Colt Technology Services v SG Global Group SRL
| Jurisdiction | England & Wales |
| Judge | Joanne Wicks |
| Judgment Date | 03 June 2020 |
| Neutral Citation | [2020] EWHC 1417 (Ch) |
| Date | 03 June 2020 |
| Docket Number | Case No: CR-2020-000220 |
| Court | Chancery Division |
[2020] EWHC 1417 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Joanne Wicks QC sitting as a Judge of the High Court
Case No: CR-2020-000220
Mr W Willson (instructed by Baker McKenzie LLP) for the Applicant
Mr D Lewis (instructed by Giambrone & Partners) for the Respondent
Hearing date: 6 May 2020
Judgment Approved by the court for handing down
Joanne Wicks QC sitting as a Judge of the High Court:
This is an application by Colt Technology Services (“ Colt UK”) for an injunction to restrain SG Global Group SRL (“ SGG”) from presenting a winding-up petition against it. SGG claims that Colt UK is indebted to it in the sum of US$4,936,619.93 plus interest. Colt UK contends that the debt is bona fide disputed on substantial grounds, such that the Companies Court is not an appropriate forum to determine the dispute and the presentation of a winding-up petition would be an abuse of process.
Introduction
Colt UK is a telecommunications company incorporated in England and Wales and part of the Colt group. SGG is an Italian company.
On 14 March 2016, Colt UK and SGG entered into a bilateral VoIP (“voice over internet protocol”) interconnect agreement (“ the Agreement”) under which SGG agreed to provide Colt UK with voice trading services. In the Agreement, Colt UK nominated another member of its group, an Italian company, Colt Technology Services SpA (“ Colt Italy”) as its “Affiliate” to receive the services to be provided by SGG and to be invoiced by it. The Agreement is governed by English law and includes a clause giving exclusive jurisdiction to the Courts of England and Wales.
Pursuant to the Agreement, in 2016 and early 2017 SGG provided Colt Italy with voice trading services under which SGG granted Colt Italy's business customers with access to its overseas networks outside Italy, mainly Africa. Seven invoices were submitted to Colt Italy for more than €40 million including VAT. These invoices were met by Colt Italy.
In January 2017, Colt UK's auditors, PriceWaterhouseCoopers (“ PwC”), raised concerns over what they considered to be anomalies regarding SGG. Colt UK says that these raised suspicions that SGG was not the true supplier of the services under the Agreement, but was a shell company acting as a front for another supplier and was engaged in a form of VAT “missing trader” fraud.
After further enquiries were made, Colt UK suspended payment of SGG's outstanding invoices. These comprise:
i) An invoice dated 1 February 2017 for US$2,459,542.02 including VAT;
ii) An invoice dated 16 February 2017 for US$1,701,379.45 including VAT; and
iii) An invoice dated 3 March 2017 for US$775,698.46, including VAT (together “ the invoices”).
On 21 June 2017 SGG commenced an action against Colt Italy before the Court of Milan for payment of the invoices (“ the Milan Proceedings”). In circumstances I shall explain in more detail below, Colt UK intervened in the Milan Proceedings and is now party to an appeal to the Milan Court of Appeal.
On 12 January 2018, SGG served a statutory demand on Colt UK claiming US$5,108,227.10 (equivalent to £4,187,072) in respect of the invoices and interest. Following correspondence between the parties, an undertaking was given not to issue any petition on that statutory demand without giving notice.
On 20 December 2019, following the first instance decision in the Milan Proceedings, SGG served a further statutory demand claiming that Colt UK owed it a debt of US$5,442,768.05, equivalent to £4,170,248.88, comprising the principal sum under the invoices plus contractual interest to the date thereof.
This application was made on 13 January 2020. By way of evidence in support, the applicant relies upon three witness statements of Richard Tilbrook, a director of Colt UK, and two witness statements of Luca Pescatore, an Italian-qualified lawyer with conduct of the Milan Proceedings on behalf of Colt UK and Colt Italy. The respondent relies upon a witness statement of Jamie Johnston, the director of SGG, and three witness statements of Gabriele Giambrone, an Italian-qualified lawyer with conduct of the Milan Proceedings on behalf of SGG.
