Markus Pedriks v Serge Grimaux
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Heather Williams |
| Judgment Date | 21 December 2021 |
| Neutral Citation | [2021] EWHC 3448 (QB) |
| Docket Number | Case No: QB-2018-000996 |
| Court | Queen's Bench Division |
[2021] EWHC 3448 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Heather Williams DBE
Case No: QB-2018-000996
Matthew Bradley (instructed by Ronald Fletcher Baker) for the Claimant
Donald Lilly & Daniel Kessler (instructed by CANDEY) for the Defendant
Hearing dates: 26 – 29 October 2021
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
| HEADING | PARAGRAPH |
| Introduction | 1 – 14 |
| The events and contentions in outline | 2 – 7 |
| The Preliminary Issues | 8 – 11 |
| The Preliminary Trial | 12 – 14 |
| The MSA | 15 – 17 |
| The pleaded cases | 18 – 37 |
| The terms of the MSA | 19 – 22 |
| Fiduciary duties | 23 – 25 |
| The 2015 Representation | 26 – 27 |
| The 2016 Agreement | 28 – 31 |
| Breach of contractual and fiduciary duties | 32 – 36 |
| Loss and damage | 37 |
| The factual circumstances | 38 – 111 |
| The parties | 40 – 41 |
| Events prior to the Mediation | 42 – 50 |
| The Mediation | 51 – 57 |
| General observations regarding credibility | 56 – 57 |
| Events February – December 2015 | 58 – 66 |
| Events January – July 2016 | 67 – 74 |
| Events August – 12 September 2016 | 75 – 79 |
| Events of 13 and 14 September 2016 | 80 – 90 |
| The rest of 2016 | 91 – 102 |
| Events in 2017 | 103 – 111 |
| The applicable legal principles | 112 – 133 |
| Construction of contracts | 113 – 115 |
| Implication of terms | 116 – 118 |
| The existence of a binding agreement | 119 – 127 |
| Fiduciary relationships | 128 – 132 |
| Estoppel by representation | 133 |
| Conclusions | 134 – 185 |
| Construction of the MSA | 134 – 140 |
| Breach of the MSA | 141 – 155 |
| Clause 1 | 141 |
| Clause 2 | 142 |
| Para 13D APOC implied term | 143 – 150 |
| Clause 5 | 151 – 154 |
| Clause 10 | 155 |
| Fiduciary duties as a result of the MSA | 156 – 160 |
| The 2015 Representation | 161 – 166 |
| The 2016 Agreement | 167 – 184 |
| Intention to create legal relations | 169 – 173 |
| Certainty | 174 – 181 |
| Alternative grounds for finding a concluded contract | 182 – 184 185 |
| Fiduciary duties as a result of the 2016 Agreement | |
| Outcome and consequential orders | 186 – 191 |
Introduction
In these proceedings Mr Pedriks alleges that Mr Grimaux is in breach of a Mediation Settlement Agreement (“ MSA”) entered into in January 2015, the terms of an oral agreement made in September 2016 concerning the sale of the business of Ticketpro Limited (“ TL” and “ the 2016 Agreement”) and fiduciary duties. As well as damages for breach of contract, he seeks the taking of accounts and inquiries in relation to the alleged misappropriation of company funds. Mr Grimaux denies that a binding agreement was reached in September 2016 and denies all alleged breaches of contract and duties. The matter came before me for trial of certain preliminary issues. Before setting out those issues I will explain a little more about the dispute and its context.
The events and contentions in outline
The Ticketpro business was founded by Mr Grimaux in 1992. The core of the business is selling tickets for live entertainment events. It initially operated in Czechoslovakia (subsequently the Czech Republic) and over time its activities expanded to 17 countries, via a number of subsidiaries and associated companies. The main subsidiary companies that I am concerned with are Ticketpro a.s and Ticketpro Technologies a.s, both based in the Czech Republic. In 2004 Mr Pedriks invested USD $1 million in return for an agreed 10% share in the business. Following this a re-structuring took place and on 11 August 2005 the holding company, TL was incorporated under the laws of the Republic of Cyprus. Subsequently, Mr Grimaux was registered as holding 90% of TL's share capital and Mr Pedriks as holding the other 10%. Both Mr Pedriks and Mr Grimaux were directors of TL along with three nominee directors who were based in Cyprus. On 17 October 2010 Mr Grimaux acknowledged that Mr Pedriks' share in TL would increase to 25%.
