Stratford Hamilton (joint liquidator of Mobigo Ltd ((in Liquidation))) v James Kevin McAteer

JurisdictionEngland & Wales
JudgeMullen
Judgment Date01 June 2022
Neutral Citation[2022] EWHC 1349 (Ch)
CourtChancery Division
Docket NumberCase No: CR-2018-010206

In the Matter of Mobigo Ltd (in liquidation)

And in the Matter of the Insolvency Act 1986

Between:
Stratford Hamilton (joint liquidator of Mobigo Ltd (in liquidation))
Claimant/Respondent
and
(1) James Kevin McAteer
(2) Teresa Delgaudio
Defendants/Applicants

[2022] EWHC 1349 (Ch)

Before:

ICC JUDGE Mullen

Case No: CR-2018-010206

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

INSOLVENCY AND COMPANIES LIST (ChD)

Royal Courts of Justice

Rolls Building

Fetter Lane

London, EC4A 1NL

Ms Faith Julian (instructed by Wedlake Bell LLP) for the Claimant

Mr Robert Amey (instructed by JMW Solicitors LLP) for the Defendants

Hearing date: 24 th March 2022

Approved Judgment

I direct this judgment may be treated as authentic.

The deemed time of hand down is 10:30am

ICC JUDGE Mullen

Mullen Mullen ICC JUDGE

Introduction

1

By an application dated 11 th November 2020 (“the Substantive Application”) Mr Stratford Hamilton, the joint liquidator of Mobigo Ltd (“the Liquidator” and “the Company” respectively), brought proceedings under section 212 of the Insolvency Act 1986 against Mr James McAteer and Ms Teresa Delgaudio (“the Directors”). That collective description requires a little further explanation. Ms Delgaudio is the current de jure director of the Company. Mr McAteer was its previous de jure director but, on the Directors' case, Ms Delgaudio had no involvement in the running of the Company at all and Mr McAteer continued to act as de facto director.

2

The Substantive Application sought declarations that the Directors breached their duties to the Company and an order that they make such contribution to the assets of the Company as the court thought just. It was supported by the Liquidator's statement dated 7 th November 2020. The Directors filed evidence in answer in May 2021, in the form of witness statements from themselves and from a Mr Darren Hodes, who is said to have provided technical support to the Company. The Liquidator filed evidence in reply on 2 nd July 2021.

3

On 5 th July 2021 ICC Judge Jones, unsatisfied by the particularisation of the Liquidator's case, directed him to file a further statement, repeating the content of his statement of 7 th November 2020 but indicating which of the duties owed by the Directors under sections 171–177 of the Companies Act 2006 were alleged to have been breached and identifying the passages in the witness statement relied upon in support of the relevant allegation. The Liquidator did so on 16 th August 2021.

4

The Directors filed an application on 26 th November 2021 seeking to strike out the Substantive Application in whole in or in part (“the Strike Out Application”) on the basis that:

i) it is an abuse of process or otherwise likely to obstruct the just disposal of the proceedings; and/or

ii) because it discloses no reasonable grounds for bringing the case.

In the alternative, they seek reverse summary judgment. In the further alternative, they seek to strike out parts of the Liquidator's evidence on the basis that it is inadmissible under the rule in Hollington v F Hewthorn & Co Ltd [1943] KB 587 (“ Hollington v. Hewthorn”) or is otherwise inadmissible opinion evidence. The Strike Out Application was supported by the witness statement of Mr McAteer, dated 25 th November 2021. The Liquidator filed a statement in answer, dated 15 th February 2022, and Mr McAteer filed a further statement in reply, dated 25 th February 2022.

5

It is the Strike Out Application that I have to determine. In accordance with an order made by ICC Judge Barber on 14 th January 2022 the Directors have filed a list of issues and a list of facts for the purposes of the hearing. Mr Robert Amey, counsel for the Directors, and Ms Faith Julian, counsel for the Liquidator also filed full and helpful skeleton arguments.

The Substantive Application

6

The Company was incorporated on 7 th April 2014. Mr McAteer was its sole director and shareholder. He is recorded as having resigned as a director on 11 th April 2015 and Ms Delgaudio, who is his son's partner, was appointed as the Company's sole director on the same day. The notices of resignation and appointment were not, however, filed at Companies House until 4 th February 2016. Ms Delgaudio says that she had no involvement in the running of the Company. Nonetheless, she was paid £400 a month, which, she says, was to increase when she had been trained and took over its running. That did not happen and Mr McAteer remained in control, though Ms Delgaudio continued to be shown as the Company's sole director at Companies House thereafter. The Company apparently had no employees and relied entirely on third-party service providers.

