Sell Your Car with US Ltd v Anil Sareen
| Jurisdiction | England & Wales |
| Judge | Burton |
| Judgment Date | 03 September 2019 |
| Neutral Citation | [2019] EWHC 2332 (Ch) |
| Date | 03 September 2019 |
| Court | Chancery Division |
| Docket Number | Case No: CR-2018-011228 |
[2019] EWHC 2332 (Ch)
INSOLVENCY AND COMPANIES COURT JUDGE Burton
Case No: CR-2018-011228
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST
Rolls Building
Strand, London, WC2A 2LL
Guy Sims for the Applicant
Faith Julian for the Respondent
Hearing dates: 17 June 2019
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.
INSOLVENCY AND COMPANIES COURT JUDGE Burton
This is the hearing of an application by Sell Your Car With Us Limited (the “ Company”) made on 22 November 2018, for an injunction to restrain the Respondent, Mr Sareen from presenting a winding-up petition against the Company.
Background
On or around 25 July 2018, the Company agreed, subject to the terms of a “sale or return” contract, to sell the Respondent's Maserati Levante for a fixed fee of £995 + VAT. The Company sold the car on 4 September 2018 and pursuant to the terms of the contract, was obliged to pay the Respondent £51,800.
It appears that a third party (“ TP”) fraudulently intercepted the email exchanges between the Company and the Respondent and, purporting to be the Respondent, directed the Company to send £30,000 of the sale price to an account which was presumably under TP's control. In any event, the Respondent states that he did not receive the money and on 1 November 2018 served a statutory demand on the Company. The 21-day time period for the demand has expired but the Respondent has undertaken not to present a petition until the outcome of this injunction application.
Grounds for restraining the Respondent from presenting a winding-up petition
The Company contends that a winding-up petition should be restrained as there is a genuine and substantial dispute between the parties regarding which party is responsible for the fraud. Mr Sims' skeleton states that the Company has not agreed that the Respondent was not involved in the fraud but for the purposes of this application, does not assert that he was. On behalf of the Company, he asserts a counterclaim in an amount equal to the debt claimed by the Respondent based upon:
i) an implied term of the contract that the Respondent would take reasonable care over the security of his email communications. Mr Sims' skeleton states: “ The likelihood is that [the Respondent] failed to take reasonable care”. He appeared to be accessing his G-Mail account from his mobile telephone and “ someone getting access to his phone is an inherently more likely proposition than that someone gained access to the Applicant's corporate server”. “ It is not necessary that someone obtained the Respondent's password, or the account hacked by other means, for the fraud to have been committed – a few moments with an unlocked phone or laptop would have been sufficient for the email trail to have been forwarded to another account”. The Company stated that in order for the truth to be ascertained, an IT security expert will need to investigate the exchanges between the parties and if such expert were to establish, for example, that the rogue emails came from approximately the same physical location as the Respondent, then the likelihood is that his security had been compromised; and
ii) an implied representation by the Respondent that he had reasonable control over the security of such communications. The Company says that if he did not have such control, there is a negligent misrepresentation “ possibly under s2(1) of the Misrepresentation Act 1967, depending on the timing”.
The Company states that the likelihood is that the Respondent accessed his email account whilst travelling via his phone and that “ Someone getting access to his phone is an inherently more likely proposition than that someone gained access to the Applicant's corporate server”.
Finally, the Company states that it has adequate assets to pay the £30,000 if necessary and that the threat of insolvency proceedings should not be used as a method of debt collection. Consequently, the Respondent should withdraw the threat of winding-up proceedings and proceed with an ordinary Part 7 claim to determine which party is responsible for the fraud (seeking summary judgment if he considers his claim to be strong enough to do so).
The Respondent's response
The Respondent denies that the Company has a genuine and serious cross claim based on breach of contract and/or misrepresentation.
