Case No: 2014-115
Neutral Citation Number: [2015] EWHC 1608 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL

Date: 08/06/2015

Before :

MR JUSTICE HAMBLEN
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Between :

	Marksans Pharma Limited	Claimant	
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	Peter Beck & Partner VVW GmbH	Defendant	

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Michael Swainston QC and Richard Blakeley (instructed by Pennington Manches LLP) for the Claimant
Richard Coleman QC and Giles Wheeler (instructed by Bircham Dyson Bell LLP) for the Defendants

Hearing dates: 11, 12, 13, 14 May 2015
 
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Judgment
Mr Justice Hamblen:

Introduction

1.	The Claimant (“Marksans”) seeks specific performance of the third and last stage of a Settlement Agreement dated 22 February 2013 (“the Settlement Agreement”) with the Defendant (“PBP”) pursuant to which Marksans was to repurchase 15,278 bonds held by PBP for US$5.25 million.

2.	PBP claims that it is entitled to rescind the Settlement Agreement for misrepresentation, alternatively it claims damages.  It also denies Marksans’ entitlement to an order for specific performance.

3.	The misrepresentation alleged is that during the course of a telephone conversation on 13 February 2013 it was falsely represented on behalf of Marksans that it had “bought back all of the other outstanding bonds”.  Marksans denies that any such statement was made.  The core dispute between the parties is whether or not the alleged representation was made.

Factual background

General background

4.	Marksans is a company incorporated in India and is engaged in the business of pharmaceutical research, manufacturing and supply.  At all material times its managing director was Mr Mark Saldanha and its chief financial officer was Mr Jitendra Sharma, both of whom gave oral evidence at trial and still hold those positions in the company.   

5.	PBP is an investment fund.  Its co-founder and shareholder is Mr Bernd Högel.  He runs the company with his brother, Mr Frank Högel.  It was Mr Bernd Högel (“Mr Högel”) who was involved in all dealings with the Marksans bonds.  He gave oral evidence at trial.

6.	On or around 8 November 2005 Marksans issued US$50 million zero coupon foreign currency convertible bonds in order to raise money for its business (“the bonds”).  The bonds were due to be redeemed on 9 November 2010.

7.	By 2010 Marksans faced financial difficulties which meant that it was unable to redeem the bonds when they fell due and faced a potential liability of around US$63 million in respect of the bonds.  After that date the bonds could still be traded through the Euroclear system until such time as they were fully redeemed or cancelled.

8.	Between June 2009 and December 2010 PBP purchased bonds with a face value of US$26.918 million for US$6,765,712.50: in other words, at an average price of 25.1%.  As later became apparent, the legal owner of the bonds was in fact Mr Högel who held them to the order of PBP.

9.	Marksans attempted to negotiate settlements with the bondholders, but by November 2011 matters had not significantly improved.  On November 2011 it entered into a procedure under the Indian Sick Industrial Companies (Special Provisions) Act 1985, which necessitated Marksans self-referring to the Board for Industrial and Financial Reconstruction (“BIFR”).   On 17 January 2013 Marksans was declared a sick company by BIFR.

10.	Marksans mandated Mr Bhavesh Parekh of Whitewater Corporate Advisory Private Limted to conduct settlement negotiations with bondholders.  It is Mr Parekh who is alleged to have made the misrepresentation during a telephone conversation with Mr Högel on 13 February 2013.  He gave oral evidence at trial.

11.	The various repurchases/settlements made by Marksans in relation to the bonds before, after and including the Settlement Agreement may be summarised as follows:

(1)  On 17 July 2009, Marksans bought US$6 million worth of the bonds back from the market for 24.63% of their nominal value.

(2) On 14 April 2010, a holder of a single bond (with nominal value of US$1,000) converted its holding into equity.

(3)  On 22 November 2011, Marksans bought US$6million worth of the bonds back from the market for 20% of their nominal value.

(4)  On 1 October 2012, Marksans signed a Memorandum of Understanding with Yalegrove Limited under which it was agreed that Marksans would buy all of their bonds (which had a nominal value of US$9.871 million) back from them on mutually agreeable terms. That Memorandum of Understanding recorded in the preamble that Marksans would pay 32% plus reasonable interest for delayed payment “to be determined subsequently”. Marksans ended up paying the increased sum of 34.36% of the nominal value.  A formal settlement agreement with Yalegrove was made on 19 February 2013, but it was Marksans’s case that this was merely to formalise and record the agreement that had already been reached and performed.  In fact Yalegrove was an associated company of Marksans and Marksans had funded its purchase of the bonds from ICICI.

(5)  On 22 February 2013, Marksans entered into the Settlement Agreement with PBP, under which it agreed to buy back US$26.91 million worth of the bonds for 34.36% of their nominal value.

(6)  On 30 June 2014, Marksans entered into a Memorandum of Understanding with a further bondholder, pursuant to which it bought back US$1.149 million worth of the bonds for 30% of their nominal value. That bondholder only came forward and identified itself after these proceedings had been issued.

(7) There remain 61 bonds (with a total nominal value of US$61,000) that are unaccounted for. The holder or holders of those bonds have still not come forward and identified themselves.

