LDX International Group LLP v Misra Ventures Ltd
| Jurisdiction | England & Wales |
| Judge | David Stone |
| Judgment Date | 21 February 2018 |
| Neutral Citation | [2018] EWHC 275 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2017-005245 |
| Date | 21 February 2018 |
[2018] EWHC 275 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF LDX INTERNATIONAL GROUP LLP
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
7 Rolls Buildings
Fetter Lane
London, EC4A 1NL
David Stone
(sitting as a Deputy High Court Judge)
Case No: CR-2017-005245
Mr Cleon Catsambis (instructed on a direct access basis) for the Applicant
Mr Simon Goldstone (instructed by Kemp Little LLP) for the Respondents
Hearing date: 22 January 2018
Judgment Approved
David Stone (sitting as Deputy High Court Judge):
LDX International Group LLP ( LDX) has applied for an injunction to restrain Misra Ventures Limited ( MVL) from presenting, advertising or otherwise publicising a winding up petition. The debt owed by LDX to MVL is not contested, nor is the statutory demand on which MVL relies. Rather, LDX requests an injunction because it says that it has a cross-claim against MVL which exceeds the value of the uncontested debt, and, hence the winding up petition would be an abuse of process.
The relevant law is well known. However, counsel for the parties urged on me two very different approaches to applying the relevant principles, and hence it is necessary to set out in some detail the relevant facts, the law, and the parties' contentions.
The Facts
I had before me witness statements of:
a. Vijay Angelo, Managing Member of LDX;
b. Dorothy Delahunt, Chief Legal and Compliance Officer of LDX; and
c. Peter Dalton of MVL's solicitors.
None were cross-examined, and to the limited extent it was relied on I accept their evidence.
The relevant background facts are largely agreed and can be simply stated:
a. In 2016, MVL loaned LDX £200,000 pursuant to an agreement dated 19 October 2016. At the time, LDX was named Global Markets Exchange Group International LLP, but nothing turns on the difference in name. Under the terms of the agreement, the money was to be repaid on 31 October 2017.
b. On 9 May 2017, MVL served on LDX a statutory demand, alleging default by LDX which obliged LDX to repay the debt ahead of time (the First Statutory Demand). The First Statutory Demand was for the sum of £200,450 plus interest.
c. On 23 May 2017, MVL withdrew the First Statutory Demand after LDX pointed out that the wrong form had been used.
d. On 3 July 2017, MVL served a second statutory demand on MVL, this time for the sum of £160,902 plus interest (the Second Statutory Demand).
e. On 5 July 2017, LDX wrote to MVL denying that the debt was repayable prior to 31 October 2017, asserting that it could meet its obligations under the agreement as they fell due, and asserting a cross-claim against MVL and its principal Mr Hirander Misra, claiming damages of £300,000.
f. On 18 July 2017, LDX applied to this court for an injunction to restrain MVL from presenting and advertising a winding up petition (the First Injunction Application). The First Injunction Application was listed to be heard on 3 October 2017.
g. On 4 August 2017, MVL withdrew the Second Statutory Demand, on the basis that the First Injunction Application was listed close to the date of the loan repayment. The hearing date was vacated.
h. On 25 August 2017, LDX made an application for its costs of the First Injunction Application.
i. On 21 September 2017, Deputy Registrar Briggs vacated the 3 October 2017 hearing date, and listed the costs application for 12 December 2017. At the hearing on costs, at which both parties were represented, Deputy Registrar Frith awarded LDX its costs of and occasioned by the First Injunction Application. Those costs have not yet been agreed, nor has the assessment process begun.
j. On 11 October 2017, LDX sent MVL a Preliminary Notice, setting out allegations against MVL and four other potential defendants (including Mr Misra). Damages were put at £2.87million.
k. On 15 November 2017, LDX informed MVL by e-mail that it was preparing a claim against MVL for breach of contract and misrepresentation.
l. On 6 December 2017, MVL served a third statutory demand on LDX, the statutory demand on which these proceedings are based (the Third Statutory Demand.). That statutory demand was for £176,963.43, being £160,902.00 plus interest.
m. This application for injunctive relief was issued on 22 December 2017 (the Second Injunction Application). There was correspondence between the parties between then and 15 January 2018, when LDX sent MVL a Letter of Claim. The Letter of Claim notes MVL's failure to respond to the Preliminary Notice within the 21 day period set out in the relevant pre-action protocol, before setting out LDX's position. The Letter of Claim was received by MVL six clear working days before the hearing before me. I return to the contents of the Letter of Claim below, but for present purposes, it is sufficient to record that it included LDX's basis for its allegations and the facts on which it relies, and attached a large number of documents.
