SKS Justa & Co Ltd & Anor v Justa Limited

1. This is an application by SKS Justa & Co Ltd (the “First Applicant”) and SKS Business Services Ltd (the “Second Applicant”) issued on 6 November 2024 to restrain presentation of a winding up petition against them by Justa Limited (“Justa”).

2. The basis of the application is that the debt of £393,202.71 claimed by Justa in statutory demands dated 16 October 2024 which were served on each of the Applicants is bona fide disputed on substantial grounds. The Applicants say that: (a) the alleged debt is not due as a matter of contractual procedure or calculation; (b) Justa has impermissibly withheld sums due to the Applicants of some £200,000; and (c) Justa’s directors, who are also directors of the First Applicant, have acted in breach of their directors’ duties.

3. The statutory demands themselves are said to arise out of an Asset Purchase Agreement dated 31 March 2023 entered into between (inter alia) Justa, the First Applicant and the Second Applicant (the “APA”).

4. In support of the application, the Applicants rely on the witness statement of Deanne Hamilton dated 6 November 2024, the first witness statement of Sanjay Swarup dated 11 November 2024, the witness statement of Simon Gretton Watson dated 11 November 2024 and the second witness statement of Sanjay Swarup dated 17 January 2024. In opposition, Justa relies upon three witness statements of Mandeep Singh Sahota, dated 11 November 2024, 17 December 2024 and 7 March 2025. At the start of the hearing before me, I gave permission for Justa to rely upon Mr Sahota’s statement dated 7 March 2025 in a separate ex tempore oral judgment.

5. I am grateful to counsel who appeared before me, Mr Fagan for the Applicants and Mr Tabari for the Respondent, for their helpful written and oral submissions. When will the court restrain presentation

6. There was no disagreement between the parties as to the applicable principles on restraining petitions. It is well-settled that the court will restrain a petitioner from presenting a winding up petition where the debt on which the petition is based is disputed on genuine and substantial grounds. In Angel Group Ltd v British GasTrading Ltd [2012] EWHC 2702 (Ch), Norris J gave this wellknown summary at [22]: “The principles to be applied in the exercise of this jurisdiction are familiar and may be summarised as follows:- a) A creditor’s petition can only be presented by a creditor, and until a prospective petitioner is established as a creditor he is not entitled to present the petition and has no standing in the Companies Court: Mann v Goldstein [1968] 1WLR 1091. b) The company may challenge the petitioner’s standing as a creditor by advancing in good faith a substantial dispute as to the entirety of the petition debt (or at least so much as will bring the indisputable part below £750). c) A dispute will not be “substantial” if it has really no rational prospect of success: in Re A Company No.0012209 [1992] 1WLR 351 at 354B. d) A dispute will not be put forward in good faith if the company is merely seeking to take for itself credit which it is not allowed under the contract: ibid. at 354F. e) There is thus no rule of practice that the petition will be struck out merely because the company alleges that the debt is disputed. The true rule is that it is not the practice of the Companies Court to allow a winding up petition to be used for the purpose of deciding a substantial dispute raised on bona fide grounds, because the effect of presenting a winding up petition and advertising that petition is to put upon the company a pressure to pay (rather than to litigate) which is quite different in nature from the effect of an ordinary action: in Re A Company No.006685 [1997] BCC 830 at 832F. But the court will not allow this rule of practice itself to work injustice and will be alert to the risk that an unwilling debtor is raising a cloud of objections on affidavit in order to claim that a dispute exists which cannot be determined without cross-examination (ibid. at 841C). The court will therefore be prepared to consider the evidence in detail even if, in performing that task, the court may be engaged in much the same exercise as would be required of a court facing an application for summary judgment: (ibid at 837B).”

7. I have also been referred to the summary of principles in the decision of Deputy ICCJ Kyriakides in Sandstone Legal Limited v. Curzon Claims Limited t/a Clockwork Claims [2025] EWHC 363 (Ch) at [16]. At [16.8], the Deputy Judge noted the well-known principle that “the court will also restrain a company from presenting a winding up petition in circumstances where there is [a] genuine and substantial cross-claim that exceeds any part of the petitioner’s claim which is undisputed.”

