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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Plumbly v Beatthatquote.Com Ltd. [2009] EWHC 321 (QB) (27 February 2009) URL: http://www.bailii.org/ew/cases/EWHC/QB/2009/321.html Cite as: [2009] EWHC 321 (QB)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		27 February 2009

Mr Justice Beatson:

Part 1: Introduction

1. This claim concerns the entitlement of the claimant, Gregory Plumbly, under a share option agreement with the defendant, a company operating a very successful comparison website. He gave notice that he was exercising the option on 8 March 2006. The defendant has not allotted shares to the claimant on the ground that he was not entitled to exercise the option because he had breached his contract of employment and fiduciary duty. The claimant seeks damages for breach of contract. There are issues of liability and quantum.
2. The defendant was formed on 28 January 2005. Initially, and when it entered into the share option agreement with the claimant, the company's name was Finance Leads Online Ltd., but on 16 March 2006 it was changed to BeatthatQuote.com Ltd. For convenience, I shall refer to the defendant as BTQ in relation to events before as well as after the change of name. BTQ's founder and controlling shareholder, Mr John Paleomylites, is a man of substance as a result of the sale in 2000 of Trustbase Ltd., an internet security company in which he had an approximately 30% stake. He received some $40 million in cash and stock.
3. A comparison website allows consumers to compare the prices offered by different suppliers of products or services. It generates its income by selling the names of potential customers to the suppliers of the products and services which are compared on the website. BTQ's business concerns financial products such as mortgages, loans and insurance. The company began operating in May 2005. In its first three years of trading it won a number of awards including "Business of the Year", "Online Business of the Year" and "Young Company of the Year". In July 2008 it was employing 48 people. Like all businesses it has been adversely affected by the tightening in the credit markets.
4. The claimant has been with BTQ from its formation. Initially he was the only person involved apart from Mr Paleomylites. He previously worked for Beat That Quote Ltd., in which Mr Paleomylites also had an interest, and which was disbanded at the end of 2004. Mr Plumbly then worked for the new company from Mr Paleomylites's home in Muswell Hill. Between March and September 2005, he was BTQ's Head of Technology and then became Head of Digital Marketing. The claimant's contract of employment and a side letter concerning his operation of a website called All About Buy To Let ("AABTL"), and the share option agreement were all entered into in the first week of March 2005.
5. By the time the claimant gave notice that he was exercising his share option his relationship with Mr Paleomylites had deteriorated. He had decided to resign from the company after he exercised it. He did so on 29 March 2006, and he left the company on 29 April. The defendant's case is that the claimant was not entitled to exercise the option because he breached his contract in the following ways: (a) he operated his AABTL website in a way which competed with the defendant's business, (b) he carried on business on his own account during working hours and thus in the defendant's time, and (c) he divulged confidential information gained through his employment with the defendant to David Crane, an associate, with whom he was planning a business venture.
6. In relation to AABTL, the defendant's case is that the claimant informed Mr Paleomylites that the site provided information to those interested in investing in the buy to let market and the company authorised him to operate the site provided it did not directly compete with it. The defendant's case is that the claimant changed the nature of the AABTL website so that it competed with BTQ because it was soliciting custom and selling mortgage leads. It is also alleged that the claimant acquired a number of domain names with a view to competing with BTQ. The second alleged breach, that the claimant worked on his own account in the defendant's time, primarily relates to the claimant's business as a residential landlord of twelve properties. The third alleged breach, divulging confidential information, concerns Comparefirst.com, a website opened by David Crane which the defendant claims used the defendant's business model.
7. As originally pleaded, the defendant's case was also; (a) the option agreement did not entitle the claimant to 10% of the defendant's authorised share capital but only to 10% of the issued share capital, and (b) if on its true construction the option agreement refers to authorised and not issued capital, the contract is void for uncertainty or alternatively on the ground of mistake. Mr Aylwin did not pursue these points. He was right not to do so. In my judgment they were misconceived.

Part 2: The Evidence

(a) Factual Evidence

8. Factual evidence in support of the claim was given by Mr Plumbly and by David Crane. Mr Crane is a close associate of the claimant. He had owned Noomedia, an online shopping centre and web design service now dissolved, which employed Mr Plumbly between 1995 and 1997. Mr Crane also helped Mr Plumbly to alter the AABTL website in January 2005. In April 2005 he began working for BTQ on a sub-contractor basis.
9. Factual evidence on behalf of the defendant was given by Mr Paleomylites, by John Newby, who joined the defendant in September 2005 and is now Head of Technology and a director of the company, and by Thomas Adalbert, who is BTQ's commercial director. Mr Adalbert is a close associate of Mr Paleomylites who he has known for some years. In 2002 he developed the business concept for Beat That Quote Ltd., which was used for BTQ, with Mr Paleomylites.
10. The outcome of this case largely depends on the resolution of the sharp and fundamental conflict between the evidence of the claimant and Mr Paleomylites. Before summarising my assessment of them and the other witnesses of fact, I refer to the expert evidence, and deal with the submissions about disclosure.

(b) Expert Evidence

11. Mr Dominic Wreford, retained by the claimant, and Mr Jason Lane, retained by the defendant, gave evidence on the value of BTQ. Both are accountants with wide experience in a variety of forensic accounting contexts including acting as experts in litigation involving valuation issues. Mr Wreford is one of the principals in FTI Forensic Accounting Ltd., and Mr Lane is a Partner of Saffery Champness. I deal with their evidence in paragraphs [131] – [144].

(c) Documentary Evidence and disclosure

12. There is little documentary evidence about BTQ's mortgage business during 2005 or Mr Plumbly's activities concerning AABTL. In relation to evidence about BTQ's mortgage business, one reason is that data was lost following the merger in January 2006 of its two separate IT systems for loans and mortgages. Mr Newby's evidence is that he forgot to migrate the old mortgage data to the new system and it was lost when the server containing the old database was decommissioned in mid-2006.
13. In relation to Mr Plumbly's activities concerning AABTL, initially only statements from his account with the First Direct bank were disclosed, and they were heavily redacted. No credit card statements were disclosed. It was said on behalf of the defendant that bank and credit card statements would have shown the payments made by Mr Plumbly for AABTL's online outgoings and thus the extent of its commerciality. Mr Plumbly said these matters were not disclosed because BTQ's requests were more concerned with AABTL's income than its outgoings. In relation to the outgoings, some documents were later disclosed, including invoices from AABTL's web host, Easily.co.uk, but Mr Plumbly said he no longer had access to his account with Google Adwords, and the solicitors then acting for him had redacted items showing payments to Google Adwords from the First Direct statements.
14. Mr Aylwin submitted that this shows a failure on the part of Mr Plumbly to make any effort to retrieve or to produce archive material. He submitted that the absence or destruction of any books or records for AABTL and vouchers for its dealings with Google Adwords strains belief. In the light of this, and the late disclosure (a fortnight before the hearing and in response to BTQ's September 2008 application for specific disclosure) of AABTL's accounts with AWeber and Google Adwords he submitted that I should be slow to accept Mr Plumbly's explanations for non-disclosure and any positive case put forward by him based on the absence of his own documents.
15. I reject Mr Aylwin's submission. I do not conclude that Mr Plumbly has failed in his disclosure obligations. The two lists of documents served by him specifically referred to the fact that the documents disclosed were documents relating to his employment by the defendant and his association with Leadbay. The disclosure made later was in response to specific questions raised and in the application by the defendant for specific disclosure very shortly before the trial. That application was rejected by Cranston J. As in that application information was sought about expenditure on AABTL, the claimant disclosed the invoices of the companies which hosted the AABTL website and the payments to Google Adsense.

(d) Assessment of the witnesses of fact

16. Mr Crane was plainly trying to assist the court to the best of his ability. I have no doubt as to his reliability on the matters on which he gave evidence. I did not, however, find Mr Adalbert a satisfactory witness. He was at times evasive and non-responsive to questions about the circumstances of his joining BTQ. His approach to his evidence is also illustrated by his claim (see paragraph 54 of his statement) that Mr Plumbly tried to entice Mr Newby away from the defendant. This is not a claim that Mr Newby has made (see paragraph 21 of his statement) but Mr Adalbert made it and only withdrew it when he was cross-examined.
17. Mr Newby was reluctant to say anything inconsistent with Mr Paleomylites' evidence, for example, given what he knew about Mr Paleomylites, whether, if Mr Plumbly asked for permission to operate the AABTL website, Mr Paleomylites would have looked at the website. His view that in no circumstances whatsoever was it legitimate for an employee to receive or to make a phone call at work except on a mobile phone was possibly also a manifestation of this but in any event showed a certain rigidity.
18. I return to the conflict between the evidence of the claimant and Mr Paleomylites. This concerned, inter alia; what the claimant told Mr Paleomylites about AABTL before he entered into his contract of employment with BTQ, whether Mr Paleomylites reviewed the site, and, if so, when (see [30], [40]-[42], and [55]-[59]), whether material changes were made to the site thereafter, and whether the site was competing with BTQ (see [67]-[74]). Their evidence also conflicts as to whether on or before 1 March 2006 the claimant consented to being appointed a director of the defendant and whether he was so appointed (see [91]-[104]) and whether shortly before Mr Plumbly exercised his share option Mr Paleomylites told him he would be required to sign a disclaimer saying he would not take legal action against BTQ: see [89] and [97].
19. Mr Plumbly's evidence about the effect on his interest in the company if its share capital was increased and additional shares allocated to others showed he had not and did not fully understand the way in which his interest in the company could be diluted. I did not find his evidence satisfactory on some matters, for example, about steps he had taken in 2005 and 2006 to improve AABTL (see [39] and [76]), and what he said about the circular emails AABTL sent using the AWeber service: see [86]-[87]. However, on the core issue of what he told Mr Paleomylites about AABTL, whether Mr Paleomylites reviewed the site, on the directorship issue, whether he was told he would be required to sign a disclaimer, and on negative key words I prefer his evidence to Mr Paleomylites' evidence.
20. Mr Paleomylites is an experienced businessman and very successful entrepreneur. He is clearly intelligent and quick-witted. His quick-wittedness was evident, for example, in his response to questions about the reference to specific conversations between himself and the claimant in the defendant's reply to the claimant's request for further information, which he accepted did not occur. He suggested that the response was not inaccurate but was badly drafted. But Mr Paleomylites was also alive to the areas in which his case was vulnerable and, in trying to protect the defendant's position, was willing to mould his recollection of events.
21. Mr Paleomylites changed his evidence on the key issues of when he discovered that AABTL had signed up to Leadbay, whether he reviewed the AABTL website before or after the side letter to the contract of employment (see [41], [55]-[61]), and whether the use of AABTL as a test-bed for BTQ would involve obtaining real leads, paying for them and seeing how they were handled: see [42] and [57]. He maintained that he had not, in late February or early March 2006, asked Mr Plumbly to sign a disclaimer (see [89]) and was not able to explain the reference to this in a contemporary email (dated 8 March 2006) from Mr Plumbly to a cousin. His evidence on negative key words (see [69], [72] and [74]) was also unsatisfactory. Another example of this, albeit of less significance to the ultimate resolution of this case, concerns Mr Paleomylites' evidence about the time and the circumstances in which Mr Adalbert started attending BTQ's office and the date on which he started his employment with the defendant: see [91] ff.

Part 3: Findings of fact

22. I turn to the facts. I set out those that are not disputed, identify the areas of dispute and record my findings in respect of most of them in a broadly chronological way. Where my findings on matters in dispute depend on events later in the chronology, I record my findings after dealing with those events.

