Sophie Perhar v Louise Freestone & Ors

ICC JUDGE PRENTIS: Introduction

1. Sophie Perhar invented “The Clean Toothbrush”, an electric toothbrush with a replaceable bamboo head. The Sustainable Bathroom Company Ltd (the “Company”) was incorporated on 11 January 2019 as the vehicle to “grow and develop” what was then just an idea. She was and remains its sole director and holds its £1 issued share. By early 2021 the toothbrush was ready for marketing. In January 2022 Aldi indicated agreement to purchase product and replacement heads for sale in Germany, Denmark and Holland. Mrs Perhar and her family did not have the means to finance the order. In March 2022 the Company entered a trade finance facility agreement with Synergy in Trade Ltd (“Synergy”). There were delays, and it was not until the end of February 2023 that Aldi made payments. On 5 June 2023 Synergy appointed administrators over the Company under its floating charge.

2. This is the trial of Mrs Perhar’s application to declare the appointments invalid as made when the floating charge was unenforceable, contrary to paragraph 16 of Schedule B1 to the Insolvency Act 1986 ; or as not in accordance with the terms of the lending agreements, or other arrangements; or as made for an “improper motive”, contrary to paragraph 81 of Schedule B1. As she said in her evidence: “My point is: my business was ruined when it was solvent”.

3. Mrs Perhar has presented her case herself, assisted out of sight by her husband, who is a commercial barrister, with confidence and ability. It comes to trial after preliminary issues were ordered by ICCJ Greenwood on 10 July 2023; determined by DICCJ Baister on 11 August 2023; and then successfully appealed (save as to arguments on technical defects) by Mrs Perhar before Michael Green J on 6 March 2024. The trial listed for later in 2024, dealing with all the remaining parts of the application sealed on 29 June 2023, was subsequently stood out until now. The delay is regrettable, as the administrators, now Louise Williams (the married name of Louise Freestone) and Lisa Ion, have been unable to pursue their tasks. Facts and findings

4. Mrs Perhar developed the toothbrush herself, “without staff or premises”, just as she had her earlier product, a “natural mosquito repellent patch” called the Mozzipatch which she had already brought to market. She also adopted the same business model for the toothbrush, “a simple one in that after the product was market ready, I set about finding sales avenues with large retailers. Once I had prospective customers, I would then look to fund making the stock for the order”.

5. There was no choice for the toothbrush but outside funding. Although Mozzipatch had been selling in supermarkets, sales reduced during covid; and, just before that, its distribution company had entered administration. The Perhar family savings had largely been put into Mozzipatch, to which Mr Perhar, who “could see I was so passionate about it and that I was making good progress”, had “reluctantly agreed”. Covid had affected his work, too; which anyway was subject to the usual vicissitudes of a barrister’s life.

6. The development of a viable product, from design to manufacture, was the start; and the January 2022 agreement of Aldi in Germany to buy for over 1,000 stores did not immediately result in a contract, but in more testing and approvals. The intent was for delivery to Hamburg port in August 2022; and in February 2023 there would be a further delivery, including of the replacement heads which Mrs Perhar perceived an important part of the business, both because of the necessary recurring periodic trade if the customer still wanted to use the product, and because what was being thrown away was not plastic but bamboo.

7. So, “[d]ue to our constrained family finances and the size of the order we could not afford to fund the order ourselves”. The trouble was finding a funder: “I couldn’t secure traditional funding as essentially it was my first large trade”. Bibby Finance was willing to provide funding, at a rate around 4%, but only “after we had proven ourselves with the first trade”.

8. “It was a young lady from Bibby” who recommended Synergy. It had been incorporated on 1 October 2007 by Cassandra McAlpine and David Slinger, who remain its directors and shareholders, and is a specialist provider of trade finance, including for the first trade which, as both Mrs Perhar and Mr Slinger told the court, is “always the hardest”; an axiom borne out by this case. She met Mr Slinger, who said that having an order from Aldi “was a good start, but he wanted to see the product and get a feel for the people involved and that was how he made his decisions about whether to fund the business”. The Perhars told him they had no assets for security, had three children at boarding school, sold their house in 2012 and borrowed from friends and family while reinvesting the Mozzipatch income in that product. Mr Slinger remained interested. He declined as too small involvement in Mozzipatch, which in the event has been sold through the Company though owned by (somewhat perversely) The Clean Toothbrush Company Ltd, to which Mrs Perhar says a yearly licence fee is due but unpaid.

9. Negotiations went well. On 23 February 2022 Mrs Perhar asked Mark Cherry, Synergy’s sales director, copied to Mr Slinger, for “draft terms of what the agreement will look like”; it had been “very enjoyable to meet with you both today and interesting to hear about what you can do to help grow what I have started. I feel very positive about the prospect of working with you both”. On 28 February Mr Slinger sent the various documents under cover of a letter beginning: “Further to our discussions we are delighted to enclose our offer of Trade Finance facilities of £350,000. This figure was set in anticipation of your immediate needs but may be increased as necessary as your business grows and you have future trade opportunities”. The contractual documents

10. On around 10 March the parties entered into a series of agreements: a Facility Letter dated 1 March; a Debenture dated 10 March; a Pledge; and a Guarantee, given by the Perhars.

11. The Facility Letter states that Synergy is offering “a trade finance line of credit”, the Facility, to the Company, which was the Borrower, “for the purpose of financing its purchases from its ‘Suppliers’ for sale to [C]ustomers”. In unnumbered paragraphs, it contained the following “terms and conditions”. “ Limit This Facility relates to the issuance of import letters of credit &/or proforma payments to Suppliers up to a maximum aggregate principal amount of £350,000”, which was the Limit, “or such other amount that Synergy shall in their absolute discretion agree in writing. Availability Synergy may at any time withdraw all or any of the Facility and/ or demand repayment of all sums owing whether under this Facility or otherwise”, the Indebtedness, “whereupon the Borrower will forthwith repay in full the Indebtedness plus any accrued interest, costs and fees. This facility letter will be binding upon the Borrower and irrevocable by the Borrower for a minimum period of 3 years commencing from… 30 th June 2022”, being the anticipated date for arrival of product at Hamburg.

12. It has been a theme of Mrs Perhar’s that this was a 3-year facility. It was not, at least for Synergy. As she says in her evidence was explained to her, because of the risks associated with the first trade, and the ability after its achievement to obtain much more favourable credit terms, the Company was bound to a 3-year term; she says she was told that Synergy’s business model would not otherwise work. For its part, Synergy could call in the Facility, in whole or part, whenever it wished, and whether there had been a breach or not. That was reiterated later: “ Renewal Without affecting Synergy’s right at any time to withdraw the Facility and/ or demand repayment of all sums owing to it, the Facility is due for annual review… Synergy will assess the financial performance & risks & at their sole discretion will renew the facilities for a further year”.

13. Under the heading “Import facilities”, Synergy was “[s]ubject to the Limit and the terms of this letter” to pay “by bank transfer &/ or issue letters of credit on behalf of the Borrower to Suppliers relating to the purchase of goods on behalf of the Borrower”, without thereby becoming a party to the underlying contract. Thus it was to pay upfront for the product which was then to be distributed and sold by the Company.

14. That upfront risk, the greater on a first trade, was reflected in Synergy’s fees, described as a “profit sharing arrangement with the Borrower whereby Synergy will receive 30% of the Gross Profit of all orders received from the Customers with the Borrower receiving 70%”; that was for orders received to 30 June 2023, after which the split would be 25:75. There was a definition of Gross Profit, and also this: the “profit share due to Synergy will be made in priority and without set off or deduction”. It had paid up front. It was to receive up front.

