BAILII [Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]

Jersey Unreported Judgments


You are here: BAILII >> Databases >> Jersey Unreported Judgments >> Representation of Vidya AG re Sumner Group Holdings Limited [2022] JRC 259 (28 November 2022)
URL: http://www.bailii.org/je/cases/UR/2022/2022_259.html
Cite as: [2022] JRC 259

[New search] [Context] [Printable version] [Help]


Companies - creditors' winding up

[2022]JRC259

Royal Court

(Samedi)

28 November 2022

Before     :

Sir Michael Birt, Commissioner, and Jurats Ramsden and Hughes

 

Between

Vidya A.G.

Representor

And

Sumner Group Holdings Limited

Respondent

IN THE MATTER OF AN APPLICATION FOR A CREDITORS' WINDING UP PURSUANT TO

ARTICLE 157A OF THE COMPANIES (JERSEY) LAW 1991

Advocate M. L. A. Pallot for the Representor.

The Respondent was not represented.

judgment

the COMMISSIONER:

1.         On 10 October 2022, the Court granted the application of Vidya A.G. ("the Representor") that Sumner Group Holdings Limited ("the Company") be made the subject of a creditors' winding up pursuant to Article 157A of the Companies (Jersey) Law 1991 ("the Law").  What follows constitutes our reasons for that decision.

2.         The order was made in the absence of any representative of the Company.  Accordingly, we propose to begin by summarising the history of the proceedings and how this came about.  We shall then consider the law in respect of applications under Article 157A, before turning to apply the law to the facts of the case. 

The procedural history

3.         Pursuant to Article 157A(2)(a), on 5 April 2022 the Representor served a statutory demand on the Company (which is a Jersey company) in respect of an alleged debt of US$120,000.  The statutory demand was acknowledged (although the debt was disputed) by Ogier who were then instructed on behalf of the Company.

4.         In the absence of payment of this sum, the Representor filed a Representation applying for a creditors' winding up and this came before the Samedi Court on 17 June.  The Court remitted the proceedings to the Master for directions but said that the matter should be dealt with as if it were a cause de brievété.  The Applicant sought to agree directions with Ogier but this did not prove possible and the Master fixed a directions hearing for 26 July.  Shortly before that, directions were agreed and the Master made a consent order on 22 July.  That directed the parties to attend before the Bailiff's Judicial Secretary within seven days to fix a date for the hearing with a time estimate of not more than one day.  Advocate Pallot asserted that he had been of the view that half a day was sufficient but had agreed the longer time estimate in order to avoid a contested directions hearing.  It did not prove possible to obtain a hearing date before this Court until 27 September. 

5.         The consent order made by the Master provided for the parties to file evidence on certain dates and these were broadly complied with.  The order also required the parties to file skeleton arguments not later than 21 September.  The Company did not comply with that direction.

6.         On 2 September, Ogier informed Advocate Pallot that they were no longer instructed by the Company and since then the Company has been represented by its director, Mr David Sumner ("Mr Sumner"), with the assistance of Mr John Sumner, its chief financial officer. 

7.         On 22 September, the Company, through Mr John Sumner, applied for an adjournment of the hearing fixed for 27 September on the ground that Mr Sumner had contracted covid and was unfit to travel or represent the Company at the hearing.  That application was supported by a medical certificate.  The Commissioner agreed to vacate the date and his decision was communicated to the parties by email dated 22 September.  In that email, the Commissioner emphasised the need for the matter to be dealt with promptly and fixed 10 October for the adjourned hearing.  He directed that no further evidence be filed (the Master's order having been complied with) but ordered the Company to file its skeleton argument by 4 October.  He made it clear that, if Mr Sumner was unable to appear on 10 October, there was time for another director to get up to speed so as to represent the Company at the hearing.  He emphasised that, if no director appeared on 10 October, the Court would be likely to proceed in the absence of such a representative.  These points were reflected in the Act of the Court dated 22 September.

8.         On 6 October, Mr John Sumner emailed the Court to say that Mr Sumner was still very unwell and had been unable to advise the Company of all the pertinent information relating to the case.  He therefore sought an adjournment of the hearing fixed on 10 October until a later date in October, by which time, he said, it was expected that Mr Sumner's health would have improved.  He said that if the requested adjournment was not granted, the Company would be unable to file its skeleton argument or attend the hearing on 10 October.  However, he asked the Court to take into account the existing evidence as providing sufficient information for the Court to ascertain that the Company vigorously disputed the alleged debt. 

9.         The Judicial Secretary replied the same day to say that, in the absence of a medical report, the Court would sit on 10 October and that if anyone wished to make an application to adjourn at that stage, they could do so.  Mr John Sumner replied on 7 October to the effect that Mr Sumner would be requesting a medical report and that he expected to provide this to the Court on Monday 10 October.

