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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Cheverny Consulting Ltd v Whitehead Mann Ltd [2005] EWHC 2431 (Ch) (08 November 2005) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2005/2431.html Cite as: [2005] EWHC 2431 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		8 November 2005

1. Those involved in this case are or have been significant participants in the Executive Search industry. Mr Jean-Michel Beigbeder, the individual behind the Claimant, entered the industry in France in 1964 and became a major figure in the industry in France. The Defendant is a subsidiary of Whitehead Mann Plc, a major UK-based participant in the industry. This dispute is about the Claimant's case that it became entitled to receive from the Defendant shares in Whitehead Mann Plc after a so-called "earn-out" period following the sale of Mr Beigbeder's executive search business to the Whitehead Mann group, that is, a period of 3 years during which post-acquisition performance of the acquired business and its personnel could be relevant to the total consideration eventually received, in one form or another, by the vendor.
2. I shall use the name "Whitehead Mann" where it is not necessary to differentiate between different parts of that group. The group in due course included, as a subsidiary of the Defendant, Whitehead Mann SARL, an organisation formed very shortly before the acquisition of Mr Beigbeder's business by Whitehead Mann.
3. From 1964 to 1986 Mr Beigbeder had successive employments in the industry. The centre of his activities was in France, but in his work with Spencer Stuart until 1983 he was eventually Managing Director for Europe and then Group Chairman, overseeing that company's expansion from 5 to 24 offices worldwide. From 1983 he was with Korn Ferry, as Chairman of the International Executive Committee with responsibility for Europe. In 1986 he became independent and established Beigbeder & Partners SA. This was intended to be a French operation. Within a year or so he had established links, which were given the name "Accord Group", with other executive search firms outside France, for the referral by each firm to others in the group of clients and contacts, as appropriate. Thereafter Beigbeder & Partners SA operated successfully in France. Its business was mostly French, and at one point in his witness statement Mr Beigbeder described it as "almost exclusively French".
4. From at least 1974 Mr Beigbeder was known to Mr Gerard Clery-Melin, who has worked in the Executive Search industry for 30 years. Mr Clery-Melin started at Spencer Stuart. He confirms that Mr Beigbeder is well known in the Executive Search industry in France.
5. The substantial Whitehead Mann business was based in the UK. It had only a small presence in the US, Germany and France.
6. From 1999 to 2000 negotiations took place for a transaction the core of which was the acquisition by the Whitehead Mann group of companies of the business of Mr Beigbeder. The negotiations matured into a series of agreements, either three or four, the central dispute between the parties now being as to whether there were three or four. The undisputed agreements were:

1) A contract, in French, described as "Acte de Cession de Fonds de Commerce", ("the Acte de Cession") between La Societé Accord Group Beigbeder & Partners (a Societé Anonyme) and Whitehead Mann SARL, M. Beigbeder and, as séquestre (who was to hold funds in escrow), Maitre Arnaud Dubois. Under this contract, the key elements of the business of Beigbeder & Partners were sold to Whitehead Mann SARL. The relevant currency was the French Franc. (As a very wide approximation sufficient for this case, one can treat Fr.F 10 as having been the equivalent of £1.) The total consideration was Fr.F 5,000,000. The contract states that it was made in Paris, in 10 original copies, on 1 July 2000. Mr Beigbeder signed for himself and Beigbeder & Partners. Mr Jeremy White signed for Whitehead Mann SARL. As will appear, the actual signing of the contract appears to have taken place on 28 June 2000. I am grateful to the parties for providing after the hearing an agreed translation of Articles 10 and 11, which were available only in French at the hearing.

2) A contract of employment, also in French, under which Whitehead Mann SARL engaged M. Beigbeder as a Senior Consultant. This contract ("the employment contract") was subject to French law, and subject to the jurisdiction of the French Courts. The relevant currency was the French Franc. Mr Beigbeder's place of work, which could be varied, was the company's registered office in Paris. His work was to develop the business of Whitehead Mann SARL by securing new assignments with new clients or existing clients and carrying out those assignments and any other assignment entrusted to him. The contract states that it was made in Paris, in 2 original copies, on 1 July 2000. This contract, too, appears to have been signed on 28 June 2000. Mr Beigbeder signed for himself. It appears that Mr White again signed for Whitehead Mann SARL.

3) A contract ("the consultancy contract") between (1) Whitehead Mann Ltd (the Defendant) (2) Cheverny Consulting Ltd (the Claimant, "Cheverny") and (3) M. Beigbeder. Under this contract Whitehead Mann Ltd engaged Cheverny to provide certain services to Whitehead Mann Ltd "by means of Mr Beigbeder". This contract was in English, subject to English Law, and enforceable in any Court of competent jurisdiction. It dealt with financial matters in sterling. No date was inserted in the space provided on the contract to record the date of making of the contract. As will appear, this was circulated for execution by different parties in different places on different dates. It was signed by Mr Beigbeder, also by Mr Carthew-Yorstoun and Mr McAvilley for the Claimant, and by Messrs Clery-Melin and Brassington for the Defendant (respectively Chief Executive Officer and Chief Financial Officer). It was probably signed by Mr Beigbeder on 28 June 2000, at the Paris meeting at which the two contracts previously mentioned were also signed by him. The signatures for the English parties were added later, in the case of the Defendant in England and in the case of the Claimant in Spain and/or England.

7. The principal question in this case is whether the consultancy contract was subject to the terms of a side letter, which the Claimant says it was. No original of this letter has been produced, but that such originals existed, unsigned, is not in dispute. There is no evidence that this side letter was signed by the person for whose signature provision was made on it, Mr Clery-Melin (or indeed by anyone else). I shall follow the parties' convenient practice of referring to this as the side letter, without prejudice to the question whether the parties ever agreed that it should be provided.
8. The importance of the side letter is that the Claimant relies on it as an agreement which modifies what would otherwise be the relevant effect of the consultancy contract.
9. Clause 3.5 of the consultancy contract provided that at the end of a specified period, called the Duration, the end being 30 June 2003 [see clause 1.2], the Claimant would be entitled to have granted to it what was described as the "Stock Consideration", being a number of shares in Whitehead Mann plc. The maximum number was 162,295. The actual number of shares to be issued was explained in clause 3.6:

The Stock Consideration will vary downwards following the amount of Source of Business generated in the time of the Duration according to the following formula:

Source of Business	Downwards adjustments
£1,400,000 or over	0%
Between £1,300,000 and £1,399,999	50%
Between £1,200,000 and £1,299,999	75%
Below £1,200,000	100%.

10. The term "Source of Business" was defined in clause 13.1, by a definition which itself requires one to double back to clause 2.1 :

13.1 In this Agreement the following words and expressions shall have the following meanings ascribed to them save where the context otherwise appears:

....

"Source of Business" means, in any determined period and excluding V A T, the amount of fees collected relating to the performance and completion of the assignments obtained further to the Source of Business Services.

2.1 The Consultancy shall provide such advice and assistance to the Company by means of Mr Beigbeder in relation to consultancy recruitment in the UK, Europe, the United States of America and any other place in the world but outside France as the Board [of Whitehead Mann Ltd] may require (the "Services"). The Services will cover in particular:

2.1.1 developing business for [Whitehead Mann Ltd] by obtaining assignments from new clients and/or from existing clients of [Whitehead Mann Ltd] (the "Source of Business Services") ....

Clause 2.1.2 then refers to other services called the "Performance Services".

11. Following these provisions through, one therefore finds that what qualifies as "Source of Business" for the purposes of determining, in accordance with clause 3.6, the ultimate Stock Consideration, is the amount of fees collected relating to the performance and completion of the assignments obtained further to the service, in relation to consultancy recruitment anywhere in the world other than France, of developing business for Whitehead Mann Ltd by obtaining assignments from new clients and/or from existing clients of Whitehead Mann Ltd. Performance of the duties under the employment contract, that is, developing the business of Whitehead Mann SARL or carrying out assignments for it, would not, therefore, generate "Source of Business" for the purposes of the consultancy contract. (I am not unaware that the contract also contains a definition of "Business Generated", a term which, so capitalised, appears, for example, in clause 3.2, but this definition is not relevant for the purposes of clause 3.6.)
12. A further clause in the consultancy agreement is important. This was clause 12.5:

This Agreement constitutes the entire agreement between the parties to it with respect to its subject matter and shall have effect to the exclusion of any other memorandum agreement or understanding of any kind between the parties preceding the date of this Agreement and touching and concerning its subject matter.

