GO Capital Ltd v Jagdeep Singh Phull

Hearing dates: 11 May 2020

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs

Chief ICC Judge Briggs

Introduction

This is the adjourned hearing of a petition that seeks to adjudicate Jagdeep Singh Phull (the “Debtor”) bankrupt. The petition debt was the subject of a statutory demand served on 3 July 2019. No application was made to set aside the demand. Go Capital Limited (the “Company”) press for a bankruptcy order as the Debtor has failed to pay a sum due after demand pursuant to a document entitled “Personal Guarantee and Indemnity Deed of Agreement Transaction Code Mangosteen80”. I shall refer to this as the “Guarantee”. The Debtor denies any sum is due pursuant to the Guarantee.

The case raises some interesting points about the nature of the Debtor's liability to the Company. First, is the purported liability based on a sham transaction? Secondly, has the Debtor's signature been forged? Thirdly does the Guarantee give rise to any liability at all? The basis of this argument is that the Guarantee is not, despite its long title, in the form of a deed and no consideration moved from the promisee Company. If the Guarantee is not by way of deed and there is no consideration, it follows that there is no obligation to make the payment under the Guarantee.

These interesting arguments are matters which this specialist court is used to dealing quickly by delivering extempore judgments. It was not possible to do so and ensure a fair hearing on this occasion. The reason for this is that the hearing was held remotely, and several issues arose. First the microphone for one of the advocates did not work leading to a delay of the start time. Secondly the electronic bundle, running to several hundred pages, was not user friendly. The text was not selectable to facilitate comments and highlights; there were no bookmarks; there were several page numbers on each page; tabs were hand written; some pages were missing; the documents had no logical order; some were unreadable and the PDF had two indexes, neither of which were hyperlinked to the pages or documents. Counsel for the Company tried to rectify some of the issues by sending a second bundle but that happened within 30 minutes of the hearing and was missed. No authorities were provided. Navigating such an electronic bundle quickly and efficiently is challenging despite spending more than the allotted time pre-reading.

The Guarantee

The Guarantee is said to be made between three parties: the Company, Odyssey Energy LLC (“Odyssey”) and the Debtor. The first recital explains that the Company enters negotiations on behalf of clients and introduces financial opportunities. The Company relies on a Joint Venture Funding Agreement (JVFA”) made between the Company and Odyssey and various other documents such as a “memorandum of understanding” (“MOU”) all dated 5 April 2019. The Guarantee is said to create a primary obligation upon the Debtor to pay a sum of money in the event that Odyssey fails to meet its obligation.

The operative clauses are as follows:

5.1. In consideration for [the Company] making payments on behalf of [Odyssey] as set out within the MOU under Transaction Code: MANGOSTEEN80 in the sum of $75,000 (seventy-five thousand USD) hereinafter referred to as the (fees).

5.2. [The Debtor] agrees with full legal understanding that in default to Personally Guarantee and Indemnity [the Company] in the amount of $75,000 (seventy-five thousand USD).

5.3. As evidence of [the Debtor's] financial capacity to meet this liability they have provide a bank statement issued today April 05, 2019 which shows an account balance of £152,448.17.

5.4. [The Debtor] agrees to maintain a minimum account balance of £62,000 (sixty-two thousand GBP) to meet any claim that may be made under this Deed of Agreement. The funds can be identified as being held at…

5.5. As such the Parties hereto agree that Odyssey will no longer be required to make payment set out within the MOU, referred to as the lodging fees in the amount of $75,000. [The Company] agrees to meet the terms of the MOU by make payment of the fees in full.

