Alliance & Anor v Tishbi & ors

The issue on this application is in essence whether a compromise settled the issues between the parties or left the issues outstanding but settled the way that the issues should be determined.

Mr Nigel Alliance (“Mr Alliance”) (who sometimes acted through his company Cringle Corporation Limited) and Mr Yousef Tishbi (“Mr Tishbi”) (who sometimes acted through his company Realty Estates Ltd (“Realty”)) orally agreed in 2002 to enter into a joint venture for the acquisition, possible development and on-sale of the Barnes Hospital at Kingsway, Cheadle. The special purpose vehicle that they used for the joint venture was a company called Barnes Estates Ltd (“Barnes”) whose nominee shareholder held 50% of the shares for Mr Alliance and 50% for Mr Tishbi. Mr Alliance provided the funding and Mr Tishbi provided the day-to-day management and control and the development expertise.

There was no dispute that the anticipated profits were to be shared equally. But there was from very early in the venture a running dispute as to the charges that could be made against profits before distribution. The position of Mr Alliance was that it had been agreed that he would be able to charge interest on the funding he provided (and from 2006 he also claimed that it had been agreed that he could levy a 1% surcharge on principle and interest from time to time outstanding): but Mr Alliance said that Mr Tishbi was not entitled to make any charge for the services which he provided by way of day- to-day management or development expertise. Mr Tishbi’s position was that there had never been any agreement about interest, or surcharges or, indeed, management charges, the agreement simply being that the gross profit (less actual disbursements) should be divided equally.

Barnes Hospital was sold in April 2007 for £10 million gross. On 4 June 2007 Mr Nemat Ghatan (“Mr Ghatan”), a chartered accountant employed by the Realty Group and who was the company secretary of Barnes, sent out a financial statement relating to the venture. For the purposes of this case the following features may be noted:-

Mr Alliance was paid his £1,095,870 immediately. Mr Tishbi received his £1,353,145 about six weeks later.

Mr Alliance was not content with the account which he had received, and a dispute arose with Mr Tishbi. An attempt was made to mediate this dispute using the good offices of a Mr Sekaleshfar. In March 2008 in the course of that mediation (in circumstances which are obscure and into which it is unnecessary to enquire) Mr Sekaleshfar paid Mr Alliance £416,900. Of this sum £96,900 was his personal money: but £320,000 was money belonging to Barnes and represented its tax reserve and contingency fund.

The dispute was not resolved and proceedings which Mr Alliance had issued in February 2008 were pursued. The issues (so far as material) were these:-

The action came on for trial in the Manchester District Registry of the Chancery Division before HHJ Hodge QC (sitting as a judge of the High Court). Mr Alliance and Cringle were represented by Mr Anthony Peto QC instructed by Mishcon de Reya (“Mishcons”) (Mr Shobbrook being the responsible partner). Mr Tishbi, Realty and Barnes were represented by Mr Paul Chaisty QC (who had had the conduct of their Defence and Counterclaim throughout) instructed by Pannone LLP (“Pannones”) (Mr Megaw being the responsible partner). On the fourth day it settled. The Order was in conventional Tomlin form, and the curial part simply stayed the action and the Part 20 claim on the terms set out in the Schedule, and gave liberty to apply for the purpose of enforcing the terms of the Schedule. The fact that the Order took this form demonstrates that there were things to be done as part and parcel of the compromise. Those things were spelt out in the Schedule, which it is necessary to set out in full:-

“1.

The Claim and the Counterclaim herein are withdrawn.

A dispute has now arisen as to the meaning and effect of the compromise embodied in that Order. Mr Alliance in essence says that his claim to be entitled to charge interest was conceded (and he was to be entitled to keep that which he had received on the distribution) but that Mr Tishbi had to put back what he had received by way of distribution into the melting pot, and whether he was entitled to any management charges (and if so in what sum) was to be determined by Chadwicks or Deloittes, and that Mr Alliance was then to be entitled to a 50% share of any recalculated profit. Mr Tishbi says that the effect of the compromise was that each joint venturer was entitled to keep that which he had (and dropped any claim that his co-venturer should make any repayment to Barnes for redistribution) save only that the development and administration expenses (which were provisional) should be audited and any necessary adjustments made to the distributable profit.

