Green, (as liquidator of Sports Management Group Ltd) v Marston & Anor [2016] EWHC B11 (Ch) (20 May 2016)

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URL: http://www.bailii.org/ew/cases/EWHC/Ch/2016/B11.html
Cite as: [2016] EWHC B11 (Ch), [2016] BPIR 1224

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		BAILII Citation Number: [2016] EWHC B11 (Ch)
		Case No: 7744 of 2014

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
IN THE MATTER OF THE INSOLVENCY ACT 1986
AND IN THE MATTER OF SPORTS MANAGEMENT GROUP LIMITED (IN LIQUIDATION)

Royal Courts of Justice
Rolls Building, 7 Rolls Building,
London, EC4A 1NL

20 May 2016

B e f o r e :

REGISTRAR DERRETT
____________________

Between:

	ELLIOT HARRY GREEN (as Liquidator of Sports Management Group Limited)	Applicant
	- and -
	(1) RICHARD MARSTON (2) WAYNE LOCHNER	Respondents

____________________

Mr Ian Tucker (instructed by Freeths) for the Applicant
Ms Gemma Witherington (instructed by Pinder Reaux) for the Second Respondent

Hearing dates: 8,9,10 March 2016
____________________

HTML VERSION OF JUDGMENT APPROVED
____________________

Crown Copyright ©

Registrar Derrett :

This is the trial of an application dated 26 August 2014 brought by Elliot Harry Green, as Liquidator ("Mr Green" and/or "the Liquidator") of Sports Management Group Limited ("the Company" and/or "SMG") which sought relief against Mr Richard Marston ("Mr Marston" and/or "the First Respondent") and Mr Wayne Lochner ("Mr Lochner" and/or "the Second Respondent") ("the Application"). The part of the Application seeking relief against Mr Marston was settled, following the provision of evidence as to his limited means. The Application now proceeds solely against the Second Respondent.

The Application was issued out of the Manchester District Registry and transferred to the High Court by an order dated 7 October 2014 at the same hearing directions for evidence were given. It came before this court on 29 October 2014 when those directions were confirmed and it was adjourned to 3 February 2015 for a case management conference ("CMC"). At the CMC the Liquidator was given permission to amend his claim and he did so in accordance with the terms of an Amended Application Notice dated 4 February 2015. Directions for trial were given and the trial date was fixed shortly thereafter. By way of a consent order dated 6 March 2015 the Liquidator compromised his claim against Mr Marston.

The claim arises out of payments to the First Respondent, Second Respondent and various third parties at a time when the Company was insolvent. The Liquidator's case against the Second Respondent proceeds on the basis that payments made to him personally, or credited to his loan account (subject to the two year "relevant time" provision) were preferential and/or transactions and an undervalue. As to the remainder of the payments, the Liquidator's case is that the Second Respondent was a de facto director of the Company, and that the payments were misfeasant within the meaning of s.212 of the Insolvency Act 1986 ("IA86").

The payments complained of are as follows:

a. Payments made to Richard Marston, being:

i. Payments made by the Company out of its NatWest Bank account numbered 87702428 to Mr Marston between 23 August 2011 and 12 December 2012 totalling £56,450;

ii. Payments made by the Company out of its NatWest Bank account numbered 87702401 to the First Respondent between 23 February 2011 and 12 December 2012 totalling £13,670; and

iii. Following an amendment, additional payments made by the Company out of its NatWest Bank account numbered 87702401 to the First Respondent between 25 November 2009 and 29 July 2011 totalling £13,650. However, only an additional liability of £12,150 is claimed in the application notice.

b. Payments made to, or for the benefit of, Mr Lochner:

i. Payments made out of the Company's account with NatWest Bank numbered 87702401 to the Second Respondent between 9 February 2011 and 23 December 2011 totalling £10,452; and

ii. Following an amendment, a further £18,995 per being payments for the benefit of the Second Respondent, as credited to his Company loan account.

c. Payments made to Mr Nuttall:

i. Payments made out of the Company's account with NatWest Bank numbered 87702401 to Mr Nuttall on 2 February 2011 and 25 May 2012 totalling £12,000;

d. Following an amendment, payments made to Marshall and Co:

i. Payments made out of the Company's account with NatWest Bank numbered 87702401 to Marshall and Co on 12 December 2012 totalling £7,500.

Evidence

The following evidence is before the court:

i) The First Witness Statement of Mr Green dated 18 August 2014 together with exhibit EG1 as referred to therein, ("Green 1").

ii) The First Witness Statement of Lorraine Kerr ("Ms Kerr") in support of the Application dated 31 July 2014 together with exhibit LK1 as referred to therein, ("Kerr 1").

iii) The First witness Statement of Bruce Sinclair ("Mr Sinclair") in support of the Application dated 1 August 2014 together with exhibit BS1 as referred to therein, ("Sinclair 1").

iv) The First Witness Statement of Chris Howard ("Mr Howard") In support of the Application together with exhibit CH1 as referred to therein, ("Howard 1").

v) The First Witness statement of Mr Lochner dated 4 November 2014 together with exhibit WL1 as referred to therein, ("Lochner 1").

vi) The Second witness Statement of Mr Green dated 2 December 2014, ("Green 2").

vii) The Second Witness Statement of Mr Lochner dated 9 March 2015 together with exhibit WL2 as referred to therein, ("Lochner 2").

viii) The First Witness Statement of Matthew Nuttall ("Mr Nuttall") dated 9 March 2015, ("Nuttall 1")

ix) The Third Witness Statement of Mr Green dated 17 March 2015, ("Green 3").

x) The Fourth Witness Statement of Mr Green dated 15 January 2016 together with exhibit EG3 as referred to therein, ("Green 4")

xi) The Third Witness Statement of Mr Lochner dated 1 March 2016 together with exhibit WL3 as referred to therein, ("Lochner 3").

On 2 March 2016 Mr Lochner applied for permission to rely on Lochner 3 which was produced as evidence in reply to Green 4, for which permission had been granted in February 2016, this application was agreed and at the commencement of the hearing permission was granted. Also at the commencement of the hearing counsel for the Applicant indicated that it was not known whether Mr Sinclair would be able to attend the trial as he was unavoidably detained abroad. In the event Mr Sinclair did not attend and his evidence is not relied upon.

Background

The Company is a private company limited by shares. It was incorporated on 16 June 2009. Mr Marston was the sole shareholder of the Company and the sole de jure director having been appointed on 14 July 2009. The Company was placed into creditors' voluntary liquidation on 1 February 2013 and Mr Green was appointed Liquidator on the same day.

According to the Company's statement of affairs dated 1 February 2013 and signed by Mr Marston its main activity was the publication of two magazines giving corporate access to higher net worth individuals, one focused on UK and European football clubs and the other on Formula 1 racing industry based around Monaco. It was also said that it assisted in building brands and was a sports agent. The First Respondent attributed the demise of the Company to a potential advertiser client, into which the Company invested time, who ultimately failed to pay.

Mr Lochner says that from about August 2009 he was a consultant with the Company and that he initially worked from a free desk in its offices, in return for which he provided free consultancy services, such as dealing with HR issues for the Company. On 19 May 2010 he signed a formal consultancy and introducer agreement with Company ("the Consultancy Agreement") on the basis that if a commercial transaction was agreed between the parties as a result of his personal introduction he was paid a commission.

Ms Kerr and Mr Sinclair met Mr Lochner and Mr Nuttall in late 2011. At some point in late 2011/early 2012 discussions took place between Mr Lochner, Mr Nuttall, Ms Kerr and Mr Sinclair over a possible agreement whereby Ms Kerr and Mr Sinclair might invest in the Company. This culminated in a written agreement being concluded on 2 May 2012 ("the Investment Agreement") which envisaged a total investment of £500,000. On 23 May 2012 Ms Kerr paid the sum of £50,000 to Company in part performance of the Investment Agreement. Ultimately, Ms Kerr and Mr Sinclair decided to withdraw from the venture and did not make any further payments.

Mr Sinclair, who had knowledge and experience of the advertising industry as he had been a lecturer at a university in advertising, worked for the Company on a part-time consultancy basis from February 2012. Ms Kerr began working for the Company on a full time basis from 13 April 2012. This period of employment was said to be for them to acquire a better understanding of the Company's business and for due diligence before they entered into the Investment Agreement.

Solvency

I am satisfied that the Company was at all material times balance sheet insolvent. The Companies accounts for the year ended 30 June 2010, approved on 24 May 2011, show a balance sheet deficit of £97,852 and the accounts for the year ended 30 June 2011, approved on 28 January 2012, show a balance sheet deficit of £205,814. The Company's balance sheet as at the date of liquidation shows a deficit of £320,384. HMRC have proved in the liquidation for £204,902.27. This includes liabilities for each period from 2009/2010 to 2012/2013. It appears that HMRC were persistently chasing the Company for payment.

Issue

The issue for the court to determine is whether Mr Lochner was a de facto director of the Company.

De facto Director - Principles

A necessary part of the Liquidator's case against the Second Respondent (save for preferential payments/transaction at an under value ("TUV")) is that he was a de facto director of the Company. It is common ground that there is no statutory definition for the meaning of de facto director, but some guidance can be found in s.250 of the Companies Act 2006, ("CA06)

"In the Companies Acts "director" includes any person occupying the position of director, by whatever name called"

This definition is also given in s.251 of the Insolvency Act 1986 ("IA 86")

Once established, a de facto director owes the same duties as a de jure director (Ultraframe v Fielding [2005] EWHC1638 (Ch) para 1257).

