Rusant Ltd v Traxys Far East Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Warren |
| Judgment Date | 28 June 2013 |
| Court | ChD (Companies & bankruptcy) |
| Docket Number | Claim No: 4414 OF 2013 |
| Date | 28 June 2013 |
[2013] EWHC 4083 (Comm)
Mr Justice Warren
Claim No: 4414 OF 2013
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand
London WC2A 2LL
Mr Robert Jan Temmink (instructed by Messrs Fox Williams LLP) appeared on behalf of the Claimant
Mr Mark Hubbard (instructed by Messrs Marriott Harrison LLP) appeared on behalf of the Defendant
Approved Judgment
No of Folios: 69
No of Words: 4,999
Friday, 28 June 2013
This is an application by Rusant Limited against Traxys Far East Limited (who I will call the applicant and the respondent) to restrain the presentation of a winding up petition against the applicant.
I start with the facts with reference to an agreement between the parties headed "Loan Agreement Against Exclusive Distributorship" dated 27 May 2010 and, as its title suggests, it comprised provisions for financing as it happens by the respondent to the applicant coupled with an exclusive distributorship in favour of the respondent. I do not need to go through the agreement in detail. Paragraph 1 deals with the loans. Paragraph 2 deals with exclusive marketing agency. Paragraph 3 concerns the products which had to be marketed. Paragraph 4 deals with pricing, commission and other financial aspects. Clause 5, which is important, concerns arbitration, choice of law and jurisdiction. The agreement is governed by and construed in accordance with the substantive laws of England. Importantly:
"5.2 Any dispute, controversy or claim arising in connection with or relating to this agreement, including its interpretation, execution and effect or the breach, termination or invalidity hereof should be referred to and finally resolved by arbitration of a single arbitrator.
5.3 The place of arbitration is to be in London."
Paragraph 8, headed " Miscellaneous", contains at clause 8.1 a provision which reads as follows:
"This agreement constitutes the entire understanding of the parties and supersedes all oral or written representations or agreements, privileges or understandings between the parties. If any provision of this agreement is held by the arbitrator to be contrary to law, such provision shall be changed."
More importantly, at paragraph 8.2:
"Any change, amendment and/or addition to this agreement shall have no effect and shall be regarded as null and void unless done in writing and signed by both parties."
There was a variation of that agreement in August 2012. Materially for present purposes it was provided that the applicant acknowledged that it had received loans in the aggregate of $300,000. The respondent will make one further loan in the amount of $300,000 and they shall bear interest at the rate of 12 months Libor plus 8 per cent per annum. The outstanding balance of the loans together with accrued interest to the extent not converted into equity, which never happened, shall be repaid to the respondent no later than 20 August 2012. It was provided that the exclusive marketing agency granted to the respondent covered the entire world and was for a term commencing on the date of the agreement and continuing for as long as the applicant maintains production from (inaudible) or any other concession for which it produces and in any concentrates.
There had been an attempt comparatively recently to persuade the respondent to convert its loan into equity, but that was rebuffed. There were concerns about repayment made in e-mails in April 2013, as appears from the evidence in support of the application given by Mr Waller, a director of the applicant, in particular at paragraph 11, the whole of which I will read out:
"Mr Doctor [who was a director, indeed the president, of the respondent] assured me, at a meeting in New York on 4 April 2013, that the loans had been extended to 'July or some such date' and that the lawyers had taken care of the documentation and that I should not worry about it. I have had absolutely no doubt about that. On behalf of the applicant I was pleasantly content with that arrangement and on the basis of the amendment to the repayment date I had made no effort to procure the applicant's repayment of the loans in August 2012 and subsequently in the light of the many assurances I had received."
Pausing there for a moment, there is no evidence about many assurances which he had received and Mr Temmink, who appears for the applicant, does not rely upon that.
"In fact, to the contrary, the board organised its financial affairs on the basis that the loans would not mature until July 2013 (or 'some such date') at the very earliest. I saw no need to chase up the documentation extending the repayment period of the loans, particularly since the original time for payment of the loans had long passed and no demand had been made for their repayment."
