IN THE MATTER OF BROTHERS PRODUCE LIMITED (IN LIQUIDATION)

This application is brought by Brothers Produce Limited and its liquidators for relief following an assignment which was void under s.127 of the Insolvency Act 1986 (‘IA 1986’).

Brothers Produce Limited (‘the Company’) was incorporated on 3 February 2011. At all material times prior to its liquidation, the Company carried on business as a wholesale and retail supplier of fruit and vegetables from a market stand known as Unit P61b-P62, Western International Market, Hayes Road, Heston, Southall, Middlesex UB2 5XJ (‘the market stand’) under the name ‘Western International Market’ (‘the Business Name’). The Company occupied the market stand pursuant to a 10-year lease dated 27 February 2009 made between the Company and the London Borough of Hounslow (‘the Lease’).

At all times material to this application, the directors of the Company were Mr Akhtar and Mr Yalcinkaya, the Third and Fourth Respondents (hereafter collectively ‘the directors’). Mr Akhtar had a relatively short involvement with the Company (7 months) prior to its entry into liquidation. In contrast, Mr Yalcinkaya had been a director of the Company since 3 October 2011.

The Company filed three sets of accounts at Companies House during its trading life, for the financial years ending 31 March 2012, 2013, and 2014 respectively. The profit figures for those years (in round terms) were respectively £114,000, £141,000 and £185,000.

Whilst profitable, however, by 2014, the Company was experiencing serious cashflow difficulties. It was extending too much credit to its customers and as a result was in difficulty paying its own suppliers.

On 28 January 2015, one of the Company’s suppliers, NV Vergro SA, obtained default judgment against the Company in the sum of £83,257.12.

On 13 February 2015, NV Vergro SA presented a petition for the winding up of the Company (‘the petition’). The petition was served on the Company on 16 February 2015 and advertised on 10 March 2015.

On 12 March 2015, after presentation and advertisement of the petition, the Company assigned the Lease for £5000, its fixtures and fittings (‘the fixtures and fittings’) for £25,000 and its goodwill (‘the goodwill’) for £5000 (collectively ‘the Assignment’ and ‘the Assets’) to Mr Ercin Tarim, the Second Respondent (‘Mr Tarim’).

At Mr Tarim’s instigation, on 17 March 2015, Tydene (Western) Limited, the First Respondent (‘TWL’) was incorporated. Mr Tarim’s unchallenged evidence was that he ‘transferred everything’ to TWL on 17 March 2015 (Tarim (1) para 21). On 21 March 2015, shortly after its incorporation, TWL commenced trading as a wholesale seller of fruit and vegetables from the Company’s market stand. Mr Tarim was at all material times sole director and sole shareholder of TWL. A director of the Company, Mr Yalcinkaya (the Fourth Respondent) and a former employee of the Company, known as Mr Huseyin, were hired by TWL to work at the market stand.

On 30 March 2015, the Company was wound up by the Court on the petition of NV Vergro SA. There were two supporting creditors.

The Applicants maintain the Assignment is void by reason of section 127 IA 1986.

Restitutio in integrum is no longer possible. Trading at the market stand ceased in or by January 2019 and Mr Tarim has surrendered the Lease.

As against the directors, the Applicants maintain that the Assignment was entered into in breach of their duties to the Company, and that such breach caused the Company loss. They seek compensation for that loss.

The directors have played no part in these proceedings and, following non-compliance with an unless order, are debarred from defending the same.

As against Mr Tarim and TWL, the Applicants seek:

Further or in the alternative, the Applicants maintain that Mr Tarim is liable in knowing receipt. They contend that the Assets were assigned in breach of the directors’ fiduciary duties and represented trust property in Mr Tarim’s hands. They argue that Mr Tarim had actual or constructive knowledge of that breach and is liable to account to the Company for the value of the goodwill as assigned and/or the profits derived from the Assets since the Assignment. The Applicants further maintain that TWL is liable in knowing receipt (on the grounds that Mr Tarim had knowledge of the directors’ breach and his knowledge is attributable to TWL) and seek similar relief against TWL. No separate remedy is sought in respect of the assignment of the Lease and the fixtures and fittings, save insofar as those assets assisted in the generation of profit: (the ‘knowing receipt claims’): A’s skeleton argument, paragraphs 20 (c) and 21 (c).

As a third alternative, the Applicants maintain that Mr Tarim held the Assets on trust for the Company, contingently whilst the petition was outstanding, and absolutely once a winding up order had been made. They contend that Mr Tarim was under a duty to return the Assets and/or to account for profits derived from the Assets and that he has breached both duties. They seek from Mr Tarim equitable compensation, in the sum of the value of the goodwill as assigned, and/or an account of profits derived from the Assets by Mr Tarim and/or TWL since the Assignment. Corresponding claims are also made against TWL. Again, no separate remedy is sought in respect of the assignment of the Lease and the fixtures and fittings, save insofar as the assignment of those assets assisted in the generation of profit: (‘the constructive trust claims): A’s skeleton argument, paragraphs 20 (a) and (b) and 21 (a) and (b).

Mr Tarim and TWL accept that the Assignment is void and do not seek a validation order. They do however oppose any claim for financial relief arising from the Assignment.

In relation to the restitutionary claims:

In relation to the knowing receipt claims, Mr Tarim and TWL accept that a third party who receives for his own benefit trust property transferred to him by a trustee in breach of trust with knowledge of the trust and of the breach will be liable to account for the trust assets and for any profits derived therefrom on the grounds of knowing receipt: El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685 at 700: R’s skeleton, paragraph 29 and 30. They deny, however, that they had knowledge of the directors’ breach of duty. They say that they cannot be fixed with constructive notice because (1) the Company warranted that it was solvent; (2) Mr Tarim acted on the advice of his solicitors, Arlington Crown (3) Mr Tarim was never provided with a business valuation; and (4) at no point was Mr Tarim informed that the petition had been presented.

In relation to the constructive trust claims, the position of Mr Tarim and TWL is as follows:

For the purposes of this application, I have considered

I have considered the expert reports of Mr Brewer, Mr Rose and Mr Aslin.

I have had the benefit of hearing Mr Tarim, Mr Rose and Mr Aslin in cross examination. Mr Cohen’s attendance for cross-examination was excused by agreement.

As expert witnesses, Mr Rose and Mr Aslin each assisted the court honestly and to the best of their ability.

Mr Tarim’s written and oral evidence was peppered with inconsistencies, to which fuller reference will be made in the course of this judgment where appropriate. At this stage I shall simply list a few examples.

At paragraph 8 of his statement, Mr Tarim stated that ‘I was only interested in buying the stand, not the business.’ Yet he explained giving Mr Yalcinkaya a job with TWL ‘because he was already working at the stand and I thought that it would be beneficial as it would maintain the continuity of the business’ (para 25).

At paragraph 9, Mr Tarim stated that during the negotiations for the purchase of the stand, he was ‘not aware whether or not the Company was solvent or owed any large debts’. Yet in the same paragraph he stated that he knew that ‘the Company was in difficulties’, that the Company ‘had a cash flow problem’ and that the Company ‘had acquired large debts to suppliers’ (one of which was TL, a company he worked for).

He blamed the downturn in TWL’s fortunes (which conveniently dovetailed with the liquidators stepping up their inquiries into the Assignment) on ‘our sales persons giving credit to customers, which affected the cash flow’, and in turn ‘meant that it was more difficult for the Company to get credit with suppliers, and therefore made it more difficult to acquire stock’ (paragraph 27), yet had earlier explained that TWL had a great advantage as a start-up as it ‘had a confirmed supplier in [TL], which was my brother’s company and where I had already worked since 2010…. because I had a supplier which was another company with which I was involved, there would be no problems with obtaining stock on credit’ (paragraph 10).

Mr Tarim’s oral testimony also contained numerous inconsistencies. He initially denied that the Company had traded extensively with TL, for example, then had to accept that it had. He denied that the Assignment had included the Company’s laptop and desktop computers, but later accepted that it had. As put by Ms Julian in closing, Mr Tarim was a witness who ‘wanted it every which way’. He did not hesitate to deviate from the truth when it suited his purposes and seemed to have no sense of how utterly implausible some of his responses were. One example was his claim in cross-examination not to have realised that he had purchased the goodwill of the business until after issue of these proceedings. As put by Ms Julian, it was inconceivable that his own solicitors would have drawn up the deed of assignment of goodwill without instructions to do so.

Overall, having considered the evidence at length, I have come to the conclusion that, save where supported by contemporaneous documentation, Mr Tarim’s evidence, both written and oral, should be treated with caution.

On the evidence which I have heard and read, it is clear that Mr Tarim took possession of the Company’s books and records on or by 21 March 2015. Notwithstanding repeated requests from the liquidators of the Company, he has failed to deliver them up.

TWL’s accounts have been something of a moving target. According to its accounts as originally filed, TWL recorded a profit of £146,294 in 2016, £375,955 in 2017, and £360,637 in 2018. The 2019 accounts, however, then recorded a trading loss of £83,930. This loss was recorded after the First and Second Respondents were on notice of the liquidators’ claim.

Similarly, after notice of this claim, amended accounts for the year ending 28 February 2018 were filed on 28 August 2020, showing a dramatically reduced profit of £71,516. No adequate explanation for that amendment has been proffered. The amended accounts were filed after service of both (a) these proceedings and (b) the single joint expert evidence referred to below.

Mr Tarim has since produced a letter from TWL’s accountant, which states that TWL made a profit of £146,294 in 2016, a profit of £289,661 in 2017, a loss of £304,439 in 2018, and a loss of £160,446 in 2019. Again, no adequate explanation has been put forward for these further revisions, which were entirely unsupported by documentary evidence.

Even if one were to take these latest figures at face value, however, it is clear that TWL was very profitable for at least two years after the Assignment.

