Karim Frederick Dhanani v Serge Crasnianski
| Jurisdiction | England & Wales |
| Judge | Mr. Justice Teare |
| Judgment Date | 15 April 2011 |
| Neutral Citation | [2011] EWHC 926 (Comm) |
| Docket Number | Case No: 2010 Folio 328 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 15 April 2011 |
[2011] EWHC 926 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Justice Teare
Case No: 2010 Folio 328
Marcus Smith QC and Simon Atrill (instructed by Charles Fussell & Co. LLP) for the
Claimant Roger ter Harr QC and Daniel Shapiro (instructed by Lewis Silkin LLP) for the Defendant
Hearing dates: 14–17, 21–24 February and 25 March 2011
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Claimant, Mr. Karim Dhanani, is a Belgian national who resides in London. He has worked in the world of private equity, in particular, investing in distressed companies, "turning them around" and selling them for profit. The Defendant, Serge Crasnianski, is a resident of Switzerland who is a successful scientist and inventor. In November 2006 they met on the Eurostar and by the end of March 2007, after a very few meetings, they had signed a letter and term sheet pursuant to which it was envisaged that the Defendant would provide the Claimant with €50m. which he would invest in a private equity fund to be managed by the Claimant. But by the end of June 2007 they had fallen out and the Defendant no longer wished to give the Claimant the opportunity to invest €50m. of his personal wealth. The Claimant alleges that the Defendant is liable to him in damages for breach of contract in the sum of over £11.3m. The Defendant denies that he is liable to the Claimant in damages for breach of contract and counterclaims for the repayment of €312,500 advanced to the Claimant.
Witnesses of fact
The Claimant gave oral evidence to the court. He did so with a degree of exuberance and theatricality. He was particularly anxious to explain his point of view rather than simply answer the questions put to him. He was in many ways an advocate for his cause and had plainly studied the documents in the case. That, together with own admitted practice of "embellishing the reality" when it came to providing potential investors or employers with his c.v., meant that I did not feel able to accept all that he said. I considered it safer to rely upon the contemporaneous documents where they existed and the probabilities where they did not.
The Defendant also gave evidence but he did so, it appeared to me, rather more calmly than the Claimant. However, he gave evidence through an interpreter and I must therefore be wary of relying upon the manner in which he gave evidence. A better guide is the content of what he said. From time to time he could not resist the opportunity to emphasise what he regarded as weaknesses in the case against him and his recollection was at times at odds with the documents. So, as with the Claimant, though for somewhat different reasons, I considered it safer to rely upon the contemporary documents and the probabilities.
There were two additional witnesses of fact who gave oral evidence. The Defendant's daughter, Tania Crasnianski, answered the questions put to her concisely and clearly. However, she did not have a clear recollection of the discussions in which she participated and so again it is necessary to have regard to the contemporary documents and the probabilities. Mr. Adams of S.J. Berwin gave evidence in a straightforward manner. Much of his evidence was reflected in the documentary evidence reflecting the work done by his firm.
Certain statements were read and were not subject to cross-examination.
Events leading up to the signing of the letter and term sheet.
The Claimant and the Defendant had first met in about 2001, when the Claimant was a vice-president at Deutsche Bank Capital Partners, in connection with a sale of part of Photo-me International Limited of which the Defendant was the main shareholder and CEO. They had also met on business trips to the US and Japan. In addition there were one or two social meetings. The Claimant and the Defendant were at most acquaintances rather than friends.
