Key Points

  • A binding contract by exchange of email did not arise where parties were simply exploring a potential deal.

  • Sale by auction is often appropriate where an asset is difficult to value.

  • Where no differential treatment of creditors, unfair harm requires that a decision does not withstand logical analysis.

The Facts

Meem SL Limited (the “Company“) which was formed to develop and sell a new type of phone charger was placed into administration and the business and assets sold to an entity incorporated by a former director and shareholder (D).

The inventor of the phone charger (who was also a creditor and shareholder) ( C ) alleged that D and the other directors had conspired to put the Company into administration and sell the Company’s assets at an undervalue. Such claim was an asset of the Company.

The administrators sought to auction the claim. C applied to prevent the auction on the basis that: (i) following emails between the administrators and C’s solicitors, the administrators had formed a binding agreement to assign the claim to C; and (ii) that any auction would cause unfair harm to C’s interests.

The Decision

The court held that there was no offer made by the administrator which was capable of acceptance. The email exchanges simply represented the parties exploring terms on which they might be prepared to do a deal and it was clear that the administrator intended to instruct solicitors to prepare documentation and their exchange was impliedly subject to contract.

The court further held that any auction would not cause unfair harm to C who was not being treated differently to any other creditor and the transaction was not one which “does not withstand logical analysis”.

Comment

While it is clear that it would be possible for an administrator to create a binding contract by exchange of emails, this case is helpful reassurance that preliminary email exchanges between an administrator and interested party cannot easily be construed as such. Nevertheless, noting correspondence as subject to contract would remove uncertainty in this regard.

Goel & another v Grant & another [2017] EWHC 2688 (Ch)