(a) The operation of comparison websites

23. My starting point is, however, not an event, but the evidence about the topic of comparison websites. The evidence about their operation was largely uncontroversial. The first step is to attract consumers to the site. Consumers use search engines such as Google to get to websites relevant to their interests. The operator of a website may rely on the results of "natural" or "organic" searches, or may pay the operator of the search engine in respect of specified search terms ("keywords") for which it has bid on a "pay per click" basis. In Google's case the website operator did so by signing up to "Google Adwords" also referred to as "Google click-through". Although the search engines will determine certain factors, such as the relevance of the website to the search term, the results of paid searches tend to appear at the top of the screen or in a column on its right hand side. The higher the bid that is made, the higher the ranking of the operator's website in the list will be, and thus the operator will have a greater chance of the searcher clicking onto its website.
24. In the case of search terms which are to be paid for, in determining how much to bid for a term, account has to be taken of the income that might be earned from a searcher who clicks into the operator's website and uses its service. In order to keep away business for which there is no demand or which is unlikely to generate a profit, "negative keywords" can be used to exclude certain searches from triggering a "pay per click" obligation. Such negative keywords can be used at one of two levels. The first is what Mr Paleomylites referred to as the "campaign" level. The second is what Mr Paleomylites referred to as the "adgroup level". A "campaign" (for example "mortgages") is a collection of adgroups (for example "buy-to-let mortgages" and "self-certification mortgages"). The use by BTQ of negative keywords is of relevance to the question whether Mr Plumbly's AABTL site was competing with the defendant: see [67]-[74].
25. The results of "natural" searches, for which no fee is paid, are also listed in a rank order determined by the operator of the search engine. The formulae used by search engines to rank the results of searches are secret and frequently changed, but it is generally known that the greater the number of hyperlinks to a website from other websites the higher the ranking. Since no fee is paid for a visit to a website generated by a natural search, and such a visit can lead to the sale of an introduction by the operator of the website, it is highly desirable to achieve a high ranking by natural searches.

(b) The Claimant's background and meeting Mr Paleomylites

26. The claimant started working in finance in 1987. He developed an interest in the internet in 1995 and, with the exception of the period between 1997 and 1999, after he left Noomedia and worked as an interest rate options broker in Tokyo, has since worked for internet related companies. Between 2000 and the autumn of 2004 he worked for Clearlybusiness.com, a joint venture between Freeserve and Barclays, first as a project manager and latterly as Head of Technology.
27. In about 2002 Mr Plumbly became interested in the buy-to-let property market. He purchased his first investment property in 2003 and has since purchased twelve more properties, six on his own and six together with other people. In the light of his research on the buy-to-let market, in 2003 he also set up the AABTL website. It was primarily an information resource for buy-to-let investors although Mr Plumbly earned a small commission from a link to Amazon's buy-to-let property books pages and from Google Adsense in respect of adverts displayed. Between February 2005 and October 2007 the income from Amazon totalled £11-69. In March and April 2005 the income from Google Adsense was US $219-36. From January 2005 there were a number of developments to the AABTL website. Mr Aylwin submitted the changes made were to improve its commercial profile and meant it was no longer only an information resource and that it was competing with the defendant. The most significant of the developments was that on 17 January Mr Plumbly registered the AABTL website with a new website operated by Leadbay. Leadbay's business was to purchase the details of people who, on websites operated by others, expressed an interest in obtaining a mortgage quote, and to sell those details to brokers registered with it. I deal with this and the other developments later in this judgment.
28. In 2004 Mr Paleomylites was, with others, involved with Beat That Quote Ltd, which had been formed in September 2003. Beat That Quote Ltd combined internet-based lead generation with tele-marketing. Its aim was to attract consumers interested in financial products such as loans and mortgages to visit the site to compare the prices of the products, to obtain information about the consumers, and to sell that information (as "introductions" or "leads") to the businesses whose products are compared on the website. In developing this part of the business Mr Paleomylites and his associates carefully examined other comparison websites, in particular MoneySupermarket.com, to work out what they did, and to copy and improve on that.
29. Mr Paleomylites was not satisfied with the web development contractor the company was using. He was introduced to Mr Plumbly in approximately October or November 2004. They met and discussed Mr Plumbly's experience with internet companies and website design, and as a result Mr Paleomylites retained Mr Plumbly as a consultant for Beat That Quote Ltd.. Mr Plumbly's role was to develop a consumer facing website, Beatthatquote.com, and a business facing website, Financeleadsonline.com. During December 2004 he worked on a part-time basis, and Mr Paleomylites and he worked in a room in Mr Paleomylites' home in Muswell Hill.
30. Mr Plumbly's evidence was that, when they met, he told Mr Paleomylites about AABTL saying it was an information resource. Mr Paleomylites said that at that time AABTL was purely a website providing information about buying property to let including guides, training, and software, but he knew it earned commission from Amazon for leads directed to Amazon by it. He said that the site then contained no information about financial services or mortgages.
31. Beat That Quote Ltd was disbanded at the end of 2004 because of disagreements between its principal investors about the direction the business should take. Mr Paleomylites planned to form a new company and, in December 2004, according to Mr Plumbly on 24 December, told Mr Plumbly of his plans and said that he wanted him to work for him. On 28 January 2005 Mr Paleomylites formed the defendant company. It acquired all the rights of Beat That Quote Ltd. Mr Plumbly then worked for the new company, again from Mr Paleomylites' home. The business model of the new company was also based on that used by Moneysupermarket.com. In April 2008, in an interview with "Startups", Mr Paleomylites said the business model was entirely copied but that they saw where improvements could be made and made them using more effective technology.
32. During January and February 2005 Mr Paleomylites and Mr Plumbly discussed the terms upon which Mr Plumbly would work for the new company. Mr Paleomylites states he gave Mr Plumbly two options; to remain a consultant with no share options and no significant commitment to the company, or to become an employee with share options and a complete commitment. Mr Plumbly states that Mr Paleomylites told him that he would be paid a salary and bonus and be given an interest in the equity of the company by way of a share option in respect of 10% of the company. Mr Plumbly did not recall any discussion or negotiation between himself and Mr Paleomylites about the terms of employment and the share options other than the amount of his salary which was he said initially to be £50,000 and then £40,000 with a bonus and equity element. A letter dated 22 February 2005 written by Mr Paleomylites on behalf of the company set out the terms and conditions proposed for Mr Plumbly's employment, and which were subsequently agreed: for the material terms, see [44]-[52] below. Mr Plumbly was to be employed from 1 March 2005, and it appears from the date beneath Mr Plumbly's signature on the letter that he signed it and agreed to the terms on 2 March.

(c) The AABTL website and Leadbay

33. I have referred to the fact that before then, on 17 January, Mr Plumbly registered his AABTL website with Leadbay. Leadbay was visible on the site shortly afterwards. The "Wayback Machine", enabling one to ascertain what was on a website on a given day, shows that on 7 February 2005 there was a link on AABTL's homepage to "Free mortgage advice", which it was common ground took one to Leadbay's form. Under headings "Welcome to All about Buy-to-Let" and "Why choose property?", that page also states:

"Looking for UK mortgage advice? With over 7500 mortgage deals to choose from getting the right deal is not easy. By completing our simple enquiry form we can put you in touch with a UK professional mortgage adviser who will contact you by telephone to discuss your requirements."

There is a hyperlink to the enquiry form, which it was common ground was Leadbay's form.

34. The form in the bundle is in fact dated 7 February 2006 but it was not suggested that it differed materially from the form used on 7 February 2005. The form states:

"If you would like to speak with a whole of market mortgage broker that can give you a free, no obligation quote, please fill in the form below.

This could be either for a buy-to-let mortgage or re-mortgage or you might be interested in re-mortgaging your current property to fund your next investment property."

The boxes to be completed reflect this, asking whether the form filler wants to "buy a property", "re-mortgage a property", or "buy a property to let".

35. Mr Plumbly soon started to earn commission as a result of leads passed to Leadbay via the AABTL website. The summary of his account with Leadbay shows that Leadbay paid him £360-90 for 24 leads generated in February 2005. In the period between 1 February 2005 and 31 March 2007 AABTL generated 116 leads to Leadbay worth £1,467-30.
36. On 4 March 2005 Simon Baker of Leadbay sent an email to Mr Plumbly's personal email address ([email protected]). It stated:

"First of all, thank you for sending your mortgage leads to Leadbay.

Since its launch in January Leadbay's growth has been quicker than we anticipated. We have over 400 brokers registered with Leadbay and of these about 180 have credited their accounts and are actively bidding for leads.

This is leading to increased bid prices and ultimately more revenue for you. Our top affiliate last month earned over £20,000. We have recently launched an advertising campaign in the industry press and expect to built the brand and register more brokers over the coming weeks.

Today we have made some improvements to the form that you use to generate leads. One of these changes may require a minor change to your technical integration to ensure it appears correctly on your webpage…"

37. The email then summarises the changes made to the form and the technical details. The heading to the email is "Important Information from Leadbay". In an email dated 6 March 2005 Mr Plumbly forwarded Simon Baker's email to Mr Paleomylites, stating, "FYI". Mr Paleomylites replied that day stating:

"Very interesting. We should speak with them in a week or so and see if we can use our forms. If we can't, and we want to use them, how easy is it to replace our forms with theirs?"

The final email in this chain is Mr Plumbly's response to Mr Paleomylites later that evening. With regard to the question asked, Mr Plumbly said "stroll in the park".

38. At about the time Mr Plumbly registered AABTL with Leadbay, he asked David Crane to alter its website and signed up with Google Adwords. He offered David Crane a share of the profits achieved, and accepted that the share was something like half those profits, although he also said that no payment had ever been made to Mr Crane. David Crane made the changes to the website and the home page and links to which I have referred (see [8]) showing the link to the Leadbay form on 2 February 2005 is the product of those changes.
39. Mr Plumbly's evidence was that, "having recently become involved with Beat That Quote Ltd. and been exposed for the first time to the business of lead generation" (first statement paragraph 12), he was interested in Leadbay's website and thought that it could be a small source of income for AABTL. He said that it was his idea to try to create a small income for AABTL and to test out the service with a view to subsequently recommending it to BTQ. He said he had operated AABTL as a hobby and continued to do so although he signed up to Leadbay and Google Adwords, in the case of the latter exposing himself to an obligation to make payments to Google Adwords, in the hope of making money. An email dated 25 November 2005 shows that he had not invoiced Leadbay for leads from AABTL between May and October that year. He said he did not make money from the association because the cost per lead payable to Google was greater than the income earned from Leadbay for a buy-to-let lead. In March 2005 Mr Plumbly paid Google Adwords £1,260-17 in respect of the period since he had signed up but in the period between May 2005, when BTQ started operating, and March 2006, when he exercised his share option, Mr Plumbly only earned some £700 from Leadbay.
40. Mr Plumbly also said that within days of AABTL signing up with Leadbay he told Mr Paleomylites about it and said it was possibly something which could benefit BTQ in the future. He said Mr Paleomylites then reviewed the AABTL site containing the Leadbay link and agreed that he could continue to operate it. He did not recall telling Mr Paleomylites that AABTL had signed up to Google Adwords but said that, in order for AABTL to have been a testbed for Leadbay, there had to be ways of driving traffic through to the site. He first stated that AABTL had signed up to Google Adwords in his fourth statement made on 29 September 2008, in response to the defendant's application for specific disclosure, to which I have referred (see [14]-[15]). He did not recall the precise dates on which he bid for key words, but said that, from the payments he made to Google Adwords he thought he did so in around February and March and in November and December 2005.
41. Mr Paleomylites's evidence is that Mr Plumbly advised him of the existence of Leadbay at some point either at the end of January or at the beginning of February 2005. He accepted that he had discussions with Mr Plumbly about putting Leadbay on the AABTL site before the conclusion of the employment contract on or about 2 March and before 3 March when he wrote a side letter to Mr Plumbly about Mr Plumbly's operation of the site: see [53]. Those agreements were made and the side letter was written before BTQ became operational. Mr Paleomylites said that, notwithstanding these discussions about AABTL and Leadbay and the side letter written on 3 March, he did not review the AABTL site until after 6 March 2005, that is after the contract of employment and the side letter. That date is also after Mr Plumbly forwarded the email dated 4 March 2005 from Simon Baker of Leadbay to Mr Paleomylites.
42. Mr Paleomylites also accepted that he was content for Mr Plumbly to make money from AABTL so long as he was not competing with BTQ and it was not interfering with his job. However, he stated (paragraph 56 of his first statement) that it was "well-known and understood by us both that [Mr Plumbly's] approach to Leadbay was purely tactical to allow us [that is BTQ] to understand how Leadbay worked" and (paragraph 58 of his first statement) that they agreed that Leadbay would be removed from AABTL's website when they understood how it worked.