In November 2006 they met by chance on the Eurostar train travelling from Paris to London. The Defendant, who had an economy class ticket, chose to upgrade his ticket to join the Claimant. They had slightly different accounts of their conversation, which was in French. The Claimant professed little recollection of their conversation, particularly with regard to what he said about his discontent at Platina, the private equity firm where he worked at the time. This chance meeting led to a most significant opportunity for the Claimant and I find it surprising that he had so little recollection of it. For that reason, and because I consider that the Defendant's account is the more probable, I prefer the Defendant's account of this meeting. In response to a question from the Defendant the Claimant told him that he worked in private equity for a fund known as Platina. He said that investing in private equity was preferable to investing in the shares of listed companies. He said that his boss, Mr. Rottner, took the credit for the Claimant's hard work and gave the Claimant the impression that he was not happy at Platina. He had plans for his own fund. It is very probable that the Defendant expressed a polite interest in what he was being told. On parting the Defendant gave the Claimant his telephone number and asked to be kept informed of his progress.
In January 2007 the Claimant telephoned the Defendant and in consequence was invited to the Defendant's house in Cheyne Walk on Saturday 27 January 2007. The Defendant was interested to know what the Claimant had in mind because he though it might represent an opportunity to acquire companies and assist them to recover.
The Claimant had prepared a presentation of what he had in mind. He showed the Defendant a 16-page document in English which, in the form of bullet points, described what he intended to do through a fund entitled Zoji La Capital. (Zoji La was the name of an existing company which had been established by the Claimant.) The fund was described as having a target size of €70m. with a minimum of €50m. There was to be one core investor and two additional investors. The investment period was described as 5 years and the exit period as 5 years from the end of the investment period. Manuscript notes of the Defendant indicate, as do the Claimant's own notes, that the Claimant explained how the investors and the fund managers would benefit from the Fund. If, on the sale of an investment, the price achieved was more than 6% of the investment ("the hurdle") the investor would retain 80% of the profit and the fund managers would retain 20% of the profit ("the carried interest"). The management fees were described and a projected time table was set out running from February to April 2007 (commitment from investors and legal documentation) to January-March 2008 (first investment). Information as to the Claimant's experience and his achievements in private equity were summarised. The Claimant's speaking notes indicate that he said that he envisaged the Defendant being the main investor in the fund, that he intended to use but improve upon a tested model (that which he had used at Platina) and that he intended to leave Platina so that he could manage the fund himself. The main investor would, in addition to providing funds and paying the management fees, provide an office. The Defendant was reluctant to accept that the Claimant had him in mind as the main investor but it seems to me likely that he did. His speaking notes and his manuscript notes of the meeting suggest that he did. The Defendant was impressed by the presentation and said that the Claimant could discuss the subject further with his colleague Jean-Luc Peurois. The meeting lasted, according to the Defendant's recollection, about 45 minutes to one hour.
The Claimant met Mr. Peurois the next day, Sunday 28 January, at the Claimant's house. The only witness to this meeting was the Claimant because Mr. Peurois has since died. The Claimant said that Mr. Peurois was very supportive of the project.
On 2 February the Claimant wrote to a potential investor stating that he hoped to launch his own fund in 2007. He said that he was in "the advanced stage of discussions with a first investor … who would contribute 50 million Euros to the new fund." I myself would not describe the discussions with the Defendant as "advanced" at this time. They had only just begun. The use of the adjective is an illustration of the Claimant's tendency, as he would put it, "to embellish the reality" where he thought that was desirable in order to advance his own interests.
On 8 February the Claimant and the Defendant met at the Gare de Lyon in Paris. The Defendant's recollection was that the meeting lasted about 35 minutes. The Claimant thought somewhat longer, between 45 and 75 minutes. The Claimant produced a one-page document entitled "Zoji La – Business Plan." It referred to the investments totalling €72m., including one of €50m., and to the fees which would be charged per annum based upon such investments. It also referred to the expenses of the fund, including salaries. It is likely that this document was the focus of the parties' discussions. Manuscript notes of both the Claimant and the Defendant on the document suggest that there was discussion of salaries, bonuses and possibly travel expenses. The Defendant gave evidence that he indicated to the Claimant that he wanted control over investments and expenses. The Claimant did not accept that he did. It is, however, probable that he did. They were discussing an investment of €50m. of the Defendant's money. It is to be...
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