13. The consultancy contract ends:

IN WITNESS whereof this deed has been executed by the parties hereto and is intended to be and is hereby delivered as a deed on the day and year first above written.

As I have observed, no date is written "above" at all, nor does the document tell us the "date of this Agreement", for the purposes of clause 12.5 or at all. The date of execution on behalf of the Defendant, which is not stated on the document, appears from the e-mail traffic to have been some time in the first week of August 2000, probably 4 August, and purely fortuitous, the documents having waited for at least a fortnight in the offices of the Defendant before being signed.

14. The side letter is said by the Claimant to change the basis of calculation under clause 3.6 of the consultancy contract, by including for the Source of Business calculation the value of assignments for French work. The English text of the side letter (the original being in French) reads:

Dear Jean-Michel,

I refer to the different agreements signed between the Whitehead Mann group, the company Beigbeder & Partners and yourself.

I confirm that when the said agreements refer to certain levels of performance to realise in order to give you, directly or indirectly certain rights, the amount to consider will be the total amounts directly or indirectly realised by you for the . benefit of the Whitehead Mann Group, taken as a whole.

Yours sincerely,

[Space for signature, in the event unfilled] Gerard Clery-Melin

Chief Executive Officer.

This document, the French copy of which is printed on the paper of "Whitehead Mann Group plc", begins "Paris, Ie 1er juillet 2000" .

15. I am in no doubt about, and I understood Mr Barklem realistically to accept, the fact that if the side letter was agreed to be made as part of the series of agreements between the parties, the intent and effect of this was, particularly, to include French business as part of the business to be taken into consideration for the purposes of clauses 3.5 and 3.6 of the consultancy contract.
16. The core dispute, in practical terms, is therefore as to whether, in calculating "Source of Business", business in France for Whitehead Mann SARL was to be included or excluded for the purposes of calculating the Stock Consideration. If it was to be included, the Claimant qualified for the grant of up to 162,295 shares. If it was to be excluded, the Claimant did not in the events which happened qualify for the grant of any shares.
17. The possibility of Mr Beigbeder selling out to Whitehead Mann was opened up between him and Mr Clery-Melin. The latter had been running the Paris branch office of the Defendant (when the possibility of the deal was first canvassed, Whitehead Mann SARL had not been formed). He had then been appointed Chief Executive Officer of the Defendant and had appointed Mr Jeremy White to succeed him in the Paris office. He explains:

"My preoccupation was to focus on the UK. Jean-Michel was very well known in the French market and I thought it would be helpful for Jeremy White to have an "old head" to help run the business in France. I wanted to use him as a "developer" who I hoped would pass on market contacts and good habits to Jeremy (Jeremy did not speak French well and did not have particularly high visibility in the French market). We wanted to grow the French business and I knew that Jean Michel was at the end of his career."

As to the French practice, Mr Cl6ry-Melin added:

"Jean-Michel was supposed to launch a Board practice in France and to execute "high level assignments" for senior employees in "blue chip" companies. We also hoped that he would help the French practice achieve market recognition."

18. In those paragraphs Mr Clery-Melin explained how he saw Mr Beigbeder and his business fitting in to Whitehead Mann's plans for France. He referred also in his statement to the possibilities elsewhere. He said that Mr Beigbeder:

" ... made great play during the negotiations of his client contacts and the business that he claimed he could generate outside of France as a result of working for Spencer Stuart and Korn Ferry .... He also claimed to have made a large number of contacts in the United States."

"To encourage Jean-Michel to develop international business, we entered into a separate Consultancy Agreement with the Claimant under which the Defendant would pay both a retainer fee and an additional amount (in shares) which were dependent on hitting certain revenue (or "Source of Business") targets. Those targets were not achieved ... "