By the application now before me Mr Tishbi, Realty and Barnes seek a declaration that on the true and proper construction of the Order it does not entitle Mr Alliance:-

“To receive from the proceeds of sale of Barnes Hospital…any further monies beyond those already paid, by way of a share of profit or otherwise, save in the event that the figure for development expenditure and administrative expenditure is, after any review and determination provided for by paragraphs 6 and 7 thereof, less than that previously provided for by the defendants and that no such entitlement arises by reason of the sums paid to [Mr Alliance] being treated in any audited accounts as “interest”…”

If the arguments on construction fail then the defendants say that the meaning for which they contend was the common intention of themselves and Mr Alliance and that the Order should be rectified to accord with the bargain actually made; or alternatively must be read subject to an estoppel by convention as to its true effect. If on the evidence the Defendants fail to establish the common intention which they assert, then they say it was undoubtedly their intention, and if the Order fails to carry that intention into effect, then there is a unilateral mistake: they say that Mr Alliance must have been aware that they were making that mistake (or suspected it but decided not to enquire less he discovered the true position) and that accordingly they are entitled to rectification of the Order or alternatively rescission on the grounds of unilateral mistake. If that fails then the Defendant’s say that the position was misrepresented to them and they are entitled to take advantage of a promissory estoppel or estoppel by representation or alternatively to rescind the compromise. Finally the Defendants say that their legal representatives had no authority to enter into any form of compromise which had the effect of putting what Mr Tishbi had received back into the melting pot with a view to realigning the profit shares of the joint venturers so that there is no compromise. The analyses most heavily relied upon were construction and rectification.

I address first the question of construction. There was no difference between Counsel as to the correct approach to be adopted. The meaning which the parties intended by the words they used is to be found by asking the question: “What would a reasonable person (having all of the background knowledge available to the parties in the situation in which they were at the time of the compromise) have understood them to be using the language of the document to mean?” In answering this question I shall pursue the approach which I summarised in Scottish Widows [2011] EWHC 729 (Ch) at [17].

I have already set out the words of the Order and of the Schedule. These embody an agreement reached at the door of the court, negotiated between Leading Counsel with contributions from their respective instructing solicitors. Such people are able users of language, and it may be expected that in general they will have used words in accordance with their ordinary and natural meanings. But on the other hand given the short space of time within which and the pressure under which the bargain was made there is the possibility that what would have appeared obvious to the negotiators at the time will not be so readily apparent to a third party coming to the document afresh in very different circumstances.

At the heart of the dispute lies paragraph 5 of the Schedule, and in particular the words:-

“…for the purpose of auditing the accounts of Barnes Estates Limited the sums paid out by Barnes Estates Limited to Mr Alliance…represent the discharge of Barnes Estates liability to pay interest to Mr Alliance”.

What those particular words mean must have course be read in the context of the entire document in which they are to be found.

The words used have, of course, to be read in a practical context. I have already set out the issues pleaded in the action that was settled by the Order. But it is useful to refer to four other features of the context within which the compromise was forged.

First, the state of the action at the time when the compromise was reached. The action had commenced on 20 April 2009. The course of the hearing may be ascertained from contemporaneous notes taken by Ms Anushka Stone, an associate solicitor employed by Pannone. Mishcons also had a trainee solicitor note taker, but his notes were not disclosed because they had been lost. Ms Stone’s notes therefore constitute the only contemporaneous evidence, though they are supplemented by a full attendance note which she dictated on 28 April using those notes as an aide memoire.

Mr Peto QC opened the case. Mr Alliance was the only witness for the claimants: but Mr Peto QC indicated that he would be making an application to adduce three further witness statements (one of which dealt with the Manchester Garages Site). Since the cross examination of Mr Alliance was anticipated to last until Wednesday, if the additional witnesses were admitted then the case was unlikely to be completed within the time allotted. The cross examination of Mr Alliance began on the afternoon of 20 April 2009 and it continued throughout the following Tuesday and Wednesday. The case put in cross examination was that there had been no agreement about interest and no agreement about management charges. It is common ground that Mr Alliance gave a very poor account of himself in cross examination. I have been invited to read (and have quickly read) the transcript. When (in the context of an objection to further cross examination going to credit) the judge said (at page 50 of the transcript for the 22 April 2009) that “I have formed a certain view of the witness” I think I understand what he meant: Mr Alliance had by turns been evasive, self-contradictory, exaggerated and dramatic and had given answers that contradicted contemporaneous documents or which were inherently improbable. Insofar as he sought to prove oral agreements in the terms he alleged he faced very great difficulties. Though as Mr Megaw very fairly said in his oral evidence