For some time, the liquidators wrote to TWL, Mr Tarim and the Directors, seeking information relating to the Assignment. None of the parties engaged, and accordingly the liquidators issued an application on 5 December 2019 seeking remedies against all four respondents.

It was only after service of the application that Applerose Solicitors (‘Applerose’) replied on behalf of TWL and Mr Tarim, asserting that Mr Tarim had paid the Company £25,000 for the fixtures and fittings, £5000 for the goodwill, and £5000 for the Lease. Applerose enclosed some supporting documentation. The application was stayed on the 23 January 2020 for three months to allow the liquidators time to conduct further investigations, including obtaining the file from the Company’s conveyancing solicitors, Simon Noble.

After these investigations were complete, the liquidators concluded that the Assignment was void and was very likely to have been effected at a significant undervalue, in particular in relation to the goodwill.

At the next hearing of the application, directions were sought for written evidence from a single joint expert as to the market value of the company’s business and goodwill in March 2015. By paragraph 1.1 of the order dated 1 May 2020, the parties were granted ‘permission to rely on the jointly instructed written evidence of a valuation expert on the following issue: ‘the sale value of the business and goodwill of [the Company] .. as at March 2015’.

None of the Respondents engaged with the process of selecting a single joint expert in accordance paragraphs 1.2 to 1.5 of the order of 1 May 2020. The Applicants were left to select an expert themselves.

The single joint expert, Mr Ian Brewer, was duly instructed and reported to the parties on 11 August 2020. He valued the business and goodwill at around £1,397,000 in March 2015.

The application came before the court again on 28 September 2020. At that hearing, directions were given for pleadings. The directors were ordered to file and serve points of defence on unless terms. As they failed to do so, they are now debarred from defending these proceedings.

Mr Tarim and TWL, however, did file points of defence, and purported to issue two Part 20 claims, one against the directors for a contribution (‘the contribution claim’) and one against Arlington Crown solicitors, alleging professional negligence (‘the negligence claim’). The negligence claim has been stayed pending the outcome of the main application. A directions hearing was ordered in the contribution claim, by order of ICCJ Prentis dated 19 April 2021, but I am told that this has not yet taken place.

On 11 December 2020, Mr Tarim and TWL applied for permission to rely on additional expert evidence. Permission was granted by an order of 22 March 2021 and corresponding permission was granted to the applicants. The applicants instructed Mr Daniel Rose. Mr Tarim and TWL instructed Mr Tom Aslin. The parties exchanged expert reports on 11 June 2021. Mr Rose valued the goodwill at the date of the Assignment at between £400,000 and £500,000. Mr Aslin valued the goodwill at between £0 and £5000. The experts subsequently prepared a joint statement, dated 21 July 2021.

Counsel for the Applicants and for the First and Second Respondents were largely agreed on the legal principles applicable to this case. Accordingly, I will address them fairly briefly.

Section 127 provides that:

Where a company is compulsorily wound up by the court, the ‘commencement of the winding up’ is the date that the petition is presented: s.129(2) IA 1986. The courts will ordinarily only ‘otherwise order’ (ie make a validation order) where the transaction in question has been or will be for the benefit of the general body of unsecured creditors.

Unlike its bankruptcy counterpart (s.284 IA 1986), there is no saving for dispositions made to parties in good faith, the value, and without notice that the winding up petition had been presented. I consider it legitimate to proceed on the basis that the drafting of s.127 is, in this respect, a conscious decision on the part of the legislature; absent a validation order, all dispositions made between the presentation of a petition and a winding up order being made, are void: Officeserve Technologies Ltd (in liquidation) v Annabel’s (Berkeley Square) Ltd [2018] EWHC 2168 (Ch) at [17], [21].

There is no statutory remedy for dispositions rendered void by section 127 IA 1986. The court must instead look to the general law.

It is clear that when dealing with void dispositions of property, officeholders may look to the law of restitution; see by way of example Hollicourt (Contracts) Ltd v Bank of Ireland [2001] Ch 555 at 563B-G; Rose v AIB Group (UK) Plc [2003] 1 WLR 2791 at [30]; Re D’Eye [2016] BPIR 883 at [49]; Officeserve at [32]; Clark v Meerson [2018] EWHC 142 (Ch) at [47]; and re MKG Convenience Ltd (in liquidation) 2019 EWHC 1383 (Ch) at [42].

Whilst most of the examples in the case law concern a return of money, the law of restitution extends to intangible property. The property must simply have financial value, such that the disponee is ‘enriched’: Goff & Jones: The Law of Unjust Enrichment, 9^th ed, at 8.39.

To make out a claim in unjust enrichment, a claimant must show:

The court will then ask itself (4) whether there are any defences available to the defendant. In this regard, it is not for the claimant to prove the absence of a defence: see Officeserve at [34]. Once a claim is made out, it is for the defendant to defend it.

Enrichment by a disposition of property rendered void by the insolvency regime is necessarily unjust: see Re D’Eye at [54], a bankruptcy case, but the reasoning applies equally to corporate insolvency. See too Officeserve at [32] and Goff & Jones at 24-40.

The defence of receipt in good faith, for value and without notice of the petition is unavailable in a corporate insolvency context: see Officeserve at [35] – [36] and re D’Eye at [54]. Change of position is not pleaded or relied upon in this case, but to the extent that it may still be relied upon at all in answer to s.127 (see Conway [2019] UKPC 36 at [106], [116] and Bucknall v Wilson [2021] EWHC 2149 (Ch) at [86], [90] [91], [94]), its limits are now constrained to circumstances where the court would also be prepared to make a validation order: see MKG Convenience per HHJ David Cooke, sitting as a Deputy High Court Judge at [65] – [70], in particular [69]: see too Colchester Estates (Cardiff) v Carlton Industries Plc 1986 Ch 80 per Nourse J at p84-86.

Where a defendant is unjustly enriched at a claimant’s expense and no defence is made out, the claimant has a right to restitution from the defendant. Restitutionary remedies are gain based: the claimant is entitled to recover the value of the defendant’s gain. The gain, or enrichment, is valued at the date of receipt: Benedetti v Sawiris at [13] – [14]. The claimant is entitled to a personal restitutionary award; an order that the defendant pay the claimant a sum of money representing the value of the benefit that he received at the claimant’s expense: Goff & Jones at 36-03 to 36-5. He is not required to accept a return of the benefit in specie.

Proprietary restitutionary remedies are also available in some cases, such as an order declaring that the claimant has a new ownership or security interest in an asset held by the defendant, usually accompanied by consequential orders such as an order that the assets should be conveyed to the claimant, or an order that the assets should be sold and a share of the proceeds remitted to the claimant: Goff & Jones at 37-01.

As an alternative to a claim based on the law of restitution, an officeholder may look to equity. The Court of Appeal held in Ahmed v Ingram [2018] EWCA Civ 519 at [45] that the effect of s.284 IA 1986 upon a disposition of property is that it is held by the recipient (i) contingently for the bankrupt, in the event that a bankruptcy order is made against him; and (ii) subject thereto (i.e. in the event that no such order was made) for himself (the recipient) absolutely. Clearly the same analysis must apply to transactions caught by s.127.

What duties that imposes on the trustee will depend, in part, on the circumstances (see Ahmed at [47]), but there can be no doubt that the beneficiary is entitled to call for the return of trust property, and claim equitable compensation in respect of any loss that the beneficiary has suffered as a result of a breach of those duties: Ahmed at [33].

Loss will not necessarily be calculated on or from the date of breach, however. Quantum is fixed at the date of judgment and assessed at the figure then necessary to put the trust estate or the beneficiary back into the position it would have been in had there been no breach: Ahmed at [56].

Directors are trustees of a company’s property. Where a third party receives company property in breach of trust, and it is unconscionable for him to retain the benefit of his receipt, he will be liable in knowing receipt: BCCI (Overseas) Ltd v Akindele [2001] Ch 437 at 455D-F. It will usually be unconscionable for him to retain the benefits if he has knowledge of the breach of trust. Knowledge may be (i) actual, or constructive by (ii) wilfully shutting one’s eyes to the obvious; (iii) wilfully and recklessly failing to make such enquiries as an honest and reasonable man would make; (iv) knowledge of circumstances which would indicate the facts to an honest and reasonable man; or (v) knowledge of circumstances which would put an honest and reasonable man on enquiry: Baden and Others v Societe Generale Pour favoriser le developpement du Commerce et de L’industrie en France S A [1993] 1 WLR 509 at [250]. The knowledge of a company’s directing mind and will can be imputed to the company he controls: El Ajou v Dollar Land Holdings Plc (No 1) [1994] BCC 143 at 150-151.

A knowing recipient is under a duty to restore the trust property immediately, and is accountable for profits, or any loss that would have been avoided if the property had remained in the hands of the true trustees and had been dealt with according to the trust: Williams v Central Bank of Nigeria [2014] UKSC 10 at [31].

The claim against the directors is brought under s.212 IA 1986. This provides (inter alia) that if, in the course of the winding up of a company, it appears that a person who is or has been an officer of the company has been guilty of misfeasance or breach of any fiduciary or other duty in relation to the company, the court may, on the application of the liquidator, examined his conduct and compel him to contribute such sum to the company’s assets by way of compensation in respect of the misfeasance or breach of duty as the court thinks just.

A director of a company owes the general duties specified in sections 171 to 177 of the Companies Act 2006 (‘CA 2006’), which include:

The legal backdrop is largely agreed. Ultimately, this case turns on the facts and the valuation evidence. For the purposes of determining this application, I have therefore identified certain key issues, which it is convenient to address at this stage. In summary, the issues are as follows:

I shall deal with these in turn.