10.       When the Court sat on 10 October at 10am, nothing further had been heard from the Company. No medical report on Mr Sumner had been received and no one was present to represent the Company at the hearing.  Having considered the history of the matter and the terms of the correspondence which had taken place, the Court decided to proceed in the absence of any representative of the Company.  It had been made quite clear to the Company that this was likely to occur if a director was not present to represent the Company on 10 October.

The law

11.       The ability for a creditor to apply for a creditors' winding up was introduced into the Law in March 2022.  Article 157A provides (so far as relevant) as follows:

"157A.  Application for creditors' winding up by creditor

(1)       A creditor may make an application to the court for an order to commence a creditors' winding up if the creditor has a claim against the company for not less than the prescribed minimum liquidated sum and:

(a)       the company is unable to pay its debts;

(b)       the creditor has evidence of the company's insolvency; or

(c)       the creditor has the consent of the company.

(2)       A company is deemed to be unable to pay its debts for the purposes of paragraph (1)(a) if:

(a)       the creditor to whom the company is indebted in a sum exceeding the prescribed minimum liquidated sum then due has served on the company, by way of personal service, a statutory demand in the prescribed form on the company requiring the company to pay the sum so due; and

(b)       the company has for 21 days after service of the statutory demand failed to pay the sum or otherwise dispute the debt due to the reasonable satisfaction of the creditor...."

(3)       ..

(4)       ..

(5)       An application under paragraph (1) must be made in the form approved by the court and must be accompanied by an affidavit verifying the content of the form."

12.       Pursuant to Article 9 of the Companies (General Provisions) (Jersey) Order 2002, the prescribed minimum liquidated sum for the purposes of Article 157A(1) is £3,000.  The Representor's claim therefore exceeds this amount.

13.       However, in its evidence, the Company disputes that any sum is due to the Representor.  The question therefore arises as to whether the Representor has a claim for 'a liquidated sum' pursuant to Article 157A(1) and whether, for the purposes of Article 157A(2)(b) the Company has failed to ".. dispute the debt due to the reasonable satisfaction of the creditor .."

14.       In considering what is meant by the expression "dispute the debt due", Advocate Pallot referred the Court exclusively to English authority.  There was logic in this approach as the provisions introduced by Articles 157A - D are similar to longstanding provisions in the Insolvency Act 1986 ("the 1986 Act") of the United Kingdom.  The relevant part of section 123(1) of the 1986 Act defines when a company is unable to pay its debts in the following terms:

"(i)  If a creditor... to whom the company is indebted in a sum exceeding £750 then due has served on the company, by leaving it at the company's registered office, a written demand (in the prescribed form) requiring the company to pay the sum so due and the company has for 3 weeks thereafter neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor."  [Emphasis added]

15.       It is well established as a matter of English law that the emphasised expression requires the court to consider whether there is a substantial dispute about whether the debt is due.  The position was helpfully summarised by Norris J in Angel Group Limited v British Gas Trading Limited [2013] BCC 265 at [22] in the following terms:

"22.  The principles to be applied in the exercise of this jurisdiction are familiar and may be summarised as follows:

(a)       A creditor's petition can only be presented by a creditor, and until a prospective petitioner is established as a creditor, he is not entitled to present the petition and has no standing in the Companies Court:  Mann v Goldstein [1968] 1WLR 1091.

(b)       The company may challenge the petitioner's standing as a creditor by advancing in good faith a substantial dispute as to the entirety of the petition debt (or at least so much as will bring the indisputable part below £750).

(c)       A dispute will not be "substantial" if it has really no rational prospect of success:  In Re a Company (No. 012209 of 1991) [1992] 1 WLR 351 at 354B.

(d)       A dispute will not be put forward in good faith if the company is merely seeking to take for itself credit which it is not allowed under the contract:  ibid at 354F.

(e)       There is thus no rule of practice that the petitioner will be struck out merely because the company alleges that the debt is disputed.  The true rule is that it is not the practice of the Companies Court to allow a winding up petition to be used for the purpose of deciding a substantial dispute raised on bona fide grounds, because the effect of presenting a winding up petition and advertising that petition is to put upon the company a pressure to pay (rather than to litigate) which is quite different in nature from the effect of an ordinary action:  In Re a Company (No. 006685 of 1996) [1997] BCC 830 at 832F.

(f)        But the court will not allow this rule of practice itself to work injustice and will be alert to the risk that an unwilling debtor is raising a cloud of objections on affidavit in order to claim that a dispute exists which cannot be determined without cross-examination (ibid at 841C).

(g)       The court will therefore be prepared to consider the evidence in detail even if, in performing that task, the court may be engaged in much the same exercise as would be required of a court facing an application for summary judgment:  (ibid at 837B)."