It is also common ground that to identify a de facto director, there is no single decisive test to be applied; all of the relevant circumstances must be taken into account (HMRC v Holland [2010] UKSC 51)

As set out by counsel for the Liquidator in his skeleton argument, useful guidance has been given, by Jacob J in Secretary of State v Tjolle [1998] 1 BCLC 333, at 343-344 cited with approval in Holland:

"For myself I think it may be difficult to postulate any one decisive test. I think what is involved is very much a question of degree. The court takes into account all the relevant factors. Those factors include at least whether or not there was a holding out by the company of the individual as a director, whether the individual used the title, whether the individual had proper information (eg management accounts) on which to base decisions, and whether the individual had to make major decisions and so on. Taking all these factors into account, one asks 'was this individual part of the corporate governing structure', answering it as a kind of jury question. In deciding this, one bears very much in mind why one is asking the question. That is why I think the passage I quoted from Millett J is important. There would be no justification for the law making a person liable to misfeasance or disqualification proceedings unless they were truly in a position to exercise the powers and discharge the functions of a director. Otherwise they would be made liable for events over which they had no real control, either in fact or law."

Another useful list of factors can be found in Re UKLI Ltd [2013] EWHC 680 (Ch) at paras 40 and 41:

"40. A matter of debate has been whether it is a necessary ingredient of de facto directorship that the person in question should have been held out by the company as a director, as Millett J considered in Re Hydrodam (that being the essential difference, on that analysis, between a de facto and a shadow director). Authorities subsequent to Re Hydrodam have tended to downplay this ingredient to being a useful indicator, but not an essential requirement: see, for example, the decision of Etherton J (as he then was) in Secretary of State for Trade and Industry v Hollier [2006] EWHC 1804 (Ch), [2007] BCC 11 at paragraphs 61 to 81.

41. There is a valuable review and summary of the effect of these authorities in the (unreported) decision of Chief Registrar Baister in the UKPFM Ltd proceedings in which Mr Chohan was disqualified [Case No. 3232 of 2006]. Although I have introduced some small variations I agree with the Chief Registrar that the following characteristics are all relevant, though not every one is required to be established, and there is inevitably some overlap between them:

(1) A de facto director must presume to act as if he were a director.

(2) He must be or have been in point of fact part of the corporate governing structure and participated in directing the affairs of the company in relation to the acts or conduct complained of.

(3) He must be either the sole person directing the affairs of the company or a substantial or predominant influence and force in so doing as regards the matters of which complaint is made. Influence is not otherwise likely to be sufficient.

(4) I am not myself persuaded that an "equality of footing" test is required: I prefer the looser fact-based approach advocated by Jacob J, and consider the indicia to be whether the person concerned has undertaken acts or functions such as to suggest that his remit to act in relation to the management of the company is the same as if he were a de jure director

(5) The functions he performs and the acts of which complaint is made must be such as could only be undertaken by a director, not ones which could properly be performed by a manager or other employee below board level

(6) It is relevant whether the person was held out as a director or claimed or purported to act as such: but that, and/or use of the title, is not a necessary requirement, and even that may not always be sufficient.

(7) His role may relate to part of the affairs of the company only, so long as that part is the part of which complaint is made.

(8) Lack of accountability to others may be an indicator; so also may the fact of involvement in major decisions.

(9) The power to intervene to prevent some act on behalf of the company may suffice.

(10) The person concerned must be someone who was more than a mere agent, employee or advisor."

I agree with counsel for the Liquidator's submission that taking the above together, whilst it is recognised that there is no decisive test, the correct 'question to ask' is, per Holland at 94

"If the question is, as I believe, whether Mr Holland was part of the corporate governing structure of the composite companies and whether he assumed a role in those companies which imposed on him the fiduciary duties of a director…"

Witness evidence

Mr Green

Mr Green is an experienced insolvency practitioner and the Liquidator of the Company. In cross-examination he confirmed that Mr Marston was the sole signatory on the Company's bank account with NatWest, that he had not seen any cheques signed by Mr Lochner and that he had not seen any evidence to link Mr Lochner with the Company's bank account and that although he said that a lot of the banking transactions were conducted online he did not contact the bank about this. He accepted that Mr Marston was the link to the bank and agreed and that the evidence suggested that Mr Marston alone dealt with HMRC.

In relation to employees, beyond confirming that Mr Lochner had signed some HR contracts he said that he could not recall seeing anything which linked Mr Lochner to any staff matters, including, amongst other things, recruitment, disciplinary, training or pay. Mr Green did caveat this saying that this was in the context of the records made available to him. He did not recall contacting any employees. He accepted that he was told by Mr Lochner at the interview he conducted with him in 13 June 2013 that there were about 'a dozen' staff and that he had helped them 'straighten out their HR contracts'.

In cross-examination Mr Green said that he did not recall a loan agreement date 19 November 2010 between Mr Lochner and the Company whereby he made a loan of £72,000. He agreed, after being taken to relevant documents, that he had no reason to doubt the £72,000 was received by the Company, although he said he did not recall seeing this in the bank records. Counsel took Mr Green to the minutes of two board meetings, one held on 4 November 2009 which records that Mr Lochner lent £10,000 to the Company as working capital and the second on 25 November 2009 which records a further loan of £40,000. Counsel put it to Mr Green that Mr Lochner is not recorded as a director in these minutes. Mr Green said that he is recorded as being present. In answer to counsel's question whether he had seen any other board minutes Mr Green said that he did not recall seeing any statutory books from Mr Marston as they were not handed over.

Counsel took Mr Green to what he described as the takeover bid, in particular, the Investment Agreement. Mr Green confirmed that he recalled Mr Lochner describing this to him as an agreement for the four of them to 'take over the business'. It was drawn to Mr Green's attention that both Ms Kerr and Mr Sinclair are described as directors of SMG in the Investment Agreement. Mr Green accepted that if the £500,000 had been invested it might have avoided the Company going into insolvent liquidation. It was put to Mr Green that Mr Marston told him that he was in agreement with the takeover. Mr Green said he did not recall Mr Marston talking to him about it.

Counsel took Mr Green to a document which is headed 'Board Meeting 11 June 2012 at SMG'. He was asked if it was his understanding that this was a meeting of the four parties to the takeover of SMG. Mr Green replied "to say I understand what this is, is too high". He pointed out that he was not there and did not know what this document was.

Counsel took Mr Green to the heading 'Finance' in the minutes where it is recorded 'WL to ask Richard to send over the P&L account for the financial year to date'. Counsel put it to Mr Green that if Mr Lochner was a director he would have had access to the financial information. Mr Green said that if he was a director he should have, but it did not does not necessarily follow. Counsel suggested that it also seemed that Mr Lochner did not have access to bank statements. Mr Green said that there was nothing unusual in a company of this size for a director to ask for financial information. Mr Green agreed that Mr Marston was the only de jure director and he said that what he did for the Company was consistent with him being the accountant. Counsel asked if it was unusual for only the accountant to have access to financial information and the bank account. Mr Green repeated that this was a small company he did not see it as being unusual for Mr Marston as the accountant to have this information.

Mr Green could not recall why he did not pursue Ms Kerr and Mr Sinclair for the remainder of their investment saying he believed he would have taken legal advice. Mr Green confirmed that he met Mr Marston at the s98 meeting on 1 February 2013 and that Mr Marston described Mr Lochner as a consultant and as freelance. He accepted that Mr Marston was consistent in what he told him.

Mr Green confirmed that he relied on the under lease which is signed by Mr Lochner as Corporate Finance Director, as evidence in support of his case. He said he did not know why Mr Lochner had signed it as Corporate Finance Director. He confirmed that he did not have an executed copy. Mr Green agreed that Mr Lochner had said that he was not involved in any of the leases or moves.

Counsel took Mr Green to 'In The Game' magazine for Autumn 2010 where Mr Lochner is described as 'Commercial Director' and Mr Marston as 'Group Financial Controller'. Counsel asked Mr Green whether he agreed that these titles were not accurate, he replied that there was a difference between those titles and what appears in other documents. He said that he did not recall seeing Mr Marston described as the Group Financial Controller elsewhere. He said he did not recall Mr Lochner telling him that Mr Marston had told him to use that title.

Counsel took Mr Green to the commission agreement dated 6 October 2009 between Manor Grand Prix Limited and the Company. Mr Green agreed that in the document the Company was described as 'the Consultant' and it was represented by Mr Lochner. Counsel put it to Mr Green that when Mr Lochner signed this document he did not do so as a director. Mr Green said he would expect a commercial agreement of this nature to be signed by a director and that if it was not it would be revocable. Counsel put it to Mr Green that it was not unusual for Mr Lochner as a consultant to sign this commercial agreement on the Company's behalf. Mr Green disagreed saying that he would regard it as unusual.

Counsel took Mr Green to certain terms of the Consultancy Agreement, in particular his job description at 2.5, his appointment at 2.1 and his compensation at 4. Counsel put it to Mr Green that in the light of this it was not unusual for Mr Lochner to sign on behalf of the Company. Mr Green disagreed saying he did not think that followed, to introduce a prospective client to a company does not mean the introducer executes the documents. He accepted that Mr Lochner says he was told to sign these documents on the Company's behalf.

Counsel took Mr Green through the documents relating to solicitors, A City Law Firm ("ACLF") who dealt with the substantial claim involving Mr Conroy/Oxigen. It is accepted that Mr Lochner was involved in the correspondence with ACLF. Mr Green acknowledged that Mr Marston signed the retainer letter/document which included a guarantee. Counsel took Mr Green to emails from ACLF dated 28 October 2011 and 10 November 2011 sent to Mr Lochner, Mr Nuttall and Mr Marston. Mr Lochner was also involved with the law firm 'Burlingtons' who were instructed in relation to another matter. Mr Green acknowledged that Mr Lochner said he was asked to become involved with the solicitors by Mr Marston. Counsel put it to Mr Green that this was not a case of Mr Lochner giving instructions. Mr Green disagreed.

Mr Green confirmed that they had recovered some money from contracts entered into by the Company but said that he did not recall asking any of the contracting parties whether they saw Mr Lochner as holding himself out as a director of the Company.