The transactional documentation relating to the Assignment comprised

Clause 1 of the 2015 Agreement provides as follows:

The copy of the 2015 Agreement in evidence before me did not include a copy of the schedule referred to in Clause 1(c).

Clause 5 of the 2015 Agreement continues:

The copy of the 2015 Agreement in evidence before me did not have attached to it an inventory as provided for by Clause 5a.

Clause 7 of the 2015 provides for a deposit to be paid ‘on exchange’. The amount of the deposit was left blank. From the evidence as a whole I consider it legitimate to conclude that no deposit was paid, exchange and completion having occurred on the same day.

Clause 11 of the 2015 Agreement provided as follows:

Clause 12 of the 2015 Agreement provides that the book debts of the Business are not included in the sale.

Clause 13 of the 2015 Agreement provides that

Clause 18 of the 2015 Agreement provides for a given date to be fixed for completion, but the date chosen is left blank in the copy of the agreement n evidence before me. Clause 18 then continues:

The reference to Clause 14 in Clause 18 is an error. The reference to stock is, however, pertinent.

Clause 19 of the 2015 Agreement provides:

Clause 20 of the 2015 Agreement provides that:

Clause 24 of the 2015 Agreement provides, inter alia, as follows:

Under Clause 24.8 of the 2015 Agreement is provided:

Clause 25 of the 2015 Agreement goes on to provide that the terms of the agreement ‘shall not merge at completion but shall continue to have effect in so far as they remain to be performed.’

Schedule 1 to the 2015 Agreement is in three parts.

Part 1 of Schedule 1 provides inter alia as follows:

It will be noted that in clause 1.1, ‘the Business and Assets’ are defined as ‘the Property, fixtures and fittings, rights and assets of the Business’.

By Clause 4.1 of Schedule 1, the Seller goes on to warrant that:

I shall set out Clause 5 of Schedule 1 in full. This provides as follows:

Clause 7 of Schedule 1 provides inter alia:

Clauses 8 and 9 of Schedule 1 go on to provide:

Clause 10.2 of Schedule 1 provides:

In a section of Schedule 1 immediately after clause 10.2, which in context it would appear was intended to be Part 2 of Schedule 1, it is provided as follows:

Part 3 of Schedule 1 goes on to provide inter alia as follows:

The Goodwill Assignment, also dated 12 March 2015, is a much shorter document, executed by deed. The recitals provide as follows:

The operative parts of the deed are set out in Clauses 1 and 2. These provide as follows:

The Goodwill Assignment concludes with Clause 3, a governing law provision.

The Lease Assignment dated 12^th March 2015 is in conventional terms. Nothing turns on its wording for present purposes. It was common ground that the assets transferred from the Company to Mr Tarim included the unexpired residue of the 10-year term granted by the Lease. The term under the Lease commenced on 7 July 2008 and (subject to any renewal under the 1954 Act) was due to expire on 6 July 2018.

The 2015 Agreement, the Goodwill Assignment and the Lease Assignment were all executed on behalf of the Company by Umar Akhtar, the Third Respondent.

Extracts from the files of Simon Noble solicitors relating to the Assignment include a typewritten list headed ‘The list of Fixtures and Fittings’. The list provided as follows:

Mr Tarim’s written testimony was that the fixtures and fittings transferred ‘consisted mainly of the refrigerator’ (a large refrigeration storage unit used for storing fruit and vegetables at the market stand). In cross-examination however, after initial denials, Mr Tarim ultimately accepted that the items set out in the list of fixtures and fittings (including the Company’s laptop and two desk top computers) were also among the assets transferred.

One issue which generated a degree of debate at trial was the issue of what was comprised in the ‘goodwill’ assigned by the Goodwill Assignment. According to the International Valuation Standard 210 paragraph 20.6 (which both Mr Aslin and Mr Rose agreed to be the correct starting point in this regard), the definition of goodwill is as follows:

At paragraph 5.2.2 of his Report, Mr Aslin opined that he would ‘typically expect’ goodwill to include some or all of the following:

As noted by Mr Aslin at paragraph 5.2.3 of his report:

Mr Tarim asserted, by paragraph 15 of his witness statement, that ‘Mr Yalcinkaya did not supply any customer list during the negotiations, and the cost of acquiring existing customers was not something which was factored into the price’. By paragraph 26 of Mr Tarim’s statement, he also stated:

I reject Mr Tarim’s evidence on this issue. Mr Tarim’s written testimony on this issue does not accord with the contemporaneous transactional documentation in evidence; see by way of example the 2015 Agreement clauses 11.4 and 13(a) and Part 3 of Schedule 1: see also references in the Goodwill Assignment to the transfer of the goodwill, custom and connections of the Assignor, and to assignment of the benefit of contracts, engagement and orders.

Mr Tarim also asserted, at paragraph 24 of his witness statement, that ‘the stand did not have regular customers’. He went on to state (at para 24) that:

The clear implication of Mr Tarim’s responses to these questions was that, in the world of wholesale fruit and vegetables, there was no such thing as customer loyalty or a customer base. On the evidence as a whole, I reject Mr Tarim’s evidence on this issue. Given his long-standing close involvement in his brother’s company, TL, which also traded in the wholesale of fruit and vegetables, and as an experienced businessman in his own right, I am satisfied that Mr Tarim knew his evidence on this issue to be untrue. In his brother’s strategic report for TL for the year ended 31 March 2021 (forming part of accounts filed at Companies House), for example, it is stated that:

Moreover, the aged debt mailshot exercise undertaken by TWL in respect of the Company’s old customers in 2015, when considered in the context of the evidence as a whole, supports the conclusion that the Company had a customer base. In September 2015, TWL sent out 41 statements of account, headed with TWL’s logo, addressed to the Company’s old customers by name and address, actively chasing the Company’s book debts relating to various periods spanning back to 2011, long before the date of the Assignment. The statements of account were clearly drawn from detailed records compiled by the Company. Each statement listed the invoices relating to the customer in question, by date, invoice number and invoice total, gave particulars of any payments received by date and amount, and in a final column, gave a cumulative total of the amount outstanding. The customers to which the statements of account related each had their own account code in the Company’s records (suggesting regular business) and it is clear from the statements of account themselves that many placed repeat orders over an extended period of time.

Mr Salis sought to play down the significance of the statements of account, suggesting that at best they comprised a ‘list of bad payers’. Whilst some were undoubtedly ‘bad payers’, however, many were clearly loyal customers who had placed (and paid for) repeated orders with the Company over several years and had, in relative terms, only modest sums outstanding at the time of the aged debt mailshot. Hadi Cash & Carry, based in Southampton, for example, placed regular orders with the Company from October 2012 to November 2014, with a total value of £70,137.70, of which only £5871.57 remained outstanding at the date of the mailshot. Medina Foods & Halal Meat Centre, based in Southampton, placed regular orders with the Company from September 2012 to January 2014, with a total value of £49,528.63, of which only £1445.70 remained outstanding. LNB G5 Ltd, based in Southall, Middlesex, placed repeated orders with the Company from December 2012 to May 2014, with a total value of £151,705.30, of which only £14,041.47 remained outstanding at the date of the mailshot. Majliss Restaurant, based in Cowley, Oxford, placed regular orders with the Company from August 2012 to October 2014, with a total value of £12,660.21, of which only £685.60 remained outstanding. Padma UK Ltd, based in Croydon, had placed repeated orders with the Company from October 2012 to July 2014, with a total value of £19,736.49, of which only £771.50 remained outstanding. These are simply a selection of examples drawn from the statements of account in evidence. In the interests of brevity, I will not cite them all. In my judgment, these examples clearly evidence an established customer base. It will also be noted that these statements of account relate only to customers with sums outstanding. It is in my judgment legitimate to conclude that the Company had other regular customers who, at the date of the Assignment, were up to date with payments in respect of their custom.

Mr Tarim had no persuasive explanation for these statements of account, or the mailshot, when asked about the same in oral testimony.

The mailshot may go some way to explaining the very poor recovery achieved by the debt collection specialists, Credebt, instructed by the Company’s liquidator. According to the statement of affairs provided by the directors, the Company’s debtor ledger had an estimated realisable value of £950,000. In the liquidators’ progress reports, it is confirmed that Credebt had limited success in recovering monies, as ‘many debtors have disputed their indebtedness on various grounds’: one of those grounds being that payment has been made to a third party: see by way of example Annual Progress Report for year ending 21 May 2017, para 4.1.2. As misappropriation of book debts was not specifically pleaded, however, I shall leave the issue of book debts to one side.

Suffice it to state that, on the evidence as a whole, I am satisfied that details of existing customers and suppliers of the Company were passed on to Mr Tarim as part of the Assignment and were thereafter shared with TWL on its incorporation. The transactional documentation makes clear reference to customers and suppliers being passed on. On a balance of probabilities I am satisfied that details of existing customers and suppliers were stored on the Company’s laptop and two desktops transferred to Mr Tarim as part of the Assignment. I am further satisfied that one of the purposes of taking an assignment of the laptop and the desktops was to have access to information regarding existing customers and suppliers. On Mr Tarim’s own evidence, which in this regard was unchallenged, he set up a new accounting system for the business when he took it over. He therefore had no need for the Company’s old laptop and desktops to access the old accounting system. On the evidence as a whole, it is in my judgment legitimate to conclude that the laptop and desktops were taken on for the valuable information stored on them in relation to the Company’s customers and suppliers.

Mr Tarim claimed not to know the passwords for the laptop and computers. He may not have memorised such passwords, but I am satisfied that at all material times he has had access to the laptops and desktop computers via the staff that he took on to run TWL on a day-to-day basis following the Assignment. After the Assignment, he took on the Fourth Respondent and another former employee of the Company, Mr Huseyin, to run the business. On the evidence as a whole, I am satisfied on a balance of probabilities that both the Fourth Respondent and Mr Huseyin knew the access codes for the Company’s laptop and desktop computers. Mr Tarim accepted as much in oral testimony.