12.	PBP submitted that the Yalegrove transaction was relevant to the credibility of Mr Sharma and Mr Saldanha (but not Mr Parekh).  First, it submitted that the transaction involved the misleading of ICICI by Marksans as to the true identity to the purchaser and evidenced a willingness to use underhand tactics if necessary to acquire the bonds.  Secondly, it submitted that Marksans was embarrassed by the transaction and had sought to conceal the truth in relation to Yalegrove’s acquisition of bonds from ICICI.
13.	I accept that the evidence supports a desire by Marksans to conceal that it was ultimately behind the purchase.  ICICI had stated that it did not want to sell its bonds to an Indian company or to Marksans.  I also accept that Marksans was coy about this in its disclosure (which involved redactions) and its evidence.  However, it has not been established that the dealings involved any illegality, the essential underlying facts have been explained in evidence and in my judgment the transaction does not raise significant credibility concerns.
The negotiations leading to the Settlement Agreement

14.	In November 2012, Mr Parekh received instructions to make contact with PBP to see whether PBP was interested in engaging in settlement talks in regard to the bonds it held. On 21 November 2012, he sent an email to PBP’s director, Mr Frank Högel, introducing himself and saying that he wanted to speak to him in relation to the bonds.

15.	The same day, Mr Högel replied by email to Mr Parekh saying that PBP’s CEO had forwarded him Mr Parekh’s email and stating that he was dealing with the Marksans matter.

16.	Between that email and 10 December 2012, Mr Parekh spoke to Mr Högel on the telephone to enquire about the basis on which PBP would be willing to sell its bonds and thereafter there was periodic contact between them.

17.	On 18 January 2013, Mr Parekh received an email from Mr Högel in which he said “When it comes to a settlement of our FCCB’s I would like Marksans to make us a realistic offer”.

18.	Following that email, there were some telephone conversations between Mr Parekh and Mr Högel in which they discussed the financial constraints that Marksans was encountering and discussed what range of settlement terms would be mutually agreeable. Those calls ended with Mr Högel saying that he would think it over and come back to Mr Parekh.

19.	On 28 January 2013, Mr Högel sent an email to Mr Parekh in the following terms:
“I did some more thinking and arrived at the bottom line price of USD 10mn for the USD 26,918,000 of FCCB’s we hold. If Marksans pays this price within a reasonable time, then, we would have a deal.” (“the 28 January email”).

20.	Later that day, Mr Parekh had a telephone discussion with Mr Sharma in which they discussed the terms on which Marksans would be willing to settle with PBP.  Mr Sharma said that Marksans would need at least a year to make the payment in a few tranches. Following that call, Mr Sharma sent an email to Mr Parekh summarising what they had discussed. In the email, he also summarised the position as to the bonds that were outstanding, and said:
“Another thing we need to keep in mind is that after this settlement, there will be a balance of USD 1.33mio…. We need to take care of balance 1.33 mio also before closing with Trustees”.
The same US$1.33 million was mentioned in a later email from Mr Sharma to Mr Parekh in which he stated that this was “To be discussed”.  Mr Parekh was therefore well aware that there were approximately US$1.33 million worth of bonds outstanding (in fact the correct figure was US$1.21 million).

21.	At around that time, Mr Parekh received instructions from Mr Sharma and Mr Saldanha to make an offer to pay PBP US$8 million for its bonds.  Mr Parekh made that offer to Mr Högel over the telephone, but he rejected it, saying that he wanted US$10 million.

22.	Mr Parekh then received instructions to offer Mr Högel the US$10 million he had asked for, but to be paid in instalments over a period of 18 months, and also to make an alternative offer to pay the sum of US$9 million over a period of 12 months.  Mr Parekh made those offers to Mr Högel in ensuing telephone discussions. In those discussions, Mr Högel made a counter offer to sell the bonds for the slightly increased sum of US$10.46 million, on the basis that that sum would be paid in five tranches: US$2 million after signing the contract; US$2 million after three months; US$2.1 million after 12 months; US$2.15 million after 16 months and US$2.18 million after 18 months. He confirmed that proposal in an email on 6 February 2013 in which he made clear that the increase in amounts of the later instalments was to account for “loss of interest and increased risks.”

23.	Mr Sharma and Mr Saldanha told Mr Parekh that those terms were not acceptable. They also told him around this time that if Mr Högel was concerned about loss of interest and increased risk because of the 18 month payment plan, PBP could accept the offer to pay US$9 million over the shorter period of 12 months that had been put to him.

24.	A few days after Mr Högel’s email of 6 February 2013, Mr Saldanha came to Mr Parekh’s office to sit in on a call to Mr Högel. In that call Mr Parekh told Mr Högel that those increased payments were not agreed. After some discussion, the parties appeared to be close to an agreement that PBP would sell all of its bonds to Marksans for US$10 million payable over a period of 18 months.

25.	On 13 February 2013, Mr Parekh was scheduled to have a call with Mr Högel at which Mr Saldanha was also going to be present.  Mr Parekh rang Mr Högel who told him to give him some time as he was sending something to him.