16.       Advocate Pallot also referred us to the judgment of Chadwick J in Re a Company (No. 006685 of 1996) (referred to above).  At 835 F, the judge said this:

"In my view those authorities, and in particular the authorities of the Court of Appeal to which I have referred, make it clear that the general rule under which this court refuses to entertain a petition founded on a disputed debt applies only where the dispute is a genuine dispute founded on substantial grounds; and does not preclude this court from determining - or entitle this court to decline to determine - the question whether or not there are substantial grounds for dispute.  Indeed, in the passage from the judgment of Oliver LJ to which I have just referred, he pointed out that the court necessarily has to take a view whether on the evidence there really is substance in the dispute which is raised by the alleged debtor." [Emphasis added]

17.       At 838 B - D, Chadwick J said this:

"The application is put, and the petition is founded, on the basis that the issue before me is whether or not this debt is disputed on substantial grounds.  That is the issue which I need to address; it is not open to me to dismiss the petition simply because the company asserts that there is a dispute.

The company's case is that there is a dispute as to the terms agreed at the meeting in August 1995.  It is said that, in the absence of any written agreement, the terms agreed can only be identified by resolving issues of fact to which deponents have deposed on affidavit.  It is said, of course - and said rightly - that the court should not seek to resolve disputed issues of fact on the basis of weighing one affidavit against another, without the advantage of hearing cross-examination of the deponents. 

I accept that any court, and particularly the Companies Court, should not seek to resolve issues of fact without cross-examination, where there is credible affidavit evidence on each side.  But I do not accept that the court is bound to hold that there is a need for a trial in circumstances in which, on a full understanding of the documents, the evidence asserted in the affidavits on one side is simply incredible."

18.       Chadwick J went on to conclude at 841C:

"For those reasons, I reach the conclusion that this is a case in which the dispute now said to exist is not founded on any substantial grounds.  Rather, this is one of those cases in which, as Oliver LJ observed in Re Claybridge Shipping Company SA, an unwilling debtor is raising a cloud of objections on affidavit in order to claim that a dispute of fact exists which cannot be determined without cross-examination so that the petition cannot be allowed to proceed.  Staughton LJ pointed out in Re Taylor's Industrial Flooring Limited that anything that the law could do to discourage such behaviour should be done.  One of the things that the law can do in a case of this nature is to allow the petition to proceed. .."

19.       In summary therefore, the position in England and Wales is that a company will only be able to resist an application by a creditor for a creditors' winding up where there is a substantial dispute (i.e. a genuine dispute founded on substantial grounds) as to whether the debt claimed by the creditor is due and this is decided in the same way as an application for a summary judgment.  In other words, if the creditor would succeed in an application for summary judgment, there will be no substantial dispute as to the claim. 

20.       In our judgment, the considerations which have led the English courts to require that there is a 'substantial' dispute as to the validity of the creditor's claim before refusing an application for a creditors' winding up are equally applicable to applications for such a winding up in this jurisdiction.

21.       Helpful as it was to be referred to the position in England and Wales, it seems to us that the same result is reached by consideration of the position under Jersey law.

22.       In HWA 555 Owners, LLC v Redox PLC SA [2022] JRC 181 the Court (Commissioner Clyde-Smith and Jurats Ramsden and Le Heuzé) had to consider whether the representor was a creditor with a claim for a liquidated sum so that it had standing to bring an application for a creditors' winding up pursuant to Article 157A.

23.       The Court referred to the fact that an applicant for a declaration of désastre also had to have a claim for a liquidated sum and therefore considered previous authorities in that respect.  Thus in Representation of Harbour [2016] JRC 171 at [38] the Court noted that, for an application for a declaration en désastre:

"The creditor must show that it has a liquidated claim, in other words a certain debt to which there is no reasonably arguable defence (so that if proceedings were issued it could form the basis for an immediate application for summary judgment) - see Dessain and Wilkins, Insolvency and Asset Tracking, 5th Ed. (2016) pages 149 - 150."

24.       The most authoritative statement is to be found in the judgment of Southwell JA in the Court of Appeal in Re Baltic Partners Limited [1996] JCA 075 where he said at page 10:

"The creditor's claim will usually have been established by a judgment of a competent court often a summary judgment.  A judgment is not a pre-condition.  But if the creditor does not have a judgment in his favour, there must nevertheless be a liquidated sum undoubtedly due and payable by the debtor.  The indebtedness must be certain, and not the subject of a genuine dispute and arguable defence, set off or counter-claim.  The indebtedness must be such as could form the basis of an immediate summary judgment."

25.       We also note - as did the Court in the HWA case - that Practice Direction RC 22/01 dated 1 March 2022 and entitled "Applications for a Creditors' Winding Up and Procedure for a Creditors' Winding Up Searches" provides at paragraph 3(b):-

"The affidavit [in support of the application] must:

(b)       state that the creditor has a claim against the debtor company for a liquidated sum, that to the best of the creditor's knowledge is not subject to a genuine dispute and arguable defence or counterclaim, and which has not been paid."