8. In considering any witness statement evidence before the court, it has been held that it would be open to the court to reject that evidence if it was inherently implausible or if it was contradicted, or was not supported, by contemporaneous documentation: Collier v P & MJ Wight (Holdings) Limited [2007] EWCA 1329 at [21]. Background

9. Justa was incorporated on 21 January 1997 and operated as an accountancy practice. Its directors are Mr Mandeep Singh Sahota and Mrs Harminder Kaur Sahota who are husband and wife and are accountants. Mr Sahota describes Justa as continuing a family business which was originally established by his father in 1980.

10. Mr Sanjay Swarup is also an accountant. He incorporated the Second Applicant on 6 November 2007, and it began trading as an accountancy firm in 2009. The Second Applicant is a holding company for 15 other companies that have merged and become part of “the SKS Group”, which provides accounting and business services. Mr Swarup explains that the SKS Group has a turnover of £20 million per annum with over 16,000 listed and private clients.

11. The First Applicant is a special purpose vehicle incorporated as a company on 19 December 2022. It is a wholly-owned subsidiary of SKS West Midlands Ltd, which in turn is a wholly-owned subsidiary of the Second Applicant. The Second Applicant is a wholly-owned subsidiary of SKS Midco Limited, which in turn is a wholly-owned subsidiary of SKS Holdings Limited (“Holdings”). Mr Swarup explains that he owns more than 50% of the shares in SKS Holdings Limited, with the remaining shares owned by an investor, Kartesia Management SaRL (“Kartesia”). Mr Swarup describes himself in his second witness statement as the ultimate beneficial owner of the Applicants.

12. Mr Swarup is the sole director of SKS West Midlands Limited and a director of the First Applicant (resigned on 29 April 2025), the Second Applicant, SKS Midco Limited and Holdings.

13. Mr Swarup says in his first statement that: “13. Whilst I am the sole director of the Second Applicant, it is ran [sic] as part of the Group with the day to day running of the Group being managed by an executive management team consisting of Philippe Mauguy, Ritu Bugli, Simon Gretton-Watson, Faraz Yunus and Harvey Downe (the “Executive Management Team”).

14. All decisions relating to the Group require the authorisation from the Executive Management Team and big decisions, such as payment of deferred consideration, require SKS Holdings’ board approval. In order for a decision to be passed it has to be agreed by a majority.”

14. By “Group” in this context, Mr Swarup appears to be referring to the group of companies of which the Second Applicant is the ultimate parent: see para 11 of Mr Swarup’s first witness statement, and para 9(a) of Mr Fagan’s skeleton argument.

15. In 2022, the Second Applicant entered into discussions with Justa for Justa to become part of the Second Applicant’s group of companies. It was subsequently agreed that the Second Applicant would, via a newly incorporated special purpose vehicle, purchase the business of Justa, which was the provision of tax, accounting and related services and assets.

16. As I have mentioned, the First Applicant was incorporated on 19 December 2022. On 31 March 2023, Justa (as seller), the First Applicant (as buyer), the Second Applicant (as guarantor for the First Applicant) and Mr and Mrs Sahota (as guarantors for Justa) entered into the APA. The APA is a lengthy and detailed document, professionally-prepared by an experienced firm of solicitors.

17. In broad outline: a) By clause 2.1 of the APA, Justa agreed to sell to the First Applicant the Assets (being the property, rights and assets that comprised Justa’s business), and the First Applicant agreed to buy the Assets with a view to carrying on the business as a going concern; b) The APA provided for a headline sale consideration of £1,187,906.29 (clause 3.1); c) Payment of the sale consideration was to be made by an up-front payment of £593,953.15 (the “Initial Consideration”) followed by deferred consideration across just over 2 years (clauses 3.1.2 to 3.1.3) (the “Year 1 Consideration” and the “Year 2 Consideration”); d) The amount of the deferred payment was subject to adjustment and agreement or determination in accordance with the APA (clause 3.2). This is at the heart of the present application and is discussed in further detail below; e) The Second Applicant agreed to guarantee the First Applicant’s obligations under the Agreement and keep Justa indemnified against all losses incurred in connection with (inter alia) the exercise and enforcement of any rights under or in connection with the guarantee (clauses 7.1 to 7.5); f) As one would expect, the APA includes extensive warranties and indemnities from Justa (as seller) and Mr and Mrs Sahota (as the seller’s guarantors) to the First Applicant (as buyer) (clause 5 and Schedule 6);

