Thus by the time the hearing commenced on 30 October 2023, the somewhat curious position had emerged of the four alleged purchasing members of the concert party either indicating that they would mount no positive challenge to the Executive's Statement of Facts or, in the case of Mr Eker, admitting the case in full, while those accused of playing facilitating or ancillary roles in the transactions in question and who were alleged to have misled the Executive contrary to section 9(a) when questioned about their involvement, continued vigorously to resist the case against them.

This was the position when the hearing began. However, at intervals during the course of the hearing four of the Respondents, namely Mr Froidevaux, Mr Huguenin, Mr Houri and Mr Pankhania, made formal admissions of breaching the Code in the terms explained below.

Given the seriousness of some of the alleged misconduct there was some debate during the hearing concerning the standard of proof to be applied by the Committee. It is not disputed that the burden of proving the facts alleged rests squarely upon the Executive. The standard is the civil standard of balance of probabilities, but the nature and seriousness of the matters alleged may affect the cogency of the evidence required to find them proved. The standard remains the balance of probabilities, but such an approach recognises that cogent evidence will, as a matter of common-sense, be needed to justify a conclusion that someone of apparent good character has acted fraudulently or otherwise dishonestly.

This application of the civil standard of proof was explained by the Committee in Principle Capital Investment Trust Plc and approved by the Takeover Appeal Board in the same case [Takeover Appeal Board Statement 2010/1]. As the Committee in Principle Capital observed:

"[48] It is common ground that the standard of proof which the Executive must meet is the balance of probabilities, but that this civil standard of proof is to be applied flexibly depending upon particular features of the case. To assist the Committee in doing so various authorities were referred to.

[49] As the Court of Appeal put it in R (on the application of A) v. Mental Health Review Tribunal (Northern Region) [2006] 4 All ER 194 at [62]:

"Although there is a single civil standard of proof on the balance of probabilities, it is flexible in its application. In particular, the more serious the allegation or the more serious the consequences if the allegation is proved, the stronger must be the evidence before a court will find the allegation proved on the balance of probabilities. Thus the flexibility of the standard lies not in any adjustment to the degree of probability required for an allegation to be proved (such that a more serious allegation has to be proved to a higher degree of probability), but in the strength or quality of the evidence that will in practice be required for an allegation to be proved on the balance of probabilities." "

The long-standing approach to applying the civil standard of proof cited by the Court of Appeal in the Mental Health Review Tribunal case [supra] has been qualified and disapproved in one respect following a comprehensive review of the relevant authorities in the recent Supreme Court case of Jones v Birmingham City Council & Anor. (Rev 1) [2023] UKSC 27. At paragraph 51 of his judgment in that case Lord Lloyd-Jones said this:

"I pause at this point to take stock of these developments.
(1) It is now established that there is only one civil standard of proof at common law and that is proof on the balance of probabilities.
(2) Nevertheless, the inherent improbability of an event having occurred will, as a matter of common sense, be a relevant factor when deciding whether it did in fact occur. As a result, proof of an improbable event may require more cogent evidence than might otherwise be required.
(3) However, the seriousness of an allegation, or of the consequences which would follow for a defendant if an allegation is proved, does not necessarily affect the likelihood of its being true. As a result, there cannot be a general rule that the seriousness of an allegation or of the consequences of upholding an allegation justifies a requirement of more cogent evidence where the civil standard is applied. I would therefore respectfully disagree with the contrary statement by Richards LJ in N (cited at para 49 above) and with the statements of Lord Carswell (at para 28) and Lord Brown (at paras 43, 47) in Re D [2008] 1 WLR 1499; [2008] UKHL 33, to the extent that they may be read as supporting that statement of Richards LJ in N."  

The allegations made by the Executive in the present case include the making of deliberately misleading statements in public documents as well as lying systematically to a regulator. Such allegations have serious consequences for the individual if proved. Accordingly, the Committee has had well in mind that compelling evidence of such misconduct is required before finding it to have occurred.

However, this approach to applying the standard of proof does not rule out the drawing of inferences from facts that are found to have been proved. Provided an inference from established fact is not only reasonable but, in the case of serious misconduct, compelling, there is nothing in the approach outlined above to prevent the Committee from drawing inferences where it is appropriate to do so. 

Findings of Fact

The following narrative is not in dispute.

At the beginning of 2009 MWB had equity and debt securities admitted to the Official List and admitted to trading on the Main Market of the London Stock Exchange. Its subsidiaries included Liberty Plc ("Liberty") (in which MWB held a 68.3% interest), Business Exchange (in which MWB held a 68.2% interest) and MWB Malmaison Holdings Limited (in which MWB held an 82.5% interest).

In 1982 Mr Balfour-Lynn was one of two founders of Warwick Balfour Properties Plc, a company formed as a commercial and residential property development and investment company which, as its operations expanded, in due course changed its name to Marylebone Warwick Balfour Group Plc.  

In June 1997 Marylebone Warwick Balfour Group Plc merged with Ex-Lands Properties Plc ("Ex-Lands") in a reverse takeover. Following the takeover, Ex-Lands assumed the name of Marylebone Warwick Balfour Group Plc.  At the time, the Executive was consulted as to whether the former shareholders of Marylebone Warwick Balfour Group Plc were to be treated as acting in concert with the renamed Ex-Lands, a public company, the shares of which were listed on the Official List and admitted to trading on the Main Market of the London Stock Exchange. Applying its usual practice in cases where the shares in a company which are privately held with no public trading facility are sold in consideration for shares in a "Code company", the Executive ruled that the shareholders in the privately held company, who included, amongst others, Messrs Balfour-Lynn and Singh, were to be treated as acting in concert with each other in relation to their acquisition of shares in the Code company.

The concert party thereby identified was known henceforth as the "1997 Concert Party". On several later occasions the Executive was consulted as to whether additional individuals should properly be included within the 1997 Concert Party. On one such occasion the Executive ruled that Mr Blurton (the former finance director of Ex-Lands and since the merger, a joint finance director of the merged entity along with Mr Singh) should be included as a member. As noted below, the practice of the Panel is to treat as a single entity a group acting in concert albeit the membership of that group may fluctuate from time to time. Once a concert party is found to exist, the Panel requires clear evidence to establish that it no longer continues.   At the time of the transactions relevant to these proceedings, MWB was contemplating seeking a ruling from the Panel that the 1997 Concert Party no longer obtained, but in the event did not do so.

In February 2008, Marylebone Warwick Balfour Group Plc underwent a capital reorganisation as a result of which MWB was formed as the new group holding company.

By the beginning of 2009, the disclosed members of the 1997 Concert Party held just under 29.68% of the issued share capital. Accordingly, any further acquisition of MWB shares by persons acting in concert with the 1997 Concert Party which increased their aggregate holding to 30% or more of the shares of MWB carrying voting rights, would trigger an obligation under Rule 9.1 of the Code to extend an offer to other shareholders³.

In order to understand the process by which, on the Executive's case, Messrs Balfour-Lynn, Singh, Aspland-Robinson and Eker surreptitiously acquired a controlling interest in MWB while acting in concert with the 1997 Concert Party, it is necessary to explain a prior acquisition of MWB loan notes, some of which were subsequently "converted" into shares of MWB in a placing of new shares which closed on 12 January 2010.

The Committee is satisfied that the following narrative is borne out by the documents. Save where otherwise indicated, this narrative is undisputed.

At the beginning of 2009 MWB had outstanding £30 million nominal of unsecured loan notes that carried interest of 9.75% and which were to be redeemed during 2012 ("the Loan Notes"). The Loan Notes were admitted to listing on the Official List and admitted to trading on the Main Market of the London Stock Exchange. By the beginning of 2009, 51% of the Loan Notes (£15.3 million nominal) was held by Pendragon Capital Management Inc., a company which, during January or February 2009, was acquired by GLG Partners Inc. ("GLG").

In common with many such businesses, the MWB group was hard hit by the financial crisis of 2008/2009. Of direct relevance to these proceedings was the problem this created under the Loan Note Trust Deed which capped MWB's maximum permitted gearing by limiting the group's net debt to a multiple of four times the adjusted shareholders' funds. As the value of MWB's property portfolio fell during the financial crisis, its auditors, KPMG, became increasingly concerned about their ability to give an unqualified audit opinion on a going concern basis. In the event, the 2008 Annual Report published in April 2009 did include in the Independent Auditor's Report a paragraph entitled "Emphasis of Matter - Going Concern". This paragraph noted the existence of a material uncertainty casting doubt on MWB's ability to continue as a going concern, namely that:

"…the continued availability of the Group's Unsecured Loan Stock is dependent upon compliance with a gearing covenant which depends in part on property values."

 MWB's communications with their advisers during spring 2009 make it clear that the group was running out of "headroom" under the covenant. If the group's property values continued to fall, MWB believed that it might be in default by August 2009. In an email to an adviser at Deutsche Bank sent on 27 May 2009 Mr Singh relayed what he described as advice to MWB previously received from a third party:

"The projections for 2009 show a potential loss of £10M, which therefore only leaves a buffer of £25m - which on a £500M plus Property Portfolio means that if the values fell by just 5% over the full year you would be in breach. There is no doubt that the half year figures reviewed by KPMG will reveal this and you will be put on notice as a Board about this by KPMG. The timing for this potential occurrence is August 2009 only 3 months away. Therefore one needs to raise cash to do a deal with the Loan Stock Holders - either through an effective fund raising or the selling of assets."

At the time, GLG was putting pressure on MWB. GLG had suggested in correspondence that MWB was already in breach of the gearing covenant in the Loan Note Trust Deed and had called a meeting of Loan Note holders for 17 June 2009 with the object of appointing a committee to enquire into the matter. Breach of the gearing covenant would have triggered accelerated payment of the principal of £30 million of the Loan Notes along with various cross-defaults and would have had disastrous consequences for MWB.

This was the context in which Mr Treger agreed with Mr Singh to approach Mr Julian Harvey-Wood of GLG with a view to negotiating an agreement for purchasing at a discount GLG's £15.3 million nominal of Loan Notes. Mr Singh had previously elicited from Mr Harvey-Wood that GLG was in principle keen to sell its Loan Notes and might be amenable to selling at a discount to par value. It is apparent from MWB board minutes that Mr Singh and his colleagues had identified the potential for securing additional "headroom" for MWB if ownership of the Loan Notes were to be transferred to a friendly party likely to be amenable to a relaxation of the gearing covenant. 

What follows is hotly disputed between Mr Treger and the Executive. The Executive maintains that Mr Treger agreed with Mr Singh from the outset to "front" the purchase of the Loan Notes from GLG by acting ostensibly in his capacity as a potential investor through Audley's managed funds, but in fact acting on the instructions of Mr Singh with a view to acquiring the Loan Notes for the senior management of MWB and their associates whose identities as purchasers would be concealed.

Mr Treger, on the other hand, points to the unchallenged fact that he was already comprehensively involved with MWB in an advisory capacity in attempting to find solutions for the group's financial difficulties and in assisting them to raise capital (a project given the code-name Project Mint). One method of alleviating MWB's difficulties would be to find purchasers of GLG's Loan Notes who would be less hostile, if not friendly, to MWB's interests. Mr Treger maintains that it was against this background and as an extension to his pre-existing advisory role with the group that he undertook to seek investors willing to purchase GLG's Loan Notes.

The Committee will revert to this dispute when it addresses the Executive's case against Mr Treger. However, it is convenient to summarise now those aspects of the dealings between Messrs Treger and Harvey-Wood that are evident from contemporary documents.

On 15 April 2009, Mr Singh sent an email entitled "Ideal Scenario" to Mr Adam Epstein, a junior analyst employed by Audley Capital who did most of the detailed work involved in advising MWB on its options for raising capital or otherwise alleviating its financial difficulties. The email was copied to Mr Treger and in relevant part said as follows:

"lt was good to meet with you yesterday. Apologies I couldn't get this to you earlier. The Ideal scenario would be to use the least amount of cash to do a deal with the Loan Stock Holders. My current conversations lead me to believe that there is a deal to be done at 65p ish or perhaps a little lower. We would only need a 50% vote⁴ on Loan Stock to increase the covenant levels to give us substantial headroom, and if this could be done for an amount of say £ 6-7M that would be better than investing the £ 27M in the current model."  

The minutes of MWB's board meeting of 2 June 2009 include the following:

"The Board discussed the possibility of the Company or a potential investor acquiring GLG's (previously know (sic) as Pendragon Capital Management) holding of Loan Stock. They agreed that there was likely to be benefit, particularly if rights were offered subsequently to the remaining Loan Stock holders to convert their investments to equity. Andrew Blurton advised the Board that the offer of conversion would be subject to approval, in respect of at least 75 percent of the Loan Stock that was voted and 75 percent of the ordinary shares that was voted."

The previous day Mr Treger had emailed Mr Singh saying:

"Think parts of your idea have merit. Let's see where you get to with pendragon⁵ and where we get to re  investors appetite. Will you set up something with shankland and let me know when. Perhaps ramon should come to"⁶

On 2 June 2009 Mr Singh spoke to Mr Harvey-Wood and told him of a potential buyer for GLG's Loan Notes at a price of around 50% of their par value. Mr Harvey-Wood rejected the idea of a sale at a discount from par of 50% but agreed to talk to the potential buyer. This was followed on the same day by an email from Mr Treger to Mr Julian Harvey-Wood in which Mr Treger said:

"Julian

Audley is interested in potentially acquiring a position in the mwb bonds for our income product. Jag singh mentioned you are willing to discuss disposing of your holding. Can we arrange a time to discuss this further? I am in the us this week but perhaps early next week?