19. In the end I do not accept the latter of the quotations just set out in paragraph 18. It may well be the case that Mr Beigbeder emphasised that his experience was not exclusively French and that he might be able to make himself useful beyond the borders of France, but I do not think this was a significant factor for Whitehead Mann. They wanted to buy Mr Beigbeder's business, and to have his services, essentially because they wanted to make a major impact in France. The consultancy contract was not motivated by a desire to encourage Mr Beigbeder to develop international business. It appeared in the later stages of the formalisation of the legal arrangements for implementing the commercial deal, and did so as part of the tax planning of the deal.
20. After the early contacts, the negotiations were conducted with the assistance of professionals, on both sides. Mr Beigbeder retained a French law firm, Latournerie Wolform & Associates, in particular Mr. Pascal de Moidrey (who now works for Eversheds' Paris office). Whitehead Mann retained Clifford Chance, in particular Mr. Jonathan Olier of Clifford Chance's Paris office. A Mr Billam of Clifford Chance, apparently the Paris office, was also involved, and it is clear that during the course of negotiations Clifford Chance Paris consulted Clifford Chance London.
21. A Mr Dominique Rongier participated in the evolution of the finalised documents. Mr Clery-Melin seemed, in oral evidence, reluctant to accept that Mr Rangier participated on behalf of Whitehead Mann. There is no doubt that Mr Rongier occasionally did consultancy work for Whitehead Mann. Although Mr Beigbeder originally thought Mr Rongier was Chief Financial Officer of Whitehead Mann's French operation, he was in fact an independent financial consultant engaged to do some work for Whitehead Mann. It appears to me, both from Mr Rongier's evidence and from the fact that Clifford Chance sent him (for example) draft agreements for review and discussion before sending them to Mr Beigbeder's lawyers, that he was engaged in the matter for Whitehead Mann.
22. Unfortunately, evidence of the circumstances of the making of the contracts is very limited, especially so evidence of the critical period at the end of June and beginning of July 2000. There are virtually no notes of meetings: the principals disclose almost none, and almost all Mr Rongier's notes have gone missing (and there is a dispute as to whether he or the Defendant last had them). Manuscript notes on documents are undated, and the parties are mostly uncertain as to whether such notes are contemporaneous with the documents in question. An additional problem is that the French lawyers' Code of Ethics is said to prohibit them making any such material as they have available, even with their clients' consent. I was informed that both parties had considered calling their French lawyers to give evidence, but that the Code of Ethics to which they are subject prevents them doing so even with the full consent of their clients. (That being so, there is no question of drawing any inferences based on the absence of such evidence.) Add to all I have mentioned that no one appears to have kept or at least produced any diary of any significance, and that the witnesses were giving evidence about matters which had taken place 5 years earlier, and the parties come before the Court markedly short of detail. At one stage in his evidence Mr Clery-Melin referred to the style of negotiation of Mr Olier as "more French, more friendly, more open than with other parties". That may be, but what happened is now anything but transparent.
23. All oral evidence was given by Frenchmen in English. None appeared to be at a disadvantage as a result.
24. A matter regarded as important at the time was seeking to avoid arrangements which would produce unnecessary exposure for anyone to tax, National Insurance or social security or similar liabilities in the U.K or in France. This theme appeared in a note from Mr Beigbeder dated 7 July 1999 and never disappeared, and the existence of tax risks is mentioned, for example, in Clifford Chance's letter to Mr Rongier, with copy to Mr Clery-Melin, of 9 May 2000. When advising Mr Beigbeder, Eversheds (London) were later to say that their understanding was that "The Agreements were constructed as they presently stand simply in order to ensure that the overall arrangement was as tax efficient as possible. That was understood by each side." I am sure that ensuring that the overall arrangements were as tax efficient as possible was a prime objective of the negotiation between professionals. The commercial proposals had been agreed first, then the professionals were to establish appropriate contractual structures to give effect to them with maximum tax efficiency. Mr Beigbeder explained in giving evidence, among other things, that he did have tax advisers for the purpose, that he thought the idea of using an English company on his side came from Clifford Chance, and that his understanding had been that there were non-negligible UK tax risks to be addressed in structuring the transaction. Mr Rongier said that there was discussion about how to avoid French social tax of 40% on the award of shares to Mr Beigbeder at the end of the earn-out period, and that Mr Brassington of Whitehead Mann proposed the idea of having the award payable through Whitehead Mann in England where the social charge would not arise. No one gave me a clear explanation of what the tax strategies were and how they were to be achieved: the evidence referred to some taxes which it was hoped might be avoided and that the documentation was intended to avoid them, without going into the detail of the operation of the particular taxes or into the detail of why it was considered that particular documentation would avoid the incidence of such taxes. How, when and by whom individual steps towards tax efficiency were proposed is not documented in the papers before me. That the obtaining of tax advantage, or the avoiding of tax disadvantage, was a matter to which both the Whitehead Mann and the Beigbeder parties were addressing their minds, I am entirely satisfied. Although it was put to Mr Beigbeder that Whitehead Mann say that there was no question of the consultancy contract being a tax saving scheme for them, I am sure that both parties were addressing their minds to minimising the incidence of tax all round and that the consultancy contract was part of a suite of documents put together with a view to the parties' commercial arrangement being implemented at minimum tax cost all round. The less money became lawfully due to public authorities, the better for all parties aiming to make a commercial deal.
25. The fact that tax considerations were very much present in people's minds does not mean that the negotiation of documentation did not provide opportunity for changing the commercial elements of the bargain. Clearly it did provide such opportunity.
26. The progress between Mr Beigbeder and Mr Clery-Melin through 1999 and into 2000 resulted in a draft proposal from Whitehead Mann dated 21 February 2000 and sent to Mr Beigbeder. The idea was that if Mr Beigbeder agreed the principle of the letter, then it could serve as the basis for lawyers to prepare a binding contract.
27. The proposal provided for three consultants from Beigbeder & Partners, including Mr Beigbeder himself, to work for and be paid by Whitehead Mann. At the end of the earn-out period these people would have the opportunity to join Whitehead Mann on standard Whitehead Mann service contracts, and to join the Whitehead Mann equity participation plan which could result in the acquisition by them of Whitehead Mann shares.
28. The proposal provided for variable consideration for the acquisition of the Beigbeder business (clause 2), the headline consideration of Fr.F 10,000,000 being stated to be "based on the generation of 10 million francs of assignments by the three consultants ... in the first full financial year after acquisition of 11.5 million francs of business in the second year and [13.225] million francs in the third year." The consideration would be varied downwards, according to. the size of shortfall, if there were one, in generation of assignments by the three consultants; it would be varied upwards in the event of significantly better than assumed generation of assignments. The consideration of Fr.F 10,000,000 would be payable as to Fr.F 3,400,000 in cash and the balance in shares in the Whitehead Mann parent company.
29. Nothing in this version restricted the business to be taken into consideration for earn out purposes by geography. Whether Mr Clery-Melin did or did not have it in mind that Mr Beigbeder might be useful as a source of non-French business, or outside France, at this stage the proposal that he was putting forward did not tie the capital consideration or any part of it to the generation of business outside France, and there appears not to have been any provision of this proposal which was designed to provide an incentive to Mr Beigbeder to exert himself on non-French work as opposed to French work.
30. The proposal from Mr Clery-Melin to Mr Beigbeder of 21 February had matured into communication between lawyers by 16 March, when Mr Olier got in touch with Mr de Moidrey. The initial e-mail referred to an element of stock grant referable "de son activite chez notre client", without any geographical qualification.
31. On 30 March Clifford Chance sent "the draft of the letter of intent" in a "final version satisfactory to our client". This was a statement of the commercial proposal as understood by Clifford Chance and as approved by the Defendant. There is no evidence that this approval could have come from anyone but Mr Clery-Melin and/or Mr Brassington, and I am confident that it must have carried the approval of Mr Clery-Melin.
32. The structure of this proposal, now that the matter had been entrusted to lawyers, was different. The proposal envisaged sale of the "Fonds de Commerce", now for a maximum of Fr.F 5,000,000, and a Whitehead Mann service contract for Mr Beigbeder. The consideration for the sale and purchase of the Fonds de Commerce would be wholly cash. The service contract would be with Whitehead Mann SARL. The service contract proposal contained salary and bonus proposals updated from those of February. It also included eligibility for a "Stock Grant", referable to the achievements of "source of business" targets. The maximum share allocation would be made if he had been "credited in aggregate with Fr.F15,000,000 source of business over the full three financial years period", and reduced according to a formula if that were not attained.
33. Again, at this stage there was nothing in this version which restricted the business to be taken into consideration for earn-out purposes by geography. At this stage, therefore, it was satisfactory to Whitehead Mann, and in particular to Mr Clery-Melin that the Stock Grant calculation should not have a geographical limitation, and there was no provision designed to motivate Mr Beigbeder towards non-French business.
34. The documents before me are then silent until on 4 May 2000 Clifford Chance circulated to Mr Rongier a draft proposal for a Consultancy Agreement, which was under review by Clifford Chance's London office. The documentation envisaged Mr Beigbeder being offered (1) an English law consultancy contract with Whitehead Mann Ltd, that contract to be between Whitehead Mann Ltd and an English company to be formed for Mr Beigbeder (2) a French law Sale and Purchase Agreement for the Fonds de Commerce to be bought by Whitehead Mann SARL and (3) a French law employment contract with Whitehead Mann SARL.
35. Mr Rongier runs his own financial consultancy. He describes Mr Clery-Melin as a friend who he first met at business school 35 years ago. Mr Clery-Melin consulted Mr Rongier for advice on the acquisition by Whitehead Mann of Mr Beigbeder's business. A particular concern of Mr Clery-Melin, said Mr Rongier, was to structure matters so that Whitehead Mann should not be exposed to existing liabilities of Beigbeder.
36. The Clifford Chance documentation sent on 4 May 2000 started with a draft letter which was not itself a draft Consultancy Agreement, but which was expressed to be an indicative offer which could be the basis on which lawyers could prepare a formal Consultancy Agreement. This draft was provisionally addressed to Mr Beigbeder, the address lines being temporarily marked "[JMB Ltd]" and then "[JMB Ltd Address]", reflecting the fact that there was as yet no English company nominated by Mr Beigbeder to be a party to the agreement. The draft proposed a consultancy agreement to be made between the Defendant and a limited company to be incorporated in England. This future company was to provide consultancy services, being exclusively the services of Mr Beigbeder, who was to be forbidden to delegate performance from himself. "The scope of the consultancy services will be limited to recruitment consultancy in the UK, Europe, the United States of America and any other place in the world but outside Prance."
37. The draft went on to provide for the grant by the Defendant to the future company of shares in Whitehead Mann plc based on earn-out provisions. The grant would be based on what was credited to the future company of "source of business" over three years. The draft did not (unlike previous drafts) have the figures for the earn-out provisions. Neither did it contain a definition of "source of business". What it did contain was the geographical limitation on the services to be performed by the future company. It did not clearly indicate what was envisaged as the "aggregate source of business credit pursuant to the Consultancy Agreement"
38. There was a draft Consultancy Agreement of 3 May 2000. This matured through a series of drafts, the second of which was dated 29 May 2000, to which I refer below. All drafts included as clause 12.5 a clause in the form of the eventual clause 12.5, the "entire agreement" clause.
39. There were associated proposals for the "Ponds de Commerce" sale and a service contract between Whitehead Mann SARL "for your work performed on the French market". These proposals included proposals for bonuses related, in the second and third years, to the source of business generated on the French market, and a right, if the source of business achieved certain targets, to join the Whitehead Mann equity participation plan.
40. At about this time there is a manuscript note of Mr Beigbeder. While his statement said that he did not recall the date of the meeting or who was present, he expressed the opinion that "most likely" those present were Mr Clery-Melin, Mr Brassington, Mr Olier, a member of Clifford Chance's tax department and Mr de Moidrey. There is in fact no clear evidence, other than inference from the content of the document, establishing the date of such a meeting or its attendance. The document begins with Mr Rongier's name (and ends with a telephone number for him for week-end contact). It then refers to there being a contract for the sale of the Fonds de Commerce, and to there being two service contracts. It also refers to there being a new British company which would be for services outside France. There is a note:

+ [it may be "et"] stock grant 5M.

