Signia Wealth Ltd v Vector Trustees Ltd & Ors

INTRODUCTION Para. 1

THE COMPULSORY TRANSFER Para. 19

An analysis of the compulsory transfer Para. 19 process

The triggering event Para. 19

The Deemed Transfer Notice Para. 23

The process of sale of the Shares the subject of Para. 25 the Deemed Transfer Notice

Issues arising out of the compulsory transfer Para. 29 process

STRUCTURE OF THE JUDGMENT Para. 30

THE WITNESSES Para. 31

Introduction Para. 31

Factual witnesses called by Mr. Caudwell Para. 32

List of witnesses called Para. 32

Mr. David Canfield Para. 33

Mr. Tim Maycock Para. 39

Mr. John Caudwell Para. 42

Ms. Kate Cooper Para. 48

Ms. Janet Tarbet Para. 52

Ms. Rebekah Caudwell Para. 55

Ms. Victoria Olszewska Para. 57

Mr. Paul Lester Para. 59

Mr. David Hayes Para. 62

Mr. Daniel Ward Para. 66

Mr. Michael Fenton Para. 68

Mr. Michael Balfour Para. 70

Factual witnesses called by Ms. Dauriac Para. 71

List of witnesses called Para. 71

Ms. Nathalie Dauriac Para. 72

Ms. Kelly Degruttola Para. 80

Ms. Tracy Gehlan Para. 84

Ms. Suzette Burger Para. 88 (f) Mr. Martin Wilson Para. 89

The expert witnesses Para. 92

The background to Mr. Caudwell’s and Ms. Para. 97

The objective of the collaboration Para. 101

Mr. Caudwell’s practice Para. 106

The indicative terms Para. 108

The Investment Term Sheet Para. 113

Incorporation Para. 114

Kinetic Partners’ advice on regulatory Para. 115 capital

Ms. Dauriac’s Service Agreement Para. 120

The Shareholders’ Agreement Para. 122

The loan agreements Para. 124

The Articles of Association Para. 126

The early operation of Signia Para. 127

Signia’s business activities and the revenue Para. 131 derived therefrom

Signia’s total costs and total revenue Para. 143

Signia’s profit/loss Para. 145

Signia’s sources of finance over time Para. 149

Introduction Para. 149

Financing of Signia in 2011 Para. 153

Financing of Signia in 2012 Para. 155

Financing of Signia in 2013 Para. 159

Financing of Signia in 2014 Para. 168

Signia’s debt as at the end of 2014 Para. 170

Ms. Dauriac’s bonuses Para. 172

Setting the scene Para. 177

Events leading up to the investigation into Para. 182

The Mayfair Project and its effect Para. 182

Provision of information by Mr. Hayes to Mr. Para. 195

The trip to see Rebekah Caudwell Para. 200

The problem with Barclays Para. 209

Ms. Dauriac tries to regain the initiative Para. 324

The next steps in the investigation Para. 331

The first draft of Mr. Maycock’s report Para. 340

A proposed visit to Signia by Mr. Maycock Para. 344

Mr. Maycock’s “main changes” sheet Para. 353

Conclusion of the investigation into Mr. Para. 355

Ms. Cooper seeks time to make more Para. 356 submissions

Further information is provided by Signia Para. 364

The termination of Mr. Wilson’s employment Para. 374 at Signia

Ms. Dauriac’s attempt to document to work Para. 377 done in relation to her expenses

The 2014 regulatory capital shortfall Para. 382

Mr. Maycock’s next report Para. 388

The telephone call from Ms. Lee Para. 392

Consideration of the terms on which Ms. Para. 395

Ms. Dauriac enquires about the applicable Para. 402 expense policy

Mr. Stoebe’s offer to take a lie detector test Para. 403

Putting the terms to Ms. Dauriac and her Para. 404 reaction

Next steps by Mr. Canfield Para. 416

The telephone call between Mr. Canfield, Mr. Para. 418

Ms. Dauriac seeks legal advice Para. 422

A meeting between Mr. Caudwell and Ms. Para. 423

The next iteration of the Statement of Para. 425

Interviews with Signia staff Para. 428

Ms. Dauriac’s suspension Para. 439

Resignation Para. 443

The statement of the investigation Para. 451

Further interviews Para. 452

Ms. Dauriac queries her on-going suspension Para. 453

Ms. Degruttola complains of pressure Para. 454 (oo) Invitation to a disciplinary hearing Para. 456

The pleaded case Para. 459

The law Para. 462

The similar fact evidence in this case Para. 468

The primary case: the conspiracy allegation Para. 468

A secondary case: disparaging and offensive Para. 469 comments

A third point: admission by Mr. Caudwell Para. 475

Considerations in evaluating the conspiracy Para. 478 allegation

The witness evidence Para. 479

Mr. Caudwell and Mr. Canfield Para. 479

Mr. Fenton and Mr. Balfour Para. 480

Ms. Gehlan Para. 481

Ms. Burger Para. 485

The conspiracy allegation Para. 488

No evidence of a “conspiracy” at Pure Jatomi Para. 489

No similarity with events at Signia Para. 493

Factual unreliability Para. 495

The alleged admission by Mr. Caudwell Para. 496

Conclusion Para. 500

BIFURCATION BETWEEN THE Para. 503

LEAVER OR NON-LEAVER? Para. 506

GOOD LEAVER OR BAD LEAVER? Para. 511

Types of Leaver Para. 511

The definition of a Good Leaver Para. 513

Issued arising Para. 517

General employment law principles Para. 520

Was Ms. Dauriac constructively dismissed? Para. 521

Ms. Dauriac’s case Para. 521

Points that arise Para. 526

Was Ms. Dauriac a whistleblower? Para. 528

Was the expenses investigation a “sham”, Para. 532 initiated with an intention to remove Ms. Dauriac from her position within Signia?

The manner in which Ms. Dauriac’s Para. 627

Dishonesty and Signia’s right to dismiss Ms. Para. 629

The operation of the Leaver provisions Para. 637

Introduction Para. 637

Good Leaver under Limb A Para. 641

Good Leaver under Limb B Para. 647

Conclusions Para. 650

THE DATE OF THE TRANSFER EVENT Para. 654

THE DATE OF MS. DAURIAC’S Para. 656

THE VALUE TO BE ASCRIBED TO THE Para. 657

The appropriate measures of value Para. 657

Fair value Para. 666

Determination of Fair Value by the Board Para. 668 and the Investor

Who determines Fair Value? Para. 668

Determination of Fair Value in this case Para. 671

Determination of Fair Value by the court Para. 676

The approach of the experts Para. 676

Points in issue Para. 685

Augmenting the definition of “Fair Value” Para. 686

INTRODUCTION

The Claimant, Signia Wealth Limited (“Signia” (Footnote: ¹)), is a private company limited by shares registered in England and Wales with company number 07044573. Signia was incorporated on 15 October 2009. Its articles of association (the “Articles”) have been amended, most recently by written resolution passed on 14 August 2013. (Footnote: ²) All references in this Judgment to “Articles” are to these, amended, articles of association.

The Articles describe a number of different shares (“Shares”, held by a “Shareholder”) in Signia. They are as follow:

The Articles define the “Investor” as the holder(s) of the A Ordinary Shares. At all material times, the holder of the A Ordinary Shares in Signia was the Fourth Party to these proceedings, Grecco Limited (“Grecco”). Grecco was set up by Mr. Caudwell, the Fifth Party to these proceedings. Grecco is a company registered in Guernsey. Grecco holds the A Ordinary Shares on trust for Mr. Caudwell’s children. (Footnote: ³) Grecco also holds, on trust on the same terms, 1,000,000 Preference Shares. Mr. Caudwell is an entrepreneur who, as will be described, invested in Signia.

The Second Defendant is Ms. Nathalie Dauriac. Ms. Dauriac was, until recently, married to a Mr. Konrad Stoebe and, when married, went by the name of Ms. DauriacStoebe, the name in which she has been claimed against in these proceedings. I shall refer to her, as she was referred to during the course of the trial, as Ms. Dauriac.

Prior to the termination of her employment – which is a matter that will have to be considered in due course in this Judgment – Ms. Dauriac was employed as the chief executive officer of Signia. The terms of her employment are set out in a written service agreement (the “Service Agreement”), signed on 12 February 2010.

The Articles from time-to-time make reference to a “Manager” (see, for instance, Article 6.2). Manager, according to the Articles, has the meaning given to it in the

“Shareholders’ Agreement”. “Shareholders’ Agreement” is itself not a defined term in the Articles of Association. I consider – and so find – that the reference to a

Shareholders’ Agreement is a reference to an agreement of that name dated 15 February 2010. The Shareholders’ Agreement defines Ms. Dauriac as “Manager”. Grecco is defined as the Investor – using the same term as used in the Articles. (Footnote: ⁴)

The following Shares were allocated by Signia to Ms. Dauriac on the following dates:

These Shares, which I shall refer to as the “Dauriac Shares”, were transferred by Ms. Dauriac to the original First Defendant in these proceedings, Marlborough Trust Company Limited (“Marlborough”), to be held on trust for her. That trust is known as the “Cap Ferret Trust”. Marlborough was succeeded as trustee of the Cap Ferret Trust and as First Defendant by Vector Trustees Limited (“Vector”). (Footnote: ⁵) Vector was then succeeded as trustee by New Street Trust Limited (“New Street”). (Footnote: ⁶) Permission to amend the pleadings so as to replace Vector with New Street was given on Day 1 of the Trial (17 October 2017). (Footnote: ⁷)

The Dauriac Shares (at that time held by Marlborough) were transferred away from Marlborough (pursuant to a procedure that is described below) on 30 June 2015. Neither Vector nor New Street ever held the Dauriac Shares pursuant to the Cap Ferret Trust or had any proprietary interest in those shares, although (as I have described) each was a trustee of the Cap Ferret Trust. The trustee – now New Street – is a party to these proceedings because some of the claims in these proceedings involve the trust, rather than Ms. Dauriac personally. (Footnote: ⁸)

Article 6.2 of the Articles provides that (subject to certain exceptions), “no Manager being a Shareholder may during the period of seven years from becoming a holder of Shares except with Investor Consent (which shall not be unreasonably withheld in the case of a transfer to the trustees of a trust for the benefit of the Transferor and his or her family or to a transfer on a change of trustees (any such transfer being a “Permitted Transfer” and the transferee being a “Permitted Transferee”) transfer any Shares whilst the Investor is a Shareholder”.

In this case, it was common ground that Ms. Dauriac’s transfer of the Dauriac Shares to Marlborough was “a transfer to the trustees of a trust for the benefit of the Transferor and his or her family” within Article 6.2. Although I was shown no evidence of Investor Consent to these transfers, it was admitted on the pleadings that such transfers had taken place, (Footnote: ⁹) and I proceed on that basis.