Look forward to your answer.

Yours sincerely

Julian Treger"

Mr Harvey-Wood replied on 4 June 2009 agreeing to a meeting to discuss, whereupon Mr Treger forwarded the exchange to Mr Singh with the comment - "As predicted. Let's see." This set a pattern for the subsequent negotiations between Messrs Treger and Harvey-Wood with Mr Treger routinely reporting back by email to Mr Singh on the course of negotiations. It also appears from calendar entries that Mr Singh arranged to meet Mr Treger on 8 June 2009 and Mr Balfour-Lynn arranged to meet him on 9 June following a meeting earlier that day between Messrs Treger and Mr Harvey-Wood.  The Executive invites the Committee to infer from this that Mr Treger was throughout taking his instructions from Mr Singh.

In an email sent on the morning of 11 June 2009 Mr Harvey-Wood proposed a price of 61 pence. This was agreed an hour later by Mr Treger who said:

"Great news. We will need to go to investment committee and then draw down funds. So we should agree the deal but have a closing in a few weeks - perhaps after the next interest payment."

Mr Harvey-Wood immediately replied by email to Mr Treger saying:

"…I do not have a problem with delayed settlement, but at what point would you be able to unconditionally commit to a trade?"

Mr Treger forwarded this response to Mr Singh simply saying:

"FYI. How to respond?"

Later on the same day Mr Treger emailed Mr Singh saying:

"I am tempted to say I can place 6.4m firm and am speaking to coinvestors about the other 2.9m. can we structure the deal to close on the 6.4m on say July 2 and provide an option for the further 30 days on the other 2.9m? what do you think?"

Consistently with this suggestion, on the following day, 12 June 2009 Mr Treger emailed Mr Harvey-Wood saying:

"What we would like is an irrevocable commitment to sell valid for four weeks from you. Our present situation is that we have firm appetite for around £6.5m, but the deal is £9.3m (61x15.3) and we have some coinvestors who are interested in the remaining £3m. So we need probably two weeks to commit on the remainder assuming you want to do the whole piece. Is that ok?

Let me know"

It should be explained that Mr Treger's evidence to the Committee was that Mr Harvey-Wood had made it clear that GLG was looking to sell all or none of its Loan Notes. Thus £9.3 million would be needed to complete the purchase of £15.3 million nominal of Loan Notes at a price of 61 pence per £1 nominal.

Shortly after receiving Mr Treger's email of 12 June 2009, Mr Harvey-Wood emailed a reply refusing the request for an irrevocable commitment to sell, but inviting Mr Treger to make a firm bid when he was in a position to do so. Consistent with what by now was the established pattern, Mr Treger forwarded the email exchange to Mr. Singh.

Mr Treger's evidence to the Committee was that once a price had been agreed with Mr Harvey-Wood on 11 June 2009, he set about sourcing investors. However, when on the next day Mr Harvey-Wood refused his request to close on a purchase of £6.5 million on 2 July 2009 with a further 30-day option for the balance of £2.9 million, Mr Treger is said to have realised that the one firm indication he claimed by then to have received could not be finalised within the time frame required by GLG.  Mr Treger maintains that the £6.5 million referred to in his email to Mr Harvey-Wood of 12 June 2009 referred to a firm indication he had recently received from Matlin Patterson regarding an investment of £6.4 million together with a small investment of £100,000 by Audley. 

According to Mr Treger, when he reported the position back to Mr Singh, Mr Singh seemed surprisingly relaxed and disclosed that he had Mr Aspland-Robinson and Mr Eker lined-up as potential investors. Mr Treger had met Mr Aspland-Robinson on a few previous occasions and knew that he was a director of Business Exchange. He did not know Mr Eker but told the Committee that Mr Singh explained that he was Mr Balfour-Lynn's uncle.  Mr Treger also maintained that he was told by Mr Singh that Banque Privée Edmond de Rothschild ("EDR", a private bank based in Geneva) represented or advised some other interested investors.

According to Mr Treger, upon being told this by Mr Singh, he ceased looking for investors and continued at the request of Mr. Singh to deal with Mr Harvey-Wood on behalf of Messrs Aspland-Robinson and Eker and the investors represented by EDR. 

The Executive accepts none of this. It disputes that Mr Treger ever looked for investors and maintains that he acted throughout on the instructions of Mr Singh, in effect using the Audley name as a front to cover the interests of MWB's senior management and their relatives and associates. The Executive maintains that when Mr Treger said in his email to Mr Singh of 11 June 2009, "I am tempted to say I can place 6.4m firm and am speaking to coinvestors  about the other 2.9m", the first figure referred to the commitments that Mr Singh already had and the residual £2.9 million to that which Mr Singh still needed to find in order to meet a price of £9.3 million.

In support of its case that Mr Singh was at this stage still looking to raise in the region of £2.9 million, the Executive refers to an email sent by Mr Singh to Mr Aspland-Robinson on 14 June 2009 with an attachment entitled "Project Wealth". That email and its attachment were also forwarded to Mr Pankhania, Mr Aspland-Robinson's friend and co-director at Business Exchange. The "Project Wealth" attachment spelt out the profit available for investors in the Loan Notes at a price of 61p irrespective of whether investors decided subsequently to convert their Loan Notes into MWB shares or to retain them for the interest coupon and their par capital value at redemption. The email attachment said this:

"The Company has in issue £30M of Unsecured Loan Stock (LSTK). This LSTK attracts an annual interest coupon of 9.75%, paid half yearly.

A holder of some of the LSTK wishes to sell their stake for 61p per £1 of Loan Stock held.

The Company is currently minded to consider giving all LSTK holders the right to convert their LSTK into ordinary shares of the Company at a conversion price of 46p per share.

The Companys current share price is 46p. This would mean that any LSTK Holder would be buying approx 2.2 shares for each £1 of LSTK. Therefore for the Investor acquiring LSTK at 61 p per £1 of LSTK, they would be effectively getting the converted share at a price of 27.3 p. This would be attractive as it gives an instant theoretical profit of 40% per share on the current Companys share price of 46p.

However even if the Investor who acquired the LSTK at 61p per £1 of LSTK wished to hold on and not convert as would be their right as they wished half yearly income and then a profit at the end of the life of the LSTK, being 30 June 2012, they would receive the following.

An annual interest on their investment of 61p of 16% but being paid half yearly. This interest would be paid until 30 June 2012, when the LTSK would be redeemed at £1 for every £1 held - this would mean that an Investor who had paid 61p to acquire £1 of LSTK would get back £1 for each £1 of LSTK held by them. This would give them a 64% capital profit on redeeming the £1 of LSTK at 30 June 2012 - being a simple capital profit over say 3 years of 21.3% per annum.

Therefore if a LSTK holder who buys at 61p does not convert then they would get an annual income stream of 16% per annum and a capital profit per annum of 21.3%, being a total simple annual return of 37.3%.

The Investor who likes income can obtain a 37.3% annual return. The Investor who likes Equity can on day 1 obtain a 40% discount on current share price and enjoy the benefit of Share price uplift as the Company expands."  

It is clear from the above that Mr Singh was offering investors in the Loan Notes two profitable options (i) buying at a discount with a view to converting into MWB shares in an exchange based on the par value of the Loan Notes, or (ii) retaining the Loan Notes for their interest coupon and capital value at redemption.

The Committee will address the disputed evidence when considering the Executive's case against Mr Treger.

It is apparent from the documents that Mr Treger continued to negotiate with Mr Harvey-Wood until an agreement was reached on about 23 June 2009. In the meantime, when on 18 June 2009, Mr Harvey-Wood emailed Mr Treger asking "any progress on identifying who will be the buyers?" Mr Treger responded by saying they were waiting for the brokerage details and would revert tomorrow. He then forwarded the exchange to Mr Singh before saying "Please give me a call when you are up".

On 1 July 2009 Mr Treger was told by Mr Harvey-Wood that the Loan Note Trustee had asked about the identity of the purchasers "specifically whether it is a company or related party".   In the same email Mr Harvey-Wood suggested that Mr Treger might reply that he did not know the identity of the underlying purchasers or beneficial owners or alternatively that:

"it has been confirmed to us that the underlying purchasers and beneficial owners have no connection or arrangements with the company or its management". 

Mr Treger forwarded this email to Mr Singh saying "Can we discuss?" to which Mr Singh replied "I will call you shortly".

In the event, Mr Harvey-Wood's enquiry on behalf of the Loan Note Trustee went unanswered and GLG were not informed of the identity of the purchasers or their connection with MWB or its senior management.

The purchase of the Loan Notes was not a transaction regulated by the Code. However, the subsequent "conversion" of a proportion of the Loan Notes into shares of MWB issued in a placing, directly engaged the Code and, accordingly, makes relevant the ownership of those Loan Notes that were "converted" into equity.

The Loan Notes were not purchased by Audley funds or by any funds managed by Mr Treger or by any Audley entity.

The primary documents and contemporary emails obtained by the Executive show that all the funds used to acquire the Loan Notes were provided by Messrs Balfour-Lynn and Singh or by members of their family or associates. The following figures and sources of funds were ascertained by the Executive by analysis of the contemporary documents and are not challenged.

Mr Aspland-Robinson acquired £4,950,000 nominal of Loan Notes for the total sum of £3,019,500. Of that, £3,400,000 nominal of Loan Notes were purchased ostensibly for himself for the sum of £2,074,000 and £1,550,000 nominal of Loan Notes for Mr Pankhania for the sum of £945,000 received from Mr Pankhania.

Mr Eker acquired £6,250,000 nominal of Loan Notes, ostensibly on behalf of himself and his daughters. The total sum paid was £3,812,500.

EDR acquired £4,100,000 nominal of Loan Notes for a total sum of about £2,503,050.

Of the total sum of £3,019,000 paid by Mr Aspland-Robinson, Mr Balfour-Lynn provided £470,000, Mr Singh, through accounts held by his wife, Dr Ajit Gill and others on his behalf, provided £1,149,000, Mr Pankhania paid £945,500 and Mr Aspland-Robinson himself funded the balance of £455,000.

Of the total sum of £3,812,500 paid by Mr Eker, £2,501,000 was provided by Mr Balfour-Lynn, £488,000 by Mr Eker's daughter, Mrs Annabel Wood, £213,500 by Mrs Charlotte Kerr, Mr Eker's other daughter, and £610,000 by Mr Eker himself.

The total sum of just over £2,500,000 paid by EDR was provided by three clients of the bank incorporated variously in Panama or Liechtenstein each of which was beneficially owned by the relatives of Mr Balfour-Lynn identified below.

£793,650 was paid by Mr Balfour-Lynn under a sole power of attorney from his mother, Mrs Valerie Balfour-Lynn, over her account with Malibran. Malibran was beneficially owned by Mrs Valerie Balfour-Lynn. £793,650 was the consideration for £1,300,000 nominal of Loan Notes acquired for Malibran.

Naberrie, a client of EDR beneficially owned by Mr Eker, provided £1,221,000 for £2,000,000 nominal of Loan Notes.

Museum Foundation, which was beneficially owned by Mr Eker's brother, Mr Leonard Eker, provided £488,400 for £800,000 nominal of Loan Notes. 

On 29 June 2009, Mr Singh emailed Mr Balfour-Lynn attaching an unsigned declaration of trust declaring that Mr Eker was the legal owner of £7,100,000⁷ nominal of loan notes of which he held £4,100,000 nominal on trust for Mr Balfour-Lynn⁸. At the price of 61p for £1 nominal, the £4,100,000 million nominal corresponded exactly with the funds of £2,501,000 provided by Mr Balfour-Lynn to Mr Eker. Mr Balfour-Lynn subsequently sent the declaration of trust to Mr Eker who responded "…seems OK to me".   As noted above, Mr Eker admitted by counsel that he had lied to the Executive in his interviews and that Mr Balfour-Lynn was the beneficial owner of £4,100,000 nominal of the Loan Notes which Mr Eker had purchased from GLG.

As also noted above, Mr Aspland-Robinson did not provide a witness statement or give evidence in the proceedings. He did, however, serve submissions in response to the Executive's Disciplinary Submissions, but they did not contest the Executive's case regarding the source of funds for the Loan Notes purchased by him from GLG. In the circumstances the Committee has no doubt that the Loan Notes acquired by Mr Aspland-Robinson with the £470,000 advanced to him by Mr Balfour-Lynn (to the value of £770,492 nominal) were owned by Mr Balfour-Lynn as ultimate beneficiary. Similarly, the Committee has no doubt that those Loan Notes acquired by Mr Aspland-Robinson with the funds of £1,149,000 advanced to him by Mr Singh (equating to £1,883,607 nominal) were acquired for Mr Singh as ultimate beneficiary.

The following is not in dispute.

During November or early December 2009, Mr Aspland-Robinson acquired title to the shares of Audley Investments Portfolio Limited ("AIPL") a company incorporated in the BVI. At the same time, Mr Eker acquired the shares of Audley Capital Development Limited ("ACDL"), another company incorporated in the BVI. The companies were acquired as nominees for holding the Loan Notes purchased by Mr Aspland-Robinson and those Loan Notes of Mr Eker which he held on trust for Mr Balfour-Lynn as beneficiary.