(d) The contracts

43. Before setting out the remainder of the evidence about Leadbay and my findings, I turn to the terms of Mr Plumbly's employment with the company contained in the letter dated 22 February which Mr Plumbly signed on 2 March, the contents of a side letter dated 3 March from Mr Paleomylites to Mr Plumbly about Mr Plumbly's operation of AABTL, and the terms of the share option agreement between Mr Plumbly and the company, signed by Mr Plumbly on 8 March 2005.
44. The material terms and conditions of Mr Plumbly's employment are as follows. Clause 3, which deals with salary, states that:

"Your salary will comprise a basic salary of GBP 40,000 per annum.

You will also receive a monthly Commission Bonus. The Commission Bonus will be calculated according to the prevailing rules of the FLO Commission Bonus. For the calendar year 2005, the Commission Bonus is calculated as 5% of gross profit (revenue less all marketing costs and external consulting costs). The Commission Bonus will be payable monthly in arrears cleared payment. The Commission Bonus will be revised at the start of year calendar year. If your employment is terminated for any reason before your Commission Bonus is paid, you will not be entitled to any Commission Bonus.

…

You will be entitled to receive share options in FLO issued pursuant to FLO's share options scheme. Details of FLO's share options scheme are attached to this document."

45. Mr Plumbly's duties are set out in Clause 4 which provides inter alia:

"Your duties include: the promotion of new business selling FLO's products and services through FLO's associated websites, liaising with clients, managing FLO's associated websites including site development, adding further features, search engine optimisation, pay-per-click campaigns, affiliate programmes; developing proposals for the establishment of FLO introducer websites; working with other FLO staff and contractors to develop plans and processes for the remote marketing of financial products and such other duties as may be reasonably be assigned to you and which are in keeping with the nature of your role."

46. Clause 5 states that the normal working hours are 9am to 5.30pm Monday to Friday but that the requirements of the employment call for flexibility and "you will be expected to work different hours without additional pay whenever so required". Provision is also made disapplying the Working Time Regulations 1998.
47. Clause 13, headed "Professional Conduct and Confidentiality" provides:

"You must at all times observe the highest standards of professional conduct in your dealings with clients, professional colleagues, fellow members of staff and others with whom your work will bring you into contact. All affairs of FLO and of its clients are confidential and you must keep them secret and confidential both during and after the termination of your employment."

48. Clause 17, headed "Protection of Business Interests" provides inter alia:

"You will not without the prior written consent of FLO directly or indirectly at any time within the relevant period engage or be concerned or interested in any business which competes or will at any time during the relevant period compete with the business."

49. The relevant period is defined in appendix A as "the period of 6 months from the termination date less any period during which you have not been provided with work pursuant to the third paragraph of clause 12 of this agreement".
50. Clause 12, headed "Notice", provides, in its third paragraph, that FLO may require the employee:

"to remain away from the office during your notice period (whether you or FLO gave notice) in which case you will be required to comply with any conditions laid down by us and, whilst on full pay during such time, you will not be permitted to work for any other person, firm or client or on your own behalf without our prior written consent".

51. Appendix A defines "directly or indirectly" as:

"acting either alone or jointly with or on behalf of any other person, firm or company, whether as principal, partner, manager, employee, contractor, director, consultant, investor or otherwise".

52. Mr Plumbly's evidence was that, in the light the prohibition on being concerned in any business which competed with BTQ's business in clause 17, he again told Mr Paleomylites that he had the AABTL website and asked for something to be put into the contract. He said Mr Paleomylites looked at the site with the Leadbay form visible, gave him permission to continue to operate it, and said he would deal with the matter in a side letter. Mr Paleomylites stated that he agreed to allow Mr Plumbly to continue to operate AABTL if it did not compete, but that he did not review the AABTL site before writing the side-letter.
53. In the side-letter dated 3 March 2005 Mr Paleomylites states:

"With reference to your employment agreement dated 2 March 2005, please accept this letter as agreement by Finance Leads Online Ltd ("the Company") that you may continue to operate the Internet website, "www.allaboutbuytolet.com".

This agreement is conditional upon your website not directly competing with the business of the company and the company reserves the right to request that you remove or terminate the site subject to the company giving you two weeks notice.

This letter does not alter in any way the provision of your employment agreement except as stated above."

54. The share option agreement appears to have been sent to Mr Plumbly at the same time as the letter dated 22 February containing the terms and conditions of employment. Its first page states that it is made on that date, but it is common ground that it was signed on 8 March. Mr Plumbly is described as the Option Holder and Finance Leads Online Limited as the Company. The relevant provisions are:

"1. OPTION

1.1 In consideration of the sum of £1 by the Option Holder to the Company (the receipt whereof the Company hereby acknowledges) the Company hereby grants to the Option Holder, with immediate effect (the "Effective Date") an option ("the Option") to subscribe for 100 ordinary shares of £0.01 each in the capital of the Company ("Ordinary Shares") at the price of £0.01 per Ordinary Share ("the Subscription Price"). Such Option to represent 10% of the Ordinary Shares of the Company.

2. DURATION

2.1 Conditional upon the Option Holder remaining in the full time employment of the Company the Option shall be exercised by the Option Holder by giving notice in writing to the Company ("the Option Notice") at any time during the period commencing on the first anniversary of the Effective Date and ending on the third anniversary of the Effective Date ("Option Period"). The Option shall be exercised upon receipt of the Option Notice and not before.

2.2 The Company shall allot and issue to the Option Holder the Ordinary Shares, the subject of the Option specified in the Option Notice, upon it receiving from the Option Holder payment of the Subscription Price and shall register the Option Holder's name in the register of members of the Company and issue a share certificate in respect thereof as soon as reasonably practicable thereafter.

3. OBLIGATIONS OF THE COMPANY

3.1 During the period from the date of this Agreement to the expiration of the Option Period or exercise by the Option Holder of the Option in full, whichever shall first occur, the Company will:

3.1.1 ensure that there will at all time be sufficient authorised but unissued share capital and all requisite or other authorities necessary to enable the Company to discharge its obligations under this Agreement;

3.1.2 despatch to the Option Holder copies of all notices, accounts, statements and circulars dispatched to members or debenture holders of the Company at the same time as they are so despatched.

4. OPTION SHARES

4.1 The Ordinary Shares issued as a result of the exercise of the Option will rank in full for all dividends declared and payable on Ordinary Shares from the date of receipt of payment of the Subscription Price (unless a prior record date has been set before receipt of the Subscription Price) and will rank in all other respects pari passu with all other Ordinary Shares for the time being in issue from the date of receipt.

5. DEALINGS IN OPTIONS

The Option Holder may exercise the Option in whole or in part and may during the Option Period exercise the Option on any number of occasions provided that no exercise of the Option shall require the Company to issue more Ordinary Shares than those subject to the Option hereby granted.

6. ALTERATION OF SHARE CAPITAL

6.1 If, at any time between the date of this Agreement and exercise of the Option in full, the Company shall make an issue by way of rights in existing holders of Ordinary Shares then the Option Holder shall, so far as legally possible, be given the opportunity to participate in such rights issue at the rights issue price as if he or it had exercised the Option hereby granted in full in respect of the Option Shares then remaining under Option and was the registered holder of all Option Shares then the subject of this Option. If this is not legally possible, any discount element on the rights issue shall be treated as if it were a variation of share capital and Clause 6.2 shall apply. If such rights issue shall be declared between the date of the Option Holder giving an Option Notice on exercise of the Option and the allotment of Ordinary Shares in respect of such Option Notice, then the Option Notice shall be deemed not to have been given, solely for the purpose of extending such rights issue to the Option Holder in respect of the Option Shares then the subject of the Option Notice.

6.2 If the Company shall sub-divide or consolidate the whole or any part of its issued share capital into denominations of other than £1 or capitalise any of its reserves of profits by the issue of new shares or vary its share capital in any other way the number of shares the subject of this Option shall be adjusted accordingly to ensure that the Option Shares are of the same value after as well as before such variation.

6.3 In the event of the alteration of the number of Preference Shares the subject of this Option pursuant to any of the provisions in Clause 6, the Subscription Price shall be adjusted as appropriate."

(e) What Mr Paleomylites knew about AABTL's use of Leadbay:

55. I return to the important conflict in the evidence about Leadbay and the AABTL website. This concerns whether Mr Paleomylites reviewed the website before he wrote the side letter and whether he saw the Leadbay form on it before he wrote the letter. Mr Paleomylites says he did not review the site. He believed it was an information site with information about guides, training, and software relevant to buy-to-let, which earned commission from Amazon for leads directed to Amazon by it. I have stated that it is common ground that Mr Plumbly told Mr Paleomylites about Leadbay in late January or early February, and that they discussed putting it on AABTL's website before Leadbay's Simon Baker sent his email dated 4 March 2005. It is also common ground that the Leadbay form was on AABTL's website from 2 February and that Mr Plumbly wanted Mr Paleomylites to give him specific permission to continue operating the website after he started working for BTQ.
56. I reject Mr Paleomylites's evidence on this matter. It was not satisfactory. There were two significant changes between the pleadings and Mr Paleomylites's statements, and his oral evidence. Mr Paleomylites's statement and what he initially said when giving evidence was that the first discussion about putting Leadbay on AABTL's website was after 6 or 7 March but he later said that there had been discussions about this both before and after 4 March. Secondly, the defendant's response to the claimant's request for further information states that Mr Paleomylites had specific conversations with Mr Plumbly about AABTL being purely an information site but, when giving evidence, Mr Paleomylites accepted that there were no such conversations.
57. More importantly, Mr Paleomylites's account requires me to accept that, despite the discussions in late January or early February about putting Leadbay on the AABTL website, and his "hands on" management style, toughness, and keen interest in what his employees were doing, he did not review the AABTL website between the beginning of February and the beginning of March, in particular before writing the side letter. The side letter was written because of Mr Plumbly's concerns about clause 17 of the proposed employment contract and the issue of possible competition between the websites. I do not accept that in the context in which Mr Plumbly raised the issue, Mr Paleomylites did not look at the site. I also do not find Mr Paleomylites's evidence that using AABTL as a testbed did not involve permitting Mr Plumbly to use the website to generate real mortgage leads to Leadbay credible. He accepted that the testbed scenario was to help them "to understand what [Leadbay] do, how they do it, how effectively they do it, [and] how it can be improved upon". It is difficult to see how this could be done without AABTL generating real leads and seeing what income could be earned and whether Leadbay would pay.
58. Mr Paleomylites's account also requires me to accept that there were discussions about putting Leadbay on the AABTL website after 4 March. As Mr Croxford observed, that only makes sense if Mr Plumbly had said or suggested that it was not then on the site. But that is an improbable scenario. The Leadbay form was visible on the AABTL site at that time and had been since early February. Mr Paleomylites (who was monitoring the results of Google searches) could have discovered it at any time.
59. Secondly, Mr Plumbly forwarded Simon Baker's email dated 4 March to Mr Paleomylites. Mr Aylwin suggested that email could be read by someone, and was read by Mr Paleomylites, as one sent to a person who had signed up but had not yet sent any leads to Leadbay, as well as one sent to a person who had sent leads to Leadbay. Accordingly, the email should not be regarded as suggesting to Mr Paleomylites that AABTL had already sent leads to Leadbay. I consider this an implausible reading of the opening sentence of the email, which states: "Thank you for sending your mortgage leads to Leadbay". Whether or not that is so, what is significant is that Mr Plumbly forwarded the email from Leadbay to Mr Paleomylites. Whatever its meaning, this does not fit with him saying or suggesting to Mr Paleomylites that the Leadbay link was not then on the AABTL website.
60. Thirdly, since BTQ was not at that time operational, there was no reason for Mr Plumbly to conceal the existence of Leadbay on AABTL's site. His conduct throughout the period is inconsistent with such concealment.
61. Moreover, Mr Paleomylites's evidence was that it was not acceptable for Mr Plumbly to have the Leadbay form on the AABTL website and to use it in this way. But he accepted that at some point after 4 March he saw the AABTL website on a screen, with the Leadbay form. His evidence was that it was not acceptable for Mr Plumbly to have the Leadbay form on the AABTL website is not consistent with the fact that he did not at any time after he saw the form, ask Mr Plumbly to remove it from the site or exercise his right under the side-letter to require Mr Plumbly to close the site down. He did not do this even after BTQ registered with Leadbay, which it was common ground had occurred by July 2005.