The Dauriac Shares were compulsorily transferred away from Marlborough to Grecco pursuant to a procedure set out in Articles 6.21ff, at a (total) price of £1.00 for the B Ordinary Shares and a (total) price of £1.00 for the C Ordinary Shares. The date of transfer was 30 June 2015.

The Shareholders (disregarding the Preference Shares) immediately prior to this process of compulsory transfer were as follows:

It will be necessary to describe this process of compulsory transfer in some detail, and to identify and resolve a number of issues that this process gives rise to. For the present, all that needs to be noted is that whether this process was properly followed is controversial.

In these proceedings, as pleaded in its Particulars of Claim, Signia seeks various declarations regarding the compulsory transfer process. In very brief summary, taken together, they amount to a declaration that the compulsory transfer process was properly carried out and that the value of the Dauriac Shares is as attributed by that process. The Defendants – New Street and Ms. Dauriac – have filed a detailed Defence disputing Signia’s claims.

By a Part 20 Claim, Ms. Dauriac makes various claims against Signia, New Street, Grecco and Mr. Caudwell. The details are pleaded in Re-Re-Amended Particulars of Additional Claim (the “Part 20 Particulars”). In her turn, Ms. Dauriac seeks various declarations in respect of the compulsory transfer process, but also damages for breach of various agreements, damages for the tort of procuring these breaches of contract and damages for conspiracy to injure. Although it will be necessary to consider these additional claims in their own right, the validity and strength of these claims essentially turns on the same or similar issues as those which arise out of the declarations sought by Signia in the Particulars of Claim and by Ms. Dauriac in the Part 20 Particulars. (Footnote: ¹⁰)

Although there are multiple parties to this dispute, there are only two sides: Mr. Caudwell (comprising Signia, Grecco and Mr. Caudwell himself) and Ms. Dauriac (comprising Ms. Dauriac herself and New Street). Save where it is necessary to do so, I shall not differentiate between the various parties comprising each side, but shall refer to Mr. Caudwell and Ms. Dauriac.

It is necessary for this Judgment to begin with an analysis of the compulsory transfer process pursuant to which Grecco acquired the Dauriac Shares. The relevant provisions regarding this process are described in Section B(1). Section B(2) then identifies a number of issues that arise out of this compulsory purchase process.

THE COMPULSORY TRANSFER PROCESS (1) An analysis of the compulsory transfer process

The triggering event

Article 6.21 of the Articles describes the “Transfer Events” that serve to trigger the compulsory transfer process. Article 6.21 identifies five Transfer Events, only one of which is relevant in these proceedings, which is that set out in Article 6.21.3.

Article 6.21.3 provides that a Transfer Event exists, in relation to any holder of B Ordinary Shares, C Ordinary Shares or D Ordinary Shares (or, where the relevant Shares are held by a nominee or have been transferred to a Permitted Transferee, the original holder of the relevant shares), where a holder becomes a Leaver. (Footnote: ¹¹)

The Articles define a “Leaver” in the following terms: “a holder who is an individual and who is or was previously a director or employee of [Signia] ceasing to hold such office or employment and as a consequence no longer being a director or employee of [Signia] unless the Investor notifies [Signia] within one month of the matter coming to his attention that such event is not a Transfer Event in relation to that holder for the purposes of Articles 6.21 to 6.25”. (Footnote: ¹²)

Article 6.25 provides, in relation to when a holder becomes a Leaver:

The Deemed Transfer Notice

Upon the happening of a Transfer Event, the holder in question is (by virtue of Article

A Deemed Transfer Notice is to be contrasted with a “Transfer Notice”, which is a term defined in Article 6.5.

The process of sale of the Shares the subject of the Deemed Transfer Notice

Article 6.23 states that “[t]he shares the subject of any Deemed Transfer Notice shall be offered for sale in accordance with Articles 6.5 to 6.13 as if they were Sale Shares in respect of which a Transfer Notice had been given save that…”. There then follow various provisions that serve to modify or exclude the application of the provisions in Articles 6.5 to 6.13.

“Sale Shares” are the Shares the subject of a Transfer Notice under Article 6.5.

It is proposed to set out the material provisions of Article 6.23, before considering which parts of Articles 6.5 to 6.13 pertain:

Articles 6.5 to 6.13 operate in accordance with Article 6.23, but subject to and not in derogation from the compulsory transfer procedure:

Issues arising out of the compulsory transfer process

The compulsory transfer process gives rise to a number of the issues between the parties which are important for the determination of these proceedings. It is helpful to identify them now, even though I do not propose to resolve them until later on in the Judgment:

STRUCTURE OF THE JUDGMENT

This Judgment deals with the following matters:

THE WITNESSES (1) Introduction

I heard evidence from a number of factual witnesses. Additionally, I heard evidence from two experts in the valuation of companies, Mr. Robert Sharp (who was called by Ms. Dauriac) and Dr. Min Shi (who was called by Mr. Caudwell).

Factual witnesses called by Mr. Caudwell

List of witnesses called

Mr. Caudwell called the following witnesses in the following order:

Mr. David Canfield

Mr. Canfield is by training an accountant and, after a career with (amongst others) British Leyland, the Volvo Bus Corporation and British Nuclear Fuels, he was introduced to and began working for Mr. Caudwell in 2007. From late 2007 until the spring of 2008, Mr. Canfield transitioned from his role at British Nuclear Fuels to a new role that Mr. Caudwell offered him. Mr. Canfield’s new role became full-time when he left his employment with British Nuclear Fuels on 31 March 2008.

Mr. Canfield operated as Mr. Caudwell’s right-hand in relation to his business and financial affairs. In 2011, Mr. Caudwell caused to be incorporated a company called JDC Investments Limited (“JDC”). JDC employed Mr. Canfield and others (such as Mr. Maycock) and it provided accountancy and other support services to Mr. Caudwell and his interests. Mr. Canfield was a director of JDC and of a number of other Caudwell companies, including Signia.

Mr. Caudwell was a delegator. In any new venture, it was his practice to be heavily involved in the strategic planning, and then to adopt a hands-off approach. His approach appears to have been similar if some problem emerged out of his business interests: he would be involved in the strategic issues but would delegate the detail. One of the persons to whom the important detail was delegated was Mr. Canfield. (Footnote: ¹⁵)

Mr. Canfield made two witness statements, the first dated 9 March 2017 (“Canfield 1”) and the second dated 5 September 2017 (“Canfield 2”). Mr. Canfield gave evidence on Days 2 and 3 of the trial (18 and 19 October 2017).

Mr. Canfield presented as a careful and competent person. He gave his evidence clearly and, within his limits, honestly. By this I mean that Mr. Canfield was a very loyal servant to Mr. Caudwell, with all the advantages and disadvantages that this entails. Mr. Canfield was assiduous in furthering and protecting Mr. Caudwell’s interests. But, conversely, he was – entirely unsurprisingly – disinclined to cross his boss, even if Mr.

Mr. Caudwell described Mr. Canfield as “hugely respected amongst everybody, all our associates. I’ve never found him anything other than the most honest, diligent and fair person…”. (Footnote: ¹⁶) Subject to the proviso that everything that Mr. Canfield did was to further or defend Mr. Caudwell’s interests, and to ensure that he (Mr. Canfield) did not incur Mr. Caudwell’s displeasure, I would agree with this description.

Mr. Tim Maycock

Mr. Maycock is an employee of JDC, reporting to Mr. Canfield, but he dealt face-toface with Mr. Caudwell when occasion arose. (Footnote: ¹⁷) He trained and qualified as an accountant at PwC.

Mr. Maycock made one witness statement, dated 9 March 2017 (“Maycock 1”). Mr. Maycock gave evidence on Days 3 and 4 of the trial (19 and 20 October 2017).

Mr. Maycock was a self-confident and articulate witness. He gave his evidence clearly and, as I consider, entirely reliably. Although employed by Mr. Caudwell – through JDC – his evidence was not, in my judgment, affected by this fact. Mr. Maycock was straightforward and impartial in his evidence.

Mr. John Caudwell

Mr. Caudwell was a successful entrepreneur, having developed and then sold the mobile telephone retailer, Phones 4U, for around £1.5 billion. Since 2006, when Phones 4U was sold, Mr. Caudwell has focussed on charitable and philanthropic activities, but he has retained interests in various businesses, including Signia.

Mr. Caudwell made two witness statements, the first dated 3 March 2017 (“Caudwell 1”) and the second dated 5 September 2017 (“Caudwell 2”). He gave his evidence on Days 4 and 5 of the trial (20 and 23 October 2017).

Mr. Caudwell was a formidable man, who clearly knew his own mind and was, in my judgment capable of acting decisively, even ruthlessly. As I have described Mr.

Mr. Caudwell was also an emotional man. He and Ms. Dauriac had obviously formed a close friendship, which unravelled and then ruptured – in circumstances that I will have to consider in some detail – in the course of 2014. Mr. Caudwell did not seek to minimise his own upset at this rupture and what he regarded as a betrayal by Ms. Dauriac. I obviously must bear in mind the extent to which these events have coloured

As a witness, Mr. Caudwell was clear and articulate. It was suggested, in crossexamination, that he had come pre-prepared with certain speeches or points that he would deploy at appropriate points in his cross-examination. I reject that suggestion: I consider that – subject to the qualification I have made about Mr. Caudwell’s objectivity being clouded by emotion – Mr. Caudwell’s evidence was reliable.

In his first statement, Mr. Caudwell stated that he suffered from Lyme disease: one of the symptoms of this disease is that it can impact upon memory. (Footnote: ¹⁸) In both his statements and his oral testimony, Mr. Caudwell was careful to say when he could not remember something. He was also careful to differentiate between his actual recollection and reconstruction (i.e. what, based on the documents and the evidence of others, he considered he would have done or said, but without specific recollection).

Ms. Kate Cooper

Ms. Cooper was, at all material times, an employee of Signia, although when she gave evidence to the court her role had become that of a consultant to Signia. (Footnote: ¹⁹) Ms. Cooper was the chief compliance officer of Signia.

Ms. Cooper was one of a number of employees or former employees of Signia to give evidence. The others (described further below) were Ms. Tarbet, Ms. Olszewska, Mr. Hayes, Mr. Ward and Ms. Degruttola. An organogram, setting out the structure of Signia, is appended hereto at Annex 2.

