Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v Ioannis Kent (Aka John Kent)

JurisdictionEngland & Wales
JudgeLord Justice Leggatt
Judgment Date22 February 2018
Neutral Citation[2018] EWHC 333 (Comm)
CourtQueen's Bench Division (Commercial Court)
Docket NumberCase No: CL-2016-000265
Date22 February 2018
Between:
Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan
Claimant
and
Ioannis Kent (Aka John Kent)
Defendant

[2018] EWHC 333 (Comm)

Before:

Lord Justice Leggatt

Case No: CL-2016-000265

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Hefin Rees QC and Samar Abbas (instructed by Denning Legal) for the Claimant

David Lewis and Jack Dillon (instructed by Simons Muirhead & Burton) for the Defendant

Hearing dates: 22–23, 27–30 November and 4, 6, 12–13 December 2017

Para No.

A. INTRODUCTION

1

B. FACTUAL NARRATIVE

8

The boat trip

10

The agreement to invest

14

Purchase of the Bella and Silva Hotels

17

The cash problems begin

20

Acquisition of YouTravel

29

Personal friendship

31

Financial problems continue

32

The visit to Athens in December 2011

41

February and March 2012 board meetings

43

YouTravel and the FTI solution

46

Execution of the share transfers

52

The meeting at the Grande Bretagne Hotel

56

The terms of separation are developed

64

The meeting in London

68

Mr Kent's attempt to negotiate

71

The agreements are signed

76

The terms of the Framework Agreement

78

Double dealing with FTI

79

Subsequent events

87

C. THE DISPUTE

88

D. THE CLAIM

91

(i) The promissory note

93

(ii) The Operational Debts claim

95

(iii) Other debts

106

Employee social security and tax liability

113

Interest rate protection contract fee

116

VAT penalty

118

Property taxes and municipality taxes

120

Legislation of building permit violations

121

(iv) The grant claim

124

Conclusion

136

E. THE COUNTERCLAIM

137

Nature of the parties' legal relationship

140

Terms expressly agreed between the parties

141

Partnership

150

Fiduciary duties

153

A duty of good faith

167

Alleged duty to give notice of termination

177

Duress

178

Financial condition of Aquis and YouTravel in April 2012

192

Mr Kent's options at the time of the Framework Agreement

201

Conduct of the Sheikh's representatives

203

Nature of the demands

206

Threats of litigation

211

Physical threats

214

Consequences of duress

217

Is duress a tort?

222

Breach of contractual duty of good faith

226

Intimidation

227

What loss has Mr Kent suffered?

235

F. CONCLUSION

239

Lord Justice Leggatt

A. Introduction

1

The story is all too familiar. Two friends go into business together. The business founders, their friendship falls apart and they end up in a dispute on opposite sides of a courtroom.

2

The claimant in this case is Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan (“Sheikh Tahnoon”). He is a member of the Royal Family of Abu Dhabi and a resident of the United Arab Emirates. The defendant is Ioannis (or John) Kent, a Greek businessman. In 2008 Mr Kent set up a hotel business in Greece with the aim of establishing (by lease, purchase or franchise) a brand of luxury hotels under the name of Aquis. In October 2008 Sheikh Tahnoon agreed to invest in the business as an equal shareholder with Mr Kent. Their joint venture was later expanded to include an online travel business called YouTravel. It is agreed that Sheikh Tahnoon ultimately contributed a total of €31.1m of share capital to the Aquis and YouTravel companies. The final €6.5m was paid between December 2011 and April 2012 in exchange for equity which increased his share of the group to 70%. By then the business was critically short of cash and on the brink of collapse. In early April 2012, representatives of Sheikh Tahnoon, to whom he had by now delegated his dealings with Mr Kent, decided that Sheikh Tahnoon should not support the business any longer and that he should instead separate his interest from that of Mr Kent.

3

A scheme was devised to restructure the Aquis and YouTravel companies and to provide for Mr Kent to repay to Sheikh Tahnoon part of the capital contribution which Sheikh Tahnoon had made to the business. To implement this scheme two agreements were made between Sheikh Tahnoon and Mr Kent, both dated 23 April 2012. The first, described as the Framework Agreement, provided for the demerger of the business and contained certain undertakings and indemnities given by Mr Kent. The second was a promissory note by which Mr Kent agreed to pay Sheikh Tahnoon a sum of €5.4m in annual instalments between 1 November 2013 and 1 November 2018. These two agreements are at the centre of the present dispute.

