Crossed wires as a phone charger company dies


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In the UK 85% of adults have a smartphone and nearly all use their phone every day.[1] So a company with a device that automatically backs up your phone whilst charging should be flying high. However, this was not so for Meem SL Limited (Meem).

In Re Meem SL Limited (in administration)[2], against the backdrop of a pre-pack sale, crossed wires regarding contract formation and the court’s interference with the commercial decision of an office-holder to dispose of assets, were considered.

Background

In 2013 Meem was formed by Mr Goel (the inventor) and Mr Sumner (the funder) to exploit the Meem memory cable. Following a dispute between them, in April 2016 the company went into administration with a pre-pack sale of the business to Meem Memory Ltd (MML), a new company formed by Mr Sumner and his fellow Meem directors. Mr Goel alleged an unlawful-means conspiracy between Mr Sumner and the directors to put Meem into administration and dispose of its assets to MML at an undervalue. A letter of claim was sent in respect of damages of at least £11.8 million including a derivative claim to be brought on behalf of Meem.

In Re Meem, Mr Goel alleged that in the correspondence that followed his letter of claim the Administrators concluded an agreement to assign the claim to him and his uncle for £5,750. The Administrators disputed this. Mr Goel sought to restrain the Administrators from auctioning the claim on the grounds that: (1) there was a concluded agreement for the sale of the claim; and (2) the proposed auction sale would unfairly harm his and his uncle’s interests and should be restrained under paragraph 74 of Schedule B1 to the Insolvency Act 1986.

Contract formation

The court found that the emails passing between Mr Goel’s solicitors and the Administrators did not establish a binding agreement to assign the claim. The reasoning noted that at no point did the initial tentative idea morph into an offer capable of acceptance; instead the parties merely explored possible terms. Further, Mr Goel’s solicitor knew the Administrators intended to instruct a solicitor in relation to the proposed assignment and that the Administrators were concerned that the transaction should be unimpeachable by the creditors and members. Consequently, the email exchange was impliedly subject to contract at the outset and this did not change.

Unfair harm and paragraph 74

It was determined that the applicants had failed to establish that the Administrators’ proposal to dispose of the claim by auction would unfairly harm their interests. The decision is useful in showing the points a court will consider in determining whether or not to interfere with an office-holder’s decision-making. In particular, it was noted that:

  • as a matter of language the term “unfair” is not limited to cases of unequal treatment but is capable of including conduct which is unfair to everybody within the class;
  • the threshold for the court to interfere with the decision of an administrator regarding the sale of an asset is at least as high as it is in the case of a liquidator, given that administrators are typically appointed in order to achieve speedy results; and
  • where there is no different treatment of creditors, the court will not interfere with the administrator’s decision to sell an asset unless the decision does not withstand logical analysis.

Consequently, Mr Goel’s application failed on both grounds.

The decision in Re Meem is useful for both general points of contractual formation and in the more specific company insolvency context.


[1] Deloitte “State of the smart: Consumer and business usage patterns: Global Mobile Consumer Survey 2017: UK Cut”.

[2] Anil Goel, Sushil Gupta v Stephen Grant and Anthony Cork (as joint administrators of Meem SL Limited), Kelly Sumner [2017] EWHC 2688 (Ch).

 

For further information, please contact:

Steven Mash, Partner, Fladgate LLP (smash@fladgate.com)

Leigh Callaway, Senior Associate, Fladgate LLP (lcallaway@fladgate.com)

 

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