Mr Tarim demonstrated knowledge of the Company’s customers and suppliers in his witness statement.

At paragraph 29 of his witness statement, for example, he listed certain products and claimed that ‘Brother [sic] Produce Limited could not supply these products at the same price and quality as Tydene Limited.’ He also claimed that ‘Tydene Western Limited also secured better deals with the suppliers from other countries such as the Netherlands than Brothers Produce Limited’. This raises the question of how Mr Tarim would know of such matters if he did not have details of the Company’s suppliers and the terms upon which the Company did business with such suppliers. He did not state the source of his knowledge in his witness statement. He only attended the stand a handful of times after purchasing it. In my judgment, on the evidence as a whole, the most likely (and correct) explanation is that he received supplier details as part of the Assignment.

Mr Tarim also demonstrated knowledge of who the customers of the Company were. At paragraph 24 of his witness statement, for example, he stated that ‘[s]ome of the customers who purchased supplies from my stand had already been customers of Brothers Produce Limited before I started trading there’; an assertion which begs the question of how Mr Tarim would know, if he did not have a customer list for the Company and rarely attended the stand. Mr Tarim’s attempts to explain this away in oral testimony were unconvincing. In answer to my question, he suggested that his reference to ‘existing’ customers was a reference to existing customers of TL. Reading paragraph 24 of his statement, this is clearly incorrect.

Mr Tarim also demonstrated knowledge of the products sold by the Company. Whilst it was correct that TL, Mr Tarim’s brother’s company, was a supplier of the Company (and so Mr Tarim might be taken to know the products which TL supplied to it), TL was not the Company’s only supplier.

Mr Salis submitted that the aged debt mailshot of itself did not establish that a complete customer list was passed on as part of the Assignment; at best, he argued, it might demonstrate that an aged debt list was passed on. The question whether a customer list was passed on, however, does not rest simply on the evidence of the aged debt mailshot, but on the evidence as a whole, which includes (i) the 2015 Agreement and the Goodwill Assignment, each of which contain provisions consistent with and/or supporting the conclusion that a customer list was passed on (ii) latterly admitted evidence that the Company’s laptop and two desktop computers formed part of the Assignment and (iii) Mr Tarim’s own knowledge, demonstrated in his written evidence, of the difference between new and existing customers.

The fact that Mr Tarim selected the Company’s market stand to purchase, when there were plenty of other stands (on Mr Tarim’s evidence of equal size) standing empty at the time, is also significant. In my judgment it is utterly implausible to suggest that Mr Tarim would want to buy a stand associated with a company which he contended had a bad track record with suppliers (and hire two individuals who previously worked for that company to front the stand), if the only assets of value which he was purchasing were a stand and a modest selection of fixtures and fittings.

The fact that the business name of the Company formed part of the Assignment is also of relevance in this regard. The business name is expressly referred to in the transactional documentation. Mr Tarim and TWL sought to play down the significance of this, claiming that the Company ‘did not have a logo or any other branding’ and that there was ‘no brand loyalty’. I reject their evidence on this issue. No persuasive explanation was put forward for the express inclusion of the business name in the 2015 Agreement. This was not, as Mr Salis sought to suggest, simply a ‘boilerplate’ provision; the business name itself is set out, in terms. On the evidence which I have heard and read, I am satisfied that the business name was a significant asset; together with the continuity of staff, the same trading premises, and the customer information stored on the Company’s laptop and desktop computers, it was the means by which Mr Tarim and TWL could tap into the Company’s existing customer base.

On the evidence which I have heard and read, I am satisfied that the Company’s customer base was of material financial value and was important to Mr Tarim. Mr Tarim clearly needed a customer base if TWL was to ‘drop to the ground running’. TWL may have had the support of TL for supplies (and to guarantee its obligations to other suppliers), but it needed customers. There would be no commercial sense in TL handing its own customers to TWL, and in fairness Mr Tarim did not suggest in his witness statement that it had; the support that TL gave TWL was said by Mr Tarim in his written evidence to be the supply of some goods at cost and latterly the guarantee of obligations incurred by TWL when placing orders with suppliers other than TL. The question thus arises: where did TWL get its custom from, in order to achieve the flying start that it achieved in its first year of trading? I reject the suggestion that the wholesale traders based at the market depended simply on ‘footfall’ custom. I also reject Mr Tarim’s attempts in oral testimony to suggest that TL itself supplied TWL with customers. On the evidence which I have heard and read, I am satisfied that TWL started trading with the benefit of the Company’s name, market presence, continuity of staff and custom base. Whilst much was made of the Company’s poor reputation with suppliers, nothing was said of its reputation with buyers. On the evidence as a whole, which includes the Company’s trading figures and clear evidence of loyal custom, I consider it legitimate to conclude that the Company had a good reputation with buyers.

I am fortified in my conclusions by the trading performance of TWL as a start-up company. Its profits in its first year of trading were (at least) £146,000 from a standing start. There was no evidence before me that TWL advertised its own launch and in the absence of such evidence I conclude that it did not. Yet TWL got off to a flying start and its trading figures were close to those previously achieved by the Company. On the evidence before me, I am satisfied that this would not have been possible without the benefit of an established custom base.

I am also satisfied that the goodwill of the Company was transferred to Mr Tarim in March 2015 on a ‘going concern’ basis. Numerous provisions in the 2015 Agreement and the Goodwill Assignment support this conclusion. These provisions include but are not limited to clause 13(a), 19(a) and 20 of the 2015 Agreement, Clauses 4.1 and 5 of Schedule 1 to that Agreement and Part 3 of Schedule 1. Recital B(a) to and Clauses 1 and 2 of the Goodwill Assignment also support this conclusion. Mr Salis invited me to place little weight on the transactional documentation, claiming that ‘boilerplate’ provisions had been included. I reject that invitation. Whilst it is correct to state that both the 2015 Agreement and the Goodwill Assignment are poorly drafted in certain respects, both parties to this commercial arrangement were professionally represented and the parties’ respective solicitors were selective in the precedent provisions which they employed. The transactional documents cannot simply be ignored.

Moreover, the transactional documents themselves are not the only evidence which point to a sale as a going concern.

Mr Tarim confirmed at paragraph 25 of his witness statement that he gave Mr Yalcinkaya a job with TWL ‘because he was already working at the stand and I thought that it would be beneficial as it would maintain the continuity of the business’ (emphasis added).

Mr Tarim also stated at paragraph 21 of his witness statement that the Company did not cease trading at the stand on the completion date of 12 March 2015 but instead continued to trade from the stand until 21 March 2015. In oral testimony, Mr Tarim confirmed that there was no break in trading at the stand; the Company continued to trade there until TWL took over. Mr Tarim’s written and oral evidence on this issue was unchallenged and I accept it. The most likely (and in my judgment correct) explanation for the continued trading at the stand by the Company post-completion was that it was in order to preserve the business as a going concern whilst Mr Tarim set up TWL.

The remaining stock owned by the Company was also transferred to TWL on 21 March 2015, when TWL started trading from the stand. I so find. At paragraph 26 of his witness statement, Mr Tarim stated that

Mr Tarim gave evidence to similar effect in oral testimony. To keep the stand open and to maintain the business as a going concern, the Company would need to maintain stock levels rather than run them down. The stock figures provided for in the Company’s professionally drawn annual accounts were fairly consistent; £45,933 for the year ended 31 March 2012, £41,122 for the year ended 31 March 2013 and £40,236 for the year ended 31 March 2014. These figures are in my judgment a reliable guide to the value of stock levels maintained by the Company at the stand when trading.

Whilst the 2015 agreement makes reference at clause 18 to existing stock being valued and paid for at the time of completion. I was taken to no evidence that the Company’s stock was valued and paid for as envisaged by the 2015 agreement and consider it legitimate to conclude that it was not.

On the evidence as a whole I am satisfied on a balance of probabilities that the Company left its stock at the market stand on cesser of trading on 21 March 2015, that neither Mr Tarim nor TWL paid the Company for such stock, and that TWL thereafter sold such stock from the stand without accounting to the Company for the same.

Turning back then, to the factors listed at paragraph 5.2.2 of Mr Aslin’s report, on the evidence which I have heard and read, I am satisfied that included in the goodwill assigned by the Goodwill Assignment dated 12 March 2015 from the Company to Mr Tarim (and thereafter used and enjoyed by TWL on its incorporation) were the following:

Given the incomplete transactional documentation (see for example paragraphs 70 and 72 above; Simon Noble’s file was also incomplete in other respects), it is not possible to list comprehensively the assets transferred on the Assignment. On a balance of probabilities, however, on the evidence which I have heard and read, I am satisfied that the assets which were transferred to Mr Tarim on the Assignment (and which were thereafter used and enjoyed by TWL on its incorporation) at the very least included:

On the evidence as a whole, I am satisfied that the Assignment was not an arm’s length transaction.

Mr Tarim’s evidence about how he knew Mr Yalcinkaya was guarded and opaque. He stated that he knew Mr Yalcinkaya ‘as he had previously worked for [TL] in about 2007’. Yet this was before Mr Tarim had started working for TL. His evidence was that he came to live in the UK in March 2008 but did not start working for TL until 6 April 2010. No further details are provided in Mr Tarim’s written evidence as to the relationship between Mr Yalcinkaya, Mr Tarim and his brother. Yet there was plainly an ongoing relationship or friendship between Mr Yalcinkaya, Mr Tarim and his brother in the period after Mr Yalcinkaya had ceased to work for TL. TL traded extensively with the Company and, at the time of the Company’s liquidation, was one of its largest creditors. Even after the Assignment on 12 March 2015, the Company paid TL £15,000 on 24 March 2015, at a time when it was just about to be wound up on the petition of a different supplier. I was taken to no evidence that the Company paid any money to the petitioner in the run up to being wound up on 31 March 2015. The fact that the Company chose to pay TL this sum at such a time, after the Company had ceased trading and when it was about to be wound up, strongly supports the conclusion that there was an ongoing special relationship between one or more of those running the Company (on a balance of probabilities, Mr Yalcinkaya) and those running TL, namely, Mr Tarim and his brother.