Counsel took Mr Green to the Company's bank account statements to consider some of the payments relied upon.

i) Mr Green acknowledged that the bank statement referred to 'T Nuttall' who is the father of Mr Nuttall, he could not explain this.

ii) It was put to Mr Green that the Company was obliged to pay the Newlyn Business Rates. Mr Green agreed that if it was demonstrated that this was a legitimate business expense he would accept that.

iii) Counsel took Mr Green to two emails relating to a rent payment made by Mr Lochner on behalf of the Company, dated 11 and 14 June 2010. In the first, although he paid the rent with his credit card he asks Mr Marston (as Director of SMG) to confirm that this amount would be paid back by next week. Counsel asked Mr Green why Mr Lochner would write that. Mr Green said he could not understand why Mr Lochner decided to 'flash this up'. Counsel said this would be unnecessary if Mr Lochner had access to the bank account and said that it shows he had no access to Company cheques.

iv) In relation to the three payments to K W Corporation Limited ("KWC") on 5 October 2010 totalling £15,000 which appear on the statement of Mr Lochner's loan account Mr Green confirmed that he had not done further research in relation to them.

In re-examination Mr Green confirmed that he had not received a complete set of book and records for the Company, he acknowledged that he had received some documents including purchase invoices. He said he did not think he had any records from anyone dealing with staff. He confirmed that as far as he was aware Mr Marston was an accountant and was the Company's accountant. He confirmed that his recollection was that Mr Marston was linked to Marshalltons who were the Company's external accountant.

Mr Green's evidence as the Company's liquidator relies upon the documents in his possession and what he has been told by those involved with the Company. It is apparent that in this case he did not receive the statutory books. Whilst his recollection of the relevant matters was at times poor, he is an officer of the court and as such has a duty to the court. I found him to be an honest witness.

Ms Kerr

Ms Kerr was both an employee of and investor in the Company. She agreed that she and Mr Sinclair had a personal relationship. She confirmed that they had brought proceedings against Mr Nuttall and Mr Lochner to recover the monies she had invested in the Company and for payment of wages due to them. She confirmed that, as set out in the amended particulars of claim in those proceedings, she described herself as an individual of high net worth. Her evidence is that she was introduced to Mr Lochner and Mr Nuttall through her former accountant, that she was told that the Company was Mr Nuttall's creation and that it was run by both Mr Nuttall and Mr Lochner, that Mr Marston was the named director and shareholder but there was no suggestion that he had any involvement in the day to day operations or running of the Company. Ms Kerr said that she had no doubt in her mind that Mr Nuttall and Mr Lochner were the people who were in operational, strategic and financial control of the Company and were the true directors of the Company.

Ms Kerr said that she started working for the Company in April 2012 was employed for about 2 ½ months until early July 2012. She said that during that period Mr Lochner was in the office on most days. She said she understood it to be a sports management company. She said they claimed to represent up to 2000 high net worth individuals. She said it published the magazine 'in The Game' and that it published a magazine for the Cannes Film Festival. She said Mr Lochner had a relationship with CISCO to introduce technology into sports stadia. She agreed that part of her role was to generate new business and to introduce new clients.

Ms Kerr accepted that by the Investment Agreement she was going to invest £500,000 and take over the Company. Ms Kerr said she was not sure it was a take over, there was to be a change of ownership but it was the same business. Counsel took Ms Kerr to a document headed 'Work for SMG – Lorraine Kerr'. Ms Kerr said that she produced this for her solicitors shortly after the relationship with Mr Nuttall and Mr Lochner broke down when they would not discuss the return of her investment funds. She said she did some investigations which caused her concern and wanted her money back. She agreed that this lead to the County Court claim.

Counsel took Ms Kerr to the document headed 'Board meeting 11 June 2012', Ms Kerr denied that this was a board meeting of Newco, that is the four who were going to acquire the Company and/or its business. She said that it was a weekly meeting of SMG as Newco would not be formed until the investment was made. Counsel said that in the context of the Investment Agreement and the fact this meeting took place on 11 June 2012 it related purely to Newco. Ms Kerr said that she could see why she said that. Counsel drew her attention to the fact it states that it was their first formal meeting. Ms Kerr replied that SMG did not have regular meetings and that she was trying to get things onto a formal basis. She said that they had requested that Mr Marston attend meetings, but he never did, although she thought he should. Counsel suggested that Mr Lochner was not really involved and pointed out that there were only 2 references to him in these minutes. Ms Kerr said that he was and they were looking at how they were going to develop the Company, they were looking to increase sales staff for the magazine, to employ as sales manager and she was going to draft an advertisement for trainees.

Counsel asked Mr Kerr whether it was her understanding that Mr Lochner did not have access to the financial information. Ms Kerr said she was aware that Mr Marston was the accountant and that Mr Lochner had to ask him for financial information. She confirmed that she had checked with Companies House before she invested that Mr Marston was the sole owner and director. She said that she understood that Mr Nuttall was the beneficial owner and that he and Mr Lochner ran the Company. She agreed that she did not ask why Mr Lochner was not listed as a director at Companies House. Counsel asked Ms Kerr about 'financial control' saying that in June/July 2012 it was clear that Mr Lochner did not have 'financial information'. Ms Kerr pointed out that these were two different things. Counsel put it to her that to have financial control you had to have access to the bank account. Mr Kerr agreed but said that Mr Marston acted on their instructions. Ms Kerr said she did not feel that Mr Marston had financial control. She said he was the accountant and in that respect he controlled the financial side but Mr Nuttall and Mr Lochner controlled the money and what it was used for. Her evidence is that they instructed Mr Marston what to pay and that he did what they asked.

Counsel took Ms Kerr to emails in May 2012 relating to her £50,000 investment although she said she only dealt with Mr Nuttall, Mr Lochner is copied into the first email in this chain. Ms Kerr agreed that she expected to be a director and accepted that she had called herself a director from about May 2012. She said this was in name only and was because Mr Nuttall was keen to get their business cards printed. She pointed out that all of them were described as directors on their business cards apart from Mr Nuttall, who was bankrupt. Ms Kerr agreed that on emails sent to third parties on 8 May 2012 she is described as a director. She said that Mr Nuttall was responsible for this as he had the IT manager change their descriptions. She said that told him it was premature and maintained that they were directors in name alone.

Counsel cross-examined Ms Kerr about the work she did for the Company. She maintained that she always acted on instruction. She agreed that she did not see Mr Marston and Mr Lochner together. She said that she knew invoices were paid and assumed that Mr Lochner had given Mr Marston the instruction to pay. Ms Kerr confirmed that they looked at other projects and at the meeting on 11 June 2012 considered a project involving Mr Howard's company described as 'Bridge to Brazil'. Ms Kerr did not accept counsel's suggestion that the four of them decided not to proceed with this project. She said that Mr Nuttall and Mr Lochner dealt with the business decisions and that the four of them brought different things to the Company, Mr Sinclair his advertising connections and she her networking skills.

In relation to the proceedings she brought against Mr Nuttall and Mr Lochner for the recovery of her investment, counsel asked Ms Kerr why she had not sued the Company. Ms Kerr said that she took legal advice and that Investment Agreement was drawn up by the individuals. Ms Kerr agreed that the letter of claim from her solicitors dated 25 July 2012 addressed to Mr Nuttall refers expressly to Mr Marston as the Company's sole shareholder and director. The letter states that because of the general lack of transparency around the business practices and financial affairs of the Company they had decided not to proceed with the proposed investment and demanded the return of the £50,000 paid plus the sums due to them by way of the agreed remuneration. Ms Kerr agreed that the trial fixed for 30 November 2015 had to be adjourned because of their late disclosure. She agreed that costs of £19,200 had been awarded in favour of Mr Nuttall and Mr Lochner as defendants but said that the solicitors were ordered to pay those costs. She maintained that the costs were paid by her solicitors so it did not affect her.

In re-examination Ms Kerr confirmed that she had only worked at the Company for a few days before signing the Investment Agreement and that Mr Lochner or Mr Nuttall had tasked her with putting in advertisements for staff, this had been discussed at one of their meetings. She agreed that her impression was that Mr Marston could not have refused a request from Mr Lochner or Mr Nuttall. Ms Kerr said that they agreed a course of action at the 11 June 2012 meeting, a sales manager was to be appointed and Ms Kerr was to place an advertisement for trainees. Ms Kerr said that none of these actions were required to be signed off by Mr Marston there was no suggestion that his sanction was required. The placing of advertisements incurred costs to be paid by the Company and Mr Marston was told to pay them. Her evidence is that Mr Marston was not involved in these discussions and she did not see him at any time when she was in the office. She said that Mr Lochner drafted the minutes of the 11 June 2012 meeting.

It has to be accepted that there are some inconsistencies in Ms Kerr's evidence, for example she said that the meeting on 11 June 2012 was one of their weekly meetings and later she said that she was concerned to get things onto a more formal footing which is why they had the meeting on 11 June 2012. However, I believe that she is truthful when she says she believed that Mr Lochner and Mr Nuttall were the Company. She spoke to what she knew having been involved in the Company for some 2 ½ months. Her clear and unequivocal evidence was that Mr Marston was the accountant and that he acted on Mr Lochner's and Mr Nuttall's instructions. She agreed that she knew that Mr Marston was the sole de jure director and shareholder of the Company saying that she understood Mr Nuttall to be the beneficial owner of the shares. This is consistent with the fact that he was for a period an undischarged bankrupt and as such could not be a director and should not have been involved in the management of the business without the sanction of the court. Ms Kerr never meet Mr Marston, despite asking to do so on a number of occasions, until the creditors' meeting. Her evidence is that she believed Mr Lochner to be acting as a director of the Company. Whilst I am aware that she brought proceedings against Mr Lochner and Mr Nuttall to recover money owed to her I did not consider her evidence to be biased by that fact.

