PGH Investments Ltd v Sean Ewing
| Jurisdiction | England & Wales |
| Judge | Passfield |
| Judgment Date | 17 March 2021 |
| Neutral Citation | [2021] EWHC 533 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2020-003678 |
| Date | 17 March 2021 |
[2021] EWHC 533 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF PGH INVESTMENTS LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
DEPUTY ICC JUDGE Passfield
Case No: CR-2020-003678
Phillip Gale (instructed by LEXLAW Solicitors & Advocates) for the Applicant
Rory Brown (instructed by Wedlake Bell LLP) for the Respondent
Hearing dates: 1 March 2021
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.
DEPUTY INSOLVENCY AND COMPANIES COURT JUDGE Passfield
By an application notice dated 25 September 2020 (“ the Application”), PGH Investments Limited (“ the Company”) applies for the dismissal of the winding up petition (“ the Petition”) presented against it by Sean Ewing (“ the Petitioner”) on 8 September 2020. In the alternative, the Company seeks an order restraining the Petitioner from advertising the Petition.
By the Petition, the Petitioner claims that the Company owes him the sum of £825,000 (“ the Alleged Debt”), which is said to arise pursuant to the terms of a Share Purchase and Loan Assignment Agreement (“ the Agreement”) entered into between the Petitioner (as seller), Andrew Neate (“ Mr Neate”) (as buyer) and the Company (as guarantor) on 15 May 2020.
The Company disputes that it is liable to pay the Alleged Debt. I am required to determine whether it has genuine and substantial grounds for doing so. It is common ground that this will depend on the proper construction of the terms of the Agreement.
If I conclude that the Company is liable to pay the Alleged Debt, it is further common ground that I must go on to consider whether it is likely that the court will be able to make a winding up order against the Company under s.122(1)(f) of the Insolvency Act 1986 (“ the 1986 Act”), having regard to the coronavirus test in para.5(3) of Schedule 10 to the Corporate Insolvency and Governance Act 2020 (“ the 2020 Act”).
Finally, if I am satisfied that the court has jurisdiction to make a winding up order against the Company, it is necessary for me to consider the Company's argument that the Petition should nevertheless be dismissed as an abuse of process on the grounds that the Petitioner has presented it for a collateral purpose.
Background
The Company was incorporated on 5 March 2019 and is part of the Photon group of companies (“ the Group”), which is involved in the production of dedicated purpose designed and manufactured cannabis growing lighting and the provision of facilities and infrastructure for the purpose of growing cannabis. Mr Neate and his wife are the directors of the Company. It is common ground that the Company does not carry out any trading activity. It previously held shares in other companies in the Group, but these were transferred to Mr Neate and his wife on 9 September 2020 (the day after the presentation of the Petition).
The Petitioner is an investor in the Group. He has purchased shares in Photon Holdings Limited (“ PHL”) and Photongrow Limited (“ PGL”). He has also made or procured a loan to PHL in the sum of £500,000 (“ the Loan”). The Company has raised a dispute as to whether the Loan is repayable to the Petitioner personally or to a company of which he is the sole director and beneficiary (Doyne Investments Limited), although this was not specifically addressed at the hearing.
On 15 May 2020, the Petitioner, Mr Neate and the Company entered into the Agreement. In broad terms, it provided for Mr Neate to purchase some of the Petitioners' shares in PHL and PGL (“ the Sale Shares”) and the Loan for £825,000. Mr Neate asserts that this was conditional on him finding an onward buyer for the Sale Share by 15 July 2020; the Petitioner denies this. By clause 6 of the Agreement, the Company provided a guarantee and indemnity to the Petitioner. I will turn to consider the precise terms of the Agreement and, in particular, the guarantee and indemnity, in paragraphs 37 to 63 below.
On 7 July 2020, the Petitioner's solicitors (Wedlake Bell) emailed Mr Neate noting that he had yet to make any payments to the Petitioner pursuant to the Agreement and indicating that the “latest date for payment in full” was 15 July 2020.
In the event, Mr Neate did not purchase the Sale Shares and the Loan by 15 July 2020.
On 22 July 2020, Mr Neate emailed the Petitioner stating: “I'm being told by my source of funds we should complete on Tuesday [28 July 2020]. I will stay in touch before then with news”.
On 23 July 2020, the Petitioner responded to that email stating that he had spoken with his solicitors but has asked them to “refrain from progressing as advised, pending your update over the next few days, and completion next Tuesday” and asking Mr Neate to “forward a part payment” as a show of goodwill.
