Tolaini was willing to go along with that proposal, and would have been happy to transfer the 35 shares to the pension scheme. The references in some documents to 34 shares was clearly an error. But in the end, he was only asked to agree to transfer 9 shares to the pension scheme.
219. There is no doubt that the original agreement made at the beginning of July 2011 for the transfer of 35 shares to Mr Pannell was varied by subsequent agreement. It is clear that Mr Pannell and Mr Tolaini agreed, at least, that 9 shares would be transferred to DAP, and that Mr Pannell would ensure that, when the amount due was paid, he would ensure that they were transferred back to Mr Tolaini. So much is common ground. What is less clear is whether that agreement was in complete substitution for the original agreement to transfer 35 shares to Mr Pannell, or whether it was only in substitution for the obligation to transfer 9 shares to Mr Pannell, leaving untouched the obligation to transfer the remaining 26 shares.
220. Were it not for the terms of the Shareholders Agreement, then I think the reasonable inference would be that Mr Pannell was not giving up a right to take 35 shares as security for the loan in return for an obligation on Mr Tolaini to transfer only 9 shares to DAP. I think such an observer would understand that the obligation to transfer 9 shares to DAP satisfied Mr Tolaini's obligation to transfer 9 shares to Mr Pannell, but left untouched Mr Tolaini's obligation to transfer the remaining 26 shares to Mr Pannell.
221. However, the terms of the Shareholders Agreement are, in my view, inconsistent with an outstanding obligation on Mr Tolaini to transfer 26 shares to Mr Pannell. It is true that Mr Pannell was not a party to the agreement. But Mr de Palma, who was acting on behalf of Mr Pannell drafted it, and he sent the email on 7 October 2011 referred to in para 105 above on behalf of Mr Pannell, in which he assured Mr Tolaini that the "real agreement" was what had been agreed between him and Mr Pannell, and that Mr Pannell would sell back the shares to Mr Tolaini for the agreed profit. I do not think it is open to Mr Pannell now to say he was ignorant of the terms of the Shareholders Agreement.
222. In my view, the objective observer, taking into account the terms of the Shareholders Agreement, would infer that Mr Pannell had given up his entitlement to have the additional 26 shares transferred to him.

