Re UK-(Aid)-Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon Mr Justice Blackburne,Mr Justice Blackburne |
| Judgment Date | 15 May 2003 |
| Neutral Citation | [2003] EWHC 1090 (Ch) |
| Date | 15 May 2003 |
| Court | Chancery Division |
| Docket Number | Case No: 7723 of 2002 |
[2003] EWHC 1090 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand,
London WC2A 2LL
The Honourable Mr Justice Blackburne
Case No: 7723 of 2002
In The Matter Of Uk-(aid)-ltd And
In The Matter Of The Insovency Act 1986
Jonathan Lopian (instructed by Theodore Goddard) for the petitioner
Mark Arnold (instructed byBates Wells & Braithwaite) for the respondent
Hearing dates : 30 April, 1, 2 and 6 May 2003
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.
Introduction
This is the hearing of a contested winding-up petition. The petitioner, GlaxoSmithKline Export Limited ("GSK"), is the export arm of the multinational pharmaceutical group formed by the merger of Glaxo Wellcome and SmithKline Beecham which is now known as GlaxoSmithKline plc. The respondent company is UK Aid Limited ("the company"). GSK alleges in its petition that the company is indebted to it in the sum of £5,421,768.41 (plus interest) arising out of the non-payment of invoices —in respect of pharmaceutical goods sold and delivered to the company —dated between 14 September 2001 and 15 May 2002. The sum was calculated after giving credit for £140,149.93 in respect of VAT wrongly included in certain earlier invoices. The company denies that it is indebted to GSK. On the contrary, it claims that it has overpaid GSK to the extent of around £300,000.
According to the winding-up petition, the company was incorporated in September 1996 and has an issued share capital of £100. I am told very little about it. Its business includes the supply of medicinal drugs to relief aid agencies, NGOs, charities and others in the Crimea, Ukraine and Belarus.
The petition debt and the company's cross-claims arise out of dealings conducted principally by Mr Richard Jones on behalf of GSK and Mr Martin Mitchell on behalf of the company. Between early April 2000 and 31 December 2002 (when he left GSK's employment) Mr Jones was a commercial manager working as part of GSK's Central and Eastern Europe team. Mr Mitchell is the company's managing director. The company's evidence in opposition to the petition consists of six witness statements by Mr Mitchell. GSK's evidence consists of two witness statements by Mr Jones and four witness statements by Steven Rix who is employed as senior in-house counsel by another company within the GlaxoSmithKline group. There are extensive exhibits to the statements. Much of that evidence was before the court on an unsuccessful application by the company to restrain GSK from presenting its petition. I come to that episode in my narrative of events.
The law
I remind myself that I am concerned to determine whether the petition is founded on an undisputed debt. If the petitioner establishes his debt then the court may, and ordinarily will, make a winding-up order unless there is some good reason not to do so, for example, a short adjournment to enable the petition debt to be paid. If, on the other hand, the petition debt is the subject of a genuine dispute founded on substantial grounds, then the petition ought to be dismissed since it is not, or at any rate is not ordinarily, the function of the Companies Court in disputed debt cases to determine whether the petitioner can establish the debt on which his petition is founded. I remind myself that the mere fact that the company disputes the petitioner's debt does not, without more, lead to a dismissal of the petition. As Oliver LJ observed in Re Claybridge Shipping Co SA [1981] Com LR 107 at 109:
"…it is only too easy for an unwilling debtor to raise a cloud of objections on affidavits and then to claim that, because a dispute of fact cannot be decided without cross-examination, the petition should not be heard at all but the matter should be left to be determined in some other proceedings."
Where the debt is disputed, the court must determine whether, on the evidence, there is substance to the dispute. So also must it where the company asserts cross-claims as well. The fact that the evidence may be detailed and substantial in volume (as to some extent is the case here) does not absolve the court from undertaking this task. If, after considering the evidence, the court comes to the view that the evidence asserted by or on behalf of the respondent company is simply incredible —that it carries no conviction —the court should be free to find (as it may when exercising its summary judgment powers under CPR Pt 24) that the challenges to the petition debt are not founded on any substantial grounds and give judgment accordingly. See Re a Company (No 006685 of 1996) [1997] 1 BCLC 639 at 645, 649 (a decision of Chadwick J). None of this was a matter of controversy between the parties before me.
The background
In considering whether GSK's claim is genuinely disputed, it is instructive, as it usually is in disputed debt cases, to see how the company reacted from the time that GSK first began to press its demands.