(f) May 2005: BTQ's website becomes operational:

62. The BTQ website became operational in May 2005. It was expected that its first product would be loans but it was intended that the company would become involved with mortgages. It did so soon afterwards in about July, by which time it had registered with Leadbay.
63. Initially Mr Plumbly and Mr Paleomylites were the only people working for BTQ. Mr Plumbly was the only person in the office when Mr Paleomylites went on holiday that summer. At that time Mr Plumbly was involved in all aspects of the technology required, including planning and designing the websites and running the on-line advertising campaign. The advertising campaign included developing keywords to be used in BTQ's pay-per-click advertising. At some stage Mr Plumbly introduced David Crane to Mr Paleomylites and suggested that BTQ use Mr Crane to design and set up the websites. In April 2005 Mr Crane began working for BTQ on a sub-contractor basis. Other sub-contractors were also used for the website.
64. Once the website was operational Mr Plumbly monitored BTQ's activity, in particular its advertising expenditure and the leads created. By 27 May he had placed a link to BTQ on AABTL's website so that potential customers were made aware of the site and also to improve the position of BTQ in natural search results. In about June he introduced Mr Paleomylites to John Newby, who he knew from his time at Clearlybusiness.com. Mr Newby was offered the job of Head of Technology on 19 July and started working for BTQ on 5 September. When Mr Newby started at BTQ Mr Plumbly became Head of Digital Marketing, and responsible for driving consumers to the website, primarily through paid search. At the time of his appointment Mr Newby was given a share option for 5% of BTQ's share capital but otherwise in identical terms to Mr Plumbly's option. In early 2006 Mr Paleomylites decided to increase Mr Newby's allocation because he considered that his performance had been exceptional.
65. By this time the company was growing rapidly. Mr Paleomylites described the work as manic with everybody, including Mr Plumbly, working long hours. In August the business had moved from Mr Paleomylites' home to serviced offices in Kentish Town. In October an administrative assistant was employed. The first holder of the post, Jermain Roper, was replaced by Quincey Julien in November. In November Mr Adalbert started attending BTQ's office on a full time basis. That month Mr Paleomylites told Mr Plumbly that if the company closed down then, it would have made about £425,000 profit. In his third statement (paragraph 62) Mr Paleomylites said this depended upon certain assumptions which in the event proved unfounded. The accounts show that in 2005/06 BTQ's gross profit was £345,780, and the profit after tax was £80,402. In that year Mr Paleomylites took no salary; A report in FT.com on 23 June 2006 states that BTQ made £99,000 profit on a £1.4 million turnover in its first twelve months and was on target to make £4 million profit on £12 million revenues in its second year.
66. Mr Plumbly said that significant amounts were spent each month on pay-per-click adverts. By the end of Mr Plumbly's time with BTQ in the spring of 2006 the amount spent was in the region of £300,000 to £400,000 per month. In early 2006 Sophie Neary, who had worked with Mr Paleomylites at Trustbase, joined BTQ as Director of Product Management.

(g) Was AABTL competing with BTQ?

67. I turn to the evidence relevant to the issue of whether AABTL was competing with BTQ, either directly or indirectly. Mr Paleomylites' position was that, as a result of AABTL's use of the Leadbay form and Google click-through to drive potential business to it, they were competing. This was because, although BTQ was not focussed on buy-to-let business and took steps to ensure that it only did such business in a commercially viable way, it did buy-to-let business. BTQ also relies on developments regarding the AABTL website (see [76]) and emailings using the AWeber service (see [86]-[87]). Mr Plumbly's position is that the two websites were not competing since BTQ used "buy-to-let" as a negative key word because buy-to-let mortgage business was not economically worthwhile. Secondly, while AABTL would appear in a natural search for "buy-to-let", it would not appear on one for the term "mortgage", whereas BTQ would.
68. It is common ground that BTQ did do buy-to-let business. The company's reply to the claimant's request for further information states that during 2006 there were 3,185 buy-to-let leads generating £29,255.29 commission. In that period there were 105,428 non buy-to-let leads generating commission of £2,636,132.33. The buy-to-let leads represented 3% of the leads but 1% of the revenue. Mr Plumbly said that the business came to BTQ from seekers of mortgages who searched for a broad term such as "mortgage" but then filled in a form on the BTQ site seeking a buy-to-let mortgage. It is thus common ground that if a consumer arrived at the BTQ site and sought a buy-to-let mortgage through the site, BTQ would process the request and pass it on.
69. Mr Paleomylites said that the percentages of buy-to-let and non buy-to-let business reflected in these figures reflected the fact that BTQ's generation of buy-to-let leads was broadly in proportion to the volume of buy-to-let mortgages in the market. It was put to Mr Paleomylites that the proportion of BTQ's buy-to-let to non buy-to-let mortgages in 2006 was roughly half the proportion in the wider market, but he said closer to 65%. On the figures for 2006, 3% of BTQ's leads were for buy-to-let mortgages and in the wider market the proportion of buy-to-let to non buy-to-let mortgages was nearer 10%. The proportion of BTQ's buy-to-let leads was 6.8% in 2007 and 5.7% for the first nine months of 2008.
70. The question is whether BTQ was actively in the market for this type of business. In 2005, the vast majority of its business was generated by paid search. Although later BTQ took steps to increase the importance of natural search in its marketing, paid search predominately accounted for BTQ's transactional visitors. Its business plan for 2007/08, which was in the course of preparation in January 2007, stated that at that time paid search represented 90% of transactional visitors and natural search represented 4%.
71. Mr Plumbly said that BTQ would not appear in the first 50 to 100 natural search results for "buy-to-let" mortgages or any likely variation. He relied in part on the results of a search conducted on 21 May 2008. He said that BTQ's buy-to-let business came from searches from broad terms such as "mortgages". In his evidence Mr Paleomylites said that he could not say whether BTQ had never had any success from natural search for buy-to-let. However, in the light of the very small proportion of transactional visitors and revenue from buy-to-let represented by the 2006 figures, it is not likely that it did. It was common ground that AABTL was extremely unlikely to appear on a natural search for the term "mortgage".
72. As far as paid search is concerned, the issue is whether BTQ used "buy-to-let" as a negative key word. I have referred to Mr Plumbly's evidence that "buy-to-let" was always a negative key word for mortgage products because the cost of acquisition of leads was greater than the price obtained for those leads. Mr Paleomylites said that BTQ tailored bids for key words to enable it to make a profit and it used negative key words selectively. A list of negative key words used by BTQ in September 2008 shows that "buy-to-let" is not one of them. There is no record of negative key words used by BTQ in 2005 and 2006 because Google does not maintain an audit trail for negative key words. Mr Paleomylites said that negative "buy-to-let" key words were only used in certain ad groups and were not used at campaign level. Mr Aylwin invited me to accept Mr Paleomylites' evidence. He characterised Mr Plumbly's evidence on this as assertion without elaboration or supporting evidence. He submitted that this was extraordinary because Mr Plumbly was responsible for BTQ's marketing and spending a very large budget on paid search by the end of his time at BTQ. He submitted that the absence of detail in Mr Plumbly's evidence was not accidental and that providing the detail would show that the position was as Mr Paleomylites said it was.
73. As far as the criticisms of Mr Plumbly's evidence are concerned, I do not consider that the absence of supporting evidence for what he has said should be held against him. There is a similar lack of supporting evidence for the defendant's position and for what Mr Paleomylites said about the negative key words used in 2005 and 2006. Google keeps no record of negative key words used by a site in the past and BTQ's own data on its mortgage business was lost when Mr Newby did not transfer it to the new IT system in January 2006. Mr Plumbly was not likely to have any documentation relating to this generated in the course of his employment at BTQ.
74. Moreover, although Mr Paleomylites said that "buy-to-let" was not used by BTQ as a negative key word at the campaign level, the word "let" was so used in the September 2008 table at the campaign level. That is consistent with Mr Plumbly's evidence. Secondly, the 3% proportion of buy-to-let leads from BTQ in 2006 is significantly less than the proportion of buy-to-let mortgages to all mortgages in the general market at the relevant time. That was in the region of 10%. I accept Mr Plumbly's evidence that during his time at BTQ "buy-to-let" was a negative key word for mortgage products because the cost of acquisition of leads for this type of business was greater than the price obtained for those leads.

(h) Deterioration of Mr Plumbly's relationship with Mr Paleomylites:

75. According to Mr Plumbly, the relationship between him and Mr Paleomylites deteriorated towards the end of 2005 because of differences as to the amount of commission bonus payable. He said Mr Paleomylites told him the bonus was to be based on the monthly balance in BTQ's account rather than its gross profits as provided by clause 3 of Mr Plumbly's employment contract, did not give a satisfactory explanation of why this should be so, and only paid the correct amount when chased by Mr Plumbly and Mr Newby. He also said Mr Paleomylites told him the commission bonus would not continue in 2006. In his third statement Mr Paleomylites says this decision was made because the company needed working capital as it expanded. Mr Plumbly received a pay increase of £10,000 in December 2005 and a further increase in January 2006. He considered these did not compensate him for the loss of a bonus worth 5% of the gross profit. He said that by Christmas 2005 he had decided to leave BTQ, but not to resign until after he exercised his share option in March 2006. There was a further deterioration in the relationship in January and February 2006. This was caused because, during discussions among the management team, which at this stage included Mr Newby and (see [80]-[82]) Mr Adalbert, Mr Paleomylites said that the holdings of existing share option holders would be diluted when new employees were given share options.