Arrangements for the acquisition of the BVI companies were made by Mr Singh through MWB's auditors, BDO, and subsequently through STM Fidecs Limited ("STM Fidecs") a professional services firm based in Gibraltar. STM Fidecs provided nominee services in relation to AIPL and ACDL.

On 11 November 2009, the name of Saltus Holdings Limited (a company incorporated in the BVI during 2008) was changed to AIPL and on the same day Potter Developments Limited (a company incorporated in the BVI during 2007) changed its name to ACDL. For reasons that become clear from what follows, the Committee has no doubt that the names of the two companies were chosen to give the false impression that they were entities controlled or managed by Mr Treger or by Audley Capital. Messrs Balfour-Lynn and Singh must be taken to have intended this, but whether Mr Treger was complicit in this design will be addressed in connection with the Executive's disciplinary case against him.

A loan stock transfer form, dated 12 November 2009, recorded the transfer of all of Mr Aspland-Robinson's £4,950,000 nominal of Loan Notes by STM Fidecs to AIPL.  The transfer of £4,100,000 of Mr Eker's Loan Notes to ACDL took longer and appears not to have been effected until early December 2009. The Loan Notes that Mr Eker had purchased for himself and his daughters as beneficiaries were not transferred to ACDL. Mr Eker admits, and Mr Balfour-Lynn does not dispute, that Mr Balfour-Lynn was the ultimate beneficiary of all the Loan Notes transferred to ACDL. 

Despite having no ostensible interest in the acquisition of AIPL and ACDL and the transfer to those companies of Loan Notes, the contemporary documents show that Mr Singh was engaged throughout in the detailed administrative arrangements. Mr Balfour-Lynn was not engaged in the detail but intervened occasionally (for example to seek KYC information from Mr Eker): there is no doubt that he approved the transactions and was kept aware of what was going on. 

It is apparent from the matters referred to below that MWB had resolved by no later than the summer or early autumn of 2009 to raise capital in a placing and for a proportion of the Loan Notes acquired from GLG to be purchased for cancellation by MWB at their nominal value so as to enable the Loan Note holders to use the proceeds to acquire shares in the placing. As explained below, this scheme enabled Messrs Balfour-Lynn, Singh and Aspland-Robinson, the ultimate beneficiaries of the Loan Notes that were converted into shares in the placing, to make a considerable undisclosed profit at the expense of MWB.

Before addressing the placing and its implications it is convenient to deal with a discrete purchase of MWB shares made by Mr Aspland-Robinson on 1 June 2009. The Executive only became aware of this transaction by reviewing documents obtained during the course of its investigation.

On 1 June 2009 Mr Aspland-Robinson acquired 1,811,385  MWB shares, equating to 2.5% of MWB's then issued share capital, for a consideration of £724,554. Of that consideration, £500,000 was advanced by Mr Balfour-Lynn, according to Mr Aspland-Robinson, by way of a loan.

At the time of this acquisition the disclosed members of the 1997 Concert Party held 29.75%⁹ of MWB's issued share capital. Accordingly, if Mr Aspland-Robinson had been acting in concert with the 1997 Concert Party in acquiring these shares, the aggregate holding of the 1997 Concert Party would have increased from 29.75% to 32.25% of MWB's issued share capital, thereby triggering an obligation to extend a Rule 9 offer to other shareholders.

Before this transaction, Mr Aspland-Robinson owned 50,000 MWB shares but was not a disclosed member of the 1997 Concert Party. In his submission in the proceedings, Mr Aspland-Robinson maintained that he was ignorant both of the concept of acting in concert under the Code and specifically, of Rule 9. He maintained that had he been aware that his acquisition of 2.5% of MWB's share capital might trigger an obligation to make a Rule 9 offer he would never have bought the shares, as he could not afford the financial obligations associated with an offer. As Mr Aspland-Robinson elected not to give evidence these assertions could not be tested. Nevertheless, these claims are manifestly contradicted by the terms of the advice Mr Aspland-Robinson received from Peel Hunt to consult the Panel in connection with his proposed purchase of shares (see below).

On 6 April 2009, a special purpose meeting of the board of MWB was convened to consider Mr Aspland-Robinson's proposed purchase of MWB shares. The meeting was chaired by Mr Blurton and attended in addition by Messrs Balfour-Lynn and Singh. The relevant section of the minute which Mr Blurton told the Committee was probably drafted by him, states as follows:

"The Board considered whether Richard Aspland-Robinson could be considered part of the 1997 Concert Party, which was a presumed concert party by the Panel on Takeovers and Mergers. Andrew Blurton reminded the meeting that typically some of the factors taken into account by the Panel when determining whether someone is part of a concert party, included shared directorships, other business relationships, shared offices, social interaction etc., where these had a bearing on the share buying activities, of the person concerned. Andrew Blurton also reminded the Meeting that the Board did not consider the 1997 Concert Party still existed and this had been discussed with the Panel in 2008.

A further submission with regard to its continued existence or otherwise, and its continued members or otherwise, was due to be made to the Panel shortly. Andrew Blurton advised that this further submission being made to the Panel was that some or all of the previously presumed Concert Party members were no longer members of the presumed 1997 Concert Party. All those present considered that whatever the outcome of that submission, Richard Aspland-Robinson could not be considered as a member of such Concert Party, as none of the attributes that the Panel considered were relevant in making that presumption were relevant to Richard Aspland-Robinson."

There is no suggestion that Mr Blurton knew that Mr Balfour-Lynn was to advance most of the funds for the acquisition of Mr Aspland-Robinson's shares. Nor is it suggested that Mr Blurton subsequently became aware of the identities of the ultimate beneficiaries of the Loan Notes or the shares into which the Loan Notes owned by AIPL and ACDL were converted. He was not part of an inner circle of friends and directors revolving around Mr Balfour-Lynn and, indeed, was asked by Mr Balfour-Lynn to step down as joint finance director in January 2010. In common with other colleagues on the board of MWB he was kept ignorant of the true ownership of AIPL and ACDL.

 Nevertheless, by 2009 Mr Blurton was an experienced director and his experience included dealing with the Takeover Panel, one such occasion being in connection with the reverse takeover of Ex-Lands and the 1997 Concert Party. In the light of the relationships between the relevant parties and the advice from Peel Hunt referred to below, Mr Blurton must be taken to have been aware of his obligation to consult the Panel consistent with the obligation in section 6(b) of the Introduction to the Code ("section 6(b)") which states that:

"When a person or its advisers are in any doubt whatsoever as to whether a proposed course of conduct is in accordance with the General Principles or the rules …. that person or its advisers must consult the Executive in advance."

It is evident from the minute of the board meeting that Mr Blurton correctly spelt out considerations which the Executive treats as relevant when considering concert party issues; but given that these factors were relevant to the issue in question, it is clear that there was at the very least real doubt as to whether the Executive would agree with the MWB board that Mr Aspland-Robinson would not be acting in concert with the 1997 Concert Party in connection with his proposed purchase of MWB shares. It is also clear that Mr Blurton, with his experience should have, and in the Committee's assessment must have, appreciated this.

It was not necessary to know that Mr Balfour-Lynn would be providing funds for the acquisition in order to conclude that as a prominent figure within the MWB group and as a friend as well as colleague of Mr Balfour-Lynn with an office diagonally opposite Mr Balfour-Lynn's on the same corridor, there was a sufficiently close association to create the real risk of being found to be acting in concert with the 1997 Concert Party. In his submissions to the Hearings Committee Mr Aspland-Robinson disputes that he was a close friend of Mr Balfour-Lynn, but even on his own case Mr Balfour-Lynn had entertained him on holidays and there had been substantial social interaction. Furthermore, although this may not have been known to Mr Blurton without further enquiry, there was also at least one shared business relationship between Mr Balfour-Lynn and Mr Aspland-Robinson existing in connection with Alternative Hotels Group Plc ("AHG").

If all the known connections were not reason enough for Mr Blurton to enquire further and to know that his duty was to consult the Panel, that duty was put beyond argument by the advice Messrs Blurton and Aspland-Robinson received from the trading team at Peel Hunt¹⁰ who were approached to act as brokers for the acquisition. On 9 April 2009, Mr Capel Irwin of Peel Hunt emailed Messrs Blurton and Aspland-Robinson saying:

"… With  knowledge of Rick's relationships with members of the concert party there is a possibility that questions could be raised by other parties, and should the panel become involved the concert party may find that they are required to satisfy the panel that he is not in concert. I would suggest that Rick and/or the concert party, If they have any concerns about this, seek appropriate advice." 

On 9 April Mr Nicholas Marren of Peel Hunt sent the following email to Mr Aspland-Robinson:

"As you know there's a concert party (1997 Concert Party) who own circa 29.67% and can buy another 225,039 shares before they hit the 30% mark. After that under the code rules, if any more shares are purchase (sic) they have to make an offer for the rest of the company. Anyway, we know you are not part of the 1997 concert party at the moment but we not sure (sic) whether if you were to buy shares in MWB the takeover panel might consider you are in concert with other members of the party. Historically factors to take into consideration include mutual directorships, places of work, business & social arrangements, any mutual agreements with anyone else in the concert party. We think this is worth finding out before trading.

Fully recognise that you and the 1997 cp might think there is no concert party/no one acting in concert but to be safe our advice would be to check this with the panel. I understand Michael Steinfeld is working with Andrew on a submission regarding getting approval that the panel considers there no longer is a concert party and it might be worth tying it in with that. The panel do tend to take some time before determining whether someone is/is not acting in concert. We also understand that you might decide you want to deal immediately and therefore if you decide to trade through another execution only broker we understand!"

This email was forwarded by Mr Marren to Mr Blurton on the same day who promptly suggested to Mr Aspland-Robinson that they get Coutts (Mr Aspland-Robinson's bankers) to effect the purchase on an execution basis. The reference to Michael Steinfeld is to MWB's lawyer who, at the time, was preparing a submission to the Panel that some or all of the members of the 1997 Concert Party should no longer be regarded as acting in concert.

On 14 April 2009, Mr Marren sent another email to Mr Aspland-Robinson (copied to Mr Blurton) which said:

"Apologies to go on about the acting in concert point (and I know you have told us before that you don't think there is any issue here regarding acting in concert), but the definition of acting in concert includes, inter- alia, "persons who … co-operate to obtain or consolidate control"…. As Michael will let you know the downside of getting this wrong is theoretically being required to make an offer for the remaining shares at the highest price paid by the concert party over the last 12 months. I appreciate we are not acting for either the 199CP (sic) or Rick but we would be happy to run through parts of the code with you if you wish.

As we mentioned on Friday, we would advise that the 1997 Concert Party /Rick seek further clarification on this point with the Panel to remove any possible Rule 9 issues prior to dealing (since the 1997CP is close to 30% already), which could be done either by Michael now through a submission or perhaps when the submission to the panel regarding the break-up of the existence of the 1997 CP (sic)." 

Mr Blurton forwarded this email to Mr Aspland-Robinson saying:

"This is a pain but OK. Can you give me a call in the office when convenient to discuss."

Neither Mr Aspland-Robinson nor Mr Blurton (nor any other board member of MWB who, according to Mr Blurton, would have seen the minute of the meeting of 9 April at the next meeting of the full board) referred the issue in question to the Panel. As previously noted, Mr Aspland-Robinson purchased 2.5% of MWB's issued share capital (1,811,385 shares) for a consideration of £724,554 (that is, at 40 pence per share) on 1 June 2009. The shares were acquired from Principle Capital Investment Trust Plc albeit on an "on market" basis through Mr Aspland-Robinson's bankers, Coutts.

On 1 June 2009, Mr Aspland-Robinson sent the following email to Mr Balfour-Lynn:

"Richard, a big thank you for the loan of £500,000 you gave me today.

As you know, I have been looking to purchase some MWB shares and the opportunity arose last Friday with Principal Capital (sic) wanting to dispose of 1.8 million. I have bought them. To confirm the position, I have £250,000 immediately available and have spoken to my trustees this morning and am organising for them to transfer the balance to me. I will keep you advised on timing."  

Mr Aspland-Robinson submitted that the alleged loan was repaid in part by a transfer to Mr Balfour-Lynn's account by Mr Singh on Mr Aspland-Robinson's behalf of the sum of about £241,500 on 3 June 2009. This transfer was said to constitute part payment of a number of loans totaling £2,000,000 made by Mr Aspland-Robinson to Mr Singh during 2005/6 when Mr Singh was going through a divorce from his first wife. Messrs Singh and Balfour-Lynn gave variants of this account when interviewed by the Executive, although Mr Balfour-Lynn made no mention of any payment or reimbursement by Mr Singh.

The Committee concludes that there was never any genuine expectation that the sum of £500,000 advanced by Mr Balfour-Lynn to enable Mr Aspland-Robinson to acquire the shares, would be repaid. In the Committee's judgment, this conclusion is reinforced by a pro-forma declaration of trust received by Mr Aspland-Robinson as an attachment to an email from a friend on 2 June 2009. The document declared an undertaking by the trustee to hold shares on trust for a beneficial owner or owners. Mr Aspland-Robinson then asked his secretary to print out two copies and remove the words in square brackets so he could fill in the details.