Mr Howard

Mr Howard is a director of 4:You Property Partners Limited ("4:You"). Mr Howard's evidence is that he first had contact with the Company through its agent/employee Bruce Metcalfe ("Mr Metcalfe") who he met at the Property Investor Show in October 2011. In cross-examination Mr Howard said that Mr Metcalfe invited him to come and meet Mr Lochner the Director of Financial Affairs. As counsel noted this is not what Mr Howard said in his witness statement. In cross-examination Mr Howard he said that Mr Metcalfe told him that Mr Lochner and Mr Nuttall were 'directors'. It seems that he was contacted again by Mr Metcalfe in February 2012 and eventually after a few meetings with Mr Nuttall he attended the Company's offices around 17 May 2012 when he met with Mr Nuttall, Ms Kerr and Mr Sinclair and gave them a presentation about services and investment opportunities offered by 4:You. When he was asked about Ms Kerr and Mr Sinclair, Mr Howard said that he did not know them well but he believed that it was intended they should become directors. In his witness statement he said that he had previously had a good working relationship with Ms Kerr.

Mr Howard said that Ms Kerr told him she was making a small investment of about £50,000 in the Company. He said Ms Kerr was interested in his project in Brazil and wanted to get people to invest with the Company. He said it was intended to be a joint investment with another company to be managed by 4:You. In cross-examination he was unsure precisely when he first went to the Company's offices. He said that although he was told Ms Kerr was involved he did not believe the story he was being given. In spite of this he said he did not conduct any research about the Company saying he knew it was in a state of transition saying that he relied on Ms Kerr. He said he saw Mr Nuttall before he made the presentation. Afterwards he made various changes to the presentation at Mr Nuttall's request and then met with Mr Lochner on 8 June 2012. In the event it seems that there was no investment in 4:You.

I found Mr Howard's evidence to be confusing. In an email dated 8 May 2012 from Ms Kerr to third parties there is reference to a meeting involving Mr Howard on 11 May 2012. Mr Howard's response was to point out that it was about him not to him. In an email from Mr Lochner as director of Carbon Neutral Group (London) Ltd to Mr Howard dated 18 May 2012 he starts "further to our meeting yesterday…" Mr Howard denied that he wanted a carbon neutral development. However, he agreed that he had nothing from Mr Lochner from SMG. It was put to Mr Howard that although he said in his witness statement that he was told by Mr Lochner that he was a director of the Company that was not right. Mr Howard maintained that it was what he was told. He said 'Brendon told me' 'Matthew told me' but he could not say when he had had a conversation with Mr Lochner when he had told him this. Counsel put it to him that this was very different. Mr Howard agreed that he was told by people in the Company and not by Mr Lochner and Mr Nuttall personally. He said that you could not infer too much from the words and needed to look at actions. He reiterated that he was told that he had to come back for a second meeting with Mr Lochner because he was responsible for financial matters. He said that Mr Nuttall said this. In his view it wasted a lot of his time to what he had said in his witness statement where he said that he was "told by them" that they were directors. Counsel put it to Mr Howard that the meeting with Mr Lochner did not relate to SMG but to the Carbon Neutral Group (London) Ltd. Mr Howard disagreed saying that it was part of the package SMG were offering him.

In my judgment Mr Howard's evidence was inconsistent and contradictory. I did not find him to be a helpful witness. I consider him to be unreliable. Although I believe that he met with Mr Lochner at some point I do not find his evidence convincing when he describes Mr Lochner's role at the Company. I therefore place little weight on what he says.

Mr Lochner

Mr Lochner described himself as a consultant to the Company in the period from November 2009 to December 2012. He said that his background was mainly in telecommunications, online retail and software development. He said that he had been the founder and a director of a number of successful companies and that he had during his career built up solid working relationships with market leaders in various sectors including CISCO Systems, Fujitsu and Vodafone. He maintained that he had often fulfilled the role of consultant to a number of companies and that his expertise ranged from human resource issues to brokering commercial transactions. His evidence is that he was first introduced to Mr Marston by a mutual friend, Mr Nuttall, towards the end of 2009. He said that at the time he was operating UPAD Ltd, an online lettings agency, KWC, a technology company, Ubtrac Ltd, a software company specialising in mobile phone tracking and Carbon Advice Group Ltd, a company specialising in environmental friendly sales issues. His evidence is that Mr Nuttall had recently formed the Company alongside Mr Marston who was a chartered accountant with substantial business experience. He said that Mr Nuttall, who was aware of his business success, felt he could be of some assistance to the Company.

Business Card/LinkedIn

In cross-examination counsel drew Mr Lochner's attention to his business card for SMG where he is described as Corporate Finance Director and also his LinkedIn profile where the same description Corporate Finance Director is used. The profile says that he has held this position from 'August 2009 - Present (4 years 1 month)' which would mean September 2013. Mr Lochner said that he was asked to use this title and that he took it down when the Company went into Liquidation. Counsel drew his attention to the fact that the Company went into Creditors' Voluntary Liquidation in February 2013. In the bundle there is another print of Mr Lochner's LinkedIn profile where he is still described as the Corporate Finance Director of the Company and it states 'August 2009 – present (5 Years 4 months)' which takes us to December 2014. Mr Lochner conceded that he took it down sometime after the Company went into liquidation.

In The Game

Counsel took Mr Lochner to the Autumn 2010 issue of In The Game, the magazine which is published by the Company where on the first page he is described as Commercial Director. Mr Lochner accepted that this is how he is described. He said that he had nothing to do with the magazine, he had no control of it, it was no part of his consultancy.

Ariadne Capital Ltd ("Ariadne")

Counsel took Mr Lochner to a document dated 2011 described as 'Investors and Shareholders' in Ariadne. On his page he is described as the Corporate Finance Director of the Company 'from August 2009 to present'. Counsel described this document as 'a prospectus' intended to be considered by third parties. Mr Lochner disagreed saying it was a bible of members and shareholders and not an investment document. He denied that it was at simplest an advertisement and said its purpose was to inform shareholders who the other shareholders were. He was asked whether it was his case that this document was only circulated to other shareholders of Ariadne, to which Mr Lochner replied that he had no control over Ariadne, that he was a small shareholder. He was asked whether his case was that they only produced 57 copies, one for each of the 57 shareholders, he said 'no' but conceded that he did not know whether it was circulated more widely. Mr Lochner agreed that he was described as the Corporate Finance Director of the Company and confirmed that he was aware of this document and of his profile. He said he contacted them and asked them to change it. Counsel put to Mr Lochner that in Lochner 1 he had said he was "unaware that [he] had been referred to as Finance Director of the Company…" and "had he been aware … he would have asked for it to be amended immediately". Mr Lochner maintained that this is what he had said, in other words, if he had been aware before publication he would have asked for it to be changed immediately and once he saw it he contacted them and asked them to change it. Counsel pointed out that it is not in evidence that he had asked them to change it. Mr Lochner said that once it was published it was too late. I infer that they were not asked to change it.

London Hong Kong Exchange Plc ("LHKX")

Counsel asked Mr Lochner to explain a three page document in the bundle headed LHKX, Mr Lochner said it looked like a document from that company's website. He confirmed that he was the Chief Executive Office of LHKX and that it described him as a director of SMG. Mr Lochner corrected counsel pointing out that it says director 'to' and not 'of' SMG saying that he did not want to mislead and that he did this on advice. Counsel asked Mr Lochner whether he was saying there was a difference between 'to' and 'of'. Mr Lochner said "that is what I have been advised." Counsel put it to Mr Lochner that this was not the case, that there was nothing in his witness statement to say advice was taken on this point. Counsel took Mr Lochner to a press release announcing his appointment to LHKX as Chief Executive Officer dated 14 June 2010. Mr Lochner said that evidence would have been produced to the Frankfurt stock exchange and the press release would have been verified by lawyers. Counsel put it to Mr Lochner that it was his case that this press release had been verified by lawyers, he then drew Mr Lochner's attention to the fact that it said he was a director 'of' SMG and not 'to'. Mr Lochner response was to say that this was a typo and that the lawyers did not always pick them up.

ACLF

Counsel took Mr Lochner to an email exchange on 25 February 2011 and 2 March 2011 with Edward Miller at the ACLF. The content concerns the issue of proceedings against Mr Guy Conroy, Mr Lochner's description is Corporate Finance Director of SMG. Mr Lochner said this was the title he was asked to use.

Counsel put it to Mr Lochner he was being held out by the Company as a director to which he replied 'no'. Counsel put it to Mr Lochner that he was holding himself out as a director, which he denied. Counsel put it to Mr Lochner that even in documents verified by his own lawyers and the stock exchange there was no mention of him being a consultant. Mr Lochner maintained that he was a consultant and that he was asked to use the title. I find this explanation wholly unconvincing. I simply do not believe Mr Lochner.

Employment Contracts

Mr Lochner denied that one thing he did for SMG was to deal with HR. However, he agreed that he was asked to draft employment contracts. Mr Lochner was taken to two employment contracts both are signed by him as HR Director and are dated 23 October 2009. They are both signed by Mr Nuttall on 5 November 2009 as Group CEO. One is in the name of Marcus Lochner the other Owen Lochner, his sons. Mr Lochner said he signed them as the HR Director because it was the title he was asked to use and that he did not engage in the employment that was done by Mr Nuttall who agreed the contracts. Mr Lochner was taken to a further employment contract with Amanda Goodier dated 22 June 2012 where again he signed as HR Director. In this case he is the only signatory for the Company. Mr Lochner said he understood Mr Nuttall was bankrupt and so he could not sign. When asked why Mr Marston did not sign them Mr Lochner said it was because he did not come into the office.