On 31 July 2020, Wedlake Bell wrote to Mr Neate threatening to issue proceedings against him if he did not pay the sum of £825,000 to the Petitioner by 7 August 2020. On the same day, Wedlake Bell also sent the Company a formal demand for payment in accordance with clause 6 of the Agreement.
On 19 August 2020, the Petitioner sent Mr Neate a WhatsApp message indicating that he would commence proceedings against him the following day. Mr Neate replied to that message stating “I cannot pay you with what I currently don't have” and asking the Petitioner to “extend the completion date of our contract” to 30 September 2020.
On 20 August 2020, Mr Neate sent to Wedlake Bell a letter signed on behalf of himself and the Company stating as follows:
“We acknowledge, confirm and agree to an amendment of the Agreement as follows;
1. The Agreement of 15th May 2020 is between Sean Ewing, Andy Neate, and PGH Investments limited and as detailed therein provides for the purchase by Andy Neate of Mr. Ewing's shares in PHL and PGL together with Mr. Ewing's loan to PHL for £825,000; and
2. The closing envisaged in the Agreement to be by 15 July, 2020 has not occurred and Mr. Ewing has not been paid;
3. In consideration of Mr. Ewing agreeing to amend the closing date / payment date in the Agreement to 30 September, 2020 Andy Neate agrees at closing to pay Mr. Ewing interest at the rate of 5% from 15 July, 2020 on the £825,000 until Mr. Ewing is repaid the £825,000;
and
4. Andy Neate / PGH Investments Limited's obligation to pay Mr. Ewing is subject to the terms of the Agreement and (i) Mr Ewing adhering to the Confidentiality Provisions as detailed in the Agreement, (ii) refraining from issuing any of the letters before action referred to in the 20 August Email and (iii) Mr. Ewing not demanding repayment of his loan from PHL until after 30th September 2020, it being envisaged that such demand can only occur after 30 September, 2020 if there is no closing / Andy Neate fails to make payment in full by that date to Mr. Ewing in accordance with the Agreement as amended by the terms of this letter.
5. We agree that we shall promptly execute a Deed of Variation with Mr. Ewing that reflects the content of this letter.”
On 26 August 2020, Wedlake Bell sent to Mr Neate a draft deed of variation (“ the Draft Variation”) and a conformed copy of the Agreement (“ the Conformed Agreement”) which provided for Mr Neate to purchase the Sale Shares and the Loan by 30 September 2020. It is common ground that this obligation would not have been conditional in the way that Mr Neate alleges that the Agreement was. Mr Neate alleges that he sent emails to Wedlake Bell on 26 and 27 August 2020 expressing surprise at this and providing revised drafts of the Draft Variation and the Conformed Agreement. The Petitioner denies that these emails were ever received. It is nevertheless common ground that the Draft Variation and the Conformed Agreement were never executed.
On 3 September 2020, Wedlake Bell sent to Mr Neate two letters. The first, which was addressed to Mr Neate personally, asserted that he was in breach of the Agreement by reason of his failure to purchase the Sale Shares and the Loan by 15 May 2020 and threatened to issue proceedings against him (and to “appraise the various directors and stakeholders of the concerns raised”) if he did not execute the Draft Variation and the Conformed Agreement by 6pm the following day. The second, which was addressed to the Company, stated that the Petitioner was at liberty to serve a demand for payment on the Company under clause 6 of the Agreement, and again threatened to issue proceedings if the Draft Variation and the Conformed Agreement were not executed by 6pm the following day.
On 8 September 2020, the Petitioner presented the Petition. In accordance with para.4.1 of the Insolvency Practice Direction relating to the Corporate Insolvency and Governance Act 2020 (“ the CIGA PD”), this was initially listed for a non-attendance pre-trial review on 13 October 2020.
On 14 September 2020, Mr Neate sent Wedlake Bell a detailed letter in which he asserted that the Agreement had automatically terminated on 15 May 2020, and that he and the Petitioner had reached a fresh oral agreement on 20 May 2020, but that this was conditional on his finding a buyer for the Sale Shares by 30 September 2020.
On 23 September 2020, the Company's solicitors (LEXLAW) wrote to Wedlake Bell inviting the Petitioner to withdraw the Petition and threatening to issue an urgent application for an injunction to restrain the advertisement of the Petition and for the dismissal of the Petition. On 24 September 2020, Wedlake Ball responded confirming that the...
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