15. Synergy was to undertake the book-keeping and provide monthly accounts, using Sage; that was of the account between the parties rather than for the Company generally, as a Borrowers Account was to be set up in Synergy’s books in which payments to Suppliers would be debited, and receipts from Customers credited; it would also include Synergy’s fees and “any expenses paid or incurred by Synergy on behalf of the Borrower (including, but not limited to, freight charges and Value Added Tax)”, which would be debited. A “monthly statement will be provided and in the absence of manifest error be conclusive and binding on the Borrower”.

16. Synergy’s control of the fee collection process was then enshrined. A Designated client account (sic) was to be “opened with Barclays Bank & the Borrower must use this account on all invoices, order acknowledgements, payment requests and credit control demands to Customers”. The Designated client account was to be quoted on the Company’s invoices if it was not on the Customers Portal. “No other account details will be provided to the Customers during the term of the Facility and until Synergy are paid in full”. Invoices were to be settled by payment to the Designated client account, from which Synergy would settle its invoice for its profit-share, and any costs and expenses, before transferring the balance to the Borrowers account. Again, a mechanism to ensure Synergy was paid out first, before the Company received anything.

17. The Company was to provide Synergy with copies of its Suppliers’ pro-forma invoices; and all purchase orders from Customers; and also unaudited annual accounts, within 180 days of its financial end.

18. Synergy held a pledge of the title to unpaid goods, with title not to pass until Synergy was repaid all due amounts; “but the Borrower may resell or use the goods in the ordinary course of its business but holds any and all proceeds of sale to the goods on trust for Synergy until they are paid in full”. So, if a Customer paid to other than the Designated client account, Synergy was protected by a trust through which, again, it was to be paid first.

19. There were defined events of default, the first being that “the Borrower fails to perform and observe any of its obligations under this Facility or any security document”.

20. Upon such event of default: “Synergy shall cease to be under any obligation to issue letters of credit… and all monies payable under this Facility and all interest accrued and costs incurred pursuant to the Facility shall become immediately due and payable, and the Borrower shall immediately pay them to Synergy”.

21. That was a non-demanded obligation. There was another, demanded, obligation being that “the Borrower agrees in the event of a default to provide immediately to Synergy upon Synergy’s request full cash cover in respect of any of the Borrower’s actual prospective or contingent liabilities owed to Synergy”.

22. There was additional protection of Synergy’s rights under the Facility Letter in: “ Waivers: remedies cumulative No failure or delay by Synergy in exercising any right, power or privilege under the Facility or any security they hold shall impair the same or operate as a waiver of the same nor shall any single or partial exercise of any right, power or privilege preclude any further exercise of the same or the exercise of any other right, power or privilege”.

23. The notice provisions distinguished between “[a]ny notice or other communication required to be given” under the Letter; and the same, but not required. If to the Company, and if required, that was to be by letter to a specified address; otherwise by telephone, email, post or fax. Whichever method was used, it was “effective on receipt”.

24. By its clause 3, the Debenture was “a continuing security for the payment and discharge of all moneys, obligations and liabilities hereby covenanted to be paid or otherwise hereby secured (the ‘Secured Liabilities’)”; there were full fixed and floating charges; and by clause 7, paragraph 14 of Schedule B1 was applied, giving Synergy the right in certain circumstances to appoint administrators.

25. The covenant for which this was security was at clause 2. “The Company covenants that it will on demand pay to the Lender all moneys and discharge all obligations and liabilities whether actual or contingent now or hereafter due owing or incurred to the Lender by the Company in whatever currency denominated, in any manner whatsoever…” together with interest and costs and all else.

26. Plainly, the Facility Letter and the Debenture (and the rest of the document suite) must be read together: so, when shortly afterwards, on 12 April, the Facility Letter was amended to a 30:70 split of Gross Profit throughout the 3 years, the Debenture remained in place as it was. (Synergy insisted on that increased return because the anticipated risks had changed: the proposed Chinese supplier was not willing to accept a letter of credit, even one drawn on Bank of China, and required direct payment).

27. What that reveals is that the obligation to pay, while covenanted in the Debenture, may be found elsewhere; including, in this relationship, in the Facility Letter. Put another way, the Company might be subject to an obligation to pay under the Facility Letter, and, because of that obligation, also and without more obliged to meet it as a covenant under the Debenture.

28. Of importance to this case, it follows that, if required at all, a demand for payment under the Facility Letter would be in accordance with its notice provisions, not those of the Debenture, even though the demand, if unmet, would amount to a breach of covenant under the Debenture.

29. The Debenture also contained other particular covenants. At clause 10.8 was that the Company will: “10.8.1 as an agent for the Lender, collect in and realise all Book Debts, pay the proceeds into such account as the Lender may from time to time notify the Company (the ‘Designated Account’) immediately on receipt and, pending that payment, hold those proceeds in trust for the Lender; 10.8.2 not without the prior written consent of the Lender, withdraw any amounts standing to the credit of any Designated Account”.

30. The latter provision protected Synergy where monies were in the Designated Account, being the Letter’s Designated client account. The former reinforced the Letter’s trust obligations in the event that a customer paid elsewhere. By clause 10.9 there was a covenant “promptly upon becoming aware of the same [to] give the Lender notice in writing of any breach of… any covenant set out in this clause 10”.

31. For whatever reasons, the Debenture’s notice provisions did not mirror those in the Facility Letter. By clause 45 “Any notice or other communication given in connection with this Debenture will be in writing and will be delivered personally or sent by prepaid first class post to the recipient’s address as set out at the beginning of this Debenture… or to any other address… which the recipient has notified in writing to the sender received not less than 7 business days before the notice was despatched”. There were also provisions for service by fax, but not by email.

32. By clause 46.2, if sent by prepaid first class post, deemed notice was “on the second business day… after posting”.

33. Within the Debenture are several references to rights arising to Synergy’s benefit where it has “become enforceable”. Pertinently, by clause 26: “The Lender may without notice to the Company appoint any one or more persons to be an administrator of the Company pursuant to paragraph 14 of Schedule B1 of the Insolvency Act 1986 if this Debenture becomes enforceable”.

34. When that would be is not stated explicitly. One limb of Mrs Perhar’s challenge to the administration process is under paragraph 16: “An administrator may not be appointed under paragraph 14 while a floating charge on which the appointment relies is not enforceable”.

35. The court has had wide citation of authority on the interpretation of a contract; and, alternatively, the implication into it of terms necessary to make it effective in the way that it considers the parties must be taken to have contemplated.

36. Here, the Debenture was taken to provide security rights additional to the Facility Letter, including the right to enforce by appointment of administrators as a qualifying floating charge. The security rights were, obviously, intended to be effective; and Mrs Perhar does not say otherwise. Miss Temple KC, who has represented Synergy, submits, as have her predecessor leading counsel, that on its true interpretation, the rights under the Debenture became enforceable where there was an event of default as defined in the Facility Letter; an interpretation which would, in accordance with the agreed contractual scheme, align the two. If need be, words conveying that could and should be implied in.

37. Although it would make no difference to the outcome, I do not think that quite right.

38. First, as seen, it is not only an event of default under the Facility Letter which gives rise to an obligation to repay. There is also such an obligation if the Facility is withdrawn and the sums due demanded, and that without any default or breach by the Company. Given the purpose of the Debenture, it must be intended to encompass that situation as well.