Mr Tarim’s evidence of the circumstances in which he and his brother decided to look at purchasing a stall in a market in Uxbridge in 2014 was also opaque. He said that in about 2014, his brother and he started to talk about expansion. His evidence was that TL was doing good business in East London and that he and his brother believed that they could be ‘just as successful in West London if we opened up a stand there’. (para 5). I was taken to no evidence of any market research undertaken during the course of these plans for expansion and I consider it legitimate to conclude that there was none. Mr Tarim’s evidence was that in the second half of 2014/early 2015, he visited the Western International Market a few times and noted that whilst there were one or two other stands in the market doing good business, such as Jay Star and Fruit of Lebanon, ‘generally the business in the market was not particularly good. There were a number of empty stands in the market’ (Tarim (1) para 13). This begged the question of why Mr Tarim and his brother would select the Western International Market, rather than any other market, in which to purchase a stall.

The timing of Mr Tarim’s interest in purchasing a stall in the Western International Market (which on his evidence was in the latter half of 2014) is also telling. On the evidence as a whole, I am satisfied that the timing is far from coincidental. It tallies with the point at which the storm clouds were gathering for the Company; the Company could not pay its suppliers (including TL). One of its suppliers had issued (or was just about to issue) proceedings against the Company, proceedings which would lead to a default judgment a few months later and thereafter a winding up petition. On the evidence as a whole, I am satisfied that by the second half of 2014, the directors knew that the Company was or was likely to become insolvent.

There was no documentary evidence before me suggesting that the Company’s stall was ever placed on the open market for sale. In the absence of any such evidence, on the evidence as a whole I consider it legitimate to conclude that it was not.

Mr Tarim does not state, in terms, in his witness statement, how he came to learn that the Company’s stall was up for sale, or how he came to select the Company’s stall, rather than any other of the many vacant stalls at the market, to purchase. His evidence, which in this regard I accept, was that the market stalls were all of identical size.

At paragraph 6 of his statement, he stated that ‘We … started to look around for units in West London which were for sale. Sometime during the second half of 2014, we heard about a unit in the Western International Market in Southall which had been put up for sale [ie the Company’s stand]’.

There was no evidence that Mr Tarim or his brother had ever considered any other stalls at the market prior to deciding to purchase the Company’s stall. In the absence of any such evidence, considered in the context of the evidence as a whole, I consider it legitimate to conclude that they did not. There was no persuasive explanation of why the Company’s stand was selected for purchase, rather than any one of the numerous empty stands at the market.

Mr Tarim does not state in his witness statement how, or from whom, he and his brother ‘heard’ that the Company’s stall was up for sale. His reluctance to state in his witness statement the source of that information is in my judgment telling. His written evidence is totally silent on the issue. I reject his attempts in oral testimony to suggest that he and his brother heard that the Company’s stand was up for sale from other stall-holders at the market. On the evidence I have heard and read, I am satisfied that the Company’s stall was not placed on the open market for sale. It was not ‘marketed’ for sale at all. On the evidence which I have heard and read, I am satisfied on a balance of probabilities that it was Mr Yalcinkaya who told Mr Tarim and his brother that he wished to sell the stall. This was a private arrangement.

Mr Tarim claimed that initially he had simply wanted to purchase the market stand and the fixtures and fittings for £30,000 and not ‘the business’. In that regard he relied upon a short attendance note of Arlington Crown dated 27 November 2014 (which states ‘no business Lease and F & F’) and their retainer letter dated 28 November 2014, which confirms their instructions ‘in relation to the assignment of the lease’. Whilst such contemporaneous documentation must undoubtedly be taken into account, however, it must be considered in context of the evidence as a whole. On the evidence as a whole, I am satisfied that at all material times Mr Tarim intended the Assignment to include the elements listed at paragraph 131 above which I have found to be comprised in the Company’s goodwill, including the Company’s customer base. Whether he knew of ‘goodwill’ by name is irrelevant; he wanted the components listed at paragraph 131 above; there was no other reason for selecting that particular market stand in a market with numerous vacant stands of equal size. The most likely (and in my judgment correct) explanation for Mr Tarim’s initial instructions to his solicitors is that he wished to make clear that he was not buying the Company (ie by share sale). On a balance of probabilities I am satisfied that Mr Tarim initially proceeded on the assumption that the assignment of the market stand, coupled with his retainer of key members of the Company’s staff, such as Mr Yalcinkaya, to continue working at the stand, would be enough to secure for him, in practice, the other elements of goodwill which he required, such as knowledge and custom base; and that it was only at some point after his initial telephone conversation with Arlington Crown of 27 November 2014 that the need for an assignment of goodwill was recognised and an extra £5000 was agreed to cover it. It was at that stage that the purchase price was increased from £30,000 and £35,000.

The global sale price of £35,000 was agreed by 22 January 2015 at the latest. A file note dated 27 November 2014 on Simon Noble’s file for the transaction referred to that price, although it did not in terms confirm that the price was agreed on that date. On 6 January 2015 Simon Noble communicated a sale price of £30,000 to Hounslow in respect of the Lease and the fixtures and fittings, suggesting that the remaining £5000 had been earmarked for goodwill. An email dated 22 January 2015, from Alton & Co, who acted as accountants for the Company and TL, referred to an agreed global price of £35,000 and to a breakdown of that price as follows: £5000 (business), £5000 (Lease) and £25,000 (chattels).

Overall, this was an extremely informal arrangement. There was no evidence that any of the usual enquiries ordinarily undertaken when taking an assignment of a lease and purchasing the goodwill of a trading business were undertaken in this case. There were no ‘enquiries before contract’ in relation to the Lease. There were no local authority searches. No meaningful ‘due diligence’ was undertaken in respect of the business; Mr Tarim’s evidence, which in this regard I accept, was that he spent about 5 minutes looking at the Company’s sales figures for the past year on the Company’s computer when visiting the stall in the run-up to purchasing it.

I was taken to no evidence of any valuations undertaken prior to the Assignment in respect of the Lease, the fixtures and fittings, or the goodwill. In the absence of any such evidence I consider it legitimate to conclude that no such valuations were undertaken.

Save for the adjustment of price from £30,000 to £35,000 to cover goodwill, I was taken to no evidence of any meaningful negotiations between the two firms of solicitors, or between the Company and Mr Tarim, over the sale prices agreed for the Lease, the fixtures and fittings, and the goodwill respectively; in the absence of any such evidence, I consider it legitimate to conclude that there were none.

The intended speed of the transaction is also significant. As confirmed in Simon Noble’s email to Hounslow dated 27 November 2014, the parties had originally intended to compete the Assignment ‘within the next two weeks’; it was only as a result of Hounslow’s concerns as to the evidence produced by Mr Tarim of his ability to pay the rent (by then £45,000 per annum) that the transaction took several months. The tone of the correspondence between the Company’s solicitors and Hounslow became increasingly urgent as time went on (see by way of example emails from Simon Noble to Hounslow dated 21 January 2015 and 5 February 2015, around the time that default judgment was entered by NV Vergro SA against the Company on 28 January 2015, and generally the number of emails headed ‘very urgent’ thereafter); reading between the lines, it is clear (and I so find) that the directors knew that they were in a race against time to get the transaction completed before the Company was wound up. The ostensible reason given for the urgency in correspondence (that one of the directors was ill and could no longer manage the business) was plainly not the real reason; Mr Akhtar had only been a director for a few months and was not essential to the business: this much is apparent from the fact that after the Assignment, Mr Yalcinkaya carried on running the business on a day to day basis with another former employee of the Company, Mr Huseyin, achieving very similar trading results for the first year or two to those previously achieved by the Company. I consider it legitimate to conclude from this that Mr Yalcinkaya had not been rendered incapable of managing the business by any medical condition.

Mr Tarim’s involvement with the business post-assignment was minimal. At paragraph 5 of his statement, Mr Tarim had stated that ‘My brother and I decided that once the stand in West London was up and running, I would be responsible for running it. To have better control of the business my brother and I therefore decided that the West London business should be purchased in my name.’ (para 5). Yet at paragraph 22, he stated: ‘After the purchase I visited the stand only three or four times, and left the job of running the business to others. I did not spend any real-time working for [TWL] after the transfer by [the Company], because of my commitments to my brother’s company [TL]’. In oral testimony Mr Tarim explained that his brother, the sole director of TL, suffered from debilitating manic depression for a few months running from the spring of each year and that, when he did suffer such bouts of depression, Mr Tarim would have to take over running TL. This begs the question of how Mr Tarim and his brother could possibly have thought that Mr Tarim could be based in West London running a new stall in the spring of 2015. He was needed in East London. I reject Mr Tarim’s oral evidence that it was only after purchasing the stand that he realised that he would not have time to run the business in West London. On the evidence which I have heard and read, I am satisfied that the plan all along was for Mr Yalcinkaya and one or more former employees of the Company known to Mr Tarim and his brother to continue to run the business on a day to day basis following the Assignment.

A further factor which I take into account in considering whether the sale was at arms-length are the unconventional arrangements immediately after completion. Completion took place on 12 March 2015, yet the Company stayed in occupation and continued trading until TWL was up and running on 21 March 2015. The business did not miss a beat. The Company left stock behind for no consideration, which TWL then sold.