Mr Lochner was asked whether he accepted that Ms Kerr asked to meet Mr Marston, he said she could have meet him. It was put to Mr Lochner that she was there every day from 1 May 2012 to early July 2012 but Mr Marston did not come into the office. Mr Lochner replied that in that 2 ½ month period that could be right. Counsel suggested that this was consistent throughout his consultancy to which Mr Lochner said he was there infrequently and he could not comment.

Contracts

Counsel took Mr Lochner to appendix two of the Investment Agreement which is headed 'Assets' where, amongst other things, lists contracts, including the contract with Virgin. Mr Lochner said his role was to be involved with particular projects to utilise his expertise in financial matters and green projects. He said he had been approached by Oxigen on behalf of Virgin Formula 1 as Richard Branson wanted to have the first green racing car. Counsel asked Mr Lochner and he agreed that the Company's contract with Manor Grand Prix Limited dated 6 October 2009 was its second biggest asset. He agreed that it was a major asset of the Company. Counsel put it to Mr Lochner that it was entered into by him. Mr Lochner said it was his area of expertise, that this contract required expertise in green energy and financial matters. Counsel took Mr Lochner to the first page of the contract after the index where the Company is defined as the 'Consultant'. He then took Mr Lochner to the signature pages where we see it is signed by Mr Lochner on behalf of the Company. Mr Lochner agreed with counsel that this was potentially an enormously valuable contract, worth up to £50m. He maintained that it was all done with Mr Marston's consent and approval saying he would not have got it if he had not been there.

Under Lease

As evidence in support of his case the Liquidator relies on the fact Mr Lochner signed an under lease dated 10 March 2011 for 7^th Floor 51-53 Great Marlborough St London W1. The document is executed as a deed and states that the Company is acting by its director, beneath this is written Corporate Finance Director and Mr Lochner's signature appears. It is not in issue that the Company occupied these premises from March 2011 to September 2011. However, Mr Lochner denies that he signed this document as a director of the Company. From his third witness statement and his cross-examination I understand him to say that the under lease (as referred to above) was being negotiated from around late August 2011 and that original agreement ran from 10 March 2011 for 6 months. His evidence is that he original under lease was signed by Mr Marston. This document has not been produced to the court. The only document which has been produced was obtained by the Liquidator from the landlords and it has not been executed by the landlord. Mr Lochner suggests this supports his version of events.

Mr Lochner says that the Company moved to 6^th Floor 17-19 Cockspur St London SW1Y 5BL in September 2011, he has exhibited a rent deposit deed and tenancy at will both of which are undated but have been signed by Mr Marston.

Mr Lochner says that when he signed the under lease in August/September 2011 he made it clear he was not a director. He says that this is why it was never executed by the landlord. He says that he signed it because of pressure exerted by the landlords who, frustrated by delays in the negotiation of the under lease, visited the office and threatened to throw the Company out if it was not signed. However, this does not explain the fact it is dated 10 March 2011. He maintains that the fact the rent deposit document states the period is to expire on 31 May 2012 shows that what he signed was not the original under lease and that they were trying to negotiate a renewal. He said that they were told that if they did not sign it immediately they would be thrown out.

The contemporaneous email correspondence in early March 2011, before 10 March 2011, addressed to Mr Lochner and Mr Nuttall shows that the solicitors, ACLF, acting on the Company's behalf expected him to sign the documents as a director of the Company. In an email to the landlords solicitors dated 9 March 2011 from the Company's solicitors timed at 16.55, the solicitor records that his client has just signed all the documents apart from the statutory declaration. An email timed as 12.13 on 9 March 2011 to Mr Lochner and Mr Nuttall states that they have all the documents "they need to be signed by Wayne". I note that Mr Marston is not included in any of these emails. I note that the same day in the relatively short period of time between 12.13 and 16.55 the documents are signed and are with the solicitor for transmission to the landlord by courier the next day. There is nothing to suggest that Mr Marston was ever informed that he needed to sign these documents.

Counsel put it to Mr Lochner that he signed the under lease on about 10 March 2011 as a director. Mr Lochner said he did not think so because if he had 'they', by which I understand him to mean the landlords, would have produced an executed counterpart which they have not, saying they would not accept his signature. He denied that the Company's lawyers considered him to be a director. He denied that he signed the under lease on about 10 March 2011 challenging counsel to produce the document saying 'you don't have the original'. I conclude that Mr Lochner is seeking to take advantage of the fact the Liquidator has not produced the executed copy of the under lease signed by both parties. In my judgment what Mr Lochner has said is not supported by the contemporaneous documents.

Solicitors

Mr Lochner confirmed that two sets of solicitors were instructed, ACLF and Burlington's.

ACLF dealt with two pieces of work (i) the claim involving Mr Conroy and his company Oxigen and (ii) the under lease. Mr Lochner confirmed that when he learnt on 25 August 2010 that Oxigen was the subject of a compulsory winding up order he emailed Karen Holden the senior partner of ACLF asking whether they should do something. She responded 20 minutes later with advice, asking for his instructions and some money on account. She said she had £140 as she had managed to recall the process server. Mr Lochner maintained that ACLF was already doing work for the Company on the instructions of Mr Marston. He said that Virgin and Oxigen were one of the few projects he became involved with by Mr Marston. Counsel pointed out that some 19 minutes later at 13.21 he responded to Ms Holden giving her instructions. Counsel put it to Mr Lochner that this was a case of him giving instructions. Mr Lochner agreed that he responded but denied that he was giving instructions – 'absolutely not' – He said it was a shock to be told about the winding up. He had worked on this project for a long time. He said that as soon as he got the email telling him about the winding up he spoke to Mr Nuttall who spoke to Mr Marston. Counsel suggested that, if that was the case, it would have been easier to copy both Mr Nuttall and Mr Marston into the emails. Mr Lochner agreed saying they usually did but it was all happening very quickly. He agreed he could have copied them in.

Counsel put it to Mr Lochner that this was an example of him giving instructions. Mr Lochner denied this saying he had never made any decision on behalf of SMG and that decisions were always made by Mr Nuttall and Mr Marston. Counsel put it to Mr Lochner that he paid the money. Mr Lochner did not answer directly but said he did not want anything to be held up by a small amount of money. Counsel said he could have spoken to Mr Marston about the money. Mr Lochner said he did not know how long it would take the Company to get it to the lawyers. He said he knew his money was safe as Mr Marston gave a personal guarantee. Counsel pointed out that this money was not protected by the personal guarantee as that was in 2013. Mr Lochner said that the Company was the client and he said to the lawyer that the Company would send over the money but if there is a problem 'you can take it from me'. He maintained that it had nothing to do with corporate governance saying he had a great deal to lose.

Counsel took Mr Lochner to the solicitors attendance note of a telephone conversation with him on 3 November 2010 in which it is recorded that "Wayne, expressly on behalf of SMG gave instructions to the effect that : as soon as we have judgment we are to get a warrant of execution and Charging Order". Mr Lochner denied that this was an example of him giving instructions saying it was an example of him passing on instructions not giving them. He said he did this because he was intimately involved with the project and that there was no personal benefit to him as he did not have any shares in SMG.

Counsel took Mr Lochner to a series of email with ACLF commencing on about 11 February 2011 through to 2 March 2011, again they concern Mr Conroy and discuss the possibility of obtaining a freezing injunction against him. As counsel noted none are copied to Mr Marston. Counsel put it to Mr Lochner that they are all examples of him giving instructions. Mr Lochner maintained that he was giving instructions on behalf of Mr Marston. He was asked if he spoke to Mr Marston between the emails as, for example, those sent on 11 February 2011 occur in the period 10.56 to 15.58. He said no he did not. He said he was asked to give a witness statement on behalf of the Company and agreed to do so saying this was because he was intimately involved. The emails include one from Master McCloud seeking parties' dates to avoid so that a hearing can be fixed. It is noted that this was not sent to Mr Marston, that the solicitors want Mr Lochner to attend and he gave dates to avoid. Mr Lochner said that this was because Mr Marston was not involved in the transaction.

In email dated 25 February 2011 to both Mr Lochner and Mr Nuttall ACLF ask for the court fee of £75. In an exchange on 2 March 2011 about the court fee they are looking to Mr Lochner for this and he said that he was going to take a cheque into them. Mr Lochner said that he was because his home was between the Company's and ACLF's office. The solicitors then ask for a further court fee and he said he would 'put the cheque in the post tomorrow'. Counsel asked whether this was one of the fortuitous occasions when Mr Marston was in the office to sign the cheque. Mr Lochner said he had no recollection, saying he may have left signed cheques with Mr Nuttall. When he was asked if that was something Mr Marston did he said 'he may have done'. He denied that Mr Marston ever gave him signed cheques. Mr Lochner denied that it was a blank cheque that he completed saying he never handled any cheque book that belonged to the Company and that he never completed any cheque for SMG.

On 21 November 2011 ACLF did copy Mr Marston into an email about the case and the enforcement of the default judgment. In an email dated 24 April 2012, which is only addressed to him and Mr Nuttall, ACLF asks about the settlement of outstanding fees and raises the question of enforcement. As counsel said there are no emails from Mr Marston. Mr Lochner said he believed the Liquidator had some emails from him. Counsel put it to Mr Lochner that he gave instructions to ACLF. Mr Lochner denied this saying he acted on the instruction of Mr Marston, that there was no benefit to him, no reward just risk.

Burlington's were instructed to stop Ms Kerr making allegations of fraud against him, the Company and Mr Marston. Mr Lochner said he did not think she was making allegations against him but agreed she was sending out emails about the Company. He agreed that Burlington's sent a client care letter dated 14 November 2012 which enclosed their terms of business to him and Mr Nuttall and not to Mr Marston. He agreed that he supplied identification documents to them but said he did so on instructions and that he signed the letter on behalf of the Company as requested by the solicitors 'but not as director'.