Although the Committee has not seen a signed version of the pro forma declaration of trust, it concludes that the document reflected Mr Aspland-Robinson's intention to record Mr Balfour-Lynn's beneficial interest in such proportion of the shares acquired as matched Mr Balfour-Lynn's contribution to the purchase price.

 It is to be noted that the Annual Report for Business Exchange for 2009 (published on 30 March 2010) did not disclose Mr Aspland-Robinson's acquisition of 1,811,385 shares of MWB or any proportion of that number. Instead, the Annual Report incorrectly stated that as of 31 December 2009 Mr Aspland-Robinson held 50,000 shares in MWB (i.e. the number of MWB shares he owned immediately prior to the 1 June 2009 acquisition). This was a material inaccuracy in an important, public document.

The Committee concludes that from 9 April 2009 at the latest Mr Aspland-Robinson was fully aware of the implications and effect of Rule 9 of the Code. We also conclude that Mr Aspland-Robinson acted in concert with the 1997 Concert Party in acquiring the 1,811,385 shares of MWB on 1 June 2009.  Mr Balfour-Lynn's contribution to the purchase price puts this beyond doubt; but given Mr Aspland-Robinson's professional and personal association with Mr Balfour-Lynn, the conclusion would have been the same had this contribution not been made. Mr Aspland-Robinson's acquisition triggered an obligation to make a mandatory offer under Rule 9.1 of the Code, but the price paid by him of 40p per share will acquire a wider relevance when the Committee addresses the implications under the Code of the later share acquisitions made in the placing by AIPL and ACDL.

Pyrrho acquired an initial 14.38% of MWB's issued share capital during September 2009. Shortly afterwards, on 7 October 2009, Messrs Anson Chan and Paul Cummins, who are co-founders and directors of Pyrrho, met Messrs Balfour-Lynn, Singh and Blurton for dinner at the Gherkin Building in London. Messrs Nicholas Tulloch and Edward Burbidge of Arbuthnot Securities, who were advising Pyrrho at the time, also attended the meeting.

At this dinner MWB's proposed placing to raise capital of £27.5 million was discussed. Messrs Chan and Cummins gave evidence to the Committee from which it is clear that on this occasion they registered their objections to the proposed placing price of 30p per share when MWB's shares were then trading at over 40p. Messrs Chan and Cummins were surprised when an offer by them to underwrite a fund-raise at 40p per share was declined by Mr Balfour-Lynn when such an offer appeared to be manifestly in MWB's interest. Mr Balfour-Lynn explained that, at his request, Mr Treger had purchased the Loan Notes from a difficult investor on behalf of Audley Capital's managed accounts and he (Mr Balfour-Lynn) had given his word to Audley that they would have the opportunity to convert their Loan Notes into equity in the placing at the price of 30p per share.

The Committee accepts this evidence and also the evidence given by Messrs Chan and Cummins that they were encouraged by Mr Treger's reputation as an activist investor¹¹ and by the prospective involvement in MWB of another major independent shareholder in the form, as described to them by Mr Balfour-Lynn, of funds managed by Audley on a discretionary basis. Pyrrho were undoubtedly kept ignorant of the identities of the true purchasers of the Loan Notes.

The wider board of MWB was similarly kept in the dark. The minutes of an MWB board meeting of 28 July 2009 record that:

"Jag Singh confirmed that discussions had been held with Julian Treger of Audley Capital Management (who had recently acquired GLG's substantial Loan Stock holding) concerning the partial underwriting of a rights issue. He believed that Audley Capital Management would expect any equity shares to be issued at a sizeable discount to the current share price and reported that Panmure Gordon had advised that a discount of up to 40 per cent might be necessary. The issue price was likely to be about 30p per new share."

The fundraising structure in its final form envisaged an equity raise of £27.5 million, an issue price in the placing of 30p per MWB share, the "conversion" of £7.5 million nominal of the Loan Notes held by AIPL and ACDL into 25 million shares of MWB, and the investing of some £5.42 million in the placing by MWB's senior management and their associates with a similar investment by Pyrrho.

The proposed acquisition of shares in the placing by MWB management would increase the interest of the 1997 Concert Party from a disclosed position as of October 2009 of 29.81%, to 33.51% of MWB's share capital. Accordingly, MWB operated on the understanding that without a whitewash waiver, such an acquisition by management would trigger an obligation under Rule 9 of the Code to extend an offer to MWB shareholders.

It follows that the passing of the Whitewash Resolution by independent shareholders on 11 January 2010 was induced by misrepresentation and was passed on the false premise that the interests of the 1997 Concert Party would increase to no more than 33.51% of MWB's enlarged issued share capital. It also follows that the Executive's prior agreement to a Rule 9 waiver was similarly induced by the same misrepresentation and agreed on the same false premise.

The Loan Stock Purchase Agreements between ACDL and AIPL respectively and MWB pursuant to which the "Audley Investors" subscribed for New Units in MWB, were signed on behalf of ACDL and AIPL by Ms Vanessa Garrod of STM Fidecs. It appears from other correspondence that Decherts LLP, who prepared the documents, were unaware of the identity of the owners of ACDL and AIPL and shared the common assumption that they were under Audley Capital management.

It will be seen from the Committee's assessment of the Executive's Disciplinary Submission against Mr Treger, that Mr Treger claims to have acted as adviser to Messrs Eker and Aspland-Robinson since his purchase on their behalf of the GLG Loan Notes in June 2009. Until June 2010, when the terms of Audley Capital's advisory retainer were reduced to writing, Audley Capital's advisory role is said to have been undertaken pursuant to an oral agreement made through Mr Singh as an intermediary.

Mr Treger maintains that, via Mr Singh, he advised his clients that the proposed "conversion" in the placing of £7.5 million nominal of their Loan Notes into 25 million New Units of MWB for the price of 30 pence per share, was a very profitable deal - as it undoubtedly was. Having acquired Loan Notes at 61 pence per £1 nominal and exchanged them at par value for shares offered at 30 pence (when they were trading at 40 pence or above) the "look through" price of the investment was about 18 pence per share. Mr Treger's evidence to the Committee was that his practice was to advise Messrs Eker and Mr Aspland-Robinson via Mr Singh as an intermediary on the understanding that Mr Singh would relay the advice to his clients.

Mr Treger also maintains that he was alerted by his colleague, Mr Adam Epstein to the references to the Audley Investors in the Prospectus and Shareholders Circular of 17 December 2009, and until then he had had no idea that Messrs Eker and Aspland-Robinson were using the Audley name for the companies holding the Loan Notes. On 17 December, Mr Epstein sent Mr Treger the following email:

"I have seen in the MWB announcement (attached):-

"The Company has entered into the Loan Stock Purchase Agreements with the Audley Investors, pursuant to which the Audley Investors have agreed to subscribe, as part of the Placing, in aggregate £7.5 million for a total of 25 million New Units at the Issue Price. The Company has agreed to purchase for cancellation a total of £7.5 million of Loan Stock currently held by the Audley Investors."

"The Audley Investors" are defined as "Audley Capital Development Limited and Audley Investments Portfolio Limited, both companies incorporated in the British Virgin Islands". The loan stock purchase agreements between MWB and the Audley Investors were agreed today.

Who are these investors, and what are these entities?"

Mr Treger replied some 10 minutes later:

"I don't know. I think they formed these companies in the bvi. Nothing to do with us."

Mr Treger said in evidence that he was annoyed by this use of the Audley name and complained by telephone to Mr Balfour-Lynn both at the time and on various other occasions over the following two years while the Audley names remained unchanged.

Although Mr Treger said that he had no intellectual property in the Audley name such as would have enabled him to prevent its use, he told the Committee that he regarded the use of the name by the owners of the BVI companies as "identity theft". The Committee addresses this and related issues in assessing the Executive's Disciplinary Submission against Mr Treger, but it is appropriate to observe now that the nonchalant tone of Mr Treger's response to Mr Epstein is surprising for someone who has just been alerted to the theft of his identity. As will be seen, the use of the Audley name led to a widespread assumption that the shares acquired in the placing by the Audley companies were shares managed by Mr Treger or by one of the Audley entities.

Mr Treger accepts that he gave an irrevocable undertaking on behalf of Messrs Eker and Aspland-Robinson to vote on behalf of the resolution to amend the covenant in the Loan Note Trust Deed so as to increase MWB's headroom for compliance. He maintains, however, that this undertaking, in common with later undertakings given on behalf of the Audley Investors as shareholders, was given purely as adviser to Messrs Eker and Aspland-Robinson and not as ostensible manager or controller of the relevant shares.

The placing closed on 12 January 2010. Leaving aside for the moment the question whether Mr Treger held himself out as manager or controller of the shares acquired by AIPL and ACDL or whether, as he maintained, he made it clear when occasion arose, that he acted purely in an advisory capacity to the owners of AIPL and ACDL, one thing is clear - the market, the financial press, the Panel and the wider board of MWB and its professional advisers, remained ignorant of the true ownership of the 25 million shares of MWB acquired by AIPL and ACDL in the placing.

Had the true ownership and source of funds for the acquisition of the Loan Notes been known, it would have been apparent that the ultimate beneficiaries of the shares held by AIPL and ACDL were members of or persons acting in concert together and with the 1997 Concert Party, the relevant acquisitions having been organised and funded in substantial part by Messrs Balfour-Lynn and Singh who were principal and directing members of the 1997 Concert Party.

Calculations appended to the Executive's Statement of Facts show that once one includes the undisclosed shareholdings of those who ought properly to have been regarded as members of the 1997 Concert Party (including in particular the shares acquired by Mr Aspland-Robinson on 1 June 2009 and previously) upon the closing of the placing the disclosed and undisclosed members of the 1997 Concert Party held 50.33% of the enlarged share capital of MWB. Neither the figures, nor the assumptions underlying the Executive's calculations, were challenged and the Committee accepts them as accurate. Those calculations are attached to this ruling as Appendix III. In summary, they show that by 12 January 2010 disclosed and undisclosed members of the 1997 Concert Party had acquired statutory control of MWB. 

By a Share Purchase and Security Agreement dated 15 December 2010, the issued share capital of AIPL (two fully paid up and registered common shares) was sold to Audley Investment Holdings Limited, a Hong Kong incorporated company owned by Mr Giancarlo Cioffi. The agreement recited AIPL's ownership of the MWB shares and Loan Notes and set out the consideration for the sale as:

"…the lower of:

(i) The average monthly market value of the MWB Shares computed using the closing mid-price on the last trading day of every calendar month over a period starting on the last trading day of December 2010 and ending on the trading day immediately following May 4th, 2012; AND

 (ii) The market value of the MWB Shares computed using the closing on the trading day immediately following May 4th, 2012;

Minus a 12% illiquidity discount." 

There was an equivalent additional consideration formula for AIPL's Loan Stock.

This formula for determining the purchase consideration was unusually favourable to the purchaser. In addition, although an unusually long period was agreed between the dates of contract for sale and completion (about a year and a half) all voting rights attaching to the shares and to AIPL's Loan Notes transferred to the purchaser immediately upon the delivery of share certificates, which was to take place no later than 31 December 2010.

 The Share Purchase and Security Agreement was entered into by HP Lux Sàrl ("HP Lux") "acting for and on behalf of an undisclosed seller" and was signed by Mr Cohen on behalf of HP Lux. HP Lux is a Luxembourg company in the Hoche Partners group of which Mr Cohen was and is chairman. Mr Cioffi, who was a long-standing client of Mr Froidevaux of Budin, signed the agreement on behalf of the purchaser.

On 15 December 2010, a Share Purchase and Security Agreement for the shares of ACDL was agreed on materially the same terms. ACDL was sold to Audley Capital Holdings Limited, another Hong Kong incorporated company which was owned by a Mr Gilles Verduron, another long-standing client of Mr Froidevaux.  HP Lux also entered into this agreement as agent for an undisclosed seller and Messrs Cohen and Verduron signed on behalf of seller and purchaser respectively. The Share Purchase and Security Agreements are referred to collectively as "the SPAs".

Pursuant to two Escrow Agreements agreed on materially identical terms on 15 December 2010 between HP Lux, the purchaser and Mr Froidevaux, Mr Froidevaux agreed to hold the MWB share certificates as escrow agent pending joint instructions from HP Lux and the purchaser to release them.

The Executive's case is that the sales of AIPL and ACDL were a sham orchestrated by Messrs Balfour-Lynn and Singh with the assistance of Messrs Froidevaux and Huguenin who devised and implemented the legal machinery to give effect to the transactions. The on-sales were intended to give the impression that ownership of the shares of MWB held by AIPL and ACDL respectively had been "sold down" and accordingly, that the senior management of MWB and their associates had divested themselves of whatever interest they had previously owned in the shares. However, according to the Executive, the funds to complete the purchase were provided indirectly by Mr Balfour-Lynn and by Mr Singh's wife, Dr Ajit Gill on her husband's behalf and the money circulated by a complicated route back to the sellers. Thus, the ultimate beneficial owners of the shares of MWB held by AIPL and ACDL remained the same.

Each of Messrs Cohen, Froidevaux, Huguenin and Houri are accused of deliberately misleading the Executive contrary to section 9(a) of the Code. They are each said to have misled the Executive during interviews in which they were questioned in connection with their respective roles in the transactions.

Mr Cohen is a corporate financier based in Paris and Luxembourg with a background in investment banking. He is a founding partner of Hoche, a corporate finance group with offices in Paris and Luxembourg. Hoche provides advisory services to clients in various areas including M&A and asset finance.