The Parties' Positions
Put shortly, it is LDX's position that the amount set out in the Third Statutory Demand is due and payable. However, LDX says it is entitled to an injunction to prevent the presentation and advertisement of a winding up petition because it has a cross-claim against MVL which exceeds the value of the claimed debt. The cross-claim relied on is in two parts: first, the costs order it has obtained against MVL but which has not to date been agreed or assessed, and secondly, its claim against MVL as set out in the Letter of Claim.
Mr Cleon Catsambis, who appeared on behalf of LDX, submitted that, in assessing the cross-claim, it was not the role of the court to “get into the weeds” on the details – I need only satisfy myself that the cross-claim is genuine and serious, and exceeds in value the amount claimed in the statutory demand. If that is the case, so long as there were no “special circumstances” justifying the petition proceeding (and Mr Simon Goldstone, who appeared for MVL, did not allege that there were), then an injunction ought to issue.
In his written submissions, Mr Catsambis submitted for LDX that there were two further grounds for issuing an injunction to restrain presentation and advertisement of a winding up petition:
a. Because MVL is seeking to obtain a collateral advantage rather than using the proceedings for the purpose for which they are properly designed; and
b. Because MVL's application is an abuse of process or otherwise bound to fail.
The collateral purpose ground was pressed at the hearing, but the abuse of process ground was not.
On behalf of MVL, Mr Goldstone took a different approach, submitting that the authorities require a detailed assessment of the strength of LDX's cross-claim. Counsel for MVL submitted that I did indeed need to “get into the weeds”, and at the hearing he did just that, working from the detailed analysis helpfully set out in his written skeleton argument. He characterised the Letter of Claim as “totally unparticularised” and full of “bare and vague assertion[s] unsupported by evidence”. He submitted that a thorough examination of the evidence should lead to the conclusion that LDX has failed to show evidence of a serious and genuine cross-claim.
Counsel for MVL made a further point in relation to what he described as LDX's failure to progress its cross-claim. LDX's delay, he said, whilst not being a barrier to injunctive relief, was an indication that the cross-claim is not genuine and serious.
Counsel for MVL further criticised the costs claimed by LDX in relation to the order made by Deputy Registrar Frith. The current value of that costs claim, he said, was vastly overstated.
Finally, counsel for MVL took me in some detail to the solvency of LDX. For reasons which I explain below, I do not need to say anything further about this point.
The Law
It is well established that the court will restrain the presentation of a winding up petition if the debt is disputed on genuine and substantial grounds. Even if the debt itself is not disputed, the court will restrain the presentation of a winding up petition if the debtor has a genuine and serious cross-claim that exceeds the value of the debt.
(I note in passing that, technically, the cross-claim need only equal the debt less £750. Whilst the £750 will be material in some cases, it is not in this case, and so I say no more about it.)
In In re Bayoil SA [1999] 1 WLR 147, Nourse LJ, with whom Ward and Mantell LJJ agreed, said this (at page 155):
“The ability of a petitioning creditor to levy execution against the company does not entitle him to have it wound up. Moreover, an order that a company be wound up, unlike a bankruptcy order, is often a death knell. Nor can it be certain that a liquidator, even with security behind him, will prosecute the company's claims with the diligence and efficiency of its directors. These, I believe, are considerations which go to justify the practice in cross-claim cases. I emphasise that the cross-claim must be genuine and serious or, if you prefer, one of substance; that it must be one which the company has been unable to litigate; and must be in an amount exceeding the amount of the petitioner's debt.”
I note in passing that later courts have occasionally reworded slightly Nourse LJ's requirement that the cross-claim be “genuine and serious or, if you prefer, one of substance” (emphasis added) to a requirement that the cross-claim be “genuine and serious and of substance” (emphasis added): see, for example, Laddie J in Orion Media Marketing Limited v Media Brook Limited and Anor [2002] 1 BCLC 184 at paragraph 35. I have, below, adopted the Court of Appeal's formulation.
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