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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 >> Alstom Transport v Elequip Projects Ltd [2004] EWHC 2897 (Ch) (13 December 2004) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2004/2897.html Cite as: [2004] EWHC 2897 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
From The Birmingham District Registry

		Royal Courts of Justice Strand, London, WC2A 2LL
		13/12/2004

Mr Justice Hart:

1. This is the hearing of an application dated 5^th November 2004, issued by Alstom Transport ("Alstom") against Elequip Projects Limited ("Elequip") seeking to restrain Elequip from presenting a winding up petition against Alstom based on an alleged debt of £86,631.20. On Alstom's without notice application made on 4^th November 2004, His Honour Judge Norris QC granted an injunction until after the hearing on 18^th November 2004 and gave directions for evidence.
2. Alstom is a manufacturer and supplier of railway locomotive stock and other transport equipment, and Elequip is or was in the business of manufacturing, supplying and maintaining similar equipment. On 10^th October 2003, Elequip was placed into administrative receivership, Messrs. Andrew Peters and Robert Maxwell of Deloitte being appointed receivers.
3. As at the date of the receivership there were outstanding a number of orders from Alstom for the supply of various equipment pursuant to an agreement dated 7^th April 2000. Under that agreement Elequip were, inter alia, to design, engineer, manufacture, test, commission, pack and deliver items referred to in the contract as "Purchase Units", being equipment for use in the tilting trains to be used on the West Coast Main Line. Two different sets of Purchase Units which had been ordered and invoiced by Elequip were the subject matter of the outstanding orders, namely (1) "underframe equipment rafts" and (2) "J Car material". As at 16^th/17^th October 2003 the position, as it appeared to the parties, was that both sets of Purchase Units were ready for delivery to Alstom but remained on Elequip's premises, that the underframe equipment rafts had been paid for, but that the J Car material had not been paid for.
4. On 16^th October 2003 all Elequip's customers were circulated with a letter from the receivers on behalf of Elequip which read, so far as material, as follows:

"We write to advise that Joint Administrative Receivers were appointed to the Company on 10 October 2003. We understand that you may have outstanding orders or outstanding deliveries for/of goods ("the goods") under a supply contract/agreement with the Company and may wish to place future orders or ensure future supplies under the existing contract/agreement. We wish to record the terms upon which the Company will make any future orders and/or deliveries. We plan to continue trading for the foreseeable future to complete existing orders and endeavour to sell the business and assets as a going concern.

The Receivers require written confirmation of outstanding orders/deliveries for/of the goods, which arose prior to the appointment of the Receivers together with a schedule of future requirements up to 5 December 2003. These requirements are to be your guaranteed minimum order quantities from the Company. Should you require a supply of goods from the Company beyond 5 December 2003 we require written confirmation of order quantities so the Receivers can evaluate trading going forward. The Receivers will give no guarantee that goods ordered prior to or after the appointment of the Receivers will be produced but the Receivers will use their best endeavours to procure that the Company satisfies all orders placed or to notify you of any shortages. In the event that trading performance in receivership does not support an ongoing trading strategy, the Receivers may be obliged to undertake an orderly wind-down of the business. To that end the Receivers will give no more than 24 hours notice of their intention to cease trading the Company.

In consideration of our (as agents of the Company) causing the Company to supply the goods to you we require your written confirmation that you will make payments in full for such supplies for deliveries made on or after 10 October 2003 to be made within 30 days from the date of invoice without any set-off, deduction, counter-claim, claim to a lien or other withholding of any nature whatsoever, whether the set-off, deduction, counter-claim or other withholding arises under the contract or otherwise.

…

Risk to any goods supplied by the Company will pass on collection/delivery to you. Title to any goods supplied by the Company shall not pass until payment has been made of all sums outstanding from you to the Company on any account whatsoever, whether owing in respect of goods supplied prior to or after our appointment on 10 October 2003.

Please note that we are acting as agents of the Company and shall incur no personal liability under or in connection with any contracts, nor any liability, which would rank as an expense of the Receivership. All goods and services are sold "as seen" without any form of warranty, guarantee as to quality, fitness for purpose or otherwise whatsoever. You will be entitled to test goods supplied by the Company within 14 days of receipt of those goods by you. If you do not advise us within 14 days of receipt of the goods that you are rejecting all or any of them then you shall be deemed to have accepted them. Any goods rejected by you must be returned, at your expense, within 14 days of delivery/collection to the Company in which case you shall not be liable to pay for such goods as are returned. You agree not to make any claim against the Receivers in respect of any breach of contractual terms by the Company which may have existed either before or after our appointment as Receivers (as varied by this letter) that may occur whilst you are trading with the Company acting by its Receivers. The Joint Administrative Receivers do not personally adopt the terms and conditions attaching to any existing contracts/agreements or orders between you and the Company.

Following the receipt of a signed copy of this letter and a confirmation order from you and confirmation that the existing debt will be paid, we will be in a position to continue with the production.

You hereby agree that the provisions contained in this letter shall apply to all future dealings between you and the Company during the period of receivership, to the exclusion of all and any conditions that may have applied to any previous contract between you and the Company.

