Fletcher v Davis & Anor

This is an action which flows from the fall-out from the breakdown of a business relationship between Mr Noel Fletcher, the claimant, and Mr Trevor Davis, the first defendant. In 1999, Mr Fletcher had an idea for a new way of presenting advertisements on the internet. He required capital from another person in order to develop that idea, and he was introduced to, and came to some form of arrangement with, Mr Davis. That resulted in the incorporation of the second defendant (“PFI”) which was a company intended to develop the relevant software and carry forward at least some aspects of the joint venture. Mr Fletcher brought the ideas into the venture; Mr Davis provided the initial capital. In April 2001 a website was launched which was based on the new software, but that coincided with a falling-out between Mr Fletcher and Mr Davis. That dispute rapidly got out of hand, and within a few months the two gentlemen had in substance parted company, and the project ground to a halt. As a result of that, Mr Fletcher commenced this action, claiming monies from the company by way of agreed remuneration and consultancy fees, damages from the company in respect of his alleged wrongful removal as a director of the company, reimbursement for certain debts of the company that he says he discharged, damages from Mr Davis for breach of what he says was a shareholders’ agreement reached in December 1999 and a declaration that any patent granted in respect of what he claims was his invention belonged to him jointly with two other co-inventors. The damages claimed against Mr Davis can be summarised as being the amount of profits which would have resulted from the venture had Mr Davis not performed certain acts which Mr Fletcher says wrongfully brought the project to an end. Mr Davis defends the action, disputing amongst other things the existence of the shareholders’ agreement and that Mr Fletcher is not the appropriate claimant for any loss of profits. The company also denies the existence of the shareholders’ agreement relied on by Mr Fletcher, and in addition counterclaimed for relief on the footing that Mr Fletcher threatens a breach of copyright in respect of the software written for the venture (until that claim was settled during the course of the trial).

The story of the formation of the venture between Mr Fletcher and Mr Davis, its pursuit and its breakdown is a detailed and sorry one. The value of any judgment against PFI is highly questionable, since on any sensible view of the facts the company is insolvent. The applications for the patents which form part of Mr Fletcher’s claim have lapsed because relevant fees were not paid, and Mr Fletcher has in fact indicated that he no longer pursues that part of his claim. However, this action and the counterclaim have proceeded not least, it seems to me, because the question of costs has got in the way of any settlement. These proceedings were started on 10 April 2001. After about a year, Mr Fletcher dispensed with his legal advisers and has thereafter represented himself, though it is plain from some things that he has said that from time to time he has taken legal advice (including advice from leading counsel) on certain aspects of this case while acting in person. Mr Davis, until the end of December 2004, has been legally represented for most (but not quite all) of the period of this case, but as from the beginning of this year he too has been acting in person. In addition to one deferment of the trial date because of an accident to a member of Mr Fletcher’s family, there have been two abortive attempts to start this trial. The first was in May 2003, when the trial started before Pumfrey J. After two days Pumfrey J adjourned the trial because of the recent production of a significant volume of documents. The trial resumed at the end of October 2003, but again on the second day it was adjourned because of the late production of yet more documents. Those two abortive trials must have caused large amounts of costs to be wasted. In addition, there has been a very significant number of interim applications, an administration petition and proceedings to restrain a third party (seen by Mr Davis, with some justification, as an ally of Mr Fletcher) from petitioning to wind up the company. In mid-action, Mr Davis changed solicitors, leading to the assertion of liens and general disruption to the continuation of the case. The overall effect of all this is the incurring of large amounts of costs and the creation of large amounts of documentation. It is fortunate in one sense that the trial bundles were assembled by the solicitors acting for Mr Davis in October 2003, because that means that there are at least some coherent bundles. It is, however, unfortunate in that it appears that insufficient thought was given to the documentation which would be necessary for the trial, with the result that I was presented with six volumes of witness statements and exhibits (most of which turned out to relate to earlier applications) and which contained large quantities of evidence that in the end the parties did not rely on at the trial; and 15 lever-arch files of chronological documents of which, it seems to me, the vast majority were of only peripheral relevance (if that). There were 7 further volumes of documents relating to other proceedings stemming from this affair, bank statements and statements of case. All this required a great amount of pre-reading.

At the trial Mr Fletcher and Mr Davis appeared in person, and Mr Davis represented PFI. It was quite apparent from the moment the trial started that the bitterness of the parties, and their mutual distaste, has not abated over the last three years, remains very severe, and cannot be repressed. Cross-examination of each party by the other was constantly obstructed by this feature, and obviously the two litigants in person were not seasoned cross-examiners (though Mr Davis’s efforts were quite commendable in this respect) and the court had to take a greater role in examining (and restraining) witnesses than would otherwise be the case. At the end of the day the present factual position means that the claims, if established, are likely to be worthless, so the action is likely to be all about costs. All this makes this a most unfortunate piece of litigation, and the lack of assistance from any lawyers means that many areas of the case were not covered with the thoroughness that one would normally require and expect. The effect of this is that in some areas where I would have wanted to make clear findings (and in particular in relation to the details of the stages of the rise and fall of the relationship between Mr Davis and Mr Fletcher) I have felt unable to do so because the facts were not sufficiently expounded, developed and tested. Nevertheless, the result of the evidential stage of the hearing is that I am satisfied that in the core areas, where central findings are required, I heard sufficient evidence, and saw enough cross-examination, to be sufficiently well informed to be able to make findings in those areas. At the start of the action it seemed that there was going to be a problem over documentation, because the defendants’ solicitors came off the record at the end of December 2004 (as a result of non-payment of their fees) and the trial bundles for whose preparation they had been made responsible (because Mr Fletcher was acting in person for most of this action) were not available. However, this potential problem was overcome when the solicitors procured delivery to me of a set of the bundles retained by Mr Davis’s former junior counsel (marked up to some extent, but not in a way which was embarrassing or which caused any difficulty), and Mr Davis and Mr Fletcher had their own bundles from which they worked. It transpired from time to time that Mr Davis’s bundles were not quite as complete as those of Mr Fletcher and me, but those difficulties were overcome when they arose and I was satisfied that all parties (and I myself) had the right documentation to enable the case to be conducted fairly.

In this section of the judgment I shall set out the details of the history of this matter, narrating facts which in the main are either agreed or which are clearly established, and indicate some of the respective cases of the parties where their cases diverge in matters material to the action. In what follows, any statement of fact should be taken as being a finding by me unless the contrary appears. There were a large number of disputed facts in relation to almost every detail of this case; at times it seemed that the parties were hardly ever in agreement about anything. It is not necessary (and indeed it is not possible) for me to make findings in relation to very many areas of dispute, so the following narrative confines itself to those areas which are necessary to understand the case and to enable me to decide, or to determine the background to, the issues which arise.

Mr Fletcher has a background partly in marketing. He was a marketing manager (though sometimes styled director) in substantial organisations, including the Sears group and Consolidated Foods. He did that for a number of years. Between 1980 and 1992 he conducted his own businesses, whose details are immaterial for these purposes. He does not have technical computer expertise. In 1999 he conceived an idea for the better presentation of advertisements on the internet. His idea was to present pages of classified advertisements on a website in varying sizes and colours so that they presented like the sort of classified advertisements that one finds in written publications, and especially in the Sunday colour supplements. Apparently that format has not been used on the internet before (or at least not so far as the evidence before me revealed). This requires specialist software to be written. The site and project came to be known as Shopping Classifieds, and I shall use that term from now on.

His son Ralf was reading computer sciences at Brighton and he spoke to him about it. Ralf in due course became involved in developing the software. Mr Fletcher also spoke to one of Ralf’s tutors, Miss Angela Crossley, and she expressed great interest and some enthusiasm. Mr Fletcher engaged her to assist. She in turn, and in due course, involved one of her best students, a Mr Stephen Dunkley, and in due course he came on board too. The ideas within the project developed from time to time, and one of the developing ideas was how to get visitors to the website. Mr Fletcher had registered, planned and set up various sites for specific interest groups which he called Squawkbox. They included, for example, sites dedicated to gardening and shares. As well as banner ads intended to entice the visitors to those sites to go on and visit Shopping Classified, another way of getting them there was to write code in Java script, appended to the Squawkbox site, so that the Shopping Classified window popped up behind the Squawkbox window. When the user logged out of the Squawkbox window the Shopping Classified site then popped into view. Another way in was to procure references from other commercial sites (“symbiants”). Some symbiants were asked to agree to include the relevant Java script on their web pages so that the Shopping Classified pages would “pop behind” them, and there were also to be explicit links on the symbiants’ sites.

Funds would be required for hardware, for software development, and in due course for marketing the project. Hardware had to be acquired, both so that the software could be developed and for a server. Personnel had to be engaged to write the software and, to a limited extent, to run the business. In due course funds would be required for marketing, but that was a second phase. Mr Fletcher planned to engage himself heavily in the development in terms of overall supervision. Premises were to be found. All this required funds, and Mr Fletcher did not have them. He tried to interest various bodies in the City, and to that end visited them and made presentations. He prepared various documents for them. The precise form of documents is not clear, and no clear instance of those documents has survived. However, there is one document in the papers (dated 23rd August 1999) which, if it was not actually presented, is a close draft to one that was. Mr Fletcher was equivocal in his evidence as to the extent to which this document represented what he put before potential investors, but viewing his evidence on this in its totality I find that if this was not an actual final draft of what some of them saw, then it is very close. Under a section which described the then members of the “Squawkbox team” Mr Fletcher described himself as “a retired Marketing Director” whose past appointments “include: Marketing Director Imperial Tobacco. Marketing Director Consolidated Foods. Marketing Director Sears Holdings.” Those expressions clearly suggest that he was the marketing director of those substantial concerns. The fact was that he was not always a director in the company law sense and he was, on his own admission to me, a marketing manager lower down the group (albeit a senior one with other marketing managers below him and in some cases in charge of the marketing of a division of the group concerned). I came to the conclusion that it is likely that this documentation was put before potential investors in this form, and that they were intended to take from this that Mr Fletcher was more senior than he in fact was in this respect. He was prepared seriously to puff his experience in order to get the attention of his listener, a fact which goes to his credibility and to which I return below.

