PCP Capital Partners LLP v Barclays Bank Plc
| Jurisdiction | England & Wales |
| Judge | Mr Justice Waksman |
| Judgment Date | 26 February 2021 |
| Neutral Citation | [2021] EWHC 307 (Comm) |
| Date | 26 February 2021 |
| Docket Number | Claim No. CL-2016-000049 |
| Court | Queen's Bench Division (Commercial Court) |
[2021] EWHC 307 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
THE HONOURABLE Mr Justice Waksman
Claim No. CL-2016-000049
Joe Smouha QC, James Collins QC, Robert Weekes and Owen Lloyd by (instructed by Quinn Emanuel Urquhart and Sullivan UK LLP, Solicitors) for the Claimants
Jeffery Onions QC, David Quest QC, Charlotte Eborall, Alexander Polley and Oliver Butler (instructed by Simmons & Simmons LLP, Solicitors) for the Defendant
Hearing dates: 8–12, 15–17, 19 and 22–24 June, 2, 6–10, 13–16, 20–24, 27–28 and 31 July, 3–7 August and 12–16 and 19 October 2020
TABLE OF CONTENTS
| PART ONE — GENERAL | |
| BETWEEN | 1 |
| Claimants | 1 |
| Defendant | 1 |
| GENERAL INTRODUCTION | 6 |
| The Parties | 6 |
| The Capital Raise of October-November 2008 | 6 |
| PCP's claim against Barclays | 8 |
| THE CRIMINAL AND FCA PROCEEDINGS | 11 |
| THE INSTRUMENTS | 12 |
| CHRONOLOGICAL OVERVIEW | 13 |
| Introduction to Overview | 13 |
| Before October 2008 | 13 |
| October 2008 | 15 |
| November 2008 | 27 |
| 2009 | 32 |
| THE ISSUES | 32 |
| THE EVIDENCE | 33 |
| Live Witnesses | 33 |
| Hearsay Notices | 34 |
| Expert Evidence | 34 |
| Particular evidential features of this case | 35 |
| SUBMISSIONS | 37 |
| SOME PRELIMINARY FACTUAL MATTERS | 38 |
| Introduction | 38 |
| The general position of Barclays | 38 |
| The role and abilities of Ms Staveley | 40 |
| The general credibility of Ms Staveley | 41 |
| Mr Jassim's business connections with Ms Staveley | 42 |
| The credibility of Barclays' witnesses including Mr Forbes | 43 |
| Adverse inferences from witnesses not called | 45 |
| The Yeltex Invoice and the events of 8 and 9 October | 45 |
| The Yeltex Invoice | 45 |
| Events of 8 and 9 October 2008 | 50 |
| Some Dealings with Mr Restis | 51 |
| PART TWO — LIABILITY | |
| INTRODUCTION TO LIABILITY ISSUES | 53 |
| THE MAKING OF THE SDR | 53 |
| 23 October | 54 |
| 24 October | 57 |
| 31 October | 58 |
| THE MEANING OF THE SDR | 59 |
| THE MAKING OF THE JR | 62 |
| THE MAKING OF THE INVESTOR REPRESENTATION | 69 |
| PCP AS REPRESENTEE (1): INTENTION THAT REPRESENTATIONS SHOULD BE RELIED UPON BY PCP | 70 |
| Introduction | 70 |
| Analysis | 71 |
| PCP AS REPRESENTEE (2): RELIANCE BY PCP | 73 |
| FALSITY OF THE SDR (1): BY REASON OF ASA 2 | 75 |
| Introduction | 75 |
| Sham — the Law | 75 |
| The parties' cases on sham | 77 |
| ASA 1 — Key Facts | 78 |
| ASA 1 — Analysis | 85 |
| Conclusion on ASA 1 as a sham | 89 |
| ASA 2 — Introduction | 89 |
| The genesis of ASA 2 | 90 |
| The Text of ASA 2 | 92 |
| The Benefits by then of ASA 1 | 93 |
| Barclays' Perception of Future benefits under ASA 2 | 96 |
| Post-Asa 2 Benefits | 96 |
| ASA 2 — Analysis | 97 |
| Conclusion | 100 |
| Falsity: ASA 2 as connected to CR 2 | 100 |
| FALSITY OF THE SDR (2): BY REASON OF THE £66M FEE | 101 |
