Advanced Multi-technology for Medical Industry v Uniserve Ltd
| Jurisdiction | England & Wales |
| Judge | Richard Farnhill |
| Judgment Date | 22 August 2023 |
| Neutral Citation | [2023] EWHC 2147 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2021-000092 |
and
and
[2023] EWHC 2147 (Ch)
Richard Farnhill
(sitting as a Deputy Judge of the Chancery Division)
Case No: BL-2021-000092
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
BUSINESS LIST (ChD)
Rolls Building
Fetter Lane,
London, EC4A 1NL
Mr Mark Vinall (instructed by Capital Law Limited) for the Applicants
Mr David Walsh (instructed by Holman Fenwick Willan LLP) for the Respondent
Hearing date: 10 August 2023
Richard Farnhill (sitting as Deputy High Court Judge for the Chancery Division):
Introduction
The Applicants seek to discharge a worldwide freezing order made initially ex parte by Peter Knox KC, sitting as a judge of the High Court, on 16 December 2022 and continued by Meade J on 21 December 2022 (the Order). The Applicants had notice of the latter hearing but did not attend.
The Order arose out of these proceedings, in which Uniserve is sued for breach of a contract for the supply and purchase of disposable face masks (the Supply Contract) and of a related commission agreement (the Commission Contract) by the Claimants. Uniserve denies liability but has also brought a Part 20 claim against the Applicants on the basis that if it is liable to the Claimants, the Applicants are in turn liable for breach of their contract with Uniserve (the Maxitrac Contract).
Following the service of the Claimants' original Reply in August 2021 Uniserve sought permission to amend its original Part 20 Particulars. Before any amendment was made the Claimants made a largely unsuccessful application for summary judgment, which further delayed amendment of the original Part 20 Particulars. Permission to amend was ultimately granted on 25 November 2022 by Deputy Master Lampert and the Amended Part 20 Particulars (which I will refer to simply as the Part 20 Particulars) were served on 28 November 2022, ahead of the ex parte application before Mr Knox KC.
It is recognised, and indeed was recognised at the time, that the return date hearing followed very soon after the initial making of the Order. Meade J therefore granted the Applicants until 30 January 2023 to apply to vary or discharge the Order without needing to show any material change in circumstances. They did not do so, only issuing this application on 21 July 2023.
The Applicants accepted, shortly before the hearing of this application, that they did not have the evidence to challenge the Order on the ground that there was no real risk of risk of dissipation. Instead they challenged it on the basis that Uniserve has no good arguable case against them and, in any event, there was a failure to comply with the duty of full and frank disclosure. Uniserve resisted the application both on the merits and on the basis that there had been undue delay in making the application.
The underlying dispute
While an application for a freezing order is not intended to be a dress rehearsal for the trial, given that the arguability of the case is contested some analysis of the dispute and the facts underpinning it is inevitable.
Maxitrac was incorporated on 11 April 2019; Dr Stead was its sole shareholder and sole director. Initially it appears to have operated on a small scale: its financial statements for the year 2019–2020 recorded current assets of £1,026 and sums falling due within a year of £8,501.
That position was transformed with the outbreak of Covid-19. Dr Stead had a network of contacts from his work as a business consultant that he considered he could use to source personal protective equipment ( PPE). Uniserve had an agreement to supply PPE to the Department of Health and Social Care ( DHSC). On 29 March 2020, through an exchange of emails between Dr Stead and Uniserve, Maxitrac and Uniserve entered into a contract under which Maxitrac was to act as Uniserve's agent in dealing with potential suppliers of PPE. The arrangement was formalised in the Maxitrac Contract on 2 June 2020, under which Dr Stead also guaranteed Maxitrac's obligations. The degree of the transformation is striking: between 25 April and 28 August 2020 Uniserve paid Maxitrac £42,510,000.
Following an introduction by Maxitrac, on 21 April 2020 Uniserve entered into the Supply Contract with the First Claimant for the supply of 80 million disposable face masks. On the same day Uniserve entered into the Commission Contract with the Second and Third Claimants.
Production of the face masks by the First Claimant was delayed. The Supply Contract provided for the first six million units to have been ready in a single batch by 28 April 2020. In fact, the first units were delivered for inspection on 12 May 2020 and by 20 May 2020 only one million units had been shipped to the UK. In the Amended Reply and Defence to Counterclaim, which, for convenience, I shall refer to simply as the Reply, the Claimants accept that those delays constituted either a repudiatory breach of the Supply Contract or a basis for termination under its terms.