26.       The Court in the HWA case concluded as follows at [39]:

"We conclude that as a matter of Jersey law the reference to a liquidated claim in Article 157A of the Companies Law is a reference to a claim that is certain in amount and which is not the subject of a genuine dispute and arguable defence or counterclaim and which has not been paid."

27.       The above Jersey cases and the Practice Direction are concerned with what constitutes a claim for a 'liquidated sum' rather than what constitutes a 'dispute' for the purposes of Article 157A(2)(b).  However, in our judgment, the reference in Article 157A(1) to the need for a creditor to have a claim for a liquidated sum and the reference in Article 157A(2)(b) to the company not disputing the debt are two sides of the same coin and are addressing essentially the same underlying point. 

28.       Drawing on both the Jersey and English jurisprudence, we hold that a claim is not 'disputed' for the purposes of Article 157A(2)(b) unless it is the subject of a substantial dispute (as that expression has been interpreted in the English cases and which is essentially to the same effect as the expression 'genuine dispute and arguable defence or counterclaim').  In deciding whether there is a substantial dispute, the Court will consider much the same matters as it would do on an application for summary judgment.  There will not be a substantial dispute if the claim is one for which the creditor could obtain immediate summary judgment.  If, on the other hand, there is a substantial dispute as to the creditor's claim, then it is not appropriate to order a creditors' winding up because non-payment of the creditor's claim will not have shown that the company is unable to pay its debts for the purposes of Article 157A(i)(a).  The validity of the creditor's claim should in those circumstances be established by conventional civil proceedings.

Application to the facts

The background

29.       The Court had before it three affidavits from Mr Douglas Geertz (dated respectively 14 June, 9 September and 19 September 2022) on behalf of the Representor and a first witness statement (dated 14 June) and an affidavit (dated 9 September) from Mr David Sumner on behalf of the Company.

30.       The essential background is as follows. 

31.       The Company is the holding company of a group of companies known as the Sumner Group ("the Group") which carry on various businesses in a number of jurisdictions.  One division of the Group is engaged in the provision of services and supplies to the National Health Service in England and Wales.  Other companies have mining interests in Brazil and one of the mining companies is a company called VI Mining Plc ("VI Mining").  Mr Sumner is the majority shareholder and chief executive officer of the Company. 

32.       Mr Geertz is the chief executive officer and beneficial owner of the Representor, which is a Swiss company.

33.       On 27 June 2018, the Company and the Representor entered into a written consultancy agreement ("the Agreement") whereby the Representor would provide consulting services to the Company and the Company would pay the Representor a fee of US$20,000 per month, payable monthly in arrears. 

34.       The duties of the Representor were set out in the Agreement in the following terms:

"1.       Appointment of Consultant

The Company appoints the Consultant, represented by the Individual [Mr Geertz] to provide the Consulting Services to the Company and the Consultant agrees to provide such Consulting Services for the Duration of the Agreement upon the terms and conditions hereinafter mentioned.

2.        Consulting Services

The Consulting Services to be performed by the Consultant under this Agreement include strategic advisory, introduction of prospective investors and other prospective business associates, and such other services as the Company and the Consultant may agree to from time to time, during the duration of the Agreement.

....

4.        Consultant's Obligations

For the Duration of the Agreement the Consultant shall perform the Consulting Services in an expert and diligent manner and to the best of his ability and make himself available to the Company at such times and such locations as the Company and Consultant shall agree from time to time."

35.       An important aspect for our purposes is the provision for termination of the Agreement.  Paragraph 3 provides that the Agreement is to commence from 1 June 2018 (defined as the Effective Date) until October 2019 (sic) whereupon it will automatically renew for successive periods of 1 year unless and until the Agreement is terminated in accordance with paragraph 7. 

36.       Paragraph 7 is in the following terms:

"7.       Termination

Without limitation both the Company and the Consultant may terminate this Agreement with immediate effect by giving written notice to the other if the party to whom notice of termination is given:

7.1      commits any breach of this Agreement and, in the case of a breach which is capable of remedy, fails to remedy it within fourteen (14) days after receiving written notice giving full particulars of the breach and requiring it to be remedied; or

7.2      is incompetent, guilty of gross misconduct and/or any serious or persistent negligence in respect of his obligations hereunder; or

7.3      the Individual does not own all of the issued share capital (from time to time) of the Consultant;

After a period of six (6) months from the Effective Date, either the Company or the Consultant may terminate this Agreement at any time on giving thirty (30) days written notice to the other party, whereupon this Agreement shall terminate."

In other words, there was an initial 6 month period during which the Agreement could only be terminated by written notice on one of the grounds set out in 7.1, 7.2 or 7.3 but after the 6 month period, the Agreement could be terminated by either side simply on giving 30 days written notice.