4

In this action, Sheikh Tahnoon claims the value of the promissory note, which remains unpaid, along with further sums allegedly due under the Framework Agreement. The total amount claimed by Sheikh Tahnoon from Mr Kent is just over €15m.

5

It is Mr Kent's case that his consent to the Framework Agreement and the promissory note was obtained by unfair means, including threats of physical violence and economic duress, and in breach of fiduciary duties and/or a contractual duty of good faith which Sheikh Tahnoon allegedly owed Mr Kent. Mr Kent has not sought to rescind the Framework Agreement and ultimately accepted at the trial that the promissory note cannot be separately rescinded and is therefore enforceable. But he denies that any further sum is owed under the Framework Agreement and has counterclaimed for an account of profits or damages which include any amount which Mr Kent is held liable to pay to Sheikh Tahnoon under the Framework Agreement and the promissory note.

6

Before I address the issues in more detail, I will give a narrative history of the parties' business relationship. Tracing this history is necessary in order to determine what legal duties Sheikh Tahnoon and Mr Kent owed each other and what breaches, if any, of those duties were committed and to what effect – before, at the time of and after the signature of the Framework Agreement and promissory note. In the narrative below I will refer to only a small part of the large amount of evidence adduced at the trial about events which spanned a period of over five years. As well as many bundles of documents, this evidence included lengthy testimony from the parties themselves and other witnesses. Although I have taken account of the whole of the evidence, in the interests of economy I will focus and make findings of fact on those aspects of the history which seem to me most salient for the purpose of deciding the issues in dispute.

7

After giving this factual narrative I will consider in turn the Sheikh's claim and Mr Kent's counterclaim.

B. Factual narrative

8

Mr Kent lived and worked in the UK for some 15 years before returning to Greece in 2006. In 2008 he established the Aquis group of companies with a holding company in Cyprus (“Aquis Cyprus”) and a Greek subsidiary called Aquis Société Anonyme of Hotel, Tourism and Technology (“Aquis SA”), which was to be the main operating company of the group. At that time Mr Kent was already running an online hotel booking service for travel agents and tour operators called YouTravel and came up with the idea of combining this business with a hotel chain. He planned to start by leasing two or three hotels and then expand as quickly as he could. Part of his plan was to upgrade hotels to a higher standard with the assistance of grants available from the Greek government.

9

The first board meeting of Aquis SA was held on 4 June 2008. In addition to Mr Kent there were six other members of the board. One of them was Mr Nicholas Kouladis, a lawyer who was a close friend of Mr Kent and had also lived in the UK, where he had been a law lecturer at Southampton University and Honorary Consul for Greece in the south of England. Mr Kouladis was a witness at the trial. At the board meeting on 4 June 2008 decisions were made to proceed with renting office premises in Athens and negotiating the lease of two hotels in Corfu.

The boat trip

10

Mr Kent first mentioned his new business to Sheikh Tahnoon during a boat trip at the end of June 2008. The two men had previously met a few times socially. In June 2008 Sheikh Tahnoon decided to spend a few days with some friends cruising around some Greek islands on a yacht (possibly at Mr Kent's suggestion). Sheikh Tahnoon asked Mr Kent to make the arrangements for the trip, which were made through YouTravel, and to join his party. It is common ground that during this trip there was a conversation in which Mr Kent explained his business plans to develop a chain of hotels. In their evidence at the trial, however, the two men gave very different accounts about the extent of the interest expressed by Sheikh Tahnoon at this stage.

11

Mr Kent said that, when he had explained his plans, Sheikh Tahnoon shocked him by saying that it would be his honour to become Mr Kent's partner if Mr Kent would have him. Sheikh Tahnoon then shook Mr Kent's hand. Mr Kent said that he was very excited and took the handshake to mean that they had made a legally binding agreement to go into business together. Sheikh Tahnoon denied that any such agreement was made. He recalled the conversation as a brief one with other people present and said that no serious business discussion took place. He did say, however, that he was intrigued by what Mr Kent described and was interested in the idea of working with someone who seemed to have extensive experience of tourism and the luxury hotel market.

12

I think it likely that in this initial conversation Sheikh Tahnoon expressed rather more enthusiasm for participating in the Aquis business than he now recalls. But I reject as fanciful Mr Kent's claim that he believed at the time that they had made a legally binding...

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