5.6. [The Debtor] unconditionally agrees by signing the Deed of Arrangement that in default (such terms of default stated below), that [the Debtor] will have a separate and primary obligation to [the Company] to pay the sum of $75,000 (seventy-five thousand USD] and unconditionally and irrevocably Guarantee to make full payment without delay or withholding of any kind. (sic)

It is apparent from these operative clauses that (1) the Company was to pay the fees and (2) Odyssey was to pay the Company and (3) the Debtor would only be liable for the fees in the event of a default by Odyssey. This is said to be the trigger of the Debtor's obligation (clause 8):

“In default [the Debtor] …unconditionally and irrevocably Guarantees to make payment in the amount of $75,000…without any deductions, withholding or set off of any kind within 3 banking days of a copy of the default notice being served on [the Debtor]…”

The Company signed the Guarantee through its agent and director Bruce Robertson and a signature appears on behalf of the Debtor. No witnesses attest the signature. I turn to the documentation recording the underlying transaction.

The Transaction

The transactional documentation is all dated 5 April 2019. I note that there are many typographical errors in the documentation, but oddly Party “A” to the JVFA is named as Ms Somrudee Boontanonda, not the Company. The witness to “Party A” is Mr Vourakis and Mr Robertson, a director of the Company, is named as a witness to Mr Pallone and cited as “Party B” to the JVFA. On the face of it the JVFA concerns individuals only.

In addition to the JVFA there exists the MOU, a letter of authorisation, an acceptance letter on behalf of Odyssey, a “Confirmation of Window Time” letter which purports to set out the time frame when the funding would be transferred, and an “Irrevocable master fee protection agreement” where by Ms Boontanondha confirmed her personal commitment to pay “the participating beneficiaries” consulting fees for “services performed for both Parties to originate and complete the Transaction” (which included a non-disclosure agreement).

I should now explain that Mr Pallone is an American citizen and director of Odyssey which is registered in Nevada, USA. Odyssey is stated as carrying on business in “Green Energy”. Its registered office and mailing address are said to be in North Carolina and it used a law firm in California. The transaction, quintessentially the provision of US$500 billion, was to be conducted through a bank in Hong Kong. The Company held a Hong Kong and Shanghai Bank account in Hong Kong. As a prerequisite for the provision of US$500 billion, Odyssey was required to demonstrate that it had “proof of funds” in the amount of US$20 billion. No reason is provided for this condition.

The term “Joint Venture” does not appear to describe the transaction. As stated above the transaction involved the provision of funds. Upon “Total Drawdown” the Company would pay to Odyssey $20 billion as a “Bonus”. All procedures set out in the JVFA concern proof of funds, verification, timing for draw down and payment of the “Bonus”. The documentation is silent about an enterprise or commercial undertaking. Money is simply moved around and siphoned off in the form of commissions and “Bonus” payments. I asked Mr Lewis during the course of the hearing if he could elaborate on the venture. He responded that “it's all in the documentation”. Mr Batten informed me that he was unable to understand it and preferred therefore to present his argument based on lack of formality.

The fees and expenses (the petition debt) are described as service charges payable by the Company to HSBC, Hong Kong “and other financial organizations in order to engage the Bank as Host Bank to handle the transaction”. There is no provision or obligation on Odyssey to do anything under the JVFA (other than demonstrate that it had US$20 billion in an account) or repay the UD$500 billion advanced. That may explain why no security was taken. No other explanation has been provided. The letter of authorisation is expressed “We, [Odyssey] …hereby authorise Ms Somrudee Boontanondha …to verify and authenticate my bank account…having case on deposit in an amount equivalent to Twenty Billion Dollars USD…” It is signed by Mr Pallone only. The use of the possessive pronoun is confusing. It has not been submitted that there was no intention to use the pronoun.

The MOU states that Mr Vourakis (an Australian citizen) represents “Party A”. As I have mentioned above this appears to be Ms Somrudee Boontanonda and the counterparty “Party B” is Mr Pallone in his own capacity. The pre-amble states that Ms Somrudee Boontanonda “certifies that [she] is required to pay fees and expenses in excess of USD $75,000 … directly to HSBC… to engage the Bank as Host Bank to handle the transaction.” If...