The Shareholders Agreement Issue

223. The breaches of the Shareholders Agreement alleged against Mr Tolaini were as follows. First, that Mr Tolaini failed to disclose to Mr Dufoo his negotiations with Mr Pannell regarding the terms of Mr Pannell's advance to the Company. In particular, he failed to inform Mr Dufoo that he had promised Mr Pannell a guaranteed return of £130,000. Regardless of whether this promise was, in fact, binding, it is said that Mr Tolaini acted in serious breach of duty in failing to discuss the promise with Mr Dufoo, or seeking his consent, before making it.
224. I reject this allegation. First, Mr Dufoo clearly knew that money was being borrowed from Mr Pannell, and could have obtained details of the terms from Mr Tolaini if he had wanted to know them. Second, I think Mr Tolaini probably did inform Mr Dufoo of the terms, although Mr Dufoo could not remember them. Third, as I have held, there was no agreement between Mr Tolaini and Mr Pannell for Mr Pannell to have a guaranteed return of £130,000.
225. The second alleged breach is that Mr Tolaini failed to negotiate with Mr Mansoori in good faith and in the interests of QML, in conceding that C Group would receive an equity funding fee of 5% of the whole of the equity put in by McLaren, and project management and consultancy fees of £200,000.
226. I reject this allegation. As to the equity funding fee, as I have explained above, there was no difference in substance between the way it was originally proposed this should be dealt with and the way it was eventually dealt with. More generally, I am quite satisfied that Mr Tolaini throughout did his best to negotiate the best deal he could with Mr Mansoori, in all respects. QML's negotiating position was weak. It had introduced the property to C Group on the basis that the property would be acquired through a joint venture vehicle, but then McLaren made its own offer for the property which was accepted, and the property was purchased by a McLaren company. That left QML, as it seems to me, with no more than an entitlement against C Group to a quantum meruit - a reasonable payment for the work that QML did in introducing the property to C Group and in facilitating the acquisition. Mr Mansoori said, and I accept, that a payment for introducing a property would normally be equal to 1 to 2% of the purchase price, but he thought it fair to give QML more than that, to reflect the work that QML had done in getting a contract issued by the sellers, and in sorting out the problem with the roof terrace. He said C Group had done vastly more work on the project than QML. C Group had been working on it for 2 years, spending about 30 hours a week, and the Profit Sharing Agreement had to reflect that. I accept that evidence.
227. I think that it is clear from the emails, and from the evidence of Mr Mansoori, which I accept, that Mr Tolaini did all that he could, bearing in mind the weakness of QML's negotiating position, to secure for QML as large a share of the profits from the 6 Upper Brook Street development as possible. I think it was clearly in QML's interests for Mr Tolaini to cause it to enter into the Profit Sharing Agreement, despite the fact that this was done after the dispute with Mr Dufoo and Mr Pannell had started. Without the Profit Sharing Agreement, QML's claim against C Group would have been uncertain and, in my judgment, would at best probably have been for a lower amount than that payable under the Profit Sharing Agreement.
228. Mr Dufoo alleged that Future Capital would have put equity into the purchase if permitted to do so, and therefore it was unfair for C Group to get an equity funding fee on the whole of the equity. He said that McLaren's position was that they wanted to put in all the equity. There is no document in the trial bundle containing a clear unconditional offer from Future Capital to provide funding, nor any document from McLaren saying that they would not countenance any equity funding from someone else. Mr Dufoo did not call any evidence from Future Capital Partners that they would have provided funding if allowed to do so. Mr Tolaini supplied a statement from Mr Mycock who was head of real estate for Future Capital at the relevant time, in which he said that Future Capital was unable to offer committed funding. I admitted that under the Civil Evidence Act 1995, but give it little weight, given that Mr Mycock could not be cross-examined. Mr Mansoori said that Future Capital was essentially a broker which put investors in touch with investment projects, mostly films, it did not have funds of its own to invest, it never offered a committed facility, and his understanding was that the hope that Future Capital would come up with funding simply never materialised, which is why McLaren had to put in all of the equity.
229. It seems to me that the burden is on Mr Dufoo to establish that Future Capital were willing and able to put in equity funding but were not permitted to do so, and he has not discharged that burden. On the evidence, even putting to one side Mr Mycock's statement, I do not think Future Capital ever went past the point of expressing an interest in possibly providing some funding.
230. The third alleged breach is that Mr Tolaini failed to disclose to Mr Dufoo that Mr Mansoori had lent him very substantial amounts of money and was a substantial creditor, and that he was talking regularly with Mr Mansoori regarding the possibility of carrying out other property development opportunities together with him. These undisclosed matters, Mr Shaw submitted, created an obvious and acute undisclosed conflict of interest for Mr Tolaini in negotiating with Mr Mansoori over the terms of QML's profit share. This meant that Mr Tolaini was not entitled to continue the negotiations without Mr Dufoo's informed consent, which he did not obtain.