The respondent denies that any agreement was made at the New York meeting, although it is accepted that there were discussions about continuing the loan. But even the applicant accepts that no date was agreed other than the rather vague phrase "July or some such date". I comment in passing in relation to the sentence concerning organising the company's financial affairs. That is the limit of the evidence. No detail is given and no particular aspects of reliance on detriment are alleged.
There then came a statutory demand. It is dated 10 June 2013 and it is served under section 123(1)(a) of the Insolvency Act 1986 and seeks immediate payment of the loan and interest, the loan being $600,000 and the interest at the date of the demand being claimed at $64,932.63. It is the issue of that statutory demand which has prompted the present application. The applicant seeks injunctive relief to prevent reliance on the statutory demand because, as Mr Temmink submits, no money is yet due. It does not, at least at this stage, seek to enjoin reliance on section 123(1)(e) or subsection (2). If that is done no doubt the court can expect a further application. Whether the respondent would want to seek to present a petition on such an alternative basis without first giving the applicant the opportunity to apply for further relief I do not know. I am not asked today to restrain such an application. I would think, however, that if an injunction would be granted, if it could only be made in time, then there would be a very strong case for striking out any petition which had in fact been made in the interim.
On this application Mr Hubbard for the respondent accepts that there is no evidence that the applicant is balance sheet insolvent and does not rely on that in any case. However, he does say that there is sufficient to show that there is cash flow insolvency as an alternative to the statutory demand.
Mr Temmink's essential case is that the meeting in New York on April resulted in a binding agreement between the parties that the date for payment of the loans and interest would be postponed to the end of July 2013, or at least until the beginning of July, but that alternative is not of much assistance as that is next Monday.
The Law: Arbitration.
Mr Temmink submits that the reliance on the statutory demand is precluded by the arbitration provisions of the agreement read with the Arbitration Act 1996, section 9. Section 9 refers to a claim or counterclaim, and it is perhaps sensible that I read subsection (1):
"A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter."
Mr Temmink submits that a petition is a claim and that the arbitration agreement, which in our case is a very wide one, entails that the matter in dispute must go to an arbitrator. Put that way, and I have probably distorted his submission, it is not quite right. An arbitrator cannot wind up a company. So the question is how the petition and the claim which would be made in order to found the petition interact in the context of an arbitration agreement. Mr Temmink says in effect that if any dispute is raised between the parties, that dispute must go to an arbitrator before a petition can properly be issued. Mr Hubbard says that that is wrong. The petition is not a claim. Rather, he relies on the decision of Park J in Best Beat Limited v Michael Joseph Russell, which I will come to later. He says the position is not a claim and does not fall within the scope of section 9. It is a class action and the arbitration provision has nothing to do with it.
Mr Temmink submits that Best Beat is irrelevant. It is true that the judge in that case held that the dispute in that case was one which was not within the scope of the arbitration agreement, whereas the dispute about the debt which is said to be due in our case is clearly within the arbitration agreement. Having said that, it is to be noted that Park J does start with the Arbitration Act and identifies as one of the difficulties facing the applicant in that case the fact that the petition was not a claim or counterclaim. However, that aspect of his judgment is not, as I read it, a matter of decision. He did not actually decide the point because he referred only to difficulties and the fact that it would appear, to use his words, that the claim was not within the Act. One might think that the...
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...for the petition to proceed. 5 In support of its argument that the disputes should be referred to arbitration Altomart relied on Rusant Ltd v Traxys Far East Ltd [2013] EWHC 4083 (Ch) in which Warren J. had held that section 9 of the Arbitration Act 1996 applies to proceedings in the form o......
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...dispute, it would be deemed by the court to be unable to pay its debts as and when they fall due. 20 The Judge referred to Rusant Limited v Traxys Far East Limited [2013] EWHC 4083 (Ch) and Halki Shipping v Sopex Oils [1997] EWCA Civ 3062, [1998] 1 WLR 726. In Rusant Warren J made an order......