39. That indicates the second aspect, which is that the Debenture hinges on the clause 2 covenants to pay all sums and discharge all liabilities owed by the Company to Synergy. It is the failure to abide by those covenants, or any of them, which is a breach of the Debenture; and, therefore, as a matter of interpretation (but, if need be, implication) enforceability would arise where there was a breach of a covenant contained in the Debenture. Whether the definition would extend directly into breaches of clause 9’s representations and warranties it is not necessary to decide; and neither do the potential answers to that cut into the covenant-founded interpretation. Performance

40. Mrs Perhar found compliance with the Aldi framework terms “vast, very challenging and bureaucratic”. Aside from trilingual manuals and packaging, there was a testing protocol, which “turned into a complete horror” as the independent tester “kept coming back with required modifications”, finally including a non-EU-required battery management system. She was dealing with all this herself; “I neglected my family and our personal financial position to get this first Aldi deal completed”.

41. She had also, unexpectedly, to incorporate a branch of the Company in Ireland, as Aldi stated that it would not contract with a UK company.

42. So the August 2022 delivery to Hamburg was missed; and so too the expectation that Aldi monies would begin to be collected from that month. A new sale date was agreed of “January/ February 2023”. “As a result of the delay with the Aldi order,” says Mrs Perhar, “I was starting to come under extreme pressure to pay my personal outgoings”. Their daughters were threatened with exclusion from their school unless payment of outstanding fees was made; and that in an A-level year for the oldest.

43. Mrs Perhar turned to Mr Slinger. It says much for the open-minded and constructive approach of his and Synergy’s that he was willing to entertain such a payment for no direct commercial purpose. But, as he and Mrs McAlpine explained in their evidence, they tried to take a holistic view in their business dealings; they recognised that, as Mrs Perhar put it in her evidence, “the Company is me; I am the Company, no-one else; if I break, there is no Company”; and Synergy had already advanced considerably in excess of the Limit, at £492,931. On 24 November Synergy therefore paid £25,000 to Downe House.

44. Mrs Perhar’s reaction to this most unusual corporate generosity is revealing. She says “I was very grateful” for the payment: no doubt. She also says that Mr Slinger “was quite helpful and understanding” when asked for this advance; it “demonstrates the nature of our co-operative and mutually trustful relationship”. Again, yes it does; but describing Mr Slinger as “quite helpful” is now to downplay the mutuality of that relationship, and the trust which it evinces Synergy then had in her. Her attitude at the time is demonstrated by her email to him and Mrs McAlpine and Stuart Weatherhog, Import Client Account Manager at Synergy, of 23 December 2022 headed “HUGE THANKS and HAPPY CHRISTMAS”: “Ahead of Christmas, I wanted to send you all an email to say a huge thankyou for all your help and support over the last 8 months. It has been quite a challenging time for me in a personal and professional capacity and your input and professional guidance has been invaluable to my business and I am truly grateful to you and your team for this- THANK YOU! I am sorry that the Aldi trade has been so problematic- I think the end is now in sight and we have managed to overcome so many hurdles- again, Thank you”.

45. Mrs Perhar is a woman driven to succeed; in part because of a belief that the toothbrush is a product good for the planet. But there was an undercurrent to her evidence, of which we have seen indications already, that she and her vision were the centres of this relationship. Synergy was a tool along the way, useful for funding her good product, and in the event useful for assisting with her and her family’s affluent lifestyle. She and her family came first; and when choices had to be made, that was hers, whatever the contractual documents said. It does not seem to have come to her mind that Synergy was actually as much a personal business as the Company: it did not rely on outside lending; its money was effectively its shareholders’, Mr Slinger and Mrs McAlpine; and they had devoted a substantial part of their working lives to it.

46. It is therefore important to tally Mrs Perhar’s evidence and strongly-stated beliefs with the contemporaneous documents.

47. Her email of 23 December referred to the “new Boots contract” and final stage meetings for another tender, and other opportunities. It ended with: “PS. I am not signing off for Christmas I will be working… and will chase German VAT etc this is just a thank you!”.

48. The final unexpected issue with the Aldi contract was the German VAT. While the shipment was on the water it was now appreciated that it could clear Hamburg port only if there was payment of German VAT on import, albeit that could be reclaimed by the Company. Synergy found a German VAT consultant, and advanced more than €150,000 for the necessary payment.

49. With the late delivery came delay to the second part of the Aldi contract, the supply of further product and replacement heads. That was now anticipated for “the end part of 2023 or the beginning of 2024”. A payment from Tesco for Mozzipatch allowed the Perhars to “pay critical sums off to relieve some pressure. I hadn’t paid myself for years so everything was at breaking point”.

50. The invoices, addressed separately to each Aldi branch, were dated 26 January 2023; they specified a “Swift payment to the following account”, being the Designated client account at Barclays. They were prepared by Mr Weatherhog, as included within its profit share Synergy had been helping Mrs Perhar with backroom tasks; and sent out by Mrs Perhar. She had forwarded to Aldi the details of the Designated client account, duly stamped by Barclays, by email of around 26 October 2022. It seems from an email of Synergy’s Elaine Cherry of 28 September 2022 that Aldi already held other details, which these were to replace: the stamped account was sent through “so that [Mrs Perhar] may change with Aldi”.

51. On 17 February 2023 Mr Weatherhog emailed Mrs Perhar: “I have just noticed there is a mistake in all the Aldi invoices. In the bank details. Although the bank account, swift code and sort code are correct they don’t match the IBAN. Please see attached the revised invoices…”.

52. Mrs Perhar called the Aldi supplier helpline, to be told that some depots had paid already. “Stuart and I then worked together to try and trace the payments. We were concerned that the payments had been paid into an unrelated third-party account…”. It is not clear what was happening to the corrected invoices.

53. On 23 February Mrs Perhar and Mr Slinger met at his office. She says that he and Mrs McAlpine had been aware since December “that because of the delay I desperately needed to pay sums as I was under financial strain”. She says that she had “on the advice of an accountant” been billing the Company “as a self-employed contractor… for £20,000 per month”, which had not been paid (there is no evidence of that, nor that Synergy was aware of it; nor as to how or when it was intended to be paid). “I was being crippled by overdue business debts, credit card payments and school fees”, but at the meeting explained to him that because of the Mozzipatch receipt, “the majority of the things urgently remaining to be paid were now under control”. There remained about £80,000 of school fees, a credit card bill of £30,000 and pawned goods of £40,000. “I explained this was going to be more than my profit share from Aldi. The conversation was very relaxed and natural not like a commercial relationship with a lender. We discussed this was a tough first trade but… he was very optimistic about the future and that we would trade the RCF very quickly to a profitable situation. David said he would make sure everything I desperately needed to be paid was paid immediately and that as long as the £350,000 RCF was not breached we had 3 years to work things out”.

54. That was a statement of intent from Mr Slinger, no doubt made because, as she adds, “the Company was essentially me”; and also because Synergy was hundreds of thousands of pounds down the line; and payment, and profit, was now expected soon.

55. At this meeting and later, Mr Slinger did not disagree that they discussed personal matters, on both sides, which went beyond usual business confines. That was a part of the trusting and holistic relationship. Mrs Perhar remembers him talking at this meeting of his stage 4 prostate cancer, with 1 year to live; and how he had left his wife, and showed and discussed pictures of others he was dating.

56. What this meeting cannot have achieved is what is sketched in Mrs Perhar’s evidence, and said in her closing to be his agreement that “once Aldi funds landed, urgent sums could be paid”. The account hiatus had not yet been resolved. No sums had yet been paid. Crucially, when they were, Mr Slinger (and, it must be assumed, Mrs Perhar too) would be anticipating their receipt into the Designated client account, and therefore Synergy having control over them. When in November he had permitted £25,000 to be paid to Downe House, that was a specific transaction in a specific sum. For all Mrs Perhar’s optimism, there was nothing to show the Company had other definite new trades. And anyway, the Limit had already been extended, pending receipt of the Aldi monies.