Having had no luck with investors in and around the City, Mr Fletcher spoke to Mr Charles Goodfellow, a stockbroker with whom he had been friends for some years. He asked Mr Goodfellow whether he knew anyone who might provide the funding and Mr Davis sprang to Mr Goodfellow’s mind. Mr Davis was someone who had apparently had had some success in investing. Mr Goodfellow arranged a lunch meeting between himself, Mr Fletcher, Mr Davis and a member of Goodfellow’s staff. This took place at about the end of November 1999. Mr Fletcher’s proposed venture was discussed and Mr Davis expressed an interest in funding it. There is a dispute as to how far the discussion went at that meeting, but it is common ground that Mr Davis was given some documents. Mr Fletcher told me that he gave Mr Davis a “pack”. Exactly what was in it is no longer clear, but I find that whatever else might have been given, Mr Fletcher gave Mr Davis a document which comprised a technical paper (which had been written by Ralf in November, and on which nothing turns), and details of the estimated initial capital expenditure, estimated first year operating overhead, estimated first year revenue, first year gross expenditure and first year operating surplus. It is, however, less than clear what figures appeared in those pages. There are two versions of that document in the papers before me, and neither of them is dated. They contain differing figures. It looks as though one set of figures is an update of the other, but it is not clear which is which. While I find that Mr Davis was presented with figures similarly categorised, it is not clear whether it was either of these or none of them. From what appears in a later document given to him, I think it likely that neither of them was.

It is common ground, and I find, that Mr Davies expressed serious interest at the lunch. What happened next is an area in which the accounts of the parties and their witnesses diverge.

Mr Fletcher says that Mr Davis was very seriously interested, and that they left the lunch together and went to Victoria station where Mr Fletcher was to board a train to get him home to Hove. At the station they had a long discussion during which Mr Davis’s interest firmed up even more to the point of agreement on all major points apart from the shareholding in the new venture. Agreement as to shareholdings was agreed subsequently. The agreement reached was as follows. Mr Fletcher says that they agreed that they would exploit Mr Fletcher’s invention together. Mr Fletcher would continue to develop it and would take day to day control of the project. Mr Davis would provide the funding that was necessary. That funding was estimated at £300,000. Both men would be directors of the relevant company and the shareholding would be 52% for Mr Davis, 42% for Mr Fletcher and 6% for Mr Goodfellow (because he effected the introduction). Mr Davis would not receive remuneration. Mr Fletcher would not receive remuneration while the product was in development, but on launch of the website the new company would be liable to him for remuneration of “between £100,000 and £150,000” per annum (quoting from his witness statement), backdated and “reviewable upwards”, together with a consultancy fee of £200,000. Mr Fletcher then set about finding premises, formalising the relationships with the programmers and generally taking the matter forward.

Mr Fletcher’s evidence is equivocal as to when this agreement was reached. At the stage of these proceedings when he was expected to produce a witness statement for the purposes of the trial he did not serve anything recognisable as such. He produced a document which was part witness statement and part submissions (mainly the latter) and it was obviously not his main witness statement. For that latter purpose he relied on one signed on 8^th April 2001, shortly after the action started and at which point in time there were proceedings for interim relief. That witness statement sets out when the agreement now sued on is said to have been reached. It explains that there were discussions of the project over the lunch, at which point the £300,000 estimate for capital was referred to, as was the absence of a salary for Mr Fletcher. It was in telephone calls over the next few days that the terms of his remuneration were agreed as being between £100,000 and £150,000, as was the shareholding. In cross-examination in the witness box Mr Fletcher described matters differently. He said that apart from the shareholding, all matters were agreed between the parties by the time they parted at Victoria Station at the end of the day of the lunch. At the station he indicated the salary he required, and he told Mr Davis that he certainly wanted £120,000. The agreement as to shareholdings came as a result of telephone dealings a few days later. In the course of this he had a meeting with Mr Goodfellow at the Thistle Hotel at Victoria at which he discussed the matter further. Mr Davis did not attend that meeting. However, the important strand which he takes from both these accounts is that two things that were agreed by Mr Davis – that Mr Fletcher would have remuneration in the amounts referred to, and that Mr Davis was obliged to provide capital to the company. The pleaded remuneration claim is for “a salary of at least £150,000 per annum, backdated to December 1999”, together with a one-off consultation fee; and the obligation of Mr Davis is said to be to “pay the development costs of the invention, which the claimant estimated would amount to about £300,000, in return for 52% of the shares in the Company.”

Mr Davis presented a different sequence of events. He agrees that he and Mr Fletcher were introduced to each other at a lunch hosted by Mr Goodfellow at the latter’s offices at the end of November 1999. The project was discussed and he indicated serious interest. He did not accompany Mr Fletcher to Victoria station and certainly did not have any business discussion there. No agreement of any sort was reached at this point. A few days later (probably on 7^th December) he met with Mr Goodfellow and Mr Fletcher at the Thistle Hotel and the matter was discussed further, both in the presence of Mr Goodfellow and after he left. Mr Fletcher’s idea seemed attractive to him and he decided to put the venture to the trustees of a trust called the Kilmeaden Trust, an English law discretionary trust (with Manx Trustees) in which he and his wife (among others) were potential beneficiaries. Shareholdings were not discussed at that time, and Mr Fletcher said he wanted his shareholding held offshore. Over the next few weeks there were further discussions, and it was in the course of those shareholdings that the ultimate shareholdings (52% to Mr Davis, 42% to Mr Fletcher and 6% to Mr Goodfellow) were agreed. I shall return to some of the detail of Mr Davis’s version of the discussions below. Apart from detail, the important difference between the parties for these purposes is that Mr Davis denies that there was any form of agreement that Mr Fletcher would have the remuneration he now seeks, denies that he was under any obligation to provide funding and denies the other obligations which Mr Fletcher uses to found his action. Mr Davis’s Defence (served in January 2002) clearly states that at the Thistle Hotel meeting Mr Davis said he would present the idea to the Kilmeaden trustees, clearly averring thereby that there was an express reference to the Kilmeaden trust at that stage. However, in his witness statement signed on 28^th April 2003 Mr Davis says that at that stage he did not identify the Kilmeaden trust to Mr Fletcher at that stage because it was none of Mr Fletcher’s business, though he referred to discussing funding with some unidentified trustees. When he wrote an email some days later on 16^th December 1999, referring to the project and “our company”, he did not refer to Kilmeaden, and he says that that was because it was not necessary to do so (and the email does not in fact refer to trustees either).

Mr Goodfellow also gave evidence. He gave evidence that he introduced Mr Fletcher and Mr Davis over lunch at his offices at the end of November 1999, and that Mr Davis was interested, though he could not remember what was said at that time. He could not recall a further meeting at the Thistle Hotel in connection with this project, but said that he often met Mr Fletcher there so it was possible there was one that he has forgotten. The effect of the discussions at the time was that there was some sort of understanding that Mr Davis would put in what Mr Goodfellow called stage 1 funding. He could not recall reference to any amounts.

It is quite clear, and I find, that by the end of 1999 or the beginning of 2000 Mr Fletcher and Mr Davis had reached an arrangement for the development of Mr Fletcher’s idea. That arrangement, in broad terms, was that Mr Fletcher would provide the idea and arrange the day to day matters necessary to develop it, and it was expected that Mr Davis would provide the funding for that. It was pursuant to that that the events which I now recite took place.

By 9^th December 1999 Mr Goodfellow had given instructions to accountants to incorporate an English company for the venture. That company was the second defendant (PFI); it was incorporated on 15^th December. Everyone treated the setting up of the venture as having two phases. In an email to Mr Goodfellow of 22^nd November 1999 Mr Fletcher referred to the first phase as getting the hardware and software in place and “bringing the network on line”. By “the network” Mr Fletcher probably meant the Squawkbox network of special interest sites, together with the shopping site which was at the heart of the venture. At this stage of the operation Mr Fletcher envisaged that the principal route into the shopping site (or the main way in which it would be drawn to customers’ attention) was via the Squawkbox network of sites. The second phase, according to this email, would involve promotion, marketing and the sale of advertising “space”. The concept of two phases, divided in that way, was referred to from time to time in contemporaneous documents and was referred to in the evidence of both Mr Fletcher and Mr Goodfellow. It seems to have been the basis on which all parties were working. Obviously, income would not come until the second phase.

The company having been incorporated, Mr Davis and Mr Fletcher became directors. Mr Goodfellow was proposed as company secretary, but decided to put his wife forward instead. In the course of evidence Mr Fletcher indicated that he thought that Mr Goodfellow was a director, or at least treated him as such, but he was never formally appointed. However, it does seem that he had an active role from time to time, and Mr Fletcher considered that he was actively involved in the financing of the company. PFI took a lease of office premises at Wilbury Grove, Hove, and Miss Crossley, Mr Dunkley and Ralf joined in the operation on the software side. At about the same time as he met Mr Davis Mr Fletcher was indicating to Mr Goodfellow that he wanted any company he was involved with to be registered outside the UK. He said as much in an email of 29^th November 1999 and said that he had been advised by a Herr Schrier, his “Swiss family advisor”, that it was “very important for [his] personal financial affairs”, though he said he would rethink the matter if having an offshore company would adversely affect any future flotation of the enterprise. A discussion paper that he sent Mr Goodfellow at the beginning of December confirmed that he would personally prefer the company to be registered offshore (preferably the Channel Islands). PFI was an English company. It is not clear how that came to be incorporated when Mr Fletcher had expressed his wish for an overseas company if possible. The shares in PFI were not, on incorporation, allotted to Mr Fletcher and Mr Davis (or Mr Goodfellow). By February 2000 the parties had agreed that the shares in PFI would be held by an Isle of Man company, and instructions were given for the incorporation of a company known as Clicktronics plc for that purpose. That company was incorporated by agents on 23^rd February 2000, with Mr Davis instructing agents (known as Coda) for that purpose – they were already known to Mr Davis. The shares in that company were held in the agreed proportions referred to above, though the Fletcher and Davis shares were allotted to trusts nominated by them. Mr Davis’s nominated trust was called the Kilmeaden Trust – I have referred to this above. It owned a corporate vehicle called Kilmeaden Ltd, a Bahamian registered company. Mr Fletcher’s nominated trust was called the Judith Ann Fletcher trust – his wife was the principal beneficiary. Officers of Coda were directors of Clicktronics - Mr Davis and Mr Fletcher were not. One of the directors of Coda was a Mr Francis Howard. Until some date late in 2001 or 2002 he was a director of Clicktronics, a director of Kilmeaden Ltd and a trustee of the Kilmeaden Trust.