The investigation into Ms. Dauriac had a polarising effect on the Signia employees. At some stage in the process – and for some it was earlier than others – they were forced to choose or to change sides between Mr. Caudwell and Ms. Dauriac. For Ms. Cooper, this occurred during the process of the investigation, when she stopped assisting Ms. Dauriac and began to assist Mr. Canfield. The point at which this occurred can be timed very precisely, from the date of her conversation with Mr. Canfield on 17 December 2014. (Footnote: ²⁰) The difficulties in recollection and impression that this gives rise to is a matter I have taken into account.

Although Ms. Cooper was giving evidence for Mr. Caudwell, and against Ms. Dauriac, I found her to be a measured and objective witness. I consider that she was, justifiably, proud of her position in Signia and her performance in that position. She gave her evidence carefully, and I consider that I can place reliance on it.

Ms. Cooper made one witness statement in these proceedings, dated 9 March 2017 (“Cooper 1”). She gave evidence on Day 6 of the trial (24 October 2017).

Ms. Janet Tarbet

Ms. Tarbet was, at all material times, Signia’s chief operating officer. She made one witness statement, dated 9 March 2017 (“Tarbet 1”) and gave evidence on Day 6 of the trial (24 October 2017).

Ms. Tarbet was one of those who began assisting Ms. Dauriac in responding to the expenses investigation, but who ended up giving evidence for Mr. Caudwell. I have borne this in mind. I find that Ms. Tarbet was a straightforward witness, doing her best to assist the court.

Ms. Rebekah Caudwell

Ms. Caudwell is Mr. Caudwell’s daughter and was, at the material times, a friend of Ms. Dauriac. As Mr. Caudwell’s daughter, giving evidence on his behalf, I was naturally alive to a pre-disposition in favour of Mr. Caudwell. When giving evidence, Ms. Caudwell was frank, clear and careful in her evidence, and I find that she gave her evidence objectively. I found her evidence transparent, both in terms of its clarity and its neutrality.

Ms. Caudwell made one witness statement dated 27 February 2017 (“R. Caudwell 1”) and gave evidence on Day 6 of the trial (24 October 2017).

Ms. Victoria Olszewska

Ms. Olszewska was employed by Signia as a receptionist for five months. She reported to Ms. Dauriac’s personal assistant, Ms. Degruttola. She assisted in processing expenses and in filling out expenses forms.

Her evidence was limited in scope and ambit and she gave it honestly. She made a single witness statement dated 30 January 2017 (“Olszewska 1”) and gave evidence on Day 6 of the trial (24 October 2017).

Mr. Paul Lester

Mr. Lester was the non-executive chairman of Signia. His role was an advisory one, and he was at the material times neither a director (Footnote: ²¹) of nor a shareholder in Signia. He presented as an experienced and competent businessman.

Mr. Lester was drawn into the later stages of the expenses investigation. He saw his role very much as a mediator or middleman, steering a course between Mr. Caudwell

Mr. Lester made one statement dated 8 March 2017 (“Lester 1”) and gave evidence on Day 6 of the trial (24 October 2017).

Mr. David Hayes

Mr. Hayes is now the managing director of Hyde Park Finance Limited, a business he established (with the assistance of Mr. Caudwell (Footnote: ²⁴)) in February 2015. Prior to that, Mr. Hayes had been employed by Signia as the head of debt structuring and real estate. He resigned from Signia on 16 October 2014.

Mr. Hayes was involved in the investigations into the expenses of both Ms. Dauriac and Mr. Wilson (another employee of Signia, who also gave evidence (Footnote: ²⁵)). In the case of Ms. Dauriac, he was the whistleblower who provided information in relation to Ms. Dauriac’s expenses to Mr. Canfield. In the case of Mr. Wilson, Mr. Hayes fanned the flames of an expenses investigation.

It was apparent that Mr. Hayes did not like either Ms. Dauriac or Mr. Wilson, and it was this dislike that I find was his prime motivator in his actions against them. I have therefore treated his evidence with a measure of care, in case this dislike influenced his evidence. When giving evidence, however, my impression of him was that he was doing his best to assist the court, and he gave his evidence straightforwardly. Nevertheless, on points that are material, I have sought to cross-check his evidence against other evidence in the case.

Mr. Hayes made one witness statement dated 23 February 2017 (“Hayes 1”) and he gave evidence on Day 7 of the trial (25 October 2017).

Mr. Daniel Ward

Mr. Ward was employed by Signia as financial controller between 10 October 2011 and

Although I consider he gave his evidence honestly, Mr. Ward was unimpressive as a witness. In his evidence in-chief, he made a correction to paragraph 14 of his witness statement, correcting the date there stated from “July 2014” to “November 2014”. The change was material in terms of the narrative of events. Obviously I accept that errors can be made in witness statements. I make no criticism of Mr. Ward in this regard. But Mr. Ward did not seem to take very seriously the importance of at least attempting to ensure that his evidence was accurate and reliable: (Footnote: ²⁶)

Mr. Michael Fenton

Mr. Fenton was a director of Pure Jatomi and his evidence related solely to the similar fact evidence considered in Section H below. Mr. Fenton made one witness statement dated 6 September 2017 (“Fenton 1”) and gave evidence on Day 7 of the trial (25 October 2017).

I provide my views on the evidence given by Mr. Fenton – together with that of the other witnesses whose evidence related solely to Pure Jatomi (Mr. Balfour, Ms. Gehlan and Ms. Burger) – in Section H.

Mr. Michael Balfour

Mr. Balfour was a minor shareholder in Pure Jatomi. He was also, at times, chairman, CEO and director of Pure Jatomi. His evidence related solely to the similar fact evidence considered in Section H below. Mr. Balfour gave one witness statement dated 31 August 2017 (“Balfour 1”) and gave evidence on Day 9 of the trial (30 October 2017). I consider the evidence he gave in Section H.

Factual witnesses called by Ms. Dauriac

List of witnesses called

Ms. Dauriac called the following witnesses in the following order:

Ms. Nathalie Dauriac

Ms. Dauriac made two witness statements, the first dated 10 March 2017 (“Dauriac 1”) and the second dated 13 September 2017 (“Dauriac 2”). She gave evidence on Days 7, 8 and 9 of the trial (25, 26 and 30 October 2017).

Ms. Dauriac was appointed the managing director of Signia on 9 November 2009. She tended to be referred to as the chief executive officer of Signia, and it is by that title that I shall refer to her in this Judgment. She was, according to her evidence, very much a hands-on manager in Signia. (Footnote: ²⁷)

Ms. Dauriac’s honesty was, in many respects, central to these proceedings. It was alleged against her that various expenses that she charged to Signia’s account as expenses had not only been improperly charged, but dishonestly so. It was also alleged that when it became clear that her expenses were going to be investigated, and during the course of that investigation, she deliberately and dishonestly sought to cover up her improprieties.

These are, obviously, most serious allegations, and they are considered in detail in the course of this Judgment. I do not, at this point in the Judgment, express any conclusion as to Ms. Dauriac’s honesty: that, as it seems to me, is a matter that needs to be considered in light of all the facts, when those facts have properly been laid out.

Allegations of dishonesty apart, Ms. Dauriac was a remarkably unsatisfactory witness for a number of reasons. In cross-examination, Ms. Dauriac gave long and generally not very responsive answers to questions that were put to her. She tended to the argumentative and – particularly when dealing with difficult points – was combative and aggressive in her answers. She was also prone to exaggeration.

Her memory of events did not appear to be especially good, and on a number of occasions the evidence she gave appeared to be more based upon what Ms. Dauriac thought would improve her case than on genuine recollection.

This was most evident when Ms. Dauriac was questioned in relation to individual expenses. Of course, giving evidence is not a memory test. However, Mr. Caudwell had fully pleaded the expenses that were alleged to have been improper, and Ms. Dauriac (and her legal team) had had every opportunity to consider these allegations in light of the disclosure. They took that opportunity, both in the Defence and in Ms. Dauriac’s witness statements, and there was, in these documents, a detailed refutation of the allegations against her. In these circumstances, it was troubling that Ms. Dauriac’s evidence as to why the expenses had been incurred changed over time. Even in the witness box, Ms. Dauriac tended to advance fresh explanations for the challenged expenses and seemed to be making up her explanations as she went along.

I can, for these reasons, place very little reliance on Ms. Dauriac’s evidence. That does not mean – I stress – that a finding of dishonesty in relation to the expenses must follow. It is perfectly possible for Ms. Dauriac to give unsatisfactory evidence in relation to perfectly proper expenses, although it is equally possible for inferences to be drawn from a failure satisfactorily to explain facts. As I say, I consider the question of Ms. Dauriac’s dishonesty separately, in light of all the evidence, later on in this Judgment.

Ms. Kelly Degruttola 80. Ms. Degruttola was, at the material times, Ms. Dauriac’s personal assistant at Signia. She left Signia on 16 January 2015 (Footnote: ²⁸) and – at the time she gave evidence – was again working for Ms. Dauriac as her PA at Hay Hill Wealth Management. (Footnote: ²⁹)

Ms. Degruttola made one witness statement, dated 10 March 2017 (“Degruttola 1”) and gave evidence on Day 9 of the trial (30 October 2017).

Like Ms. Cooper and Ms. Tarbet, Ms. Degruttola was one of those staff caught in the cross-fire between Ms. Dauriac and those investigating Ms. Dauriac. Unlike Ms. Cooper and Ms. Tarbet, Ms. Degruttola stayed with Ms. Dauriac. I consider that Ms. Degruttola was – between November 2014 and January 2015 – under considerable stress because of the investigation. She wanted to tell the truth; but she did not, out of loyalty to Ms. Dauriac, want to say anything that might prejudice Ms. Dauriac’s position. She was also quite prepared herself to take the blame for matters that were not necessarily her fault.

In short, Ms. Degruttola was a devoted and loyal employee, but I consider that that loyalty and devotion was primarily to Ms. Dauriac the person rather than to Signia the organisation. This coloured Ms. Degruttola’s evidence and, although I consider that Mr. Degruttola was doing her best to provide the court with clear and honest and objective evidence, she lacked objectivity, and this affected her evidence.

Ms. Tracy Gehlan

Ms. Gehlan was, until her dismissal, the chief executive officer of Pure Jatomi. Her evidence related solely to the similar fact evidence considered in Section H below. Ms. Gehlan made two witness statements in the course of the proceedings. One, dated 13 September 2016, was made in support of Ms. Dauriac’s application to adduce the similar fact evidence (“Gehlan 1”). Ms. Gehlan did not, in her evidence in-chief, affirm the truth of Gehlan 1, but she was cross-examined on this statement.

Ms. Gehlan’s second statement, dated 6 September 2017 (“Gehlan 2”), constituted her evidence in-chief at the trial. Ms. Gehlan gave evidence on Days 9 and 10 of the trial (30 and 31 October 2017).