26.	Shortly thereafter Mr Parekh received an email from Mr Högel.  The email said that that the situation had changed, that PBP had sold US$2.5 million worth of bonds to another buyer, who also wanted to buy another US$2.5 million worth. Mr Högel set out the terms on which PBP was willing to sell the remainder of the bonds it held to Marksans, but indicated that he wanted Marksans’ agreement to those terms that week; otherwise he might go ahead and sell the other US$2.5 million worth of the bonds to the other buyer. At the end of the email Mr Högel said that he thought that the end buyer was Marksans or their promoters (i.e. meaning that the buyer who had purchased the US$2.5 million worth of bonds from him was actually doing that for Marksans).  In fact both the sale (“the false sale”) and the proposed further sales were a fiction.  They were what Mr Högel described as a “negotiating tactic” designed to enable him to hold back some bonds from the proposed sale.  

27.	Mr Parekh responded by email shortly afterwards saying “No for sure” by which he meant that whoever Mr Högel was dealing with was not seeking to buy the bonds on Marksans’ behalf (“the “No for sure” email”).

28.	Mr Parekh knew from his discussions with Mr Sharma and Mr Saldanha that the new deal Mr Högel was proposing was not acceptable and that all of PBP’s bonds would need to be included. The main purpose of wanting to agree settlements with bondholders was to enable Marksans to raise the funds for the same. Any lender or investor would have been averse to providing funds for a partial settlement.

29.	Having discussed Mr Högel’s new proposal with Mr Sharma and Mr Saldanha, Mr Parekh telephoned Mr Högel to discuss it in the presence of Mr Saldanha.  Mr Parekh informed Mr Högel that Marksans could not do the deal he was proposing unless it meant Marksans purchasing all of the bonds that PBP held, and that that was not negotiable. He essentially told Mr Högel that the sale was a deal breaker and that the deal was off.  Mr Högel concluded by saying let him see what he could do about it.  It was during this conversation that the alleged misrepresentation was made that Marksans had “bought back” all the bonds other than those held by PBP.

30.	In his witness statement Mr Parekh said that “I believe that in this call we raised again the option to pay $9million over 12 months rather than $10 million over 18 months. He appeared interested in that.”  In cross examination it was suggested that this meant that Mr Parekh realised that the US$2.5 million sale was not definite and that the deal could be resurrected.  However, I accept the evidence of Mr Parekh and Mr Saldanha that this was not the case.  They took what Mr Högel had said at face value – US$2.5 million of the bonds had been sold and so the deal was off.  Mr Parekh was here referring to the deal as previously discussed and Mr Högel’s concluding words to their telephone conversation.   

31.	Mr Högel then sent an email to Mr Parekh saying that the US$2.5 million worth of bonds he had sold had “not settled yet”, suggesting that he had “leverage” and that he would try to reverse the deal he had done.  Again this was a fiction.

32.	Later the same day Mr Högel sent an email to Mr Parekh with an update stating:
“after a lot of hassle and cost we will be able to get the USD 2,5000,000 back. It means we need to add USD 250,000 to the USD 9,000,000 you offered within 12 months. USD 2,000,000 immediately and USD 2,000,000 after 3 months and the remainder of USD 5,250,000 until one year is over. It means Marksans needs to pay USD 9,250,000 within 12 months.”  
Again this was a fiction.  There had been no “hassle”, no “cost” and no consequent “need” to pay a further US$250,000.

33.	Mr Parekh was nevertheless instructed to close the deal on that basis and these were the terms that were eventually incorporated into the Settlement Agreement.  Mr Parekh informed Mr Högel over the telephone that the terms were acceptable and that he would send a draft settlement agreement.

34.	Following the email exchange on 14 February 2013, emails went back and forth between Mr Parekh and Mr Högel as they sought to agree the precise terms of the Settlement Agreement.  At no stage during those exchanges was there any mention of whether or not there were other outstanding bondholders. Nor was it ever proposed that any warranty to that effect should be included in the Settlement Agreement. 

35.	The Settlement Agreement was executed on 20 February 2013 but dated 22 February 2013. In summary, the Settlement Agreement provided that, on or before 8 March 2013, Marksans would pay PBP US$2 million and PBP would transfer 5,829 bonds (each of which had a face value of US$1,000) to Marksans (“the first tranche”); on or before 22 May 2013, Marksans would pay another US$2 million and PBP would transfer a further 5,820 bonds (“the second tranche”) and, on or before 22 February 2014, Marksans would pay US$5.25 million and PBP would transfer the remaining 15,278 bonds (“the third tranche”).

Events following the Settlement Agreement

36.	Following execution of the Settlement Agreement, Marksans paid the first instalment of US$2 million for the first tranche.
 
37.	On 3 May 2013, Mr Sharma forwarded an email and attachment to Mr Parekh from Deutsche Trustee Company Limited (the trustee of the bonds) (“DTC”) about a proposed written resolution of bondholders to effect a settlement in respect of bonds held by parties who had not come forward to identify themselves, and requested that they discuss it.

38.	Mr Parekh then had a telephone call with Mr Sharma and Mr Saldanha in which it was explained by Mr Sharma that, as the holders of 90% of the bonds outstanding needed to approve the resolution, and that no written resolution could therefore be passed without PBP (because the second and third tranches of bonds were still technically outstanding), they wanted to make sure that Mr Högel was on board with the resolution before any notice was sent out to the other bondholders, making their intentions for a resolution public. Mr Sharma also instructed Mr Parekh that they wanted to proceed with the second tranche under the Settlement Agreement within the next fortnight and, ideally, they wanted the second tranche to be executed before the notice to other bondholders was sent out.