Mr Lochner said that Mr Marston had told Mr Nuttall they should use 'Katie Simmonds' ("Ms Simmonds") and that he was asked by Mr Nuttall to contact her. He said that she was well aware of the set up at SMG as she had been invited to join the Company and she knew that he was not a director. He confirmed that he signed the engagement letter. He confirmed that he provided the identification documents saying that he was asked to do so and he did. As counsel pointed out although she was intimately involved with the company Ms Simmonds saw no need to include the only de jure director in communications about the client care letter which was sent to him, copied to Mr Nuttall, on 14 November 2012, because she knew that he and Mr Nuttall ran the Company. Mr Lochner said she knew they were going to take over the Company and there was to be further investment. Counsel said this investment was not going forward, she knew Mr Marston was the director. Mr Lochner agreed that was correct but said she was happy to work on that basis.

Counsel took Mr Lochner to two emails from Ms Simonds to him and copied to Mr Nuttall dated 15 and 19 November 2012 in which she asked for instructions having received a response from Ms Kerr's Solicitors. He put it to Mr Lochner that although this was a letter from Ms Kerr's solicitors she did not see the need to speak to the director of the Company. Mr Lochner said that she knew who the director was but she saw no need to speak to him. He said that this was nothing more than a £500 cease and desist letter.

Counsel put it to Mr Lochner that he had said he got nothing from the Company and if so, what was his rational for getting involved with Burlington's at this time. He said he was asked by Mr Marston and Mr Nuttall to get Burlington's to write a cease and desist letter. He said Mr Nuttall made the call to Burlington's but he was bankrupt and so if anything needed to be signed either he or Mr Marston had to do it. Counsel put it to Mr Lochner that this was another example of him instructing solicitors who were aware of the situation on the Company and were prepared to accept instructions from him. Mr Lochner said it was a single instruction to write a cease and desist letter.

Board meeting 11 June 2012.

This meeting was attended by Mr Nuttall, Mr Sinclair, Ms Kerr and Mr Lochner. Mr Lochner said that the Company had a PA and he recalled that she had drafted the minutes of this meeting. He said they were circulated to the four of them before being finalised. He agreed that together they decided to appoint a sales manager and that Ms Kerr was tasked with this subject to her investment in the Company. He said that this was forward planning for when the investment came in. He agreed that they discussed and tasked Mr Nuttall with sales training as the Company had a sales team. Mr Lochner said that Mr Marston knew what was going on and that he was going to hand over once the money came in.

Under the heading 'Finance' he agreed that he was tasked with asking Mr Marston for the P&L account for the year to date. He confirmed that of the £500,000 Ms Kerr was to invest, £250,000 was to pay debts and the rest was capital. The minutes recorded that £250,000 was owed to HMRC. He said that Mr Marston was keen to get rid of the Company, he was not spending enough time on the Company. Counsel asked what impact that had. Mr Lochner said that the Company was not as successful as it should have been. Counsel asked whether others had to step up to which Mr Lochner replied that it was wrong to assume he was there all the time, in fact he was only there on a few days as 95% of his time was spent on LHKX. He agreed that he had a desk at the Company's offices and LHKX had a team of people working there. He said it would have cost him £1000 a month to have a desk in Canary Wharf and that when HKFX asked to employ him the Company had space so they had four desks in their office. He said he was working with LHKX before the press release in May 2010 having been approached by the owner, the purpose was to allow high net worth individuals to manage their finances.

Consultancy Agreement

In cross-examination Mr Lochner accepted that he was wrong in his witness statement when he said that he was a consultant from November 2009 to December 2012 and that in fact it was from August 2009.

Counsel asked why he did not mention the Consultancy Agreement when he was interviewed by Mr Green on 13 June 2013. He told Mr Green "It was just sort of a straight consultancy quid pro quo, free desk in exchange for helping out when I could." Mr Lochner said it was not what he was asked. Counsel drew his attention to the fact that the transcript of that interview shows Mr Green asked him "how was the arrangement documented?" to which he replied "It wasn't".

In cross-examination Mr Lochner said his recollection was that there was only one agreement that he signed and that related to one specific contract, a development. Counsel put it to Mr Lochner that this was a different case to that put in his witness statement. Mr Lochner then said that the Consultancy Agreement was broader than just one deal, he said he did not want a contract until this deal was presented and he then asked for a contract to cover the deal and the generality of his appointment as a consultant. He relied on clause 2 which is headed 'Appointment'.

Counsel took Mr Lochner to clause 4 of the Consultancy Agreement which is headed 'Compensation' from this it is clear that it relates to 'work undertaken on behalf of SMG for its client Elan Strategic Investments Ltd trading as Millionaire Investments and Alligator Bay Development Company Ltd', he asked Mr Lochner where it provided for payment of any other services. Mr Lochner said he was sure it did. Counsel put it to Mr Lochner that his position was that this contract covered his services as a consultant but, as Mr Lochner was forced to concede, it does not provide for any payment for the services he provided or for the payment of expenses.

In his witness statement Mr Lochner said he submitted his standard consultancy agreement. In cross-examination he conceded that the document he had exhibited was not his standard agreement. He said that he had submitted it, but it did not get signed. In his witness statement he said that the agreement did not provide any remuneration from the Company aside from commission on deals he might broker. He conceded that the agreement only gave him commission on the one deal. Counsel put it to Mr Lochner that his written evidence was wrong. Mr Lochner accepted that the Consultancy Agreement did not deal with the 'quid pro quo' which was that in return for his services he was permitted to use the Company's office facilities, including a desk, for his other business interests which he said was worth about £1000 per month. He said when it came to this deal he wanted it documented. Counsel agreed that this was a very large deal and the commissions were very significant. Mr Lochner agreed saying they wanted a green deal.

Mr Lochner agreed that there was no provision for any benefit in this agreement outside clause 4 saying that he had an oral agreement. Counsel put it to him that this was not in his witness statement. He agreed saying this agreement was signed a year after he started working for SMG and that there was no other contract. Counsel said that the impression given by his witness statement was that this was his standard consultancy agreement. Mr Lochner accepted it was not. He agreed that he should have submitted an agreement to cover the scope of his work. Counsel said that before the Consultancy Agreement he was described as a director of SMG in the LHKX press release.

In my judgment it is apparent that Mr Lochner's evidence has moved from telling Mr Green there was no consultancy agreement, to exhibiting a document signed by Mr Marston which he said was his standard from consultancy agreement, to accepting in cross-examination that the document signed was not his standard consultancy agreement and that it related to one contract as shown by the payment provisions in clause 4, to saying that there was a verbal agreement. It is not as though these points were new to Mr Lochner. Mr Green had dealt with them and what he saw as the shortcomings of Mr Lochner's evidence in respect of the document he relied upon in his evidence in reply. As counsel for the Liquidator submitted in closing this changing series of events leads the court to conclude that it cannot have any confidence in what Mr Lochner has said.

Mr Sinclair and Ms Kerr

In cross-examination Mr Lochner said that the reason they had employed Mr Sinclair was because Ms Kerr stipulated it as a condition of her investment and said they were told not to tell Mr Sinclair. He accepted that this is not in his witness statement saying he did not think it was relevant. Mr Lochner agreed that Mr Nuttall wrote to Mr Sinclair on 17 February 2012 setting out details of his proposed role and remuneration. He agreed that this email made no mention of Mr Marston. He accepted that it said Mr Nuttall and he would spend time with Mr Sinclair attending meetings so that he could get a better understanding of the business. Mr Lochner said that the remuneration package was very similar to that offered to existing employees.

Counsel put it to him that this occurred before the Investment Agreement was signed so it was before there was any agreement with Ms Kerr. Mr Lochner then said that Ms Kerr had orally agreed to put in £500,000, that she spent a large amount of time at the office, that he had put together a thick file of all the contracts agreed by SMG, some 200 clients. Counsel took Mr Lochner to the terms of the Investment Agreement from this it seems that for the £500,000 investment Ms Kerr and Mr Sinclair were to get a 10% interest in the Company (5% each), yet he was getting 39%, Mr Nuttall 51% and Mr Marston was only getting '5% of the sale price of the business'. Mr Lochner said that was his price for selling the Company. Counsel pointed out that according to the Agreement other 'key members of staff' were getting similar payments, for example Brenden Metcalfe the sales manager was also to get 5%. Mr Lochner said that these were deals which were negotiated. Counsel put it to Mr Lochner that this was a nonsense, that he was getting 39% for nothing. Mr Lochner said he had negotiated a deal with CISCO which, if the investment went ahead, each deal would be worth £5m. Counsel pointed out that in appendix two to the Agreement he said £1m. Mr Lochner said it would enable people to use Wi-Fi and 4G at stadia.

Mr Marston

Counsel put it to Mr Lochner that it was Mr Marston's company yet he was giving it away. Mr Lochner denied this. Counsel put it to Mr Lochner that the split reflected the reality of SMG. Mr Lochner denied this, saying he had no equity in the Company. Counsel put it to Mr Lochner that Mr Marston was there in name only and that he was a de facto director. Mr Lochner denied this. Counsel said that Mr Marston was valued the same as Mr Metcalfe in sales. Mr Lochner replied 'that was the deal'.

In an email dated 24 May 2012 from Mr Nuttall to Ms Kerr he described Richard [Marston] as the 'accountant'. Mr Lochner said that this was an unfortunate reference. Counsel put it to Mr Lochner that Mr Marston did the accounts of the Company. Mr Lochner said that Mr Marston was involved with corporate governance and he did the finances. He said he was a shareholder of Marshaltons. Counsel returned to the email to Mr Sinclair dated 17 February 2012 and said this tells us about old SMG the reference to 'WL' is to him and Mr Nuttall and there is no mention of Mr Marston. Mr Lochner said that was because he did not take part in the sales so there was no need to mention him, by which he meant that he did not get involved in the sales process of the Company, he did not get involved with new/old clients because he employed people to do that for him. Mr Lochner said Mr Marston started the Company, ran the Company, he ran the bank account, the finances and gave instructions. He agreed that Mr Marston was the accountant but denied that he ran the business with Mr Nuttall. He said that Mr Marston was the owner.