57. The Irish branch had set up a Revolut account, operative in sterling and euro denominations. From 27 February the Aldi branches began to pay the invoices. For reasons unknown, those payments were made to the Revolut account, and not to the Designated client account, despite the correction to the invoices; both sides speculate that the Revolut account was the master account in Aldi’s books, which is in part borne out by an internal Aldi email of 14 March 2023, referring to different bank details having been put on the invoices erroneously, and so “Please ensure that the amounts invoiced for are paid to the bank account details stored in the master data”. Mrs Perhar says she had given details of the Revolut account to Aldi only as part of the compliance details when setting up the Irish branch, and not in certificated form (and whether that was a breach of the Facility Letter has not been explored in depth). Why Aldi should have it as the master account was a mystery, given it had been sent, as it requested, a stamped copy of the Designated current account.

58. For the purposes of this trial the payments into the Revolut account, rather than the Designated client account, can be taken as a mistake on the part of Aldi. Synergy reserves its position on whether that is right; and down the line this may become a live and central issue. But it is not for now.

59. What is critical, both to the legal analysis and as explanatory of the parties’ breakdown in relations, is that when on 28 February Mrs Perhar first became aware of the erroneous payments, and thereafter, she did not transfer them over to Synergy, or give it control over them, or, as the Company was bound, treat them as trust monies; those contractual obligations were very largely ignored. Neither, as we shall see, was she open and frank in her dealings with the receipts, again despite the contractual obligations, and, actually, also despite the open and informal relationship she had with Synergy and, at this point, Mr Slinger.

60. Again, to be clear, the honesty of her dealings with the Revolut monies is not for this trial; and findings of breach of trust are not to be equated with dishonesty.

61. On 27 February, 19 Aldi branches paid a total of €414,673 into the Revolut account. Mrs Perhar discovered this the next day. She says she spoke to Mr Weatherhog to tell him, “and proceeded to transfer large chunks as it landed”: €373,533 on 1 March, and all the five receipts of 2 March, totalling around €104,000. According to the account print out, she is mistaken as to the 1 March payments: it has €273,533, although the last figure for the February printout and the first for the March do not tally, so there may be missing entries.

62. For Mrs Perhar, after the years of hard work, the receipt of Aldi monies must have been a vindication; and also a temporary alleviant which had unexpectedly dropped in her lap. She acknowledges as much. “As I had received the money and not the Synergy account, I settled the sums as discussed out of what was my share of the profit”, these being sums “overdue and incurring high levels of interest”. So she paid her pressing debts: two pawnbrokers and a loan from Alison Jacques Ltd, an art gallery run by a friend, who by now had passed the loan to a third party debt collector it had been outstanding for so long.

63. The payments were in breach of the trust provision in the Facility Letter; and that in the Debenture; and contrary to the scheme of both, in providing for Synergy’s discharge first; and the express term of the Facility Letter that its profit share be paid in priority. As above, while she had discussed her financial problems with Mr Slinger, there was no agreement to these payments. Neither, as above, did she actually consider that all the sums she withdrew would represent profit; and that is so whether she means the profit of the Company or her profit from the Company: she drew no apparent distinction between the two in her use of these monies, which was, from the Company’s viewpoint, undocumented, as she failed to keep up its books: there is nothing which evidences the position between her and the Company as a result of these and the later withdrawals.

64. On 7 March was another meeting with Mr Slinger, at Kings Cross. She recollects that they discussed restructuring the Facility to extend the Limit so that potential product deals with smaller entities could be met; and they debated additional profit share for Synergy. Mr Slinger also referred to some recent dates.

65. Money continued to arrive in the Revolut account, but there was only one other payment, a modest €8,484, made to Synergy on 23 March. Among other payments, not all of which can be purposed even now, Mrs Perhar had on 13 and 15 March paid school fees of, respectively, €40,000 and €58,000. She says she was “paying what I urgently needed”.

66. Rightly, as it would turn out, Synergy was getting twitchy. “Have you received any further funds today?” Mr Weatherhog asked her on 14 March. That was not met with a response: yes: and as agreed I paid €40,000 yesterday to Downe House; and am going to pay them €58,000 tomorrow. Monies, albeit in diminishing amounts, continued to be received into Revolut until at least 10 May; occasional payments were made to Synergy.

67. The emails we have really start on 11 April when at 12.35 Mr Weatherhog asked “Can we get an update please? As requested by David please forward us the Euro bank account statements to aid reconciliation”. Provision of those statements, into which Synergy’s money was being paid, was already an issue, even if at this stage directed just at a reconciliation between the invoiced amounts and the amounts received, Synergy not knowing that receipts had not been preserved for it. “Hi Stuart, I have sent 4 payments through and will send bank statements” was the 12.44 reply. By 14.01 Mr Weatherhog was already chasing: this was urgent.

68. As is now apparent, the Company had indeed made four payments to Synergy that day. That took the balance on the Revolut euro account from €76,316 to €47,492. On 12 April Mrs Perhar generated a transaction statement for that account. This contained “Filtered transactions from 01 February 2023 to 12 April 2023”. How filtered accounts were generated has not been a question for this trial, but the filtering of these and the others Mrs Perhar produced meant that they showed receipts and a running balance only. She is right that just looking at those two elements tells the reader that there must have been debits; but that is not the same as full and open disclosure by a trustee to its beneficiary of dealings with the trust monies.

69. So, by way of example, what did not appear on these statements was that the same day they were produced, Mrs Perhar caused €47,200 to be transferred from the euro account, probably to the Revolut sterling account, leaving a balance of €292. Statements for the Revolut sterling account have never been produced.

70. It does not appear that Mr Slinger knew of these movements, let alone in any particularised way, when on 12 April Mrs Perhar says he telephoned her to say “in an extremely aggressive manner”, that she had stolen his money; he would pull the funding; and her business would be ruined. “He said that he wanted all the money transferred. At this point many Aldi depots still hadn’t paid and we were supplying Aldi NL so I didn’t have all the money to transfer. I was left reeling by this outburst”.

71. The next day, Mrs Perhar emailed him: “When you are able to have a rational and constructive conversation I am happy to arrange a time to speak. I am still deeply disappointed and upset with how you spoke to me yesterday on both a personal and professional level. I feel I have been entirely transparent with you”. She then refers to the 3-year term, her hopes, and her concerns over any renegotiation of the profit share on future deals.

72. Though no actual detailed information had been forthcoming, Mr Slinger replied to agree to meet on Tuesday: “We will accomplish far more face to face & I will listen before I speak”

73. They met on 18 April at Vinoteca in Kings Cross. Mrs Perhar says they initially discussed stories of previous occasions when Synergy deals had failed; and how it had bankrupted parties responsible; and how Mr Slinger “wanted to destroy them and any future chance they had of trading. I didn’t understand why he was saying this”. In cross-examination Mr Slinger agreed they had discussed those matters, but not in such terms; and it may be underlined that Mrs Perhar did not understand these to be the concealed, but not illegitimate, warnings for which they might be taken. After more uncomfortable talk about his personal life, Mr Slinger told her that “he was not actually sure whether he intended to honour the terms of our 3-year RCF and fund the deal with Boots”. That proposed deal was not then within the Facility. “I made it clear that if I wasn’t able to trade my business then this would be fatal to me in terms of looking after and educating my children”.

74. There is no obvious appreciation from Mrs Perhar that the Company owed Synergy a great deal of money which, because of her withdrawals, it was unable to repay; and as to which she was saying as little as possible. Instead, she was, as later, looking to a bright future to resolve everything; albeit one which would first have to be funded yet further by Synergy.

