Sophie Rebecca Perhar v Louise Freestone
| Jurisdiction | England & Wales |
| Judge | Baister |
| Judgment Date | 11 August 2023 |
| Neutral Citation | [2023] EWHC 2065 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2023-002923 |
[2023] EWHC 2065 (Ch)
Deputy Insolvency and Companies Court Judge Baister
Case No: CR-2023-002923
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF THE SUSTAINABLE BATHROOM COMPANY LTD
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
Rolls Building
Fetter Lane
London EC4A 1NL
The Applicant appeared in person
Mr Martin Ouwehand (instructed by Mills & Reeves LLP) for the First and Second Respondents
Mr James Morgan KC (instructed by Howes Percival LLP) for the Third Respondent
Hearing date: 4 August 2023
Approved Judgment
This judgment was handed down remotely at 10.30 am on 11 August 2023 by prior circulation to the parties or their representatives by e-mail and by release to the National Archives.
Deputy ICC Judge
The applicant, Sophie Perhar, incorporated The Sustainable Bathroom Company Ltd in January 2019. She is its sole shareholder, director and employee. It carried on business as a wholesaler of environmentally sustainable bathroom products developed by Mrs Perhar, initially a mosquito repellent called Mozzipatch and later an electric bamboo toothbrush. The Mozzipatch project was initially a success but ultimately came to grief as a result of the insolvency of the long established company entrusted with its distribution. By early 2022 the company had developed the toothbrush to the point of having in place a supply agreement with Aldi, the German supermarket chain.
Synergy in Trade Ltd is a provider of business finance. In March 2022 it agreed to provide the company with a line of credit on the terms (as varied) set out in a letter dated 11 April 2022 and accepted by the company on 12 April 2022. In essence, Synergy agreed to pay, or issue letters of credit on behalf of the company to, its suppliers for the cost of the goods in return for remuneration in the form of a share of profits, 70% in favour of the company, 30% in favour of Synergy. The facility was subject to a maximum aggregate principal of £350,000. The company agreed that a designated account would be set up, details of which would be quoted on invoices to its customers (in effect Aldi at this stage). This was because Synergy was funding the supply of goods to the company from China and wanted to ensure that it received the income generated by the sale of those goods so that, in the words of Mr Slinger, a director of Synergy, the company could not use the receipts as its own general working capital.
The facility was supported by a debenture dated 10 March 2022. Mrs Perhar and her husband also gave personal guarantees.
Agreeing the deal with Aldi and arranging the supply of goods from China was a laborious process, but business began in early 2023, and Aldi was invoiced. As a result of an error, the invoices did not contain full and accurate details of the designated account into which payments were to be made: they gave the wrong IBAN of the account. Instead of making payments into the designated account, in late February 2023, Aldi made payments to a Euro Revolut Business account held by the company which Mrs Perhar says had been set up in connection with establishing an EU branch in Ireland. As Mr Morgan KC says in paragraph 13 of his skeleton argument, the court is not in a position to make findings as to the circumstances which led to this, but for present purposes, and on the basis that it appears to have been Synergy which set up the account, I will assume, but without making any finding, that Mrs Perhar is correct in blaming Synergy for what she describes as a “critical mistake,” although, as Mr Morgan says, the IBAN error does not explain how money that should have been received into the designated account found its way into the Revolut account.
This, and related matters, led to the breakdown of the relationship between the company and Synergy. On 5 June 2023 Synergy made demand under the terms of the facility and filed a notice of appointment of administrators, the first and second respondents.
Mrs Pehar challenged the validity of the appointment of the administrators with commendable speed. Her then solicitors, Francis Wilks & Jones, wrote a comprehensive letter of 15 June 2023 challenging the validity of the appointment. Having failed to convince those instructed in the administration of that, she issued her application. It seeks an order (or more properly, I think, a declaration) that the administration order and subsequent appointment of the joint administrators are a nullity and relief under paragraph 81 of Schedule B1 Insolvency Act 1986, further relief, damages and costs. By order dated 10 July 2023 ICC Judge Greenwood, having allowed minor amendments to the application, ordered a hearing to decide:
(a) whether the floating charge under which the administrators were appointed was enforceable at the date of their appointment;
(b) whether the notice of their appointment was defective and incapable of cure.