I consider the evidence Ms. Gehlan gave in Section H.

After the trial, I received, via my clerk, an unsolicited communication from Ms. Gehlan on 12 March 2018, enclosing certain documents which Ms. Gehlan had (so her communication said) obtained pursuant to a request made by her under the Data Protection Act. Her communication was copied to the solicitors instructed in these proceedings and – on 15 March 2018 – I received a detailed response in regard to Ms. Gehlan’s communication from Mr. Caudwell’s solicitors, Mishcon de Reya LLP. Whilst I have read both of these communications, I consider that (with the exception of material that I specifically requested, notably the material described in paragraph 139 below) the evidence has closed and it would be inappropriate to have regard to posttrial material. I have, therefore, paid no regard to this material for the purposes of this Judgment.

Ms. Suzette Burger

Ms. Burger was the former chief marketing and brand officer of Pure Jatomi. Her evidence related solely to the similar fact evidence considered in Section H below. Ms. Burger made one witness statement in the course of the proceedings dated 5 September 2017 (“Burger 1”). She gave evidence on Day 10 of the trial (31 October 2017). I consider the evidence Ms. Burger gave in Section H. Shortly before this Judgment was handed down, Ms. Burger wrote to me in terms similar to Ms. Gehlen. For the reasons stated in paragraph 87 above, I do not consider it appropriate to have regard to this material,

Mr. Martin Wilson

Mr. Wilson was formerly employed by Signia, where he was head of wealth structuring. He made one witness statement dated 10 March 2017 (“Wilson 1”) and gave evidence via video-link on Day 10 of the trial (31 October 2017). Whilst at Signia, he had been professionally close to Ms. Dauriac.

The video-link connection was less than satisfactory: quality was poor, and the connection was subject to multiple interruptions. On a number of occasions, parts of Mr. Wilson’s replies to questions were lost because the connection broke down without

The expert witnesses

The question of the value of the Dauriac Shares was considered by two experts: Mr. Robert Sharp of Valuation Consulting LLP (who was called by Ms. Dauriac) and Dr. Min Shi of Oxera (who was called by Mr. Caudwell).

The experts’ reports were exchanged sequentially, with Mr. Sharp going first. The reports that I saw were as follows:

The experts made a joint expert statement dated 13 October 2017 (the “Joint Expert Report”). Additionally, under cover of a letter from Signia’s solicitors dated 5 December 2017, the experts provided me with a set of agreed metrics regarding Signia’s performance.

Dr. Shi gave evidence on Days 10 and 11 of the trial (31 October and 1 November 2017). Mr. Sharp gave evidence on Days 11 and 12 (1 and 3 November 2017).

I consider the evidence of the experts more specifically in Section N below.

THE FACTS: THE ESTABLISHMENT OF SIGNIA

The background to Mr. Caudwell’s and Ms. Dauriac’s relationship

Mr. Caudwell and Ms. Dauriac first met in 2006, when Mr. Caudwell became a client of the Private Office of Coutts Bank, following his sale of his “Phones 4U” mobile telephone business for around £1.5 billion. The Coutts Private Office, where Ms. Dauriac held the position of senior client partner, was awarded a mandate to manage roughly £300 million of Mr. Caudwell’s assets.

Ms. Dauriac impressed Mr. Caudwell, both in the management of the assets entrusted to the Coutts Private Office and in the assistance she provided in relation to his personal financial affairs. During this time, Mr. Caudwell and Ms. Dauriac developed a strong professional relationship and a personal friendship, which included sharing family holidays, regular dinners and invitations to other social engagements.

In around 2009, Ms. Dauriac decided to leave Coutts and pursue setting up an independent wealth management firm. The proposition was that this firm would be managed by Ms. Dauriac, together with a colleague from Coutts, Mr. Gautam Batra, who already managed a significant proportion of Mr. Caudwell’s assets. Accordingly, she approached Mr. Caudwell with this proposal to seek investment to assist in establishing what ultimately became Signia.

Mr. Caudwell was willing to consider such a proposal: (Footnote: ³⁰)

The objective of the collaboration

The proposal was for both Mr. Caudwell and Ms. Dauriac to contribute – in very different ways – to the establishment and operation of a new wealth management company. Ms. Dauriac would provide her services (at a salary) as the chief executive officer of the new venture. (Footnote: ³¹) Mr. Caudwell was to provide a substantial quantity of assets for the new venture to manage. This would provide a foundation from which the business could launch and begin to trade. It would assist Ms. Dauriac in attracting other investors so as to build the new venture into a successful business.

The plan was for the new business to be sold, when successful, at a profit to both Mr. Caudwell and Ms. Dauriac.

Whilst the new venture was establishing itself, Mr. Caudwell would, of course, have to fund its costs. It will be necessary to consider this aspect of the venture in some detail, but essentially the necessary funding could be achieved in three ways, which could be used either individually or in combination:

Although, as has been described, the equity in Signia was owned 51% by Mr. Caudwell and 49% by Ms. Dauriac, (Footnote: ³²) Mr. Caudwell did not want to fund the venture through equity, simply because (in the case of insolvency) he would be most unlikely to recover his investment. His preference was for debt funding, by loans procured by him. These loans were provided by Grecco.

Mr. Caudwell was less keen on funding Signia through the fees charged to him for the management of his assets. As will be seen, however, to an extent Signia was financed in this way.

Mr. Caudwell’s practice

As has been noted, Mr. Caudwell was a delegator. It was Mr. Caudwell’s practice to be heavily involved in the strategic planning of a new venture, and then to adopt a “hands-

On this occasion, once the strategic planning was done, Mr. Caudwell handed the process over to Mr. Canfield to work with Ms. Dauriac to develop Signia into a business that was ready to trade. But, during the initial strategic planning, Mr. Canfield’s role was minimal. (Footnote: ³⁴)

The Indicative Terms

The essential commercial aspects of the venture were informally agreed between Mr. Caudwell and Ms. Dauriac (Footnote: ³⁵) on 25 August 2009 in a document headed “Nathalie and Gautam Agreement”, and which I shall refer to as the “Indicative Terms”. These provided:

“Salary – first year:

Commence 1 January 2010 - £200k basic / £200k bonus.

Bonus to be paid for achievement of £250 million AUM.

First £100k bonus to be paid month after achievement of target.

Remaining £100k bonus to be paid month following end of year.

If needed, a 12 month period for bonus qualification to be extended by 3 months.

Salary – second year:

Full bonus to be paid for a PBT breakeven performance, and to be paid in the month following the 12 month period.

Shares

Nathalie to invest £200k for 5% class A shares.

Gautam to invest £100k for 2.5% class A shares.

Rest of shares taking total shareholding to 40% to be on a linear scale in line with final company valuation, between £75 million base price and £175 million target, so that the intention is that both ND and GB will end with 20% each in total of class A and B shares, provided that target is achieved.

9% of shares to be available to motivate new Managers coming into the business. Should the £175 million target be achieved and no extra shares given away, then the 9% will revert equally back to ND and GB.

JC to make a loan of up to £6 million interest accruing at 3% over 3 month libor, accruing until the business is cash flow positive, or will make a loan of £6.5 million interest to be paid quarterly.

Some of the above loan will actually be made as share capital and not interest bearing, and at the time of writing it is thought this would have to be equivalent to 3 months worth of overheads.

Good leavers and share treatment:

Good leaver events:

Death.

Serious illness and permanent disability.

A leaver who leaves amicably.

Share treatment:

Class A shares valued at fair market price.

Class B shares are calculated at fair market price x 20% (to a maximum of 100%) for each year of service, excluding the first 2 years.

Bad leaver and share treatment less than 2 years employment:

Bad leaver events:

All others.

Share treatment:

Class A shares paid at investment value or fair market price whichever is the lower.

Class B Shares nil value.

Bad leaver and share treatment more than 2 years employment:

Bad leaver events:

All others.

Share treatment

Class A shares paid at investment value or fair market price whichever is the lower.

Class B shares are calculated at fair market price x 25% (up to a maximum of 100%) for each year of service, excluding the first 3 years.

These values will be calculated at the point of employee termination and will be paid upon the sale of the business or earlier if the Board plus JC decides to.

Fair market valuation will be determined by the shareholding Board plus JC.

If the departing employee does not agree with the valuation, a valuer may be appointed completely independent of both parties and his cost shared 50/50.

JC investment

The business to take over the Coutts investment portfolio and it is expected that this investment will remain for several years, but will be subject to performance.

No management fee to be charged for the first 2 years.

Performance fee will be considered.”

A number of points emerge from this. It is clear who was calling the shots: Mr. Caudwell was providing the finance and the AUM. The indicative terms reflect this fact. Whilst, I am sure, Mr. Caudwell had great appreciation for Ms. Dauriac’s talents, and great liking for her at this stage, this did not override his businessman’s instincts. The Indicative Terms are commercial: fair, but not generous.

Thus, we see that Mr. Caudwell was the main investor and in control. The good leaver/bad leaver provisions in the Articles are foreshadowed, as is the aim to sell the company in due course.

Apart from the (fairly limited) equity investment, the company would be funded by a loan (interest-bearing) of £6 million. Although Mr. Caudwell would transfer his AUM from Coutts to Signia, the Indicative Terms stated that no management fees would be charged for the first two years.

Mr. Caudwell said this about the Indicative Terms: (Footnote: ³⁶)

The Investment Term Sheet

An “Investment Term Sheet” – which was expressly subject to contract – was concluded on 22 September 2009. This was a lengthy document, expanding upon the Indicative Terms, which set out Mr. Caudwell’s position on a range of subjects concerning the project. The following points are of significance for present purposes:

Incorporation

Signia was incorporated on 15 October 2009 (as “True Wealth Limited”) and was renamed as “Signia Wealth Limited” on 20 October 2009.

Kinetic Partners’ advice on regulatory capital

Kinetic Partners was a firm that was engaged to advise on the regulatory aspects of the new venture.

On 29 October 2009, Kinetic Partners sent an email to Ms. Dauriac entitled “Regulatory capital and financial projections”. The email attached financial projections for 2010/2011. These showed – unsurprisingly for a new venture – that Signia would be loss-making and would be dependent on loans from Mr. Caudwell (in the event, provided via Grecco). This, as has been seen, was already anticipated by Mr. Caudwell and Ms. Dauriac in the Indicative Terms and the Investment Term Sheet.

However, the email went on to say that the loans – whilst they would ensure Signia’s solvency – would not ensure that Signia was compliant with the requirements in relation to regulatory capital. The email explained:

“Further explanation following our conference call

If a business makes a loss, this must be deducted from the Share Capital immediately before this capital can be assessed against the Regulatory Capital requirement. Conversely, if the business makes a profit, this can only be included as Regulatory Capital once it has been externally verified – i.e. after an audit.

