Apex Global Management Ltd v FI Call Ltd

The court determined a consolidated dispute arising from cross-petitions and related claims concerning the ownership, management and financing of Fi Call Limited. Applying the statutory test in section 994 of the Companies Act 2006 and the just and equitable winding-up jurisdiction, the judge found that the affairs of Fi Call Limited had been conducted in a manner which was unfairly prejudicial to the interests of a minority member and that the company had no viable commercial substratum. The judge concluded that a winding-up order on the just and equitable ground was appropriate and that a liquidator should be appointed to investigate the company’s accounting records and transactions. The court also made subsidiary monetary orders against the Apex Parties for monies due under an SPA (the Al Shehri 2011 SPA) and for sums lent and not repaid to the company.

The judge refused a late amendment by Global Torch seeking to assert in its own right a claim to monies the subject of an earlier default judgment (the Al Masoud monies), declined to set aside the relevant default judgment at this hearing, and directed a further hearing after appointment of a liquidator to determine the issue of the Al Masoud monies and the pending Set Aside application.

Background and parties: Fi Call Limited was incorporated in England in October 2009 to develop a VoIP application. The principal shareholders and participants were Apex Global Management Ltd (Apex) controlled by Mr Faisal Almhairat and Global Torch Limited (Global Torch) (with Prince Abdulaziz an owner of Global Torch). The parties fell into dispute about the state and ownership of the VoIP technology, the conduct of company affairs, and a series of share purchase agreements that generated substantial consideration which was not transparently dealt with.

Nature of claim and procedural posture: Global Torch brought a petition under section 994 of the Companies Act 2006 for unfairly prejudicial conduct and alternatively sought a winding-up on the just and equitable ground under the Insolvency Act 1986. These consolidated proceedings included interlocutory skirmishes resulting in various "unless" orders and default judgments. Most claims had been disposed of by default; the principal live matters were Global Torch’s petition/counterclaim seeking winding-up and accounts, a Set Aside application by Prince Abdulaziz to reverse a default judgment against him, and an application by Apex to resurrect its petition which had been struck out.

Issues before the court:

• Whether Fi Call Limited’s affairs had been conducted in a manner unfairly prejudicial to Global Torch such as to justify relief under section 994 CA 2006 or warrant a just and equitable winding-up;
• Whether specific transactions (notably payments under various SPAs, the Al Shehri 2011 SPA and the Al Masoud transactions, and payments to third parties including Octro) involved misappropriation, breaches of fiduciary duty, or other misconduct;
• What monetary relief (restitution or damages) should be awarded against Apex and Mr Almhairat; and
• Whether the default judgment against Prince Abdulaziz should be set aside and/or whether the monies held to the order of the court should be released.

Court’s reasoning and findings: The judge reviewed the statutory framework (sections 994 and 996 CA 2006 and the just and equitable winding-up jurisdiction under the Insolvency Act 1986). He applied the principles in O’Neill v Phillips, Ebrahimi v Westbourne Galleries and related authorities considering (a) what constitutes the affairs of the company, (b) the nature of prejudice required and (c) the concept of unfairness in the quasi-partnership/joint venture context.

On the facts adduced by Global Torch (the only side permitted to present evidence on the Counterclaim after defaults), the judge found widespread deficiencies and irregularities in Fi Call Limited’s accounting and governance, misdescriptions of the company’s technology and its ownership, undisclosed arrangements with Octro undermining Fi Call Limited’s claimed rights, unexplained payments and transfers from company-related accounts, and the dissipation of SPA proceeds in breach of expectations. The judge accepted Global Torch’s account of the Al Shehri 2011 SPA and found that Apex had retained and dissipated the proceeds payable to Global Torch, ordering restitution in that respect.

Because the company had effectively ceased trading, the parties had lost trust and confidence, and crucial records were deficient or missing (exacerbating the dispute over whether certain SPA proceeds had been accounted for), the court concluded that winding-up on the just and equitable ground was appropriate. However, given the defaults and the absence of the Apex Parties from substantive contest on many issues, and in particular because the issue of the Al Masoud monies implicated the default judgment against Prince Abdulaziz and outstanding Set Aside proceedings, the judge declined to determine that matter at this hearing and directed a further hearing after a liquidator had investigated company records. The monies paid to counsel for the Prince and held on order were to remain undisturbed until the further directions.

The court ordered that Fi Call Limited be wound up on the just and equitable ground. The court found that the Apex Parties must account to Global Torch in respect of the Al Shehri 2011 SPA and ordered restitution (or damages) in the sum of US$6.7m plus interest, and further ordered repayment to Fi Call Limited by Apex and/or Mr Almhairat of US$100,000 (or such greater sum as proved) plus interest. The court refused Global Torch’s late amendment to pursue Apex’s share of the Al Masoud monies in its own right, declined at this hearing to set aside the default judgment against Prince Abdulaziz, and directed a further hearing after appointment of a liquidator to determine the Al Masoud monies and the Set Aside application. The judge gave these directions under section 996 CA 2006 and his inherent jurisdiction.