I accept that this is a note made by Mr Beigbeder of a discussion in which the structuring of the deal in three different contracts was proposed. It may be a note of the meeting mentioned in paragraphs 11 and 12 of Mr Rongier's statement but, if so, it does not mention the side letter to which Mr Rongier refers. It is certainly evidence, which I accept, that when the structure was proposed to include a contract between a new English company and Whitehead Mann, Mr Beigbeder understood the proposal to be that that was where the Stock Grant, which had always been a part of the commercial deal, would be located in the documentation, and that the Stock Grant would, subject to target achievement, be of 5M - clearly, in context, Fr.F 5million.

41. The second page of the note has been translated:

Notion of business referral

Volume activity referred

Would not be realised in F but W.M:

Service rendered-outside France =

Mr Beigbeder offers a more elaborate translation, or as I would say, interpretation, of the note in paragraph 31 of his witness statement. I do not find this part of the note of assistance to either party.

42. My conclusion of and from the note as a whole is that this reflects a proposal to change not the commercial proposal, which I see as being that, subject to earn-out, Mr Beigbeder would receive of the order of Fr.F 10 million for his business (as distinct from, for work done under service contracts after transfer of the business); rather, a proposal to change the legal structure (which is exactly what people do when they are trying to find ways of minimising the exposure to tax and similar liabilities. In particular, I do not find anything to indicate that the proposal was being made that it should be made significantly harder than previously envisaged for Mr Beigbeder to achieve a total payment for his business of Fr.F 10 million. I think this has some significance, given that the first line of the note is translated as "We would prefer a sale of the goodwill at 5M rather than 4M": if there had been understood to be a proposal that the earn-out should be significantly harder to achieve than previously envisaged, I think this would probably have been noted too.
43. In late May 2000 Clifford Chance sent to Mr de Moidrey draft agreements including a draft Consultancy Contract, the draft consultancy agreement itself being sent on 29 May. Clause 2.1 of that provided for Mr Beigbeder to provide services exclusively outside France. Clause 2.2 proposed that Mr Beigbeder should not be required to provide services under it for more than 1 day per week. Clause 3 provided for fees, including a Stock Consideration referable to "Source of Business Credit". This expression was defined as:

the amount of fees (excluding V AT) collected by the Company directly from the performance of the Services by the Consultancy during the term of the Agreement

...

"The Services" were defined in clause 2.1, and, as noted, they were to be performed exclusively outside France. The Defendant could agree to the Services being performed by another person than Mr Beigbeder subject to at least 2 weeks notice, a provision which was carried forward into the eventual agreement.

44. The draft still did not set out the financial details for the Stock Consideration calculation.
45. The documents are silent as to what happened before 22 June, when Mr Olier was sending the latest draft contracts to Mr de Moidrey, though the correspondence shows that Mr de Moidrey was probably away from 1 to 12 June and Mr Olier for some of that period. The letter of 22 June was probably accompanied by draft 3 of the Consultancy Agreement, which appears to have included for the first time figures for the calculation of Stock Grant. These envisaged the maximum Grant being made if "Source of Business" were £1,400,000 or over, a figure which is not wildly far from equivalence to the Fr.F 15m earn-out figure proposed in Clifford Chance's 30 March letter.
46. On Mr de Moidrey's copy of the letter of 22 June 2000 there is an undated manuscript note by Mr de Moidrey:

Il manque la side letter. [The side letter is missing.]

pour Ie consultancy agreement - Source of Business en Fr est pris en cpt [for the consultancy agreement - Source of Business in France is taken into account [compte]]

Pour Ie ct de w - les hono etrangers pris en cpte pour Ie "WM equity participation plan" [for the contract of work foreign business should be taken into account for the WM Equity Participation Plan]

No one is sure when these notes were made, it being speculated that these may have been made a long time after, perhaps when the documents were being reviewed once a dispute had arisen. It seems to me probable that they were made when the letter was received. There is certainly nothing in their terms inconsistent with their being made at that time. And if Mr de Moidrey did make that note on Thursday 22 June, one would expect him to take it up with Mr Olier, and for something then to happen about a side letter. Something did then happen about a side letter. So I infer that by 22 June Mr de Moidrey was expecting a side letter, and that he took its absence up with Mr Olier.

47. On Monday 26 June 2000Mr Olier sent Mr Rongier and Mr Billam a draft side letter for their respective comments. The draft indicated that the finalised letter was to be issued on the Whitehead Mann letterhead. It bore footers showing that it was generated in Paris, evidently by Clifford Chance - I was told that these contained Clifford Chance references. The draft envisaged that the letter would be sent to Mr Beigbeder and signed by Mr Clery-Melin.
48. The brief terms of Mr Olier's letter - one sentence enclosing the draft side letter assume that Mr Rongier and Mr Billam knew about the side letter and its purpose. Mr Olier himself says nothing in the letter about its purpose.
49. Mr Rongier clearly saw this letter at this draft stage. As I shall mention below, Mr Clery-Melin has set out his thoughts as to how this side letter came into being, but his evidence is that he did not see it at this stage.
50. Mr Rongier, who claimed to have returned his notes to the Defendant (a claim I think more likely than not to be right: I see no reason to disbelieve this credible witness on this), gave evidence of a meeting which his statement did not date.

"It was also agreed by Gerard and Matthew Brassington at this meeting that Whitehead Mann would prepare a side letter confirming to Mr Beigbeder that for the purposes of determining the award of shares, the basis was total business generated by him whatever the country of origin. There was no question that he would not be rewarded for his services in France. It was accepted that Whitehead Mann were purchasing the fonds de commerce of a French company and Mr Beigbeder would continue to generate predominantly French business.

"As far as I am aware, Mr Olier of Clifford Chance prepared the first draft of the side letter, which he sent to me for approval. On receipt of the letter, I rang him to let him know that I did not have any comments. As far as I was concerned, the letter reflected exactly what we had agreed at our meeting and its meaning was entirely clear."

51. I interpolate that the first of these paragraphs is consistent with the commercial arrangement as it had been envisaged as at 30 March. Also, there is no other evidence which would explain the selection of the particular financial details for the Stock Grant calculation which eventually got into the consultancy contract, and how anyone expected that the Claimant might generate the contemplated Source of Business outside France if Mr Beigbeder was not to be expected to work for the Claimant (and through it for the Defendant) for more than one day a week. This is significant, as the commercial scheme had been that Mr Beigbeder's business would be treated, subject to earn-out, as being worth Fr.F 10,000,000, that no more than half of this would be paid in cash, the rest being made up of shares in the Whitehead Mann group if the earn-out were successful. Earn-out arrangements which made it very unlikely that any shares would be granted to Mr Beigbeder or his nominee would represent a very substantial change to the scheme.
52. I considered that Mr Rongier was concentrating when giving his evidence and that he was open with the Court. My assessment of him as he was giving evidence was that he was not very clear on detail but was honest. I am in no sense surprised that a witness giving evidence about events 5 years before, without access to his notes, and about events which had no particular drama to fix them in the memory, should not be very clear on detail.
53. Mr Clery-Melin's witness statement says firstly that he is "not entirely clear" how the side letter came into existence. Secondly, he says that it was not drawn up on his instructions, nor, as far as he is aware, the instructions of anyone else employed by the Defendant. He adds that no one save him and Mr Brassington would have had authority to ask Clifford Chance to produce such a document.
54. He then speculates (his word) that the most likely explanation of its existence is that the "Side Letter" was produced either on the instructions of Mr Beigbeder, or of his business advisers. Certainly, his evidence is that he does not know how the side letter came into being, or anything about it until it reached England. I shall come to that below.
55. A meeting was arranged for 28 June 2000. The day before, M Olier wrote by fax to Mr Rongier, Mr de Moidrey, M. Dubois and Mr Billam setting the timetable, commencing at 0900, with the signatories to arrive at 1100. The agenda was:

- finalising the schedules to the Acte de Cession de Fonds

- signature of the Acte de Cession de Fonds and presentation of the cheque to be held in escrow

- signature of the Work Contract

- initialling of the Consultancy Agreement and entrusting this to Clifford Chance until documents are given which satisfactorily prove the existence of the English company

- signature of the side letter. (This last presupposes that Mr Clery-Melin was to attend. )

Mr Olier added that he was available for any comments of further discussion.