It is not possible for Signia to meet its Regulatory Capital requirements with Share Capital and Long Term/Short Term Subordinated Loans alone. The business initially makes a loss, which must be deducted from the Share Capital before it can be assessed against the Regulatory Capital requirement. To qualify as Regulatory Capital, even Subordinated Loans have restriction on their values. These restrictions are based upon fixed percentages of the Share Capital, so, as the Share Capital is reduced by the business’ losses, any loans are also reduced proportionately. The certain outcome therefore is that if a business is making a loss and its Share Capital is reducing accordingly, in time there is a breach.

Solution

It is necessary to charge a 45bp management fee on the £350m seed capital in order to prevent the business from making a loss in the initial months (Note: the above bulleted reductions to the business’ costs have reduced this from 50bp). This preserves the £612k Share Capital for assessment against the Regulation Capital requirement. As you are aware, the Requirement itself is one quarter of your first year’s fixed expenses – which are £3,206k – making the Requirement £802k.

A further capital injection is therefore needed in addition to the £612k Share Capital to cover this shortfall. This capital injection can either be in the form of Long-Term or Short Term Subordinated Loan and it must be at least £190k.

We would recommend that a buffer of one month's expenses was added to this figure and that the actual amount of Subordinated Loan that was placed in the business as Regulatory Capital was £350k. The loans maturity can either be Long-Term or Short-Term – the major difference being that the latter offers more flexibility.

We understand that your seed investor intends to put more capital into the business than the £962k (Share Capital of £612k + £350k Sub Loan) that is required to meet the Regulatory Capital Requirement. An additional amount can be put into the business at your discretion, and as a loan if this is preferable based on the legal and tax advice you receive, but we would not recommend that it be put in as Regulatory Capital (i.e. further Share Capital and/or Subordinated Loans) as this would place restrictions on its subsequent removal and future flexibility of the business.”

Ms. Dauriac forwarded this email to Mr. Canfield on 1 November 2009, commenting as follows: “David

Thus, Mr. Caudwell’s aim to fund Signia maximally by loans, with as little cash injection as possible, received a setback in the form of this unanticipated regulatory capital requirement. The anticipated solution was to charge Mr. Caudwell for the management of his assets, contrary to the original plan. (Footnote: ³⁷)

Ms. Dauriac’s Service Agreement

Ms. Dauriac concluded the Service Agreement with Signia on 12 February 2010.

The relevant provisions were as follow:

The Shareholders’ Agreement

The Shareholders’ Agreement was concluded on 15 February 2010 between (amongst others) Grecco, Ms. Dauriac and Signia. (Footnote: ³⁸)

The Shareholders’ Agreement:

The loan agreements

Clause 5.1 of the Shareholders’ Agreement specified that Signia would be funded by three loan agreements – the “Loan Agreement”, the “Subordinated Loan Agreement” and the “ND Loan Agreement”.

It is unnecessary to describe these loans in any detail, save to note that they were entered into. Subsequently, other loans were made available by Mr. Caudwell to Signia. It will be necessary – in Section F below – to explore in greater detail how Signia was funded over time. As will be seen, this was from a combination of sources, including – but not restricted to – loans and fees for the management of AUM.

The Articles of Association

The Articles were described in paragraph 1 above, and the compulsory transfer process provided in the Articles described in Section B above.

The early operation of Signia

Signia initially operated from the premises of Vestra Wealth at 15 Cornhill, London, (Footnote: ³⁹) before moving to its current premises in the summer of 2011. (Footnote: ⁴⁰)

Mr. Canfield was appointed a director of Signia on 16 October 2009 as Mr. Caudwell’s nominated board director. Mr. Canfield continues to hold this appointment.

Ms. Dauriac was appointed as director of Signia on 28 October 2009 and was employed as chief executive officer of Signia from 9 November 2009, a position she held until her employment ended on 21 January 2015.

It was common ground that Mr. Caudwell acted as a shadow director of Signia through Mr. Canfield. But he was not a de facto director. It was contended by Mr. Caudwell that, in these circumstances, he was not able to bind Signia and that his conduct could not be attributed to Signia. (Footnote: ⁴¹) To the extent that it matters, I am prepared to accept this submission. On the facts, however, I do not consider that these questions of agency and attribution arise: Mr. Caudwell tended to act through and with others – notably Mr. Canfield – whose actions and words are undoubtedly attributable to Signia.

THE FACTS: SIGNIA’S PERFORMANCE AND FUNDING

Signia’s business activities and the revenue derived therefrom

There was, unsurprisingly, a high degree of agreement between the parties as to the nature of Signia’s business activities. The following description of Signia’s business activities is taken from Dr. Shi’s first report, but I did not understand Mr. Sharp materially to disagree with this description.

Dr. Shi suggested that the main business activities of Signia during 2010 to 2014 could be split into three types:⁴²

In my judgment, the secondary and tertiary activities of Signia can, for the purposes of this Judgment, be disregarded. It is obvious that a newly-established business must concentrate on its core activities, because these are the key revenue-generating activities. Revenue from other sources, whilst no doubt welcome, would not be worth diverting substantial resource to. It is on the core activities of Signia that the focus must be.

Signia earned fees from investing its clients’ money. (Footnote: ⁴²) These are known as

“discretionary” services, where in essence the expertise of Signia is deployed in determining how funds should be invested. These fees comprised three elements:

(1)

Management fees, generally calculated as a fixed proportion of the Assets Under Management per annum from each investor.

(2)

Custody fees through rebates from certain custodian banks chosen by the clients.

(3)

Performance fees, paid when the returns of the investment exceed an agreed benchmark.

A less remunerative form of service is where a client’s assets are “under supervision”.

“Assets Under Supervision” are client assets not managed by Signia, but for which Signia had some administrative or supervisory responsibility. (Footnote: ⁴³)

Signia also managed clients’ cash and charged an annual management fee of around 0.1%. Unlike in the case of investment and hedge fund assets under management, Signia did not charge performance fees on the cash it managed. (Footnote: ⁴⁴)

Hedge fund management services are services relating to the management of hedge funds, pooled investment structures that adopt a wide variety of alternative investment strategies often using gearing, futures and options. Hedge fund management services are generally remunerated at a level at or above discretionary services. Signia began offering hedge fund management services in the second half of 2014, after hiring Mr. Rosenthal. (Footnote: ⁴⁵)

The term “AUM” (for Assets Under Management) is used in this Judgment to describe all assets under Signia’s management, namely:

The experts provided a variety of (unagreed, incomplete and not reconcilable) measures of Signia’s performance over time in their reports. I invited them to set out, in a single document, agreed figures for each class of business over time. Although not completely agreed, the experts’ response was provided under cover of a letter dated 5 December

Although the hedge fund AUM did not generate much revenue, this was partly because it was a new venture for Signia (the service was provided for the first time in 2014, and then only for the latter half of that year) and partly because (as will be seen) Mr. Caudwell provided the bulk of this class of AUM and paid very low fees for the service. The revenue for 2014 of £224,000 in Row B[2] of Table 1 is thus unrepresentatively low. More importantly, the evidence was that although a new service for Signia, it did perform extremely well.

In my judgment, the essential parts of Signia’s business lay in its discretionary and hedge fund AUM. Although, no doubt, AUS and cash management services were services that Signia, as a wealth management company, had to offer to its customers, these services were not the profit centres that (if it was to be a success) Signia needed to develop. The same is true for the secondary and tertiary forms of business described in paragraph 132-133 above.

So far as discretionary AUM and hedge fund AUM is concerned, further analysis of the figures is in order. This set out in Annex 4 to this Judgment. Annex 4 provides a more detailed breakdown of the figures contained in Table 1 above. As to the data in Annex 4:

Signia’s total costs and total revenue

Signia’s costs, as they appear from Signia’s management accounts and as agreed by the experts (Footnote: ⁵²) were as follows:

The totality of Signia’s revenues – including, but not limited to, those set out in Table 2 – were as follows:

Signia’s profit/loss

From Tables 9 and 10, it is possible to ascertain Signia’s profit/loss: this is the difference between Row E in Table 9 and Row A in Table 10. This difference is set out in Row A of Table 11 below.

“EBITDA” stands for Earnings Before Interest, Taxes, Depreciation and Amortization. Self-evidently, the items recorded as costs in Table 9 include items that would not form part of EBITDA. (Footnote: ⁵³) The experts have helpfully calculated what Signia’s EBITDA would be, on the basis of the figures in Tables 9 and 10. (Footnote: ⁵⁴) These figures are set out in Row B of Table 11 below.

Finally, the EBITDA as recorded in Signia’s management accounts is set out in Row C of Table 11 below. It will be noted that these differ from the EBITDA in Row B, but not materially.

Table 10 thus shows that Signia had a modest loss in 2010, modest profits in 2011 to 2013, and a significant loss in 2014:

Introduction

Clearly, as a start-up company, making relatively small profits in 2011 to 2013, a small loss in 2010, and a significant loss in 2014, Signia was dependent upon the sources of finance described in paragraph 103 above. It is now necessary to describe, in greater detail and by reference to actual events, how Signia was financed over this period.

At Coutts, Mr. Caudwell paid a fee of 50 BPS for each £ managed.⁵⁷ As has been seen, the plan was for Mr. Caudwell to pay no management fees during the first two years of Signia’s operation, and thereafter for his fees to be negotiated. (Footnote: ⁵⁷) That would, selfevidently, deprive Signia of fee income, but Mr. Caudwell planned to fund Signia through loans. (Footnote: ⁵⁸)

The need to maintain regulatory capital (which was pointed out by Kinetic) required a reconsideration of this approach. (Footnote: ⁵⁹) In order to preserve the share capital of Signia for assessment against Signia’s regulatory capital requirements, Signia advised charging a 45 BPS management fee on the £350 million AUM that Mr. Caudwell was proposing to place with Signia. The fee income this was expected to produce to Signia was deducted from the amount of the loan facility that Mr. Caudwell was extending to Signia. Thus, the amount of the loan intended to be made available by way of the Loan Agreement was reduced from £6,000,000 to £4,263,000. Thus, the monies Mr. Caudwell was paying – or at least making available – to Signia remained the same; but, of course, Signia would not be obliged to repay the fees it received (which, of course, was why Mr. Caudwell preferred the structure of a loan). (Footnote: ⁶⁰)

This, at least, was the plan. The following paragraphs describe how Signia was actually financed over time.