(i) Developments regarding AABTL:

76. In November 2005 Mr Plumbly changed the web-host of AABTL from support@1and1, which was based outside the UK, to Easily, a UK based web-host. This increased the chances of the web-site being identified as a result of a natural search. On 10 December he emailed Overture saying he had "a lot of property investment traffic" at AABTL and "several thousand high net worth individuals" on his mailing list, and wanted to feature Overture search results on the site, although nothing came of this. During this period there were also email exchanges between him and Mr Crane about improving AABTL's page ranking. Mr Aylwin submitted that these were matters under consideration in order to improve AABTL's commercial profile. Consideration of the annotations to the Wayback machine results, however, supports Mr Plumbly's evidence that there were no significant changes to the AABTL website.

(j) Thomas Adalbert's involvement with BTQ:

77. I turn to Thomas Adalbert's involvement with BTQ. I have referred (see [9]) to his having helped Mr Paleomylites to develop the business model for Beat That Quote Ltd in 2002. They had agreed that Mr Adalbert would get 5% of the equity of Beat That Quote Ltd. for the advice and assistance he had given. In 2005 Mr Adalbert was running his own company, The Preference Service. He said their idea, which crystallised in July 2005, was for him to join the new company when it was up and running or when he sold The Preference Service, whichever occurred first. When, in about November 2005 Mr Paleomylites decided to appoint a Sales Director to BTQ, it was Thomas Adalbert, whom he wanted to appoint to the post and to BTQ's board.
78. It is necessary to say more about the circumstances in which Mr Adalbert started attending BTQ's office and the date on which he started his employment with the company because Mr Croxford submits that their evidence on these matters shows that neither Mr Adalbert nor Mr Paleomylites are truthful witnesses.
79. In August 2005 Mr Adalbert sold The Preference Service to a firm called Interactive Prospect Targeting Ltd. (hereafter "IPT"). It appears from a letter from him dated 31 January 2006 to IPT's solicitors that Mr Adalbert resigned from IPT on 24 November 2005 and, at IPT's request had been on "gardening leave" since 28 November. The terms of the sale to IPT prevented him starting with BTQ until 1 March 2006. In his statement Mr Adalbert says that he started working for BTQ on that date. Mr Paleomylites, in his first statement, says that he offered Mr Adalbert a full-time position as Sales Director on 1 March 2006. However, Mr Plumbly, in his second statement says that he believed that Mr Adalbert started working for BTQ in about November 2005, and that he did so using the assumed name of William Taylor. Mr Paleomylites and Mr Adalbert do not refer in their statements to Mr Adalbert's presence at BTQ's office at that time. However, when cross-examined both accepted that he was there.
80. Mr Adalbert said inter alia that he attended BTQ's office on a full-time basis from November 2005, that a fictitious persona (with an email address) had been created for him, and that he spoke to BTQ's clients representing himself as that person - William Taylor. He said he placed a job advertisement for BTQ, and attended its Christmas party. He said that this was all part of a due diligence exercise by him in connection with a possible investment by him in BTQ. When asked what investment, he said it was his potential employment by BTQ with an entitlement to acquire shares in the company. He said he wanted to see the potential of the business in the long term, and it was like a form of interview. At that time he was keeping his options open and had interviews with other companies in early 2006. Mr Croxford submitted this explanation is incredible and was deployed in the light of Mr Adalbert's letter to the solicitors representing IPT, to which I have referred. That letter was disclosed to Mr Plumbly's lawyers only on the first day of the trial. In it Mr Adalbert said he was "looking at a private investment opportunity with Finance Leads Online" (BTQ's predecessor company) and he had been "conducting some in-depth market analysis – both internal and external as due diligence prior to making any investment".
81. In cross-examination, Mr Paleomylites said Mr Adalbert was formally not allowed to work for BTQ, whatever Mr Adalbert was doing, he was doing with the express consent of IPT, and the assumed name reflected the fact that IPT was keen that Mr Adalbert was not seen to be working for someone else immediately after they had acquired his company. His evidence was thus, at its lowest, that he believed Mr Adalbert had IPT's consent for what he did but it is, however, significantly different from Mr Adalbert's evidence. It presupposes that Mr Adalbert was working for BTQ in order to reassure himself that he wanted to do so. However, Mr Adalbert states he was not working for BTQ at that time and that he did not seek permission to do so from IPT.
82. I do not accept the evidence of either Mr Adalbert or Mr Paleomylites on this matter. Apart from the significant difference between their evidence, and even if the explanation for the use of an assumed name is accepted, it is difficult to see why someone investigating the long-term potential of a business owned by someone he knew well should do some of the things Mr Adalbert did, such as placing a job advertisement and attending the company's Christmas party. I find that Mr Adalbert was working for BTQ during the period between November 2005 and March 2006, and that Mr Paleomylites knew he was doing so in breach of his obligations to IPT. Their written and oral evidence sought to conceal this.

(k) Mr Plumbly's performance at BTQ:

83. I now deal with the evidence about Mr Plumbly's performance. During working hours at BTQ he undertook some work on the telephone and by email relating to his own business activities, in particular his investment properties but also his operation of AABTL's website. Mr Newby and Mr Adalbert knew this but did not raise it with either Mr Plumbly or Mr Paleomylites. Mr Paleomylites also knew and said that within limitations it was not an issue for him. Mr Plumbly said that he was working long hours and these activities did not interfere with his work for BTQ. Mr Paleomylites accepted that until November or December 2005 Mr Plumbly worked very long hours and was very committed to his work. However, he said things changed and, by January or February 2006, his work started to tail off. Mr Adalbert and Mr Newby said that at some point Mr Paleomylites criticised Mr Plumbly. Mr Adalbert said Mr Paleomylites told Mr Plumbly off for not doing enough work and Mr Newby said that Mr Paleomylites told Mr Plumbly he lacked the killer instinct necessary in business. Notwithstanding these criticisms, Mr Plumbly's salary was raised by £10,000 a year in December 2005 and by another £10,000 a year in the very next month, January 2006. Moreover, at about the time Mr Paleomylites said Mr Plumbly's work started to tail off, he said he decided to make him a director of the company.
84. During February 2006 there was an occasion on which Mr Plumbly, Mr Crane and Mr Newby went for a drink at the Pineapple pub. Mr Newby said that Mr Plumbly spoke of a new venture because he found the atmosphere at BTQ difficult and that Mr Crane tried to persuade him to join the new venture. Mr Crane denied that he tried to persuade Mr Newby to leave BTQ. He said that he had mentioned an idea he had recently thought of to Mr Newby in general terms to get his view as an expert programmer about its feasibility and that Mr Newby gave him the impression that it would be technically difficult and expensive to develop the idea. Mr Newby did not say Mr Plumbly tried to persuade him to leave. There is no evidence whatsoever that Mr Plumbly sought to persuade Mr Newby to leave BTQ.
85. Mr Adalbert said that the standard of Mr Plumbly's work fell from early March. He said that, at that time, Mr Plumbly told him that his trust in Mr Paleomylites was jaded because he did not understand what was being proposed in discussions then taking place about the dilution of the interests in the company under the share option agreements. He also said that, when Mr Plumbly was asked about a task he was to do, he would say he had not got round to it yet. Mr Plumbly's evidence was that, by this time, he had decided to leave the company once he had exercised his option to acquire shares in BTQ.

(l) AABTL's emails using the AWeber service:

86. It is convenient at this point to deal with emails sent out on a mass basis to AABTL's subscribers using the AWeber service. There are two in the bundle, although, in the light of the criticisms made of Mr Plumbly's disclosure Mr Aylwin invited me not to accept Mr Plumbly's evidence that these were the only such mailings. The first of these emails, dated 20 January 2006, was the first of 5 daily emails that were sent to those who signed up for the website's buy-to-let guide to provide an introduction to the buy-to-let property market. The bulk of the email is concerned with buy-to-let property but it also gives an explanation of "leverage" and makes three suggestions. The second suggestion is that the subscriber:

"speak to an IFA about mortgage requirements. Fill in the online form below for free advice from a UK professional mortgage advisor. As well as buy-to-let mortgages, you may also wish to discuss the option of re-mortgaging your current property so you can fund your next buy-to-let investment."

87. The second of the mass mailings is dated 3 April 2006. It is also AABTL's five day guide follow-up. Again, while focussed on the buy-to-let market, other matters are mentioned. The invitation to fill the form, which was the Leadbay form, if the subscriber wanted to speak with a whole of market independent financial advisor for information and a free quote is contained in the document. Another email dated 26 April includes the message "find the best mortgage and re-mortgage deals from over 8,500 mortgage products". Mr Aylwin submitted that these emails showed that AABTL was competing with BTQ. Although they went only to subscribers of AABTL who were likely only to want buy-to-let finance advice, they were advertisements for "whole market mortgages" and thus in competition with BTQ.

(m) Discussions about share options:

88. It is clear that, in particular in January and February and at the beginning of March 2006, there were a number of discussions about the share options BTQ's employees had or would have. The discussions involved Mr Paleomylites, Mr Plumbly, Mr Newby, Mr Adalbert, and Ms Neary and it was said that the effect of employing new members of staff who would receive share options would be to dilute the holdings of existing option holders. Mr Plumbly objected to any dilution of his shareholding because it was his understanding that he was entitled to 10% of the company after a year.
89. Mr Plumbly said the question of options being granted to future members of staff came up when he first mentioned to Mr Paleomylites that he would soon be exercising his option in the last week of February. He said the matter may also have been discussed on or around 6 March. He said that when he told Mr Paleomylites he would soon be exercising his option to acquire shares in BTQ Mr Paleomylites replied that his share interest in the company would be diluted by share options that were to be given to new employees. Mr Plumbly said that he would have to take legal advice and that Mr Paleomylites asked him not to as he was concerned that what BTQ was doing might cause it problems from a tax perspective. Mr Plumbly said Mr Paleomylites also asked him to sign a disclaimer saying he would not sue BTQ over this issue. Mr Paleomylites denies mentioning any tax problems or asking Mr Plumbly to sign a disclaimer. I accept Mr Plumbly's evidence on this. His account is supported by a contemporaneous email (dated 8 March 2006) from him to his cousin Mark Bricknell stating (see [97]) that "the MD", that is Mr Paleomylites, would require him to sign such a disclaimer. There would be no reason for him to refer to being required to sign a disclaimer if Mr Paleomylites had not said this to him.
90. In his oral evidence Mr Plumbly said he understood that (subject to the protection under s.994 of the Companies Act 2006) his shareholding could be diluted by an increase in the company's share capital. However, an email dated 8 March to his cousin Mark Bricknall (see [96] below) suggests he did not understand the implications of what was proposed in relation to the share options. In paragraph 5 of his second statement, he says that it was his understanding "that [his] 10% stake would not be diluted under any circumstances, whether as a result of further employees joining BTQ or otherwise", and it was for this reason that he strongly objected. I have concluded that at the time of the discussions Mr Plumbly did not understand the way his interest might be diluted. He thought that dilution would be inconsistent with his option to acquire shares representing 10% of the ordinary shares in BTQ, and this contributed to the deterioration in his relationship with Mr Paleomylites.