75. When she emailed him the next day beginning “It was helpful to meet up yesterday and try and clarify the position”, she “attached the bank statements… of monies received”. That was right. She said that “I have paid over to you and paid to myself enough to ensure the company or I don’t go under and looking forward I need to make sure I have enough cash flow to manufacture future orders”. That made it sound as though at least some of the unidentified withdrawals were for the benefit of the Company. “I am concerned that you are no longer interested in funding the further deals. This will cause the company to fail… Consequently I need to feel comfortable that you will fund future deals and honour our 3 year agreement”. If Mr Slinger were pressuring her to comply with the contract, she was also pressuring him: Synergy would be repaid only if it provided the Company with more funds.

76. In his reply of 21 April Mr Slinger noted that at the meeting “you also agreed to send us the balance of the funds in the Revolut account which is €92,492. We now have the bank statements, thank you & so now please transfer the funds as you promised. There will be more incoming funds to be received & we remind you that the funds must be transferred to us without deduction”. Those statements were filtered, and no transfer was made. Further filtered statements were sent on 24 April- “please find attached the up to date bank statement showing all receipts”- but not the daily statements also requested.

77. At this point Mr Slinger, getting nowhere in obtaining monies, and not very far in obtaining information, passed matters over to Mrs McAlpine. Mrs Perhar says “I was relieved as I wasn’t sure what to do next… I felt that she understood and sympathised with my difficulties in dealing with David and his erratic behaviour. I am not sure if David had anticipated that he had overstepped and had suggested Cassandra contact me”. That was not the case. Mr Slinger and Mrs McAlpine were looking for the return. Further, as apparent from his evidence, Mr Slinger believed the non-business elements of his conversations were “mindless chatter”. Those extra-business conversations were not explored by either side in any detail; there was embarrassment for each. It is easy to see that, as she said, Mrs Perhar as a businesswoman, at a meeting by herself, found the conversations uncomfortable, and not how business ought to be conducted. We have also already seen that the personal relationship with those behind the borrowers was important to Mr Slinger, and a basis on which Synergy would lend; and he is an astute businessman who would continue to keep an eye on the relationship. I therefore doubt that this was “mindless chatter”; and this was the only point in his evidence when Mr Slinger appeared discomforted, it otherwise being brisk and cogent. But I do not draw from that that Mr Slinger at the time recognised that in Mrs Perhar’s eyes or otherwise he had crossed a line. Further, Mrs Perhar conveyed more upset in her submissions and questions than can be gathered from her evidence. The point is a deflection from the substance of that meeting, which was that Synergy wanted its information and money.

78. Mrs Perhar was given no warning that Mrs McAlpine, who thus far had had little direct involvement, was now taking over, but with it came a change of tone, aided by their use of WhatsApp as well as email. A WhatsApp came first on 25 April: “Hey Sophie, It’s Cas here. I’ve just tried to call you. Perhaps you didn’t recognise my number. I’m feeling awful about the current situation & I thought calling you might go a long way to help us both. I’m hoping you’re coping OK… Please give me a call… You see talking thru issues almost always helps. And for you & me it will definitely work out to be positive”.

79. The email which followed included “Please reach out, let’s see what we girls can do to get everything on an even keel. Let’s just say that we’ve together found ourselves in an uneasy situation. I would like to put things right and hear you & listen to you”.

80. Mrs McAlpine gave impressive evidence, clear as to what she was hoping to achieve in her dealings with Mrs Perhar, and fortified by a profound knowledge of the Synergy business and why it works. As she said, she was brought in because the relationship was “breaking down”, which Mrs Perhar agrees, and Mr Slinger had thought it better if she was the one to re-engage with Mrs Perhar to restore it. A part of that was understanding what more things they could do together, and so listening to her future projects; “but also we were all in a terrible situation, and therefore needed to look for solutions”. Using their personal relationship, what she intended was a “help me: help you”. That account is supported by the tone of those initial communications, at once indicating a difficult situation and hoping that together it can be worked through.

81. It was Mrs McAlpine who was on the front foot. Mrs Perhar’s reply had said they could speak tomorrow: there were family issues. At 17.04 that day “Sorry to hear about your aunt. As you say you need to prop up & support your parents… We can chat tomorrow. I don’t mind if it’s late afternoon or in the evening. Whenever suits you. I’m keen to help you…”.

82. On 26 April Mrs McAlpine sent a series of WhatsApps, unanswered doubtless because of the family issues. They spoke on 27 or 28 April. This was Mrs Perhar’s account: “I explained that I had lost complete trust in faith in the relationship, that I was unable to work with David and I didn’t trust the fact that Synergy had any intention of honouring the 3-year contract. Cassandra said ‘I’ll give you my cast iron promise that I will honour every trade for the next 3 years’”.

83. Mrs McAlpine agreed that they were in it together, because she could not make progress by herself; but denied she gave any promise, cast iron or otherwise; and she must be right, because this was just a first conversation when knowledge was still imperfect. It is also belied by what came next.

84. By 3 May, still with no progress, Mrs McAlpine was chasing: 14.48 “So sorry, but please could you call me on your journey back”; 14.49 “Yes I can call you- pls bear with me for a moment”; 21.03 “Hello Sophie I know it’s different”, surely difficult, “times. Have you 5 mins available this evening please”; 4 May 16.51 I “wonder when you are free for a further short catch up”; 8 May at 22.33: “Hello Sophie, We’ve not been able to catch up. I appreciate your current circumstances. Could you call me please. I’m afraid we are in a bit of a predicament here. And need your support & help. It’s very important. I don’t feel it right to mention here, but I could really do with some help from you. Please call me tonight or early tomorrow”.

85. There was no more information, and no payment. The Company was still in control of the Aldi payments. Yet, as Mrs McAlpine said, this “was our cash”; and Synergy was facing only the fourth failed deal it had ever done.

86. It decided to turn for further assistance to James Hunt of Pegasus Intelligent Corporate Finance, to see what a third party could bring. He and Mrs Perhar, and perhaps others, met by Teams on 10 May; and there is an email of 12.07 that day in follow up from Mr Hunt. “We discussed and agreed that we would use the [Facility Letter] as our operating document. This is a 3 year agreement to support your business, and sets out the manner in which both companies will operate- it is important that everyone buys into that document as it clearly sets out the responsibilities of both parties. I can confirm that Synergy will honour that agreement, and that the forthcoming Boots contract and subsequent contracts will be fulfilled under that agreement/ methodology. Assuming you are in agreement, then I need to understand more about where your business is today, and to reconcile the current Aldi contract. In that respect please can you let me have:

1. Your current Unfiltered bank statements for the last 12 months up to today.

2. Full audited accounts to Jan 22 with commentary on where you are with the Jan 2023 accounts.

3. Any management information you have from your accounting software- Profit and loss, Balance sheet, aged creditors and aged debtors.

4. A financial forecast including future orders and expenses. With regards to items 3 and 4, then I would guess from our conversation today, you may struggle to produce these, so any information, even spreadsheet based, or a photo of a handwritten note of monies owed or owing would be of assistance, as well as a list of contracts… If you can send 1 and 2 through as quickly as possible, then Stuart and I will look to reconcile the transactions… I very much look forward to working with you and to seeing your business grown into something that you will be proud of”.

87. This was, with a different tone, the same request for information; and, although perhaps now contemplating that the Boots deal might be brought within the Facility Letter, the same insistence that the existing contractual terms applied. In her skeleton Mrs Perhar characterises this email as the basis of a “written stabilisation plan”, “agreed and in place and… never revoked”, the terms of which were that Mr Slinger was “[e]xcluded… from daily dealings”, which it does not mention, not surprisingly as he remained a director of Synergy deliberating matters with Mrs McAlpine; and that there was “Permitted retention of working capital and staged remittances”. In her closing, Mrs Perhar said “put in place [was] a plan that explicitly assumes that past urgent payments are a fact, and that the way forward is a reconciliation and trade-on, not immediate enforcement. That is classic ratification by conduct: knowing that payments have been made, the lender nevertheless continues to deal on the footing that the relationship endures, the Facility is honoured…”. Those last words betray this submission. It is to take from this email, and the later interactions with Mrs McAlpine, only what benefitted the Company, and ignore that all this action was posited on the Company’s now complying with the Facility Letter. It is to assume that Synergy would simply paper over the Company’s existing breaches, without knowing exactly what they were. It is effectively to rewrite the Facility Letter and turn it into a 3-year obligation within which the control of cashflow is taken away from Synergy and handed to the Company; and that despite the Company yet to produce a full account of its dealings, and Synergy being significantly out of pocket.