39.	Mr Sharma followed up that call by confirming to Mr Parekh in an email of 3 May 2013 that Marksans wanted to execute the second tranche between the next week and 15 May 2013, and requesting that he make contact with Mr Högel.

40.	The same day, Mr Parekh sent an email to Mr Högel saying that Marksans was ready to execute the second tranche.  Mr Högel replied that day confirming that PBP was ready when Marksans was.

41.	On 7 May 2013, Mr Parekh received an email from Mr Sharma forwarding him an email from DTC and informing him that DTC might not wait before distributing the notice to bondholders about the proposed resolution, and asking Mr Parekh to “inform and take [Mr Högel] into confidence, whenever convenient to you”.  Mr Parekh responded the same day confirming that he would speak to Mr Högel.

42.	On 8 May 2013, Mr Parekh received an email from Mr Sharma attaching confirmation from Marksans’ bank that the second tranche funds had been debited and requesting that he forward it to Mr Högel, which he did by email that day.

43.	On 14 May 2013, Mr Sharma forwarded Mr Parekh confirmation that the second tranche trade had settled.  In his email, he said that they would inform DTC that they should send the notice to bondholders about the resolution.

44.	At trial PBP suggested that the Marksans’ witnesses had conspired to cover up Marksans’ proposal to pass a resolution of 90% of the bondholders to corral the remaining 10% until after the second tranche of bonds due under the Settlement Agreement had been transferred.  The contention was that this cover up was to prevent Mr Högel from discovering that he had been misled that he was the last bondholder.  I reject that case.  It is plain from Mr Sharma’s email of 7 May 2013 that there was a desire to take Mr Högel into Marksans’ confidence from that time and well before the second tranche went through on 14 May 2013.  That was to happen whenever “convenient” to Mr Parekh and I accept his evidence that he did make unsuccessful attempts to contact Mr Högel over the following days. 

45.	Mr Parekh finally got through to Mr Högel on 15 May 2013.  He told him that Marksans intended to seek a written resolution of the outstanding bondholders to force settlement in regard to the few outstanding bonds of which the holders had not come forward. He explained that, as the approval of owners of 90% of the outstanding Bonds was needed in order for the resolution to be passed, it was necessary for him to be on board with it.  Mr Högel did not raise any concern or complaint about there being other outstanding bondholders.

46.	Following that telephone conversation Mr Parekh emailed Mr Sharma the same day stating “We have already informed Bernie and he is fine”.

47.	Mr Högel denied in oral evidence that there was any such telephone call but I find that there was.  This is borne out by a later transcript of a Skype call which Mr Högel had with Mr Peter Giles in which he referred to this telephone conversation.

48.	During that conversation with Mr Parekh it would have been apparent to Mr Högel that there were other outstanding bondholders; they were the target of the resolution proposed.  On PBP’s case this was contrary to the representation which Mr Parekh had made but Mr Högel expressed no concern and seemed “fine” about what he had been told.

49.	The first reference to any possible representation comes in an email sent by Mr Högel to one of his brokers, Mr Weichhart, on 29 May 2013.  During the course of a discussion about possible outstanding Marksans bonds Mr Högel stated that:
“See the attachment. We made a contract to sell back our holdings to them. ⅓ of our selling back has happened already. But the next and final tranche is in about 10 months time.
They told us that we are the last piece remaining, but now they allude that more is outstanding. I can only assume that this will be a few million at best.
It is not clear how they want to achieve the few bonds outstanding going to them. They have also not alluded to how much they would pay.
I would be curious to know what you think of it.”

50.	Mr Högel did not, however, raise any issue about what he had been told with Marksans.

51.	There is then a document in which Mr Högel made various notes (“the Note to Self”).  This includes an entry at the top of the document dated 30 May 2013 (but out of chronological sequence) which records that:
“Bhavesh Parekh… who acted for Marksans had previously stated to us that he will not do the deal with us if we do not sell back all our FCCB’s to them.  This is after I alluded that I have or can sell some of our FCCB’s at a higher price.  HE TOLD US THAT MARKSANS HAVE BOUGHT BACK ALL OUTSTANDING FCCB’S EXCEPT OURS.  OBVIOUSLY THAT WAS A LIE.”

52.	PBP placed strong reliance on this document.  Marksans challenged the timing of this entry and suggested that it was made later.  The document’s metadata was examined by an IT expert who noted that it had last been modified on 21 March 2014 and that logically, as the last entry, that modification would have been to the top of the document.  However, any change of the document would be a modification and it was Mr Högel’s evidence that when he came back to a document he would commonly correct the typing, change the formatting or add highlighting and also that the most important entry would be at the top.  I shall return to this issue later but the matter was not raised with Marksans at the time that the “LIE” was purportedly noted by Mr Högel.

53.	Following the communications in May 2013 there was no further contact between the parties until the time came for payment of the third tranche.

54.	On 9 January 2014, Mr Högel was informed that Marksans was ready to execute that third tranche under the Settlement Agreement in the next week.

55.	Having received no response and also chased by telephone, on 13 January 2014 Mr Högel was sent a chasing email.

56.	On 13 January 2014, Mr Högel responded saying “I directed a question to the Trustee regarding Marksans, but have not heard back from them. As soon as I hear back from them I let you know.” 