There is one conflict of evidence that I should deal with at this point. Mr Fletcher clearly stated in his cross-examination that the idea of an offshore company came from Mr Davis and he went along with the suggestion. That was consistent with his witness statement (confirmed by him in the witness box) which, while perhaps a little muddled on chronology, stated that Mr Davis was the proponent of the idea. I find that to be clearly wrong. Mr Davis had his own reasons for wishing to have his share interests held offshore, as the email and discussion paper that I have referred to indicated. Whether or not Mr Davis was keen for other reasons, he did not originate this idea, and I find not only that Mr Fletcher was inaccurate in his evidence in this respect, but that he was deliberately inaccurate in an attempt to present himself as something of an ingénue so far as offshore matters are concerned when he is in fact nothing of the sort.

Development of the software continued and Mr Fletcher, with his background in marketing, set about planning how to draw the website to the attention of customers, as well as supervising the project. In the witness box Mr Fletcher told me that he planned a launch date of November 2000 – he had reckoned that it would take about a year from the start of the project. That was not what he was telling those with whom he dealt. On 11^th January 2000 he wrote to a Ms Goodwin seeking contributions for a gardening discussion site and saying he planned to launch his “portal” in April. Mr Fletcher told me that he could not have launched at this time, and that this sort of thing was what went on in marketing – he described it as a “liberty”, which was presumably intended to be a justification. On 2^nd February 2000 he told PFI’s accountant/book-keeper (a Mr John Line) that they would “arrive on line in March/April” – I do not know whether that was a similar “liberty”, but it is unlikely since there would be no need to puff the project in-house. On 29^th February 2000 he informed another proposed contributor to the gardening site (a Mr Geoffrey Hodge) that the launch would be in June/July 2000. On 22^nd March 2000 he told a potential advertising agency that he planned to launch a “heavily promoted network of ten websites” “during May 2000”. At the beginning of May he told Mr Davis that the Squawkbox sites would be launched at the end of May, and during April he told others that a June launch was planned. On 11^th October 2000 he told a Mr Emyr Williams (another possible contributor) that the launch date had been “put back” to November. Eventually the site was launched on 2^nd April 2001. The pattern of documents I have seen suggests one or both of two things – that he was lying to others about the planned launch date, and/or that he lied to me as to what his original planned launch date was. I find that there was certainly the former, and he admitted as much in saying that the April date was a “liberty”. I also think that his evidence to me (that he thought launch would take about a year) was to some extent a rationalisation of something that was not formulated quite as consciously as that, but it is at least consistent with one of his generalised financial projections prepared at the outset which indicated a requirement for first stage funding covering a year.

As part of his general supervision and conduct of the project, while phase 1 was under way Mr Fletcher set about implementing phase 2, and in particular marketing. From mid-2000 he set about contacting people with a view to engaging marketing and advertising experts. Amongst others, he contacted an agency known as DPA, and incurred some fees to them, and an agency called Endacott RJB Marketing Ltd (“Endacotts”) where his principal contact was Mr Charles Endacott, the managing director. Endacotts were ultimately engaged to provide services. The activities of PFI cost money, and in the main this money was provided by Mr Davis in the sense that he procured its provision from some source or other. Whether and to what extent it was his money, and what route it took into PFI, is one of the points that arises in this action (or at least it is said by Mr Fletcher to arise, and it has been addressed). Mr Fletcher’s prime contention is that it was provided by Mr Davis himself. Mr Davis’s contention is that as a matter of fact its source was Kilmeaden Ltd and the moneys were in essence those if the Kilmeaden trust. As a matter of technicality, he says that the moneys were advanced to Clicktronics who then lent it on to PFI.

The ultimate source of the money point is said to go to whether or not Mr Davis was personally a party to a shareholders’ agreement on which Mr Fletcher sues. Mr Fletcher sought to say that the money was Mr Davis’s, and this supported his claim that Mr Davis was a counter-party to what he called the shareholders’ agreement. I am not sure it determines much either way, but since the point has been raised I will make some findings on it. I find that the money which Mr Davis procured should be put into the venture was for the most part not his own money but was actually Kilmeaden Ltd’s, and was thus in substance Kilmeaden Trust money. Mr Davis certainly had great influence over how that trust’s money was disposed of (particularly in terms of investments) but it does not fall to be treated as his money. The amounts introduced at the behest of Mr Davis in the period up to the launch of the website exceeded £300,000, of which over two-thirds apparently came from sources clearly attributable to Kilmeaden, and it may be that further investigation would demonstrate that the proportion is even higher. That demonstrates that most of the money emanated from Kilmeaden. Much less of it emanated from Mr Davis. There is nothing in the evidence which justifies an assertion that Kilmeaden’s money was in fact Mr Davis’s. I find that the source of the bulk of the money was the Kilmeaden Trust.

In reaching this conclusion I do not ignore the quality of Mr Davis’s evidence about his relationship with the Kilmeaden Trust and Kilmeaden Ltd. I think that he was heavily involved as a (if not the) real decision-maker for this trust and company at the relevant time and in relation to all relevant dealings between the trust and Kilmeaden Ltd on the one hand and PFI and Mr Fletcher on the other. I deal with this below when I deal with Mr Davis’s credibility. However, this power to control does not make the trust money Mr Davis’s.

There is also dispute between the parties is as to who PFI’s creditor was. Mr Davis (and PFI, through him) asserted that as a matter of technicality the money was lent to Clicktronics which in turn provided it by way of inter-company loan to PFI. Mr Fletcher disputes this. He obviously regarded it as some sort of contrivance which has been made up and was not agreed. The evidence on this is rather slim, but if it matters I find that the defendants’ case on this is correct, that is to say that as a matter of technicality the introduced moneys were treated as introduced into Clicktronics and then treated as an intercompany loan. There was no oral evidence of any agreement to this effect, but there was some limited documentary evidence. I saw some unaudited and unsigned financial statements of Clicktronics for the year ended 31^st December 2000 (probably drawn in 2002) in which the inter-company debt is shown, but that is of little evidential value because they are likely to have been drawn on the instructions of Mr Davis after the dispute in this case arose. On 1^st February 2000 Mr John Line, an accountant introduced by Mr Davis, emailed Mr Fletcher asking for certain financial information which was “important because it [would] assist in coming to a decision about how Trevor’s finance should be structured vis-à-vis the company”. The next day Mr Fletcher responded to Mr Line’s queries, saying “PFI will be taking up loans from it’s [sic] parent company”. A printout of PFI’s nominal ledger on 19^th August 2000 shows an inter-company loan standing at £87,546.68, and internal management figures drawn by Mrs Jo Davison, who was PFI’s accountant (succeeding Mr Line from the summer of 2000), and attached to an email of 11^th December 2000, reflect an inter-company loan shown increasing month by month throughout the year. There is no other candidate for an inter-company loan other than the Davis/Kilmeaden moneys. The email I have just referred to was sent to Angela Crossley, but is addressed to “All” and refers to a discussion with Angela Crossley earlier that day. It indicates that Mrs Davison proposed to produce similarly formatted figures each month, and asked the recipients to let her know if something different was required. I think it likely that this was intended to be addressed to, inter alia, Mr Fletcher and it likely that it came before him at some point. There is no evidence that he protested at this stage. In the intervening period, on 3^rd October 2000, Mr Goodfellow emailed Mr Davis and Mr Fletcher saying that Jo Davison had been instructed to forget that Clicktronics existed “until such point where we need to consider it in accounting terms”, but if any such instruction was given it had apparently been superseded, or treated as not being applicable to the Davis money, by the time she sent her email at the end of the year. On 12^th February 2001 she sent a schedule of payments “received from Clicktronics”, indicating her clear understanding of the accounting treatment of these moneys. Taking a view of the evidence, I find that it was agreed by the parties that the Davis-introduced moneys would be treated as arriving at PFI via an inter-company loan from Clicktronics. Mr Fletcher vehemently denied that there was an inter-company loan, and he seemed to treat it as conclusive that Clicktronics never had a bank account through which money could have passed. That point simply ignores the fact that the loan could be perfectly validly constituted without any money being seen to pass through Clicktronics’ hands in the form of bank account entries, and demonstrates Mr Fletcher’s naivety, if not wilful blindness, in relation to such matters.

During 2000, therefore, the project was being advanced. Mr Davis did not participate in the day to day affairs. The most he did was to keep some sort of eye on things from afar. In March 2000 he moved to Belgium to work there, a move which suited him from a tax point of view because it assisted him to avoid capital gains tax on the realisation of one of his personal investments. During 2000 he had very few meetings with Mr Fletcher. Such dealings as they had were over the telephone or by email. By and large Mr Fletcher was left to get on with it (which was of the essence of the original arrangement that he should be in charge of the day to day affairs of the company). Mr Davis claimed that he also maintained some control by putting in Mr Line as the accountant. He did not visit the offices of the company until May, when he met with Mr Goodfellow and Mr Fletcher there. During this year he arranged for funds to be provided to PFI. From time to time he would be asked to provide funding so that creditors could be paid. He did not always pay promptly, and creditors sometimes had to wait longer than might be desirable, but in the end (during this period) the funds were provided. In the second half of the year the moneys required included money needed to pay for marketing (principally to Endacotts). Despite the fact that these costs were second stage, not first stage, costs Mr Davis provided funds to pay them. During the whole of this initial period no marketing plan and no detailed cashflow plan (worthy of the name) was produced.

Mr Fletcher decided that the ideas behind his invention ought to be protected by a patent application, and by September 2000 patent agents known as Frank B Dehn had been instructed to make such an application. An application was filed on 4^th October 2000. Trade mark applications were also made. On 7^th February 2001 an application was made for a US patent. The UK patent application was made in the name of PFI. The US patent application was filed in the name of Clicktronics. It is quite clear from an email sent by Mr Fletcher to Angela Crossley on 25^th October 2000 that he specifically instructed that the US patent application be made in the name of Clicktronics and not PFI; and the same also clearly appears in a letter sent by Miss Crossley to the patent agents on 28^th February 2001. A further email of 2^nd March 2001 to Angela Crossley makes clear Mr Fletcher’s intention that intellectual property rights should be in the name of Clicktronics, as does his acquiescence when sent a letter by Mr John Lewis, solicitors involved on behalf of PFI by Mr Davis on 12^th March 2001 which clearly presupposes that intellectual property rights would be vested in Clicktronics. This is important because Mr Fletcher claimed before me that one of the things that made him deeply suspicious of Mr Davis was the latter’s insistence (at the end of March 2001) that patent applications be transferred to Clicktronics. He claimed to have been outraged by this and to have seen this as an attempt at transferring assets offshore with a view to asset-stripping. Not only does this not make much sense as an allegation, such a transfer was clearly within what Mr Fletcher himself had contemplated should be the case for some considerable period.