The application is supported by two witness statements of the applicant herself. The third respondent relies on witness statements of David Slinger and Cassandra McAlpine, both directors of Synergy, and the administrators rely on a witness statement of the first respondent (now Louise Williams). The scope of the evidence is wide, but the matters relevant to the issues I have to decide are narrow and can be dealt with largely by reference to facts that are uncontroversial and a limited number of documents. For that reason I shall not deal with a number of allegations made regarding the conduct of the directors and others working for Synergy or evidence as to the course of negotiations and discussions between them and Mrs Perhar after things began to go wrong. I do, however, recognise Mrs Perhar's compelling account in her evidence of the hard work she put into, and her energy and commitment in developing, the business of the company. She embodies many of the best qualities associated with the word “entrepreneur,” and it is a matter of considerable regret that she has been unable to enjoy the fruits of her very real endeavours.
No order was made for the cross-examination of witnesses in connection with the issues before me. That is another reason why I do not comment on much of what is set out in the witness statements.
As we have seen, Mrs Perhar's attack on the appointment of the administrators goes to the enforceability of Synergy's debenture and to defects in the notice of appointment of the administrators. I shall deal first with the enforceability issue.
Synergy, through Mr Morgan, accepts that its documentation suffers from defects but contends that those are not fatal to its ability to enforce its rights.
The facility agreement provides that:
“Synergy may at any time withdraw all or any of the Facility and/or demand repayment of all sums owing whether under this Facility or otherwise (‘Indebtedness’) whereupon the Borrower will forthwith repay in full the Indebtedness plus any accrued interest, costs and fees.”
It provides for the establishment of the account to which I have already referred as follows:
“An account in the name of The Sustainable Bathroom Company Ltd (‘Borrower's Account’) will be established in Synergy's books. Payments to Suppliers will be debited to this account and receipts from the Customers will be credited. All invoices issued to the Borrower relating to Synergy's fees together with any expenses paid or incurred by Synergy on behalf of the Borrower […] will be debited to this account and a monthly statement will be provided and, in the absence of manifest error be conclusive and binding on the Borrower.”
A later provision allowing the company to resell or use goods otherwise subject to retention of title in the ordinary course of its business provides that the company “holds any and all proceeds of sale to the goods on trust for Synergy until they are paid in full.”
Events of default are set out in the form of a list of bullet points. These include failure on the part of the company to observe any of its obligations under the facility or any security document and the following free standing provision:
“Synergy shall cease to be under any obligation to issue letters of credit and/or to pay deposits hereunder at any time after the occurrence of any event of default and all monies payable under this Facility and all interest and costs incurred pursuant to the Facility shall become immediately due and payable, and the Borrower shall immediately pay them to Synergy.”
The debenture contains a term (clause 10.8.1) that the company will
“as an agent for the Lender, collect in and realise all Book Debts, pay the proceeds into such account as the Lender may from time to time notify the Company (the ‘Designated Account’) immediately on receipt and, pending that payment, hold those proceeds [o]n trust for the Lender.”
Further relevant terms are set out in paragraph 25 of Mr Morgan's skeleton argument. I shall come to some of those later.
Synergy relies on its general power to demand immediate payment and the designated account/trust provisions, which it says have been breached and constitute an event of default which also entitled it to enforce its rights.
The general power relied on requires little explanation. A letter was sent on 5 June 2023 demanding payment of £376,291.30. That sum, which is not disputed, was calculated by reference to statements which, in the absence of manifest error, are deemed conclusive (see paragraph 12 above). I understand that it has been suggested on behalf of Mrs Perhar that the letter is defective in that it makes demand under the terms of the debenture and not explicitly under the terms of the...
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