56. Before reaching a conclusion of fact about the side letter and its status, I have considered all the evidence in relation to this, including all that in the period down to the beginning of August 2000 when the Defendant executed the consultancy contract and considering the extent to which later behaviour is consistent with one case or another. It is, however, convenient to point out at this stage in the narrative that what was happening was very odd if it was unauthorised on behalf of Whitehead Mann. On this hypothesis, Clifford Chance were setting up a meeting for signature of documents, which was to include signature of a document to which they had not got their client's consent (and by a person who did not in the event attend the meeting). On this hypothesis, they had discussed this document internally, and had obtained Mr Rongier's comments on it. He had assented to it (again, I found his evidence that he did so entirely credible) but, contrary to his evidence, he had not heard Mr Clery-Melin or Mr Brassington discuss the proposal, he did not have their instructions on it, and was commenting on an entirely speculative proposal.
57. I am well aware that professionals, even the most eminent ones, do make mistakes, including serious mistakes. But to get to the stage of having all the documents finalised except the Annexes, and to have a timetable for arrival of signatories and signature, when not only does one not have the client's consent to an important document but the client is actually unaware that it has been proposed, would be a striking error, and accordingly rather improbable.
58. If Clifford Chance believed that they did have instructions that the side letter was to be signed, that will probably have been based on some material. And that material will have come from someone senior, as they believed that Mr Brassington would not need an explanation when the side letter was sent to him to procure its signature (see below). It has been in my mind that this sort of mishap could occur if Clifford Chance had taken instructions from M,. Rangier and Mr Rangier had failed to get instructions from Mr Clery-Melin or Mr Brassington, but I dismiss that as unrealistic speculation on my part. I see not the slightest reason to suppose that Mr Rongier acted in that way, still less that he would invent an account of a non-existent meeting, or non-existent part of a meeting, with Mr Clery-Melin and Mr Brassington, who undoubtedly did go to Paris at some stage in the negotiations.
59. Nothing in the cross-examination of Mr Rangier caused me to think that his evidence of there being a meeting at which the principle of the side letter was agreed by Mr Clery-Melin and Mr Brassington was wrong. Insofar as anyone was forthcoming about the reason for the side letter, foremost was Mr Rongier. I think it clear that the parties had well-understood commercial plans to which they wanted to give appropriate legal form. I have no doubt that there was consideration on both sides to the tax liabilities that would or might be incurred if the commercial plans were given one legal form, or perhaps I should say, one set of legal forms, rather than another. I am not satisfied as to whether the parties were, or were not, clear as to what the tax position would be in the case of each legal form contemplated. They mayor may not have been clear, and it is certainly possible that they structured their transactions in the way that they hoped would be most beneficial as opposed to in a way which they were satisfied would actually be beneficial. What I am clear is that, in every respect down to the time when Mr Clery-Melin received but did not sign the side letter, Mr Rangier's account of the origin of the letter is consistent with what the documents show to have happened. But then, Mr Clery-Melin did not sign.
60. On 28 June a meeting took place in Paris. According to Mr Beigbeder, those present when he was there were (1) Mr White (2) Mr Olier (3) Mr Beigbeder (4) Mr de Moidrey (5) Mr Dubois, the escrow agent.
61. M. Beigbeder attended that meeting to sign documents. I find that he signed the Acte de Cession, the employment contract, and the consultancy contract. In this connection, I am aware that when Mr Olier eventually sent him a copy of the consultancy contract executed by all parties Mr Olier said that Mr Beigbeder could enter the date on which the original was signed, which Mr Olier believed to be 10 July, by Mr Beigbeder's signature, but not on the first page. It is not clear where this date came from, and Mr Beigbeder did not know, and it seems improbable that this was the date when Mr Beigbeder signed, as at that date the originals were in course of circulation to the Claimant's directors (of whom he was not one) for execution on behalf of the Claimant, and to the Defendant.
62. Mr White attended to sign for "Whitehead Mann SARL. Mr Clery-Melin did not attend, and I am unclear why not. At all events, the meeting ended with the side letter unsigned. It and the consultancy contract still needed signatures, other than that of Mr Beigbeder to the consultancy contract..
63. There is no evidence as to what happened between 28 June and 6 July, apart from the fact that no later than this period the former Beigbeder business started to operate as part of Whitehead Mann.
64. On 6 July 2000 Mr Olier wrote to Mr McAvilley at the Claimant (newly-established) enclosing 3 originals of the Consultancy Agreement for execution on behalf of the Claimant. Mr McAvilley was asked to forward all 3 originals, after execution on behalf of the Claimant, to Mr Brassington of Whitehead Mann in London, for execution on behalf of the Defendant.
65. On 6 July 2000 Mr Olier also sent Mr Brassington the following letter by courier:

Side letter - Beigbeder & Partner

Please find enclosed the side letter in two originals for execution by Mr Gerard Clery-Melin.

You will also be receiving from Cheverny Consultancy" [sic] "Limited the Consultancy Agreement in 3 originals for execution as a deed by Whitehead Mann Limited (execution by two directors or by a director and the secretary).

These documents should be sent back to my attention and I will dispatch them to the relevant parties.

66. This letter contains no hint that signature of the side letter was either a matter new to Mr Brassington or optional for Whitehead Mann. I ask myself whether Mr Olier would have 'written in these terms if there had been any question, at the Paris meeting, of the side letter not being executed, or the arrangements embodied in the principal agreements being put into effect without the side letter, and I answer No. I give the same answer to the question whether he would have written in these terms if he were in doubt as to whether Mr Brassington already knew of the side letter. I do note that he did not copy this letter to Mr Beigbeder or anyone acting for him, and so this document is internal to the Defendant's side. However, it is improbable that the parties left the Paris meeting without agreement as to whether the side letter did or did not form part of the arrangements - after all, it would have seemed that the fate of perhaps Fr.F 5,000,000 would be likely to turn on it - and it seems to me also improbable that Mr Olier would have written to his clients in these terms if the point was, in his mind still open.
67. It is at this stage, I think, that Mr Clery-Melin says that he first became aware of the existence of the side letter. He says that he first became aware of its existence in June 2000 (changed in oral evidence in chief from 2003) when, according to his witness statement:

" ... Matthew Brassington came into my office waving a bit of paper explaining that Jean-Michel was asking us to "vary" the Consultancy Agreement to include France in the Source of Business calculations. I recall Matthew saying to me "you're not going to agree to this are you?" and I said to him clearly "no". Neither Matthew nor I ever had any intention of agreeing to this."

It appears to me that, so far as concerns date, this description probably relates to the occasion of receipt by Mr Brassington of the letter of 6 July couriered from France. If it relates to June, then it would seem likely to relate to a date before 28 June, and to the seeking of instructions by Clifford Chance, in which case one would expect evidence that Clifford Chance were (on Mr Clery-Melin's basis) told in clear terms that the proposal was rejected. There is no evidence that Mr Beigbeder ever sent anything in writing to Mr Brassington himself.