Mr Cohen's evidence to the Executive and to the Committee was that if the on-sales were a sham, he was unaware of it. He believed they were genuine transactions. He told the Committee (and the Executive beforehand) that in the late summer of 2010 he was contacted by Mr Christophe Sicot, a business partner whom he had known since about 2003/4 and with whom he was frequently in contact regarding business opportunities. Mr Sicot is a colleague of Mr Cohen's through Hoche Achrisia Solutions, a marketing joint venture between Hoche and Mr Sicot's  Achrisia & Partners.

According to Mr Cohen, Mr Sicot told him that he had recently met Mr Aspland-Robinson at a polo tournament in Sotogrande in the south of Spain. In the course of conversation, Mr Aspland-Robinson had told Mr Sicot that he was a shareholder in MWB which controlled Malmaison and that he was looking to sell his position in MWB. That Mr Sicot should refer this enquiry to Mr Cohen was, as Mr Cohen maintained to the Committee, no particular surprise as Mr Cohen had had recent dealings with Malmaison which he had mentioned, in turn, to Mr Sicot. 

Mr Cohen's evidence, both to the Executive and the Committee, was that Mr Sicot must have given him Mr Aspland-Robinson's telephone number, because Mr Cohen then telephoned Mr Aspland-Robinson (effectively, a cold call), following which, probably during the second half of September 2010, Mr Cohen went to London to meet him. It transpired that Mr Aspland-Robinson was very keen to sell his shares. During this meeting, Mr Aspland-Robinson agreed to a 2% commission on the transaction and mentioned that there was another prospective seller, Mr Eker. Mr Cohen claims to have met Mr Eker later that day at Mr Eker's London flat. His evidence was that either on the train back to Paris or in the office the following morning, he made rough manuscript notes of these meetings which he produced to the Executive and the Committee.

This commission from Messrs Aspland-Robinson and Eker was a one-off for Mr Cohen; brokering a sale of shares in a UK public company was outside Hoche's usual line of business and not something that he had previously undertaken.

Mr Cohen's evidence was that this was small business for Hoche, but he had agreed, nevertheless, to see what he could do to find a buyer for the MWB shares. He claimed to have telephoned first Mr Frank Orenstein, the executive chairman of Hospitality Investors' Group and someone who was well-known to Mr Cohen and with whom he had had recent dealings in connection with Malmaison's involvement in a potential hotel operation in Paris. Mr Orenstein was, apparently, not interested, whereupon Mr Cohen telephoned Mr Froidevaux.

Mr Cohen had worked with Mr Froidevaux for a number of years, having been introduced to him by Mr Sicot, who was and is a very close friend of Mr Froidevaux. Whether the search for a purchaser for the MWB shares of Messrs Aspland-Robinson and Eker was the purpose of the call to Mr Froidevaux or whether the subject came up while discussing another matter, Mr Cohen cannot remember, but the outcome was that Mr Froidevaux undertook to make enquiries and to come back to Mr Cohen within a few days.

Consistent with what he had told the Executive, Mr Cohen's evidence to the Committee was that Mr Froidevaux telephoned him a few days later and told him that he had potential buyers. The potential buyers turned out to be Mr Froidevaux's long-standing clients, Messrs Cioffi and Verduron.

Mr Cohen then claims to have drafted Agency Agreements, dated 1 October 2010 which recorded the terms of his engagement by Messrs Aspland-Robinson and Eker. Mr Cohen's evidence was that he later emailed redacted copies of the Agency Agreements to Mr Froidevaux as an aide memoire or source of reference for Budin's drafting of the SPAs. This, according to Mr Cohen, explains why the Agency Agreements and the SPAs have the same font and typeface and share certain typographical errors and drafting peculiarities.

On 10 October 2010, Mr Froidevaux wrote a letter to Mr Cohen setting out the terms of an offer from one of his clients and seeking a response by 18 October 2010. Mr Cohen then claims to have sent separate Notices of Bid to Messrs Eker and Aspland-Robinson signed by HP Lux and notifying Messrs Eker and Aspland-Robinson of the terms negotiated on their behalf. Mr Cohen's evidence was that the Notices of Bid were signed by Mr Eker and Aspland-Robinson respectively so as to notify their agreement to the proposed terms.

As noted above, the SPAs and Escrow Agreements were executed on 15 December 2010.

There are no emails evidencing any contemporary communications either between Mr Cohen and Budin or between Mr Cohen/HP Lux on the one hand and Messrs Aspland-Robinson and Eker on the other. Apart from Mr Cohen's handwritten notes¹³, the only documents evidencing Mr Cohen's retainer by the sellers and his communications with the prospective purchasers through Budin, are the standalone documents referred to above and a handwritten note of a conversation with Mr Froidevaux which is said to have occurred between 1 and 10 October 2010. In this conversation Mr Froidevaux is said to have proposed basing the purchase contracts on the agency agreements (as recorded in the note, "draft contract basé sur l'agency"). There is no evidence that any document was ever signed by Mr Eker.

The Executive invites the Committee to reject Mr Cohen's evidence and to find that he lied to the Executive, and subsequently to the Committee, in tendering it. The Executive's case is that Mr Cohen's evidence is a false narrative put forward to disguise the fact that he was brought into the transaction by Mr Froidevaux, who in turn had been engaged by Mr Balfour-Lynn to orchestrate and document the sham sales.

 The Executive maintains that a calendar entry for Mr Balfour-Lynn indicates that he had arranged to meet Mr Cohen on 19 November 2010 in Paris, the meeting probably having been arranged following or in connection with Malmaison's potential involvement in a hotel development in Paris with Inovalis, a client of Hoche. According to the Executive, the evidence also establishes that Mr Balfour-Lynn had had previous dealings with Mr Froidevaux in connection with several property transactions, and that he and Mr Singh had arranged to travel to meet Mr Huguenin at Budin's offices on 6 December 2010 before the flight arrangements for this meeting were pushed back to 15 December.  Messrs Balfour-Lynn and Singh had return flight tickets booked for Geneva on 15 December 2010, the date upon which the SPAs and Escrow Agreements were executed.

 The Executive does not allege that Mr Cohen was aware of the respective interests of the ultimate beneficiaries in the shares of MWB held by AIPL and ACDL, but it does allege that he was aware that the on-sales were a sham devised by Mr Balfour-Lynn and intended to conceal the interests of owners associated with MWB's management in the shares of MWB. 

The Committee addresses these and related issues in assessing the Executive's Disciplinary Submission against Mr Cohen. 

Mr Froidevaux and Mr Huguenin worked closely together on the transactions in issue and their roles may fairly be considered together. Mr Froidevaux was a senior partner of Budin at the time. He tended to have the relevant contacts and business relationships while Mr Huguenin, who is fluent in English, took care of the detailed documentation.

The route by which the consideration for the purchase of AIPL and ACDL travelled from Mr Balfour-Lynn and Mr Singh to HP Lux as agent for the sellers, was labyrinthine in the extreme. It involved as a conduit two companies controlled by Mr Houri whose family were long-standing clients of Mr Froidevaux.

During April 2012, two months or so before the completion monies were due to be paid under the SPAs, Mr Houri was introduced to Mr Balfour-Lynn through Mr Robert Dallal, another long-standing connection of Mr Froidevaux and a cousin of one of MWB's former senior directors. Mr Houri's account to the Executive and his evidence to the Committee was that he met Mr Balfour-Lynn at Mr Dallal's instigation after mentioning to Mr Dallal that he was looking to develop as hotels two properties that he owned in Poland and Israel. Mr Balfour-Lynn had a profile in the hotel industry through Malmaison and AHG and was recommended by Mr Dallal as someone who might help. Mr Houri's evidence was that, having met Mr Balfour-Lynn and through him Mr Singh, the three of them agreed in principle upon a fifty/fifty joint-venture for the sourcing and developing of hotels in Poland and Israel. 

On 25 April 2012 Mr Balfour-Lynn entered into an agreement to lend EGT Finance Limited ("EGT Finance"), a company incorporated in England and controlled by Mr Houri, £1 million. On the same day, Mr Singh's wife, Dr Ajit Gill, lent EGT Finance £2 million. The loans were interest free and unsecured. According to Mr Houri, the £3 million was Mr Balfour-Lynn's and Mr Singh's down-payment for the proposed joint venture.

On about 2 May 2012, Dolman Finance, a company incorporated in St Vincent and the Grenadines and owned by the E&G Trust, subscribed for 3,000 shares of the Baffin Real Estate Investment Fund ("the Baffin Fund") for £3 million. E&G Trust was a Houri family trust in relation to which Budin exercised wide agency powers.

The Baffin Fund had been established in the BVI by Budin with Messrs Cioffi and Verduron as directors. A Baffin Fund fact sheet dated 16 September 2010 reveals that it had by then (a few weeks before the date of HP Lux's Agency Agreements with Messrs Aspland-Robinson and Eker), been established as a real estate investment fund with the object of acquiring a 15.2% holding in MWB, described in the document as "the Target Company".  It was ostensibly managed by Messrs Cioffi and Verduron through Baffin Capital Management Limited, a Cayman Island company owned by Messrs Cioffi and Verduron.

When interviewed by the Executive, Messrs Cioffi and Verduron conceded that they had had virtually no involvement in the Baffin Fund or its management. They told the Executive that they were long-standing clients of Mr Froidevaux whom they trusted implicitly.  They also told the Executive that Mr Froidevaux had assured them that he was confident of being able to find third party investors in the Baffin Fund so as to enable the purchase consideration for AIPL and ACDL to be met from the fund before the completion monies became due under the SPAs.

The subscription of £3 million by Dolman Finance was paid from its account at Union Bancaire Privée ("UBP") and was authorised by Mr Houri after receiving and briefly reviewing a Baffin Fund Information Memorandum sent to him by Mr Huguenin. The Baffin Fund had no previous track record and this was the only subscription it had ever received. Furthermore, the Dolman finance subscription was used to effect the only investment the Baffin Fund ever made, namely a purchase of the MWB shares and Loan Notes which had been sold along with the share capital of AIPL and ACDL to the Hong Kong companies under the SPAs of 15 December 2010. The consideration paid by the Baffin Fund for MWB's shares and Loan Notes was remitted to the Hong Kong purchasing companies to enable them to pay the completion monies due under the sales of AIPL and ACDL.

Mr Houri told the Executive and the Committee that his investment through Dolman Finance in the Baffin Fund was made in contemplation of the prospective joint venture and was intended to match the £3 million contributed by Mr Balfour-Lynn and the wife of Mr Singh by way of loan to EGT Finance. Mr Houri said he hoped the Baffin Fund would enable him to establish some sort of track record in real estate investment pending the formal setting up of the joint venture.

Meanwhile, Mr Houri protected his position by obtaining indemnities from Mr Balfour-Lynn and Mr Singh's wife, Dr Gill with a view to covering any loss sustained by Dolman Finance as a result of its subscription in the Baffin Fund. He also obtained promissory notes from Mr Balfour-Lynn and Dr Gill in a further attempt to ensure that Mr Balfour-Lynn and Dr Gill would be solely at risk for any loss sustained as a result of the Dolman Finance subscription. 

Finally, Mr Houri told both the Executive and the Committee that he had no idea that the Baffin Fund would deploy the Dolman Finance subscription to invest in MWB's shares and Loan Notes.

The Executive rejected Mr Houri's explanation. It maintained that Dolman Finance's £3 million subscription in the Baffin Fund had nothing to do with a prospective joint venture, but was effected by Mr Houri against indemnities and promissory notes from Mr Balfour-Lynn and Dr Gill in the knowledge that the subscription was part of a sham intended to produce the funds which would enable a sham sale to complete.   

Mr Houri's cross examination by counsel for the Executive, Mr Mark Simpson KC was part heard at the conclusion of the sitting on Thursday 9 November 2023. On the following morning, Mr Simpson told the Committee that:

"On condition and on the basis that Mr Houri has now accepted and admitted knowing involvement between 2012 and 2015 in a sham transaction involving Messrs Balfour-Lynn, Singh, Froidevaux and Huguenin (the latter of Budin Partners law firm), and that he has admitted knowing involvement in a cover-up concerning the Baffin Fund, the Executive is recommending to the Hearings Committee that Mr Houri should be cold shouldered for a period of one year, rather than the period of three years proposed in its remedial submissions, on the basis of the early admission and that significant time and cost will now be saved on his case."  

The terms of this admission were duly confirmed by Ms Elizabeth Weaver, counsel for Mr Houri who submitted that the Committee should accept the Executive's recommended sanction. After retiring to consider the matter, the Committee duly accepted the recommended sanction and thereby concluded the proceedings against Mr Houri. Mr Houri's admission confirmed the Executive's case that the on-sales involved the circular flow of monies and, specifically, that the Baffin Fund was a conduit deployed for the purpose of indirectly channeling funds provided by Mr Balfour-Lynn and on Mr Singh's behalf to complete the purchase of AIPL and ACDL. 