Financing of Signia in 2011

On the assumption that Mr. Caudwell would place £350 million with Signia and pay a fee of 45 BPS, this would produce fee income of £1,575,000. In the event, in 2011, Mr. Caudwell placed £471 million AUM with Signia, paying fees of £1,586,354, at an implied (Footnote: ⁶¹) rate of 34 BPS. (Footnote: ⁶²) Of course, Signia also received fees in respect of Caudwellrelated and third-party AUM.

In the event, with the loan facilities made available to Signia, Signia was solvent and satisfied the regulatory capital requirements for this year. (Footnote: ⁶³)

Financing of Signia in 2012

For 2012, Mr. Caudwell only wanted to pay a rate of 25 BPS and he wanted the same rate for the Caudwell-related parties. (Footnote: ⁶⁴) On 16 March 2011, Signia agreed with Mr. Caudwell that, from 1 January 2012, he would pay a reduced management fee of 25 BPS and a performance fee of 10% of performance above 5% on his portfolio.

However, he also increased the loan facilities available to Signia by some £10 million to provide further capital for the growth of the business and to make further hires. (Footnote: ⁶⁵)

In 2012, Mr. Caudwell placed £463 million AUM with Signia, paying fees of £1,109,900, at an implied rate of 24 BPS. (Footnote: ⁶⁶)

In 2012, Signia’s fees were insufficient to meet its regulatory capital requirements – although, because of the loans available, it remained solvent. The regulatory capital deficit was addressed by Mr. Caudwell waiving an introduction fee that would have been payable to him by Signia, and which he permitted Signia to retain. This, in addition to a £600,000 rebate, enabled Signia to meet its regulatory capital requirements for 2012. (Footnote: ⁶⁷)

Financing of Signia in 2013

The arrangement that Mr. Caudwell – and the Caudwell-related parties – pay 25 BPS for Signia’s services continued into 2013.

Mr. Caudwell placed £475 million AUM with Signia, paying fees of £1,135,246 at an implied rate of 24 BPS. (Footnote: ⁶⁸)

Signia’s revenue – including, but not limited to, the fees paid by Mr. Caudwell – was not sufficient to prevent an issue arising in relation to regulatory capital in 2013. (Footnote: ⁶⁹)

The potential for a regulatory capital shortfall was identified (at the latest) around 7 January 2014, when there was an email exchange between Mr. Wilson, Mr. Canfield,

The shortfall in regulatory capital was addressed by Signia raising, for payment by Mr. Caudwell, two invoices, both dated 31 December 2013:

The evidence regarding the generation of these invoices was as follows:

In the pleadings and in correspondence between the parties, these payments were described as “ex gratia” payments. (Footnote: ⁸¹) In cross-examination, Mr. Canfield sought to qualify this position: (Footnote: ⁸²)

Mr. Caudwell took the same line as Mr. Canfield: that the invoices were inflated, but that they reflected actual liabilities of Mr. Caudwell, albeit in a lesser amount. (Footnote: ⁸³) He knew that the invoices had been raised to sort out a regulatory capital issue but was not closely involved. (Footnote: ⁸⁴)

It is necessary to bring out the circumstances in which these invoices were produced, because it is these invoices that form the basis for Ms. Dauriac’s contention that Mr. Caudwell (with Mr. Canfield) sought to get rid of Ms. Dauriac in the latter part of 2014. The point is considered and determined fully later on in this Judgment, but essentially Ms. Dauriac’s contention (about which I express no view for the present) was as follows: (Footnote: ⁸⁵)

Financing of Signia in 2014

It is not necessary to consider the specifics of Signia’s funding in 2014. The events of 2014 are considered in detail in Section G below. However, the issues of regulatory capital shortfall that might have arisen in 2014 were overtaken by the events surrounding the termination of Ms. Dauriac’s employment with Signia, and there is no need to consider this issue for the purposes of this Judgment.

It was during the course of 2014 that Signia established – at some cost (mainly to recruit Mr. Rosenthal) – its hedge fund capability. (Footnote: ⁸⁶)

Signia’s debt as at the end of 2014

As has been described, various loan facilities were made available to Signia over time, and Signia drew down on these. (Footnote: ⁸⁷) The detail of these drawdowns is immaterial: it only needs to be noted that, as at the end of 2014, Signia had debt outstanding of £1.5 million, but also a cash holding of £90,000 – so net debt stood at around £1.4 million. (Footnote: ⁸⁸)

Signia drew significantly on the loan facilities in 2015, after Ms. Dauriac had left the business. (Footnote: ⁸⁹)

Ms. Dauriac’s bonuses

Ms. Dauriac was paid a bonus of £200,000 in both 2010 and 2011. (Footnote: ⁹⁰)

In 2012, the growth in Signia’s AUM decreased: total discretionary AUM was down from £782 million to £768 million. Part of this was due to a reduction in Mr. Caudwell’s own AUM with Signia (which fell from £471 million to £463 million), but (perhaps crucially) third party AUM did not rise. It fell from £220 million to £214 million. Caudwell-related AUM remained constant. (Footnote: ⁹¹) Ms. Dauriac was not awarded a bonus in 2012, although Mr. Canfield considered she should have been. The decision not to pay a bonus would have been the decision of Mr. Caudwell. (Footnote: ⁹²)

For 2013, Mr. Canfield again recommended a bonus, but again Mr. Caudwell did not agree, and no bonus was awarded. (Footnote: ⁹³)

In an email dated 17 June 2014 from Ms. Ohbi (Signia’s General Counsel) to Mr. Canfield (copied to Ms. Dauriac), Ms. Ohbi stated:

“Further to conversations between Nathalie and John last week, John has confirmed that Nathalie shall be entitled to a bonus of £300,000 every year from 2014 going forward. The remaining terms of her employment contract will remain unchanged.”

Ms. Dauriac contended that – on the basis of this communication – Mr. Caudwell had promised a bonus of £300,000 every year, irrespective of performance. (Footnote: ⁹⁴) I reject this suggestion of bonus as salary as entirely implausible. When the point was put to him, Mr. Caudwell said that: (Footnote: ⁹⁵)

“I would never, ever, agree to unconditional bonuses other than in very extreme circumstances like somebody joining the business and doesn’t know what the business targets might be and I might, for a very short period of time, guarantee a bonus. I would never guarantee a bonus ongoing to an employee in a failing business, and this business was failing dramatically at the time…”

I accept this evidence. At most, there was a conversation between Mr. Caudwell and Ms. Dauriac as to the sort of level of bonus she might hope to achieve in 2014. But I find that the terms of Ms. Dauriac’s contract of employment – as I have set them out in paragraph 121 above – remained unchanged. In other words, Ms. Dauriac’s bonus was to be individually negotiated each year.

THE FACTS: EVENTS OF 2014 (1) Setting the scene

At the beginning of 2014, Signia had been in business for just over three years. Performance had, perhaps, not been as Mr. Caudwell might have wished, and a good deal of the evidence adduced by Signia went to the disappointing nature of Signia’s performance and, inferentially, the lacklustre leadership of Ms. Dauriac as Signia’s chief executive officer.

Save for the purpose of valuation (which is considered separately in Section N below), I am disinclined to place very much – if any – weight on such points regarding performance. This is not so much because I reject them as because I do not consider that they were material factors in the circumstances that resulted in Ms. Dauriac’s departure from Signia. In my judgment, had these circumstances not pertained, then Mr. Caudwell might well have pressed Ms. Dauriac to cause Signia to perform better; but her employment relationship with Signia would not have ended.

For this reason, it is not necessary for me to consider the extent to which Signia did, or did not, meet the requirements of the various business plans that were produced. That is probably just as well, because the management of Signia was conducted very informally indeed. Formal business plans were not agreed, and Signia’s performance against those plans was not monitored. There were no board meetings. Although Mr.

Ms. Dauriac, as I find, ran the show, and she preferred to engage with Mr. Caudwell, rather than his subordinates, including Mr. Canfield. More specifically:

Having set the scene, the events of 2014 fall into two, broad, chronological parts: (Footnote: ¹⁰⁶)

Events leading up to the investigation into Ms. Dauriac’s expenses

The Mayfair Project and its effect

During the course of the summer of 2014, the dynamic in Mr. Caudwell’s relationship with Ms. Dauriac began to change: (Footnote: ¹⁰⁷)

The issue with Mr. Babaee arose in the following way.

In early 2012, prior to Mr Hayes’ employment with Signia, he had worked on a deal together with Signia and a Mr. Babaee, a property developer, to acquire a property at 25 Culross Street, Mayfair, London (“Culross Street”), for £7 million. Mr. Hayes performed due diligence on the transaction and acted as the key point of contact between Signia and Mr. Babaee.

According to Mr. Hayes, (Footnote: ¹⁰⁸) when carrying out this due diligence, he discovered some invoices at Culross Street from the previous year (2011), which were addressed to the “K10 Group”, Mr. Babaee’s property development business. The invoices related to some rubble which Mr. Babaee had had removed from the premises. When Mr. Hayes asked about this, Mr. Babaee explained that, in 2011, he had the benefit of a contract to purchase Culross Street and that he ultimately surrendered this contract because he was unable to line up a buyer for the property at a higher price. Instead, he introduced the deal to another buyer in return for receiving a commission for brokering the deal. (Footnote: ¹⁰⁹) Culross Street was sold for £5 million in this 2011 transaction.

Mr. Hayes accepted that he was aware of Mr. Babaee’s prior involvement in the project and he considered that Mr. Wilson was too.¹¹¹ There is no suggestion that either told Ms. Dauriac. It was only in June 2014, some two years after the transaction, that Ms.

Ms. Dauriac raised this issue with a number of people on a number of occasions, making serious allegations of financial impropriety against Mr. Babaee. These allegations of wrongdoing were vigorously denied by Mr. Babaee.

It is unnecessary for me to reach any view as to the soundness of these allegations. What matters, for the purposes of this Judgment, is the way in which the making of these allegations by Ms. Dauriac affected her relationship with others in the months leading up to the expenses investigation.

Ms. Dauriac raised the issue with Mr. Canfield, who initially was wholly supportive of

In an attempt to resolve the issue, Ms. Dauriac and Mr. Hayes met with Mr. Babaee on or about 1 July 2014. Although Mr. Babaee remained calm throughout the meeting, Mr.

Ms. Dauriac interpreted this or chose to interpret this as a threat of physical violence against her, specifically a threat to break her fingers. (Footnote: ¹¹²) In his statement, Mr. Hayes said: (Footnote: ¹¹³)

“I met Nathalie in the car outside and she was red-faced with anger. She asked me if I had heard his threat to “break her fingers”. I explained to Nathalie in the taxi back to the office that he had not threatened to break her fingers and that the phrase Kam had used was merely a figure of speech that had been used during an admittedly quite heated business meeting. Despite me telling her this, she called her husband and said Kam had physically threatened her. I think Nathalie understood my explanation but chose to pretend not to understand it, as it suited her purposes to paint Kam as the oppressor and herself as the victim.”