You further agree to waive any rights contained in your contract with the Company which arise from the receivership of the Company or from the appointment of Joint Administrative Receivers on 10 October 2003.

We should be grateful if you would confirm your agreement to the above by signing and returning this letter by fax to: [ fax number] as a matter of urgency.

By signing this letter you commit to take all goods previously confirmed to the Company and to us and all goods manufactured by us as set out in your order request upon these revised terms. Save as to the extent varied by or inconsistent with this letter, the existing terms of trading between you and the Company continues for the time being.

The Joint Administrative Receivers contract as agents of the Company and all personal liability is expressly excluded."

5. On 17^th October 2003, Alstom and Elequip (acting by the receivers) entered into an agreement recorded in a letter of that date ("the 17^th October agreement") which related specifically to underframe equipment rafts which were listed in Schedule 1 to the 17^th October agreement and the J Car material which was identified in Schedule 2. The 17^th October letter recorded the following agreement between the parties:

"1. ALSTOM Transport requires that the Joint Administrative Receivers acting on behalf of the Company, confirm that such title as the Company has in all goods and equipment listed in Schedule 1 attached hereto, are vested in ALSTOM Transport free of any lien or encumbrance, and, subject to the remaining paragraphs of this letter that ALSTOM Transport may enter the premises of the Company and remove all such goods and equipment by prior arrangement;

2. ALSTOM Transport also requires the Joint Administrative Receivers to confirm that upon payment of the sum of £500,000 by ALSTOM Transport, such title to and property as the Company may have in the goods and equipment represented by the list of invoices set out in Schedule 2 hereby vest in ALSTOM Transport, and ALSTOM Transport may enter the premises of the Company and remove all such goods and equipment by prior arrangement.

3. ALSTOM Transport also requires the Joint Administrators to confirm that they will use their reasonable endeavours to procure that support staff reasonably required by ALSTOM Transport in order to facilitate the loading and removal of equipment will be available at the Company's premises at Wigston, Leicester from receipt of funds on Monday 20^th October 2003 in accordance with paragraph 4.

4. In consideration of the above undertakings, ALSTOM Transport agrees to pay the sum of £500,000 to the Company by telegraphic transfer on the opening of banking hours on Monday 20^th October 2003, and subject to the receipt of such funds all goods and equipment vested in ALSTOM Transport may be removed from the Company's premises. ALSTOM Transport will pay the further sum of £230,000 by close of business on Friday 24^th October 2003. In the event that any equipment which is vested in ALSTOM Transport pursuant to this agreement has not been removed by 08.00 hours on Monday 27^th October 2003, the Company will, so far as it is able, provide ALSTOM Transport with access to the Company's premises for the purpose of such removal.

5. The Company acting by its Receivers hereby accept that the payment of &730,000 is in full and final settlement of all invoices raised by the Company up to the end of September 2003, but is without prejudice to the further costs incurred, to be incurred, invoiced or to be invoiced by the Company since 1^st October 2003."