“.. “Inevitable” is not a word that comes readily in a litigator’s dictionary. But I had high expectations”

By the end of Wednesday Mr Chaisty QC had almost concluded his cross examination. It is common ground (although the transcript does not record the exchange) that Mr Peto QC asked the judge if he might confer with his client even though the cross examination had not concluded. At 10:00am on Thursday the parties asked the judge for time. The cross examination of Mr Alliance was not concluded: but the compromise (as embodied in the Order and the Schedule) was thereafter placed before the judge. In approving it he commended all parties for achieving the compromise and referred to “at least a couple of occasions during the course of the trial” when he had indicated that this was pre-eminently the sort of litigation that should be settled without judicial decision.

The second feature of the context to which I wish to refer is the arguments as they were presented at trial. The claim relating to the Manchester Garages Site merited two sentences in Mr Peto QC’s argument, making two points: (a) the claim would depend upon the court’s assessment of oral testimony, and (b) Mr Tishbi took a limitation point. The remainder of the skeleton argument related to Barnes Hospital. It did not assert that it was part of the original joint venture arrangement that Mr Alliance should be entitled to charge interest on the funding he introduced. But it did refer to one subsequent letter stipulating for the payment of interest and three further letters in which the issue was debated. As to management charges themselves, Mr Peto QC’s skeleton argument said:-

“The position on management charges has not been made clear nor has any proper account been rendered for the deductions made by Barnes in respect of charges made by Realty. The position needs to be ascertained by the taking of a proper account, which is part of the relief sought in the Particulars of Claim”.

In the identification of the issues for resolution the question whether Mr Alliance was entitled to an account of the profits made by Barnes was identified, and the skeleton argument continued:-

“Directions will be sought as to the taking of this account in order to ascertain what claims are being made for management charges and how they should be adjudicated. There is at present no pleaded case as to the amount or basis of calculation of management charges in the Defence and so this cannot be determined at this trial”.

Finally, the skeleton argument identified the issue relating to the £257,000 interest and the £417,000 which had been received from Mr Sekaleshfar (£320,000 of which Barnes Estates Ltd claimed back).

Mr Chaisty QC’s skeleton argument likewise identified issues relating to the interest and surcharge claimed by Mr Alliance, the liability for the £257,000 interest, repayment of £320,000 and “management fees” and an account. As to management fees the skeleton argument noted that Mr Alliance had (until delivery of his witness statement) been robust in his rejection of any entitlement on the part of Mr Tishbi to payment in respect of the management work carried out on the project: and that Mr Tishbi had “up to now” not claimed any agreement as to such management charges. But the skeleton argument noted that in his witness statement for trial Mr Alliance seemed to accept that Mr Tishbi/Realty was entitled to deduct management fees and commented that “it would appear clear that [Mr Alliance] believes his case is strengthened if he now accepts, never having done so before, an entitlement on the part of [Mr Tishbi/Realty] to management fees”: the argument noted that “these are points to be explored”.

So much for the arguments as they were seen at trial. The third element of the context is the correspondence that immediately preceded the trial. Mr Alliance’s consistent position in correspondence had been that Mr Tishbi was not entitled to charge for his management of the project. In his witness statement Mr Alliance remembered an agreement that Mr Tishbi could charge for project management (although he said the precise terms had not been agreed). On 9 January 2009 Mr Megaw of Pannones noted the change of position and said that he interpreted the witness statement as an offer to concede that Mr Alliance would make a due allowance of the management charge on a quantum meruit basis and “that offer is accepted by our clients”. In a further letter that day he set out Mr Tishbi’s position in relation to an account. He said that it had “always…been accepted that when the accounts of Barnes Estates are finally audited and completed and all final adjustments have been made there will be further sums due to the two shareholders” and he invited Mr Alliance “to more accurately describe [his] complaints” so that they could be responded to.