| Introduction | 101 |
| Analysis | 102 |
| FALSITY OF THE SDR (3): BY REASON OF THE LOAN | 104 |
| Introduction | 104 |
| The Consideration Point | 105 |
| The Funding Point | 112 |
| Footnote: Unlawful Financial Assistance | 113 |
| THE JR — FALSITY | 113 |
| THE IR — FALSITY | 113 |
| DISHONESTY | 113 |
| The Law | 113 |
| Analysis | 114 |
| The SDRs | 114 |
| The JR | 115 |
| Generally | 116 |
| CONCLUSION ON LIABILITY | 116 |
| PART THREE — CAUSATION AND LOSS | |
| INTRODUCTION TO CAUSATION AND LOSS | 117 |
| CENTRAL ISSUES IN CAUSATION AND LOSS | 117 |
| OVERARCHING LEGAL ISSUES | 118 |
| The Law on balance of probabilities as against loss of chance assessment | 118 |
| A more than 10% Threshold? | 122 |
| The Approach to Quantification | 123 |
| Loss of Chance as alternative to Balance of Probabilities | 124 |
| Mixed Questions | 124 |
| The “Fair Wind” Principle | 124 |
| Loss of Chance and Multiple Sequential Contingencies | 125 |
| Loss of Chance where more than one positive outcome to the contingency is a real possibility | 125 |
| ISSUE 1: IN THE COUNTERFACTUAL WORLD, WOULD BARCLAYS HAVE DEALT WITH PCP AT ALL? | 126 |
| ISSUE 2: HAD THE REPRESENTATIONS NOT BEEN MADE, WHAT WOULD PCP HAVE DISCOVERED? | 126 |
| ISSUE 3: IN THE COUNTERFACTUAL WORLD, WOULD PCP HAVE OBTAINED ADDITIONAL VALUE FROM BARCLAYS AND IF SO, WHAT? | 129 |
| PCP's pleaded case | 129 |
| Barclays' Preliminary Objection | 130 |
| Interrelation between Issue 3 and Issue 5 | 131 |
| The Scenarios now pursued by PCP | 131 |
| Implications of the Balance of Probabilities Assessment on Issue 3 | 132 |
| The Evidence | 133 |
| Conclusion on Issue 3 | 136 |
| ISSUE 4: IN THE COUNTERFACTUAL WORLD, WOULD PCP HAVE OBTAINED ADDITIONAL TIME FROM BARCLAYS AND IF SO, HOW MUCH? | 136 |
| Introduction | 136 |
| Original AT | 137 |
| Later AT | 138 |
| ISSUE 5: WHATEVER BARCLAYS WOULD HAVE BEEN PREPARED TO GIVE BY WAY OF AV AND/OR AT, WOULD OTHER SHAREHOLDERS (WHOSE CONSENT WAS NECESSARY AT AN EGM) HAVE AGREED WITH THE REQUISITE MAJORITY OF 75%? | 139 |
| ISSUE 6: IN THE COUNTERFACTUAL WORLD, WOULD SHEIKH MANSOUR AND/OR IPIC HAVE BEEN PREPARED TO INVEST THROUGH PCP I.E WITH PCP MAINTAINING CONTROL OF THE SPVS AT COMPLETION? | 140 |
| Introduction | 140 |
| Why did PCP lose control? | 140 |
| The Counterfactual Position | 144 |
| ISSUE 7: WHAT REMUNERATION WOULD PCP HAVE AGREED WITH SHEIKH MANSOUR AND/OR IPIC IN THE COUNTERFACTUAL WORLD? | 145 |
| Introduction | 145 |
| Remuneration Basis 1 | 145 |
| The Remuneration Agreement allegedly made: PCP's case | 145 |
| The Remuneration Agreement allegedly made: Barclays' case | 146 |
| The Majlis Agreement | 147 |
| The Emergence of the Heads of Terms | 151 |
| The 18 November Agreement | 153 |
| The Uncommerciality Argument | 156 |
| Introduction | 156 |
| The Meaning of the Terms | 156 |
| The Uncommerciality Points in detail | 157 |
| Conclusion on Remuneration Basis 1 | 162 |
| Remuneration Basis 2 | 162 |
| Remuneration Basis 3 | 162 |
| Remuneration Basis 4 | 163 |
| Conclusion on Issue 7 | 163 |
| ISSUE 8: WOULD PCP HAVE BEEN ABLE TO RAISE THE DEBT FINANCE REQUIRED AND IF SO, HOW MUCH? | 163 |