88. A remote meeting arranged for 11 May did not happen: Mrs Perhar did not telephone in, and then, in the litany of family infirmities, Mr Hunt’s father had a stroke so he could not attend later. Mrs McAlpine emailed Mrs Perhar at 15.41, with “High” importance: “Really upset that we’re behind where we had hoped to be today. Given the circumstances could you send all monies in your account due to Synergy and the bank statements unredacted. That would make a positive start & we agreed it anyway yesterday. James will touch base later today or if not tomorrow. Please confirm you can send the money in your account and the statements today. That’s all we need for now. Thanks so much”.

89. That was not done. Around now, because Mrs McAlpine said that it was 3 weeks before administration, Synergy began to consider its position. She did not tell Mrs Perhar that, as it was “our internal affairs and a serious situation” in which it wanted to “capture our monies and protect our losses”: “we spent weeks looking how to recover”, and surprise was an element of that, to try, ineffectively as it turned out, to obtain all the remaining Revolut funds before they were paid away.

90. Within that, and as part of the “help me: help you”, on 15 May Mrs McAlpine agreed “for the sake of ease and… exceptionally” that costs of packaging graphics and translation could be included within the gross profit calculation. In the first communication we have since 11 May, Mrs Perhar said that “I really don’t understand what is happening here. James is super aggressive and unreasonable. I thought he was going to work with me to help my business… I have asked for a break down of exactly what has been paid by Synergy. Profit on the trade and the split between Synergy and SBC”. Again, Mrs Perhar was drawing from the benefits, while ignoring the obligations. If she did not understand, Mrs McAlpine set it out: “I do know that since our call last week where we agreed our continued support we still await necessary information… It is somewhat frustrating that we appear to be no further forward. With the benefit of my agreement please could you now do the needful. I agree that this is beyond stressful not only for you but for Synergy too! The monies due are needed”.

91. On the evening of 17 May Mrs McAlpine and Mrs Perhar met at the Perhars’ rented flat in Lancaster Gate. Mrs Perhar’s account is again all light. “We had a very positive meeting, we went through all the bank statements to clarify what had been paid by Aldi and what was due, together we reconciled all the payments to Synergy and went through what payments I had made to pay off SBC debts and personal liabilities. We discussed future trades and Cassandra confirmed that we would trade out of the position repaying the rolling £350,000 RCF using funds from future trades… Cassandra was very sympathetic… I believed that continuing working with Cassandra was in both parties interest. I was fully on board with how she was structuring the new relationship…”.

92. As Mrs McAlpine says, she arranged the meeting “in an attempt to collect the bank statements she was still neglecting to provide”. Mr Hunt had provided a 17-item agenda, headed “Agenda items that I think you need to discuss- sorry it’s a long list but it’s important to get it right if we are to make progress”; and over some 6 hours they went through it. Mr Hunt’s memo at the end was “In short, we need to take control of the financial aspects, and to share all bank statements monthly going forward. We will act as financial processor… financial administrators and funders, providing profit allocation once payments to end users have been received at Gross profit level. We will help make this work, and then when fully repaid she can either continue with our support or not as she pleases- in the interim, I don’t believe any of the above is negotiable!”

93. Item 1 was “Establish that we are going to be open and transparent in all financial dealings- nothing held back”; and there are ticks against that.

94. Item 4 was “Understand who has been paid ‘our money’ and evidence it via bank statements, and understand why debt occurred- can we recover it/ will it re-occur/ can it be refinanced?”.

95. Item 8 was “Identify monies still due and how these come back to Synergy without being diverted”.

96. Mrs Perhar did now produce some unfiltered statements, for the Revolut euro account for months March and April, which Mrs McAlpine ensured were printed off there and then. They went through them, and we have Mrs McAlpine’s copy with notes marking payments to Synergy, but otherwise question marks, some of those with possibilities: the school fees of 13 and 15 March. There was no reconciliation at the meeting, nor sensibly could be. Mrs McAlpine says that Mrs Perhar became emotional about her creditor pressure and her need to use the money: “why aren’t you angry with me?”, she asked. Although denied, that is likely, because when Mrs Perhar emailed at just after midnight on 18 May, hers was the change of tone: “I am so sorry for the whole situation I am going to work relentlessly to resolve very quickly”. The outcome, says Mrs McAlpine, was that Mr Hunt would try to “find a way to return the monies owed to Synergy, and to stabilise Mrs Perhar’s financial situation and to assist in reviewing business opportunities”: essentially, the goal at the end of the minutes.

97. On 18 May Mrs Perhar transferred €20,000 and told Mrs McAlpine that she was retaining €5,000. A part of the meeting had been discussions about her personal financial situation, and the family’s, and how that might be aided; and Mr Perhar had just received a demand letter from a creditor to his chambers: “I am not sure why they have done this- help!”.

98. On 20 May Mrs McAlpine WhatsApp’d to say she had discussed “all opportunities available to you and for recovery of your business and the debt… We wish to get a plan together and manage step by step”.

99. Mr Hunt wrote the next day. “My objectives are: to find a way that returns the monies due to Synergy, and to stabilise your personal financial situation to assist in reviewing the business opportunities… To get the ball rolling below is the list that Cass was working from”, being the agenda. “We wanted to make sure we fully understood the position, otherwise action can be counter-productive. Presently, the main missing element is the Sterling Revolut account statements from January, which will assist us in our understanding… We need to have a long discussion”.

100. Nothing then happened.

101. On 26 May Mrs McAlpine WhatsApp’d: “James messaged to let me know that you’ve yet to catch up together. So I’m just a little concerned that perhaps you’re still not feeling well…”.

102. On 27 May Mrs McApine emailed. She had been reviewing Mr Hunt’s email of 21 May “& of course it covers the bits we spoke about in our meeting last Wednesday week. It’s quite a list to go through so I’m thinking it’s possibly too much to work thru when you’ve other matters going on with meetings and such. So I think it’s best to break it down and action a couple of points in the first instance”, which were creditor issues and bringing her husband into the process. “If we can make a start on the points above, then we can look at the others. 2 tasks a day will be easier to manage for you. I’m really wanting to help you & Synergy too! It’s not a pleasant situation for either of us but we do need to get matters sorted as soon as we can”.

103. It shows the lop-sided view she has of things that Mrs Perhar says this email constituted the “new terms of the agreement”. It was not one the Company complied with anyway. There were repeated messages from Mrs McAlpine over 30 and 31 May asking for a call. At 20.53 on 31 May Mrs McAlpine emailed, to confirm that Mr Weatherhog had received the information requested concerning VAT. “This only leaves the other points requested below”, the creditor pressure, and bringing in her husband. “Could you action these points before noon tomorrow please… Also as an aside, please send me your latest € bank statement from Revolut as at 31/5… Please let me know if you’ve rec’d any incoming payments from Aldi since our meeting. If so please send the full credit value of funds to us tomorrow. Sadly we’re no further forward & I wish to be. I promised my support so please action”.

104. That was followed by a WhatsApp of 22.22: “Just tried calling you again. I’ll send you another email. When you receive could you please respond to it. Hoping you can get across your response tomorrow”.