From the end of 2000 or the beginning of 2001 Mr Davis began to take a greater interest in PFI. He said, and I accept, that he began to be concerned about the amount of money that was being required which greatly exceeded the amounts which had been referred to at the outset. The launch date firmed up as being 2^nd April 2001. Towards the middle of February a meeting took place between Mr Davis, Mr Fletcher and Mr Goodfellow at the offices of Irwin Mitchell, solicitors retained by Mr Davis. He also arranged for Mr Lewis, a sole practitioner solicitor said to specialise in intellectual property, to attend to deal with commercial and licensing implications in relation to the software, because Mr Fletcher was proposing arrangements with concerns in the United States which would or might involve licensing.

The content of that meeting seems to be the subject of some dispute, but that dispute was not fully probed in cross-examination. Mr Davis claimed that there was a demonstration of the software which showed that it did not work properly. I am unable to make a finding about that. However, I do find that from that time onwards Mr Davis was less than satisfied about the state of readiness of the project, and in particular he was concerned about future financing. That is entirely understandable. Stage 1 was coming to an end, and stage 2 was to some extent overlapping with it in that marketing costs had been incurred for some time. There was no proper business plan, cashflow or other financial forecasting. Mr Fletcher was utterly convinced of the merits and inevitable success of his project, but that was not enough. The success of the project would depend on attracting visitors to the site and attracting customers. The latter required marketing, which in turn required funds. Mr Fletcher was still requesting significant funds from Mr Davis – on 28^th February Mr Davis procured the payment of £57,000 to PFI. In mid-February Mr Fletcher undertook a trip to the United States to demonstrate his product. He went with Mr Endacott and his son Ralf. Mr Davis gave evidence that he disapproved of this visit and told Mr Fletcher not to go; he was concerned that the product was not good enough and thought that the licensing terms which Mr Fletcher talked about there, or that he thought he talked about there, were ludicrous in the circumstances (Mr Fletcher was talking about licensing fees in the amount of $15m, though that sum may not have been mentioned until he got back). Mr Fletcher denied that he was forbidden to go, and certainly felt he was justified. The emails that he got from the US after his visit were very complimentary. I find that his visit was a success in terms of generating serious interest on the part of those to whom he demonstrated the software, though it soon transpired that he and the Americans were likely to be some way apart on price. I do not accept that Mr Davis told Mr Fletcher not to go to the United States, or that he disapproved of his activities in that respect at the time. There is no contemporaneous corroborative evidence. On 27^th February Mr Davis sent an email to Mr Fletcher which is on the face of it complimentary and commendatory of the latter’s activities in the US. It refers to Mr Davis having said to the US end (not to Mr Fletcher) that he did not want Mr Fletcher’s time being wasted by visiting them unless they were prepared to make substantial up-front payments, but that is a different point. Mr Davis sought to portray this email as a heavy piece of irony because he said that he regarded the marketing in the US as ridiculous, and Mr Fletcher as a “complete lunatic” and “damn fool” (words used by Mr Davis in the witness box). I do not think that it can be described as such, and Mr Davis was indulging in a piece of opportunism in so describing it. Apart from anything else, I do not think that Mr Davis is capable of such a piece of sustained irony. He is, however, capable of opportunism in the witness box. On 12^th March Mr Lewis reported to Mr Davis with some ideas as to how to structure the US licence deal, with absolutely no suggestion that it was regarded as absurd, or premature, or any of the other criticisms made by Mr Davis in the witness box.

Although there was no major disagreement about the US trip, Mr Davis was getting concerned in this period about where the project was going. An email from Mr Goodfellow to Mr Fletcher dated 16^th March suggests that Mr Goodfellow had had a conversation with Mr Davis about future funding at which Mr Davis was making understandable (and justifiable) requests for information about future expenditure so that he could plan ahead. There is no suggestion there of the deep concern on the part of Mr Davis which was apparently about to erupt. However, discontent was simmering in relation to some issues. Mr Davis was apparently pressing for the transfer of intellectual property rights from PFI to Clicktronics. On 25^th March Mr Fletcher wrote a hostile letter to Mr Lewis about this, complaining that Mr Davis had threatened to remove him from office if he did not assign to Clicktronics. Mr Fletcher apparently viewed this move with deep suspicion, despite the fact that he had apparently himself intended that some, if not all, such rights should be held by Clicktronics – see above. The letter pointed out that the off-shore operation which Mr Davis was setting up was potentially damaging to the company’s prospects and good name, “So much so that neither my company nor myself wish to be associated with your client or indeed your tacky little firm.”

The stages by which Mr Davis and Mr Fletcher had arrived at this position of hostility cannot be plotted on the evidence that I saw, but relationships were clearly no longer good, and they were about to get worse. On 28^th March Mr Lewis wrote to Mr Fletcher at the latter’s home address. Mr Lewis expressed himself to act for both Clicktronics and Mr Davis; I think that Mr Davis maintained that Mr Lewis was acting for Mr Davis as director of PFI, but I do not think that much turns on that. The letter was expressed to record the concerns felt by his clients and complained about the following:

This is a very serious catalogue of complaints and demands. One would have expected that they would have been foreshadowed by either a gathering dispute, with some or all of the various elements being complained about on an increasing scale, or perhaps that they would have resulted from some sort of investigation immediately preceding the letter. Neither seems to have happened. There was certainly no form of prior investigation, and while some of the issues had been raised before the letter, many had not. There are hardly any documents in which any of the relevant matters are recorded or foreshadowed. To some extent it has the air of a contrivance. For example, there is a complaint that the server had been moved to an undisclosed place. This is suggested as part of a plot to hijack the intellectual property. In fact the documents make it clear that the server was moved because there was a perfectly bona fide change of provider of internet access. There are emails passing between Angela Crossley and the new provider (Netkonect) which make that perfectly clear. Obviously no attempt was made to investigate that fact. On 21^st March Mr Davis was sent an email by Mr Fletcher which explained the reasons for the change of service provider (which was to save considerable amounts of money), and that email identifies Netkonect as the new provider. The air of contrivance in this respect is reinforced by Mr Davis’s attitude to this matter in giving evidence. He maintained that the change of server residence was done as an unauthorised act by Angela Crossley (by way of justifying his refusal to allow a periodic bill to be paid in June 2001 – a failure to pay it then would have cut the venture off from the internet). On the facts that allegation was without foundation, and I find that he contrived it in order to justify non-payment of Netkonect’s bill, payment of which was vital to preserve the status quo at the time. It is also very striking that the letter moves straight to very draconian and hostile steps without more “history” than appeared in evidence.

Whether fully justified or not, this letter marked a point from which the relationship between Mr Davis and Mr Fletcher never recovered. The launch of the website was planned for 2^nd April. Mr Davis told me that he was very concerned about the launch of the website and that Clicktronics as the parent company had instructed Mr Fletcher not to launch it because the product was not ready, or not ready enough. He claimed to be fearful that the software might infringe the patent rights of others – one of the complaints that he articulated in the evidence before me was that Mr Fletcher had not done enough (or any) searches to ensure that there was no such infringement. Some of this I find to be another contrivance. It may be that Mr Davis had some concerns about launching the website, but he has fabricated those relating to potential IP infringements. Had he had such concerns they would have been articulated in the long and carefully drawn letter of 28^th March; no such concerns appear there. However, he apparently had some such concerns the website because shortly before 3.38 pm on Friday 30^th March Mr Lewis called Mr Fletcher’s solicitor and said that in the absence of undertakings arising out of the letter they would apply at 10am on Monday morning for an order restraining the launch of the website, restraining Mr Fletcher from acting as director of PFI, for orders in the terms of the undertaking sought in the letter of 28^th March and for the “summary removal” of Mr Fletcher as director of PFI. That application was never made. Mr Davis told me that he started to put a witness statement together with a solicitor from Irwin Mitchell (solicitors representing him) but the solicitor was too tired from having worked too many hours during the week. As a result he was not up to the job, and the application was abandoned. Having heard Mr Davis give this account I find it completely incredible. I do not think that Mr Davis is the sort of person who would abandon an important application for such a reason, and I do not think that Irwin Mitchell are the sort of firm who would allow that to happen. This was a lie told by Mr Davis to cover some other explanation. It may be that he had decided on an alternative course of action to suspend Mr Fletcher.

The website was duly launched on 2^nd April. Mr Davis said that it was abortive. He claimed that when he tried to log on to the site on 2^nd April he could not do so. Whether or not he is right about that particular failure, I find that the launch was not abortive in any meaningful sense of the word. Mr Endacott denied it was abortive, and I accept his evidence. There were about 1,500 live advertisements on the site at that stage; advertisers had been offered 3 months’ free advertising. Whether or not the service and product was doomed to failure (which is Mr Davis’s case in this action) the launch could not be regarded as a failure. Once again Mr Davis is vastly overstating the true position, and once again he is doing so knowingly.

On 2^nd April Mr Fletcher emailed Mr Endacott and Mr Goodfellow about the future of the business. He referred to the successful launch and reported that the problem with Mr Davis “has now receded (buried is the term I believe you would use)”. The email does not explicitly say why it has been buried, but I think it may be because Mr Fletcher was intending to trade thereafter through Pages, which he regarded as his company. I shall come back to this aspect of the matter later, but in any event it was not buried, and was about to raise its head again. At about this time PFI acquired a new director – a company called Southquay Ltd was appointed by Clicktronics. Southquay appears to be another creature of Coda. On 3^rd April Mr Davis and Southquay sought to convene a meeting of directors at which Mr Fletcher was purportedly suspended as director of PFI. Clicktronics served a notice requisitioning a meeting to remove him. Mr Fletcher did not accept the validity of the directors’ meeting on the footing that he was given inadequate notice. In the light of that the exercise was apparently repeated on 9^th April. Mr Fletcher did not accept the validity of that either. In the meanwhile Mr Davis had attended the premises on 3^rd April and removed some of the company’s books, and then attended again on 4^th April at which point he was excluded by Miss Crossley on the instructions of Mr Fletcher. Mr Davis said he was thrown out – I think he probably was. Certainly the police were called, but no action was taken by them.

