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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Funky Brownz 2 Ltd v Vithlani [2017] EWHC 3644 (Ch) (21 November 2017)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2017/3644.html
Cite as: [2017] EWHC 3644 (Ch)
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
Fetter Lane London EC4A 1NL |
||
B e f o r e :
____________________
| FUNKY BROWNZ 2 LTD | Claimant/Applicant | |
| - and - | ||
| JITESH VITHLANI | Defendant/Respondent |
____________________
8th Floor, 165 Fleet Street, London, EC4A 2DY
Tel No: 020 7404 1400 Fax No: 020 7404 1424
Web: www.dtiglobal.com Email: courttranscripts@dtiglobal.eu
(Official Shorthand Writers to the Court)
MR RICHARD DEW appeared on behalf of the Respondent
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Crown Copyright ©
- MR JUSTICE HILDYARD: This is an application issued on 25 September 2017 made by Funky Brownz 2 Ltd (the applicant) against Mr Jitesh Vithlani (the respondent) for an injunction restraining Mr Vithlani from presenting a winding up petition against the applicant company in respect of debts said to have been incurred by the company in favour of Mr Vithlani, as set out in a statutory demand dated 31 August 2017, which was addressed to the company's directors.
- The matter has been before the court previously. It came before Birss J on 17 October, as recorded in an order sealed on 18 October. On that occasion, Birss J adjourned the application with provision for an exchange of evidence, for the respondent to put in his evidence by 31 October, and the applicant company then to reply within 14 days on 14 November. The matter was to be listed with a time estimate of 30 minutes and I am sorry to record it has taken slightly longer than that, but perhaps due to my own interventions.
- The applicant company has been represented before me by Mr Christopher McCarthy of counsel and the respondent, Mr Vithlani, by Mr Richard Dew, who has appeared under the Bar Pro Bono Unit for the respondent under the invaluable CLIPS scheme for which I, on every occasion that the opportunity presents itself, wish to express my thanks.
- This is a familiar dispute in the sense that a standard or characteristic pattern has emerged of the alleged creditor putting in a statutory demand, not perhaps in as clear terms as might be appropriate, and in the company then throwing up its hands against its inadequacies and seeking an injunction to prevent the presentation of the winding up petition, purportedly on the footing that no such debt is owed.
- On an application for an injunction, the applicant is, of course, inviting the court to intervene to prevent a creditor adopting a statutory process. Although the threshold for defeating a petition is relatively low since this court, sitting in the Companies Court, is not a debt collecting agency and does not appreciate its abuse by becoming an adjudicator in a matter in which there is a substantive dispute, nevertheless the onus remains on the applicant (if I can put it like this) to raise the wind for a valid defence.
- In this case, I think it not unfair to say that neither side's evidence is particularly precise and in respect of various of the debts which are asserted, amounting in total to some £72,000, the evidence is, frankly, thin. However, Mr Dew, I think correctly, focused in particular on two of the alleged items said to give rise to a debt; one being what is stated by Mr Vithlani to have been a £25,000 loan extended to the company at the request of the then director of it (now deceased) in order to enable that deceased director to pay as a matter of urgency a debt owed to HM Customs and Excise. The other relates to an amount, in fact paid by Mr Vithlani, in the sum of £12,455.70 to a company called Computer Modules, which Mr Vithlani says was again paid at the behest of the company and struck up a debt accordingly owed to him by the company.
- The position as regards the first payment in particular is notable. There is documentary evidence demonstrating, through bank records at Santander Bank, a transfer of £25,000 on the relevant date in May 2013 from Mr Vithlani's account to the account of Funky Brownz 2 Ltd (the company). There is no evidence put forward as to what then happened to that money.
- There is no suggestion that that payment was effected by way of gift, and although Mr Shrayash Patel (now the director of Funky Brownz 2 Ltd, who has supported the application in his second witness statement) says that the £25,000 so transferred went out again using the company as a conduit to other companies, there is no record offered of any such payment out. That is particularly noticeable since it should have been a simple matter, even within the 14 days allowed for evidence, for Mr Shrayash Patel to obtain from the company's bankers any such record, just as it should have been possible even within that limited time for him to ascertain from the company's then accountants, called Madhvani & Co, what became of the money.
- As it is, the unsupported suggestion that the company was used as a conduit and the money went out to businesses said to be owned by the respondent is not made any stronger by the fact that in the same witness statement, in fact at paragraph 28, Mr Shrayash Patel states that none of the relevant companies ever traded, raising immediately the supposition that they never needed money and never received any before both were dissolved.
- As regards the second payment, the fact of payment by the respondent is clear. I would accept that the association or the correlation between the payments and any obligation by the company is less clear; but again it would have been a simple matter, surely, even taking account of the difficulties in proving a negative, for the same accountants to have been approached in order to show by reference to the accounting records that certainly no such computers nor any such payment was authorised or became part of the business of the company.
- The long and the short of it is that the applicant, company which bears the burden, whilst he may have shown some doubt as to some of the entries, has not really raised the wind on at least one, and possibly two, of the major elements in the claim.
- Mr McCarthy valiantly maintains the position that in effect, the sworn evidence, or at least verified witness statements, sometimes in terms which he had to acknowledge appeared stronger than was likely Mr Shrayash Patel was able to state, were sufficient to demonstrate an arguable case. He remonstrated with me that unless I could say for sure that I would award summary judgment on the matter, I should direct the petition not to proceed and grant an injunction and allow the matter to proceed in the ordinary course.
- I somewhat insistently sought of Mr McCarthy whether the deficiencies in evidence meant that he needed further time, or in some way were the product of some undue pressure or disability, but I did not form the impression that Mr McCarthy wished me to defer any decision or seek to adjourn the matter. He stood his ground on the basis of what he described (not incorrectly) as the low threshold applicable.
- It is a sorry thing to expose a company to the problems which almost inevitably arise when a winding up petition is presented. It is also always anxious to reach any view that there is or is not at an early stage something or nothing in a dispute. But both by reference to the inconsistencies in the evidence of Mr Shrayash Patel and the total lack of any insight into the company's trading position (whether by way of accounting records or management accounts, statutory accounts, or some report from its present accountants or past accountants or auditors) I do not feel that I can intercede in this case. The threshold may be low: but it is there, and has not in my opinion, been accomplished.
- I say that partly having regard to the fact that, ultimately, the presentation of a petition is a class remedy and the presentation of a petition is itself a protection to the class since the winding up order, if made, would date back and all dispositions of the company's property, unless validated, would be void as from the date of presentation, which may be of considerable assistance to the general creditors. I should also say that the evidence advanced in support of the cross-undertaking in damages was not reassuring, especially in the context of the lack of evidence as to the company's viability, as I have mentioned previously.
- I will discuss with counsel for the respondent whether, notwithstanding what I have said, some short period of reflection might be afforded in order for the company and Mr Shrayash Patel to go through the accounts with a relevant professional and see what is owed in order that an accommodation might be reached before the shutters come down. But that is a matter which I leave entirely to Mr Vithlani, and I would not presume to require Mr Dew to do any more than emphasise or explain what it is I mean. He is, of course, only lent for the purposes of the hearing and has no further obligations thereafter.
- I dismiss the application. As I have said, I would hope, that some locus poenitentiae to see whether some accommodation can be reached should be possible.