57.	On 22 January 2014, Marksans wrote to PBP confirming that it was ready to execute the third tranche.  The letter was attached to an email from Marksans’ Company Secretary and Manager-Legal which referred to Marksans’ “readyness of paying the third and last one of the consideration for settling the remaining bonds in terms of the Settlement Agreement dated 22nd February, 2013”.  The letter stated:
“We are now ready to pay the third and last tranche and for the purpose have parked the consideration money of USD 5,250,000 with our Euroclear Agent. Kindly arrange to place a trade order for surrender of 15278 Bonds of the face value of USD 1,000 each with intimation to us so that we will place our trade order for matching and complete the settlement in terms of the settlement agreement.”

58.	On 22 January 2014, following Marksans sending that letter and having received no response, Mr Parekh spoke to Mr Saldanha and Mr Sharma and it was decided to call Mr Högel to see if they could find out why he was not responding. Mr Saldanha and perhaps also Mr Sharma came to Mr Parekh’s office for the call.  Mr Parekh called Mr Högel and asked him to confirm whether he was going to surrender the third tranche of bonds and he said that he was not. Mr Parekh asked him why not. At first he was unwilling to give an answer, but after Mr Parekh pressed him he said that he had seen that the trustee’s notice in May 2013 had stated that some bonds remained outstanding and that Mr Parekh had said that PBP was the last bondholder outstanding.  Mr Parekh said that he had not told him that PBP was the last bondholder and that, in any event, the bonds that were outstanding were of a face value of only about US$1.21 million and that the identity of these bondholders was not known. 

59.	At trial PBP criticised the evidence of the Marksans witnesses in relation to this telephone call.  It is submitted that there were inconsistencies between the various accounts given and that it is unlikely that Mr Sharma was present, as claimed.  It was also emphasised that Marksans had not recorded and acknowledged Mr Högel’s misrepresentation claim after he made it in the telephone conversation, the contention being that they did not set it out because it was true.  However, I am satisfied that Mr Parekh did deny the alleged misrepresentation during the telephone call.  It is correct that Marksans’ witness statement in the Indian injunction proceedings commenced shortly thereafter referred to Mr Sharma’s “understanding” of what transpired during the telephone conversation, which is curious language if he was present.  It is also correct that that evidence did not clearly identify Mr Högel’s misrepresentation claim.  However, that does not detract from the fact that it was denied from the outset by Mr Parekh.

60.	Following that telephone call, Mr Parekh sent an email to Mr Högel confirming that, based on what he had told him, it was understood that PBP did not wish to execute the third tranche as per the Settlement Agreement.  The email stated:
“Thanks for the call few minutes back. Based on the conversation, we understand that you do not want to execute transaction as per the agreement.
In such situation, the company is left with no other option but to recall the funds back and repay to the lending Bank. We shall await for one more day for your revert, failing which, the company shall reserve the rights to take corrective steps.”

61.	Mr Högel did not revert, the funds were taken back and “corrective steps” in the form of proceedings for injunctive relief before the Indian court and later the English court was taken.

62.	Marksans drew attention to the fact that Mr Högel’s immediate response to the Indian injunction was seemingly to consider ways to get round it.  PBP disclosed a draft email dated 29 January 2014 which was created at 17:26 that day, one hour and four minutes after Mr Högel received the Indian injunction. It shows Mr Högel proposing a transfer of the bonds, for no consideration (“per free delivery”) to Goldin Equities Ltd. He requested the recipient, Ms Margot Busch, to disguise the true ownership and “set up the transfer so that it’s not clear that the units are coming from Högel. Otherwise my trading partners will very soon know who the security deposit belongs to! If that’s possible”.   However, in the event he did not send the email and since the grant of injunctive relief there has been no further dealing with the bonds.

63.	In this connection Marksans also laid great stress on the fact that it has recently become apparent that the legal holder of the bonds is in fact Mr Högel rather than PBP, although the Settlement Agreement was made with PBP and there was a warranty that the bonds were owned by it.  I do not accept Marksans’ case that this was a deceptive ploy raising significant credibility concerns.  The evidence is that the bonds were and are held to PBP’s order, that PBP produced the bonds for the first two tranches and that bonds are frequently held through nominees. 

Whether the alleged misrepresentation was made

64.	Against the background of the findings made above I turn to consider the central issue in the case which is whether Mr Parekh made the alleged misrepresentation by stating to Mr Högel during their telephone conversation on 13 February 2013 that Marksans had bought back all of the bonds other than those held by PBP.

65.	Having given careful consideration to the written and oral evidence and all the parties’ submissions I have reached the clear conclusion that no such representation was made.

66.	In relation to the evidence of Mr Parekh I find as follows:

(1)	Mr Parekh came across as an honest and straightforward witness.

(2)	Mr Parekh knew very well that Marksans had not bought back all the other bonds and that over US$1 million of the bonds were outstanding.  

(3)	As an honest and straightforward witness, it is inherently unlikely that he would tell an obvious untruth.

(4)	Further there was no reason for him to say anything about whether Marksans had bought back the other bonds, still less to lie about it.  In particular:

(i)	No mention had been made at any stage of the negotiations of whether or not Marksans had bought back the other bonds.  Mr Högel had never raised it; nor had Mr Parekh.