By order dated 21 February 2020, ICC Judge Prentis gave Colt UK permission to rely on an amended version of an expert report of Professor Avv. Eugenio Della Valle, a Professor of Tax Law at Sapienza University, in relation to Italian law, and gave permission to SGG to rely on expert evidence of Italian law in response. SGG has served an expert report of Professor Avv. Alessandro Dagnino, a University lecturer in Tax Law at the University of L'Aquila. The expert witnesses have prepared a joint statement setting out the areas on which they agree and disagree, dated 27 April 2020.
At the hearing before me, Colt UK was represented by Mr William Willson of Counsel and SGG by Mr Daniel Lewis of Counsel. I am grateful to both Counsel for the high quality and focussed nature of their oral and written submissions.
The Parties' Contentions
As I have indicated, Colt UK's application is made on the basis that the sums claimed by SGG against it are, and have been for some considerable time, bona fide disputed on substantial grounds. It contends that it has a properly arguable defence that the obligation to pay the invoices is unenforceable for illegality. This is because, it says, there are significant indications that SGG is part of a missing trader scheme to defraud the Italian tax authorities of VAT charged on the services supplied under the Agreement, and payment of the invoiced sums would involve the commission of a criminal offence by Colt UK under Italian law. Colt UK therefore relies on the principle in Ralli Brothers v Compania Naviera Sota y Aznar [1920] 2 KB 287 (“ the Ralli Bros principle”), namely that a contractual obligation will not be enforced where doing so would require the obligor to commit a criminal offence in the place where the obligation falls to be performed. Alternatively, it contends that it has a genuine and arguable defence based on the principle of ex turpi causa, because SGG entered into the Agreement with the purpose and intention of defrauding the Italian tax authorities, or subsequently developed such a purpose in relation to the Agreement. Colt UK argues that it first notified SGG that the invoices were disputed in accordance with the contractual timescale under the Agreement and that the dispute should be resolved in the Milan Proceedings. It also contends that a winding-up petition against it would have the collateral and improper purpose of pressurising Colt UK, whose solvency is not in real doubt, into paying the alleged debt rather than continuing to contest the Milan Proceedings.
SGG resists the application for an injunction on the basis that the invoiced sums are due from Colt UK; that Colt UK does not dispute that it received the services for which the sums are the payment and has sold those services on to its own customers. It contends that Colt UK's reliance on the Ralli Bros principle is misplaced and that its arguments fundamentally misunderstand it; moreover that Colt UK has not adduced evidence that supports its contention that SGG is or was ever engaged in any illegal conduct. SGG strongly rejects the allegation that it has been involved in a missing trader fraud and points, as evidence of its honesty and the desire to find a pragmatic solution, to an offer made on 24 March 2020, under which Colt UK would pay the total amount under the invoices to SGG's Italian lawyers against an undertaking that SGG will pay the total amount of VAT to the Italian tax authorities and only release the net sum to SGG after the VAT liability, to be calculated by an independent chartered accountant, has been met.
The Agreement and Invoices
The Agreement is expressed to be made between Colt UK and SGG: it is signed by Mr Tilbrook for Colt UK and by Fernando Biscaioli, a former director of SGG, for SGG. The registered office of Colt UK is given as Beaufort House, 15 St Botolph Street, London EC3A 7QN; the registered office of SGG is given as 112 Viale Africa, 00144, Rome. The “ Services” to be provided by SGG under the Agreement are defined to mean the establishment of a transmission path through a party's transmission system and conveyance by that party of a signal handed over by the originating party over such transmission path.
On the front page of the Agreement, there are various provisions relating to payment. The currency in which payment is to be made is shown as US dollars and sums become due 30 days from the date of an invoice. Colt Italy is shown as the nominated Colt Affiliate and pursuant to clause 10.2 it is to receive the Services, be invoiced for the Services and serve as SGG's point of contact for all matters in connection with the Agreement. Its invoicing address is given as 56 Viale E. Jenner, 20159, Milan.
By clause 1.6, it is agreed that the parties “ will provide and use the Services in accordance with all applicable laws”. By clause 2.2 each party has the right to suspend the Services if, amongst other reasons, that party is aware of or has reasonable grounds to suspect any abuse (including fraudulent use) of the Services or the other party engages in activities which in its reasonable opinion are unlawful. By clause 2.3, each party acknowledges and agrees that the other party has no obligation to monitor or actively seek facts or circumstances indicating any abuse or illegal activities. Clause 11 also provides that both parties shall comply with all applicable laws, statutes, regulations and codes.
By clause 4.5,
“ A party shall pay all amounts not disputed in accordance with clause 4.6 as soon as possible after receipt...
To continue reading
Request your trial