18. Mr and Mrs Sahota were appointed and remain registered directors of the First Applicant since 3 April 2023. Mr Tabari explained in his skeleton argument that: “As is entirely usual in such circumstances, the post-Transaction practice required the previous owners to remain in the business during a transition period: to help the new business with any post-Transaction queries, to assist pre-Transaction clients with the transition, and to be incentivised to help the new practice succeed so that the deferred consideration would be as high as possible. That is why Mr and Mrs Sahota were appointed directors of [the First Applicant].” I did not understand the Applicants to disagree with this.

19. It is necessary to set out some of the specific terms of the APA.

20. Clause 1 (Interpretation) includes the following defined terms: “Relevant Turnover in relation to a Turnover Period, the invoiced turnover of the Business (as shown in the Turnover Statement) arising from whatever source including a sum equal to any turnover generated from clients who were during a Turnover Period a client of the Business but transferred to and are serviced by (and therefore invoiced by) another member of the Buyer Group but excluding the Excluded Turnover (save that, without double counting, 50% of any Excluded Turnover falling into limb (c) of the definition of Excluded Turnover shall be included to the extent such Excluded Turnover exceeds £25,000 (twenty five thousand pounds) in the relevant Turnover Period) and excluding all work in progress as at the end of the relevant -turnover Period. Such turnover shall be adjusted downwards to exclude any turnover which has been billed but remains unpaid for 90 days or more Turnover Statement shall have the meaning given in paragraph 4.3 of Schedule

5. Turnover Target the sum of £1,032,962, being the aggregate of the annual fees in respect of the financial year of the Seller ending 31 March 2022 as set out against the respective code for each Client in Schedule

8. Year 1 the period of 12 months beginning on the day immediately following the Completion Date and ending on the first anniversary of the Completion Date. Year 1 Consideration shall have the meaning given in clause 3.1.2”

21. Clause 3 (Purchase Price) includes the following terms: “3.1 Subject to adjustment in accordance with the provisions of this agreement, the purchase price for the Business and the Assets to be paid by the Buyer to the Seller pursuant to this agreement shall be the aggregate of the following amounts (the "Purchase Price") which shall be satisfied in cash as follows. 3.1.1 £593,953.15 (being an amount equal to the Turnover Target x 1.15 x 50%) payable on Completion ("Initial Consideration"); 3.1 2 £296,976,57 (being an amount equal to the Turnover Target x 1.15 x 25%) payable within 15 Business Days of the agreement or determination of the Turnover Statement in respect of Year 1 ("Year 1 Consideration"); and 3.1.3 £296,976.57 (being an amount equal to the Turnover Target x 1.15 x 25%) payable within 15 Business Days of the agreement or determination of the Turnover Statement in respect of Year 2 ("Year 2 Consideration"). 3.2 The Year 1 Consideration and Year 2 Consideration shall be subject to the respective adjustments in accordance with paragraphs 1 and 2 of Schedule 5 and clause 12.5. 3.3 The Purchase Price shall be deemed to be reduced by the amount of any payment made to the Buyer for a breach of this agreement. 3.11 If the Buyer fails to make any payment due to the Seller under this agreement by the due date for payment then, without limiting any other remedy available to the Seller, the Buyer shall pay interest on the overdue sum from the due date until payment of the overdue sum, whether before or after judgment. Interest under this clause will accrue each date at 4% a year above the Bank of England's base rate from time to time but at 4% a year for any period where the base rate is below 0%.”