Relying on Ali Petroleum Company of Trinidad and Tobago [2017] UKPC 2, Ms Julian submitted on behalf of the Respondent that the court should only imply a term into a contract if it is necessary to make the contract work which it may be if:
“it is necessary to make the contract work, and this it may be if (i) it is so obvious that it goes without saying (and the parties, although they did not, ex hypothesi, apply their minds to the point, would have rounded on the notional officious bystander to say, and with one voice, ‘Oh, of course’) and/or (ii) it is necessary to give the contract business efficacy. Usually the outcome of either approach will be the same. The concept of necessity must not be watered down. Necessity is not established by showing that the contract would be improved by the addition. The fairness or equity of a suggested implied term is an essential but not a sufficient pre-condition for inclusion. And if there is an express term in the contract which is inconsistent with the proposed implied term, the latter cannot, by definition, meet these tests, since the parties have demonstrated that it is not their agreement.’
She submitted that such a term would be unusual in a contract such as this and that it cannot reasonably be said, using the words from Ali Petroleum, that it is “ so obvious that it goes without saying”, nor that it was required to give the contract business efficacy.
Ms Julian submitted that to establish a cross-claim based on misrepresentation, the Company would need to show first that the Respondent impliedly represented that he would take reasonable care over the security of his email and that:
i) there is no basis upon which the court should imply such a representation: the terms of the Company's request for the Respondent's consent to communicate by electronic communication made no reference to a requirement to maintain adequate security; and
ii) even if the court were willing to imply such a representation, it amounts to nothing more than a statement of intent which cannot amount to a misrepresentation of fact unless at the time the statement was made, the person making it did not intend to do what he said or knew that he would not have the ability to do it. The Company neither alleges nor provides evidence to show that the Respondent did not intend to do what he said nor that he did not have the ability to put the intention into effect.
iii) Furthermore, the Company would need to show that the alleged representation was untrue and there is no evidence of this, whereas there is evidence that the Company's email account had been recently hacked; and finally
iv) the Company would need to show that it was induced to enter into the contract with the Respondent on the basis of the alleged representation, for which the Company has failed to advance any evidence.
Her skeleton argument summarises the Respondent's position: “ The reality is that the Applicant was careless. It neither noticed that the Third Party was using a different email address from the Respondent, nor did it think it suspicious that it had received three sets of bank account details (two of which detailed a name bearing no relation to that of the Respondent). The Respondent ought not to be punished for the Applicant's failures.”
Relevant legal test
The court will restrain the presentation of a winding-up petition where it is satisfied that the company would succeed in establishing that the proceedings constitute an abuse of process. A petition founded on a debt that is disputed on genuine and substantial grounds would constitute an abuse of process. The Companies Court practice was clearly set out by Hildyard J in Coilcolor v Camtrex [2015] EWHC 3202 (Ch):
“The Court will restrain a company from presenting a winding-up petition if the company disputes, on substantial grounds, the existence of the debt on which the petition is based. In such circumstances, the would-be petitioner's claim to be, and standing as, a creditor is in issue. The Companies Court has repeatedly made clear that where the standing of the petitioner, and thus its right to invoke what is a class remedy on behalf of all creditors, is in doubt, it is the Court's settled practice to dismiss the petition. That practice is the consequence of both the fact that there is in such circumstances a threshold issue as to standing, and the nature of the Companies Court's procedure on such petitions, which involves no pleadings or disclosure, where no oral evidence is ordinarily permitted, and which is ill-equipped to deal with the resolution of disputes of fact.
[33] The Court will also restrain a company from presenting a winding-up petition in circumstances where there is a genuine and substantial cross-claim such that the petition is bound to fail and is an abuse of process: see e.g. Re Pan Interiors [2005] EWHC 3241 (Ch) at [34] – [37]. If the cross-claim amounts to a set-off, the same issue as to the standing of the would-be petitioner arises as in the case where liability is entirely denied”.
The learned judge continued at paragraphs 34 and 35:
“[34] Further, it is an abuse of process to present a winding-up petition against a company as a means of...
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...the presentation of a petition are well-known and are usefully summarised by ICC Judge Burton in the recent decision of Sell Your Car with us Limited v Anil Sareen [2019] EWHC 2332 (Ch) at [11] and [12] as follows: “ [11.] The court will restrain the presentation of a winding-up petition w......
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