| Introduction | 163 |
| The Bank Disclosure | 164 |
| The Witness Statements of Ms Staveley and Mr Attieh on DB Debt Finance | 165 |
| The Nature of the Issue 8 Exercise | 166 |
| The Experts | 166 |
| The Debt Financing Position in the Real World | 168 |
| GSI | 168 |
| JPM | 169 |
| The Counterfactual (1): Non-recourse financing in relation to the MCNs | 174 |
| Introduction to Mr Srinivasan's Model | 174 |
| A Block Sale in Principle? | 175 |
| Availability of borrow shares to effect the block trade | 178 |
| The Size of the Block Discount | 179 |
| Profitability for DB | 183 |
| Other Points | 186 |
| The Counterfactual (2): RCI Financing | 187 |
| Introduction | 187 |
| Real World information on any RCI Financing | 187 |
| RCI Financing in the Counterfactual | 189 |
| The Counterfactual (3): The impact of any AT | 191 |
| Conclusion | 193 |
| ISSUE 9: WOULD PCP HAVE BEEN ABLE TO RAISE SUFFICIENT FUNDS OVERALL FOR THE SUBSCRIPTION? (“THE FUNDING SUFFICIENCY ISSUE”) | 193 |
| Introduction | 193 |
| The Other Investors Issue | 193 |
| Relevance | 193 |
| Substance | 194 |
| The Shortfall Issue | 197 |
| Introduction | 197 |
| Use of Warrants | 198 |
| Use of AV | 199 |
| Conclusions on the Shortfall Issue | 200 |
| The Sale of the RCIs Issue | 200 |
| Conclusion on Issue 9 | 200 |
| ISSUES 8 AND 9 TAKEN TOGETHER | 201 |
| ISSUE 6 REVISITED | 201 |
| PCP'S RESIDUAL CASE ON LOSS | 203 |
| Remuneration Basis 4 | 203 |
| Remuneration Basis 2 | 205 |
| A Final Alternative | 205 |
| CONCLUSIONS ON CAUSATION AND LOSS | 205 |
| ISSUE 10: WHAT, IF ANY, LOSS HAS PCP SUFFERED IN THE LIGHT OF THE FOREGOING? | 205 |
| Introduction | 205 |
| The Assumptions | 207 |
| Assumption 4: Split of the warrants | 207 |
| Assumption 5 (a): Definition of “profit” for Remuneration Basis 1 and Assumption 5 (c): Definition of “carried interest” for Remuneration Basis 3 | 207 |
| Assumption 6: RCI Exit Date | 207 |
| Assumption 7: Amount of Block Discount share price | 207 |
| Assumption 8: Cap on additional fees | 208 |
| Assumption 9: Amount and terms of MCN debt financing | 208 |
| Assumption 11: Treatment of £30m cash fee received by PCP in April 2009 | 209 |
| Assumption 12: Treatment of costs associated with the collar financing | 209 |
| Assumption 13: Ongoing cost of RCI loan | 209 |
| Assumption 15(a): Volatility assumption to arrive at the Theoretical Value of warrants and Assumption 15 (b): Volatility assumption to arrive at the Realisable value of warrants | 210 |
| Assumption 16: Availability of MCN Commissions to contribute to the funding of the Subscription Amount | 210 |
| Assumption 17: Exercising or unwinding the collar financing arrangement | 210 |
| Assumption 20: Ex-post discount on Warrants' realisable value | 211 |
| Assumption 21: Date of conversion of MCN to Barclays shares | 211 |
| Assumption 23: Application of the Capital Preference term at the global vs fund level | 211 |
| Assumption 24.1: The source and sequence of funding for subscribing to the Instruments for... |
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