37.       It is clear that from an early stage the Representor was pressing for payment of the monthly fee.  The first email to which we have been referred is from Mr Geertz to Katie Lenko Hiess ("Ms Hiess"), the chief operating officer of the Company, on 8 August 2018.  Ms Hiess replied the same day saying that she had checked with Mr Sumner and understood that the outstanding payment would be made that week, but there were then further chasers from Mr Geertz, with Ms Hiess replying on 20 August:

"I have just checked this with David who is travelling this week.  He has advised me that outstanding payments (including yours) will unfortunately not be processed until next Sunday.  This is contrary to the information I was previously given so I can only apologise again for the delay and the inconvenience arising from the delay."

38.       On 29 August, Mr Geertz chased again saying that no payment had been received and suggesting that, as it was the end of August, the Company could process the July and August payments at the same time.

39.       The next day, 30 August, Ms Hiess replied as follows:

"Once again I apologise for the delay and confirm that outstanding payment for July will be processed together with payment for August, as soon as funds are available.

In connection with the subject of this email, I regret that SGH finds itself in very challenging financial circumstances and accordingly I am attaching a letter requesting your consideration in revising the terms of your arrangements with SGH.  The attached letter and commission agreement provide further information, but please do not hesitate to contact David or I should you wish to discuss." [Emphasis added]

40.       In view of the importance attached to the enclosed letter dated 30 August, we think it necessary to set it out in some detail.  The letter was signed by Mr Sumner and was addressed to the Representor.  The key paragraphs were as follows:

"First, I would like to note that we are extremely grateful for the support that you have shown SGH and its pre-cursors to date, and we hope that our strong relationship will continue to grow as the group develops.

As you know, we are working hard to prepare SGH Global for a prospective admittance to trading on the New York Stock Exchange.  As part of these preparations, we are continually re-assessing our organisation, moving towards increased regulatory compliance and institutionalising the group's operations.  A further consequence of this process is an ongoing evaluation of the group's expenditure and financial commitments.

After careful consideration, we regret to advise you that the existing arrangement between SGH and Consultant has become financially untenable.  We are therefore writing to request your consent to an early termination of the Agreement, effective 31 August 2018 (Termination Date).

We confirm that your outstanding consultancy fee payment of US$20,000 for July will be paid as soon as possible, together with a final fee payment of US$20,000 for August.  These payments will be paid together with SGH Jersey's month end payments as soon as possible.  Following this payment, we request your confirmation that [SGH] will have no further obligations under the Agreement and specifically, we will not be under any obligation to make any further payment of monthly consultancy fees to you under the Agreement....

We hope that you will understand that SGH values its relationship with you and would be extremely pleased to continue working with you if possible.  I therefore attach a commission agreement for your consideration.  We hope that you will review the terms of the commission agreement and look forward to your comments.

We would like to take this opportunity to thank you for your services to SGH Global and we hope for your positive response to our request in view of the difficult circumstances." [Emphasis added]

41.       It is quite clear that the reason given for requesting termination of the Agreement was the financial position of the Company and this is reflected both in Ms Hiess' email and in the letter signed by Mr Sumner. 

42.       Mr Geertz emailed Mr Sumner the same day and Mr Sumner replied on 31 August:

"I am available on Monday at any time to speak - Katie's email was slightly draconian - The reality is that SGH has been advised it cannot and should not have such types of agreements in place for very large consultant fees as it is a red flag for its upcoming IPO."

43.       The letter of 30 August had a space for acceptance and signature on behalf of the Representor but the Representor did not sign or return the letter. 

44.       On 24 September 2018, Ms Hiess sent a further email to Mr Geertz in the following terms:

"I have spoken with David and understand that you have agreed to the requested early termination of the Vidya-SGH consultancy agreement.  I attach a revised termination letter which I would be grateful if you would review and, if in order, sign and return for our records.  For completeness, and for SGH audit trail purposes, the letter includes confirmation that Vidya waives any claim for historic fee payments from SGH which I understand is also in line with your discussion with David."

45.       The attached letter from Mr Sumner was also dated 24 September and included the following paragraphs:

"First, I would like to note that we are extremely grateful for the support that you have shown SGH and its pre-cursors to date, and we hope that our strong relationship will continue to grow as the group develops.

Further to your discussions with the undersigned, we are writing to request your written confirmation of consent to an early termination of the Agreement, effective 31 August 2018 (Termination Date). 

We further request your confirmation that SGH has no further obligations to the Consultant under the Agreement to make payments of consultancy fees or otherwise, and that any fees which remain outstanding and unpaid as of the date of this letter are hereby waived by the Consultant. 

We hope that you will understand that SGH values its relationship with you and would be extremely pleased to continue working with you if possible.  We would like to take this opportunity to thank you for your services to SGH Global...."