They deny that termination ever happened, however. Rather, it is alleged by the Claimants in their Amended Particulars of Claim (the Particulars of Claim) that in a telephone call on or around 22 May 2020 Dr Stead, as agent for Uniserve, and Mr Khader of the First Claimant orally agreed a revised schedule for delivery of the remaining 79 million units. It is further alleged that Dr Stead wrote to Mr Khader on 22 May 2020 setting out the revised agreement and Dr Khader confirmed it in an email on 26 May 2020.
Uniserve admits that the emails were sent, although denies that they constituted a variation of the Supply Contract. Uniserve also accepts that Dr Stead forwarded the 26 May 2020 email to Mr Chaplin of Uniserve soon after it was sent to the First Claimant.
From 30 May to 17 June 2020 Uniserve took delivery of and paid for multiple shipments of face masks. Internally, however, Uniserve's management were unhappy with the delays and had identified an alternative supplier. From 5 June 2020 Uniserve was seeking approval from DHSC to source face masks from BYD Auto Industry Company Ltd ( BYD) as a substitute for the First Claimant. Mr Liddell, of Uniserve, also wrote to Dr Stead stating his willingness to engage BYD even without DHSC approval in advance: “ I think we will have to take a bit of a flier on this as I don't trust [the First Claimant] to deliver.” Later that day he stressed: “ OK how to we get out of the Hitex contract [with the First Claimant]”. Dr Stead responded: “ First we see if we get the 2M, 3M, 5M and 7M, they miss one, its [sic] over, they already know that (even by a day) with 60M from BYD, that's the 80 even if they do it, I think that even if they scrape in with the 7M week, they may struggle to get the 8M week as things stand.”
On 7 June 2020 Uniserve signed a supply agreement with BYD for 60 million surgical face masks.
Uniserve admits in its Amended Defence and Counterclaim (the Defence) that it ceased to collect any PPE from the First Claimant after 17 June 2020. Emails provided to the Applicants on disclosure (the Bonnett emails) further evidence this, showing that on 18 June 2020 Mr Bonnett, of Uniserve, informed the freight handler ( Majlan), that it was not to collect any more masks from the First Claimant.
Uniserve asserts, again in the Defence, that the First Claimant failed to make deliveries in accordance with the alleged amended Schedule on 21 and 28 June and 5 July 2020 in any event. Those were further grounds to terminate the Supply Contract and Uniserve pleads in the Defence pleads that:
Uniserve did so terminate the Supply Contract through its agent Dr Andrew Stead by 11 th July 2020 at the latest. In particular, on 11 th July 2020, Mr [sic] Stead wrote to Mr Khader on at least two occasions:
10.7.1 Explaining in one message that: “ it was made very clear to you that the contract was finished last time we spoke.”
10.7.2 And in another that: “ The last time we spoke I told you clearly that you (Hitex) had breach [sic] the terms of the contract and that it was therefore cancelled/finished due to the breach and the lack of timely supply … it was ‘clearly stated’ that the contract was in breach, the contract had ended as a result.”
The Reply admits that the emails were sent but denies they amounted to a termination, stating: “ The emails do not purport to terminate the Supply Contract but simply refer obliquely to an earlier oral statement that the Supply Contract had in some unspecified manner been ‘cancelled’ or ‘finished’ or ‘ended’, none of which was correct.”
Uniserve's primary position is therefore that it was entitled to and did terminate the Supply Contract, such that no sums are due under it and the damages claim is baseless. That, in turn, means that no sums could be earned under the Commission Contract and so, again, there is no basis for a claim in debt or for any corresponding damages claim.
The Part 20 claim is pleaded in the alternative, such that it is premised on the Claimants succeeding in whole or in part. The Part 20 Particulars rely on the following terms of the Maxitrac contract:
3.2 [Maxitrac] shall ensure that:
(d) availability / deliveries occur on time, as per the agreed schedule (and [Maxitrac] shall inform Uniserve of any delays in availability / delivery, together with reasoning [sic] as to why);
(f) availability of Goods is notified to Uniserve so that they are able to be collected in a timely manner once ready to dispatch.
4.2 [Maxitrac] warrants and undertakes to Uniserve that:
(b) each supplier has manufacturing and warehousing capacity sufficient to comply with its obligations under the relevant [Supply Contract]
8.1...
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