For all of these reasons, I am satisfied that the sale was not an arms-length transaction.

The Applicants do not raise a positive case of undervalue in relation to the Lease or the fixtures and fittings. They do however maintain that the Goodwill Assignment was at an undervalue. Mr Tarim and TWL dispute this.

Whilst it is clear on the evidence that I have heard and read that the Company assets transferred to Mr Tarim included more than goodwill as defined in IVS 210, the ‘undervalue’ case, as presented to me at trial, focussed simply on the value of the goodwill of the Company’s business, as defined in IVS 210.

I find this curious. The order dated 1 May 2020 initially granting permission for a single joint expert, and the subsequent order dated 22 March 2021 granting permission for the parties each to instruct separate experts, each provided for evidence on ‘the sale value of the business and goodwill’ of the Company. Yet the following then seems to have occurred:

Overall, therefore, as far as the issue of ‘undervalue’ is concerned, it seems that there has been a narrowing of focus from the Applicants’ opening position on commencement of these proceedings. Having considered this aspect with some care, I have come to the conclusion that I must confine myself to the Applicant’s narrowed case on undervalue, as presented to me, and thus focus on the value of the goodwill of the Company’s business, as defined in IVS 210 para 20.6.

By their joint statement, Mr Rose and Mr Aslin are agreed that the components of goodwill (as so defined) may include those listed at paragraph 5.2.2 of Mr Aslin’s report. They are also agreed that the elements of goodwill actually acquired by Mr Tarim/TWL from the Company are a matter of factual rather than expert evidence. I have summarised my findings on this issue at paragraph 131 of this judgment. I shall proceed on the basis of those findings.

Mr Brewer assessed the value of ‘the Goodwill’ (as defined in his letter of instruction) in March 2015 at £1,397,000. He did so by applying a multiple of 3 to what he considered to be the Company’s maintainable earnings (or EBITDA), basing himself largely on the Company’s management accounts for the year ended 31 March 2014 (which suggested a profit figure substantially higher than the profit figure in the filed accounts). He then deducted the book value of the Lease and Stock to arrive at a figure of £1,397,000.

By their joint statement, Mr Aslin and Mr Rose have since agreed that the Company’s management accounts for the year ending 31 March 2014 (on which the Brewer valuation was based) are unreliable. On the evidence which I have heard and read, I am satisfied that Mr Aslin and Mr Rose are correct to conclude that the Company’s management accounts for the year ended 31 March 2014 were unreliable.

In the light of that consensus (along with other criticisms raised by Mr Aslin of the Brewer Report), Mr Salis invited me to disregard the Brewer Report in its entirety. I decline that invitation. The Brewer Report remains expert evidence directed by this court. It is included in the trial bundles agreed by the parties. It is referred to by Mr Aslin in his report and is referred to by both experts in their joint statement. Whilst in my judgment Mr Brewer’s ultimate figure of £1,397,000 for Goodwill must be rejected, on the ground that it is based on figures drawn from unreliable management accounts, I accept Ms Julian’s submission that Mr Brewer’s choice of an income-based method of valuation (and his choice of a multiple of 3) remain relevant when considering the approaches adopted by Mr Aslin and Mr Rose in their respective reports.

On 17 June 2021, Mr Daniel Rose of Carter Backer Winter LLP served his valuation report on behalf of the Applicants. In broad summary he concluded as follows:

On 10 June 2021, Mr Tom Aslin of Moore Kingston Smith LLP served his valuation report on behalf of TWL and Mr Tarim. In broad summary, he concluded as follows:

The Joint Statement, prepared by Mr Rose and Mr Aslin, is dated 15 July 2021. The matters agreed include the following:

The matters not agreed include the following:

Subject to certain caveats addressed at paragraph 187-188 below, I accept Mr Rose’s approach to the basis of valuation over that of Mr Aslin. This valuation related to the goodwill of a trading business consistently making six figure profits. In my judgment the goodwill of the business should be valued on the basis of past financial performance. In my judgment the EBITDA ratio method is the appropriate method of valuation.

Two out of three of the experts instructed to produce valuation reports in these proceedings have adopted the EBITDA ratio method. In their joint statement, Mr Rose and Mr Aslin agree that the EBITDA method is the most common method for valuing a business as a going concern.

The Company was producing a steady six figure profit each year. None of the accounts in evidence showed it running at a loss. As put by Mr Rose in the experts’ joint statement: ‘It would seem unlikely that the goodwill of a company who was reporting continual profits in its statutory accounts for a few years previous to the goodwill sale would not be valued at something higher than that represented in Mr Aslin’s report.’. The goodwill of the business was assigned to Mr Tarim, who then, trading through TWL, also produced steady six figure profit at a similar level for at least the first two years of trading. Mr Aslin accepted that there was some continuity. Both experts ultimately agreed that TWL’s profit figures were a useful ‘sense-check’. As Ms Julian put it in closing, ‘if you bought a business for £5000 and immediately started turning a profit of over a hundred thousand pounds, you would think you had done a very good deal’.

I reject the contention that the best indicator of the value of goodwill in this case is the price actually paid. As I have found, this was not a sale on the open market after proper marketing and it was not a sale at arm’s length.

I also reject Mr Aslin’s contention that the value of goodwill should be assessed on the liquidation basis. The liquidation basis is not appropriate for valuing the goodwill of a trading profitable business. The fact that a company carrying on a given business is cash-flow insolvent and/or about to go into a formal insolvency process does not lead inexorably to the conclusion that its assets are worthless. In this regard I refer to the components listed at paragraph 5.2.2 of Mr Aslin’s report which both Mr Rose and Mr Aslin agree may form part of the goodwill of a business. In the present case, I have found that a number of such components were included in the goodwill assigned to Mr Tarim.

I further reject Mr Aslin’s contention that the value of goodwill should be assessed on the equitable basis. Again, Mr Aslin sought to justify use of the equitable basis rather than a more traditional method of valuing a trading business on the grounds that the Company was subject to a winding up petition at the time of the Assignment and went into compulsory liquidation shortly thereafter. I am not persuaded by his reasoning on this issue. As Ms Julian put it in closing, Mr Aslin was ‘blinkered by the petition’. Again, Mr Aslin’s approach ignored the fact that the assets of a company can have value even if the company itself is facing liquidation.

Mr Aslin’s valuation of the goodwill at between £0 and £5000 was also based on a number of premises which I have found to be false. He proceeded on the basis that the sale of the goodwill was an arms-length sale, when it was not. This led him to place undue weight on the price paid in what he described as a ‘recent transaction’. Mr Aslin also relied unquestioningly on the description set out in Mr Tarim’s witness statement of how the wholesale fruit and vegetable trade operated and its dependence on footfall on any given day, when I have found Mr Tarim’s account to be materially inaccurate. Mr Aslin also proceeded on the footing that none of the elements of goodwill summarised at paragraph 3.2.17 of his report passed on the sale, save for two former employees of the Company. In the light of my findings as summarised at paragraph 131 above, this was incorrect. In cross-examination, Mr Aslin stated that ‘if I assume that elements of goodwill include trading name and repeat customers go to that name, IT system retained and used, supplier relationships – I accept that I would need to look at it differently.’ He went on to state that if the ‘recent transaction’ was arms-length, he would still have regard to the recent transaction when arriving at a valuation, but if the recent transaction was not arms-length, he would have adopted the EBITDA basis of valuation.

For all these reasons, I reject the equitable and liquidation bases of valuation relied on in Mr Aslin’s report. I further reject Mr Aslin’s valuation of the goodwill at between £0 and £5000, as (bases aside) it is based on a number of premises which I have found to be false.

On the evidence which I have heard and read, I am satisfied that the appropriate basis of valuation of the goodwill is the EBITDA method.

Having established the appropriate basis of valuation, I shall now turn to consider the other criticisms raised by Mr Aslin in his report in relation to Mr Rose’s valuation.

To give context to the points raised, I set out the factors and assumptions summarised by Mr Rose at section 1.7 of his report. For ease of reference, I have put them in a slightly different order to the order in which they appeared in his report. They were as follows:

By the Joint Statement, Mr Aslin challenged (1) and (2) on the basis that the material used for the multiple EBITDA valuation was ‘extremely limited’; it was based on movements in the profit figures recorded in the Company’s statutory abbreviated accounts and there was no information, such as a profit and loss account, to demonstrate how the profits had been calculated.

In my judgment, these concerns are over-stated. Salary and dividend are conventionally deducted before calculation of retained profit. Mr Aslin himself accepted (when comparing the reliability of management and statutory accounts at paragraph 3.2.10 of his report) that

At paragraphs 3.2.12 to 3.2.14, Mr Aslin continues:

I also note that the statutory abbreviated accounts for these years were professionally prepared for the Company by Alton & Co, a firm of chartered accountants. In this regard I remind myself of the guidance given in Burnden Holdings (UK) Ltd v Fielding [2019] EWHC 1566 (Ch) at [201] and [202], where Zacaroli J, referring to opinions of Lord Hoffmann and Lady Arden, stated:

I was taken to no evidence to suggest that any of the abbreviated statutory accounts prepared by Alton & Co for the Company do not comply with the ordinary practices of professional accountants. On the evidence as a whole I consider it legitimate to conclude that the Company’s statutory abbreviated accounts for the years ending 2012, 2013 and 2014 present a ‘true and fair view’. I so find.

In my judgment, it was legitimate for Mr Rose to proceed on the basis that the movement in reserves was equal to the adjusted EBITDA and that the only significant add backs were the depreciation charge present in the statutory accounts and the corporation tax per annum.

Mr Aslin also challenged assumptions (3) and (4), namely:

Moreover assumption (5), that ‘a sale of the business would be subject to … standard anti-competition provisions’, was not only reasonable and legitimate but demonstrably correct on the evidence; both the 2015 Agreement and the Goodwill Assignment contained standard anti-competition provisions.