Mishcons responded to both letters on 12 February 2009. They made clear that Mr Alliance “has not made an offer to deal with the issue of management charges on a quantum meruit basis as you “interpret”…he has done nothing more than acknowledge that your client is due something for the work carried out in managing the property”. As to the way in which in which this “something” might be ascertained they said:-

“We would imagine that the most straight forward way of establishing a fair and reasonable figure for your client’s management charge would be to canvass opinion from local management agents used to dealing with properties of the nature in question. Your suggestion that an independent expert be appointed to make a full enquiry and assessment strikes us as being hugely time consuming and costly”.

As to the proposal to narrow the issues, Mishcons did not accede to that suggestion, saying that the matter should be left to the judge to give directions as to the taking of an account.

The final element of the context to which I would refer relates to the material that was available to be deployed at trial. First, so far as the dispute over the Manchester Garages Site was concerned there was a statement from an “introducer” as to a single conversation he had had with Mr Tishbi in 1994 (which Mr Alliance sought to adduce but for which he had not obtained permission). Second, there was a statement from Mr Sekaleshfar (which again Mr Alliance sought to adduce) as to the circumstances in which the £417,000 had been paid to Mr Alliance. Third, there were the abbreviated financial statements of Barnes from 31 December 2001 until 31 December 2005 which had been audited by Chadwicks. These showed as a charge against income in each year a sum for interest and for administrative expenses. Included in the latter figure were said to be related party transactions involving the provision of services by Realty. Mr Ghatan’s first witness statement explained that the interest figure was inserted at the request of Mr Alliance, that the management charge was inserted as a nominal figure to counter balance the other entry, that neither item was actually paid, that each simply represented a cost that would ultimately have to be borne out of the respective shares of the participants, and that the figures were not significant because Barnes would not generate income until the land was actually sold. Fifth, there were no audited financial statements after the end of 2005 because of the ongoing dispute between Mr Alliance and Mr Tishbi relating to the chargeability of interest and management charges. Sixth, there was a further income and expenditure account prepared by Mr Ghatan shortly after March 2008 (updating the Schedule attached to the letter of 4 June 2007) showing development expenditure down by some £10,000, administration and other expenditure up by some £73,157, but bringing into account bank interest received after the sale of the property of some £87,000. The net effect was to increase the distributable profit by some £23,496. Last, there was a schedule which Mr Ghatan had prepared for Mr Sekaleshfar at his request for use in his mediation. Its purpose was to illustrate the level of management activity (in addition to the direct development and administration costs paid to third parties). On the assumption of a constant charge-out rate for the entire six and half year period of £72 per hour the management time that could be charged came to some £1.445 million. But no invoice in that or any other sum had ever been rendered: and this figure was not put directly to Mr Alliance by Mr Tishbi.

Reading the words used in the Order and the Schedule in that context I hold that upon its true construction the compromise has the effect in law that Mr Alliance can keep that which he actually received (by way of direct distribution of profit share and by way of payment from Mr Sekaleshfar), that Mr Tishbi can keep that which he actually received by way of profit distribution) subject in each case:-

These are the reasons for that view.

For those reasons I would construe the compromise in the sense indicated in paragraph 23. In so doing I recognise that I am treating as implicit in paragraphs 4 to 7 inclusive a right for Mr Alliance and Mr Tishbi both to seek out of Barnes by way of dividend or other distribution any enhancement to the previously declared profit arising from a reduction (through the audit process) of any costs charged against profit or from any additional income arising since the June 2007 distribution date. But that seems to me to be the clear (if unexpressed) qualification to paragraph 9 of the Schedule. I would ask Counsel to agree a form of declaration which accords with my judgment.

Although this is sufficient to dispose of the case I should make further findings of fact in case my legal conclusion on the facts already found is in error. Of the alternative cases advanced that based on rectification upon the ground of common mistake was most heavily relied on.

