BL-2023-NCL-000014 - [2025] EWHC 2074 (Ch)

Various permutations of deal, including an immediate loan by Tokyo, were discussed. However, by an email dated 28 July 2022, Mr Mellor set out two options (by way of a negotiated deal) and a third option of a cancelled festival.

Option 1 was described as “No Security/No Risk-Immediate Asset Sale”. It involved “we” (which is a Tokyo entity) purchasing all assets, IP and Goodwill to include 100% of the share capital of IG Festivals Ltd and SSD Venues Ltd for £1. Ticketline would keep all ticket money in respect of all events/venues received up to 1 July. [Again suggesting that Ticketline had the ticket money and/or was obliged to pay it or an equivalent sum to SSD]. All tickets sales from 1 July would be paid over on maturity of the events. In summary, the proposed deal was summarised as being one under which Ticketline would obtain £500k ticket money + a £475k VAT Refund + £200k potential future VAT Returns, so circa a return of £1.2m in respect of Ticketline’s (otherwise) £2.8 million write off. Precisely how Ticketline would receive a VAT refund was unclear but it seems likely that this was intended to be used to pay down debt owed to Ticketline by SSD Music or possibly by IG Industries.

Option 2 was described as “Rev Share/Loan to Ticketline”. It was described as involving (as in Option 1) “We” (that is a Tokyo entity) purchasing all assets, IP and goodwill, to include 100% of the shares in the two SSD companies mentioned in Option 1 for £1. Tokyo Industries would then take over and pay for all contract supplier costs for Bingley 2022 and pay them directly. Ticketline would release all ticket money for Bingley and any other show as it matured. “NewCo” would then pay Ticketline 5% of all ticket sales + 10% of “PDQ” up to a combined value of £1 million. Ticketline would retain future ticketing income until the £1m cap had been repaid. Ticketline would retain £475k VAT initial VAT return but pay forward any future VAT returns on a £ for £ basis (expected to be £200k). Tokyo would loan Ticketline £550k payable over 6 months in monthly instalments at 1.5% interest. The end result for Ticketline was said to be that Ticketline would receive, as against a debt or investment of £2.8 million, a £1.457m return (being the £1m and the VAT of £475k).

The third option was “Event Cancellation”. The 2022 Festival would be cancelled. Ticketline would have to refund customers £550k ticket money and there would be terminal reputational damage to the festival, SSD and Steve David personally, which would in turn impact upon “This is Tomorrow”. There was then a possibility that the repayment on the VAT return would be lost because of a formal insolvency intervening before the refund was received. “This gets you zero value”.

The email ended by saying that if Option 1 or Option 2 could be agreed in a binding heads of terms document then Tokyo would place some £200k to pay for “critical immediates to keep this rolling”. If the heads of terms did not materialise into an agreement, then Ticketline would have to repay the £200k. The relevant wording was as follows:

“If we can agree either OPTION 1 or 2 in a binding HoT - I will place £200k today to pay for critical immediates to keep this rolling. If the Binding HoT is not completed after agreed - Ticketline will need to repay this £200k.

We can then agree a short form asset purchase agreement when your lawyer returns tomorrow to complete by Monday.”

The email is in economic/businessmen terms and precisely how, in legal terms, Option 1 and Option 2 were envisaged as being effected and precisely what they involved was not entirely clear to me. However, that does not matter for reasons that I will explain later in this judgment.

I should add that it is obvious from the context, but also confirmed orally by Mr Mellor, whose evidence I accept, that the references under Option 1 and Option 2 of “we” buying various things was clearly a reference to a relevant Tokyo company owned/controlled by Mr Mellor and which he might nominate in due course.

Mr McGarry made much of the closing words of the email about provision of £200,000. As I see it this was a proposed interim position whereby if there was a binding heads of terms the £200,000 would be paid by Tokyo and if the heads of terms was not completed (and it seems to have been envisaged separately that the heads of terms would be “completed” by at the least a short form asset purchase agreement when Mr Betesh’s lawyer returned) the £200,000 would be repaid. However, a binding heads of terms was not agreed (though as I find Mr Betesh constantly assured Mr Mellor not to worry as there was an agreed deal) and in the event Mr Mellor, through Tokyo, committed a lot more than £200,000 as the only way of keeping the 2022 Festival “on the road” and avoiding the need to cancel it. Although I accept that at this point Mr Mellor was indicating an intention to commit only to £200,000. I do not accept, as Mr McGarry submitted, that “the risk to both parties was capped at £200,000”. The suggestion in question was, as I have explained, overtaken by events.

By email dated 28 July sent at 20:06 Mr Betesh told Mr Mellor that “in principle” he preferred “Option 2 with some tweaks” which he then set out. However, by further email sent at 23:15, and following Mr Mellor’s response to the “tweaks”, he wrote that “We will agree to option 1” (though seeking to vary it by asking if Ticketline could pay ticket money over “from today rather than 1 July”).

One point that Mr Mellor and Mr Betesh addressed in their respective emails was the issue of cash proceeds of ticket sales in respect of the 2022 Festival. Mr Betesh made the point, in the context of Option 2, that “Ticket monies had already been paid across, so if I pay out a further £675k this effectively takes the debt to £3.5m”. As I understand the correspondence, Mr Betesh was saying that under Option 2, Ticketline would be paying over a further £675k of ticket sales but that the proceeds of the same had already been paid across to SSD Music (and/or IG Industries) as “forward funding”. The result would be to increase the debt owed to Ticketline to £3.5m. Mr Mellor’s point was that whether or not sums had already been advanced by Ticketline (in fact using the proceeds of ticket sales that it had got in), Ticketline had simply lent sums to SSD Music/IG Industries. The actual ticket sales proceeds were something that Ticketline had to account to SSD Music/IG Industries for: the relevant obligation (being the debt arising in respect of receipt of ticket sales) might be capable of being set off against the debt owed to Ticketline from its advances to SSD Music/IG Industries. Mr Mellor put the point as follows:

“we have to stop thinking the ticket money is yours its not legally it’s the customers that you are holding in escrow for the customer will until the show maturity then to the promoter-it’s never Ticketline’s ????”.”

Whether or not Ticketline was obliged hold ticket sale money separately, at the very least it owed a debt to SSD Music/IG Industries in respect of those proceeds unless and until (a) otherwise agreed or (b) on completion of the relevant event, the proceeds (less refunds) being then due to SSD Music/IG Industries, were set off by agreement against sums owing to Ticketline or paid to SSD.