By the conclusion of the trial, it was accepted by Counsel for Mr Tarim and TWL that Mr Rose’s calculation of the average annualised profits to 31 March 2014 (which were assumed to be the same to 12 March 2015) as £202,000 was ‘about right’.

By the conclusion of the trial, the multiple of 2.0-2.5 adopted by Mr Rose for the purposes of his valuation was not the subject of serious dispute either. In cross examination, Mr Aslin stated that 2.5 was ‘a reasonable starting point’, adding that an appropriate multiple ‘could be 2 or 3’. At a later stage in cross-examination Mr Aslin accepted that a multiple of 2 or 2.5 was ‘probably about right’, adding ‘2.5 doesn’t seem too far off the mark to me’. In this regard I note that Mr Brewer had used a multiple of 3.

In cross-examination Mr Rose gave evidence that his starting point was 4, from his experience of multipliers used for ‘other businesses in similar industries’ where ‘net working capital would move with’. He went on to explain that as in this case no assets were ‘moving with’ (he was valuing goodwill only), he had reduced the multiplier to a conservative 2-2.5.

In my judgment, a ‘starting point’ of 4 for a relatively new company based on three years’ trading figures was too high, even allowing for the strength and stability of the Company’s profits. On the evidence as a whole, I am satisfied that the appropriate multiplier is 2.5, at the higher of the range ultimately employed by Mr Rose.

Applying a multiple of 2.5 to the average annualised profits figure of £202,000 results in a figure of £505,000.

In my judgment however Mr Aslin is correct in stating that a deduction in respect of net assets is then required against the figure arrived at on an EBITDA multiple basis. This is because the figure of £505,000 represents the value of the business as a whole, rather than the value of the goodwill as defined in IVS paragraph 20.6. Mr Rose maintained in the joint statement and in cross-examination that he had already adjusted for this by reducing the multiple. As noted by Mr Aslin, however, this is an unconventional use of the multiple. That aside, as I have found, the ‘starting point’ multiple of 4 was too high for a relatively new company; in my judgment, the appropriate multiple was 2.5. It follows that a deduction in respect of net assets must still be made in order to reflect the fact that the valuation is of goodwill as defined in IVS paragraph 20.6 rather than of the business as a whole.

The figure given for net assets in the abbreviated balance sheet forming part of the statutory abbreviated accounts for the Company for the year ended 31 March 2014 is £439,755. This includes fixed tangible assets of £50,402, which it appears to be common ground comprised the book value of the Lease and attendant Fixtures and Fittings (see Mr Aslin’s report at paragraph 3.2.16, referring to Mr Brewer’s report at paragraph 8.3 and 8.4). The price actually paid for the Lease and Fixtures and Fittings respectively was £5,000 and £25,000; a total of £30,000. The Applicants have not alleged that the Lease and the Fixtures and Fittings were sold at an undervalue. In the absence of any such challenge, in my judgment, for present purposes, the court should proceed on the basis that the Lease and the Fixtures and Fittings were sold at market value. On that basis the net assets figure falls to be adjusted by the sum of £20,402, bringing the net asset figure down to £419,353. Absent any further adjustments which the parties may invite me to make following receipt of this judgment, the value of goodwill as at March 2015 was therefore £85,647 (£505,000 minus £419,353).

It will be noted that even absent the adjustment of £20,402, the value of goodwill would stand at £65,245 (£505,000 minus £439,755); considerably more than £5000.

For all of these reasons, I find that the transfer of goodwill was at an undervalue.

In the light of my earlier findings, I can deal with this issue fairly briefly. Both directors knew of and participated in the Assignment; Mr Akhtar instructed the solicitors and signed off the transactional documentation, whilst Mr Yalcinkaya dealt with Mr Tarim. As I have found, both directors knew by the second half of 2014 that the Company was or was likely to become insolvent. On the evidence which I have heard and read, I am satisfied on a balance of probabilities that by the time of the Assignment, both directors knew that a substantial judgment had been entered against the Company, that a winding up petition had been presented and that liquidation was imminent. Section 172(3) of the Companies Act 2006 is therefore engaged.

In my judgment, the directors plainly acted in breach of their duties to the creditors of the Company as a whole in selling off assets of the Company, at a price which they must have known to be an undervalue, at a time when they knew that the Company was insolvent, knew that a winding up petition had been presented and knew that liquidation was imminent. In the absence of any evidence suggesting that the directors considered the interests of the Company’s creditors as a whole when entering into the Assignment, I consider it legitimate to conclude that they did not. It follows that for the purposes of s.172 CA 2006, the objective test is engaged: Re HLC Environmental Projects at [92]. The court must ask itself whether an intelligent and honest man in the position of a director of the company concerned could, in the circumstances, have reasonably believed that the transaction was for the benefit of the creditors as a whole. The answer is plainly no. I find both directors acted in breach of s.172(3) CA 2006. I also find that both directors used their powers for improper purposes, contrary to s.171 CA 2006. Accordingly, the claim in misfeasance brought against them is made out.

By his witness statement and in oral testimony, Mr Tarim claimed that he did not know at the time of the Assignment that he was purchasing the goodwill of the Company. I reject his evidence on this issue. It was not pleaded that Mr Tarim didn’t know that he was buying the goodwill. It was not mentioned in correspondence. In 2020, Mr Tarim’s solicitor in these proceedings, Mr Ahsak, filed a witness statement stating, on instruction, that Mr Tarim did know that he bought the goodwill but just thought that he had paid the right price for it (Ahsak (1) 11 December 2020 paragraph 6). The passage merits quoting. By this stage Mr Ahsak had been instructed by Mr Tarim on the case for about a year:

I would add that Mr Tarim’s own conveyancing solicitors, Arlington Crown Solicitors Limited, drafted the Goodwill Assignment. It is inconceivable that they would have done so without instructions.

Moreover this was not, as Mr Salis sought to suggest, simply a mis-recollection due to the passage of time. Mr Tarim went on to claim (at paragraph 32 of his witness statement) that when he found out that he had purchased the goodwill (which in context he claimed to be in late 2019), he contacted his previous solicitor at Arlington Crown Solicitors Limited and that his solicitor had agreed ‘that there was a mistake and that I had only wanted to purchase the lease and the fixtures and fittings, and not the business’. As put by Ms Julian in closing, it is inconceivable that Mr Tarim’s own solicitors were ‘on a frolic’, drafting a deed of assignment of goodwill without instructions to do so. It is also inconceivable that Arlington Crown would later tell Mr Tarim in late 2019 that they had drafted up a deed of assignment of goodwill by mistake. On the evidence as a whole, I am satisfied that this was a further untruth on the part of Mr Tarim – and an untruth about fairly recent events (late 2019) which could not be airbrushed out as simply a misrecollection due to the passage of time.

In closing Mr Salis accepted that it was ‘obvious’ that Mr Tarim must have known of the assignment of goodwill at the time. He submitted however the failings of Mr Tarim’s evidence on this issue were of ‘no real relevance in assessing culpability’. I reject that submission. Mr Tarim was clearly seeking to distance himself from the assignment of goodwill. The untruths he told around this issue had a consistency to them. I have already mentioned the alleged conversation with Arlington Crown in late 2019. In oral testimony Mr Tarim also initially denied that the assets assigned to him had included the Company’s laptop and desk top computers, stating ‘as I didn’t get the business, I was not interested in their system’. He later had to admit that he had taken an assignment of the Company’s computers.

The question is why Mr Tarim was so keen to distance himself from a purchase of the goodwill. On the evidence which I have heard and read, I am satisfied that he sought to distance himself from a purchase of the goodwill because he knew by the date of the Assignment that the price agreed for goodwill was considerably less than market value and that the Company was insolvent and about to go into liquidation.

In cross-examination, he stated that he knew that the Company was not doing well. He said that he ‘knew some of the suppliers’ and knew that ‘they were not keeping up payments on time’. He added ‘If a company is not paying on time, there is a problem with the company.’ He said that when he visited the market stand in the lead-up to the Assignment, ‘they said we are going to close the business’. He said that ‘they were already in a bad situation. I could see that’. Later in cross-examination he stated ‘Erdal Yalcinkaya told me that the company had too much on credit and could not collect money. Don’t remember when but it was around time I was trying to buy the place’

His pleaded reliance upon provisions of the 2015 Agreement warranting solvency (et al) fell apart in cross examination when he admitted that he hadn’t read the transactional documentation and was not aware of these provisions at the time of the Assignment.

When it was put to him that he always knew that he had acquired more than just the market stand, he responded: ‘if I had known, I wouldn’t have signed the document. What happened later on is my solicitor’s fault’ adding ‘how can you transfer goodwill of a company in liquidation?’

At a later stage in cross examination, paragraph 6 of Mr Ahsak’s statement was read to him, Ms Julian putting:

My note of Mr Tarim’s response reads:

It was at about this stage of the cross-examination that Mr Salis interrupted, in what appeared to be an inappropriate attempt to steer Mr Tarim away from any damaging admissions, suggesting that Mr Tarim had prefaced his remark with an ‘if’. Mr Tarim then sought to ‘correct’ himself, asserting that he had found out that the Company had gone into liquidation after he spoke to Norri Ahsak (in context late 2019, which I find was untrue), adding ‘if I’d known I wouldn’t have gone close to it’ (emphasis added)

Even if the testimony summarised at paragraphs 202 to 203 above is left out of account, however (and in this regard I should say that Mr Salis’s note of the responses does not accord exactly with mine), on the evidence (bar paragraphs 202-3) as a whole, I am satisfied on a balance of probabilities that Mr Tarim knew in February 2015 (or at the very latest early March 2015, prior to the Assignment) that a winding up petition had been presented against the Company.