(n) The "directorship" issue:

91. As far as directorships were concerned, Mr Paleomylites had decided in 2005 that Mr Adalbert should become a director of BTQ when he joined the company and Mr Plumbly knew this. Beyond this there is a conflict between their evidence. Mr Paleomylites said that towards the end of February 2006, he, Mr Plumbly, Mr Newby and Mr Adalbert discussed appointing new directors to the board. He said Mr Plumbly felt that as he had been with the company from the start he should become a director whereas Mr Newby was indifferent. Mr Paleomylites said he decided to make Mr Plumbly a director despite the drop in his performance because he thought that his performance had dropped because other people had been brought into the company and he felt marginalised, and that making him a director would remedy this. He said Mr Plumbly and Mr Adalbert were appointed directors at a board meeting on 1 March. He was sure that both the discussion of Mr Plumbly's appointment as director and the appointment occurred before Mr Plumbly exercised his option.
92. Mr Plumbly denied that there were such discussions, that he said he wanted to be a director, or that he consented to appointment as a director. His evidence was that Mr Paleomylites informed him on or around 9 March that he was going to make him a director, but that he did not respond or consent. Mr Plumbly was initially not sure whether the discussion of the directorship occurred before or after he exercised the option but in the light of his email to Mr Bricknell he thought it was on 9 March, after he exercised it. Mr Adalbert and Mr Newby's evidence deals with the discussions about share options and dilution but they do not refer to any discussion about the appointment of directors in their statements and were not asked about this when giving oral evidence.
93. The documents before the court include two documents recording the minutes of a board meeting of Finance Leads Online Ltd on 1 March 2006 (just over two weeks before the company's name was changed to BTQ on 16 March) and the record of the filing of the notification of Mr Plumbly's appointment with Companies House electronically on 13 March by Russell Marks (Company Secretarial) Ltd., BTQ's company secretary.
94. The first document recording the minutes was disclosed shortly before the hearing and the second after the start of the hearing. Both are signed by Mr Paleomylites. He said that the document originally disclosed was created by Stephenson Harwood at a time the other, contemporary, minute had been temporarily lost. It had been created in connection with the due diligence being conducted by Summit Partners, a firm of venture capitalists who were considering making a substantial investment in BTQ. Stephenson Harwood confirmed that it created the document originally disclosed. Mr Paleomylites said the document disclosed during the hearing was a contemporaneous minute obtained from Russell Marks (Company Secretarial) Ltd, who acted for the company at the time. There are differences between the documents. The document obtained from Russell Marks names those present as Mr Paleomylites and Russell Marks (Company Secretarial) Ltd. as company secretary, whereas the document created by Stephenson Harwood only records Mr Paleomylites as present. That document also specifies that the meeting was held at 2pm. No time is specified in the document prepared by Russell Marks. That document gives the names and addresses of Mr Plumbly and Mr Adalbert but the document created by Stephenson Harwood only gives their names.
95. There is also a document recording a board meeting on 6 March chaired by Mr Paleomylites and attended by Mr Plumbly and Mr Adalbert. Mr Paleomylites is recorded as stating that the purpose of the meeting was to consider the proposed change of name of the company to BTQ. The document records that it was noted that this would require the prior approval of "the sole shareholder". Mr Paleomylites was the sole shareholder. The document also records that, after a draft written resolution was produced, the meeting was adjourned to enable the sole shareholder to consider the draft resolution, and that, after the adjournment, the Chairman (that is Mr Paleomylites) reported that the draft resolution had been approved by the sole shareholder (that is himself). Mr Plumbly recalled management meetings at which changing the company's name was discussed but said that Mr Newby and Ms Neary, who were not directors, were present. In cross-examination he said any discussion was informal, he did not recall a vote, and did not recall a note taker at the meeting. Mr Paleomylites, as the controlling shareholder, tended to make decisions such as that about changing the company's name himself. He said that it was possible that the question of share options was also discussed at this time. Mr Adalbert's evidence did not deal with this matter.
96. On 8 March 2006 Mr Plumbly gave notice that he was exercising his option to acquire shares in the defendant. That day he emailed, his cousin, Mark Bricknall informing him of this and stating:

"The MD here tells me new shares can be issued diluting my equity so long as they are sold at market value. Previously he wanted to issue these with a nominal strike price thus reducing the value of my shareholding as I understand it. After much discussion he now proposing the new employees get share options based on to be newly issued shares (when exercised) and we do set a strike price based on current market valuation.

It does seem he thinks I should agree to what this valuation is, and I don't really understand the implications of this. …

He has also said he will require me to sign a disclaimer saying I wouldn't take legal action against the company and probably a bunch of other stuff."

97. On 9 March Mr Plumbly sent another email to Mr Bricknall. Its subject heading is "Notes from meeting with MD today". The material parts of this email, timed at 2.56pm, are:

"On return from the accountant the MD has come up with the following suggestion.

[(1)(2) & (3) deal with what Mr Paleomylites considers to be a fair value for the company and with compensation for the dilution of Mr Plumbly's equity and the equity split proposed.]

(4) He is proposing I am made a Director. I can't help being suspicious about this, I have never expressed an interest and I am currently living in a world of paranoia as I have many doubts about his integrity as discussed."

98. The next document, chronologically, is an email from Mr Paleomylites to Jignesh Doshi at Russell Marks timed at 15.10 on 9 March, 15 minutes after Mr Plumbly's email to Mr Bricknall. The subject of this email is "directors". In the body of the email, there is a heading "directors forms". Mr Adalbert and Mr Plumbly's names and addresses are set out below that heading. Mr Paleomylites described this as an administrative step to execute the decision taken on 1 March.
99. Mr Paleomylites also spoke to Mr Doshi on the telephone. An email timed at 13.55 on 10 March from Mr Doshi to Mr Paleomylites refers to a telephone conversation between them. It asks for additional personal details such as dates of birth and the new directors' appointment dates to enable him to file the appointment forms with Companies House electronically. Mr Paleomylites replied in an email timed at 16.57 that day giving the requested details.
100. Mr Plumbly said that he did not recall being asked for the personal details and certainly did not recall the purpose for which the details were being asked. He thought that he would have to sign a form consenting to be a director because Mr Paleomylites had told him this. Mr Plumbly was not sure whether the discussion of the directorship occurred before or after he exercised the option. Mr Paleomylites was sure that both the discussion and Mr Plumbly's appointment as director occurred before he exercised his option. It would appear from the first of the emails Mr Plumbly sent to Mr Bricknall on 9 March that the possibility that new shares would be issued which would dilute Mr Plumbly's equity and the proposed disclaimer, were Mr Plumbly's main concerns.
101. Mr Paleomylites said that there was no reason for him to backdate the appointment. While appointment with effect from 1 March would mean Mr Plumbly would have been subject to fiduciary duties before he exercised his share option, at the time he did not know that Mr Plumbly would resign or that there was any reason to make him a fiduciary at an earlier date. But equally, why did Mr Plumbly email his cousin in the terms that he did on 9 March if he was aware that he had been appointed a director on 1 March?
102. I am not satisfied that there was a board meeting which appointed Mr Plumbly as a director before he exercised the option on 8 March or that he consented to being appointed a director before then. First, Mr Plumbly's almost contemporaneous email to Mr Bricknall on 9 March states, of Mr Paleomylites, "he is proposing that I am made a director". It does not state that the decision had been made by the board or that he had consented to appointment. The terms of the email are consistent with Mr Plumbly's evidence that he had not asked to be a director, that he had great doubts about accepting, and that any discussion about changing the company's name on or about 6 March was not at a meeting which he attended in the capacity of a company director.
103. Secondly, the minute obtained from Russell Marks, which Mr Paleomylites stated was a contemporaneous record of the relevant board meeting, records Mr Plumbly's and Mr Adalbert's addresses and the dates on which their appointments were to take effect. However, on 9 March over a week after the date on the document and shortly after the exercise of the option, Mr Paleomylites sent Mr Doshi their addresses. Had the minute obtained from Russell Marks been a contemporaneous document, Mr Doshi would have had access to it and would not have needed their addresses. While it is possible, as Mr Paleomylites said, that he voluntarily supplied their addresses again as a matter of convenience, this does not explain Mr Doshi's subsequent request for the dates of their appointments at the time he asked for the additional personal details. Had the minute obtained from Russell Marks been a contemporaneous document, Mr Doshi would not have needed to ask for the dates of their appointments.
104. The communication between Mr Paleomylites and Mr Doshi shortly after his meeting with Mr Plumbly on 9 March and Mr Plumbly's 2.56pm email to Mr Bricknall have led me to conclude that Mr Paleomylites' evidence on this issue is not accurate. He maintained his position in the face of the contemporaneous documents but was unable to explain why Mr Doshi would have asked for the names of the new directors or their dates of appointment or why, if the appointments were made on 1 March with immediate effect, nothing was done was about registering them with Companies House until after the communication between Mr Paleomylites and Mr Doshi on 9 and 10 March, i.e. immediately after Mr Plumbly exercised his option on 8 March.

(o) Mr Plumbly's resignation and subsequent developments

105. On 29 March 2006 Mr Plumbly resigned from BTQ. That day he emailed Mr Paleomylites informing him of 8 domains registered in his name and saying that if Mr Paleomylites let him know to whom to transfer them he would take care of it. The domain names included loans-secure.org.uk, loans-home.org.uk, and home-owner-loans.me.uk, which the defendant at one time said Mr Plumbly had sought to establish with a view to competing with BTQ. Mr Paleomylites told him that all domains needed to be transferred to the company and Mr Plumbly did so in letters to Nominet and Easily on 23 April 2006. He left BTQ on 29 April. I have referred to the two bulk emails AABTL's subscribers received through AWeber on 3 and 26 April before Mr Plumbly left the company.
106. With regard to the allegedly competitive websites Mr Plumbly's evidence was that a number of them were bought by him on behalf of BTQ or at BTQ's request. In a number of cases, including the websites about which allegations were pursued at the trial, he did so after he exercised his share option. In other cases he did so in order to assist BTQ's position in natural searches by disguising the fact that they were in fact connected to BTQ. In the case of other domain names, Mr Plumbly said flytolet.net was intended to develop into a similar site to AABTL for overseas buy-to-let properties but never developed beyond a basic holding page. He said emailexpertise.co.uk was purchased in November 2004 before his employment with BTQ and that the site was not finance related and did not compete with BTQ. He said find-the-best.co.uk was purchased in late 2005 with a view to transferring it to BTQ. Mr Plumbly thinks he did not ever transfer it to BTQ but the site was never hosted on the internet.
107. The allegations about acquiring domain names with a view to competition with BTQ were only pursued in respect of www.remortgages.com, www.secured-loan.com and www.secured-loans.com. These websites were purchased by the claimant after the exercise of the option. Mr Paleomylites alleged that the claimant had refused to transfer the domain names when asked after he had resigned. But these domain names were only acquired by the claimant on 9 March. Mr Plumbly must have informed Mr Paleomylites of the fact that he had bought them soon after he acquired them, which, even if logically consistent with the suggestion that he wished to conceal the fact that he had purchased them or refused to transfer them because he had acquired the domain names with a view to competing with BTQ, does not sit comfortably with such a suggestion. In any event, Mr Plumbly transferred the domain names into the company's name within days of his resignation.
108. On 10 May 2006 Mr Plumbly wrote asking Mr Paleomylites to arrange for his name to be removed as a director of the company. The letter states that he was expecting to have to sign something consenting to be made a director. The letter also states that he requires Mr Paleomylites to confirm that he had registered Mr Plumbly as holder of the shares he acquired by the exercise of the share option agreement and asking for the share certificate. Following that letter, in a letter dated 17 May, the company's then solicitor Bevan Brittan wrote stating that the company had reason to believe Mr Plumbly was directly competing with it during his employment, in particular by working with Leadbay, and stating that in view of this and other breaches of contract and fiduciary duties and because Mr Plumbly was no longer in the full time employment of the company, the purported exercise of his option to acquire shares was invalid. The solicitors returned Mr Plumbly's £1 subscription payment.
109. In October 2006 Mr Paleomylites and the other shareholders in BTQ were contemplating a partial equity sale. There is an email exchange between Mr Paleomylites and Lazards on 18 and 19 October in which Lazards state they believe they could achieve £300 million. In an interview in November 2006 Mr Paleomylites stated that "there will be a trade sale or IPO at some point… but there is no timescale for that". In November 2006 the issued and authorised share capital of BTQ was sub-divided so that the authorised share capital was 100 billion shares. A draft of a business plan for 2007/08 for venture capitalists attached to an email dated 15 January 2007 shows the pursuit of these plans for a trade sale or IPO. That business plan also states in paragraphs 5.1.1 and 5.1.2 that natural search then represented 4% of the company's transactional visitors and paid search represented approximately 90% of transactional visitors. It is also said that considerable resources had been expended by that date to develop natural search which it stated would become an increasingly important part of the marketing mix.
110. In early 2007 there were negotiations with Summit Partners (a firm of venture capitalists), about the partial equity sale. An email dated 30 April 2007 set out Summit's specific proposal made after being told its valuation of between £45million and £82million was not acceptable to Mr Paleomylites. Summit said that they would invest £12 million for a 12% share of the business. In an email dated 6 May 2007 Mr Paleomylites told Cyrus Kapadia that BTQ's management team unanimously rejected Summit's offer because Summit wanted to retain a veto below a 250% return and because Summit wanted a 3-4 year investment whereas the management team considered the existing share holders would best be served by getting out within 2 years.