Mr Houri's admission was followed by, and perhaps prompted, an admission by Mr Froidevaux and Mr Huguenin. On the evening of 14 November 2023, after the twelfth day of the hearing, the Secretary to the Committee received by email an admission in the following terms signed by Messrs Froidevaux and Huguenin:

"1. Mr Froidevaux and Mr Huguenin now accept and admit that they were  knowingly involved: (1) with Balfour-Lynn, Mr Aspland-Robinson, Mr Jeffrey Eker, Mr Singh in the sham purchases by Audley Capital Holdings Limited and Audley Investment Holdings Limited of the  entire share capital of Audley Capital Development Limited and Audley Investments Portfolio Limited, respectively, on 15 December 2010; (2) with Mr Balfour-Lynn, Mr Singh and Mr Houri in the sham transaction by which Dolman Finance invested £3m in the Baffin Fund using money provided by Mr Balfour-Lynn and Mr Singh, and those monies were then used to invest in the MWB securities held by Audley Capital Development Limited and Audley Investments Portfolio Limited; (3) with Mr Treger in covering up Mr Balfour-Lynn's, Mr Singh's and Mr Aspland-Robinson's ownership of the Audley companies. They acknowledge that they knowingly misled the Executive in relation to those transactions and their involvement in them.

2. On the basis of those admissions, Mr Froidevaux and Mr Huguenin respectfully request that they be cold-shouldered for a period not to exceed one year and that their conduct not be reported to the Geneva Bar Commission or to any other Swiss authority."

The context for the request by Messrs Froidevaux and Huguenin that having regard to their admission they be "cold-shouldered" for a period of one year and their conduct not be reported to the Geneva Bar Commission or any other Swiss authority, was a disciplinary recommendation by the Executive to the Committee that a Panel Statement under section 11(b)(v) of the Introduction to the Code ("section 11(b)(v)") be published in relation to them and that they each be cold-shouldered accordingly for a period of three years. In addition, the Executive had recommended that pursuant to section 11(b)(iv) of the Introduction to the Code ("section 11(b)(iv)"), their conduct be reported to the Commission du Barreau in Geneva. 

The proceedings against Mr Froidevaux and Mr Huguenin are brought under section 9(a) for having misled the Executive in the course of its investigation and for having obstructed the conduct of the Executive's investigation. The appropriate sanctions are to be considered at a further hearing to follow the issue of this ruling.

The events referred to below are principally relevant to three related aspects of the Executive's case against Mr Treger, namely (i) that he encouraged the widely held belief that he or an Audley Capital entity managed or controlled the block of MWB shares acquired by AIPL and ACDL in the placing; (ii) that he assisted Messrs Balfour-Lynn and Singh in concealing the true beneficial ownership of these shares and the fact that they were controlled by MWB's senior management; and (iii) that Mr Treger had no advisory or other relationship with Messrs Aspland-Robinson or Eker but in matters relating to the MWB Loan Notes and subsequently in relation to AIPL and ACDL, acted on the instructions of Messrs Singh and Balfour-Lynn.

On 12 February 2010 in the aftermath of the placing, Mr Treger's junior colleague, Mr Epstein sent the following email to Mr Treger under the subject heading "MWB":

"Julian-

I have had several calls from brokers who are seeing activity in this name and are asking about our shareholding. I have told them that the two entities on the register, Audley Capital Development Limited and Audley Investments Portfolio Limited, have nothing to do with us whatsoever.

The Arbuthnot broker who sent the below email has now asked me several times whether these entities have any relation to Audley Capital or Julian Treger- I have of course told him no. He does not believe me - his response was that it seems impossible and he doesn't see how that would be allowed. They are very keen to speak to whoever is behind these vehicles.

He doesn't know that we did any work on this situation or that we know management."

According to Pyrrho's evidence, Arbuthnot acted from time to time as their brokers rather than on any more formal advisory basis.  Whatever the scope of Arbuthnot's relationship with Pyrrho, it will become apparent from the documents referred to below that the message that AIPL and ACDL had nothing to do with Audley Capital did not get through to Pyrrho, perhaps because, as Mr Epstein observed to Mr Treger, Arbuthnot did not believe it.

During May 2010, Blue Gem Capital Partners LLP ("Blue Gem") announced a possible offer for Liberty. Pyrrho then announced that it had made a proposal to the MWB board regarding a possible offer of its own which the board had rejected. Pyrrho objected to the process by which the Blue Gem possible offer had been considered, maintaining that it had been denied the opportunity to increase its own possible offer for Liberty and that this was to the detriment of Liberty shareholders.

On 19 May 2010, Blue Gem announced a firm offer for Liberty. On 28 May it was announced that MWB had "hard" irrevocable undertakings from 51.1% of its shareholders to vote in favour of an ordinary resolution to approve the Blue Gem offer. This was followed on 21 June 2010 by an announcement that 74.6% of the MWB shares voted at a general meeting had voted to accept the Blue Gem offer. The Blue Gem offer was declared unconditional on 23 June 2010.

Meanwhile, on 13 May 2010 Ms Dipika Shah of the Executive had spoken to Mr Treger. She had been given to understand that Mr Treger had been approached for an irrevocable undertaking and wanted to know whether he had been made aware of a competing offer before he signed. Her note of the conversation is as follows:

"At approximately 6.00 pm on 13 May, I spoke to Julian Treger of Audley Capital. I said that I was calling on Liberty and understood he had been approached for an irrevocable. I asked if he had been given details of a competing offeror before he signed the irrevocable. Treger confirmed he had been and Blue Gem's offer was the higher offer at the time. I said that I had heard different versions of the story and hence called him.

Treger said that he had been called out of the blue by Arbuthnot last week asking why he had signed an irrevocable. He said that, at first, he was unclear why they were asking this and confused, but later transpired they were acting for someone who had been prevented from making a higher offer. He said that, as far as he was concerned, he had given an irrevocable to the higher bidder at the time. I thanked him for his time and the call ended."

The Executive relies upon this note as an example of Mr Treger encouraging the belief that he managed or controlled the shares held by AIPL and ACDL and in that capacity had given an irrevocable undertaking to vote in favour of the Blue Gem offer. Mr Treger had no specific recollection of how he described his role to Ms Shah, but he told the Committee that he felt that he would have explained to her that he was an adviser only to AIPL and ACDL and that that was the capacity in which he had advised the companies to give the undertaking. The Committee sees no basis for doubting the accuracy of Ms Shah's note. But irrespective of that, what is clear is that whether Mr Treger managed the shares held by the Audley companies or merely advised the companies in relation to their own management of such shares, nothing was said to rebut the assumption that AIPL and ACDL were independent shareholders exercising the rights attaching to their shares independently of MWB's management.

On 20 May 2010 Mr Singh emailed Mr Treger suggesting a meeting with him and Mr Balfour-Lynn. That email was headed "Meeting with Richard and Myself re Pyrrho visit to UK next week". Mr Treger agreed to meet on the following day. On the same day, under the same subject heading, Mr Treger emailed Mr Singh saying:

"Shall I agree to meet them? I haven't responded yet."

Later that day Mr Singh emailed Mr Treger saying:

"FYI - see you tomorrow.

Both Richard and I think you should not see Pyrrho at all. Will call you later on this p.m. if you are available."

The Executive maintains that the fact that Mr Treger consulted Mr Singh on whether he should meet Pyrrho, reveals anxiety on Mr Treger's part as to how he should represent his own position in relation to the MWB shares of AIPL and ACDL in any meeting with Pyrrho. It also suggests, according to the Executive, that Mr Treger was looking for guidance, if not direction, from Mr Singh in this respect.   

On 2 June 2010, Paul Cummins of Pyrrho emailed Mr Treger saying:

"I am writing to introduce myself as one of the directors of Pyrrho Investments Ltd. As you know Pyrrho along with Audley is a major shareholder in MWB Group Holdings Plc. I am in London the early part of next week and wondered if I might arrange to come over and introduce myself and Pyrrho to you."   

On the same day, Mr Treger forwarded this email to Mr Singh with the comment "fyi". Mr Singh, in turn, forwarded it to Mr Balfour-Lynn with the same comment.

Mr Cummins gave evidence that he and Mr Treger met a few times after this initial exchange but at no stage did Mr Treger disabuse his belief that Mr Treger managed or controlled the shares held by the Audley companies. In fact, their dealings proceeded on the explicit premise that they both controlled major stakes in MWB.

Pyrrho's assumption that itself and Audley were MWB's two major independent shareholders was evidently shared by, amongst others, Panmure Gordon who were MWB's corporate advisers. On 31 August 2010 Panmure Gordon submitted to its client an analysis of MWB's Share Register. That analysis showed the 1997 Concert Party as holding 33.51% of MWB's issued share capital, Pyrrho as holding 22.42% and the Audley Investors as holding 15.18%. Apart from the 1997 Concert Party, Pyrrho and the Audley Investors were MWB's two largest shareholders.

On 27 May 2010, Mr Howard Kagan, Audley Capital's chief financial officer who reported to Mr Treger, emailed Mr Singh attaching "as requested" a draft "Audley - letter of engagement". The draft agreement was backdated to 1 June 2009 and purported to record the terms on which Audley Capital had advised ACDL and AIPL since that date. The letter stated as follows:

"We are writing to propose the terms on which Audley Capital Advisors LLP ("Audley Capital") will act as financial advisor to Audley Capital Development Limited and Audley Investments Portfolio Limited ("the Companies") from 1 June 2009. Audley Capital will provide advice relating to corporate strategy, corporate governance, mergers and acquisitions, disposals, joint venture arrangements and minority investments in the property sector.

During the terms of the engagement Audley Capital will provide strategic and financial advice in connection with any potential transactions, including, as appropriate, advice in defining objectives, sourcing investment opportunities, performing valuation analysis, and structuring, planning and negotiating any potential transaction. Please be advised that Audley Capital does not provide accounting, tax or legal advice.

Audley Capital is a limited liability partnership incorporated under the laws of England and Wales. Audley Capital is authorised and regulated by the UK Financial Services Authority. Audley Capital will treat MWB as a professional client for the purposes of the FSA rules.

 Fees for services in connection with this appointment will be payable quarterly in arrears. The fee will be £25,000 per quarter. This will cover the costs of services relating to general advice on corporate strategy and business development."

The draft had a signature block for Mr Treger to sign on behalf of Audley Capital Advisors LLP and for signatures to be entered on behalf of ACDL and AIPL. It is to be noted that Audley Capital said that it would "treat MWB as a professional client for the purposes of the FSA rules". According to the Executive, this remark reflected the reality, namely that Audley Capital's true "client" was MWB and all its dealings in connection with AIPL and ACDL were exclusively with Messrs Balfour-Lynn and Singh.

Mr Treger's evidence to the Committee was that the written agreement was backdated to record an oral advisory agreement made with Messrs Eker and Aspland-Robinson a year earlier on 1 June 2009. As previously noted, Mr Treger said that all his advice was relayed to Mr Singh on the assumption that Mr Singh would pass it on to his clients.  It transpired that Mr Treger never met Mr Eker until February or March 2012, by when he had terminated the advisory agreement and the Executive had begun its investigation. He told the Committee that he had met Mr Aspland-Robinson on a few occasions before June 2009, but could not recall meeting him during the currency of the alleged advisory agreement. Invoices for advisory fees were initially sent to STM Fidecs, whose address Mr Kagan obtained from Mr Singh. Chasers regarding unpaid invoices were sent by Audley Capital to Mr Singh until JAM Business Consultancy Limited ("JAM"), a company owned by Mr Pankhania, took over responsibility for payment.

 The Executive's case is that the advisory agreement was a fiction intended to obscure the fact that in his dealings with regard to Messrs Aspland-Robinson and Eker and their companies Mr Treger acted on the instructions of Mr Singh and Mr Balfour-Lynn whom he correctly regarded as exercising control over the companies and their shares. The Committee's findings on this conflict of evidence are included below in its assessment of the Disciplinary Submission against Mr Treger.

On 26 January 2011 Mr Cummins emailed Mr Treger as follows regarding the composition of the MWB board:

"I just spoke to Eric Sanderson Chairman at MWB about the recruitment of the Independent Director. He tells me that they are meeting Korn Ferry this afternoon to go through the short list. I reiterated my view that major shareholders, mainly you and we, should have input on the selection. He was very strongly against this. Not sure what your view is but assuming you would like an input as well perhaps you can have a word with him as well."

The context was Pyrrho's increasing concern about the management of MWB and its attempt to enlist Mr Treger's support as a major shareholder in getting changes to the board.

On 14 April 2011, Mr Kagan emailed Mr Singh, copying in Mr Treger. Mr Kagan attached an extract from Bloomberg and said:

"Jag

Please see attached extracts from Bloomberg which discloses that Audley Capital Advisors LLP is the second largest shareholder in MWB Group Holdings Plc through Audley Capital Advisors LLP Managed funds.

Recognise that you are not responsible for data disclosed on Bloomberg but feel that this is misleading and would ask that, in the interests of having accurate information being disclosed to the market for your company, you have this updated please."

The context was that Mr Kagan had spotted the entry in Bloomberg and had referred it to Mr Treger who directed him to take up the matter with Mr Singh. When the entry was not corrected or withdrawn, Mr Kagan followed up with Mr Singh, but to no avail. There was no attempt to take the matter up with Bloomberg until much later when Mr Treger's partner and co-founder of Audley Capital intervened in the matter (see below).

On 27 April 2011, following a press report that MWB was looking to sell hotel assets, Mr Cummins emailed Mr Treger as follows:

"When we met in London you described the company as finely balanced in terms of its debt levels and it seems that this has not improved given current operating conditions. The company has a high level of debt and there are a number of ways of dealing with thls including asset sales and capital market solutions. As the two main non management shareholders it may be a good idea if we were to discuss the direction of the business." 

