Daltel Europe Ltd & Ors v Makki & Ors

For summary judgment, a party cannot rely on a contract to retain money received for services which it had no right to provide. Where the evidence shows that the supposed intermediary had no entitlement to use another company's contractual facilities, sums received for that use may be held for the company entitled to provide the services. An implied contract or consent will not readily be inferred where the dealings were not in good faith and the proposed arrangement would prejudice the company's creditors. A corporate vehicle may be treated as a front for misappropriation where the evidence gives it no bona fide role.

The liquidators of three insolvent telecommunications companies sought summary judgment against their former controller in respect of sums paid by Arbinet and diverted to accounts held by him and his father. Earlier committal proceedings had established, to the criminal standard, that parts of the defendant's pleaded case concerning ownership, control and contractual arrangements were false, and that relevant documents were fictitious.

The defendant relied on an apparently genuine contract between Daltel USA LLC and Arbinet. He argued that the sums belonged to Daltel USA, or that implied contracts or consent entitled it to use the interconnect services of Pacifica and Globenet. The central issue was whether he had any reasonable prospect of establishing that entitlement.

1. Summary judgment. The claimants obtained summary judgment for US $3,650,000 and US $1,413,929.35. The defendant had no reasonable prospect of successfully defending the claim.
2. No entitlement from the Arbinet contract. The existence of a genuine contract between Daltel USA and Arbinet did not entitle Daltel USA to use Pacifica's or Globenet's interconnect services. If Daltel USA had no such right, it likewise had no right to retain sums paid for access obtained through those services. The sums were held for Pacifica and Globenet.
3. Implied contracts. An agreement may readily be inferred between parties dealing in good faith. On the established facts, however, the defendant's fictitious sale and bogus agreement demonstrated the absence of good-faith dealings. There was therefore no reasonable prospect of establishing implied contracts between Daltel USA and Pacifica or Globenet.
4. Consent. Common control could, in different circumstances, support an inference of consent. Effective consent would have to be given in good faith and with proper regard to the interests of the consenting company. No such consent could be inferred here, and gratuitous use would in any event have been inconsistent with the companies' substantial liabilities to British Telecommunications plc.
5. Misappropriation. The evidence showed that Daltel USA had no bona fide role and was a front for the defendant's misappropriation. Diverting the sums to accounts held by the defendant and his father was a breach of fiduciary duty.
6. Further relief. The defendant accepted that, insofar as the further orders were made against him personally, they operated in personam and were governed by English law. Counsel were directed to agree the form of order.