There was again a provision for signature by Mr Geertz on behalf of the Representor to accept and acknowledge what was stated, but there is no suggestion that it was ever signed on behalf of the Representor or returned to the Company.

The position of the parties in outline

46.       The Representor asserts that the Agreement was never terminated and that the monthly sum of $20,000 continued to be payable, but no payments whatsoever have been made.  The Representor confines its claim for a liquidated sum to the initial six month period and therefore claims $120,000.

47.       In his evidence - there being no submissions before the Court - Mr Sumner, on behalf of the Company, asserts that no sum is due.  He bases this assertion on three grounds:

(i)            He states that the $20,000 payment for June 2018 was paid and therefore $120,000 is not due in any event.

(ii)           He states that the Agreement was terminated by agreement with effect from 31 August 2018.

(iii)          He states that the Representor failed to provide any of the services which it was required to provide under the Agreement and is therefore in breach of the Agreement.  It is accordingly not entitled to any payment under the Agreement.

48.       We shall consider each of these points in turn.

(i)         Payment of the June 2018 instalment

49.       Mr Sumner asserts that the Company has paid the first instalment of $20,000 in respect of June 2018 and exhibits a bank statement of the Company showing a payment to Mr Geertz on 5 July 2018 of $20,000.  The Representor asserts that the payment was in respect of some other matter.

50.       It is not possible on the material before us to resolve this issue.  However, even if the above payment was in respect of the June 2018 instalment, this does not assist the Company.  As stated by Norris J at [22(b)] in Angel Group (quoted a para 15 above), the substantial dispute must relate to the entirety of the petition debt or at least so much as will bring the indisputable part below the minimum level set by the legislation, which in this jurisdiction is £3,000; see also Foxholes Nursing Home Limited v Accora Limited [2013] EWHC 3712 (Ch) at [45]-[46].

51.       Even if one deducts the sum of $20,000, the Representor still has a claim for $100,000, which exceeds the statutory minimum of £3,000.  We consider that the principle described in Angel Group and Foxholes Nursing Home is equally applicable in this jurisdiction and accordingly this point does not avail the Company.

(ii) Termination

52.       In our judgment, Mr Sumner's assertion on behalf of the Company that the Agreement was terminated with effect from 31 August 2018 is not credible.  We would summarise our reasons for so concluding as follows:

(i)            There is no mention of early termination either in Ogier's letter of 26 April 2022 in response to the statutory demand or in Mr Sumner's first witness statement.  They both rely only on the assertion that the Representor did not perform any work under the Agreement.  If there was a genuine belief that the Agreement had been terminated on 31 August 2018, one would have expected this to be made strongly in response to the statutory demand and in response to the Representation. 

(ii)           Indeed, the first witness statement of Mr Sumner says exactly the opposite.  Having stated that the Company wrote by letter dated 30 August 2018 explaining that it wished to terminate the Agreement, Mr Sumner stated at para 4.7:

"Ultimately, Vidya did not accede to the Company's request for the early termination of the Consultancy Agreement."

(iii)      In para 24 of his affidavit, Mr Sumner sought to change this by saying:

"The use of the word 'accede' in paragraph 4.7 of the First Witness Statement was a clerical error and should be replaced by 'dispute' for the reasons set out above."

(iv)           We are unable to accept that explanation.  The wording at para 4.7 of the first witness statement could not be clearer and if Mr Sumner had really meant to use the word 'dispute', one would have expected his first witness statement to deal with the whole question of early termination on 31 August, but there is no mention in that statement that the Agreement was so terminated.  The first suggestion of termination only appeared in Mr Sumner's affidavit dated 16 September, nearly 3 months later.

(v)         At para 27 of his affidavit, Mr Sumner states that he had discussions during August 2018 regarding the parties' agreement to the early termination of the Agreement and that no further sums were payable by the Company to the Representor.  Mr Sumner does not specify when in August these discussions took place but any suggestion that they took place before 30 August is inconsistent with the terms of the email and letters of that date referred to above in the emphasised passages.  Thus, the email of 30 August from Ms Hiess (quoted at para 39 above) refers to the attached letter 'requesting your consideration in revising the terms of your arrangements....' and the letter of 30 August itself (quoted at para 40 above) could not be clearer in stating 'We are therefore writing to you to request your consent to an early termination of the Agreement..' and later '  we hope for a positive response to our request...'.  This is all completely inconsistent with any assertion that an agreement for early termination had been reached by that stage.

