Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v Kent (aka John Kent), Court of Appeal - Commercial Court, February 22, 2018,  EWHC 333 (Comm)
|Resolution Date:||February 22, 2018|
|Issuing Organization:||Commercial Court|
|Actores:||Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan v Kent (aka John Kent)|
Case No: CL-2016-000265
Neutral Citation Number:  EWHC 333 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
LORD JUSTICE LEGGATT
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Hefin Rees QC and Samar Abbas (instructed by Denning Legal) for the Claimant
David Lewis and Jack Dillon (instructed by Simons Muirhead & Burton) for the Defendant
Hearing dates: 22-23, 27-30 November and 4, 6, 12-13 December 2017
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LORD JUSTICE LEGGATT:
The story is all too familiar. Two friends go into business together. The business founders, their friendship falls apart and they end up in a dispute on opposite sides of a courtroom.
The claimant in this case is Sheikh Tahnoon Bin Saeed Bin Shakhboot Al Nehayan (``Sheikh Tahnoon''). He is a member of the Royal Family of Abu Dhabi and a resident of the United Arab Emirates. The defendant is Ioannis (or John) Kent, a Greek businessman. In 2008 Mr Kent set up a hotel business in Greece with the aim of establishing (by lease, purchase or franchise) a brand of luxury hotels under the name of Aquis. In October 2008 Sheikh Tahnoon agreed to invest in the business as an equal shareholder with Mr Kent. Their joint venture was later expanded to include an online travel business called YouTravel. It is agreed that Sheikh Tahnoon ultimately contributed a total of 31.1m of share capital to the Aquis and YouTravel companies. The final 6.5m was paid between December 2011 and April 2012 in exchange for equity which increased his share of the group to 70%. By then the business was critically short of cash and on the brink of collapse. In early April 2012, representatives of Sheikh Tahnoon, to whom he had by now delegated his dealings with Mr Kent, decided that Sheikh Tahnoon should not support the business any longer and that he should instead separate his interest from that of Mr Kent.
A scheme was devised to restructure the Aquis and YouTravel companies and to provide for Mr Kent to repay to Sheikh Tahnoon part of the capital contribution which Sheikh Tahnoon had made to the business. To implement this scheme two agreements were made between Sheikh Tahnoon and Mr Kent, both dated 23 April 2012. The first, described as the Framework Agreement, provided for the demerger of the business and contained certain undertakings and indemnities given by Mr Kent. The second was a promissory note by which Mr Kent agreed to pay Sheikh Tahnoon a sum of 5.4m in annual instalments between 1 November 2013 and 1 November 2018. These two agreements are at the centre of the present dispute.
In this action, Sheikh Tahnoon claims the value of the promissory note, which remains unpaid, along with further sums allegedly due under the Framework Agreement. The total amount claimed by Sheikh Tahnoon from Mr Kent is just over 15m.
It is Mr Kent's case that his consent to the Framework Agreement and the promissory note was obtained by unfair means, including threats of physical violence and economic duress, and in breach of fiduciary duties and/or a contractual duty of good faith which Sheikh Tahnoon allegedly owed Mr Kent. Mr Kent has not sought to rescind the Framework Agreement and ultimately accepted at the trial that the promissory note cannot be separately rescinded and is therefore enforceable. But he denies that any further sum is owed under the Framework Agreement and has counterclaimed for an account of profits or damages which include any amount which Mr Kent is held liable to pay to Sheikh Tahnoon under the Framework Agreement and the promissory note.
Before I address the issues in more detail, I will give a narrative history of the parties' business relationship. Tracing this history is necessary in order to determine what legal duties Sheikh Tahnoon and Mr Kent owed each other and what breaches, if any, of those duties were committed and to what effect - before, at the time of and after the signature of the Framework Agreement and promissory note. In the narrative below I will refer to only a small part of the large amount of evidence adduced at the trial about events which spanned a period of over five years. As well as many bundles of documents, this evidence included lengthy testimony from the parties themselves and other witnesses. Although I have taken account of the whole of the evidence, in the interests of economy I will focus and make findings of fact on those aspects of the history which seem to me most salient for the purpose of deciding the issues in dispute.
After giving this factual narrative I will consider in turn the Sheikh's claim and Mr Kent's counterclaim.