(o) Misuse of confidential information

111. Finally, I deal with the evidence relevant to the defendant's submission that Mr Plumbly misused confidential information, and in particular supplied David Crane with information about BTQ's business model which enabled him to set up a website called Comparefirst.com later. Mr Crane acquired the domain name in about December 2006 and the site started to trade in January 2007. Mr Plumbly and Mr Crane denied that Mr Plumbly had passed information about BTQ's business model to Mr Crane or helped him in preparing the website to go live. BTQ's case relied primarily on the fact that it was apparent from its website that, like BTQ, Comparefirst.com has no intermediate page between arrival on the website and filling in the form. Reliance was also placed on Comparefirst.com's use of Freedom Finance and Norton Finance, the two lenders used by BTQ. Mr Paleomylites also referred to an email between Mr Plumbly and Mr Crane in November 2005 in which there is a reference to "affiliate programs/click-thru" providing nice bonuses.
112. It is simply not possible to infer from these three matters that Mr Plumbly supplied Mr Crane with confidential information enabling him to set up Comparefirst.com. Mr Crane had worked on projects for BTQ and knew how successful the company was. It was possible for him to examine and study BTQ's website in the same way as Mr Paleomylites had examined and studied MoneySupermarket.com's website. Freedom Finance and Norton Finance were two of the six biggest lenders and it is not surprising that they would be used. However, David Crane said he mainly used Norton Finance and Central Capital, and only used Freedom Finance on two or three occasions. The email upon which Mr Paleomylites relied was in general terms and was sent over a year before Mr Crane acquired the Comparefirst.com domain name.

Part 4: Discussion

113. In view of my findings of fact and my conclusions from them, a number of the issues of law canvassed at the hearing do not fall for decision. For instance, I have found that Mr Plumbly was not a director when he exercised the option. Accordingly, the question whether he was in breach of his fiduciary duty as a director, and the implications of any difference in this context between any fiduciary duty owed by him to the defendant and his duty of fidelity or loyalty to the company as a senior employee do not fall for decision. It is therefore not necessary to decide whether the statement of Peter Smith J in Tesco Stores Ltd. v Pook [2004] IRLR 218, that there was an implied term that a share option could not be exercised by an employee who was in repudiatory breach of his contract is correct and if so, whether it is confined to fiduciaries or has a wider operation.
114. It is clear from Nottingham University v Fishel [2000] ICR 1462 and Helmut Integrated Systems Ltd. v Tunnard [2007] IRLR 126, fiduciary duties do not arise out of an employment relationship itself, but from the fact that within a particular employment relationship there are specific contractual obligations which the employee has undertaken which place him in a situation where equity imposes the rigorous duties of a fiduciary in addition to his contractual obligations: see Nottingham University v Fishel at 1491 and Helmut v Tunnard at [36]- [38] and 50. Although it is not necessary to decide whether, had the claimant been in repudiatory breach of his contract of employment by directly competing with the defendant, he would (absent him being a fiduciary) have been entitled to exercise the option, I observe that the argument that he could nevertheless exercise the option is not an attractive one. Mr Croxford relied on the approach of Rix LJ in Mallone v BPB Industries plc [2002] IRLR 452 in which the Court of Appeal held that an express power in a share option scheme to deprive an employee of rights under the scheme on the ending of his employment only permitted this to be done by the employer exercising his discretion to do so rationally. In that case, however, the employee in question had been dismissed in circumstances in which an Italian court subsequently awarded him some £300,000 in compensation, and the analysis of the court is not concerned with the position of an employee in serious breach but with the construction and operation of the clause in the share option scheme.
115. I have found that the claimant disclosed his operation of AABTL to Mr Paleomylites before he entered into his contract of employment. I have accepted the claimant's evidence that Mr Paleomylites reviewed or looked at the AABTL website containing the link to Leadbay before writing the side letter. It would (or should) also have been clear to Mr Paleomylites from the email from Leadbay dated 4 March 2005 that the claimant forwarded to him that the claimant had been sending leads to Leadbay. Mr Paleomylites knew or should have known that, if AABTL was to use Leadbay as a test bed, as he said had been agreed, it would have to generate "live" or real leads. Accordingly, permitting AABTL to be used as a test bed involved permitting the generation of real mortgage leads.
116. The revenue streams available to AABTL from Leadbay, Amazon and Google Adsense were visible on the AABTL site, both before and after the claimant entered into the contract of employment and share option agreement and before Mr Paleomylites wrote the side letter. Additionally, Mr Paleomylites said he was content for Mr Plumbly to make money from the AABTL website. In these circumstances I do not consider that the claimant was under a duty specifically to disclose that AABTL was using Google AdSense and the Leadbay form.
117. I turn to the question whether Mr Plumbly was in breach of an obligation in his contract of employment with BTQ. Clause 17 prohibited him "directly or indirectly at any time within the relevant period [to] engage or be concerned or interested in any business which competes" with BTQ's business without the prior written consent of the company. Even without that obligation, it is common ground that Mr Plumbly was under an implied obligation to act in the best interests of BTQ and not to compete with it as part of his implied duty of fidelity: see for example Wessex Dairies v Smith [1935] KB 80 and Hivac Ltd. v Park Royal Scientific Instruments Ltd. [1946] 1 Ch 169.
118. The side letter states that BTQ's agreement that Mr Plumbly could continue to operate his AABTL website was "conditional upon your website not directly competing with the business of the company" (my emphasis). The side letter states that it does not "alter in any way ...your employment agreement except as stated above". Accordingly, the side letter was either intended to be incorporated into the employment contract or in effect to vary clause 17 to permit the operation of AABTL provided that it did not "directly" compete with BTQ's business.
119. Competition broadly means the striving for custom between two or more for the same object, for example striving for custom between those who have the same commodity to dispose of. Although there was some reference in the documentation to television advertising, no reliance was placed on this in the context of competition. In the light of what Mr Plumbly had told Mr Paleomylites and the visibility of the revenue streams from Leadbay, Amazon and Google Adsense on the AABTL site, the reference in the side letter to the agreement being conditional upon AABTL "not directly competing" with the defendant's business must mean something other than the use of the Leadbay form and Google Adsense. Mr Aylwin relied on a number of matters, including Mr Plumbly's contact with Overture in December 2005 and the emailings using the AWeber service containing what he described as advertisements for "whole market" mortgages. One of the emails contains the statement "find the best mortgage and re-mortgage deals from over 8,500 mortgage products". Mr Aylwin submitted that the emails showed that AABTL was competing with BTQ. Although they went only to subscribers of AABTL who were likely only to want buy-to-let finance advice, they were advertisements for "whole market mortgages" and thus in competition with BTQ.
120. Before turning to those issues, I deal with the consequences of my finding (see [74]) about BTQ's use of "negative key-words". The case largely proceeded on the basis that the only way there could be competition between the two websites was through the use of search engines, in the sense that there is a reasonable chance that the two websites would both appear in the results of the same search.
121. I have found that during Mr Plumbly's time at BTQ "buy-to-let" was a negative key word for mortgage products because the cost of acquisition of leads was greater than the price obtained for those leads. Moreover, BTQ would not appear in any material or relevant place in a natural search for a buy-to-let mortgage. Mr Plumbly said it would not appear in the first fifty to one hundred pages of results. It is common ground that AABTL would not appear in a search for the term "mortgage". The consequence is that there is little chance of a person using a search engine obtaining links to both BTQ and AABTL in the results of the same search. In these circumstances, and leaving aside other conduct by Mr Plumbly relied on by Mr Aylwin, I have concluded that AABTL was not directly competing with BTQ. I have referred (see [68]) to the fact that, if a consumer arrived at the BTQ site as a result of searching for a term such as "mortgage" but then filled in a form seeking a buy-to-let mortgage, BTQ would process the request and pass it on. Since BTQ was not itself striving for custom from those wanting buy-to-let mortgages and used negative key-words for this type of business, I do not consider that the fact it processed requests which got to it in this way meant that it and AABTL were "directly" competing for such business.
122. What of the other conduct relied on by Mr Aylwin? By December 2005 Mr Plumbly had (as he accepted that he had) become more alive to the concept of harvesting leads. The contact with Overture, however, was about wishing to feature Overture search results on AABTL. In any event it did not lead to anything. It was at most indicative of an intention to seek to earn income from Overture by misrepresenting AABTL's commercial profile, and not of AABTL at that time directly competing with BTQ's business.
123. I turn to the two AWeber emails and the email dated 26 April 2006. They must be assessed in the light of my finding (see [76]) that examination of the Wayback machine supports Mr Plumbly's evidence that there were no significant changes to AABTL's website during his time with BTQ and the fact that the emails were only sent to those who signed up to AABTL's buy-to-let guide. The reference to "over 8,500 mortgage products" includes mortgages other than for buy-to-let. It is, in a broader sense "competition" by AABTL with BTQ in relation to those who, as a result of reading the buy-to-let guide and the email applied for some other type of mortgage using the link in the email. However, taking into account that the emails were sent in response to an expression of interest in a buy-to-let guide, I do not consider that any competitive effect from this reference constituted "direct competition" with BTQ. Neither the contact with Overture nor the AWeber emails in my judgment put Mr Plumbly in breach of his obligation in the side letter not to compete directly with BTQ in his operation of AABTL.
124. Finally, with regard to the AABTL website, the side letter made provision for BTQ to require Mr Plumbly to close the site irrespective of whether it was competing with its business. BTQ could, accordingly, have asked for the Leadbay form to be removed and for AABTL to cease using Google Adsense if the claimant was to continue to operate it. It did not do so. Mr Croxford submitted that the side letter specified the remedy available to BTQ if it was dissatisfied with Mr Plumbly's operation of the website and that remedy was not to disentitle him from exercising his share option. It was also submitted that, in the light of AABTL's total receipts from Leadbay in the period (on which see [35]) any competition with BTQ was minimal and should be disregarded. While these are factors on which the claimant is entitled to rely, I do not consider that they would have been conclusive had he committed a serious and repudiatory breach of his contract of employment with BTQ in relation to his operation of AABTL.
125. I turn to the two other alleged breaches relied on by the defendant. As far as the claimant's telephoning and emailing about his own buy-to-let business and AABTL during office hours is concerned, in view of the hours worked at BTQ as it was getting started, I do not consider that what occurred constituted a breach. If I am wrong and it was a breach, it was not a serious breach, let alone a repudiatory one. Mr Paleomylites said that, within limits, such telephoning and emailing was not an issue. Mr Adalbert and Mr Newby said that they were aware of these telephone calls but did nothing about them. That in itself is an indication, particularly from Mr Adalbert who had come in at a more senior position to Mr Plumbly, that what he was doing was not regarded as serious.
126. What of the third breach alleged by the defendant? This allegation also fails. There is no evidence that Mr Plumbly used confidential information belonging to the company for his own use or that he divulged it to a third party such as David Crane or from which this could be inferred.
127. Since I have concluded that the claimant did not breach his contract of employment in the ways alleged by the defendant, the applicability of the principle in Alghussein Establishment v Eton College [1987] 1 WLR 587 and the circumstances in which an employee who is not a fiduciary may owe a duty to disclose his own wrongdoing considered by Arden LJ in Fassihi v Item Software (UK) Ltd. [2005] ICR 450 at [55] and [60] do not fall for decision. Whether or not the share option agreement and the contract of employment and the side letter are to be construed as a single contract or a collection of collateral contracts, absent a repudiatory breach of the contract of employment there is no bar to the claimant exercising his right under the share option agreement. The defence to the claim has not accordingly been made out. I turn to the question of remedy.