On 26 April 2011, the previous day, Mr Balfour-Lynn had emailed Mr Treger advising him against speaking to or meeting with Mr Cummins and saying:

"Hi Julian

I tried to speak with you on the telephone. Personally I would avoid telephone conversations or meetings with Paul Cummins and simply state that you would rather retain your independence as you are fearful of being seen by the Stock Exchange as acting in concert with Pyrrho. Both of you are large shareholders and you therefore need to comply with the strictest independence."

On 28 April 2011, MWB announced an offer for its subsidiary, Business Exchange thereby triggering Opening Position Disclosure obligations under Rule 8 of the Code. On 6 May 2011, Ms Jessica Bonner of the Takeover Panel's Market Surveillance Unit wrote to Mr Singh explaining the implications of Rule 8. Ms Bonner also drew Mr Singh's attention to Rule 22(c) of the Code which requires the board of an offeror to assist the Panel in identifying persons who are interested in 1% or more of any class of relevant securities of the offeror. By now AIPL had been sold to Audley Investment Holdings Limited and ACDL had been sold to Audley Capital Holdings Limited pursuant to the SPAs of 15 December 2010, albeit completion had yet to take place. Accordingly, AIPL and ACDL, along with Audley Investment Holdings Limited and Audley Capital Holdings Limited, were obliged to make an Opening Position Disclosure under Rule 8.3 of the Code in respect of the Audley companies' holdings in MWB.

On 26 May 2011, Mr Singh sent Mr Treger a copy of the Rule 8.3 disclosure issued on behalf of AIPL and Audley Investment Holdings Limited which had been signed by Mr Froidevaux and which disclosed the companies' holding of 11,333,333 shares of MWB. The Rule 8.3 disclosure described AIPL as "advised by Audley Capital Advisors in the UK". A similar Rule 8.3 disclosure, dated 26 May 2011 was made on behalf of ACDL with respect to its 13,666,667 shares of MWB.

On 1 June 2011, Ms Bonner, who had been referred to Budin by STM Fidecs, emailed Mr Huguenin saying:

"[I] believe when I spoke to an individual at Audley Capital they confirmed that both Audley Capital Holdings Limited and Audley Investments Portfolio Limited were managed by Audley Capital Advisors. If this is correct l believe these two holdings need to be aggregated together on one form. This form will also need to be publicly disclosed to the market via an RIS.

Please could you call me as soon as possible to discuss this further." 

On 3 June 2011, Ms Bonner spoke to Mr Treger and told him that she had received draft disclosures from Audley Capital's lawyers, Budin and Partners and that the disclosure was now very late. Mr Treger promised to chase it up and revert. On 17 June 2011, Ms Bonner spoke to Mr Treger again and made the following file note of the conversation:

"I contacted Treger again on 17 June. I stated that the Executive appreciated the fact they had disclosed correctly and swiftly after we had contacted Audley Capital Advisers regarding this obligation. But that we were concerned it took until we contacted Treger for the disclosure to be made. It appears in part that the delay on this disclosure was due to some confusion over who was responsible for management obligations during this transition period. Treger confirmed to me that they had appropriate systems and controls in place to ensure timely disclosure of any positions in their own funds, but that this position was held by an advisory only fund, hence why their controls had not been in effect. he assured me that the lawyers were aware of the disclosure requirements and would monitor the disclosure table for changes."   

Mr Treger relies on this note as evidence of disclosure by him that he was acting in an advisory capacity only to the "fund" in question. The Executive cites Ms Bonner's note as another example of Mr Treger concealing the true ownership or control of the shares in question and his own relationship to the owners.

Mr Treger's evidence is that he only got to learn that AIPL and ACDL had been sold as a result of these exchanges regarding the Rule 8 disclosures. He told the Committee that he continued to assume that the clients he was advising through Mr Singh were Mr Aspland-Robinson and Mr Eker, albeit for some reason they had transferred their interests to the Hong Kong holding companies and were now being advised by Budin.

Examples of the widespread perception that Audley Capital controlled some 15% of MWB, continued to occur. On 14 June 2011, Mr Treger's colleague, Mr Epstein emailed Mr Kagan, copying in Mr Treger, regarding an article in the Financial Times. The article had stated that:

 "Audley Capital - the hedge fund run by Julian Treger, the high-profile South African investor - is MWB's second largest shareholder, with a 15 per cent stake."  

This prompted the following exasperated response from Mr Epstein in his email to Mr Kagan:

"We 're in the news again- the below article appeared in yesterday's FT. This has turned into a case study of management abusing their position to line their own pockets to the detriment of shareholders - not unlike the experiences we had while working closely with them for 10 months, for which we were never commensurately rewarded.

Management have been using the Audley name to suit their purposes for the past 18 months, and continue to do so, setting up new "Audley" vehicles over the past few weeks without our consent. Our misperceived involvement here makes us look weak as we allow management to trample on shareholder interests. Why do we continue to tolerate this?"

Although Mr Treger was copied into this email, it was apparent from Mr Kagan's evidence to the Committee that Mr Treger did nothing to stop such misleading statements other than to express his annoyance and, so Mr Treger claimed, to continue to complain intermittently to Mr Balfour-Lynn. No one attempted to get the Financial Times to print a correction.

On 13 July 2011, the Financial Times published another article about the dispute between Pyrrho and MWB concerning the terms of MWB's bid for the share capital of Business Exchange that it did not already hold. This article again referred to Audley Capital as MWB's second-biggest shareholder.  Mr Epstein again noticed the article and alerted Mr Treger to it by email of 14 July. Again, no one contacted the Financial Times with a view to getting it to correct the misunderstanding.

On 20 September 2011, Messrs Chan and Cummins met Mr Treger at Audley Capital's offices. At this meeting Messrs Chan and Cummins proposed that Mr Treger support Pyrrho in an attempt to obtain a seat on the MWB board. The evidence of both Mr Chan and Mr Cummins was that Mr Treger rejected that proposal, stating that in the UK the appointment of independent directors rather than the appointment of representatives of major shareholders was the standard corporate governance technique. Mr Treger expressed himself as willing to accept management proposals because he had bought into MWB at a low point and the Audley stake was not sufficiently major to merit too much of his attention.

Some aspects of the evidence concerning this meeting were hotly disputed.  Mr Treger told the Committee that he had assumed that Pyrrho were aware that he only advised the Audley companies rather than controlled or managed their shares, not least because "Audley Capital Advisors" (the prominent sign displayed in the entrance to Audley Capital's offices) underscored the fact that the company (Audley Capital Advisors LLP) was only authorised by the FSA under Part IV of the Financial Services and Markets Act 2000 to advise on investments. Mr Treger also relied upon Mr Epstein's denial in response to an enquiry from Arbuthnot that Audley Capital had anything to do with the Audley Investors (paragraph 171 above).

Pyrrho's evidence, in contrast, was that Mr Treger explained at this meeting that the Audley companies were managed accounts not Audley's usual investments. Furthermore, the inclusion of the word "Advisors" in Audley Capital's title was in Mr Chan's experience entirely consistent with activist investors holding or managing blocks of shares. The Committee addresses this disputed evidence in considering the Disciplinary Submission against Mr Treger. 

On 25 November 2011, Mr Cummins again emailed Mr Treger in an attempt to enlist his support in Pyrrho's disputes with the board of MWB and its attempt to gain representation on the board. The terms of this mail suggest that Pyrrho continued to believe that the shares of the Audley companies were held in accounts managed on a discretionary basis by Mr Treger. The material sections of Mr Cummins' email said:

"During this period we have seen a toxic debt refinancing with high cash interest

rates and accruing rates, a sharp drop in the share price and the loss of a key 

executive. You have always maintained that as the share price was well above 

your cost that you were not too concerned about the activities of the board, given 

that the share price is close to your cost I assume you are now more concerned.

 Also although these investments are small I understand that they are held in discretionary  accounts so I would assume the ultimate beneficiaries are now keen for a more activist approach, for which you are well known.

This being the case we would like your support in the appointment of a director from Pyrrho as a non executive director of MWB."  

No such support was forthcoming. On the contrary, Mr Treger wrote to the independent directors a letter, substantially drafted by Mr Singh and Mr Balfour-Lynn, justifying the policies and performance of the board. Thus, on 11 December 2011 Mr Singh emailed to Mr Balfour-Lynn the text of a detailed letter he had drafted for Mr Treger to send out to the non-executive directors of MWB refuting Pyrrho's various recent criticisms of the strategy pursued by the board. The letter was to be sent by Mr Treger before the imminent AGM. On 12 December  Mr Balfour-Lynn forwarded a further draft to Mr Treger asking him to email it to the three non-executive directors whose email addresses he supplied. Mr Treger made some amendments to the draft to make the tone, as he put it, "more temperate" but then emailed the letter to the non-executive directors without disclosing its provenance. Essentially, the letter represented Mr Balfour-Lynn's and Mr Singh's own justification for their conduct and policies, not Mr Treger's independent assessment.

The proceedings at the AGM on 13 December 2011 were recorded. The transcript records Mr Treger as saying this:

"Mr Chairman, I think as another major shareholder, I think the Company's facing a major issue. There aren't that many shareholders who represent a majority of the shares. I think all of this is best done in a private setting, and also in a  cooperative way, because I think fighting amongst shareholders is a distraction that  this company doesn't need." 

In the following day's Daily Telegraph, Jonathan Russell, the Telegraph's Assistant City Editor reported events at MWB's AGM under the headline "Accusations fly as investors round on MWB board…". The article contained the following reference to Mr Treger's intervention:

"Shortly after this Mr Treger, a 15pc shareholder in MWB, interrupted proceedings warning "fighting amongst shareholders is a distraction this company does not need""

This article finally prompted Mr Treger's colleagues at Audley Capital to demand an explanation of the dangerous use of the Audley name. Mr Kagan noticed the article and on 15 December 2011 emailed Mr Treger and Mr Michael Treichl, the other co-founder of Audley, saying this:

"Julian

The below article was in the Telegraph yesterday wrt MWB.

It continues the story that Audley are 15% shareholders in MWB, which we have previously discussed.

The attached Bloomberg extract of shareholders continues to show that Audley is a 15% shareholder, despite my many emails and attempts with the Finance Director of MWB, Jag Singh, to have this corrected (see attached emails) as no Audley entity/money, as far as I am aware, has shares in MWB.

We do know that MWB set up two SPVs called Audley Capital Developments Limited and Audley Investments Portfolio Limited (both BVI based) which originally held the shares. These entities are owned by Audley Capital Holdings Limited, a Hong Kong corporation (information that came to light when we were shown a UK Takeover Panel disclosure document that Jag Singh sent to you as attached).

We discussed at the time why these entities were using the Audley name yet you confirmed that we were not involved, other than as providing advisory services.

We have an advisory agreement with these two BVI SPVs that pays ACA LLP £100k per year in lieu of advisory services provided by ACA LLP.

At present none of us properly understand this situation. Adam has taken numerous broker calls over the years (asking what our involvement is given the Audley name on the Bloomberg share register) and Jolie has just received a request from Whitley who read the below article asking what Audley's involvement is.

I continue to be concerned by the lack of clarity as to what is going on and what the involvement is with Audley. This concern is heightened by the level of press this matter is gathering and the questions that may be asked of Audley by the FSA, should they decide to investigate.

This concern makes me question whether ACA LLP should be cancelling the advisory contract with the two BVI SPVs.

Can we discuss please?"

This email illustrates the gulf in relevant knowledge between Mr Treger and his colleagues, but it also shows that it was common knowledge within Audley Capital that MWB had set up AIPL and ACDL, that is to say, it was known that these companies were MWB's vehicles.

It seems that Mr Treichl had not previously been aware of what had been going on. His response of the same day to Mr Kagan's email was emphatic:

"lt seems to me the obvious thing to do is to terminate the advisory contract with immediate effect (if that's possible under the terms) as I understand no financial advisory services have been rendered since 2009. Julian, any objections?

 I agree that we should have a call as soon as practicable to get the full picture. Can you organise this, Howard?"

On 29 December 2011, Mr Treichl emailed Messrs Kagan and Treger saying:

"Have we now received a satisfactory explanation of who the beneficial owners are behind the mysterious 'Audley' companies? Also, why are they called audley if not to create some sort of deception?"

Mr Treichl had also been pressing for the regulator to be told that Audley Capital had no interest in the shares held by the Audley companies and for the advisory agreement between Audley Capital and the BVI companies to be terminated. By the end of January 2012, following correspondence between Mr Kagan, Bloomberg and Bloomberg's data provider, the information on Bloomberg's register was corrected. It is apparent that Bloomberg had not previously been asked to correct the relevant entry.

By notice of 6 February 2012 sent by Mr Treger to JAM, the advisory agreement ostensibly recorded in the backdated letter of 1 June 2009 was terminated with immediate effect. This notice of termination was given five days after Mr Treger's first telephone interview by the Executive.

According to Mr Treger, it was not until December 2011 that Mr Balfour-Lynn told him that Messrs Aspland-Robinson and Eker were not the owners of Audley Investment Holdings Limited and Audley Capital Holdings Limited, and that these companies were owned respectively by Mr Cioffi and Mr Verduron. Mr Treger told the Committee that the news made him angry, as it confounded his assumption that Mr Singh had been passing on his advice to those whom he regarded as his clients, namely Messrs Aspland-Robinson and Eker. Mr Treger was also told by Mr Balfour-Lynn that Messrs Cioffi and Verduron were represented by the Swiss lawyers, Budin.