105. On 1 June Mrs Perhar promised an “update” after her meeting with Boots.

106. She provided it on 2 June. “I have at last some positive news. Boots are going to look into a 3 year deal. I have had to come significantly down on price but it still makes money”. That was no deal. On 17 July Mrs Perhar was still sending Boots samples.

107. Mrs McAlpine had tried hard to engage with Mrs Perhar, including considering her desire to expand the business. Nothing in those dealings created any “time-limited promissory estoppel”, as Mrs Perhar’s skeleton has it, by which Synergy was prevented from enforcement. Mrs Perhar did not seem to realise it, apparently being more occupied with potential future deals, but Synergy had given large opportunity for matters to be resolved; but that required her basic assistance, including providing information which Synergy was bound to want; and the funds to which it was entitled. Administrators appointed

108. Mrs Perhar’s surprise on receiving Howes Percival’s demand letter of Monday 5 June by email, sent at 9am but received at 11.01, was no doubt genuine. The administrators were appointed at 11.56. Her immediate WhatsApp to Mrs McAlpine stated that this “has killed any possibility of trading out. I am finished personally and professionally, but I expect after all of David’s previous threats that this was the intention… I have no assets”.

109. Mrs McAlpine confirmed that the decision to appoint was taken by her and Mr Slinger, as Synergy’s directors.

110. Howes Percival had also posted the demand, on the same morning. It referred to the agreement being secured by the Debenture; and to £259,909 and €132,675 being outstanding, a total of £376,291; and to Mrs Perhar’s admissions that she had used monies to pay “her own personal debts”. It cited clause 10.8 of the Debenture, the trust clause, and said there had been non-compliance such that it was now enforceable were the sums not paid forthwith. It also cited from the Facility Letter the obligation on the Company not to provide account details other than the Designated client account. That had not been complied with, and “as per the Debenture”, again payment was sought. This was a final demand, which unless paid “immediately on receipt” would lead to enforcement of the Debenture.

111. The claimed sums were subsequently supported by schedules dated 6 June. Mrs Perhar took issue with some items. The Downe House advance appears, and at one point she sought to say that was a personal debt of herself and her husband, not a company debt; but not with any certainty; and it would be surprising if Synergy were to make a loan without documentation outside the lending agreements and their security. There is also a £63,944 figure for Synergy’s profit share. That is necessarily speculative, but it does demonstrate the fact that the Aldi contract was actually profitable. The Company through Mrs Perhar withdrew its share and, as she accepted, more than its anticipated £110,000. Synergy was still having its upfront costs repaid in its receipts; and not even those. An irony is that had the Company not withdrawn what is estimated at €374,644 (before the €4,000 it took after appointment), and subject to the unknowns in the sterling account, Synergy would very nearly have been paid out; and probably would have been, if and when the German VAT of about €100,000 was successfully reclaimed.

112. That does not mean that the Company was solvent. What its balance sheet position is cannot be said; but, subject always to the secreted sterling account, it could never pay these amounts on demand, even without the profit figure. Too much of the Aldi monies had gone. Neither could the Perhars: they did not have the means. There is no evidence that they had anybody to step into the breach at such short notice. Any such persons had not thus far covered out their personal expenses; and at least one friend who had had had to call in the debt collectors.

113. The only indicator of solvency is slender, and not of assistance to Mrs Perhar. The administrators’ proposals had indicated a surplus; but that was founded (it is not known how) on a director’s loan account due of £458,887. Mrs Perhar could not then pay any of that. The latest progress report refers to ongoing liaison with Mrs Perhar, and a challenge to £142,792. As she brings this application in the guise of creditor, that may well not be right; and it will be recalled that she says she was entitled to £20,000 per month for her services, which is unpaid.

114. Whether solvent or not, the Company failed because of Mrs Perhar’s unauthorised use of the Aldi monies. The paragraph 16 challenge

115. By paragraph 16 an “administrator may not be appointed under paragraph 14 while a floating charge on which the appointment relies is not enforceable”.

116. As is stated by Lightman & Moss, 6 th ed, 6-069: “Essentially this means that there must be a default on the part of the company, or an event must have occurred which has given the charge-holder the right to make the appointment”. The lead authority is that of SAW (SW) 2010 Ltd v Wilson [2017] EWCA Civ 1001 , in which Arden LJ at [51] held that the “significant point for paragraph 16 purposes is that in this case Nationwide had not then taken any step to enforce the Debenture. There is no suggestion that its contractual right to take such steps had not arisen. In my judgment, that means that the charge was enforceable for paragraph 16 purposes”.

117. The other judgment was of Briggs LJ who, albeit in the context of an argument that there could be no enforceability without assets on which to enforce, said “…the requirement in paragraph 16… that the floating charge relied upon for the appointment of administrators ‘be enforceable’ is concerned with the question whether the charge has a right to enforce… A floating charge is in my judgment enforceable if any condition precedent to enforcement has been satisfied (such as an event of default) and there remains a debt for which the floating charge stands as security”.

118. Paragraph 16 is not therefore concerned with the steps to enforce.

119. Here, the Debenture was enforceable. As already identified, there were serious and ongoing breaches of the trust obligations contained in it and in the Facility Letter. The defective enforcement challenge

120. Mrs Perhar submits that Synergy’s enforcement of its contractual rights was causative of such substantial injustice that rule 12.64 Insolvency (England and Wales) Rules 2016 could not be curative.

121. The first aspect of this is service; and this she wraps into arguments about paragraph 16 enforceability: there was no due service, so the Debenture was unenforceable for paragraph 16 purposes. For the reasons above, I do not think those arguments can affect that paragraph. Re Care People Ltd [2013] EWHC 1734 (Ch) , [2013] BCC 466 indicates otherwise, in looking at the enforcement process, wider inter-party dealings, and the financial position of the company to find that the paragraph 16 breach did not result in invalidity; but it was decided before SAW . For the purposes of this application, whether under paragraph 16 or (as I would think) otherwise, nobody doubts that an appointment may be challenged on the basis of contractual failing. I add that no point is taken on Mrs Perhar’s status, either in relation to this limb of the argument, or paragraph 16.

122. There are two points on service.

123. First it is noted that under the Debenture a posted letter is deemed served only on the second business day after posting. So, it cannot have been the posted Howes Percival demand letter of 5 June which permitted appointment the same day. The only communication which can have done so is the email; but that was not a specified method of service under the Debenture.

124. With those points I agree; and reading the suite of documents together does not, contrary to the submissions of Synergy, result in service provisions, which are distinctly separate, and were separate in the Facility Letter depending on whether the communication were required or not, being used interchangeably.

125. However, for the reasons above, what was permitted was an appointment under the Debenture for breach of covenant based on default under the Facility Letter. Where both the Debenture and the Facility Letter were named in the 5 June demand, and where each contained trust clauses, and where, under either, demand was made for a particular sum, I consider that the emailed demand was operative under the Facility Letter as well, and would reasonably be understood to be so: Mannai Investment Company Limited v Eagle Star Life Assurance Co Ltd [1997] AC 749 .

126. Secondly, although sent at 0900, it came to Mrs Perhar’s attention only at 11.01; so, she says, especially as it came out of the blue, it gave her inadequate time to raise funds for the Company.

127. This being money payable on demand, whether under the Facility Letter or the Debenture, as a matter of law that is not right. Goff J in R.A. Cripps & Son v Wickenden [1973] 1 WLR 954 , 955A said: “the cases show that all the creditor has to do is to give the debtor time to get it from some convenient place”; and it will be recalled that here, on an event of default under the Facility Letter there was a self-reporting provision, and no demand was needed; and that the multiple demands already made had not been met. As above, there is no evidence the monies could be raised; and overwhelming evidence that they could not, including the fact that they have not yet been.