At this point Mr Fletcher went on the offensive himself. On 10^th April he issued the claim form by which these proceedings were commenced. The brief details of the claim are more than usually generalised; they do not hint much at what was to follow several months later when the claim was pleaded. It refers to “threatened breach … of a shareholders’ agreement between the claimant and the first defendant, and other related matters.” On the same day Mr Fletcher applied for interim relief, seeking to restrain PFI from disposing of its IP rights. There was a hearing on that day before Etherton J, and the order drawn and sealed shows that both defendants (ie PFI and Mr Davis) gave undertakings not to deal with PFI’s IP rights without giving 7 days’ notice, and undertakings not to remove computers belonging to or operated by PFI from PFI’s premises or to copy the software on it. Mr Fletcher gave cross-undertakings in those terms. There is no doubt that that is what the order records. Mr Davis told me that the undertaking given by him was against his better judgment and against his instructions, and that he had told his counsel to go in and fight. He also said that the undertakings were not given on behalf of PFI at all – PFI was not (he said) represented. The final form of the undertaking was said by him to have been agreed after the hearing. He said it bore no resemblance to what was agreed in court and he was saddled with undertakings which he had not approved. There may be something in his point about PFI not having given the undertaking. The order records attendance by counsel for Mr Davis only, and not by PFI. There is less in Mr Davis’s point that he did not really give instructions on his own behalf. This is part of an unattractive tendency by Mr Davis to claim to have been let down by his lawyers at various times (lawyers whom he in fact continued to engage). I find that he was aware of, and approved, the terms of the undertakings which were given on his behalf. Apart from anything else, there was no reason why he would not have given them, bearing in mind that he apparently had no intention to seek to dispose of the IP rights or the computers at the time.

Those undertakings were given until further order – no further hearing of the application was specified at that time. In due course (in May) further directions were given for exchanging evidence, but there never was any further hearing of the application. Within a short time of the April 10^th hearing Mr Davis went on holiday to Sri Lanka for 2 weeks. His evidence was that he had no contact with his solicitors at all during that week, because (he said) mobile telephones do not work particularly well out there. Whatever else may lie behind that lack of contact, it certainly demonstrates to my mind that he had not left behind any problems which needed to be dealt with urgently. His dispute with Mr Fletcher, which had required urgent action at the end of March, was apparently no longer so urgent. Before he left to go on holiday there was apparently a limited agreement between Mr Fletcher and Mr Davis – this agreement is referred to in an email from Irwin Mitchell to Mr Lewis on 12^th April. Neither man gave evidence of what that agreement was, but some elements of it are apparent from the rest of the evidence. The fact that Mr Davis went away on holiday without taking any steps to ensure the continued running of PFI’s business demonstrates that he must have accepted that Mr Fletcher would remain in day to day charge of it as before. He was reluctant to admit that in evidence (at one stage he said that Mr Fletcher was not “supposed to be anywhere near it”), but in the end he more or less admitted it. It is actually obvious. He had not decided that the business should not continue, and Mr Fletcher was the only person who could run it. The email from Irwin Mitchell refers to an arrangement which put the parties back where they were at the February meeting, and refers to a letter from DMH (Mr Fletcher’s solicitors) which the writer hoped broadly reflected the “agreement” (which the writer put in inverted commas). On 10^th April Mr Lewis (on behalf of Clicktronics) had faxed DMH stating that some form of modus vivendi had been reached between Mr Fletcher and Mr Davis to the effect that Mr Fletcher had agreed to respect the wishes of Clicktronics as sole shareholder and to co-operate with Mr Davis and produce a properly formulated business plan. It also recorded that provided Mr Fletcher co-operated, then it was not Clicktronics’ then intention to take further steps prior to 15^th May to remove Mr Fletcher.

It is obvious from all this Mr Fletcher was, with the agreement of Mr Davis and Clicktronics, left in day to day charge of the business of PFI. He continued to pursue that business, dealing with employees, Endacotts, and the potential US licensee. Mr Davis returned from holiday on about 28^th April, and this state of affairs continued for a few more weeks. By 15^th May Mr Davis and Mr Fletcher had negotiated non-binding heads of terms. Mr Davis thought that these terms were negotiated by solicitors but he “may have been involved in sitting in on a couple of negotiations”. The Heads of Terms are expressed to be between Mr Fletcher, Mr Davis and PFI. Mr Davis has signed it, and his signature is expressed to be for himself – he does not express himself as signing on behalf of PFI, or Clicktronics, or any trustees. I regard this as a telling point in relation to Mr Davis’s attempts to distance himself personally from all these dealings, a point which I deal with elsewhere. The document outlines an agreement whereby the IP rights are to be assigned to Clicktronics and a new Isle of Man company (Shopping Classfieds Ltd) was to be set up, owned in the same proportions and by the same people as owned Clicktronics, to carry out the same trading function as PFI was carrying out, leaving PFI to be a research and development vehicle. This company had actually been incorporated on 15^th March 2001 and steps were taken in May to open a bank account for it. Mr Fletcher and Mr Davis apparently tried to go down this road for a period, but over the next two weeks or so they fell out again. I cannot, and I do not have to, attribute blame for this. Mr Davis had not resumed, or procured the resumption of, financing PFI, and this clearly upset Mr Fletcher and caused commercial difficulties. By mid-June they had comprehensively fallen out again. In a fax dated 7^th June 2001 Mr Lewis (on behalf of Clicktronics) pointed out that there had been non-compliance with the heads of agreement, and threatened to revive the removal of Mr Fletcher. On 11^th June, apparently by way of response, DMH indicated an intention to petition for an administration order in respect of PFI, and they served a petition the same day. This petition was vigorously contested, and on 28^th June 2001 it was dismissed by Ferris J. I do not have a copy of his judgment, and in the absence of such a document I do not know the basis on which he dismissed it. Various things have been said about it during the hearing before me (mainly by Mr Fletcher) but I do not propose to rely on them. All I know, therefore, is that it was dismissed. However, I do know that Mr Davis opposed it on the footing that there was still life in the company and he wished to have the opportunity to continue to pursue its business. He provided a witness statement with a section called “The Way Forward”, and the thrust of that section was that the company would have a real future (and a very significant value) if the petition were to be dismissed so that the removal of Mr Fletcher as a director could be procured and so that he could then set about engaging the right personnel, and obtaining the funds, to take it forward. One would have thought that he would have wished to do that.

However, events did not work out that way. Almost immediately after the dismissal of the administration petition Mr Fletcher ceased to be a director. He claimed to have resigned the same day (28^th June). Mr Davis says that on the next day the board of Clicktronics passed a resolution (presumably a resolution of PFI) dismissing him. Either way, he ceased to be a director. At about the same time he attended the premises of PFI in Hove and removed various items. Mr Davis said that he removed a lot of company documentation, procured that his son Ralf deleted company emails from the computers there and procured that Ralf despatched copies of the company’s software by email to Ralf’s email account elsewhere (outside the company’s computer systems). I shall say something more about this when I come to deal with the credibility of the witnesses. The emailing of the software was originally the subject of an issue in this action because PFI counterclaimed complaining about infringement of its IP and seeking injunctive relief. However, in a rare flash of common sense, the parties managed to dispose of this counterclaim by consent during the course of the hearing before me, so it is no longer directly in issue. That meant that certain evidence that would have been called by Mr Davis was not in fact called, and I do not have to make findings about the issue, though before then Ralf Fletcher did admit that part of the software (that part which enabled advertising agents to deal with and in relation to the website) was sent to himself outside the company on 25^th June.

On 3^rd July Mr Davis attended at PFI’s premises with a Mr Refsum, a computer systems expert whom he had engaged to assist him. They met Angela Crossley there, and she told them that Mr Fletcher had been deleting emails. Mr Davis told me that the business appeared to be in a poor state – there was no business plan, marketing plan or development plan (though he must have known this already, since that was a frequent complaint of his). He also claimed that Mr Refsum told him that there was a problem with the software in that the way it was set up it would mean that pages would take a long time to load (at least in the days before broadband), so performance was very unsatisfactory. The website had low visitor numbers. They visited again on 10^th July. On this occasion they were told that the staff would not co-operate unless they were paid 3 months’ salary. Miss Crossley went further and demanded a guaranteed injection of £675,000 into the company for further development. A view of the contents of the computers was denied them by the staff, and the staff refused to give them the necessary passwords to access them. Miss Crossley told them that Mr Fletcher had “cleaned” his desktop machine (ie had deleted the data from it) when he had lost his court case (presumably the administration petition). Mr Davis and Mr Refsum stayed on after the staff had left for the evening, and removed the computer equipment. Mr Davis says he decided to remove it to preserve it, and the material on it, for the benefit of the company. To do so was a breach of his undertaking. Thereafter it remained with Mr Refsum. In the fullness of time it revealed deleted emails, whose late discovery and production has led to, or at least contributed to, the two abortive starts of this trial.

About 2 weeks after the determination of the administration petition there was a further set of proceedings. Endacotts threatened to present a winding up petition and PFI started proceedings on the footing that the debt was disputed, and an allegation was also made to the effect that the petition was intended to stifle claims that PFI might have against Mr Fletcher. On 3^rd September 2001 Rimer J restrained the presentation of a petition in respect of the bulk of, but not quite all of, the invoices. Again, I do not have a transcript of his judgment, but it is likely that this was done on the footing that the invoices were disputed, not that the sums were not due.

Mr Fletcher’s claim form was accompanied by a document described as his Particulars of Claim, but it was in truth no more than what one would expect to see in the prayer. He did not serve anything worthy of the name until he served Amended Particulars of Claim 6^th December 2001. Defences were served by Mr Davis on 1^st February 2002 and by PFI on 4^th October 2002 (after Mr Fletcher had re-amended his Particulars of Claim on 19^th September 2002). It is not clear why it took PFI so long to serve a Defence, but nothing turns on that. As I have already narrated there has been a series of interim applications and abortive starts of this trial.

I can now set out the claims and issues in this case. Because of the agreed disposition of the counterclaim of PFI, the claims in issue are now those of Mr Fletcher only. They, and the main issues relating to each of them, are as follows:

Before going back into the evidence in order to decide the validity of the claims made in this case it is necessary to say something about the quality of the oral evidence, and the credibility of the witnesses, in this case, because a determination of some of those issues turns on facts to which they have deposed. I heard oral evidence from 5 witnesses – Mr Fletcher, his son Ralf, Mr Goodfellow and Mr Endacott on behalf of Mr Fletcher, and Mr Davis for himself. I shall say something about those witnesses in that order.

Mr Fletcher was in the witness box for a large number of hours. I was able to form a clear impression of the quality of his evidence from that, from his correspondence and from the way he conducted himself in the hearing before me.