Ms. Dauriac deployed the episode in a conversation with Mr. Caudwell. Mr. Babaee was also a friend, or at least acquaintance, of Mr. Caudwell’s. Mr. Caudwell’s reaction to what Ms. Dauriac told him was as follows: (Footnote: ¹¹⁴)

“I very clearly remember a meeting, that she came back to see me and said, “Kam is an animal, he’s an absolute ogre and he’s threatened to break my fingers”. Now, I know this guy quite well, and I couldn’t really imagine that that was the case, but at the same time I did trust – at that stage trusted Ms. Dauriac totally and had sort of no reason to disbelieve her, but at the same time it didn’t make sense…I really, at that point, was really struggling to work out whether I’d got one friend that was fraudulent, or a friend that was just destructive and malicious, or whether I’d got both…I didn’t feel quite the same because I wasn’t confident in the situation, so I distanced both of them at the same time because I just didn’t know the truth…That caused me to be a little bit cooler with Ms. Dauriac…The relationship was still good, but not as close as it had been.”

Such was the severity of the fallout from this episode that Mr. Babaee bought a defamation claim against Signia, which was settled later in 2014. (Footnote: ¹¹⁵)

For present purposes, the significance of this episode lies in the effect it had on the relationship between Mr. Caudwell and Ms. Dauriac. Although the episode did not cause “terminal” damage to Mr. Caudwell’s relationship with Ms. Dauriac, it led to Mr. Caudwell being “wary and suspicious”. (Footnote: ¹¹⁶)

Provision of information by Mr. Hayes to Mr. Canfield

In early July 2014, Mr. Hayes and Mr. Canfield exchanged text messages and phone calls regarding Ms. Dauriac’s activities at Signia. These included – but did not relate solely to – expenses. Mr. Canfield’s witness statement states that Mr. Hayes identified “a number of very serious concerns”, which he listed as follows: (Footnote: ¹¹⁷)

“(a)

It was an open secret within Signia’s office that [Ms. Dauriac] charged significant nonbusiness expenditure to the company…

(b)

He said that [Ms. Dauriac] had arranged for Signia to take a very considerable fee relating to a loan that Mr. Caudwell had made to a famous sportsperson, introduced by Signia, without disclosing this to Mr. Caudwell.

(c)

That [Ms. Dauriac’s] father, Christian Dauriac, who runs a vineyard in Bordeaux, was involved (as sole Négotiant) with Signia’s wine investment fund. For obvious conflict reasons, the rules of the wine fund specifically prevented any purchase of Dauriac family estate wines by the fund unless specific approval was obtained from Signia’s independent advisory board and with the consent of a majority of investors.

(d)

That [Ms. Dauriac] routinely manipulated the reporting of client portfolio performance to hide the true poor performance and/or losses that had been incurred and had on a number of occasions held out to clients that she personally was invested in specific investment schemes which she was trying to persuade clients to participate in.

(e)

That a succession of senior employees had left or were in the process of leaving Signia, disillusioned by her dictatorial management style.”

In addition to text messages and phone calls, screen-shots of Ms. Dauriac’s expense claims were sent to Mr. Canfield by Mr. Hayes. (Footnote: ¹¹⁸)

On 16 July 2014, Mr. Hayes and Mr. Canfield met in a pub off Oxford Street to discuss Ms. Dauriac’s expenses. Between 28 and 31 July 2014, there were further email exchanges between Mr. Hayes and Mr. Canfield regarding Ms. Dauriac’s expenses. 198. A number of points must be noted about this “whistleblowing” in relation to Ms. Dauriac:

It is clear from the surviving email exchanges between Mr. Canfield and Mr. Hayes that Mr. Canfield took the allegations made by Mr. Hayes quite seriously. He should have investigated them, and as a director of Signia – albeit not as someone with day-to-day involvement – he could have done. He did not do so. I find that the reason he did not do so was because of his perception of Mr. Caudwell’s relationship with Ms. Dauriac. He was, as I find, concerned that if he moved overtly against Ms. Dauriac, that might backfire against him. Whether he was right in his assessment of Mr. Caudwell matters not: it is his perception that counts for this purpose.

The trip to see Rebekah Caudwell

Ms. Dauriac was a friend of Ms. Caudwell, but she also arranged or helped with a loan facility that Ms. Caudwell wanted. The details of this facility are immaterial, but I consider that Ms. Dauriac could fairly describe Ms. Caudwell as a “client”. (Footnote: ¹²²) However,

On 1 September 2014, Ms. Dauriac and Mr. Stoebe had dinner with Ms. Caudwell. One of the subjects that came up was the recommendation of a doctor in New York. Ms. Caudwell emailed Ms. Dauriac and Mr. Stoebe on 2 September 2014 to give them the details of the doctor. Mr. Stoebe described this as “[n]ot only a good excuse to come to New York”. In the email chain which followed (between 8 and 12 September 2014), Ms. Dauriac and Mr. Stoebe agreed to take premium economy flights to New York to spend Halloween (31 October – 2 November 2014) with their “dear friends” Ms. Caudwell and her husband, staying at their house.

In an email dated 12 September 2014, Mr. Stoebe identified the premium economy flights he proposed that he and Ms. Dauriac should take to New York, noting that this would cost around £1,000/person. Ms. Degruttola – who was copied in – inquired “shall I book these on the corporate card”, to which Mr. Stoebe responded in the affirmative. Ms. Dauriac was copied in on this exchange.

Ms. Dauriac referred to the trips as “party time”, and a trip to have a “fun time with you guys”. Ms. Dauriac did, however, when asked whether she was free on the Saturday night in New York for dinner or whether she needed to see clients, ask if it was okay to invite another couple to dinner that evening.

It was Ms. Caudwell’s evidence that this was a social trip: (Footnote: ¹²⁴)

Of course, Ms. Dauriac might travel to see potential clients (including herself), and this was put to Ms. Caudwell: (Footnote: ¹²⁵)

In cross-examination, Ms. Dauriac was asked about the business justification for this expense. (Footnote: ¹²⁶) She could not identify any specific business purpose. Her justification was altogether more general:

By contrast, the Defence pleaded as follows: (Footnote: ¹²⁷)

“The item of expense dated 17 March 2014 was a travel expense incurred in respect of a business development trip by [Ms. Dauriac] and her husband to New York over the Halloween period to meet Mr. Caudwell’s daughter, Rebekah Caudwell…The said trip was held at the request of [Ms. Caudwell] who was a client of [Signia] and one of the ultimate beneficial owners of [Signia] via Grecco. [Ms. Caudwell] and [Ms. Dauriac] discussed a series of significant foreign exchange transactions on which [Signia] had been engaged on [Ms.

Caudwell’s] behalf. [Ms. Dauriac] also arranged a substantial loan of in excess of $3 million from Credit Suisse to [Ms. Caudwell] and her husband, secured against the assets of her mother…”

I find that this paragraph contains significant inaccuracies:

The problem with Barclays

The relationship between Mr. Maycock and Ms. Dauriac also came under strain at this time. An employee at Barclays had disclosed to Ms. Dauriac information relating to the performance of Mr. Caudwell’s portfolio at Barclays, despite neither the relevant Barclays employee nor Ms. Dauriac properly having the right to access this information.

Mr. Maycock then investigated this issue on behalf of Mr. Caudwell, which caused a degree of tension between himself (and Mr. Canfield) and Ms. Dauriac. On 12 September 2014, Ms. Dauriac emailed Mr. Canfield to complain:

“David, see attached, it is self-explanatory. I do not want another issue, but Tim [Maycock] should be respectful when he calls my team, about me or any members of the team. The mess he has created at Barclays is not great. Let’s move on, but I find it unacceptable and my friend has lost is [sic.] suspended as a consequence…”

Once again, the precise rights and wrongs of this issue are nothing to the point. The relevance of the incident lies in the fault-lines it exposed or created between the various actors. Mr. Canfield had a long text message exchange about this with Ms. Cooper. He forwarded the chain on to Mr. Maycock, with the comment:

“See below a copy of a text conversation with Kate Cooper last night and this morning. The bare faced lies are staggering.”

In cross-examination, Mr. Canfield recognised this issue as an indication of “rising tension” between himself and Mr. Maycock, and Ms. Dauriac. (Footnote: ¹²⁹)

Events at Pure Jatomi

In late September/early October 2014, an expenses investigation was launched at Pure Jatomi, another company in which Mr. Caudwell was a majority shareholder and of which Mr. Canfield was a director. Within 24 hours of that investigation commencing, Mr. Stoebe resigned from Pure Jatomi.

In an email to Mr. Caudwell dated 6 October 2014, Mr. Stoebe sought to set Mr.

Yet again, it is neither possible, nor desirable, to seek to plumb the rights and wrongs of this episode. The event is significant for its effect on relations between Ms. Dauriac, as Mr. Stoebe’s wife, and Mr. Caudwell. 216. Mr. Caudwell’s response to Mr. Stoebe’s email was on the same date, 6 October 2014. Although Mr. Caudwell rejected any “loss of trust”, his email demonstrated hostility and suspicion towards Mr. Stoebe:

“Dear Konrad,

Firstly, the information I have on the expenses is that they have been frivolously treated at best.

Secondly, I had no loss of trust in you. I sent Michael because the business was in such a serious mess to give me a second opinion.

…

When he asked to see the expenses apparently you became very irrational and emotive which, of course, raises the question why?

Given your significant financial commitments, I find it very peculiar that you would so irrationally give up your income. This suggests you have already found another job?

…

Clearly, relations between Mr. Caudwell and Mr. Stoebe were rather frosty at this stage, and Ms. Dauriac knew it. Mr. Stoebe’s reference to finding Ms. Dauriac a buyer would appear to be a reference to Signia, suggesting that Mr. Stoebe at least was contemplating a parting of the ways between Ms. Dauriac and Mr. Caudwell.

So far as Ms. Dauriac is concerned, I doubt very much that she would have attached any weight at this stage to the suggestion that Mr. Caudwell’s interest in Signia be bought out. (Footnote: ¹³⁰) However, I do consider that she would have noted from the exchange between Mr. Stoebe and Mr. Caudwell Mr Caudwell’s concern about expenses at Pure Jatomi. It would be surprising if Mr. Stoebe had not kept his wife informed about the events at Pure Jatomi, and I find that he did.