Part 5: The Remedy

(a) Specific Relief or damages

128. The claimant sought an injunction requiring the defendant to allot him the requisite number of shares in accordance with the option agreement, or damages representing their value had they been allotted on or reasonably soon after 8 March 2006. Taking account of the sub-division of BTQ's authorised share capital in November 2006 the requisite number of shares due to the claimant is 10 billion. At the hearing the claimant elected to receive damages and not an injunction if successful.
129. It is submitted on behalf of the defendant that, in view of Mr Plumbly's conduct regarding AABTL and the fact that he has not sought to repudiate the option agreement, the appropriate remedy is for him to receive shares in the defendant and not damages. But, in the light of my findings, Mr Plumbly's conduct regarding AABTL is not a ground for censure. This submission is also misconceived for two other reasons.
130. First, the primary remedy for breach of contract is damages. Equitable relief by way of injunction or an order for specific performance is only available where damages are inadequate to compensate the innocent party for the loss suffered from a breach of contract. There is no suggestion that damages would be inadequate in the present case. Moreover, acceding to the defendant's submission would be to lock Mr Plumbly into a minority position in an unquoted company, and thus protected only by the unfair prejudice jurisdiction of the Companies Court. Secondly, it is the victim of the breach of contract and not the contract-breaker who has the right to choose between alternative remedies. That choice may be made at any time until judgment: Oliver Ashworth (Holdings) Ltd. v Ballard (Kent) Ltd. [2000] Ch 12, at 28 and Personal Representatives of Tang Man Sit v Capacious Investments Ltd. [1996] AC 514, 521-522. The victim is thus allowed to choose the most advantageous remedy. I therefore turn to damages, and the assessment of the value of a 10% interest in BTQ on or soon after 8 March 2006.

(b) Quantum

131. Mr Wreford and Mr Lane agree that a revenue based multiple is a suitable method to undertake a valuation of BTQ at the present time. They now also agree about the multiplicand. Mr Lane stated that the forecasted revenues as at October 2008 are £13.34 million and Mr Wreford has used that figure as the basis for updating his valuation: see paragraphs 4.2-4.3 of Mr Wreford's Second Report and paragraphs 4.11 and 4.13 of Mr Lane's Second report, both dated October 2008. In their first reports, prepared in July, Mr Wreford had based his calculations on forecasted revenues of £16.3 million and Mr Lane on forecasted revenues of £15.1 million.
132. Mr Wreford and Mr Lane also agree that in principle the valuation of a 10% holding should be reduced to reflect the lack of control of a minority shareholder. They do not agree about the amount of such minority shareholder discount. There is also a sharp difference between Mr Wreford and Mr Lane as to the appropriate multiplier to be applied to the multiplicand of £13.34 million.
133. Mr Wreford's view is that, in the light of a number of comparators, the market has tended to take a revenue multiplier of between 2 and 2.5 regardless of other factors such as earnings. He considers that, if there is consistency between the revenue multipliers of a number of comparators irrespective of such other factors, no adjustment is required and that in this case there are such consistencies. He has taken account of deals he considers comparable. These involved u Switch, confused.com, Simply Switch and MoneyExpert. He also considered the position of MoneySupermarket.com, a listed company since July 2007, and the comparator used by Mr Lane. Mr Wreford also had regard to valuations of BTQ in 2006 and 2007 by Saffrey Champness, Summit Partners and Price Waterhouse Coopers. He regards the valuations of BTQ as less significant. In his second report Mr Wreford states that if the drop in the share price of MoneySupermarket is taken into account, the multiplier would be reduced to between 1.4 and 1.75 times revenue.
134. Mr Lane used a single comparator, Moneysupermarket, and applied a discount of up to 60% to reflect that it was more diversified than BTQ and of 20% to reflect that it was a publicly quoted company. The result was a multiple of 0.33 times revenue. Mr Lane's more recent report also uses this as the multiplier although in the joint statement he accepts that his discount should be revised down to between 45 and 60% and states that this leads to a revised revenue multiplier of between 0.55 and 1.2.
135. As far as the minority discount is concerned, Mr Wreford's view (first report, paragraphs 2.25-2.34) is that it depends on the likelihood of a trade or other sale of the entire company because in the event of such a sale the minority shareholding will be converted into cash. He refers (paragraphs 3.31-3.35) to a number of indications in the evidence that the plan was to sell or float BTQ early in its life as a company. His view (first report, paragraphs 7.21-7.24) is that if there is no prospect of a sale a discount of 80% is appropriate for a 10% shareholding and if a sale is imminent there should be no discount. He suggests a sliding scale depending on the chances of a sale. Mr Lane's view is that even if a sale of the business is imminent a discount of at least 65% is appropriate in the case of a 10% shareholding.
136. I deal first with the multiplier. As is the case in such exercises, both Mr Wreford and Mr Lane have made assumptions. I have concluded that, on the question whether adjustments need to be made to the comparators operating in the same sector, and the valuations of BTQ itself, some adjustment needs to be made and to this extent, Mr Lane's evidence is to be preferred. I do not, however, accept his evidence as to the extent of such adjustment and do not consider that a precise adjustment is possible because of the nature of the differences and the assumption built into both his and Mr Wreford's methodologies.
137. With regard to the comparable websites, Mr Wreford did not take account of the fact that Simply Switch changed hands for a nominal consideration in February 2008. His figures relied on a transaction eighteen months earlier in which the Daily Mail and General Trust paid £16.5 million for the company. I accept Mr Lane's evidence that it was wrong to use the figure of 2.5 times revenue based on the £16.5 million without having regard to what happened afterwards. I do not, however, accept that it follows that the transaction is of no assistance whatsoever.
138. As far as MoneyExpert is concerned, the revenue multiplier is not based on full accounts for the relevant period and Mr Wreford has made a number of assumptions about the nature of the acquisition of 40% of the company by Technology Crossover Ventures (TCV) for £25 million on 26 March 2008 in arriving at the conclusion that it shows value as a multiplier of 2 times revenue. Mr Lane suggests that it is likely that the terms attached to this investment by a private equity firm were likely to give considerable protection in that form at the expense of the shareholders. That may or may not be so but, since it is not possible to state what the true nature of the deal was, I have concluded that this company also cannot be relied on in an unqualified way.
139. Mr Lane's conclusion about MoneyExpert is that, taking account of such factors and of MMC Ventures' sale of its 74% interest to TCV and Nigel Warr, Money Expert's Chief Executive, the appropriate valuation multiple is 0.47 times revenue. However, this also involves assumptions. It assumes that the two sales in the last quarter of 2007 and in March 2008 were linked and that the total purchase price can be allocated evenly between the two sales or, if they were linked, the two stages of the transaction. Finally, it is based on a 400% increase in revenue between May 2007 and May 2008, although the company only filed abbreviated accounts, which do not disclose revenue figures.
140. In relation to MoneySupermarket Mr Wreford's view is that its quoted market capitalisation implying a revenue multiple of between 2.3 and 4.5 is comparable to BTQ. He has, however, made no adjustment to reflect the fact that MoneySupermarket, unlike BTQ, was profitable at the time.
141. Finally, there are the valuations of BTQ by others. Mr Wreford's original calculations based on the PWC valuations, which produced multiples of 7 (November 2006) and 2.5-2.8 (June 2007), were based on assumptions. In the light of subsequent disclosure by BTQ he revised his conclusions, and states they show a multiplier of 0.6 times revenue. The valuation by Summit Partners assumed that BTQ would make a profit of £8.5 million in 2007-08, but BTQ did not make a profit. Mr Wreford, while accepting that this was a relevant factor, did not adjust the multiplier of between 2.2 and 4.3 times revenue produced on that assumption.
142. I turn to the extent of such adjustment. I have said that the assumptions built into both Mr Wreford and Mr Lane's approaches mean a precise adjustment is not possible. Mr Lane's conclusion of 0.33 times revenue is based solely on MoneySupermarket. I have referred to the discounts he applied to reflect Moneysupermarket's greater diversification as compared to BTQ and its status as a publicly listed company. In the joint statement Mr Lane accepts that differences between Moneysupermarket and BTQ's accounting for TV advertising and VAT affects gross margins and that the discount should be revised down to between 45 and 60%. He stated that this led to a revised revenue multiplier of between 0.55 and 1.2. When giving evidence he accepted that, on the approach he used, the higher figure should have been 0.96. Mr Lane does not, however, take into account the valuations of BTQ by PWC, Saffrey Champness and Summit Partners which produce higher multipliers than his.
143. I do not accept Mr Lane's view as to the appropriate multiplier. He was unable to explain why he took a fixed multiplier at the lower end of the scale but used an average (including the low figure) at the high end of the scale. I did not find his evidence as to the implications of the sale by MMC Venture of its interest in MoneyExpert convincing. In the joint report he accepted that his original view about the discount to be applied to the MoneySupermarket figures was wrong, but the way he applied the original and the revised discounts showed he had taken different approaches to the generation of the numbers, in one case multiplying a discount and in the other adding it. I have concluded that, in the light of all these factors, the appropriate multiplier should be 1.2.
144. I turn to the discount. I accept Mr Wreford's evidence that the amount of the minority discount depends on whether a sale of the company is imminent and on the prospects of such a sale. The evidence is that Mr Paleomylites wishes to sell the company but, as is seen from the negotiation with Summit Partners, and the rejection of their proposal, only to do so on the right terms. Since the hearing the condition of the financial markets has worsened significantly. In view of this, in the present state of the market, the prospect of a sale at the sort of price being canvassed at the time of the negotiations with Summit is very small. Indeed, in view of this I conclude that the chance of a foreseeable sale is significantly less than 50%. In these circumstances I have concluded that the appropriate discount to reflect a 10% shareholding is 65%.
145. I will deal with the issue of the tax treatment of the damages in a supplementary judgment.

Part 6: Conclusion

146. The claimant is entitled to damages to be calculated on the basis of forecasted revenues of £13.34 million, a multiplier of 1.2 and a discount of 65% to reflect the lack of control of a minority shareholder and my conclusion as to the prospect of a foreseeable sale.