I regret to say that I could in no way treat Mr Fletcher as a reliable witness, and I formed the clear view that on occasions he was prepared to lie and to deceive in order to achieve his aims in this litigation. On others, while not lying, he was clearly cavalier in what he was saying. He clearly loathes and despises Mr Davis, and regards him as having destroyed the project having first tried to hijack it for himself. He was and is obsessed with what he regards as his sure-fire invention, and was clearly energetic in promoting it. He had little or no time for those lacking the same faith as he had, and while he had enormous (and commendable) drive in pursuing his project, he had a natural tendency to puff matters to the extent of deliberately giving false impressions when he was pursuing the project, and this facet of his personality has been fostered by his great hostility and bitterness towards Mr Davis when the relationship broke down. This has led him not only to exaggerate and mis-remember through wishful thinking (a common feature of parties to litigation and which does not necessarily reflect dishonesty on their part), but to go further and fabricate.

I detected the following important pointers as to the quality of his evidence:

In the circumstances I find myself unable to accept controversial evidence from Mr Fletcher unless it is corroborated or supported by another reliable witness, the documents, the probabilities or some other factor.

Mr Goodfellow was called by Mr Fletcher to give evidence to support his case. In fact most of his evidence was either neutral or, on a couple of points, it assisted Mr Davis. He plainly did not like or respect Mr Davis, and my impression was that he was reluctant to give an answer which might assist Mr Davis. He was on occasions inappropriately cagey and could be evasive. However, he was ultimately a witness of truth. Much of his evidence was of no great assistance one way or the other, but in the main I could rely on it.

Mr Endacott was also called by Mr Fletcher. He was able to supply some background. He, too, plainly shared the dislike of Mr Fletcher and Mr Goodfellow for Mr Davis. Endacotts was owed a lot of money by PFI, and he clearly regarded Mr Davis as being the person responsible for his not being able to recover it. His antipathy to Mr Davis was quite apparent from his demeanour. However, that did not, in my view, affect the quality of his evidence. He was not untruthful, and did not demonstrate inaccuracy of recollection, and I considered that his evidence was evidence that I could accept.

Ralf Fletcher was called by his father principally to give evidence of what was and what was not transferred out of the offices of PFI by email on or about 28^th June 2001. The question of the transfer of software, which lay at the heart of the counterclaim, fell out of the picture when the counterclaim was compromised, so most of his evidence no longer helped much. He did, however, confirm that he deleted emails for his father – he acted on his father’s instructions, as I consider he would generally do in relation to this project. So far as his evidence remains relevant, I treat it with caution.

Mr Davis clearly disliked Mr Fletcher intensely, and distrusted him just as much. He demonstrated that he had no respect for him at all, and this attitude coloured his evidence both in terms of accuracy and in terms of veracity. Like Mr Fletcher he was prepared to exaggerate, or if necessary lie, in evidence in order to achieve his ends of resisting Mr Fletcher’s claims, and I am afraid that, as with Mr Fletcher, I would not feel able to accept his controversial evidence unless supported in the same manner as that in which I would require Mr Fletcher’s to be supported before I accepted it. In coming to that conclusion, as well as relying on his demeanour and the totality of his evidence and the manner in which it was given, I noted in particular the following points arising out of his evidence. They are some of a number of points on which he gave evidence in a manner, and against a background, which clearly indicated to me that he was making up significant material.

There were a number of other instances in the witness box, which I have not enumerated above, in which Mr Davis gave evidence which was so unconvincing as to lead me to treat him as a witness whose accuracy, and honesty, could not be relied on. It is not necessary to list them here. I was able to form a clear view as to his merits as a witness. Of course, it does not follow that he did not tell the truth about anything at all; but it does require me to treat his evidence with the greatest of caution.

Against that background I can now revert to the issues in this case and make my findings in relation to them. I shall take them in a slightly different order from the order appearing above.

Two of Mr Fletcher’s claims (the claim to remuneration and the claim to damages) depend on the existence of an agreement, which he regards as a shareholders’ agreement, between himself and Mr Davis, and in the case of the agreement to remuneration he claims that the obligation under the agreement was assumed by the company. The relevant terms of the agreement, as pleaded, are as follows:

Mr Davis’s pleading admits that a number of things were agreed between mid-December 1999 and February 2000, but denies the shareholders’ agreement alleged and emphasises that at all times Mr Davis was not acting personally, but was acting on behalf of Kilmeaden Ltd. His Defence seems to accept that certain matters were agreed in mid-December as heads of terms between Mr Fletcher and Kilmeaden, and that matters were finalised between the beginning of January and mid-February 2000 after Mr Davis had discussed the matter with Kilmeaden’s representatives. It then sets out certain matters which were agreed in relation to the running of the company (which, apart from the shareholding in Clicktronics, do not coincide with the material terms of Mr Fletcher’s shareholders’ agreement, and particularly denies that Mr Davis and Mr Fletcher “could have been parties to [the shareholders’ agreement as alleged by Mr Fletcher] as neither of them were intended to be or were in fact shareholders in [PFI] or in Clicktronics”. His pleading is equivocal as to whether there was anything in the nature of a binding agreement between any parties, but I think it is open to him to say (and for me to consider whether) there was anything in the nature of a binding contractual arrangement at all. I think that that point may arise on the facts of this case in order to make sense of how the arrangements between the parties operated.

There was clearly some form of arrangement which was arrived at involving Mr Davis and Mr Fletcher as to the formation and running of PFI. It does not follow, however, that it gave rise to a contract. It is perfectly possible for there to have been an agreed regime with that regime operating outside the scope of a contract. Such regimes are often the basis of petitions under section 459 of the Companies Act 1985. It is, of course, conceptually possible for there to be contractual arrangements operating between shareholders which govern how they are to participate in the company, but they are usually reduced to writing, not least because they can be quite complex and require some deliberation. On any footing the arrangements alleged by each side in the present case were informal, and I have to decide whether they went beyond a working arrangement into the realms of contract, and if so whether the contract was between Mr Fletcher and Mr Davis.

The first thing that has to be established, so far as I can do so, is what the arrangements were. Strictly speaking, I only need to decide whether Mr Fletcher has made out his contract, but in doing so it would be artificial to consider only his version of events without measuring them against Mr Davis’s. I shall therefore (at least to some extent) have to look at both.

I have outlined the respective cases of the parties in relation to the relevant events above, and I now have to return to some of the detail. On Mr Fletcher’s version of events there was a complete agreement by the time he and Mr Davis parted at Victoria Station, apart from the agreement as to shareholdings which came a little later. He stood by that analysis throughout the evidence. In my view he has not sustained that version of events. The lunch was at the end of November 1999. In anticipation of that lunch Mr Fletcher sent an email to Mr Goodfellow on 22^nd November which said:

“… As to Trevor’s question vis the running of the company. The First Phase will focus on technical set-up ie getting the hardware and software in place, and thus bringing the Network online. I will bring a technical paper along with me on Friday, which covers this aspect, and also quantifies cost.

“… In respect of the forward management, marketing and promotional aspects of the business, this will most certainly have to be ‘beefed up’, and this area should be viewed as Phase Two. And will have to be discussed in depth.”

The significant parts of this are that the project was to be divided into the two phases as described, and the second phase would require detailed discussion. This split of the funding is reflected in other evidence. In a Discussion Paper prepared by Mr Fletcher after this meeting he referred to a proposal that Mr Davis provide the company with its “Fundamental Hardware requirements (£57,000) and … [its] opening 12 months operating capital requirement of £190,000.” At about this time Mr Fletcher was producing various projections of expenditure (largely unparticularised) and I have seen two versions of them. He said he took some documents to the lunch and gave Mr Davis a pack of some sort. I find that he probably gave Mr Davis something like the documents I have seen, but not necessarily the precise form of either. Neither has precise figures corresponding to those appearing in the discussion paper, but both have figures for hardware costs and an operating overhead (one for 12 months, one for 18 months), and neither contained any projections for “forward management, marketing or promotional aspects of the business”. These documents support a suggestion that the funding for those aspects was to be discussed later and agreed then (if appropriate). This is further supported by Mr Goodfellow’s own evidence that what Mr Davis was expected to do was to fund the first phase; the second phase would be discussed as and when it was necessary to do so. Furthermore, the overall tenor of Mr Fletcher’s evidence is that it was phase 1 funding that was discussed at this meeting, and everyone seems agreed that £300,000 was the sort of ball-park figure for funding what was under discussion. I find that this is the phase of the funding that was described, and that an estimate of £300,000 was mentioned.

However, it is quite clear that no agreement was reached on that day, whether at the lunch or subsequently. On 5^th December Mr Fletcher emailed his Discussion Paper (referred to above) to Mr Goodfellow for discussion at a meeting the following Tuesday (which would be the 7^th), and the following day it was forwarded by Mr Goodfellow to Mr Davis. It demonstrates that a number of things had not been agreed, and that the project was still at an early stage. I need not set out all its provisions, but amongst other things it suggests a company and trading name, and demonstrates that the division of shareholdings had not been agreed though Mr Fletcher accepts that Mr Davis should have a majority stake. It then clearly contemplates that intellectual property items would be “transferred from (NF’s) ownership and placed to the company’s balance sheet”. Then it deals with a “Management Services Fee”. This paragraph reads as follows:

“(VII) Management Services Fee
In lieu of receiving a directors emolument. The company agrees to a back-dated annual Management Services Fee of £100,000 per annum. To be paid by the company to (NF) immediately following a flotation, or sale of the company to outside parties. (NF) normal out-of-pocket expenditure ie travel etc, to be met by the company.”

The document ends (after proposing some mechanics for running the company) by saying:

“Charlie [ie Mr Goodfellow]: The above is set-out for discussion/amendment/approval. On approval (CG) to have a legal document drawn up for signature by the directors. Look forward to seeing you on Tuesday 1pm Thistle Victoria Station (Coffee Lounge)”

This demonstrates a number of things. First, that it cannot have been the case that Mr Fletcher had his remuneration (or indeed anything else) agreed by the end of the day of the lunch meeting. Vital matters still have to be discussed. Second, at this stage Mr Fletcher was proposing periodic remuneration sums which are vastly lower than those he now claims (£100,000 pa as opposed to £150,000). Third, the proposals do not include the one-off consultancy fee that he claims. Fourth, the proposals are that he should be paid sums on flotation or sale of the company, not on launch of the website.