7

The Company did not file any accounts and, on 15 th March 2016, Companies House gave notice of intention to strike it off the Register of Companies at the expiration of two months from the date of the notice. That action was temporarily suspended but the Company ceased trading in about September 2016 and was struck off the Register and dissolved on 19 th September 2017. It was restored to the register and wound up by an order of this court dated 23 rd January 2019. The Liquidator was, with Mrs Julie Swan, appointed as joint liquidator of the Company by the Secretary of State on 11 th March 2019.

8

The petitioner for the winding up of the Company was the Phone-paid Services Authority Limited (“PSA”), a company limited by guarantee that operates as regulator of premium rate services (“PRS”) charged to a person's telephone bill. It does so with the approval of the Office of Communications (“OFCOM”) given under the Communications Act 2003. OFCOM approved the Code of Practice promulgated by the PSA (“the Code”) and issued a condition requiring PRS providers to comply with the Code and with directions given by the PSA as the relevant enforcement authority pursuant to section 120 of the 2003 Act.

9

PRS are, according to the evidence that I have, provided via three levels of operator. At the top level are the “Network Operators” and sitting below them are the “Level 1 providers” and “Level 2 providers”. Level 2 providers provide the service to the consumer in the form of the content for which those consumers pay and generate the traffic of consumers telephoning or texting the premium rate numbers. Level 1 providers provide Level 2 providers with access to the networks controlled by the Network Operators. Charges are made by the Network Operators to the consumers as part of their telephone bills and the payments are filtered down via the Level 1 providers to the Level 2 providers. The Company was a Level 2 provider and registered with the PSA on 29 th April 2014, shortly after its incorporation. It used a company called IMImobile Europe Limited (“IMImobile”) as its Level 1 provider under an agreement dated 31 st July 2014, but the provision of the services under the contract with IMImobile was carried out by IMImobile's subsidiary, Tap2Bill Limited (“Tap2Bill”), as its agent (together “IMI/Tap2Bill”).

10

The principal service offered by the Company, according to the Liquidator's information, was a pornographic video subscription service (“the Service”). The Service began in earnest in December 2014 but generated negligible revenue until the end of March 2015. Use of the Service accelerated sharply thereafter, peaking in September 2015. March 2015 is also the month in which IMI/Tap2Bill conducted a risk assessment on the Company and concluded that it was “high risk”, in part because the Service offered was a pornographic video service but the risk assessment also referred to Mr McAteer being regarded as a “very high risk” individual as a result of his involvement in previous companies subject to malware app investigations.

11

On the basis of that assessment IMI/Tap2Bill concluded that service testing should take place every four weeks. The nature of this testing is not clear but it appears that testing of some sort was carried out at the end of September 2015. According to an email from Tap2Bill to the PSA on 30 th November 2015, a further result of the designation of the Company as high risk was that Tap2Bill handled all customer service calls for the Company. These similarly increased from three in March 2015 and peaked at 228 in September 2015. These were a mixture of complaints and enquiries about the Service, but Tap2Bill does not seem to have distinguished between the two. The nature of any complaints is not known and it seems that only a handful of complaints were received by the PSA itself.

12

On 11 th December 2015, an anti-fraud software body called Empello alerted a Network Operator of suspicious activity in relation to the Service. In short, it appeared that 170 consumers had been subscribed to the Service as a result of a technique called “i-frame masking” or “clickjacking”. I-frame masking software had been introduced into the Service so that consumers were presented with what appeared to be a video and a “play” button. If they attempted to click on that button they were, in fact, clicking on an overlaid “transparent” page that subscribed them to the Service without the customer being aware that this was what would happen or that it had happened.

13

On 13 th December 2015 the Network Operator issued a “red card” to IMI/Tap2Bill, with the result that the latter suspended the availability of its service to the Company on the morning of 14 th December 2015. The Company was alerted to this by email on the morning of the same day. That was acknowledged by the Company. An email from IMImobile later that afternoon stated:

“We have suspended the whole Mobigo service until we are comfortable that we know what has occurred. As soon as you can give us a full report on how service was accessed without the tester seeing our PFI pages/buttons, we will get closer to that point.”

14

The Liquidator's evidence is that...

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