128. The second aspect is divided into a number of items: that there would be substantial injustice to the Company as it did not have the 2-day buffer, but that would have made no difference; that it lost its business including the Aldi line, but that was a consequence of its non-compliance with its Synergy contract; that there was inflation of the debt claimed, but again not materially and anyway the calculation would be susceptible to additional claims as to the Revolut sterling account once that was disclosed; that Mrs Perhar was cooperating in collection of German VAT, which is true but does not go anywhere as she would be bound to do that in the course of her duties as director of the Company; that the plan for administration was one of which “Mrs McAlpine was clearly unaware”, but that is not right; and that there was a “written remedial plan”, which is not right either.

129. It follows that even were there some defect in the demand process, no substantial injustice was caused to the Company: it could never pay anyway; any failure in timing or content of the demand could have been put right such that a due appointment was made on 7 June anyway; it has unpaid creditors and insufficient assets; it has on Mrs Perhar’s own account no business left; an insolvency procedure is inevitable; and on the limited information available, at the very least a paragraph 3(1)(c) purpose would be reasonably likely to be achieved.

130. For the same reasons, were the analysis whether a notional breach of paragraph 16 should result in invalidity of appointment, the answer would be negative. The paragraph 81 challenge

131. By paragraph 81 “(1) On the application of a creditor of a company the court may provide for the appointment of an administrator of the company to cease to have effect at a specified time. (2) An application under this paragraph must allege an improper motive… (b) …on the part of the person who appointed the administrator. (3) On an application under this paragraph the court may- (a) adjourn the hearing conditionally or unconditionally; (b) dismiss the application; (c) make an interim order; (d) make any order it thinks appropriate (whether in addition to, in consequence of or instead of the order applied for)”.

132. The potential relief at (3) is therefore in the same wide and general terms as apply to a paragraph 79 application: paragraph 79(4).

133. It may be thought that if on the paragraph 81 application the court is to grant an order that the appointment cease to be effective, that would require proof of a particular motive, as opposed to purpose; which need not be the sole or even main motive; of sufficient impediment to the insolvency process or its perception that in the balancing of all relevant interests of affected parties the otherwise valid administration should be set aside.

134. That is not quite the law as it stands. Those were largely the arguments rejected by HHJ Stephen Davies, sitting as a High Court Judge in Re Aartee Bright Bar Ltd [2023] EWHC 606 (Ch) ; [2023] BCC 704 .

135. At [9] he set out the two stage process on such an application: “The first is the issue as to whether or not the appointor appointed the administrator with an improper motive. The second comprises all other circumstances relevant to the exercise of the discretion…”.

136. At [28] he followed HHJ Halliwell sitting as a High Court Judge in Koon v Bowes [2019] EWCH 3455 (Ch) “to conclude… that there is no threshold pre-condition to making a paragraph 81 order to the effect that the applicant must satisfy the court at the substantive hearing on the balance of probabilities that he has established his allegation that the appointor was motivated by an improper motive when he appointed the administrator. It is sufficient to found the jurisdiction that the allegation is made, and that it is made honestly and on reasonable grounds”.

137. That is actually a strengthening of what HHJ Halliwell said in Koon at [54], where he considered that even if an allegation were not advanced honestly or on reasonable grounds, that was not necessarily a bar to relief; but the court would be “unlikely” to grant relief under paragraph 81(1).

138. The judge went on at [29] to note that a trial judge “in most if not all cases… can and should go on to make a positive finding one way or another on the issue of improper motive… That is because whether the matter is made out is clearly a matter of great weight to be placed in the balance at the discretion stage”.

139. So, the degree of proof would be a factor material to relief; and as improper motive is a gateway, it must be proved to some extent if substantive relief, being relief which affects the administration rather than just the application itself (for example, an adjournment under paragraph 81(3)(a)), is to be gained. Whether that should be no more than the honest and reasonable test appears to depend on the nature of the final hearing, but may also reflect such matters specific to the particular application as the difficulty of the applicant in proving motive, especially were there to be non-engagement by the appointor.

140. The concepts of honesty and reasonableness are therefore used by HHJ Stephen Davies as fundamentals to open the gateway to relief; and they may in an appropriate case be sufficient. Honesty appears to relate to the applicant creditor’s state of mind; what is reasonable appears to be objective: so, the applicant’s must be a case which is reasonably arguable on the facts, and the facts themselves must be objectively capable of supporting such argument: grounds of substance.

141. Later in [29] the judge stated this. “If the judge concluded that the allegation was simply not made out at the hearing then that would, I am prepared to accept, in most if not all cases militate very strongly against the making of an order”.

142. It may be that that should be understood as a failure at a contested trial to prove the point on a balance of probabilities (the “positive finding one way or another”), but nevertheless a passing of the earlier honest and reasonable test. Plainly, and as already expressed by the judge, there must be some threshold reached to allow the gate to be opened: paragraph 81 is posited on improper motive.

143. At [30] the judge explicitly rejected leading counsel’s submission that “it is requisite upon the applicant to set out in precise detail what he alleges the improper motive was and then to support it by positive evidence… or that a failure to do so meant that the application simply could not proceed further”. On the earlier analysis, this too, must, though, be a factor going to relief.

144. As to improper motive he held this at [36]: “what is required is conduct which amounts to an improper use or abuse of the administration procedure for some purpose”, motive must be meant, “which is inconsistent with, or not in harmony with, the statutory purpose of administration”.

145. At [43] the judge rejected a submission that the discretion would never be exercised where a statutory purpose of administration might be achieved. With respect, that must be right, as the paragraph is posited on the validity of the existing appointment.

146. I must follow Aartee .

147. Here, Mrs Perhar has expressed the improper motive in a variety of ways. In closing it came to this: that Mr Slinger was upset and angry having been called out over his behaviour, and therefore placed the Company in administration to damage her reputation and destroy her business; and that motive was evidenced by the possibility of there being no return in the administration, yet the potentiality of funds coming into the Company through further Aldi collections, the German VAT recovery, and expansion; and Mrs McAlpine’s continuing to deal with her and give her time.

148. On the balance of probabilities, those submissions do not demonstrate improper motive. Alternatively, while their honesty cannot be doubted, they are not made on reasonable grounds.

149. The overarching factual problem for Mrs Perhar is that the relevant motive is that of the person who made the appointment; that is Synergy; and its decision was that of both Mr Slinger and Mrs McAlpine. The overwhelming evidence is that it was made to protect Synergy’s financial position, so far as was possible, in the face of repeated and ongoing defalcations by the Company. That the Company might have future business, which would have to be funded by Synergy, was taken into account; as were the potential recoveries of German VAT and from Aldi. As to the trigger, the behaviour at the 18 April meeting and before, there is nothing to suggest that Mr Slinger was aware of any upset, or that it would motivate his seeking a decision for administration during his discussions with his co-director when there were solid commercial reasons behind it with which his co-director agreed.

150. Even were that wrong, and there was an improper motive, for the same reasons that there has been no substantial injustice, the administration must remain on foot. The alternative, of handing the Company back to Mrs Perhar, when it has not traded for more than two years, has significant outstanding liabilities and no up-to-date accounts, would be unthinkable: at the latest, after two days it would enter administration again, if another insolvency process had not been initiated. Other matters

151. Mrs Perhar rightly did not pursue her application insofar as it sought restoration of the Company, which is unnecessary, and damages, which is beyond its scope.

152. While making no criticism, it is in hindsight regrettable that the administrators did not themselves make the application they intimated in July 2023 for a declaration as to the validity of the administration, or for a backdated appointment. It would have saved much court time, and avoided the considerable delays to this administration. Conclusion

153. Mrs Perhar’s application is dismissed.