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Application to Set Aside a Statutory Demand

Daniel Maurice Wagner -v- Benjamin Vincent St John White [2016] WL 10574979

Tech entrepreneur Ben White has successfully defeated Dan Wagner's application to set aside a Statutory Demand in relation to Mr White's £2m investment in Powa Technologies PLC ("Powa"). Ashfords advised Ben White, with Joe Curl acting as counsel.

The Facts

Powa was a British 'fintech' company founded by Dan Wagner, a well-known technology entrepreneur. In recent years, the  company developed an 'app' known as "PowaTag", the aim of which was to allow consumers to purchase goods remotely through compatible advertisements.

Powa generated a great deal of hype around the 'PowaTag' product. It attracted significant media attention, with David Cameron hailing it as a bastion of British entrepreneurial spirit.

By November 2015, however, Powa had developed serious financial problems. It had exhausted $200 million from its primary US funders, Wellington Plc, and was in desperate need of short term financing to keep running. Mr Wagner therefore approached Mr White with the proposition of investing in Powa. As a successful technology entrepreneur himself, Mr White had considerable expertise in the field and was excited by the product. After an initial meeting in November 2015, Mr White agreed to invest in Powa, and agreed to assist Mr Wagner in his urgent search for finance.

Mr White invested $2m in Powa in December 2015. Mr White also introduced Stuart Roden, who lent a further $2 million to Powa. Both loans were secured by Personal Guarantees from Mr Wagner. Mr White subsequently loaned Powa a further $1 million, and also introduced another investor who lent a further $1 million. In total, Mr White had obtained a total of $6 million in funding for Powa, $3 million of which he had personally loaned.

Mr White was appointed as a director of the company in January 2016. Soon after, relations between Mr White and Mr Wagner deteriorated as it became clear that Powa was insolvent. Powa was placed into Administration in February 2016. After trading Powa in Administration, the Administrators sold some of Powa's assets to a new company set up by Mr White at the end of February 2016.

Owing to Powa's Administration, Mr White's loan to Powa became immediately repayable under the terms of the Guarantee and Mr White served a Statutory Demand on Mr Wagner in May 2016. Mr Roden similarly served a Statutory Demand in September 2016.

Mr Wagner made an application to set aside both Statutory Demands. Ashfords acted for Mr White in serving the Demand and responding to the application to set aside.

The Judgment

Mr Wagner sought to argue that the Statutory Demand should be set aside because the debt was disputed on substantial grounds that could not be determined at a summary hearing. He also claimed that he had a counterclaim against Mr White which exceeded the debt.

The basis of Mr Wagner's claim was threefold:

  1. Firstly, Mr Wagner claimed he was induced to enter into the Personal Guarantee because of misrepresentations made by Mr White. Mr Wagner claimed that Mr White had 'guaranteed' or 'promised' he or his contacts would invest a minimum of $10 million in Powa, and that he had only agreed to the Personal Guarantee on that basis. Furthermore, he asserted that the 'assurances' made by Mr White amounted to a collateral contract which Mr White had breached and, as a result, Mr White was precluded from enforcing the Personal Guarantee.
  2. Secondly, Mr Wagner claimed that Mr White had 'conspired' with Wellington and others to bring about Powa's demise, so that he could benefit personally by subsequently purchasing Powa's assets out of Administration. Mr Wagner accused Mr White of 'dissuading potential investors' away from Powa and towards an investment deal which he was establishing.
  3. Finally, Mr Wagner claimed that in 'conspiring' to bring about Powa's demise, Mr White breached his fiduciary duties as a director of Powa.

All grounds of dispute were rejected.

As regards misrepresentation, the judge commented that the argument did not "carry any degree of conviction" and was "fanciful". He further stated that it was "at best merely arguable but not realistic and there are no reasonable grounds for believing a fuller investigation would affect the outcome". The judge further commented that the estoppel and collateral contract arguments were also "not realistic" and were "fanciful".

The argument that Mr White had 'conspired' at Powa's default, and to bring about Powa's demise, was likewise dismissed as "fanciful". The judge held that Mr White was not "subject to any duty owed to PLC to refrain from exploring" the possibility of potential recovery options.

As regards his fiduciary duties as a director, the judge held that in fact, due to Powa's parlous and insolvent financial state, the fiduciary duty Mr White owed to Powa was "to act in the interests of PLC [and] look to the interests of its creditors". He held that, as Mr White had acted in the interests of Powa's creditors, he was not in breach of his fiduciary duty to Powa.

In all, the Judge asserted he was "not persuaded that there is a triable issue that Mr White caused the default" and that there was no prospect of Mr Wagner succeeding any of his claims. Mr White was given permission to serve a bankruptcy petition.

Ashfords' Comment

This was a high profile success for Ashfords' insolvency team. Mr Wagner had invested considerable resources in this case, instructing a highly respected barrister in Richard Millett QC to represent him.

Despite this, Mr Wagner failed to persuade the judge to set aside the Demand. The case acts as further authority for the legitimacy of Statutory Demands founded on Personal Guarantees. In short, debtors must show that a claim is more than simply 'arguable' or 'fanciful' to persuade a judge that a Demand should be set aside.