Individual payments

Counsel took Mr Lochner to a schedule of payments and to the relevant bank statements for the Company bank account on which they all appear. Mr Lochner said that he never had access to the Bank account but did not take issue with this. He accepted that the payments are recorded as being to him or his company. He agreed that there are three payments to him personally, 9 November 2011 for £550, 23 December 2011 for £1902 and 24 May 2012 for £8000.

Mr Lochner said that he lent the Company £72,000 over a period of time which is recorded in a loan agreement is dated 19 November 2010. The first loan of £10,000 is recorded in the minutes of a directors meeting held on 4 November 2009, a second for £40,000 held on 25 November 2009. The minutes record him as being 'present'. Mr Lochner said he was there as a witness. He said the loans were consolidated a year later. Counsel described the loans as soft loan, meaning that they did not attract interest. Mr Lochner denied this saying that they attracted 10% interest and were secured. Counsel pointed out that the loan agreement does not mention interest. Mr Lochner was adamant that he was entitled to interest at 10% and said that he thought that the interest was included in the £72,000. Counsel put it to him that the loans total £50,000 which would mean interest was £22,000. Mr Lochner said that there were 3 loans and he believed interest was included. Counsel pointed out that he did not mention this in is witness statement. Counsel pointed out that according to his witness statement he said he paid £72,000 in three tranches, which included, in addition to the two already referred to, a third of £22,000 on 31 January 2010. Counsel repeated that this was a soft loan and that is reflected in the loan agreement. Mr Lochner reluctantly agreed that he was not entitled to interest.

Counsel took Mr Lochner to his Loan Account with the Company and in particular to 3 payments each of £5000 recorded as being made on 5 October 2010 to KWC. He then took Mr Lochner to the Company's bank statement where each payment is recorded as being 'Online Transaction' ref 'Wayne Lochner'. Mr Lochner said that when he was first asked about this he had not seen the bank statements, that he when asked KWC they said they had not received them. He went onto say for the first time that when the Company was based at Canary Wharf offices he paid Abbey the managing agents £5,000 by credit card. Counsel drew Mr Lochner's attention to the fact that Mr Green had exhibited these documents to Green 2 which is dated 2 December 2014 and yet this was the first time he said anything other than KWC did not receive the money. Mr Lochner said it was the first time he realised that it was not paid to KWC but to him personally.

Counsel took Mr Lochner to an email from Mr Marston dated 14 June 2010 which is headed 'RE: PAYMENT OF RENT TO ABBEY'. He pointed out that this is in June 2010 and the payments were in October 2010. He put it to Mr Lochner that the October 2010 payments had nothing to do with Abbey. Mr Lochner conceded this. Counsel drew to Mr Lochner's attention that his Loan account records that on 30 October 2010 he received £2000 'repay Abbey' but there is no evidence to support this. Mr Lochner said that there should be and it was the same for the three others.

The loan account records that on 1 August 20011 Mr Lochner received £1995 described as Newlyn plc. Mr Lochner said that this was reimbursement of rates he had paid in respect of the Company's liability to Westminster Council for rates. Counsel pointed out that there is no contemporaneous documentation to show which council he paid. Mr Lochner was adamant that he had made a payment for rates due to Westminster Council that Newlyn plc were the bailiffs to Westminster Council. Counsel pointed out that they were at the Marlborough St offices until September 2011 and not at Cockspur St. Mr Lochner said that Marlborough St was not in Westminster and they never had a problem with rates there. He accepted that something was not right. There are no contemporaneous documents to support this and the bank statement records this as an online transaction 'Newlyn Plc'. In the absence of any contemporaneous documentation I find Mr Lochner's explanation incredible.

In respect of the payment of £550 he received, Mr Lochner maintained this was for expenses he incurred in relation to the Conroy/Oxigen case. The Consultancy Agreement does not provide for him to be reimbursed expenses. Mr Lochner described the payment of £1902 as being a commission payment for the Virgin Racing Introduction. In cross-examination for the first time Mr Lochner said he had a verbal agreement which provided for this, certainly there is no entitlement under the terms of the Consultancy Agreement. He said that he had made this introduction in October 2009 but the payment was not made until 23 November 2011. His explanation was that Mr Marston was not very prompt in making payments. He has said that the £8000 he received on about 20 May 2012 was a commission payment for City FX Introduction. However Mr Green has said that this payment was accounted for as being a part repayment of his loan. Mr Lochner's response was to say that Mr Marston accounting was not very good. I find these explanations inherently implausible.

Re-examination

In re-examination Mr Lochner said that he did not see the bible of shareholders for Ariadne before it was published and that he was not asked whether he wanted to appear in it. He said that Mr Marston had asked him to use the title Corporate Finance Director. In relation to the under lease he was asked who signed the original to which he replied he imagined that it was Mr Marston as the landlord said it had to be a director. He said he had not signed any other leases for the company. Counsel asked what contact he had had with ACLF, Mr Lochner said they had dealt with his divorce and other matters and that when Mr Marston asked him to recommend a lawyer he thought of them. Counsel asked him to explain what he meant when he said he was intimately involved with the Oxigen/Conroy transaction. He said that he was brought in because the deal involved large scale finance and green issues, he agreed that if successful SMG would get 10% of £50m and that he would get 10/20% of that. He said that SMG were involved with about 200 different contracts and that he was involved in about 10.

Mr Lochner was asked to explain the term 'sweat equity' which he had used in relation to Ms Simmonds at Burlington's. He said that when they started discussions with Ms Kerr in 2012 about an investment they wanted to get a solicitor on board. They approached Ms Simmonds and offered her payment by way of 'sweat equity' on the basis she would get a percentage of the deal for her work. She knew the background to the deal with Ms Kerr so when Ms Kerr started sending emails about SMG Mr Nuttall asked Mr Marston who they should use and he said Ms Simmonds. She then said she would not work on a sweat equity basis and hence she was paid £550. Counsel asked Mr Lochner about the time line for the share transfer he said that it was to be immediate after the money came in. Mr Lochner agreed that the desks were rented for HKLX. In relation to the Consultancy Agreement he said that when he signed it he believed they were replacing an oral agreement and that he would get a 10% fee for larger deals. He believed that it gave him instruction to act as a consultant to effect introductions. He said he believed it to be wider then a single contract. He said he would email lots of introductions. I note he has not produced any of these emails.

I found Mr Lochner to be a most unsatisfactory witness. I simply do not believe large parts of his evidence. In cross-examination he changed his evidence to say what he believed would be most beneficial to him. For an experienced and we are told a successful business man his evidence shows him to be cavalier about the use of the term 'director'. He tried to hide behind the suggestion that he was told by Mr Marston to call himself Corporate Finance Director. However, he chose to use that title in other contexts which had nothing to do with the Company when there was no good reason to do so except to enhance his standing. I accept that it is not enough to simply use the title director and it is necessary to consider what he actually did for the Company and we see that he instructed lawyers on behalf of the Company, signed valuable contracts, dealt with landlords and acted as HR Director signing employment contracts. I do not believe that he only acted on Mr Marston's instructions. There is no evidence that he ever took instruction from Mr Marston beyond his assertion that he did so. He acknowledged that Mr Marston was the Company accountant, and he said not a very good one at that, that his firm audited the Company accounts. There is no evidence that Mr Marston was ever involved in the day to day running of the Company. Certainly he had control of the company bank account and cheque book but as Ms Kerr said he acted only on the instruction of Mr Nuttall and Mr Lochner. It is very convenient for Mr Lochner to be able to say that he had no control over the finances. In my judgment that is not borne out by the evidence he may have had to ask for information but on a balance of probability the evidence suggests he had control. Also the terms of the takeover are striking in that they give Mr Marston, the sole shareholder and director, a bonus of 5%, the same as the sales manager. It is simple not credible.

Mr Nuttall

Mr Nuttall gave a relatively short witness statement dated 9 March 2015 running to 1 ½ pages of A4 and 11 short paragraphs in which he says that he set up the Company with Mr Marston, that he was a director until August 2009 but as a result of his bankruptcy in January 2010 he was unable to be a director and acted as a sales consultant taking direction from Mr Marston. In cross-examination he said he did not identify himself in his email address apart from his name as he did not want to be portrayed as a director. However, he did not accept that this was how Mr Lochner was being portrayed when he was taken to documents in Mr Lochner's name.

His evidence is that Mr Marston gave instructions by telephone and that he had a 'laissez faire' approach to written instructions. He said that Mr Marston did not attend the Company offices every day and often worked remotely. He said he did not have regular meetings on his own with Mr Marston. He could not recall whether he was asked to give evidence in answer to Green 1.

Paragraphs 8 and 9 of his witness statement concern the payment to Newlyn plc. He agreed that the dates are wrong. He recalled the bailiffs attending the Cockspur St offices in April 2011, he recalled fraught calls to Mr Marston and that Mr Lochner was not happy about putting it on his card. He agreed that it had nothing to do with the payment in August 2011 and that paragraphs 8 and 9 of his statement were wrong.

He denied that Mr Lochner was repeatedly holding himself out as a director saying that it was only in title. He said that on the business card where Mr Lochner was described as the Corporate Finance Director was his job title that he was asked to use by Mr Marston. He did not accept that be using this in his LinkedIn account Mr Lochner was holding himself out as a director. He said he never told anyone he was a director. He said that when Mr Lochner was described in 'In The Game' as the commercial director he would not have any control over that. He said his own business card had just his name on it because he was a bankrupt. He did not accept that Mr Lochner was portrayed to third parties as being a director. He said that Mr Lochner made it very clear that he was not a director and that Corporate Finance Director was his job title. He said that Ms Kerr and Mr Sinclair had contacted a lot of clients of SMG but none were in court.