The principles are again familiar. I would summarise my approach as follows:-

I received the evidence of Mr Megaw and Ms Stone of Pannones and of Mr Chaisty QC on behalf of Mr Tishbi, and of Mr Tishbi himself and his accountant Mr Ghatan. The witnesses for Mr Alliance were Mr Peto QC and Mr Shobbrook; but Mr Alliance himself was not called (although a witness statement from him was included in the trial bundle). Each of the witnesses did his or her honest best: none of them sought to mislead me. I was alert to the risk that the evidence that Mr Chaisty QC and of Mr Peto QC might have been unconsciously strengthened in the recollection since each in some measure had his professional reputation at stake (having achieved and recorded a compromise of serious litigation, which compromise was itself then the subject of further challenge in court). In general I found the evidence of Mr Chaisty QC, Mr Megaw, Mr Tishbi and Mr Ghatan the more reliable because it was supported by Ms Stone’s contemporaneous note and the attendance note she prepared shortly afterwards. The importance of contemporaneous documents to the process of recollection was demonstrated by Mr Chaisty QC (who had forgotten that Mr Peto QC had responded to certain questions which he raised because Mr Peto QC’s email replies had been deleted from his inbox): and by Mr Peto QC who had forgotten the early course of the negotiations until his memory was refreshed by sight of Ms Stone’s notes. The unexplained failure to call Mr Alliance caused me to doubt the reliability of the recollection of Mr Peto QC and of Mr Shobbrook as to advice which they had tendered to him in the course of the negotiations (advice which, as recollected in oral evidence, was significantly more elaborate than that recorded in their respective witness statements).

Adopting that approach to the evidence, these are the facts I find. Before the hearing commenced on 20 April 2009 there was some posturing about settlement. Mr Alliance required Mr Tishbi to pay him £800,000 in full and final settlement. Mr Tishbi said that he wanted Mr Alliance to repay the £320,000 tax reserve to Barnes and to pay £200,000 in respect of costs. The hearing commenced. During the morning the judge said that the parties should explore settlement. At lunch time Mr Chaisty QC invited Mr Peto QC to come up with an offer. At the start of the afternoon the judge was asked for time. Having taken instructions, Mr Chaisty QC proposed that Mr Alliance should pay £160,000 in full and final settlement (being 50% of the £320,000 tax reserve). Mr Alliance said that he required payment of £650,000. The consequence of that would be that he would get back £2 million out of the venture, and Mr Tishbi about £600,000. Mr Tishbi rejected the proposal, and the case resumed.

On 21 April 2009 Mr Alliance’s brother, Lord (David) Alliance, offered to contribute to a settlement. The approach was rejected by Mr Tishbi: he would accept it if Mr Alliance wished to drop the case, but he would not be bought off by Lord Alliance. Mr Megaw was entirely right in his evidence when he said that the dispute was between strong willed men within the same family who had things other than money on their minds.

The cross-examination of Mr Alliance continued on 21 and the morning of 22 April 2009. At lunch time on 22 April Mr Chaisty QC proposed to Mr Peto QC that the case be settled on a “walk away” basis. Mr Alliance’s formal response was to reject that approach and to require payment to him of the sum of £500,000: but as between Counsel Mr Peto QC said that his client would consider any offer of a positive payment seriously. In short, Mr Tishbi had to be seen to submit in some way. Mr Tishbi rejected that approach. Mr Chaisty QC reiterated the offer of a “walk away” with each side bearing their own costs, but this time saying that the offer was open for acceptance only until 6:00pm that day. I accept the evidence of Mr Chaisty QC (on which he was not challenged) that during the course of the discussions that day he made absolutely clear that Mr Tishbi would not pay any money. Such a communication would be entirely consistent with the discussions that were taking place within Mr Tishbi’s camp (to which I have not referred in my account).

There was no acceptance of the “walk away” proposal that evening: but on the following morning Mr Peto QC indicated to Mr Chaisty QC that he believed the case had settled. When Mr Megaw and Mr Tishbi reached court it became clear that no acceptance had been communicated, and that the case had not settled. Lord Alliance then acted as a “go between” to facilitate communication between Mr Alliance and Mr Tishbi, particularly in relation to the £96,900 which Mr Sekaleshfar had personally paid to Mr Alliance (and which he now sought to recover from one or other of the joint venturers). This intervention bore fruit. Shortly after 9:45am Mr Chaisty QC proposed to Mr Peto QC that the parties should “walk away” on the basis that Lord Alliance should determine who was responsible for Mr Sekaleshfar’s money. Mr Peto QC said that any such settlement should be embodied in a Tomlin Order which should contain a term that the compromise was confidential. Lord Alliance said that if there was a compromise then each party would need to see the deal was tax efficient, and that if the parties disagreed a senior tax partner at Deloittes should decide what was to be done. This led to a discussion between all parties as to how any tax that was ultimately computed to be payable should be funded (because on a “walk away” Mr Alliance would be retaining the £320,000 that constituted Barnes’ tax reserve). It was agreed that any shortfall would be borne equally.