(ii)	There was no reason for Mr Parekh to believe that this was a matter of any significance to Mr Högel.  Not only had it never been raised, but Mr Högel had made an offer to sell all his bonds in the 28 January 2013 email without reference to this or any other condition or query.  As Mr Högel accepted in evidence, this offer was a “clear indication to Mr Parekh that [Mr Högel] was prepared to sell [his] bonds without any consideration of whether there were other bondholders or not.”  Further, although Mr Parekh accepted that there may be circumstances in which there are advantages to being the last bondholder, I accept his evidence that in this case he considered the critical factor to be BIFR and the risks that involved for all remaining bondholders, whether the last one or not.

(5)	In fact, Mr Parekh had positive reason to believe that Mr Högel was not concerned about being the last bondholder.  The critical conversation proceeded on the basis that Mr Högel had just sold US$2.5 million of the bonds, as he had (falsely) stated.  As Mr Högel accepted in evidence, the false sale made it clear that he was “telling Mr Parekh that [Högel] was willing to sell [his] remaining bonds, even though there are 2.5 million bonds out there in the market … irrespective of whether [PBP was] the last bondholder”.  As he also accepted, the 13 February 2013 conversation proceeded on the basis that there were other bonds in the market and thus on the premise that PBP was not the last holder.  As Mr Parekh knew, and as he told Mr Högel in the “No for sure” email, these bonds had not been bought by Marksans.  As far as Mr Parekh was concerned, Mr Högel therefore knew that there were outstanding bonds which had not been bought back by Marksans.  The allegation is therefore that Mr Parekh made a representation which he knew Mr Högel would have known to be untrue – that is fanciful.  

67.	Mr Parekh’s evidence is also corroborated by that of Mr Saldhana.  Although I accept that it was unsatisfactory for his witness statement to consist of a bald statement that he agreed with Mr Parekh’s account of this and other telephone conversations rather than providing his own account (as he then did in oral evidence), I accept that he was present and that he did not hear Mr Parekh make the alleged representation.  Further, he would have remembered such a representation and he would have immediately reacted to it since it would have been obviously untrue.

68.	In relation to Mr Högel’s evidence I find as follows:

(1)	It is apparent that Mr Högel is someone who is prepared to lie where it suits his commercial purposes.  The most flagrant example of this was in relation to the false sale.  Not only did Mr Högel lie that he had sold US$2.5 million worth of bonds, he then lied that he had managed to get the bonds back and further lied that this was at a cost of US$250,000, which “cost” he sought to and did pass on to Marksans. This was a fraud.  The lie was also cleverly embellished.  Mr Högel asked Mr Parekh whether he knew who the buyer was so as to make it seem more believable to Mr Parekh, who took Mr Högel at his word.  Later, Mr Högel lied about the history of the original lie, saying that he had managed to get the bonds back because the situation was pre-contract.  He did this in an attempt to persuade Marksans that he did stick to his deals.  Another example of a lie on the documents was an email stating that he had “found out” PBP’s holding had increased when he had not found this out but had bought more bonds in the previous days. This lie was told because for his commercial ends Mr Högel did not want to emphasise that he was acquiring bonds.

(2)	 Although it was suggested that Mr Högel has a different ethical approach to court proceedings than to bond market dealings, it was also apparent that he was prepared to be at least casual with the truth in relation to formal statements made in the proceedings.  In the Defence and Counterclaim, which was supported by a statement of truth approved by Mr Högel, the critical representation by Mr  Parekh was stated to be that Markans “had already repurchased or secured the right to repurchase all of the other outstanding Bonds”.  This was later changed in the Amended Defence and Counterclaim, supported by a statement of truth signed by Mr Högel, to an allegation that Mr Parekh had stated that Markans “had bought back” the bonds.  Mr Högel’s explanation of this in oral evidence was most unsatisfactory.  He explained that the first version was the product of him constructing in his mind what Mr Parekh “Maybe … at the time said”.  He claimed to be doing Mr Parekh a “courtesy” and so he gave him the “benefit of the doubt, in case he might have said that”.  In other words in relation to the critical issue of fact in the case he was prepared to state in a formal court document, endorsed with a statement of truth, a version of the representation which, on his own evidence, might or might not be correct.

(3)	There were also instances in Mr Högel’s oral evidence where emphatic denials were shown to be untrue.  Examples are his denial of any telephone conversation with Mr Parekh on 15 May 2013 and his alleged lack of involvement in the drafting of the Settlement Agreement.  Another example of unsatisfactory evidence was his differing explanations of the 28 January 2013 email.  His initial explanation in oral evidence was that he had made this offer without any enquiry as to whether he was the last bondholder because that was not his strategy “at that stage” and “for that strategy, that wasn’t quite the point yet”.  Later in evidence he claimed that the email was simply an attempt to gauge a price and, despite its terms (“If Marksans pays this price within a reasonable time, then, we would have a deal”) it was not a genuine offer of sale – in other words, it was another lie.