He said that Mr Marston told them which solicitors to instruct. He said that Mr Marston often asked Mr Lochner for advice. In relation to the cheque payment for fees Mr Nuttall believed Mr Lochner was wrong and that the payment was put on a card and then claimed back. He accepted there was no evidence to support this. He said that Mr Marston would leave signed cheques when he went on holiday but it was more usual for them to pay and claim it back as an expense. Counsel put it to Mr Nuttall that Ms Atherton of ACLF believed that Mr Lochner was a director as she expected him to sign the lease, he said he could not comment on that. He said he believed the lease was signed before they went into occupation but there is no evidence to support this. Mr Nuttall said that when Mr Lochner signed the employment contracts he did so in name only on Mr Marston's instruction. Mr Nuttall said he believed that Mr Marston was in the office at some point during the time Ms Kerr worked there. He said he would pop in and meet them for coffee. He denied that Mr Lochner took part in the corporate governance of SMG.

It has to be accepted that Mr Nuttall and Mr Lochner are inextricably linked through the Company and, I believe, as friends. If the evidence is to be believed he was the person who got Mr Lochner involved with the Company and so he cannot be regarded as an independent witness. He clearly understood what it means to be held out as a director which is why as a bankrupt he was careful to avoid using that title himself. I consider that he is willing to say what was necessary to help Mr Lochner and accordingly place little weight on his evidence.

Conclusion

As stated there is no real dispute over the legal test to be applied. In the absence of a definition it is accepted that the court must look at the factual matrix objectively. It is accepted that the term used to describe an individual's position in the company, in this case Corporate Finance Director, is not conclusive and the court must look at what he was doing on a day to day basis. For Mr Lochner it is said he was not making decisions but acting on instructions given by Mr Marston and that he did not have access to financial information. The burden of proof is on the Liquidator.

A relevant factor is whether the company considered him to be a director and held him out as such and whether third parties considered him to be a director – see Smithton Ltd (formerly Hobart Capital Markets Ltd) v Naggar [2014] EWCA Civ 939.

The oral evidence in this case was not satisfactory and so the court has to look at the documents. I have already in consideration of Mr Lochner's cross-examination indicated that I find many of his explanations to be implausible and incredible. I am satisfied on a balance of probability that he was held out by the Company as a director. For example on his business card, his title on emails and letters sent to third parties. I am also satisfied on a balance of probability that Mr Lochner held himself out as a director of the Company, for example his LinkedIn account, the Ariadne papers, the press release in respect of LHKX. The contemporaneous documents show that the solicitors ACLF believed him to be a director, they expected him to sign the under lease and they accepted instructions from him in relation the Conroy/Oxigen dispute. I am satisfied on a balance of probability that he gave them instructions on behalf of the Company. I am also satisfied that he instructed Burlington's. This is not the conduct of a consultant.

There is no evidence that Mr Lochner wrote or spoke to Mr Marston to get instructions. In fact Mr Lochner acknowledged that Mr Marston was the accountant, responsible for the finances. On one view that was very convenient as it distanced him from the Company's financial affairs and meant he was not on the bank mandate, did not have access to the company accounts except through Mr Marston and no responsibility for paying staff, HMRC and creditors. It has been suggested that this is evidence that he was not a director and certainly not the Corporate Finance Director but as Mr Green's said in his evidence it is not unusual in a small company for responsibility for finances to be restricted to one party, generally an accountant who is not involved in the day to day business. Mr Lochner's said in cross-examination Mr Marston was not involved on the day to day business. I am satisfied that the evidence shows on a balance of probability that Mr Marston acted on the instructions of Mr Lochner and/or Mr Nuttall.

The one person who we have not heard from who might have been expected to know what the position was is Mr Marston. As stated it is accepted by Mr Lochner that Mr Marston was not involved in the day to day running of the business and that although he was recorded at Companies House as the sole shareholder and director this was in name only and his role was that of accountant. In my judgment he acted at all times on the instruction of Mr Nuttall and Mr Lochner.

On one view, as counsel for the Liquidator submitted, when viewed objectively it could be said that Mr Lochner was involved with/in the Company from the outset in a fundamental way. The Company was incorporated on 16 June 2009, on his own case Mr Lochner accepted he was involved from August 2009, he signed the contract with Manor on 6 October 2009, he agreed that this contract was worth about £50,000 to him personally and that it was the second largest asset of the Company, on his own case he said he was fronting those negotiations, the two employment contracts with his sons he signed as HR Director on 23 October 2009. On 4 November 2009 he loaned £10,000 to the company and on 25 November 2009 he loaned a further £40,000. The evidence shows that this was a 'soft loan'. It is relevant that there was no provision for interest and in my judgment this supports the case that Mr Lochner was a de facto director. His evidence is that he did not want to lose his desk which he valued as being worth £1000 per month to him.

The Consultancy Agreement dated 19 May 2010 is signed by Mr Nuttall and not Mr Marston, despite the fact Mr Lochner's evidence is that it was submitted to Mr Marston. Mr Lochner now accepts that it relates to one deal. His evidence is now that there was an oral agreement but that does not explain the basis on which he was entitled to a desk, his right to sign contracts, his role in respect of HR or the Manor deal where he acknowledged that he was fronting this negotiation. There are no documents to show that he was reporting back to Mr Marston, the only documents we see are where he is asking Mr Marston for payment.

In relation to the Investment Agreement we see that Mr Marston is treated the same way as other staff and he is to get 5% of the shares. When viewed objectively this is indicative of the fact he is staff , he is the accountant and Mr Lochner and Mr Nuttall are the management and key shareholders.

I have no doubt that Mr Lochner pursued other business interests in this period which is why we have the press release for LHKX where he says he is Corporate Finance Director of SMG but he was in my judgment central to the business of the Company. I am satisfied on a balance of probability that Mr Lochner was involved in the corporate governance of the Company, taking operational and strategic decisions, and entering into numerous contracts for the Company with staff, landlords and clients. He made payments on behalf of the Company. The impression he gave, through express representations and how he was treated, was that he was a director, with Mr Marston being the Company accountant. In my judgment on a balance of probability, he was part of the corporate governance structure of the Company and assumed a role which imposed on him the fiduciary duties of a director.

Payments

On the basis that I have found that Mr Lochner to be a de facto director of the Company he has no defence to the Liquidators claim in respect of the payments to Mr Marston.

On the basis I have found Mr Lochner to be a de facto director of the Company it is not in issue that the payments are either in breach of section 239 or 240 IA86 as appropriate and s 212 IA86 in the alternative.

The first tranche of payments totals £10,452 between 9 February 2011 and 24 May 2012. There are three payments in total which are described by Mr Lochner in his written evidence as being Commission;

i) £550 on 9 February 2011, Mr Lochner has said that this was for a commission payment services provided and/or expenses on the Conroy/Oxigen matter. The Consultancy Agreement does not provide for any such payments and no evidence has been produced to show that they are a legitimate Company expense which should be reimbursed. This has also been credited to Mr Lochner's loan account and as such is a preferential payment.

ii) £1902 on 23 December 2011, Mr Lochner said that this was a commission payment for introducing the Manor deal in October 2009. There is no evidence to support this and again it is not covered by the Consultancy Agreement and there is no obvious link between the Manor contract and the payment.

iii) £8000 on 24 May 2012, Mr Lochner said in his witness statement that this was commission payment for City FX introduction, again there is no entitlement under the Consultancy Agreement and it is not properly explained. This has also been credited to Mr Lochner's loan account and as such is a preferential payment.

The second tranche totals £18,995 and were credited to Mr Lochner's loan account. The three payments are as follows;

i) £15,000 paid on 5 October 2010 recorded as 'KW Corporation'. Mr Lochner said that the money was not received into the bank account of KWC, which ignores the possibility of the monies being used for KWC's benefit. Mr Lochner suggested in cross-examination that he was being reimbursed for rent payment made in June 2010. I accept that there is an email in which he said he paid £8634.56 for rent. But there is no obvious link between that and these payments made in October 2010.

ii) £2000 paid on 30 December 2010 recorded as 'Wayne Lochner (Memo: repay Abbey Business Centre). Mr Lochner says that this is reimbursement for monies he has paid. The documents relied upon do not support this.

iii) £1995 paid 1 August 2011 and recorded as Newlyn plc. Mr Lochner said this was reimbursement for rates paid on behalf of the Company but in cross-examination he accepted that this was not factually correct.

Mr Nuttall was made bankrupt on 21 January 2010. £12,000 was paid to him on 2 February 2011 and 25 May 2012. The Liquidator claims that there is no basis for these payments to have been made and they are misfeasant. Mr Lochner and Mr Nuttall do not appear to challenge this

Finally there is a payment to Marshall & Co, a third party associated with Mr Marston of £7,500 paid on 12 December 2012. Mr Lochner says he was unaware of this payment. There is no clear basis for it to have been made. In circumstances where I have found that Mr Lochner is a de facto director there is no defence to this claim.

For Mr Lochner it is said that the court should exercise its discretion to grant relief under s 1157 Companies act 2006 for a directors breach of duty if, the director acted honestly and reasonably: and having regard to all the circumstances of the case he ought fairly to be excused. For Mr Lochner counsel submitted:

i) He was not aware of the financial situation of the Company at the time of the payments.

ii) He had no access to the bank accounts or company accounts.

iii) He honestly believed he was being paid for work carried out and he was entitled to the payments.

In the circumstances where I have held that Mr Lochner was a de facto director and taking account of my findings in respect of his evidence I am not prepared to grant relief.

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