22. Schedule 5 (Adjustment to Purchase Price) includes the following terms: a) Paragraph 1 provides a mechanism for increasing or decreasing Year 1 Consideration if Relevant Turnover (being the invoiced turnover in the turnover period 1 April to 31 March) exceeds or is less than the Turnover Target of £1,032,962; b) Paragraph 2 provides for various further adjustments to Year 1 Consideration including if there was a shortfall in respect of payment of Book Debts and recovery of less than 65% of Work in Progress; c) Paragraph 4 sets out the process by which a Turnover Statement was to be agreed. It provides as follows: “Turnover Statement and agreement of Adjustments pursuant to paragraphs 1 and 2 of this Schedule 5 4 In relation to each Turnover Period, the Buyer and the Buyer Guarantor shall procure that a Turnover Statement for that Turnover Period is prepared as soon as practicable and in any event within 20 Business Days of the last day of the relevant Turnover Period. The Turnover Statement shall be prepared in accordance with the existing accounting policies of the Business and shall set out: 4.1 the calculation of Relevant Turnover; and 4.2 the calculation of any adjustments pursuant to paragraph 2 of this Schedule

5. 4.3 Within the 20 Business Day period referred to in paragraph 2.1 of this Schedule 5, the Buyer and the Buyer Guarantor shall deliver to the Seller Representative a statement prepared by the Buyer and the Buyer Guarantor (“Turnover Statement”) setting out the calculations of the type referred to in paragraphs 1 and 2 of this Schedule

5. 4.4 The Seller Representative shall, within 20 Business Days from receipt of the Turnover Statement for a Turnover Period (“Review Period”), deliver to the Buyer a written notice stating whether or not the Seller Representative agrees with the Turnover Statement and the calculations set out therein ("Relevant Calculations"). in the case of disagreement, the notice ("Objection Notice") shall specify the areas disputed by the Seller Representative and describe, in reasonable detail, the basis for the dispute. 4.5 If the Seller Representative fails to deliver an Objection Notice in accordance with paragraph 4.3 of this Schedule 5 within the Review Period the Seller Representative shall, with effect from the expiry of the Review Period. be deemed to agree with the Turnover Statement in the form delivered by the Buyer and the Buyer Guarantor and the amount of the Relevant Calculations specified in it. 4.6 During each Review Period, the Seller Representative (and his agents and advisers) shall have the right to inspect the books and records of the Buyer during normal business hours, and upon reasonable prior notice, for the purpose of reviewing the Turnover Statement and the calculation of the Relevant Calculations set out in it. 4.7 It the Seller Representative serves an Objection Notice in accordance with paragraph 2.3 of this Schedule 5, the parties shall negotiate in good faith to resolve the disputed matters and agree the amount of the Relevant Calculations for the relevant Turnover Period as soon as reasonably possible. If the parties are unable to reach agreement within 20 Business Days following the service of an Objection Notice, then at any time following the expiry of such period either party may, by written notice to the other ("Resolution Notice"), require the disputed matters to be referred to an Expert for determination in accordance with paragraph 5 of this Schedule 5 ("Expert"). 4.8 Each party shall bear its own costs incurred in connection with the preparation, review and agreement of each Turnover Statement and the calculation of the amount of each Relevant Calculations.”

23. It is accepted that the Initial Consideration of £593,953.15 was paid by the First Applicant to Justa on completion, being on 31 March 2023. It is also accepted that “Year 1” (which was a “Turnover Period”) ran from 1 April 2023 to 31 March 2024. Pursuant to paragraph 4 of Schedule 5 of the APA, it was incumbent upon the Applicants to “procure” that a Turnover Statement for Year 1 was prepared “as soon as practicable and in any event within 20 Business Days of the last day of the relevant Turnover Period”, that being on Sunday 31 March 2024. Counting 20 Business Days from 31 March 2024, allowing for Easter Monday on 1 April 2024 which was a bank holiday, then this meant that the last day by which the Applicants needed to procure a Turnover Statement for Year 1 was Monday 29 April 2024.