I find that at 10:05am the parties reached an agreement under which claim and counterclaim were dropped, there would be no Order as to costs, the parties agreed to abide by Lord David Alliance’s determination as to how Mr Sekaleshfar’s money was to be provided, that the parties would work together to keep down the tax liability and would equally contribute whatever sum was required to discharge it. The judge was then asked to allow the parties time to prepare a draft Order.

Mr Peto QC then came back with a further proposal about tax. According to Ms Stone’s attendance note (which accords with her contemporaneous hand written note) the substance of what Mr Peto QC said was:-

“One way to get that [liability] down subject to the auditors is that they both be content for the £1.1 million which [Mr Tishbi] paid to [Mr Alliance] plus the £320,000 received via [Mr Sekaleshfar] to be treated as repayment of an interest claim and the £1 million (sic) which [Mr Tishbi] received should be treated as a repayment of the management charge”.

The evidence of Mr Chaisty QC is to the same effect: it was Mr Peto QC who raised the idea of treating the payments which had been made to Mr Alliance as interest and that the sums which Mr Tishbi had received should be treated as management charges. To the same effect was the evidence of Mr Megaw: at some point it was suggested that there would be some advantage “if the sums which Mr Tishbi had received by way of distribution were treated as management charges…”. Mr Ghatan says the same thing: Mr Alliance wanted them to treat the payment which he had received as interest and that the payment which Mr Tishbi received should be treated as management charges. The evidence of Mr Shobbrook of Mishcons is to the same effect. He notes that Mr Tishbi agreed with the proposal that the money received by Mr Alliance be treated as interest for the purposes of corporation tax but that “he refused to agree to the money he had received being similarly included within [Barnes’] accounts as management charges and thereby also a joint venture expense…”. So recollection (on both sides of the bargaining table) and contemporaneous (and near contemporaneous) documents all speak with one voice as to the subject matter of the discussion being what each party had received. Mr Peto QC is alone in suggesting something different. He says that he proposed to Mr Chaisty QC that the money paid to Mr Alliance be treated for the purpose of finalising and auditing the accounts as being interest, and that he invited Mr Chaisty QC “to propose the inclusion of an amount for management charges that they were claiming”. He said in his written evidence (and confirmed in his oral evidence) that he was surprised when the treatment of the payment to Mr Alliance was accepted but “the offer to agree a management charge” was turned down. I am in no doubt that Mr Peto QC’s recollection is at fault here and has been unconsciously shaped by the form which the current dispute has taken.

The proposal to treat what Mr Alliance had received as being interest was agreed: but Mr Tishbi did not accept the idea that what he had received should be treated as management charges. Mr Peto QC recalls that something was said about it being “for tax reasons”. I find that that is so: and that it is likely that Mr Chaisty QC explained that Mr Tishbi wished to characterise what he had received from the stand point of his tax perspective and what was for his advantage (for those are the instructions Ms Stone recorded that he received). It would also be consistent with Ms Stone’s note that Mr Chaisty QC said at some point during this process that the defendants were offering no commitment at this stage about the money which Mr Tishbi had received, that the matter would be discussed with the auditors, but that the defendants wanted to reserve their position on this. Further, Ms Stone’s note of the conversation between Mr Chaisty QC and Mr Peto QC at about 10:40am records Mr Peto being told that the defendants were happy for the money received by Mr Alliance to be treated as the repayment of interest, but that they would not go any further in connection with management charges because they wished to consider the split between Mr Tishbi personally and Realty.

I find that an objective observer would not have understood that by refusing to characterise his receipts in a particular way for tax purposes Mr Tishbi was thereby indicating to Mr Alliance that Mr Tishbi’s distribution was available for re-allocation (subject to the determination of accountants).

Notwithstanding the agreement then made in principle Mr Peto QC said that the parties needed to think about “a sweetener” to his client because he had not made anything out of the litigation.