Mr. Caudwell’s expression of discontent with Ms. Dauriac

On 9 October 2014, Mr. Caudwell sent an email to Ms. Dauriac expressing his discontent with her regarding the handling of the Mayfair project, another project (Footnote: ¹³¹) and the level of staff turnover:

“Dear Nathalie,

This dispute between Kam and you is getting increasingly out of hand.

Whilst I can agree with lots of things that you say, you then lose my support arguing about a point that has been my life time’s work, buying cheap and selling dear. There is no reason on earth why somebody should not buy for £5 million and sell for £7.5 million in a sort space of time, and that is a fact. Whether there was some corrupt activity is another point, but you should not use the uplift in value as an indication that this has happened, only as an indication that it could have happened. It is not helpful to you or anybody else to argue points that are irrelevant and not justifiable, and this does tend to detract from the main issues.

I

am now even more concerned about this whole thing, but have just had information on another matter that has really worried me.

Some weeks ago when the newspapers were getting involved in Signia you told me that John Moulton had not resigned, but may not be very active. He rang David up yesterday to make it crystal clear to David that he had resigned, but had allowed his photograph to remain.

Furthermore, you told me a few weeks ago, at the same time, when the newspapers were talking about high staff turnover that only one person had left in the last 12 months. I am now told that 15 people have left in the last year. I have no way of knowing whether this is true at the moment but, needless to say, I am very worried about these two pieces of information.”

Ms. Dauriac’s reply, later that day, is a combination of the defensive and the aggressive. It concludes:

“I am not sure where this conversation is going and I am getting seriously offended and propose we meet to discuss. I am happy to come to your house before the party tonight or early tomorrow.

I

can assure you that I will do all my best to take all emotions away.”

The commencement of the investigation into Mr. Wilson’s expenses

Mr. Hayes was also involved in the investigation into Mr. Wilson’s expenses, which began at about this time. Mr. Wilson was Ms. Dauriac’s effective deputy, and someone she trusted and relied upon.

A meeting was held between Ms. Ohbi, Mr. Hayes, Ms. Cooper and Ms. Tarbet on 9 October 2014. This meeting was recorded by Mr. Hayes and a transcript subsequently obtained. (Footnote: ¹³²) At this meeting, it became clear that Mr. Hayes had evidence that Mr. Wilson had been expensing lunches with Signia employees which he paid for on his corporate card, having already been reimbursed in cash by the other attendees for their proportion. Mr. Wilson was then pocketing the cash whilst also being reimbursed by Signia. This investigation resulted in Mr. Wilson's dismissal on 11 December 2014.

At the meeting, Ms. Ohbi, Ms. Cooper and Ms. Tarbet were all concerned to ensure that Ms. Dauriac did not discover that they had been investigating Mr. Wilson’s expenses.

Inquiring into Ms. Dauriac’s CV

In an email to Mr. Canfield from a Mr. Moulton (a client of Signia and investor in a project Mr. Stoebe, Ms. Dauriac and Mr. Canfield were involved in (Footnote: ¹³³)) dated 13 October 2014, Mr. Moulton stated:

“An employee fed me the remarkable allegation that [Ms. Dauriac’s] assertions about

Cambridge University education on the web might be a little expansive – alleged to be Summer School in Cambridge, but not a University course.”

Mr. Canfield clearly asked Mr. Maycock to investigate this allegation. Mr. Maycock reverted as follows:

Mr. Canfield reverted to Mr. Moulton via email with the following:

“…the reality is that, according to her CV (which I have), she achieved a post grad diploma in management studies at the Judge Institute Cambridge. That’s not ‘Finance’ and also not, as the website seems to seek to suggest, an Oxbridge degree. Her degree is from somewhere in Bordeaux. Interesting!”

In cross-examination, Mr. Canfield denied that this amounted to investigating Ms. Dauriac’s CV: (Footnote: ¹³⁴) but it is difficult to see how any other description could pertain.

The expenses investigation

Commencement of Ms. Dauriac’s “review” of her expenses Introduction

It is important, but difficult, to separate the work Ms. Dauriac caused be done in relation to her expenses before Mr. Canfield notified Signia that there was to be a review of expenses (and requested copies of the expense records of Signia) on 11 November 2014 and the period after 11 November 2014.

In the following paragraphs, I set out the relevant evidence as regards the pre-11

Signia’s records were ultimately kept on its Sage accounting system. These records, at year end, were fixed – they could not be amended or tampered with. (Footnote: ¹³⁶) None of the records here in issue involve the Sage system.

Expense forms were generally filled-in by personal assistants or receptionists. (Footnote: ¹³⁷) In the case of Ms. Dauriac: (Footnote: ¹³⁸)

Ms. Degruttola described the process of completing Ms. Dauriac’s expense sheets in the following terms: (Footnote: ¹³⁹)

“5.

A small number of people at Signia, around 4 or 5, had corporate credit cards. During my time as a receptionist (until 2013), I would receive the statement for the credit card and check the description for each item of expense which appeared on the statement. If I had not been provided with supporting receipts by the relevant person who had incurred the charge, I would ask for them. This was one of the standard tasks of the receptionists.

6.

People also sometimes incurred business expenses in cash, or on their personal credit cards. In such cases, the relevant person gave me or one of my colleagues the receipt. Most of the time as a receptionist, I would be given a description of the expenses, but if not I would look at the diary for the relevant person and try to work out a description for the expense that way. Ordinarily, there was sufficient information in the diary to identify the client and the receipt itself would tell me everything else I needed to know. If I could not obtain enough information through my own review, I would simply ask the relevant person to give me more information. It was not considered to be a problem and people did not mind if I had to ask them. (Footnote: ¹⁴⁰)

7.

Once I had gathered enough information, I would fill out the expenses spreadsheet that was kept on the company shared drive, input the description, price and date of the expense then print it and give it to either Janet Tarbet (as COO) or Kate Cooper (as Head of Compliance). They were in charge of the expenses of the firm and as far as I knew had the final sign-off authority. So far as I am aware, one of them would then check it and then get the relevant expense sheet signed by the person making the claim before processing the payment. However, I do not know what happened to the expense sheets once I passed them to Ms. Tarbet. So, once they had been completed, they would be given to the claimant to sign and also signed off by Janet Tarbet or Kate Cooper and I would then receive the completed and signed form back from them for the purposes of scanning and saving. I cannot recall any of [Ms. Dauriac’s] claims for expenses ever being queried by Ms. Tarbet or Ms. Cooper during my entire time at Signia.

8.

Once I became [Ms. Dauriac’s] personal assistant, I no longer had responsibility for submitting or processing expenses for Signia employees, but helped out from time to time if needed. [Ms. Dauriac] would give me her receipts and I would sort them into piles of expenses on her corporate card and personal card and then hand them over to the receptionists who would be inputting the expenses on a claim form…”

Thus, the process of recording expenses in Signia expenses was as follows:

I am quite prepared to accept that Ms. Dauriac’s expense forms, as originally completed, were not completed by her, but by Ms. Degruttola or by receptionists, the receptionists having had that work delegated to them by Ms. Degruttola and/or Ms. Dauriac. I am also prepared to accept that Ms. Dauriac’s original expense forms contained errors.

In her witness statement, Ms. Cooper stated: (Footnote: ¹⁴¹)

“In October or November 2014, Nathalie mentioned to me that [Mr. Stoebe] had resigned from Pure Jatomi…At the time, I was unaware of the circumstances of his departure, but in the following weeks I became aware that there was an expenses review at Pure Jatomi following his resignation. At around the same time (but I cannot recall exactly when), I overheard [Ms. Degruttola] asking Janet to re-sign a number of amended expense forms because, as Kelly put it, they had been amended to remove John Caudwell and his family. I also overheard Janet refuse to re-sign the forms and express concern about why [Ms. Degruttola had made the changes…”

As she said, Ms. Cooper was uncertain about the timing, but she clearly placed these events before 11 November 2014. (Footnote: ¹⁴²) In cross-examination, Ms. Cooper was able to add a little more information: (Footnote: ¹⁴³)

Ms. Cooper explained what was involved in removing names from expense forms: (Footnote: ¹⁴⁴)

Ms. Tarbet’s evidence was as follows: (Footnote: ¹⁴⁵)

“In or around October 2014, Kelly asked me to re-sign several months of Nathalie’s corporate expenses claim forms for 2014. She provided copies of the forms she was asking me to re-sign. I could immediately tell from memory that the forms had previously been submitted but for whatever reason the descriptions in a number of the forms had been amended. The main changes related to the deletion of [Mr. Caudwell’s] name and/or the names of members of his family from the description, so that such sections would have generic descriptions such as “client lunch” or “client travel”. I asked Kelly why I was being asked to sign-off forms that had already been submitted, and she told me that the forms had been amended at Nathalie’s request to make them clearer. I did not understand why these names had been removed because, rather than clarifying the description, and contrary to what Kelly told me, the amendments made them less clear. As amended, I could not tell which clients related to which expenses.”

It is clear – both from Ms. Tarbet’s statement and her cross-examination – that this was before 11 November 2014. (Footnote: ¹⁴⁶) Ms. Tarbet declined to re-sign the expense sheets. (Footnote: ¹⁴⁷)

The evidence of Ms. Olszewska

In her statement, Ms. Olszewska stated: (Footnote: ¹⁴⁸)

“On 3 October 2014, Kelly approached the reception desk where I was sitting with the other receptionist, Eva Woodroof, and asked us to change all of Nathalie’s expense forms which related to John Caudwell. She provided us with a large quantity of forms going back to 2010. Specifically, we were told by Kelly to delete all references on the forms going back to 2010.

Specifically, we were told by Kelly to delete all references on the forms to Mr. Caudwell’s name and replace it with the word “client”. I cannot recall why, but Eva Woodroof told Kelly she was unable to do this, so Kelly informed me I would have to do it. Kelly expressly told me that I was not to tell anyone what I was doing.”

Ms. Olszewska was not comfortable with this instruction. (Footnote: ¹⁴⁹) Ms. Olszewska was then asked, a few days later, “to reverse what I spent the last few days doing, in other words to add Mr. Caudwell’s name back onto the expense forms I had already amended.” (Footnote: ¹⁵⁰) The evidence of Ms. Dauriac

Ms. Dauriac’s evidence as to what she asked Ms. Degruttola to do was as follows: (Footnote: ¹⁵¹)

Later on in her cross-examination, Ms. Dauriac was asked about a specific transaction – a birthday cake for Mr. Stoebe (Footnote: ¹⁵²) – where the reference to Mr. Stoebe was removed. Ms. Dauriac gave the following, more general, explanation of both stages of the process: (Footnote: ¹⁵³)

Ms. Dauriac was asked why she initiated this review prior to the 11 November 2014 communication from Mr. Canfield: (Footnote: ¹⁵⁴)