24. Paragraph 4.3 of Schedule 5 of the APA is curious in that it refers to “the 20 Business Day period referred to in paragraph 2.1 of this Schedule 5”, yet paragraph 2.1 makes no reference to a 20 Business Day period. It would appear that the reference in paragraph 4.3 to paragraph 2.1 is a typographical error and should have been a reference to paragraph

4. The effect of this is that, it seems, within the same 20 Business Day period referred to above, ending on Monday 29 April 2024, the Applicants were required to both “procure” (paragraph 4) and deliver to the Seller Representative (paragraph 4.3) (defined as Mr Sahota) a Turnover Statement setting out the calculations of the type referred to in paragraphs 1 and 2 of Schedule

5.

25. By paragraph 4.4, Mr Sahota then had a further 20 Business Days from receipt of the Turnover Statement to deliver to the First Applicant a written notice stating whether or not he agreed with the Turnover statement and the calculations set out in it. By paragraph 4.5, if Mr Sahota failed to deliver an Objection Notice within that further 20 Business Day period, then he would be deemed to agree the Turnover Statement in the form and sum as delivered by the Applicants.

26. At paragraph 28 of Mr Swarup’s first statement, he states: “As set out at paragraph 4 of Schedule 5, it was the Applicants’ obligation to initially prepare the Turnover Statement for agreement. The initial draft of the Turnover Statement was prepared by Nasir Khatri, head of the Second Applicant’s Indian Finance Team in May 2024 (page 121). On 16 May 2024 I am advised that a call was had between Mr Sahota, Mrs Sahota, Nasir Khatri and Ritika Patidar (an analyst in Nasir’s team) where the figures on the draft Turnover Statement was discussed. On 17 May 2024 after receiving an updated document Mr Sahota confirmed by way of an email to Ritika Patidar (with myself and Nasir Khatri copied in) that he agreed to the figures (pages 122 to 124).

27. The document at page 121 to which Mr Swarup refers in this passage is a document headed “Justa – 1st year consideration”. It comprises a table with columns labelled “particulars”, “£” and “Comments” and then a calculation showing turnover, increase/decrease in deferred consideration and net consideration payable. The calculations are cross-referred to specific passages from the APA (namely the definition of Relevant Turnover, the definition of Turnover Target, clause 3.1.2 and paragraph 1 of Schedule 5) the text of which appears alongside the main table I have referred to. I will refer to this document neutrally as “the Statement”. From its face, it seems clear that this document represents an attempt to calculate the Turnover Statement. Mr Swarup acknowledges as much in the passage from his witness statement cited above, although he maintains that this is merely an “initial draft” of the Turnover Statement.

28. The Statement does not have a date on it, but Mr Swarup’s evidence from the passage cited above is that it was sent in May 2024 before the telephone call which took place on 16 May 2024. Mr Swarup also exhibited to his first statement an email chain between the parties running from 9 to 17 May 2024: i) On Thursday 9 May 2024 (timed at 10.29), Mrs Sahota sent an email from her Justa email address to Ritika Patidar (of the Second Applicant), saying “Hi Ritikar, Please find attached sheet with our answers and queries. Mandeep [Mr Sahota] is requesting a call with your self so we can explain our queries. Is 11.30 today ok?”. There is no evidence before the court as to what the “answers and queries” referred to are. No attachments to this email have been specifically identified in the evidence. Mr Sahota is copied in to this email; ii) At 11.04, Ms Patidar responded saying “Hi Harminder, If not an issue then can we keep this call on Tuesday when Nasir is back from leave”; iii) At 15.55, Ms Sahota responded saying “Please book in for next Tues 14th 10am”. Ms Sahota added Nasir Khatri (of the Second Applicant) as a recipient into this email; iv) On Tuesday 14 May 2025 (timed at 10.35), Ms Patidar responded to Mrs Sahota (copying Mr Sahota and Mr Khatri) saying “I have updated working and the amount after discussing with Nasir. We are in the call but you have not joined. Let me know if you have any questions”; v) On Friday 17 May 2025 (timed at 08.51), Ms Patidar emailed Mrs Sahota, copied to Mr Sahota, Mr Khatri and now adding Mr Swarup to the email, saying: “As per discussion on call yesterday we have updated the workings and attached herewith.” I observe that this email corroborates with Mr Sahota’s evidence that “On 16 May 2024 I am advised that a call was had between Mr Sahota, Mrs Sahota, Nasir Khatri and Ritika Patidar … where the figures on the draft Turnover Statement was discussed”; vi) At 09.30 that same day, Mr Sahota replied to Ms Patidar (copying Mr Sahota, Mr Khatri and Mrs Sahota) to say “The figures are agreed from our end now. Can we please have the payment transferred.”