(4)	The reliability of Mr Högel’s evidence as to the crucial representation is also undermined by the differing and, at times, inconsistent versions he has put forward.  Chronologically those versions have been:

(i)	“They told us that we are the last piece remaining” (29 May 2013 email to Mr Weichart).
(ii)	“Bought back” (30 May 2013 Note to Self). 
(iii)	An exchange in which Mr Högel asks “Do you have them all?” and “They said, 'Yeah, yeah, we have them all” (22 January 2014 Skype conversation with Mr Giles).
(iv)		There being no mention at all of the position, but “Marksans have omitted to mention that they did not have all the bonds in their possession yet, despite the fact that this was a requirement.” (3 February 2014 email to Ms Busch).
(v)	Markans “had already repurchased or secured the right to repurchase all of the other outstanding Bonds” (the first pleaded version dated 25 March 2014). 
(vi)	Markans had “bought back” the bonds (the second pleaded version dated 25 March 2015).
In particular, it is to be noted that one of these versions ((iv) above) involves no representation at all, whilst another ((iii) above) involves a specific question being asked by Mr Högel, contrary to his evidence at trial.
(5)	The main reason Mr Högel gave as to why it was important to him to be the last bondholder does not stand up to scrutiny.  Whilst I accept that that was his preferred strategy (as borne out by the creation of the false sale) it was apparent from the 13 February 2013 telephone conversation that that strategy was not going to work.  As Mr Högel accepted, Mr Parekh made it clear in that conversation that Marksans was only prepared to buy the entire holding – it was all or nothing.  Further, Marksans knew exactly how many bonds PBP held so there was no question of being able to hold some back.  As Mr Högel accepted, he was in a “corner”.  As he further accepted, it was “basically correct” that he was in that corner “[R]egardless of whether there were other bonds in the market or not”.  Either he sold all his bonds to Marksans or he sold none.  If he sold none then there was a very real risk that Marksans would remain in BIFR and PBP would get nothing for the very large holding it had.  This was a prospect which “frightened” him.  As he said in evidence, “I was really frightened. I have never seen such a mechanism because there is full protection against creditors. Promoters can do what they want. … I was really, really worried…..frightened”.

(6)	Mr Högel suggested in evidence that if the alleged misrepresentation had not been made he would have told Mr Parekh that Marksans should buy back all other bonds first and then come back to him.  However, that would not have got him out of the “corner” he was in.  He would still have been faced with an all or nothing situation and in no position to bargain.  His strategy involved selling some of the “too many” bonds he held and keeping some back to the last.  But, it was apparent that this was not going to be possible.  To get out of the “corner” he had to sell, and he had to sell his entire holding.  It was clear from his evidence that Mr Högel strongly resented being backed into a “corner” in this way and the manner in which his hand had been forced by a combination of BIFR and Marksans’ knowledge of his exact holding.

(7)	If Mr Parekh had made the alleged representation then Mr Högel would have reacted strongly when he first learned that Marksans had not bought back all the other bonds.  On his account he had been lied to and deceived.  His own evidence was that “I wasn’t called and I would have been extremely angry if he had called”.   However, as already found, he was called on 15 May 2013 and he was not angry.  On the contrary he appeared “fine” with the proposals being made, even though they concerned other outstanding bondholders.  Equally, the first written reference to the alleged misrepresentation in the email to Mr Weichhart on 29 May 2013 was in neutral terms.  It contains no hint of anger or upset.  Further, there was no attempt to raise the issue with Marksans at the time or at all until the time came for payment of the third tranche in January 2014.  This is not the conduct of someone who thinks he has been lied to, particularly on such an allegedly critical matter.

69.	It may well be that Mr Högel did believe that there were no other bondholders.  It may also be that he thought that some such statement had been made by Mr Parekh although in fact any statement made by him about Marksans buying all the bonds was in relation to PBP’s bonds, not any other bonds.  He was aggrieved at the way in which he had been backed into a corner, outmanoeuvred, unable to carry out his preferred strategy and “frightened” into a sale of all his bonds.  By May 2013 the price of the bonds was rising and there was a prospect of Marksans coming out of BIFR.  This increased his anger and frustration.  Although he knew that no clear statement had been made by Mr Parekh that Marksans had bought all the other bonds he sought to prepare the ground for so contending as a future “negotiating tactic”.  It was in this context that his 29 May 2013 email to Mr Weichhart falls to be considered.  The same applies to the Note to Self which is plainly a self serving document and reads more like a submission than a Note.  I find that this was inserted at a later date than 30 May 2013.  It is inconsistent both in its terms and in its tone with the email to Mr Weichhart sent on 29 May 2013.

70.	For all the reasons outlined above, I prefer the evidence of Mr Parekh and Mr Saldanha to that of Mr Högel in relation to the critical issue of whether the alleged representation was made.  I accordingly find that no representation in the terms or to the effect alleged by PBP was made.

71.	In those circumstances it is not necessary to consider the further issues of falsity, intention to induce and inducement which would only arise if, hypothetically, the alleged representation was made.  However, I would have found that PBP had not proved inducement, essentially for the reasons outlined in paragraphs 68(5) and (6) above.

Remedies

72.	PBP resisted Marksans’ claim for specific performance on the grounds that there had been no requisite tender of performance.

73.	PBP stressed that the authorities establish that for there to be a valid tender the tendered obligation must be performed to the fullest extent possible.