The trading relationship between the parties goes back to 1997. The practice evolved whereby the company would make large lump sum payments to GSK for goods supplied rather than match its payments to coincide with the amount claimed under one or more particular invoices. Thus it paid £400,000 on 11 October 2001 and a further £600,000 on 20 December 2001.
By March 2002 the relationship between the parties was running into difficulties. The company had made no payments during January and February. GSK claims that on 1 March 2002 Mr Jones sent an e-mail to Mr Mitchell and his fellow director (and chairman of the company) Les Silverman, proposing that the company's dollar account be closed and that trading be confined to the sterling account. A copy of the e-mail was before the court. Having pointed out that the sterling account had an outstanding balance of £3,711,532.03 of which £1,593,228.50 was already due for payment (the difference being attributable to the fact that the company had 90 days from invoicing to make payment), the e-mail proposed that the following payments be made "to ensure that future deliveries go ahead as planned": (1) an immediate payment of $335,229.93 (in order to close the dollar account), (2) £400,000 by 8 March and (3) £500,000 by the end of March.
The company denies receiving that e-mail. But the fact is that on 15 March 2002 it made a payment of $335,229.93 (ie in the very amount which Mr Jones had requested in order to close the dollar account) and on 25 March it made a payment of £400,000. It did not pay the £500,000. Indeed it failed to make any further payments. (In a note sent to me after the hearing, Mr Arnold, who appeared for the company, indicated that Mr Mitchell had informed him during the hearing that "he [Mr Mitchell] remembered a telephone conversation with Mr Jones in which it was agreed that the company would make the payments referred to".)
On 2 April 2002, Mr Jones e-mailed Mr Mitchell and Mr Silverman to say that the company's debt now stood at £4,553,960.84 of which £2,127,930 was overdue. He acknowledged that a large percentage of this was in respect of VAT which the company was claiming back from HM Customs and Excise. (The position about VAT is explained later.) It sought a date by which the company expected to be able to make the VAT payment to GSK for which it had made a claim to HM Customs and Excise and set out a programme for payments during April with a view to reducing what was overdue from the company to £1.3 million odd.
The company claims that during the weeks leading up to early April, it was (in the words of Mr Arnold appearing for the company) "clamouring for a meeting" with Mr Jones at which to discuss the accounting position but that various projected meetings were cancelled by Mr Jones. GSK disputes this. It is common ground, however, that a meeting took place at the company's offices at Waltham Abbey on 11 April. The meeting was attended by Mr Mitchell and Mr Silverman on behalf of the company and Mr Jones on behalf of GSK.
Mr Mitchell says that he produced a typed agenda for that meeting, items 1 to 3 of which were as follows:
"1. Credits and discounts to be applied immediately.
2. Reconciliation of account —my calculations are that we are in a credit situation.
3. Formal agreement —we need a written agreement for future discounts and FOC goods [ie goods supplied free of charge] we cannot go through this performance again, year after year."
His typed notes of the meeting are as follows:
"Credits and discounts —we are fed up waiting for these to be applied, what is happening? RJ [Mr Jones] said he will do it this month, but he will not be dictated to. We say —we have this problem every year, we want it resolved. Before we have another meeting, we want this in writing for confirmation and also future proposals as to how business will be conducted. In effect we want a proper agreement or contract. We also want a meeting with RJ' s superiors. RJ says that he can do this —but not till later in the month. He arranges a meeting for April 25. Because of the fact that he cannot reconcile the account, all other business is put back until the next meeting. RJ departs."
The accuracy, indeed the authenticity, of that note (and others produced by Mr Mitchell) is not accepted by GSK. It suspects that the note has been compiled sometime after the event. There is nothing to suggest that Mr Jones received copies of Mr Mitchell's typed agenda or meeting notes. Indeed, Mr Mitchell has not suggested that he supplied copies of them to Mr Jones (or GSK).
Instead, Mr Jones wrote the following letter,...
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...Re, [2012] SC (Bda) 18 Com, distinguished. (5) GlaxoSmithKline Export Ltd. v. UK (Aid) Ltd., [2003] 2 BCLC 351; [2003] BPIR 1206; [2003] EWHC 1090 (Ch); further proceedings, [2004] BPIR 528; [2003] EWHC 1383 (Ch), considered. (6) Lanaghan Bros. Ltd., Re, [1977] 1 All E.R. 265, distinguished......