231. This allegation was not pleaded, but arose from evidence given by Mr Tolaini and Mr Mansoori in the course of cross-examination, and could not have been known by Mr Dufoo prior to that. In those circumstances, it seems right to me to allow it to be made. Mr Mansoori explained that there was a loan by a family company of his to Colony South Kensington, which was effectively an investment, and that there were also two loans to Mr Tolaini personally; one of £75,000 made about 3 years previously, and one of £12,500 made during the course of this litigation to pay counsel's fees which is, therefore, not relevant. The loan of £75,000 was made on commercial terms, without security, and there had been no demand for repayment nor any discussion of when it might be repaid. It had last been discussed about a year ago when it was agreed that repayment would be shelved until Mr Tolaini got himself sorted out financially. He disagreed with the suggestion that this loan put Mr Tolaini in a position of conflict. He said people negotiate business transactions all the time with people they owe money to.
232. In my view, the fact that Mr Tolaini owed £75,000 to Mr Mansoori's family company, which there had never been any pressure on him to repay, did not create a conflict of interest and did not mean that Mr Tolaini failed to act with good faith or failed to comply with the duty of disclosure under clause 28.1.2 of the Shareholders Agreement.
233. If I am wrong about any of those matters, I am nonetheless quite satisfied that none of the breaches were a "material" breach. In the context of the Shareholders Agreement, and bearing in mind the drastic consequences of a material breach, I think that only very serious breaches, which go to the root of the relationship between the shareholders, would count as "material". Even if Mr Tolaini committed all three of the breaches alleged, I do not think that individually or collectively they were serious enough to count as "material breaches" for the purposes of the Shareholders Agreement.
234. If I had decided that Mr Tolaini did commit material breaches, I would in any event have rejected the claim, because no notice to remedy under clause 16 was served. Mr Shaw argued that no such notice was required, because the breaches were irremediable, there was no point in serving a notice to remedy an irremediable breach, and the law does not require notices to be served when they are pointless. In support of the latter submission, he cited Lewison: Interpretation of Contracts at para 13.10 and Barrett Bros (Taxis) Ltd v Davies [1966] 1 WLR 1334 at 1339F.
235. As to that, I think all three of the alleged breaches were remediable, by the payment of compensation for any loss suffered. Second, even if that is wrong, and the breaches were irremediable, I think that clause 16.2.4 does require a notice. Where a contract requires a notice to be served, it may be the case that, on the true construction of the contract, the notice is not necessary if it would be futile to serve it. So, in the Barrett Bros case, insurers could not avoid the policy in reliance on the failure of the insured to comply with a condition requiring him to notify in writing of any accident and any intended prosecution, because they received all the information they needed from the police. However, there is a clear difference between the drafting of clause 16.2.4 which applies where a Shareholder is an individual, and clause 16.3.9, which applies in the case of a body corporate. In the latter case, a notice to remedy is only required if the breach is capable of remedy. In the former case, there is no such qualification. That strongly suggests that a notice to remedy is required in the case of an individual shareholder even if the breach is irremediable.
236. Further, a notice to remedy, even in the case of an irremediable breach, is not futile. It tells the shareholder that all the other shareholders have decided to proceed under the clause, allows the shareholder a breathing space to consider his position and, if he considers he is entitled to, to prepare and make a claim for relief against forfeiture. Under s.146 of the Law of Property Act 1925, which requires a warning notice to be served before forfeiting a lease, the courts have held that, in the case of an irremediable breach, the tenant must nonetheless be given time to consider his position and whether to make an immediate application for relief against forfeiture: see Woodfall para 17.135. I think the same is true under clause 16.2.4 of the Shareholders Agreement.
237. Mr Tolaini also made a claim under clause 16. He alleged in his Amended Points of Defence and Counterclaim that the other parties committed a number of material breaches which entitle him to a transfer of their shares. Although he has settled this claim insofar as it relates to DAP and Mr Pannell, it remains a live claim against Mr Dufoo. However, this claim cannot succeed, in my judgment, because a claim can only be made under clause 16.2.4 if a notice to remedy is first served by all the other shareholders. Mr Tolaini could not pursue a claim under that clause unless he could persuade DAP to serve notice under clause 16.2.4 jointly with him.
238. His pleading also includes a claim to damages, but he did not give particulars of any loss either in the pleading, or in his evidence. He did not mention the damages claim in his submissions. I cannot see that Mr Tolaini has suffered any loss as a result of the alleged breaches, other than the costs of this dispute. In deciding on the appropriate order as to costs, I can of course take into account, under CPR r.44.2, when deciding what order as to costs to make, the matters relied on by Mr Tolaini as constituting breaches of the Shareholders Agreement. That being so, it seems to me undesirable to take time in this already long judgment in considering in detail whether the conduct complained of constituted breaches of the Shareholders Agreement. Even if they did, it would not take Mr Tolaini anywhere.
239. I will, however, very briefly record my conclusions on each of the matters alleged to constitute breaches by Mr Dufoo:

(a) Calling a meeting to get Mr Tolaini suspended as a director. I do not think that calling a meeting to consider a resolution is a breach.

(b) Sending the notice of the meeting by post knowing he would not receive it and keeping him in the dark about the meeting. I do not think it was a breach to send the notice by post, but Mr Dufoo did communicate with Mr Tolaini between sending the notice and the date of the meeting without mentioning it, and that was, I think, a breach of the clause 28.1.1 duty to display the highest degree of good faith towards in all matters relating to QML.

(c) Passing the resolutions on 5 March 2012 to suspend Mr Tolaini, alter the bank mandates and appoint new auditors. That was a breach of clause 28.1.1.

(d) Relying on the altered version of the email of 8 February 2012. That was a breach of clause 28.1.1.

(e) Commencing and pursuing this litigation. I do not think that seeking relief from the Court was a breach.

(f) Wrongly claiming, in the course of the litigation, that Mr Dufoo and Mr Pannell called the meeting for 5 March 2012 having discovered that Mr Tolaini had secretly filed forms at Companies House which were not, in fact, filed until 6 March 2012. I think that making that false accusation, without foundation, was a breach of clause 28.1.1.

240. Overall, I consider that Mr Dufoo's breaches of clause 28.1.1, and particularly the alteration of the email, were sufficiently serious to constitute "material breaches". Therefore, but for the absence of a clause 16.2.4 notice, I would have held that Mr Dufoo was a "Bad Leaver", and obliged to transfer his shares at £1 per share. And if Mr Tolaini had established that he had suffered any loss flowing from those breaches, I would have awarded him damages.

The Winding Up Issue

241. Mr Shaw submitted that a failure to act in accordance with quasi-partnership duties and understandings may justify the making of a winding up order. In support, he referred me to Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, where the House of Lords considered s.222(f) of the Companies Act 1948, which was in the same terms as s.122(1)(g) of the Insolvency Act 1986, and which does support that proposition. In that case, Lord Cross (with whom Lord Salmon agreed) said, at p.387: "A petitioner who relies on the 'just and equitable' clause must come to court with clean hands, and if the breakdown in confidence between him and the other parties to the dispute appears to have been due to his misconduct he cannot insist on the company being wound up if they wish it to continue."
242. Mr Shaw submitted that Mr Dufoo's conduct should not prevent him from obtaining a winding up order. He submitted that, in determining whether Mr Dufoo is entitled to relief, the real issue is whether his conduct or that of Mr Tolaini was the cause of the breakdown in trust and confidence between them, citing Vujnovich v Vujnovich (1989) 5 BCC 740 at 744h-745a and Re R A Noble & Sons (Clothing) Ltd [1983] BCLC 273 at 290b-290c. He did not submit that I should make a winding up order even if I was satisfied that the breakdown in trust and confidence was not Mr Tolaini's fault.
243. Applying that approach, I do not think that Mr Tolaini's conduct was the cause of the breakdown in trust and confidence. It was the decision by Mr Dufoo and Mr Pannell, behind Mr Tolaini's back, to try and suspend and then remove him as a director, followed by Mr Dufoo's claim that he was entitled to 42 shares based on an altered email, that caused the breakdown in trust and confidence. Accordingly, applying Mr Shaw's approach, I do not think it would be just and equitable to wind up the company, against Mr Tolaini's wishes.
244. It seems to me that it should be possible for the parties to agree on a procedure for getting in the money due from C Group and distributing it in accordance with the parties' rights, as determined by this judgment. Mr Pannell is entitled to be paid the first £130,000 as a payment on account of his ultimate entitlement. As to the balance, one obvious possibility is for the parties to agree that the money be paid into an account where the signatures of all of them are required to make a withdrawal. Then, if they cannot agree on their respective entitlements to the money in that account, an application can be made to the Court to determine it. If any party wishes me to make an order governing the position, I will hear submissions on that.

Conclusions

245. Mr Dufoo's claim against Mr Tolaini to 50 shares fails, but his claim to 36 shares succeeds. Mr Tolaini must, therefore, transfer 36 shares to Mr Dufoo. This order does not affect any claim which Morlan may have against Mr Dufoo in respect of those shares or part of them. Mr Dufoo is to send a copy of this judgment forthwith to Mr Yerrill.
246. As between DAP and Mr Tolaini, the agreement was that Mr Tolaini would sell 9 shares to DAP for £20,535.48 Mr Tolaini must, therefore, transfer 9 shares to DAP.
247. As between Mr Tolaini, QML and Mr Pannell, agreement was that Mr Pannell would lend £60,000 to QML, and would procure that DAP paid £20,535.48 to QML, in return for which Mr Pannell would be entitled to have repaid, to him and DAP, the sum of £100,535.48, plus interest thereon at the same rate as the rate of return earned by McLaren on its equity investment in the purchase of 6 Upper Brook Street. Mr Tolaini would transfer 9 shares to DAP, and Mr Pannell would procure that, on repayment of the loan and interest, DAP re-transferred the shares to Mr Tolaini. The original agreement that Mr Tolaini would transfer 35 shares to Mr Pannell was superseded by the later agreement for the transfer of 9 shares to DAP and the entry into the Shareholders Agreement.
248. QML should not be wound up.
249. I will hear submissions on the form of the order to be made in the light of this judgment and consequential matters, including any application for an order for costs.