74.	In this connection PBP relied on a number of authorities concerning tender of payment, such as Finch v Brook 1 Bing (N. C.) 253 and Dixon v Clark (1848) 5 C. B. 365.  As stated in Chitty on Contracts Vol 1 at 21-089:

“To constitute a valid tender there must be either an actual production of money, or its production must be expressly or impliedly dispensed with by the creditor”.

75.	That tender to the fullest extent possible may be dispensed with is borne out by Farquharson v Pearl Assurance [1937] 3 All ER 124.  In that case an offer of payment by cheque was made over the telephone but declined.  Singleton J held at 131B-G:

“Now, it is not said in this case that the claimant had the money in his pocket, in so many words, but the arbitrator finds that the claimant called on Mr French and offered to pay the premiums on both policies. From that I assume that he was ready and willing to pay. I assume, too, as I think I must that the only reason that payment was not made was that Mr French, the district manager of the respondent company, declined to accept payment. It is true that there was no jingling of money; I do not suppose that insurance premiums are paid, in the ordinary way, in ready cash; but, on these findings of the arbitrator, coupled with, indeed, the word or two in the final award, if it was necessary to look at it, thought I do not think it is for my purposes, I am satisfied that the claimant was ready and willing to pay on that day, and that he would have paid but for the fact that the district manager of the respondent company was not ready and willing to accept the money from him on that day ... I am inclined to think that the circumstances are such that that does amount to a tender in law.” 
76.	It was further held that even if it did not amount to a tender in law the respondent could not be heard to say otherwise.  As Singleton J stated at 131G-132A:

“Whether or not it amounts to tender in law, I am satisfied that the circumstances are such that the respondent company ought not to be heard to say it is not a case of tender. The respondent company could have been paid on that day; it entrusted to its district manager the duty of receiving premiums. The district manger said, “No, do not complicate matters by your paying me;... I think it would be inequitable, in a case of this kind, if the insurance company, having had that offer of payment to its agent and manager, who was authorised to receive payments, having had that opportunity and that offer, was able to say in law there is neither tender nor anything equivalent to tender.”
77.	Marksans submitted that this applied with stronger reason in the present case given that, in practice, the process of tranche completion was a mutual one requiring cooperation of both parties in order for it to be effective.

78.	The evidence as to the mechanics of how payments were made and how the bonds were transferred under the Settlement Agreement in relation to the first two tranches was in summary:

(1)	Marksans would transfer the funds required to purchase the bonds to a broker acting on its behalf.
(2)	Marksans’ broker would then issue a trade confirmation for the purchase of the bonds through a clearing agent.
(3)	Marksans (or its agent) would inform PBP of the trade confirmation that had been issued and ask it to arrange the issue of a matching trade for the sale of the bonds.
(4)	PBP would then instruct its own broker to execute the matching sale of the bonds through the clearing agent.
(5)	The sale of the bonds would then be effected through the Euroclear or Clearstream settlement system.
79.	Payment and delivery would accordingly be effected through the settlement system once there were matching trades.

80.	PBP submitted that Marksans did not go as far towards making payment as it could have done.  Whilst it was accepted that Marksans’ broker was placed in funds to make payment and that PBP was so informed, it was stressed that instructions for payment to be made to PBP by the broker were not given and that no trade confirmation was issued.  All that happened was that Marksans indicated that it was ready and willing to perform its obligations.  That was not a valid tender.

81.	In cross examination Mr Sharma said that there was a change of procedure for the third tranche for which they used a different broker.  He said that it was his understanding that the broker had put the trade order into the electronic system.  However, that was the first time this had been suggested and there was neither documentary evidence nor evidence from the broker to support it.  On the evidence before the court I am not satisfied that Marksans went further than putting its broker in funds making clear to PBP that it was ready, willing and able to perform the trade for the third tranche, and I take that into account in assessing Mr Sharma’s evidence generally.

82.	Although I find that Marksans went no further I also find that there was good reason for it not doing so in the light of the fact that Mr Högel had made it clear that PBP would not perform its part.  No purpose would have been served in putting in a trade with a proposed settlement date in circumstances in which PBP was clearly not going to agree any such date or to put in a matching trade of its own.  The payment and delivery process required mutuality.
 
83.	Mr Högel told Mr Parekh during their telephone conversation on 22 January 2014 that he was not going to deliver the third tranche of bonds.  Mr Parekh had confirmed to Mr Högel by email that he understood that Mr Högel was not willing to execute the transaction as per the Settlement Agreement but gave him a further day to revert otherwise, which Mr Högel did not do.  In those circumstances it would have been a futile exercise for Marksans to take any further steps such as issuing and informing PBP of its trade confirmation or sending instructions to its broker to make payment.  I find that Marksans was ready and willing to take all further steps necessary to complete the trade and that it would have done so but for the fact that Mr Högel made it clear that PBP would not perform its part.

84.	On the evidence I accordingly find that if further steps were required to be taken for there to be a valid tender then they were dispensed with by PBP.  

85.	PBP’s ground of objection to an order for specific performance is therefore not made out and I am satisfied in all the circumstances that this is an appropriate case for such an order to be made.

Conclusion

86.	For the reasons outlined above I conclude that Marksans’ claim succeeds, that it is entitled to an order for specific performance and that PBP’s counterclaim be dismissed.