B. Factual narrative
Mr Kent lived and worked in the UK for some 15 years before returning to Greece in 2006. In 2008 he established the Aquis group of companies with a holding company in Cyprus (``Aquis Cyprus'') and a Greek subsidiary called Aquis Société Anonyme of Hotel, Tourism and Technology (``Aquis SA''), which was to be the main operating company of the group. At that time Mr Kent was already running an online hotel booking service for travel agents and tour operators called YouTravel and came up with the idea of combining this business with a hotel chain. He planned to start by leasing two or three hotels and then expand as quickly as he could. Part of his plan was to upgrade hotels to a higher standard with the assistance of grants available from the Greek government.
The first board meeting of Aquis SA was held on 4 June 2008. In addition to Mr Kent there were six other members of the board. One of them was Mr Nicholas Kouladis, a lawyer who was a close friend of Mr Kent and had also lived in the UK, where he had been a law lecturer at Southampton University and Honorary Consul for Greece in the south of England. Mr Kouladis was a witness at the trial. At the board meeting on 4 June 2008 decisions were made to proceed with renting office premises in Athens and negotiating the lease of two hotels in Corfu.
The boat trip
Mr Kent first mentioned his new business to Sheikh Tahnoon during a boat trip at the end of June 2008. The two men had previously met a few times socially. In June 2008 Sheikh Tahnoon decided to spend a few days with some friends cruising around some Greek islands on a yacht (possibly at Mr Kent's suggestion). Sheikh Tahnoon asked Mr Kent to make the arrangements for the trip, which were made through YouTravel, and to join his party. It is common ground that during this trip there was a conversation in which Mr Kent explained his business plans to develop a chain of hotels. In their evidence at the trial, however, the two men gave very different accounts about the extent of the interest expressed by Sheikh Tahnoon at this stage.
Mr Kent said that, when he had explained his plans, Sheikh Tahnoon shocked him by saying that it would be his honour to become Mr Kent's partner if Mr Kent would have him. Sheikh Tahnoon then shook Mr Kent's hand. Mr Kent said that he was very excited and took the handshake to mean that they had made a legally binding agreement to go into business together. Sheikh Tahnoon denied that any such agreement was made. He recalled the conversation as a brief one with other people present and said that no serious business discussion took place. He did say, however, that he was intrigued by what Mr Kent described and was interested in the idea of working with someone who seemed to have extensive experience of tourism and the luxury hotel market.
I think it likely that in this initial conversation Sheikh Tahnoon expressed rather more enthusiasm for participating in the Aquis business than he now recalls. But I reject as fanciful Mr Kent's claim that he believed at the time that they had made a legally binding agreement. Mr Kent does not suggest that any concrete terms were discussed. Sheikh Tahnoon knew nothing more about the business than he was told by Mr Kent and it is inconceivable that such a general discussion in a holiday setting could have been understood to create a binding contract. Nevertheless, I think it likely that Mr Kent read more into the enthusiasm expressed by Sheikh Tahnoon than was at that stage warranted - a pattern of misunderstanding which was to recur. My impression of Mr Kent is of a man inclined to over-optimism for whom two plus two can readily equal five. Sheikh Tahnoon struck me as a warm-hearted and ingenuous person who may have responded with spontaneous excitement to Mr Kent's grandiose plans without recognising the expectations that he had raised. Although the two men became close friends, their combination of personalities was not a prudent basis for a business relationship.
A few days after the boat trip, Mr Kent flew to Dubai - I am sure for the purpose for following up the Sheikh's expression of interest in the Aquis business. Sheikh Tahnoon arranged for Mr Kent to meet Mr Berney Rozario who worked in his private office and helped to manage his financial affairs. Mr Rozario was a witness at the trial. Arrangements were made for Mr Rozario to travel to Greece to see the hotels which Aquis had already agreed to lease and other hotels which were available to lease or buy. The trip took place in September 2008. Mr Kent took Mr Rozario to visit hotels in Rhodes, Crete, Kos and Corfu. Mr Rozario was very impressed and reported back in glowing terms to Sheikh Tahnoon. On 20 September 2008, Sheikh Tahnoon messaged Mr Kent on Facebook, writing that ``Berney never expected half of w[h]at you showed him'' and saying: ``thank you for sharing this with me. I hope we both enjoy the outcome''.
The agreement to invest
On 3 October 2008 Mr Kent travelled to the UAE for five days. His trip had a dual purpose. One purpose was, as Sheikh Tahnoon said in evidence, ``to thrash out the precise contours of my involvement'' in the Aquis business. The other was to introduce Mr Kent to...
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