At one level this might be said to dispose of the first of Mr Fletcher’s claims, that is to say his claim to remuneration. He clearly puts forward a claim based on an agreement reached on a given day at a given place. It is quite apparent on that limited documentation that that cannot have been the case. However, I have considered the possibility that the agreement was reached at a later date. It is plain that the process of taking the venture forward, and agreeing how it would work in practice, continued beyond the day of the lunch, and indeed it is Mr Davis’s case that it did. I have considered the possibility that Mr Fletcher got the date and occasion wrong but was nonetheless right about what was agreed in substance about remuneration. However, even embarking on that exercise, I think he has not established his case. Indeed, I think it is plain that he is simply wrong about the agreement as to his remuneration. There are a number of reasons for this finding:

For all those reasons, therefore, I find that the agreement relied on by Mr Fletcher in this respect never existed. I think it likely that Mr Fletcher contrived it when he was trying to put together an action to counter Mr Davis’s hostile manoeuvres at the end of March 2001; the agreement was referred to for the first time in a witness statement signed by Mr Fletcher on 8^th April 2001, just before he started his action and applied to the court for interim relief. There was no agreement for the company to become party to. I therefore find against Mr Fletcher on this point.

By similar reasoning his claim against the company for damages in respect of his removal as a director fails. There was no agreement with anyone, much less the company, that he would be irremovable as a director, or serve for any particular term, or anything like that. He had no contract of employment with the company, so his status as director was terminable if the shareholders wished to terminate it and he had no legal complaint sounding in damages against the company if it were terminated (leaving aside the additional difficulties that would be posed if he is right in saying that he resigned as opposed to being dismissed by the shareholders).

Mr Fletcher’s next claim, based on the alleged shareholders’ agreement, is against Mr Davis personally. I have indicated the nature of this claim above. It suffers from the same fate as the first claim, that is to say there was no such agreement between Mr Fletcher and Mr Davis. The pleaded claim is that Mr Fletcher was excluded from management and thereby deprived “of his legitimate expectations that he would benefit personally from the exploitation of the invention by the company, by virtue of his entitlement to a salary and fees under the Shareholders' Agreement”. The pleading does not actually plead a breach of a particular term of the alleged Shareholder Agreement, and the earlier paragraph of the pleading does not set out any term in respect of which the breaches could be said to be obvious breaches. That might be thought to be a technical point (and it is not one taken by Mr Davis himself) but the technical absence of a properly pleaded term plus breach demonstrates the underlying insuperable problems with this claim. Knowing all I know about the facts, it would not be possible to plead and establish any relevant term.

The principal reason for this is that there was never any binding shareholders’ agreement of the kind alleged, whether between Mr Fletcher and Mr Davis, or between any other bodies. I have set out above my reasoning for dismissing the claim that there was an agreement that Mr Fletcher would have the remuneration and other payments claimed by him. There was no agreement to that effect. The facts also show that there was no agreement out of which the sort of terms that Mr Fletcher relies on under this head could have emerged. There was a loose arrangement between Mr Davis and Mr Fletcher as to what they were aiming for, and an acceptance that Mr Fletcher would get on and try to implement it. There was an agreement as to shareholdings, and an agreement as to the companies through which they would operate it. There was, however, no express agreement that Mr Fletcher would be irremovable as director, even though there was an arrangement that he would be in charge of the day to day running of the business. Why should there be such an arrangement in those circumstances? It is not obvious that one party’s status should be enshrined in a binding agreement of that nature, in the absence of an express agreement to that effect, so there is no reason to imply a term to that effect, and probably good reason not to. An agreement that Mr Fletcher would conduct the day to day business of the companies does not mean that he was entitled to do that for ever; and an agreement that Mr Davis would not conduct that business in these circumstances (which was certainly agreed between the parties) does not mean that he would never be entitled to. In these circumstances, and in the absence of a clear binding agreement (which is usually written, though it does not have to be) what controls the parties is a combination of common interest, trust, non-contractual understandings and section 459 of the Companies Act 1985 (or in this case its Manx equivalent operating at the Clicktronics level). The arrangements between the parties gave Mr Davis’s interest a 52% interest in the holding company. That put it in his power (legally speaking) to influence the holding company with a view to excluding Mr Fletcher. It would be possible to fetter that control contractually, but there is no factual basis for finding an express agreement to that effect in this case, and none for implying any such terms.

My conclusions thus far would be true if Mr Davis and Mr Fletcher were shareholders in the venture personally. Of course, they were not. That poses additional difficulties in the way of Mr Fletcher’s claims in this respect. He cannot claim as shareholder – his wife’s trust was the shareholder in Clicktronics, not him. Furthermore, he cannot claim against Mr Davis as shareholder because the Kilmeaden Trust was the shareholder, not Mr Davis. That means that the agreement relied on is one between two individuals neither of whom was legally entitled to control the shares whose control was essential to make the agreement work. That would not be legally fatal to an agreement of the kind that Mr Fletcher alleges, because there could be an agreement which required Mr Davis to procure that Kilmeaden operated the arrangement between himself and Mr Fletcher (and I have no real doubt that Mr Davis was in a position to control and did control the Kilmeaden interests in this respect, despite his constant protestations to the contrary), but it poses additional conceptual and analytical obstacles. Furthermore, it makes it impossible for Mr Fletcher to claim the loss that he claims. The breaches are in effect acts which led up to his exclusion and the exclusion itself. That is said to deprive him of his legitimate expectation that he would benefit personally from the invention, through salary and fees. However, I do not see that either he or the parties had any such expectation. The venture was set up with a view to floating the company, or selling it off, when the product had been shown to be successful. Such an act would yield benefits to the shareholders qua shareholders (and therefore not to Mr Fletcher personally). It would not give Mr Fletcher the opportunity to earn fees beyond that point in time. I have already found that Mr Fletcher cannot maintain the claim to allegedly accrued fees. There was no further agreement that he would ever have any, and an expectation in that respect is not something of sufficient value, on the facts of this case, to be able to form a claim to damages. Like any other director, he would have the right to remuneration if and when his company voted it (in the absence of a contract entitling him to remuneration), but the loss of the opportunity of getting fees in that way is not a valuable right on the facts of this case.

There are causation problems as well. On Mr Fletcher’s own case he resigned as director. If he lost the opportunity of getting director’s remuneration, he brought that on himself (if he is right that he resigned first). The prior acts relied on as breaches were in no way causative of the loss alleged. Since I have already held this claim to be fatally flawed for other reasons I do not need to develop this.

I would, however, deal separately with Mr Fletcher’s recurring complaint that Mr Davis was in breach of an obligation to fund the company. Even if there had been some sort of binding arrangement between Mr Fletcher and Mr Davis, I am quite satisfied that it did not include any binding obligation on Mr Davis to fund the venture. It was doubtless accepted that Mr Davis or the Kilmeaden interest would provide funds, but it is equally clear that they were not obliged to do so. To undertake an obligation would be a serious matter, which one would expect to be clearly spelled out. Matters such as the maximum amounts would have to be specified, as would the terms of drawdown or the mechanism for payment. None of those matters were agreed. There was no agreed maximum. Mr Fletcher’s case was that Mr Davis was obliged to fund to launch. There was an estimate as to the amount required to get there, but it was no more than an estimate; and in fact there was more than one of those from time to time. To suggest that in those circumstances Mr Davis bound himself to provide those funds of uncertain amounts, to be deployed in uncertain ways (though some details of the deployment were foreseeable) on a speculative venture whose timing was uncertain would be absurd. There was far too much informality for such an agreement to have existed. It was open to Mr Davis (or Kilmeaden) to cease funding at any time. The disincentive to doing so was not the existence of an obligation but the commercial reason that to do so would imperil the project and thus lead to a waste of the money already provided. It is highly significant that Mr Goodfellow thought that Mr Davis was to be the funder but was quite clear that Mr Davis had not undertaken any obligation to fund. Mr Goodfellow, as a stockbroker, was well aware of the circumstances in which, and the manner in which, a participant in a company might bind himself to provide funding, but he was quite clear that that had not happened in this case.

I would add one further matter in relation to the alleged agreement to fund. In the course of the hearing Mr Fletcher alleged that Mr Davis had agreed to fund not only the first phase of the operation but the second phase as well. This was based on Mr Davis’s apparent acceptance of certain costs projections provided by Endacotts in connection with their future activities, and his attendance at a due diligence meeting at which the American potential counterparties came to look at the software. There was absolutely no basis on which this, or any other, material can have amounted to an agreement to fund the second phase. Mr Fletcher’s assertion of this demonstrates the totally unrealistic view he has had of many aspects of this matter.

In the circumstances I reject this part of Mr Fletcher’s claim.

Last, I turn to Mr Fletcher’s claim for reimbursement of the £106,000 odd that he claims to have provided to, or for the benefit of, the company.

By March 2001 there was a funding crisis in PFI. Mr Davis was not putting in enough money to fund the company, but employees had to be paid, and the company was incurring other liabilities. Over the course of the next 2 or 3 months company bills were paid with money that came either from Mr Fletcher’s own account (that is to say, the dormant company account operated by him as his personal bank account) or his wife’s account. Between roughly mid-March and the end of June Mr Fletcher paid an aggregate of £106,389.28 to various people said by him to be creditors of the company. The fact of the actual payments is not challenged. Mr Fletcher says that he discharged genuine PFI debts and is entitled to reimbursement either because he lent the money to PFI, or by way of a restitutionary claim for money had and received. The fact of the payments was not challenged at the hearing, and I can therefore treat them as being established. What is challenged is whether Mr Fletcher paid them, for whose benefit they were paid, whether he had authority to pay money for the benefit of the company in the circumstances, and whether in the circumstances it is equitable for him to have repayment so far as his claim is only equitable.

The first point is whether Mr Fletcher paid the money. It was alleged that the money was in fact provided by the Fletcher Swiss trusts. As things were breaking down with Mr Davis, on 27^th March 2001 Mr Fletcher flew to Switzerland with his wife and Mr Goodfellow to see his wife’s Swiss trustees to ask them to provide some funding. The activities of PFI, and its prospects, were explained to the trust representative. That representative agreed to provide the funding. Although the evidence on this is sketchy, it seems unlikely that the trust agreed to make direct investments itself. I think it more likely that it agreed to provide funds to Mr Fletcher – whether by means of a loan, gift or otherwise does not matter. Mr Fletcher’s evidence is certainly that the money was provided to him, and he lent it on, and I find that he is right about this. Some of the money was actually applied before any moneys were paid by the Swiss Trustees. On 2^nd April the Swiss trustees paid £100,000 to Mrs Fletcher’s account. Thereafter substantial funds were paid from that account to Mr Fletcher’s account (or, to be accurate, the dormant company’s account which was used by Mr Fletcher), from where Mr Fletcher paid a large amount of the disputed sums to PFI creditors. Some of the moneys were paid to creditors direct from Mrs Fletcher’s account. All in all the pattern of payments and the evidence is completely inconsistent with the moneys being treated as being provided direct to PFI by the Swiss trust, as opposed to its being provided to either Mrs Fletcher or perhaps Mr Fletcher first. So far as the Swiss trust is concerned, these were in the nature of payments to beneficiaries, not payments giving rise to a direct relationship between PFI and the Swiss trust. I am satisfied that on the evidence the payer should be treated as being Mr Fletcher so that if anyone has a right of repayment it is him.