On 11 January 2012, Mr Singh emailed Mr Treger the contact details for Messrs Froidevaux and Huguenin, having advised Messrs Froidevaux and Huguenin that Mr Treger would be contacting them.

On 12 January 2012, Mr Treger emailed Mr Huguenin referring to his introductory telephone call of the previous day and setting out a "copy of the advice I gave to the board on your behalf late last year in accordance with your client's views". In fact, the advice then set out for Mr Huguenin's benefit was the letter sent by Mr Treger to the independent directors of MWB on 12 December 2011, justifying the policies and conduct of the board - i.e. the letter the initial drafts of which had been composed by Mr Singh and Mr Balfour-Lynn and which had been sent by Mr Treger to the independent directors at Mr Balfour-Lynn's request.

In order to meet know your client requirements, Mr Treger evidently needed some evidence that Messrs Cioffi and Verduron were owners of the Hong Kong companies. Accordingly, on 16 January 2012 Mr Treger emailed Mr Huguenin saying:

"Patrick

Please could you provide some evidence that the beneficial owners of the two vehicles are the two individuals. This could be a share certificate or a letter to this effect from yourselves.

Many thanks

Julian"

In response to this request Mr Huguenin asked Mr Treger to send him his full contact details. Letters from Budin confirming Mr Cioffi's and Mr Verduron's ownership of the Hong Kong companies were duly sent to Audley Capital on 20 January 2012. Share certificates and registers of members were produced by Budin on 1 February 2012.

On 1 February 2012 Mr Treger emailed Mr Huguenin saying:

"For your information, I was contacted by the takeover panel today who are investigating a claim that the funds we advise are in concert with the management of mwb. I said I did not believe this to be the case. But they have requested to contact the owners of the funds and accordingly i will give them your details tomorrow as well as the names of the beneficiaries. I believe they will call you in due course."

Mr Treger also told Mr Huguenin that the Takeover Panel was proposing to disclose to Pyrrho evidence of the ownership of the Hong Kong companies. In response, Mr Huguenin said that Budin were prepared to interact directly with the Takeover Panel but objected to any disclosure to third parties (including Pyrrho) of the identities of the ultimate beneficial owners of the Hong Kong companies. 

On 6 February 2012 Mr Treger sent the following email to Mr Huguenin:

"Patrick

I am writing to you following my meeting with the panel on Friday.

Whilst I have enjoyed working with you and advising your clients, as you are aware we have been very unhappy about the use of the Audley name and the confusion this has caused. I understand Audley is not our name exclusively and I know you have agreed to change the names of your vehicles. But the confusion that this has caused for us has been extensive and even though we have sought to correct any misapprehensions that these are Audley managed funds whenever we can, the fact is that it remains very unclear. Even the panel on Friday did not understand we did not manage these funds until I clarified this with them.

In the circumstances I believe we now need to sort this out once and for all. The best and quickest way to do this is for us to step down from our advisory relationship with immediate effect. Please can this communication serve as notice of this change and may I ask you to inform MWB of this alteration. Please would you also facilitate the name change as soon as possible and let us know when it has occurred. 

I hope we have an opportunity to work in the future on other projects but I want to put an end to this confusion now and believe a clean break is the best way of achieving this so we have no ongoing relationship with MWB or its major shareholders. I do hope you understand.

Many thanks

Julian Treger"     

On 2 March 2012 Mr Treger again emailed Mr Huguenin informing him that he had not thus far given the Panel any KYC information. He then set out, allegedly at Mr Huguenin's request, particulars of the "ad hoc advice" given by Audley Capital on a range of matters between September 2010 and February 2012. Mr Treger's evidence to the Committee was that the advice described in this email was advice he had relayed to Mr Singh during this period on the assumption that Mr Singh would forward it to those whom he had regarded at the time as his clients (Mr Aspland-Robinson and Mr Eker).

The Executive's case, which the Committee will address in its assessment of the Disciplinary Submission against Mr Treger, is that this correspondence with Mr Huguenin was a transparent attempt on Mr Treger's part to create ex post facto a fictional relationship between Audley Capital as adviser and Messrs Cioffi and Verduron as clients. In fact, according to the Executive, no such relationship ever existed.

Eleven years elapsed between Pyrrho's complaint to the Panel in December 2011 and the initiation of proceedings by the Executive in December 2022. This time frame is unique in the Panel's history, and in the circumstances the Committee was understandably concerned to receive a cogent explanation for the length of the investigation and the time taken to bring proceedings.

During the first half of 2012 the Executive interviewed all the principal protagonists connected with the acquisition of the Loan Notes and the later transfer of some of the Loan notes to AIPL and ACDL prior to their "conversion" into equity in the placing. The accounts given by Messrs Balfour-Lynn, Singh, Aspland-Robinson and Eker were in material respects consistent with each other and were all untrue. In brief, their story was that it was understood that funds available to, or put together by, Mr Treger were going to acquire the Loan Notes, but after agreeing a price with GLG, Mr Treger found that he could not produce the money in the time required by GLG. It was at this point that Mr Balfour-Lynn asked Mr Aspland-Robinson and Mr Eker to invest on the understanding that this would be a temporary commitment pending Mr Treger's purchase of their Loan Notes. It was in the expectation that Mr Treger/Audley Capital would in due course buy them out that some of the Loan Notes were transferred into BVI companies bearing the Audley name. Mr Pankhania claimed to have been introduced into the transaction by Mr Aspland-Robinson who gave him the same account, namely that this would likely be a short-term commitment pending Mr Treger's purchase.

Mr Balfour-Lynn claimed that he more or less dropped out of the transaction after securing Messrs Aspland-Robinson and Eker as investors, and thereafter assumed that Mr Treger controlled the Loan Notes despite being uncertain as to whether he had actually purchased them. Both Mr Balfour-Lynn and Mr Singh denied having any financial interest in the Loan Notes. As to the EDR involvement, that was thanks to a connection Mr Eker had with that bank. Messrs Balfour-Lynn, Singh, Aspland-Robinson and Eker all professed ignorance as to the identity of EDR's investors.

Mr Treger was interviewed by the Executive three times before the end of March 2012 and five times in all. As the Committee explains below, his account to the Executive was also substantially untrue and misleading, but it differed in important respects from that of Messrs Balfour-Lynn, Singh, Aspland-Robinson and Eker.

As regards the on-sales of AIPL and ACDL, Messrs Aspland-Robinson, Sicot and Cohen vouched for the manner in which Hoche was engaged as agents for the sellers following Mr Sicot's chance meeting in Sotogrande with Mr Aspland-Robinson. Mr Cohen and Messrs Froidevaux and Huguenin in turn explained to the Executive how Budin came to act for the buyers following an enquiry from Mr Cohen. For their part, having been recruited by Mr Froidevaux to acquire AIPL and ACDL as owners of the Hong Kong purchasing companies, Messrs Cioffi and Verduron told the Executive how Mr Froidevaux, whom they trusted implicitly, assured them that he could find investors in the Baffin Fund who would provide the consideration required to complete the acquisition of AIPL and ACDL.

At that stage the trail went cold. Mr Huguenin explained that an independent asset manager formerly employed by UBP (Mr Bergamin) had sourced the investors in the Baffin Fund; but after protracted exchanges during 2012, Mr Huguenin maintained that he could not assist the Executive with the Baffin Fund enquiry as it would jeopardise the business interests and goodwill of Budin's clients, Mr Cioffi and Mr Verduron. At this stage and having regard to the fact that Budin was a reputable Swiss law firm, the Executive believed that the investors in the Baffin Fund whose funds had enabled completion of the on-sales were likely to have been bona fide third parties procured by an independent asset manager.

In broad terms, two developments, both of which involved considerable time, labour and cost, enabled the Executive to disprove the accounts they had been given. The first was an extensive document gathering and electronic document recovery exercise. The Executive ultimately gathered some 280,000 documents from a variety of sources over a period of several years which were assessed for relevance before being uploaded to an electronic document platform. MWB were asked to produce all emails and other documents sent to or by Messrs Balfour-Lynn, Singh, Aspland-Robinson and Pankhania during the relevant years. It transpired that there were substantial gaps in the documentation. Some emails were missing or deleted and some back-up tapes were damaged or missing. PwC had to be retained to conduct a forensic review of MWB's system which ultimately succeeded in recovering most of the missing or deleted files.

Analysis of the documents revealed, amongst other things, the financial interests of Mr Balfour-Lynn and Mr Singh in the Loan Notes that were converted into shares of MWB and their extensive involvement in the arrangements for acquiring and naming AIPL and ACDL and for transferring Loan Notes to those companies with a view to their subsequent conversion into equity.  

The second development was the vital information produced as a result of litigation in Switzerland and the assistance rendered by the Swiss Financial Market Supervisory Authority, FINMA, in interviewing various key witnesses. Contested proceedings in the Swiss Federal courts took place between 2012 and 2014 in which the jurisdiction of the Takeover Panel was challenged but as a result of which the Panel achieved recognition as a competent foreign regulator to whom international cooperation obligations were owed. 

Under FINMA's auspices, interviews were conducted between 2016 and 2018 of Mr Cioffi, Mr Verduron, Mr Robert Dallal, Mr Olivier Bernard of EDR and Mr Bergamin, the asset manager and former employee of UBP who had been dishonestly identified by Mr Huguenin as the source of investors in the Baffin Fund. Under FINMA's auspices there were also multiple interviews of Mr Huguenin. These interviews, along with information released to the Executive by FINMA, enabled the Executive to see that EDR's investors in the Loan Notes were Mr Eker and other relatives of Mr Balfour-Lynn, including his mother whose account he operated under a power of attorney. They also revealed Mr Houri as the source of investment in the Baffin Fund and Mr Dallal as the connecting link between Mr Houri and Mr Balfour-Lynn. It was not until 2017 that the Executive managed to interview Mr Houri, whose admissions in the course of the hearing unlocked the truth surrounding the Baffin Fund transfer and likely influenced the decision of Messrs Froidevaux and Huguenin to make admissions of their own.

This was, therefore, a uniquely complex and difficult investigation and much of the time taken may be justified by the obstruction encountered by the Executive and in consequence its uphill task in unpicking the truth behind a series of complex transactions. The transcript files alone record 54 interviews conducted between 2012 and 2018, many comprising repeat interviews as information was gathered and understanding of the subject transactions developed.

In the Committee's view, if there is a criticism to be made of the time taken to initiate these proceedings, it must concern the time elapsed between the substantial completion of the interviewing process by January 2018¹⁴ and the initiation of proceedings in December 2022. The Statement of Facts was a formidable and complex document meticulously cross-referenced to an extensive body of underlying documents. Its sheer scale was also unprecedented in Takeover Panel investigations. The Committee does not underestimate the time and labour involved in producing a document of this nature, particularly in circumstances where the Executive's case involves serious allegations of dishonesty that had to be demonstrated by analysis of the documents. Nevertheless, the Committee believes that proceedings ought reasonably to have been launched by the beginning of 2020; and the failure to achieve this meant that there was inevitable delay and disruption caused by the Covid-19 pandemic.

The Committee is firmly of the view, however, that no unfairness has been suffered by any Respondents as a result of the time taken to initiate these proceedings. In the case of the principal protagonists, the Remedial Subjects, the documentary evidence proved to be so overwhelming that no positive challenge was mounted to the facts alleged against them. As for the other Respondents, Messrs Houri and Pankhania made admissions during the hearing and submitted to certain sanctions which, with the agreement of the Committee and upon the recommendation of their counsel and the Executive, effectively concluded the cases against them. Mr Froidevaux and Mr Huguenin also made late admissions of their complicity in a sham transaction, thereby falsifying the accounts given by them to the Executive in interviews and establishing, accordingly, contraventions of section 9(a) of the Code. Finally, the cases of contravention of section 9(a) brought against Mr Treger and Mr Cohen substantially hinge on what the Executive alleges to have been deliberately misleading information first provided to the Executive during early interviews in 2012.

As explained above, the Executive seeks a ruling that the Remedial Subjects (Mr Balfour-Lynn, Mr Singh and Mr Aspland-Robinson) pay compensation under section 954 of the Act and section 10(c).

Section 954 of the Act provides as follows:

"(1) Rules may confer power on the Panel to order a person to pay such compensation as it thinks just and reasonable if he is in breach of a rule the effect of which is to require the payment of money.

(2) Rules made by virtue of this section may include provision for the payment of interest (including compound interest)."

Section 10(c) of the Code has the title, "Compensation rulings" and is the rule introduced pursuant to section 954 of the Act. Section 10(c) states as follows¹⁵:

"Where a person has breached the requirements of any of Rules 6, 9, 11, 14, 15, 16 or 35.3 of the Code, the Panel may make a ruling requiring the person concerned to pay, within such period as is specified, to the holders, or former holders, of securities of the offeree company such amount as it thinks just and reasonable so as to ensure that such holders receive what they would have been entitled to receive if the relevant Rule had been complied with. In addition, the Panel may make a ruling requiring simple or compound interest to be paid at a rate and for a period (including in respect of any period prior to the date of the ruling and until payment) to be determined."