6. The evidence is that the 17^th October letter was signed by Mr Dolphin on behalf of Elequip and its receivers on 17^th October 2003 subject to the proviso (which is not stated in the letter) that the letter was not to be "released" until agreement had been reached on the precise content of Schedule 1. At 11.40 a.m. on 20^th October 2003 the receivers' solicitors confirmed that the 17^th October letter could be released. By that time the £500,000 (referred to in point 4 of the 17^th October letter) had been received by Elequip. Also on 20^th October 2003 Miss Hedley (of Alstom) was informed that the Schedule 1 items and the Schedule 2 items would not be released unless the letter dated 16^th October was signed and returned. In the belief (according to her) that the letter dated 16^th October was only to apply in respect of orders placed with Elequip after the receivership, she returned that letter signed.
7. Following collection of the Schedule 1 and Schedule 2 items, Alstom claim that they discovered that many of the batteries which the Schedule 1 and Schedule 2 items should have included were missing. They advised the receivers by letter dated 24^th October 2003 that the shortfall in the batteries supplied in relation to the Schedule 1 items was provisionally estimated to be 106 (at a cost of approximately £6,000 for each battery) and that they would not accordingly be making the payment of £230,000 referred to in paragraph 4 of the 17^th October letter. They have subsequently asserted that there were 112 batteries missing from the Schedule 1 items (valued at £763,000) and 16 batteries missing from the Schedule 2 items (valued at £143,368.80).
8. Elequip and its receivers have accepted for the purposes of this application that there is a bona fide and substantial dispute in respect of the £143,368.80 relating to the batteries missing from the Schedule 2 items, but do not accept that there is a bona fide and substantial dispute in respect of the Schedule 1 items. They therefore claim that the sum of £86,631.20 (i.e. £230,000 less £143,368.80) is owed by Alstom to Elequip and is not capable of being bona fide disputed and they threaten to pursue that debt by petition to wind up Alstom.
9. The receivers' primary case is that the 17^th October letter cannot or should not be read as an agreement which is separate and discrete from the letter of 16^th October, and in particular that the "no set-off" provision, and the "take as seen" provision, in the letter dated 16^th October have to be read into, or with, the letter dated 17^th October 2003. The secondary position taken on behalf of the receivers is that such claim as Alstom may have in respect of the Schedule 1 items is a claim which arose in respect of the pre-receivership agreement whereas the debt claimed by Elequip relates to the post-receivership agreement reached in respect of payment for the Schedule 2 items. No set-off is therefore possible either because the mutual debits and credits did not come into existence prior to the receivership or because the contracts under which claim and cross-claim respectively arise were separate and unconnected contracts.
10. If satisfied that Alstom has a genuine and substantial cross-claim which exceeds the petition debt, the court has a discretion which, in the absence of special circumstances, it will exercise to restrain presentation of a petition: see Re Bayoil SA [1999] 1 WLR 147, 155F per Nourse LJ. There was some debate before me as to whether the court needed also be satisfied that Alstom had been unable to litigate its cross-claim, but I am satisfied that (if such a requirement exists, as to which see the observations of Park J in Montgomery –v- Wanda Modes Limited [2002] 1 BCLC 289 at paragraphs 28 to 34) it would be quite unreasonable to have expected Alstom to litigate that cross-claim against the insolvent Elequip. Miss Bristoll on behalf of Elequip further submitted that all she needed to show was that there was a real prospect that on the hearing of the winding up petition Elequip would be able to satisfy the judge that Alstom had no such substantial cross-claim. Since, however, there is no reason to suppose that Elequip's ability so to persuade a judge will have improved on the hearing of the winding up petition beyond that which it possesses today, I accept Mr Tamlyn's submissions on behalf of Alstom that all I need to be satisfied of today is that there is a bona fide and substantial dispute as to whether the 17^th October letter incorporates the terms of the 16^th October letter, and as to whether Alstom is entitled to set off any claim it has in relation to the Schedule 1 items against Elequip's claim to the balance owing in respect of Schedule 2 items.
11. In support of its contention that the 17^th October letter is a stand alone, bespoke, agreement to which the terms of the 16^th October letter do not apply, Alstom relies upon the following points. First, on the available evidence the 17^th October letter was negotiated separately from the 16^th October letter and was executed and released prior to execution of the 16^th October letter. Secondly, the 17^th October letter makes no reference to the 16^th October letter, and was negotiated by the receivers with the benefit of legal advice specifically directed to its terms. Thirdly, the 17^th October letter is, in a number of respects, inconsistent with the provisions of the 16^th October letter in particular in relation to the date for payment and the provision for passing of title to the goods supplied. Finally, it was submitted that on its true construction the 16^th October letter in any event applied only to orders made after Alstom had signed it.
12. In my judgment it is not possible to resolve the question of interrelationship between the 16^th October letter and the 17^th October letter by textual analysis alone. While the spirit of the 16^th October letter may be said to relate only to future orders, its letter is capable of applying to future deliveries under existing orders. Were it shown that the 16^th October letter had been agreed between the parties prior to agreement of the 17^th October letter, the argument that the 17^th October letter simply amounted to an ad hoc and limited variation of certain terms of the 16^th October letter would, I think, be quite a strong one. Given, however, that on the evidence at present available the terms of the 17^th October letter were unconditionally agreed prior to agreement of the 16^th October letter, the argument that the 17^th October letter was intended to constitute a stand alone agreement appears to me, as at present advised, to be the better one. I am accordingly satisfied that Alstom has a seriously arguable case that the no set-off provision in the 16^th October letter does not apply to cross-claims arising out of the 17^th October letter.
13. The question whether more generally that Alstom has a cross-claim in respect of the Schedule 1 items which it is entitled to set-off against Elequip's claim for payment in respect of the Schedule 2 items is more difficult. I see some force in the argument that the latter claim arises directly out of the contract represented by the 17^th October letter whereas the claim in respect of the Schedule 1 items is a claim wholly referable to Elequip's unfulfilled obligations under the agreement dated 7^th April 2000 and pre-receivership orders based thereunder. However, it seems impossible to say that claim and cross-claim arise under unconnected contracts given that the 17^th October letter makes payment of the £500,000 a condition of Alstom being entitled to remove the Schedule 1 items. Alstom plainly only entered into that agreement on the understanding that the Schedule 1 items included the batteries which are now claimed to be missing. Moreover, Alstom's case is that that belief was engendered by a representation made by a member of Elequip's staff that the batteries were stored off site but were available for collection. Accordingly, even if it be right to view the liability to make payment as arising under a new post-receivership contract, the potential claim for misrepresentation exists in relation to that new contract.
14. Accordingly, in my judgment, there is a bone fide dispute as to Alstom's liability to pay the £230,000 which is not suitable to be resolved on the hearing of a winding up petition based upon it, and Alstom is therefore entitled to the relief sought by its application.
15. Unless the respondent wishes to argue for a different order as to costs when this judgment is formally handed down, I propose to order that Alstom should have the costs of its application.