By 11:15am it had become clear (a) that the only “sweetener” on offer was that Mr Tishbi’s freedom to characterise his receipts (which it had been suggested should also be subject to the decision of Lord Alliance) was to be restricted in that it was to be determined by the accountants, and (b) Mr Peto QC had secured agreement that Deloittes should have the final say. Mr Peto QC confirmed that he would type out a draft Order recording that the claim was withdrawn, the counterclaim was withdrawn, Lord Alliance was to determine issues relating to Mr Sekaleshfar’s money, and that the parties were to co-operate to deal with Barnes tax liability (which was to be dealt with by Chadwicks with Deloittes having a power of review).

Mr Peto QC then prepared a draft Order recording those terms. His first draft, (in recording the treatment to be given to the money received by Mr Alliance) already contained the words that it was “for the purpose of auditing the accounts of Barnes”. Mr Chaisty QC says (and I accept) that those words were put in at his insistence to make clear that the additional provisions were tax driven: he says (and I accept) that Mr Peto QC acknowledged that this was so.

In cross examination Mr Ghatan was pressed with the proposition that the terms additional to the bare “walk away” that emerged in the course of discussions in the morning demonstrated that Mr Alliance was not content simply to walk away and was successfully obtaining additional benefits to his advantage (and to Mr Tishbi’s detriment). Mr Ghatan said that he did not think that Mr Alliance was “moving the goal posts”: rather he was overcomplicating the deal that had been done in order that in some sense he could have the last word. I accept the accuracy of that assessment.

Mr Peto QC and Mr Shobbrook both say that each individually understood that when Mr Tishbi declined the opportunity to characterise what he had received as management charges he was in fact submitting to the accountants the determination of how much he should be entitled to take out of the profits of the venture. They also say that they understood (because it was “obvious”) that if the accountants embarked upon that process there was a possibility that the management charges might be pitched at a level higher than what Mr Tishbi had actually received (bearing in mind the Schedule provided to Mr Sekaleshfar) so that there was a risk that the total charges would exceed gross profit and a risk that Mr Alliance might have to pay back some of what he had received and characterised as interest. They say they advised Mr Alliance of this risk. I reject this evidence. There is no documentary support for it: and Mr Alliance was not called to confirm it. It is, of course, the logical consequence of what both men say was their subjective belief as to what Mr Tishbi was accepting, but I think their intellectual analysis has converted itself into a false recollection. But in any event it is not their subjective belief that counts for the purposes of rectification. A reasonable informed observer would not have gathered from what passed between the parties during the negotiations that either party thought he would have to repay anything beyond the known liability for corporation tax (and perhaps the very theoretical possibility that the development and administrative expenditure was even larger than that stated in March 2008 and more than absorbed accrued income).

On this evidence I hold that there was a clear, common, communicated and continuing intention that the compromise consisted of a “walk away”, with each man keeping what he had, and contributing equally to the liabilities yet to be computed or confirmed (to the extent that there existed a shortfall in the company’s assets). If I had not construed the Schedule in the way I have I would have ordered rectification of the Order to include a concluding paragraph to the effect that nothing in the forgoing provisions should require either party to return any part of that which he had received out of the company’s assets at the date of the Order save insofar that paragraph 8 might require.

In the light of this alternative holding it is unnecessary to consider the various alternative heads of relief sought by Tishbi. If necessary, the facts I have found and the inferences which may be drawn from them (which I believe to be sufficient for the purpose) may be deployed in those various analyses. The one alternative case to which that observation does not apply is the allegation that Mr Chaisty QC and Mr Megaw lacked authority to bind Mr Tishbi to any compromise which had the legal effect of requiring him to repay any part of that which he had received. I reject that case. I have no doubt that Mr Chaisty QC and Mr Megaw took Mr Tishbi in detail through the terms of the Order and the Schedule, that he gave Mr Megaw authority to sign on his behalf and Mr Chaisty QC authority to tell the judge that the case had settled on those terms. He is bound by the Order and by the Schedule (whatever legal effect it has).

I will hand down this judgment at 10.30 am on 20 April 2011. I do not expect the attendance of legal representatives. Unless either party requires an oral hearing I invite agreement between Counsel upon the form of order and written submissions on costs and any other matter by 4.00pm 7 May 2011.