The next question is whether the money was paid for the benefit of PFI. All sums were paid to people who Mr Fletcher says were PFI’s creditors – employees, Endacotts and others. Mr Davis says while those people were capable of being the company’s creditors (though a separate point arises in relation to Endacott in this respect), at the time these moneys were paid and on the facts they were or had become creditors of Pages, the new company set up by Mr Fletcher and through which it was alleged he was trading at the time. It is therefore said that the moneys were not paid to or for the benefit of PFI. Coupled with this is Mr Davis’s submission that on the facts Mr Fletcher had been suspended and had no authority to make payments to or for the benefit of PFI; I shall deal with that separately.

The situation of Pages is murky. It had been incorporated by 19^th March 2001, at which point Mr Fletcher wrote to Mr Davis saying that he had incorporated it and it was able to commence trading immediately, “thus increasing the company’s UK revenues (and overall value)” (see his letter of that date). There is a certain amount of confusion as to what precisely was going on, but what seems to have happened is that Mr Fletcher could see that there were growing problems about continuing to develop and launch the product within PFI because of the growing disputes with Mr Davis. He seems to have thought that one way out of the practical problem would be to conduct some or all of the activities in a separate company. He was to be the shareholder (though he was somewhat confused about that), and he and Mr Goodfellow were the directors. He did not hide the existence of the company from Mr Davis – indeed, he had himself told Mr Davis about it in a letter. It was done as a means of continuing the venture, not as a means of hijacking it. Unfortunately, and not surprisingly, Mr Davis saw it in a different light. It was an ill-advised and ill thought out step.

Mr Fletcher denies that Pages ever traded, and Mr Endacott (who apparently knew it had been set up) claimed to be able to confirm that. However, it does appear that Mr Fletcher was taking steps to transfer contracts and customers into Pages. He told creditors to reinvoice Pages, and gave instructions for others to be told to do so. On 30^th March 2001 he wrote to Mr Goodfellow as follows:

“All of the assets and offices in theory belong to PFI. We have to establish some sort of book entry which shows that these things were brought by Shopping Pages from PFI. A purchase price must be determined. In theory, Shopping Pages should take these over immediately and credit PFI account with the amounts left to run under current contracts.”

It does not appear that any of this was done. However, there is evidence in the bundles that some related steps were taken. Some customers were being invoiced in the name of Pages in May or early June 2001. There is a payment slip dating from 21^st June 2001 which says “Please make cheque payable to Shopping Pages UK (Publishing) Ltd”. On 13^th June Paul McGrath e-mailed Angela Crossley to say that “Noel has rung up in a panic – the name Shopping Pages needs to be changed to Shopping Classified in terms.htm [which is a file name associated with the website]”, from which it is apparent that, for a time at least, Pages’ name appeared on the website.

From this sort of material Mr Davis invites me to infer that it was Pages that was trading at the time, and that it was therefore Pages’ debts that were paid by Mr Fletcher. Mr Fletcher’s constant answer to this was that “Pages never traded” as was said to be demonstrated by the absence of any indication in any bank account that it ever received or paid any money. I do not think that the absence of bank account entries is as conclusive of this point as Mr Fletcher seems to think, but nevertheless I do not think that Mr Fletcher managed to transfer any aspect of the business into Pages. The picture is confused, and I am sure that Mr Fletcher was confused and was perhaps presenting a confusing picture to his employees, and it is clear that Mr Fletcher intended to transfer the business into Pages if he could. However, I do not think that he succeeded in doing so, and I do not think that Mr Davis thought at the time that he had either. There is no solid evidence that anything more than preparatory steps were taken.

There is one particular matter which strengthens this conclusion in relation to employee salaries (which comprises a very significant part of the claim). After Mr Davis put himself in charge of the company in June/July 2001, the employees left. They brought unfair dismissal proceedings; the respondent to those proceedings was PFI. PFI defended, and Mr Davis conducted or gave instructions for the conduct of that defence. The documents do not indicate that it was suggested by PFI that it had ceased to be the employer under the relevant contracts of employment, and the decision of the tribunal (in which some employees were successful and others were not) was clearly based on the premise that PFI was the employer. When asked why the point was not taken by PFI, Mr Davis claimed that he had given instructions to take the point but that the order granted in April had prevented him getting access to the computers which contained the information that he needed to run the point. Not for the first time in these proceedings he blamed the ineptness of his lawyers (and, not for the first time, very unconvincingly). I do not accept his evidence on this. It is true that some of the material which shows the intention to divert invoices to Pages has been retrieved by Mr Davis from the material deleted by Mr Fletcher, but if he had really felt he needed access to the computers he could have made an application to the court to permit it. I think that he did not run the point because it did not occur to him to do so, and that is because there was, and is, no solid evidence that the necessary transfers of assets and liabilities had taken place.

I therefore find that the liabilities discharged had not, at the time of their discharge, become the liabilities of Pages and that they were (so far as they were liabilities at all) liabilities of PFI.

Next Mr Davis said that Mr Fletcher had no authority to make payments after his suspension at the beginning of April 2001. If Mr Fletcher chose to make them then he made them voluntarily. This point would not cover all the payments, because some of them were paid before then, but it would cover a substantial amount of the claim if it were a bar. It seems to me that this point only has significance if and insofar as it is appropriate to regard Mr Fletcher as providing the money by way of loan to PFI. It would not necessarily bar a restitutionary claim. If it were a good point then Mr Fletcher would lack the authority to accept the money on behalf of the company and to impliedly agree to its disbursement on behalf of the company.

I consider that Mr Davis’s point fails. I shall assume for these purposes that the suspension was effective as and when it was pronounced. However, it was overtaken by events. I have referred above to the events after Mr Fletcher’s application to the court. There was a modus vivendi in which Mr Fletcher was left in day to day charge of the company again. Mr Davis was not doing that himself (he had actually been incommunicado in Sri Lanka for part of the time) and must have known and intended that someone else should be minding the shop for the time being. That person could only be Mr Fletcher. The parties got closer to agreement in mid-May, at which point again it was still implicitly agreed that, despite the suspension, Mr Fletcher was still running the day to day business of the company. That state of affairs continued until Mr Fletcher lost his administration petition. Mr Davis was doubtless increasingly unhappy about the situation, but he must have intended that the business should be run by someone for the time being, and that someone was Mr Fletcher. It could not have been anyone else. Accordingly Mr Fletcher was impliedly re-vested with the authority to act as director in day to day charge of the affairs of the company, insofar as he had been divested of it by the attempt to suspend him. His authority impliedly included authority to pay PFI’s debts, and to borrow from somewhere if the money to do so was not otherwise available (which it was not, because the company had no income stream). Otherwise the objective shared by Mr Fletcher and Mr Davis (to keep the company going) could not have been achieved.

Last there is Mr Davis’s point that so far as Mr Fletcher’s claim lies in restitution it is equitable, and that Mr Fletcher has sufficiently dirty hands to disentitle him to relief. I do not think that Mr Fletcher has to rely on equity, but in case I am wrong I will deal with the point anyway. The lack of equity, or dirty hands, relied on by Mr Davis are Mr Fletcher’s lies about his experience, both originally and in court. He also relied on the formation of Pages. I do not consider that these, or any other shortcomings of Mr Fletcher, amount to a sufficient shortcomings to disentitle Mr Fletcher to equitable relief if and insofar as he needs to rely on equity. Mr Fletcher has, in my view, lied about his credentials, but it is not the case that any faults can be relied on to defeat an equitable claim. As is pointed out in Snell’s Equity (30^th Edition):

“What bars the claim is not a general depravity but one which has ‘an immediate and necessary relation to the equity sued for …’” (at page 32).

Such shortcomings on the part of Mr Fletcher as have been identified in these proceedings are not sufficiently closely connected with the claim to repayment of these moneys. Even if he sought to set up Pages in competition with the PFI, he did not succeed, and even if he had I do not think that that would disentitle him to equitable relief if he has, on the facts, used his own money directly to pay PFI creditors and requires the assistance of equity to recover it. This point therefore fails.

In fact I do not consider that Mr Fletcher needs the assistance of equity. As a matter of analysis what I think happened was that he paid debts of PFI with money which is treated as being his, and thereby created his own loan to PFI. He was doing what he wished Mr Davis to do – fund the company. It is true that money was paid directly from his (or his wife’s) account, but that does not necessarily matter. The better analysis is that he thereby created a director’s loan. On 17^th May 2001 Jo Davison emailed Mr Fletcher and Mr Davis about the then intended re-structuring of PFI. The email attached two Excel spreadsheets. Neither of them is available, but the first is described by her as being outstanding invoices. The second is said by her to be:

“a file showing the companies [sic] debt to Noel which I understand is to be booked to a director’s loan account – I will do this.”

I am not aware of any moneys which could be caught by this description other than those of the payments now claimed and which Mr Fletcher had made by that date. No dissent by Mr Davis from this course of action is apparent from the evidence in this case. In the files there is a sheet of paper, presumably prepared by her, showing “Amount owed to N Fletcher as at 14/5/01”, which contains some of the payments in respect of which the claim is now made. I think the evidence clearly shows that these sums should be treated as a loan made by Mr Fletcher. I will therefore not lengthen this judgment by considering the alternative case based on money had and received.

That is not quite an end of the matter, because while Mr Davis accepted that some of the debts were proper debts, he did not accept that in the case of a substantial payment made to Endacotts in the amount of £53,632.65, paid on 2^nd April 2001. This debt was disputed, said Mr Davis. Mr Fletcher and Mr Endacott said it was due. Whether or not Endacott was entitled to this money was not properly canvassed in these proceedings. I consider that the invoice was raised and paid bona fide and there is no sufficient challenge to its genuineness. I propose to allow it.

In the circumstances this claim of Mr Fletcher succeeds. It is, of course, a claim against an apparently insolvent company, so whether it will do any good is a different matter.

I therefore allow Mr Fletcher’s claim for reimbursement and dismiss the other claims made by Mr Fletcher against Mr Davis, save for the claim in relation to the benefit of the now abandoned patent application, as to which I make no order. I also make no order on the counterclaim of PFI which was dealt with by agreement during the course of these proceedings.