(vi)        There is no assertion by Mr Sumner of any specific agreement reached on 30 or 31 August (other than through the email and letter of 30 August) and indeed the only matter specifically relied upon by Mr Sumner as evidence that the Representor (through Mr Geertz) had agreed to early termination, is an email dated 14 September 2018 sent by Mr Geertz to a Mr Paterson-Brown in which he attaches Ms Hiess' email of 30 August and simply states to Mr Paterson-Brown 'as agreed'.  Mr Sumner asserts that this is evidence that Mr Geertz had agreed to the letter of 30 August.  Even on its face, this is not tenable.  The email stating 'as agreed' was not to the Company, it was to a third party.  The natural interpretation of the email is that Mr Geertz had agreed to forward Ms Hiess' email to Mr Patterson-Brown and that is what Mr Geertz confirms in his third affidavit.  He says he had had a telephone conversation with Mr Paterson-Brown about the email and letter of 30 August and was forwarding them to Mr Paterson-Brown, as agreed. In our judgment, Mr Sumner's attempt to portray Mr Geertz's email of 14 September as evidence that Mr Geertz, on behalf of the Representor, had agreed to the letter of 30 August, gives every appearance of clutching at straws.

(vii)       It is very clear from the email and enclosed letter of 30 August that the Company was seeking early termination of the Agreement for financial reasons.  Thus, the email from Ms Hiess referred to the Company finding itself in 'very challenging financial circumstances' and the letter from Mr Sumner referred to the arrangements with the Representor having become 'financially untenable' (see paras 39 and 40 above).  Despite this, Mr Sumner asserts at para 23 of his affidavit that the reason for seeking the early termination was because he had discovered that the Representor had not provided any services under the Agreement.  Thus, he stated:

"...Once the Company had realised that Vidya had provided no services  to the Company, the Company requested the early termination of the Agreement...."

(viii)         This assertion as to the reason for seeking early termination is not only wholly inconsistent with the email and letter of 30 August as described above, but is also wholly at odds with Mr Sumner's own assertion at para 5.5 of his first witness statement, where he states that he only became aware of the Representor having failed to provide any services to the Company 'during the course of September 2018'.  It could not therefore have been the reason for requesting early termination on 30 August as he asserts. 

(ix)          Even the letter of 24 September requesting written confirmation of consent to early termination of the Agreement on 31 August is still written in precatory terms and expresses warm sentiments about continuing to work with the Representor, which is inconsistent with an assertion that Mr Sumner had by then discovered that the Representor had done no work pursuant to the Agreement and that this was the reason for the termination.

(x)           There is nothing in writing from the Representor at any stage to suggest that it agreed to early termination, nor is there any written notice of termination on the part of the Company in accordance with the requirements of paragraph 7 of the Agreement. 

(xi)          Mr Sumner's affidavit is completely lacking in any detail as to exactly when, where and in what circumstances he and Mr Geertz agreed to the early termination of the Agreement.  His affidavit is very unspecific and is in very general terms on this topic.

53.       We accept that there is no specific rejection of the requested early termination by the Representor and there is no evidence that it continued to press for the monthly instalments.  However, there is simply no real evidence that the Representor ever agreed to the early termination so as to contradict Mr Geertz's assertion that it did not.  Mr Sumner's evidence to the contrary lacks credibility for the reasons set out in the preceding paragraph.  In our judgment, there is no realistic argument that the Agreement was terminated with effect from 31 August 2018.

(iii) No services provided

54.       The Company asserts that the Representor, through Mr Geertz, did not provide any services under the Agreement and therefore is not entitled to be paid. 

55.       Mr Geertz states that he has significant experience in advising companies in obtaining investment and fund-raising initiatives and also has a number of industry contacts who at any time may be interested in engaging in businesses in volatile or unusual sectors.  He says he was therefore in a position to assist the Company and indeed, prior to being engaged by the Company, he had arranged multiple meetings with prospective investors as well as strategic advisory services and it was those activities which led the Company to engage him (through the Representor) in a formal consultancy capacity by means of the Agreement.

56.       He said that the Agreement was, in his view, a very standard document to facilitate payment for his services being available, via the Representor, to the Company should such services be required.  There were no clauses in the Agreement which purported to set out the requirement for a specified amount or indeed any work to be done and the Agreement did not contain any set of deliverables or key performance indicators.  There was nothing in the Agreement to suggest that payment of the monthly fee was dependent upon the amount or level of work done.  Advocate Pallot submitted that it was in effect an Agreement akin to a retainer.  The entity retained must be ready to be called upon by the client and the payment by the client is for the peace of mind of having the services at his beck and call. 

57.       In our judgment that is the case here.  There is simply nothing in the Agreement which sets out a specific level of work necessary to justify the fee.  In our judgment, the effect of the Agreement was for Mr Geertz to be available to the Company and to provide advice and contacts as and when required.  There is no suggestion from the Company that Mr Geertz refused to respond or make himself available in response to any specific request from the Company.  It follows that, even if the Representor provided no services during the relevant period, that is the misfortune of the Company for having entered into an agreement in these terms and is not a ground for non-payment.