Mr Tarim admitted that Alton & Co, (who acted as the accountants of both the Company and TL and were known to Mr Tarim), had warned him not to buy the business. He said that ‘Alton did tell me not to buy the business because it was not in a good position’. When I asked him whether he had told Arlington Crown that the Company was not in a good way, he responded:

He then gave evidence that when he spoke to his solicitors, Arlington Crown, about it, they had told him that the purchase ‘would not cause any trouble’ because he was ‘just buying the stand’. I reject Mr Tarim’s evidence on this issue. Arlington Crown knew full well that Mr Tarim was buying more than the stand; it was they who drafted the Goodwill Assignment. Moreover, the advice that Arlington Crown is said to have given makes no sense. On the evidence as a whole, I am satisfied that Mr Tarim has fabricated the advice he claims to have received in a conversation with Arlington Crown prior to the Assignment, in an attempt to lay the blame on them.

In re-examination, Mr Tarim was again asked when he first heard about the winding up petition. He said that it was ‘probably from suppliers we work with’ but that he did not remember the exact date. When asked ‘which year’, he replied ‘must be around 2015, March or February’.

Mr Tarim was adamant that Mr Yalcinkaya had not mentioned the petition to him. He said that they had ‘never talked about it’. I reject his evidence on this issue. For reasons already explored, it is clear that the Assignment was not at arms-length and that the timing of Mr Tarim’s interest in the Western International Market was far from coincidental. I refer to paragraphs 133-150 above. On the evidence as a whole, I am satisfied that Mr Tarim knew the petition was coming long before it was presented.

On the evidence that I have heard and read, I am further satisfied that Mr Tarim knew in February 2015 (or at any rate, prior to the Assignment) that the petition had been presented. On a balance of probabilities, I am satisfied that Mr Yalcinkaya told him. Mr Tarim mentioned February 2015 not once, but twice, in unguarded moments in his oral testimony. Again, I also refer to paragraphs 133-150 above.

I am further satisfied that Mr Tarim knew of the winding up order at or around the time that it was made. I reject Mr Tarim’s evidence that he was unaware of the winding up order until much later. A sealed copy of the winding up order was sent to the market stand as the registered office of the Company. Even if Mr Tarim did, as he suggested in evidence, simply throw away any correspondence addressed to the Company without reading it, Mr Yalcinkaya continued to work at the market stand after the Assignment; in my judgment it is inconceivable that Mr Yalcinkaya would not have mentioned the fact that a winding up order had been made. Moreover, TL, for whom Mr Tarim worked, was one of the Company’s largest creditors: and Mr Tarim’s evidence was that he knew a number of the Company’s other suppliers owed money by the Company. I also refer to paragraphs 133-150 above. Taking all such matters into account, it is in my judgment inconceivable that Mr Tarim would not have known of the winding up order at or around the time that it was made. On the evidence as a whole, I am satisfied that he did.

For all these reasons, on the evidence as a whole I am satisfied that Mr Tarim knew prior to the Assignment (i) that the Company was insolvent (ii) that a winding up petition had been presented against the Company and (iii) that liquidation of the Company was imminent. I am further satisfied that Mr Tarim knew of the winding up order at or around the date that it was made. I so find.

On the evidence as a whole, I am also satisfied that at all material times both prior to and at the time of the Assignment, Mr Tarim knew that the price of £5000 agreed for goodwill was materially less than market value. Again I refer to paragraphs 133-150 above. By the time of the Assignment, Mr Tarim was an experienced businessman. On the evidence which I have heard and read, I am satisfied that the reason that he did not trouble himself with any meaningful due diligence or obtain a professional valuation of goodwill before agreeing a price was that he knew that on any footing, the assets to be transferred on the goodwill assignment (which included the business name and customer list for a business consistently turning a six figure profit) were worth considerably more than he was paying for them.

Mr Salis urged against this conclusion, pointing to the fact that Mr Aslin, an expert valuer, had valued the goodwill at between £0-£5,000. Mr Aslin’s valuation, however, does not assist Mr Tarim in this regard, as it is based on a number of premises introduced by Mr Tarim in his witness statement which I have found to be false, including several that I am satisfied that Mr Tarim knew to be false, such as the premise that (i) there is no such thing as an established customer base in the wholesale fruit and vegetable trade (ii) the Company had no established customer base (iii) no customer or supplier databases were included as part of the assignment of goodwill (iv) the Company’s business name had no value.

Mr Salis also sought to rely upon the breakdown of the sale price prepared by Alton & Co. In my judgment little turns on this. Alton & Co were not instructed by Mr Tarim or TWL to advise them on value and, by the time that the breakdown was prepared, a global value of £35,000 had already been agreed. I also take into account the fact that Alton & Co actively warned Mr Tarim not to go ahead with the purchase.

Overall, on the evidence which I have heard and read, I am satisfied that at all material times prior to and at the time of the Assignment, Mr Tarim had actual knowledge that in selling the Company’s goodwill to him (i) at an undervalue (ii) after presentation of a winding up petition (iii) at a time when the Company was insolvent and liquidation was imminent, the directors were exercising their powers for an improper purpose and were not acting in the best interests of the Company’s creditors as a whole.

Moreover even if I am wrong and Mr Tarim did not have actual knowledge that the directors were exercising their powers for an improper purpose and were not acting in the best interests of the Company’s creditors as a whole, on the evidence which I have heard and read, I am satisfied that Mr Tarim had constructive knowledge of the same by (i) wilfully shutting his eyes to the obvious (widely known cashflow difficulties, haste, Mr Yalcinkaya’s relationship with TL, the Company’s relationship with TL, no proper marketing, low price, no valuation, transfer of the Company’s computers/ customer and supplier databases, Mr Yalcinkaya’s wish to continue working at the stand) (ii) wilfully and recklessly failing to make such enquiries as an honest and reasonable man would make (company search, professional valuation, legal advice on s.127) and/or or (iii) by knowing of circumstances which would put an honest and reasonable man on enquiry (see factors listed at (i) above): Baden and Others v Societe Generale Pour Favoriser le Developpment du Commerce et de L’industrie en France SA [1993] 1 WLR 509 at [250].

In my judgment, Mr Tarim’s knowledge can and should be imputed to TWL. At all material times, he was sole director and sole shareholder of TWL. On the evidence which I have heard and read, I am satisfied that at all material times, Mr Tarim was the directing mind and will of TWL: El-Ajou v Dollar Land Holdings Plc (No.1) [1994] BCC 143 at 150-1.

For reasons already explored, the claim in misfeasance against the directors is made out. Pursuant to s.212 IA 1986, they shall be ordered to contribute a sum to the Company’s assets together with interest at a rate to be determined. Absent any further adjustments which the parties may invite me to make following receipt of this judgment, I propose to order that they pay the sum of £80,647 (the value of the goodwill as at March 2015 less £5000) together with interest at a rate to be determined. I will hear submissions on any further relief sought against the directors on the handing down of judgment.

As against Mr Tarim and TWL, the Applicants have made out their claim in knowing receipt. On the evidence which I have heard and read, I am satisfied that both Mr Tarim and TWL received and benefited from property of the Company in breach of trust, with either actual or constructive (blind-eye) knowledge of the breach, in circumstances in which it is unconscionable for them to retain the benefit of their receipt: Baden [1993] 1 WLR 509 at [250]; BCCI (Overseas) Ltd v Akindele [2001] Ch 437 at 455D-F. For these purposes I am satisfied that the knowledge of Mr Tarim, as the directing mind and will of TWL, falls to be imputed to TWL. A knowing recipient is under a duty to restore the trust property immediately: Williams v Central Bank of Nigeria [2014] UKSC 10 at [31].

Under the ‘knowing receipt’ head of their application, therefore, the Applicants are entitled, as against each of Mr Tarim and TWL on a joint and several basis, to equitable compensation in the sum of the value of the goodwill at the date of receipt, less £5,000. Subject to any further adjustments which the parties may invite me to make following receipt of this judgment, such compensation will comprise the sum of £80,647 (the value of the goodwill as at March 2015 less £5000) together with interest at a rate to be determined. For these purposes I am satisfied that there was no material difference in the value of the goodwill as at 12 March 2015 and as at the date of receipt of the same by TWL shortly thereafter.

Under the head of knowing receipt, the Applicants are also in principle entitled to seek from Mr Tarim and TWL an account of the profits which they derived from the Assets.

In closing submissions, Ms Julian confirmed that the Applicants would await my findings before electing on which head or heads of relief to pursue.

Whilst strictly unnecessary, in the light of my conclusions on knowing receipt, I would add that on the evidence which I have heard and read, subject to one caveat, the Applicants have also made out their restitutionary claim against Mr Tarim and TWL for damages in lieu of the return of the goodwill: Relfo Ltd (in liquidation) v Varsani [2014] EWCA Civ 360 at [69-84] and [96-97]. The one caveat, upon which I will require further submissions in the event that final relief is sought under this head, is whether restitutionary relief may be sought against both Mr Tarim and TWL, in light of Henderson J’s observations in Investment Trust Companies v HMRC [2012] EWHC 458 (Ch) at [68](b), when considered against the backdrop of the ‘direct providers only’ rule. In light of my earlier conclusions, the point is likely to be academic, but I mention it for the sake of completeness. Again, subject to any further adjustments which the parties may invite me to make following receipt of this judgment, damages in lieu of return under this head would stand in the sum of £80,647 (the value of the goodwill as at March 2015 less £5000) together with interest at a rate to be determined.

In the light of my findings and conclusions, it is unnecessary for me to address the Applicants’ remaining heads of relief, including those sought in respect of the constructive trust claim.

It remains for me to thank Counsel for their helpful submissions.

I shall hear from Counsel on the handing down of this judgment on the consequential relief sought.