68. But I am sceptical of this description of events anyway. I think that this evidence has a number of problems. Mr Brassington (who now works in Australia and whose witness statement was before me, but who gave no oral evidence) says nothing about the episode of waving the letter, which I would have thought would stick in the memory of even a very busy man even if the occasion lacked the melodrama rather suggested by Mr Clery-Melin. Mr Brassington does not mention it in his witness statement, which is dated 6 weeks after that of Mr Clery-Melin. Mr Brassington, the addressee of Clifford Chance's letter of 6 July 2000, does not specifically refer to that letter in his statement. He says simply "I do not recall seeing the side letter at the time of signing the other documents relating to the acquisition of Jean-Michel's company;" M. Clery-Melin also does not refer to Mr Olier's letter. His witness statement simply does not address the role of Clifford Chance and interplay between the Defendant and Clifford Chance. Clifford Chance's letter of 6 July 2000 is clearly written on the basis that the writer believes the addressee (Mr Brassington) to know about the side letter - it is not enclosing a new proposal. Mr Clery-Melin chooses to speculate about how the side letter came into being, but does not address how it came to Mr Brassington, whether Mr Clery-Melin realised, and if so when, that it had come from Clifford Chance with the covering letter, whether he considered whether Mr Beigbeder regarded the Side Letter as an integral part of the overall arrangements, and what reply was to be made to Clifford Chance (such as, perhaps, "This is a new demand and we reject it".) Additionally, the account of the waving of the letter and the rejection was not given by Mr Clery-Melin in an e-mail he sent internally on 6 November 2003, in which he said only:

I have no recollection of having suscribed [sic] to the then request of his lawyers, and if the letter was ever presented to me for signature, I certainly believe that I would not have signed it.

69. The consultancy agreement originals were eventually signed, and distributed appropriately. A series of e-mails discloses that by no later than Monday 17 July the three originals had been received by Mr Brassington's office. By that date the three originals had been executed as a deed on behalf of Cheverny. It was over a fortnight after that that the originals were signed by Mr Clery-Melin and Mr Brassington. It was on 4 August 2000 that Whitehead Mann Ltd informed Mr Olier that "the documents" had been signed on their behalf. It is not actually stated what the documents were, and they seem to have been only the originals of the consultancy agreement.
70. What happened to the originals of the side letter is a matter of mystery. By the time Messrs Clery-Melin and Brassington signed the originals of the consultancy contract about four weeks had gone by since the letter of 6 July from Clifford Chance had reached Whitehead Mann in London. Given that time lag, it is entirely possible that when the originals of the consultancy contract were being signed no one had the letter of 6 July or the side letter to hand or in mind, and therefore that the issue was completely overlooked. It is possible, of course, that the documents had been thrown away as irrelevant rather than merely overlooked. What happened to the originals is simply a mystery.
71. So the side letter was apparently unsigned, and physically disappeared, and no signed side letter was returned to Clifford Chance. Extraordinarily, when the originals of the consultancy agreement were distributed, there was apparently no comment from Clifford Chance, from Mr de Moidrey or from Mr Beigbeder about the fact that the Defendant did not provide the signed side letter. I regard Mr Beigbeder's silence as insignificant, as a client may frequently leave it to the lawyers to obtain and retain all the necessary papers in proper form. The silence of the lawyers is, to my mind, odd. Clearly it could be consistent with the signature of the side letter having been optional rather than something that was agreed and was therefore mandatory to effect the parties' intention. It could also be consistent with carelessness.
72. The absence of evidence of communication by the Defendant to anyone about the side letter, and of evidence of communication by anyone else about its non-appearance, are problematic.
73. The most forceful point for the Defendant is precisely that Mr Clery-Melin did not sign the side letter. That, and silence, would be entirely understandable if the side letter came to the Defendant as a post-contract request for variation. But it did not. It existed as a document apparently approved and ready for signature simultaneously with the other contractual documents (subject to the need to wait for Cheverny's incorporation before anyone purported to sign on its behalf), and it was sent to the Defendant in advance of the Defendant's receipt of the consultancy contract originals for signature and on the basis that the Defendant knew that the side letter was coming. To my mind the Defendant's silence in the face of that is not understandable and not satisfactorily explained.
74. I have already remarked on the oddity of the silence of others.
75. Before expressing my conclusion, I wish to refer to three other matters.
76. The first two are of events some time later.
77. In 2002, when it seems that there was some belt-tightening going on in Whitehead Mann, there were discussions with a view to reducing the cost of Mr Beigbeder to Whitehead Mann, including the possibility that he might leave before the end on 30 June 2003 of the earn-out period. On 5 August 2002 there was a memo from Mr Brassington to Mr Clery-Melin which envisaged that up to 162,295 shares would be due to Mr Beigbeder at the end of June 2003, and no one appears to have commented that, on the known performance figures and on the Defendants' case, there was no practical possibility of Mr Beigbeder becoming entitled to the shares. Rather, the fear was that he would be entitled to them.
78. There were exchanges with Mr Beigbeder, which ended with his leaving Whitehead Mann's employment in January 2003, but on the basis that he would "continue to work as an independent consultant in association" with Whitehead Mann.
79. Both sides in their evidence attached importance to these exchanges, but I do not find in these exchanges anything of significance to the dispute as to whether the side letter was or was not part of their arrangements. If anyone at the Defendant had been conscious that in practice Mr Beigbeder was not going to qualify for the shares, the opportunity existed for that comment to be made, but the exchanges appear to me inconsequential for present purposes.
80. The exchanges in late 2003 are in a different category.
81. On 8 October 2003 (the earn-out period having ended on 30 June 2003) Mr Brassington e-mailed Mr Beigbeder. He had been asked to help Stephen Lawrence, a very senior figure in the Whitehead Mann group, in the latter's preparation for the following day's telephone call, apparently to be with Mr Beigbeder. Mr Brassington wrote:

I told him [Mr Lawrence] that it is my understanding that there was a "side letter" which included France within the calculation but that I do not have a copy of any such side letter and indeed have never seen such a letter.

Mr Brassington may have thought he had never seen such a letter, but if that was literally the case then something went wrong with the couriered letter of 6 July 2000. It seems to me much more probable that the couriered letter was delivered to Mr Brassington, but that, as the side letter was specifically said to be for execution by Mr Clery-Melin, Mr Brassington never read the side letter and simply left it to be passed on to Mr Clery-Melin. That would be entirely consistent with Mr Brassington saying, years later, in good faith, that he had never seen it: he would have seen it physically, but probably not read it, and it would not have impacted on his mind.

82. Mr Brassington's e-mail went on to ask Mr Beigbeder for a copy of the side letter.
83. Mr Beigbeder forwarded Mr Brassington's e-mail to Mr Clery-Melin: "I don't recall anything, perhaps you have a copy?" - anything but a ringing statement that there was a side letter.
84. The enquiry did the rounds. Eventually it was Mr Olier who faxed Mr de Moidrey a copy of the unsigned letter "unsigned, we do not have a signed copy". Mr Olier had the opportunity to say, if it was the case and if he remembered., anything to the effect that the question of signature of the side letter had been left to be considered later, or any indication that the side letter had not been agreed to be an integral part of the transaction. He did not take that opportunity. I do not know whether he took instructions from his clients before responding. Nor do I know whether the Code of Ethics would have inhibited him.
85. Mr Brassington's contribution at this time included a consistent theme that he had been devoting almost the whole of his attention at the relevant time in 2000 to a transaction for the acquisition of an organisation called GKR, and so his "recollection of the terms on which we acquired are hazy to say the least". But he did say, on 5 November 2003:

It seems quite clear from the draft paperwork provided to you by Clifford Chance that we must have been contemplating signing a side letter but as to whether we actually did or not or for what reason we would even have considered signing such a letter. I regret I cannot help.