58.       However, even if we are wrong on that aspect, we are satisfied from the evidence before us that the Representor did carry out work.  In Mr Geertz's second affidavit, he exhibits 51 email chains which he says evidences the provision of consulting services by him on behalf of the Representor by way of strategic advisory services, the introduction of prospective investors to VI Mining (being a member of the Group) and proposing other business connections for the benefit of VI Mining. 

59.       We accept that a number of these email chains do not show such work as they relate to the reaching of the Agreement, claims for payment of the consultancy fees etc.  However, Mr Geertz sets out at paragraph 22 of his second affidavit five specific examples of work that he says was done.  Whilst Mr Sumner disputes that the first of these constituted work undertaken for the benefit of the Company (being, he says, work done to assist the Paterson-Browns in realising their shares in VI Mining), his only response to the remaining four items listed by Mr Geertz is that they took place more than six months after the commencement date of the Agreement, by which time, says Mr Sumner, the Agreement had been terminated with effect from 31 August with no further amounts being payable to the Representor by the Company.  Given that we have rejected as unarguable the suggestion that the Agreement was terminated on 31 August, this is no answer to Mr Geertz's evidence in relation to the four remaining examples of work that he has given. 

60.       Furthermore, it is significant that there is not a single example of a contemporaneous document in 2018 where Mr Sumner (or anyone else on behalf of the Company) alleges that Mr Geertz and/or the Representor has not carried out any work under the Agreement.  If, as Mr Sumner says, he discovered this and this was the reason for the termination (see para 52(vii) above), one would have expected some contemporaneous evidence of this matter being raised with the Representor.

61.       The position is that there is nothing in the material before us to contradict the evidence of Mr Geertz, with supporting emails, that these latter four examples of work were undertaken.  We therefore reject as unarguable the allegation that the Representor did not provide any services pursuant to the Agreement, on the basis that there is no evidence to support such an allegation.

Conclusion

62.       Discounting the sum of $20,000 for the reasons we have given, we are satisfied that:

(i)       The Representor has a claim to a liquidated sum of $100,000, which is in excess of the statutory minimum of £3,000;

(ii)      The Representor has served a statutory demand in the prescribed form on the Company;

(iii)     The Company has failed to pay the sum within 21 days of service of the statutory demand; and

(iv)      The Company has failed to raise a substantial dispute as to whether the claimed sum is due.  In our judgment, the Representor would be entitled to succeed on an application for summary judgment. 

It follows that we find that the Company is unable to pay its debts for the purposes of Article 157(A)(i)(a).

63.       In the circumstances, being satisfied that the statutory requirements are met, we granted the Representor's application for a creditors' winding up in accordance with Article 157C and appointed Mr Alan Roberts of Grant Thornton as liquidator. 

64.       We also ordered that the reasonable costs incurred by the Representor in bringing these proceedings should be costs of the winding up, on the basis that the application is brought and has effect for the benefit of all creditors of the Company and it would be unfair if a petitioning creditor, who incurs costs for the benefit of creditors generally, is not be able to recoup those costs as costs of the liquidation, so as to rank in priority to the claims of all the creditors. 

65.       We also make an observation in relation to the procedure followed in this case.

66.       As the Bailiff said on the first presentation of the Representation, an application of this nature should be treated as if it were a cause de brievété in order that the application can be heard as promptly as possible.

67.       On this occasion, delay was caused by the decision to refer the matter to the Master for directions.  We emphasise that this is no criticism of the Master.  It was simply a function of the need to obtain a hearing before him.  As a result, this application has not proceeded as speedily as one might have wished.  We would suggest that in future, any applicant for a creditors' winding up under Article 157A should come, on the first presentation of the Representation, armed with draft directions to bring the matter to a conclusion within a reasonably prompt timescale.  The Court will of course be astute to ensure that the timetable gives a reasonable period for preparation to any company which might wish to oppose the application and will also insist on there being a liberty to apply provision so that the company can easily revert to the Court if it feels that the timetable set by the Court is too short.  A procedure such as this would enable the Court to manage the process and ensure as prompt a resolution of the application as possible, coupled with fairness to any company wishing to oppose the winding up.

Authorities

Companies (Jersey) Law 1991. 

Companies (General Provisions) (Jersey) Order 2002. 

Insolvency Act 1986. 

Angel Group Limited v British Gas Trading Limited [2012] EWHC 2702 (Ch); [2013] B.C.C. 265

In Re a Company (No. 006685 of 1996) [199.  7] BCC 830. 

HWA 555 Owners, LLC v Redox PLC SA [2022] JRC 181. 

Representation of Harbour [2016] JRC 171. 

Re Baltic Partners Limited [1996] JCA 075. 

Foxholes Nursing Home Limited v Accora Limited [2013] EWHC 3712 (Ch). 


Page Last Updated: 14 Dec 2022


BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII
URL: http://www.bailii.org/je/cases/UR/2022/2022_259.html