Mr Pedriks made additional payments to Mr Grimaux / TL. He regarded these as loans and particularly from 2011 onwards, he sought repayment. Mr Grimaux countered that they were investments in the business. Mr Pedriks also expressed concerns that Mr Grimaux was withdrawing large sums of money from the Ticketpro businesses for his own personal benefit or for the benefit of other companies he owned and controlled, including Intellitix, a group of companies the Defendant had founded in 2010 which provided Radio Frequency Identification technology for live entertainment events. Disagreements over these and related matters led to a mediation held on 5 January 2015 (“ the Mediation”). Negotiations resulted in a plan to sell TL and for specified sums to be repaid to Mr Pedriks, plus interest, as set out in the MSA. The Claimant contends that express and implied terms of the MSA were breached.
On 29 February 2016 Heads of Terms were agreed with Live Nation Luxembourg Holdco 2 SARL (“ Live Nation”) for the sale of the parties' shares in TL. Ultimately, the transaction proceeded as a sale of TL's assets via Aquapath Limited (“ Aquapath”), a special purpose vehicle wholly owned by TL. The initial payment made upon completion on 9 February 2017 was €5,425,000, with a further €949,000 paid by way of a net assets adjustment in August 2017. In April 2017 TL changed its name to Azurelink Limited (“ Azurelink”).
During the sale process Mr Grimaux sought to rely on a promissory note dated 1 January 2006 from TL, indicating he was owed USD $4,435,500 (“ the Promissory Note”). Mr Pedriks contended that this was not a genuine debt and that it was being used by Mr Grimaux to obtain priority over payment of sums due to him. He also said that it conflicted with what Mr Grimaux had said at the Mediation, namely that there were no loans owed by TL other than the monies that were owed to him. Over a series of communications in August and September 2016, Mr Pedriks declined to sign the Incumbency Certificate that was required for the Live Nation sale to proceed, unless Mr Grimaux provided an assurance that the Promissory Note would not be used to secure priority of payment over the monies owed to him.
Matters came to a head on 13 September 2016. Mr Pedriks' case is that the 2016 Agreement was reached on the telephone with Mr Grimaux that: (i) he would receive €3,738,000 from the proceeds of sale of TL; (ii) any excess cash and/or working capital would be divided equally between them; (iii) he would be responsible for paying the bills of Andrew Fielding (TL's accountant in the sale process) and White & Case (TL's lawyers in the sale process); and (iv) Mr Grimaux would provide him with an equity interest equal to 10% of his shareholding in Intellitix. Mr Grimaux denies that any binding agreement was reached either on 13 September 2016 or subsequently. He says that versions of a written agreement that he subsequently provided were simply drafts and that nothing was finalised.
On 13 February 2017 Mr Grimaux transferred the equivalent of USD $2,050,000 to Mr Pedriks. Previously he had been paid USD $300,000 by TL. No further payments were made. Mr Grimaux's position is that he made the payments due under clause 5 of the MSA and that nothing more is owed. Mr Pedriks contends that clauses 1, 2, 5 and 10 of the MSA were not complied with and that the balance of the €3,738,000 sum agreed in 2016 is owing to him, along with 50% of the excess cash / working capital of TL and an equity interest equal to 10% of Mr Grimaux's shareholding in Intellitix.
The Preliminary Issues
By Order of Master Gidden sealed on 4 February 2021 (“ the February 2021 Order”) the issues to be determined at a Preliminary Trial were set out in an agreed appendix (“ the Preliminary Issues”). The recitals indicated that non-inclusion of an issue in the appendix did not of itself imply that a party could not adduce evidence in relation to it. In the event, the evidence adduced by both parties ranged more widely than the Preliminary Issues and it was agreed that I should consider the same in so far as it bore on credibility and context.
The agreed Preliminary Issues are as follows:
i) “ The construction of the Mediation Settlement Agreement dated 5 January 2015, including (for the avoidance of doubt) the existence and scope of implied terms.” Cross references were given to paras 13A – 13G, Amended Particulars of Claim (“ APOC”); paras 11A – 11D and 22.3, Amended Defence (“ ADef”); and paras 19D and 36, Amended Reply 1 (“ AReply”) 2;
ii) “ Whether the Defendant owes the Claimant fiduciary duties as a result of entering into the 2015 Mediation Agreement in the context of the factual background, and if so, what duties he owes.” Cross references were given to paras 13E – 13F, APOC; paras 11E – 11F, ADef; and para 19F, AReply;
iii) “ The 2015 Representation: whether, at the mediation a representation was made that there were no loans owed (other than the loan monies owed to the Claimant), giving rise to an estoppel by representation or implied representation precluding reliance on the Promissory Note or a waiver of rights under the same.” The cross references were to paras 15A – 15D, APOC; and para 13A, ADef;
iv) “ The existence of the alleged agreement between the Claimant and the Defendant as pleaded in...
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