86. I am sure that the two originals sent with the letter of 6 July 2000 were received by Mr Brassington, that the Clifford Chance letter of that date occasioned him no surprise, and that he had the originals of the side-letter passed to Mr Clery-Melin. His account in November 2003 certainly lends no support Mr Clery-Melin's account of a letter being waved and discussed, and a proposal rejected.
87. By November 2003 Mr Clery-Melin had changed his job within Whitehead Mann. He had been asked to resign as CEO and to move to chairing Whitehead Mann's continental operations. The trigger for this was that he had been blamed for a profit warning having to be given to the market. Mr Clery-Melin was asked to accept a reduced remuneration package.
88. I have deliberately gone slightly out of chronological order. To revert to the chronological order, Mr Beigbeder had written on 30 October 2003 to another apparently senior figure, Clive Mann, who he said had been active in the management of Whitehead Mann at the relevant time, enclosing the correspondence and hoping for his support. The same day he wrote to Mr Clery-Melin and to Mr Brassington. He referred to the side letter as "part of the comprehensive package of 4 Agreements signed between us" and later to its having been "agreed in good faith as an integral part of the deal relative to the purchase of my practice in Paris ... ", and he asked for confirmation that it had been so agreed.
89. That confirmation was not forthcoming.
90. Mr Brassington's response of 5 November, to which I have already referred, was not one of denial. He explained that at the time of the Beigbeder acquisition Whitehead Mann had been in the process of acquiring another organisation, and thus

Certainly the GKR transaction had my almost complete attention during that time and thus my recollection of the terms on which we acquired B&P are hazy to say the least. As a consequence, I can confirm only what signed paperwork I can lay my hands on which is:

- the purchase agreement to the "fonds de commerce" and

- the Cheverny contract

- your Service Agreement

You will no doubt recall I asked you a couple of years ago about the clause in the Cheverny contract that states that the contract applies to the work you were undertaking outside France and in that time you told me about the existence of a side letter. At the time, I accepted your verbal assurance that such a letter existed, although for some reason I did not request a copy of it from you.

There then appeared the reference to the draft paperwork which I have already quoted. This was followed by:

I am not in a position therefore to confirm that the draft letter you have supplied to me was executed or ever intended to be executed.

91. In oral evidence, Mr Beigbeder said that he did not remember receiving this letter or the conversation in 2001 to which it referred. It seems to me that the document shows Mr Brassington not being actively opposed to what Mr Beigbeder was asserting in 2003. Rather, his general position was that, with one exception, he had no relevant memory, which is entirely understandable if he was, as he claimed, focussing intensely on another matter at the time. The one exception was his memory of a conversation in which Mr Beigbeder is said to have asserted the existence of the side letter and its relevance to the key contract provisions about geography, and in which conversation Mr Brassington was content to accept, a year or so after the contracts were made, what Mr Beigbeder was saying. There is no reason to suppose that Mr Brassington's version of the supposed conversation, given in this letter, was a figment of the imagination. If such a conversation occurred, it also shows that Mr Beigbeder believed in late 2001 that the side letter existed and was significant.
92. When Mr Clery-Melin received Mr Beigbeder's request for confirmation of the side letter, he got in touch with Mr Lawrence:

Firstly, I have been requested by Beigbeder to acknowledge in writing that there is a side letter to the Cheverny agreement extending the calculation of his performed work to include French business. I have no recollection of having suscribed [sic] to the then request of his lawyers, and if the letter was presented to me for signature, I certainly believe that I would not have signed it.

Unlike Mr Brassington, Mr Clery-Melin did not, for whatever reason, pick up on the point that the side letter had been circulated by Clifford Chance.

93. Mr Lawrence replied:

On the first point Matt has said the same as you to Begbeder [sic]. Perhaps you could liaise with Matt to ensure that there is consistency in the wording of any response you make.

94. The significance of all this material seems to me to be this. First, no one on Whitehead Mann's side was accepting in 2003 that the side letter formed or had been intended to form part of the agreements between the parties. Second, that Mr Clery-Melin's witness statement account of his first seeing the side letter did not appear at this date, when one might reasonably expect that it would have done so. Third, that there is some material suggesting that in late 2001 there was a working assumption that the side letter existed and was effective, even though no one attempted to find it and Mr Brassington was simply content to assume that what Mr Beigbeder was saying was right.
95. The third matter I want to refer to is the possible purpose of the side letter exercise. Having taken the first, important, point that the side letter was never signed by Mr Clery-Melin, the Defendant then makes the point, put thus in Mr Barklem's argument, that "on the face of it there is no obvious and legitimate purpose to entering into an Agreement which expressly excluded business generated in France, only to have that provision negated by a side letter written in vague terms."
96. I agree that that is so. During the trial I indicated, in rather different terms, that the words "and legitimate" are an important part of that sentence from Mr Barklem's skeleton argument. I agree that there is no obvious reason for doing something by way of side letter if it can easily be done by a modest change to the draft agreement to be modified, so easily done by word-processing (though I sometimes see cases in which, where there are definition clauses, parties agree late changes thinking them to be easy and then finding out that the effect of the late changes is more complex than had been foreseen). That is why, when presented with documentation like this, my reaction is one of suspicion that the purpose may have been illegitimate, creating documentation which could be shown to a third party without the side letter, doing which would involve giving that third party a document which did not reflect the actual agreement of the parties. I was not surprised to find the parties shying away from this explanation when I was exploring the point (which it is hardly surprising that I was, given that Mr Beigbeder's witness statement described the exclusion of France from the face of the Consultancy Agreement as "window dressing"). The Defendant has not raised a defence of illegality. The lack of precise detail as to the taxes the incidence of which it was sought to avoid, on either side of the Channel, and as to what the strategy was, leaves me without my curiosity as to the circumstances giving rise to this documentation being satisfied. What I do not think is that the question of the identification of the purpose of the form of the documentation actually assists the Defendant. Mr Clery-Melin's account of his first encounter with the document suggests that the side letter was or might have been a proposal that cropped up as an afterthought after the parties had formalised the three undisputed contracts, or at least agreed clearly that those documents did between them contain the whole of their intended arrangement. If that were so, use of a side letter rather than amending the substantive agreement would suggest afterthought and that the parties had already committed to the three other contracts without the side letter. That would be entirely understandable in some cases, but I do not think that it is in this case. The side letter existed in draft form before the meeting for signature. It formed part of a suite of documents intended to be signed on the same occasion. F or some reason each of the three French documents (Acte de Cession, Contrat de Travail, and Side Letter) was to be "fait" on 1 July, although the meeting for signature was scheduled for 28 June. That being established, the reason for the choice of form - side letter rather than change to existing text - is something other than that it was a proposal after the time when the signature meeting took place, or after agreed arrangement of all elements of the transaction. I accept that it is in theory possible that the side letter was to be "optional", i.e. that the transaction was to go through either with or without the side letter, at the option of the Defendant, but that would involve my rejecting Mr Rongier's account of the genesis of the letter, and that I am not prepared to do. Whatever the reason for adoption of the side letter technique, I do not consider that the side letter appeared only as an afterthought.
97. I considered the witnesses very carefully as they were giving evidence. This is not a case in which I have reacted on the basis of any particular impression, while the oral evidence was being given, that one of the main protagonists was lying when giving evidence. At one stage Mr Clery-Melin appeared to me stressed while being cross-examined in a manner which was restrained rather than confrontational, but I did not react more strongly to that impression than to take note of it. It was not difficult to imagine Mr Beigbeder and Mr Clery-Melin in happier times enjoying one of their occasional lunches together. But I am afraid that I consider it more likely than not that Mr Clery-Melin's account of the receipt of the side letter in England is untrue, and I have previously indicated that I do not accept that the motivation for the consultancy contract was the one that he put forward. Overall, I do not consider his account of the relevant history of dealings reliable. (For example, paragraph 8 of his witness statement telescopes the history of evolution of the proposals, ignoring the 30 March 2000 step when the stated price for the Fonds de Commerce was altered, and provision for the Stock Grant moved to a "service contract" with a French company, not, as the witness statement asserts, to a Consultancy Agreement to cover international work. This sort of evidence is simply not reliable.)
98. I consider it more probable than not that the side letter was agreed as part of the arrangements which were to be given written effect, and agreed by the Defendant as arrangements to be given written effect, well as by all other parties. I think that by 28 June there was agreement all round that those concerned, including, when it was able to, the English company in the course of formation for Mr Beigbeder, would enter into four, not three, agreements including the side letter. I have found it impossible to arrive at a conclusion which leaves no puzzle unresolved, but I regard my conclusion as very much more probable than anything else.
99. In reaching my conclusion I have borne in mind, and to an extent been influenced, by the original importance of Mr Beigbeder as primarily a significant figure in the French market. While Mr Clery-Melin maintained in oral as well as written evidence that senior people were expected to develop business around the world and that this was expected of Mr Beigbeder, I do not doubt that both sides really expected and intended that Mr Beigbeder would mainly be focussed on the French market. Mr Clery-Melin said that Whitehead Mann wanted to establish themselves in France, Mr Beigbeder was "very attractive, a very good name in the market place at the right level", in which case it is logical to suppose that he would be active in that market rather than elsewhere. Mr Beigbeder was attractive to Whitehead Mann not because he was, in the general sense, an immensely experienced senior figure in the industry, but because he was, specifically, a market leader in France where Whitehead Mann wished to establish a major presence.
100. Mr Barklem accepted, rightly in my judgment in this case, is that if there were four agreements pre-agreed to be signed so far as possible on the same day, it was not open to his clients to decide after the event to sign only some, insisting that they would be binding without the other parts of the arrangement.
101. The Defendant then relied on the "entire agreement" clause, 12.5. The advantage of such clauses in cutting down litigation in many circumstances is well known. In The Inntrepreneur Pub Company (GL) v. East Crown Ltd. [2000] 2 Lloyd's Rep. 611 Lightman 1. explained at p.613 col. 1 that:

"7. The purpose of an entire agreement clause is to preclude a party to a written agreement threshing through the undergrowth and finding in the course of negotiations some (chance) remark or statement (often long forgotten or difficult to recall or explain) on which to found a claim such as the present to the existence of a collateral warranty. The entire agreement clause obviates the occasion for any such search and the peril to the contracting parties posed by the need which may arise in its absence to conduct such a search. For such a clause constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere, and that accordingly any promises or assurances made in the course of negotiations (which in the absence of such a clause might have effect as a collateral warranty) shall have no contractual force, save insofar as they are reflected and given effect in that document. The operation of the clause is not to render evidence of the collateral warranty inadmissible in evidence as is suggested in Chitty on Contract 28^th ed. Vol 1 para 12-102: it is to denude what would otherwise constitute a collateral warranty of legal effect.

"8. Entire agreement clauses come indifferent forms ... "

102. It seems to me helpful to consider what would the position have been if the side letter had actually been signed. The statement that "This Agreement constitutes the entire agreement between the parties to it with respect to its subject matter ... " would then have been literally untrue, if one interprets "The' Agreement" as referring to an identified specific document not including the side letter. But what if the Agreement had had the signed side letter stapled to the back of it? Or stapled within it before the signature page of the Agreement? It would seem to me that the Court should, in that situation, be willing to treat "the Agreement" as including the associated document.
103. If that is right, as I think in this particular situation it is, the absence of a signature would not be fatal: the approach suggested involves, in very limited circumstances, concluding that the term "This Agreement" extends to include a particular piece of paper.
104. It not, however, necessary to decide the point simply on that basis, because I have only quoted part of the clause. The clause should of course be considered as a whole, in context in the Agreement and in the context in which the Agreement was made. For convenience, I set out the clause again:

This Agreement constitutes the entire agreement between the parties to it with respect to its subject matter and shall have effect to the exclusion of any other memorandum agreement or understanding of any kind between the parties preceding the date of this Agreement and touching and concerning its subject matter.

If one reads it as a whole, it seems to me to fit in to the context as a whole rather than disjunctively (by which word I mean as consisting of two provisions, the first down to the first "subject matter" and the second being "This Agreement ... shall have effect etc."). It makes sense that the clause should exclude any other memorandum agreement or understanding of any kind between the parties preceding the date of the Agreement; it does not make sense to exclude reference to a document forming part of the suite devised for execution on the same occasion. In the context of the clause as a whole, "This Agreement" does exclude any other memorandum agreement or understanding preceding its date, but includes any other memorandum or agreement being made at the same time. (It may well include any other understanding, but the clause is concerned with identifying the pages which constitute the entire agreement and confining attention to them. My conclusion is that this does include, in the pages identified by the term, pages added on the date of the Agreement.)

I have pointed out that the Agreement in fact has no date inserted in it. The reason for there being none originally was probably the necessity to avoid the accident of the Agreement bearing a typed date which in the event preceded the date of incorporation of the Claimant. The reason for there being none inserted in writing was probably human error rather than design. I do not believe that there was any intention that the Agreement should operate on the basis that it should be dated so as to bear a date later than the date of the side letter and so, possibly, exclude the side letter's operation.

105. The effect of my decision is that the consultancy contract is to be read on the basis that French as well as non-French "Source of Business" counts for the purposes of the calculation required by clauses 5 and 6.
106. No shares having been granted, the parties agreed that the measure of damages, which they have calculated by taking the value of the shares at a date with which they are content, would be £501,934.77, subject to any deduction for various points taken as to whether certain items did, or did not, constitute Source of Business and to what extent.
107. On 24 July 2000 Mr Clery-Melin circulated a memorandum to all Partners/Consultants dealing with the arrangements for bonus calculations and introducing new Source of Business Guidelines (to deal, among other things, with awkward situations in which more than individual was claiming "Source of Business" credit for one and the same assignment). At that stage the Claimant had signed the consultancy contract and the originals were with the Defendant awaiting signatures on behalf of the Defendant. I do not consider that, without assent from the Claimant to the new Source of Business guidelines for bonus purposes being applied to vary the definition of "Source of Business" in the consultancy contract, any alteration of those guidelines can vary that contractual definition and affect the calculation under clause 3.5.
108. The Defendant suggests that when arrangements were made for Mr Beigbeder's departure from Whitehead Mann at the end of 2002, evidently on terms of a letter dated 28 November 2002 (of which there is no signed copy before me, but which was accepted as representing the terms), the letter operated to exclude from the end of 2002 accrual of further Source of Business. I do not see that it has this effect. Paragraph 11 says that any current entitlement under the Chevern[e]y contract was to remain in force and be honoured, and paragraph 7 that the current arrangements with Chevern[e]y were to remain in force until June [2003] except as described in paragraph 8. As paragraph 8 did not address the Stock Grant provision, I do not see that the Stock Grant provision was affected.
109. Beyond those points Mr Barklem did not press any of the points which had, at the opening of the trial, been foreshadowed as points which might reduce the Stock Grant below 100% if I found the side letter effective. Accordingly, I conclude that the Claimant is entitled to 1 00% of the Stock Grant, and in the event to damages as described in paragraph 107 for the non-delivery of the shares.
110. There is no dispute that interest should be awarded on the damages, but dispute as to the rate which ought t9 be awarded. The immediate loss was felt by the Claimant in shares which could be sold for sterling. That provides strong reason for awarding interest at London sterling base rate + 1 %. The situation is unusual because the parties have calculated loss by taking the value of shares at a date later than 30 June 2003, and have also highlighted the commercial reality that in practical terms the impact of non-payment has really been felt by Mr Beigbeder, whose creature the Claimant is, rather than by the Claimant. Mr Beigbeder himself was, entirely predictably, conducting his business in France, and borrowing as necessary. His evidence is that if the Claimant had received the shares he would have been a seller (in tranches) rather than a holder. The words "entirely predictably" are important to my mind, and apply to all times, both before and after the making of the various agreements. While a case can be made either way as to where justice lies in making an award of interest, to my mind the fairest solution in the particular circumstances is to make an award of interest related to Euro rather than sterling rates. A schedule was helpfully provided to me of French inter-bank rates for daily, monthly and quarterly periods, accompanied by information that in general, but subject to customer-specific circumstances, on quarterly rates an individual would expect credit interest of 0.5 percentage points below the "Euribor" rate, or to pay debit interest at 5 percentage points above Euribor rate; for company customers the respective rates would be 0.25 below and 3 above Euribor. I propose to award interest at 1.5 percentage points above the Euribor 3-month rate from 1 November 2003 to judgment, the interest of course being simple, and it should be calculated for each 3-month period on basis of the "moyenne" rate shown for the month of commencement of the period, e.g., for the quarter commencing 1 November 2003 the moyenne rate to be taken is 2.159% so the applicable rate of interest to be taken for that quarter is 3.659%.