29. It appears from this and from Mr Swarup’s evidence above that the Statement was attached (on any view, at the very latest) to Ms Patidar’s email dated 17 May 2024. I note that the final total for “net consideration payable” given on the Statement is £378,818, which is the same figure given on the statutory demands (without interest). Mr Swarup in his second statement acknowledges that the Statement was prepared by the Applicants but he maintains that it was simply a draft.

30. At the hearing before me, Mr Tabari handed up an A3 paper version of this document which included a substantial set of figures behind it. Mr Tabari explained (on instructions and by way of submission) that this was a complete version of the document which was attached to the email dated 14 May 2024. This was not disputed by the Applicants and therefore I allowed the document to be admitted into evidence, although I am careful to note that it does not have a date on it and there is no witness evidence specifically tying this document to any one of the emails in the chain mentioned above.

31. Mr Sahota says in his evidence that one week after the email dated 17 May 2024, he was assured by Mr Swarup that payment of the sum set out in the Statement would be made by the end of the month. Mr Swarup does not accept that such a conversation took place. I do not for the purposes of this hearing determine that particular factual issue, but for the reasons set out below it does not appear to me to be necessary to do so. Mr Sahota says that he continued to chase the Applicants for payment after 31 May 2024.

32. On 1 July 2025, Mr Sahota exchanged Microsoft Teams messages with Mr Swarup. At 11.57, Mr Sahota said: “Hi Sanjay Will the money with interest be transferred today, please. Regards Mandeep”

33. In response, at 12.37, Mr Swarup responded: “Mandeep. I thought we agreed first or second week of July…will confirm by tomorrow the exact date. Thanks.”

34. This does appear, on its face at least, to be an acknowledgment by Mr Swarup that an agreement had been reached in respect of payment of a sum from the Applicants to the Respondent. There was no suggestion before me that any other sum of money was owing at that time from the Applicants (indeed this is what Mr Sahota says at paragraph 5(i) of his third statement and this point was not challenged by the Applicants).

35. On 2 July 2024 (at 15.57), Mr Swarup sent a Whatsapp message to Mr Sahota saying: “Re your payment, will be done by end of next week” (Mr Sahota’s witness statement says this was sent on 24 July, but I note that the copy of the message exhibited to his third statement indicates it was sent on 2 July 2024.)

36. On 9 July 2024, Mr Khatri forwarded Ms Patidar’s email dated 17 May 2024, together it appears with the Statement and Mr Sahota’s email in response agreeing to the figures on the Statement, to the Second Applicant’s Chief Financial Officer, Mr Craig Grant.

37. On 26 July 2024, the Respondent’s then solicitors (Kemsley & Company Solicitors LLP) wrote to the Applicants to demand payment of the sum of £378,818 plus interest pursuant to the Statement. This clearly indicates that the Respondent believed the Turnover Statement had been agreed following the parties’ email and telephone exchanges in May 2024. The letter is marked “without prejudice and subject to contract”, however the letter is exhibited to Mr Sahota’s first statement and its inclusion in the hearing bundle was neither raised nor challenged by the Applicants. The letter goes on to make a proposal to settle the sum said to be due under the Turnover Statement.

38. On 30 July 2024, Mr Sahota sent a Microsoft Teams message to Mr Grant, saying: “Hi Craig I trust you will have received the email/letter from Caroline of KemsleyPein. I need the first payment to be made by the end of this month as we discussed a few days ago. Can you please respond to her to confirm and have the funds transferred. Regards”

39. Mr Grant responded the same day saying that he had received the letter, which the Applicants were reviewing with their lawyers. He then asked whether Mr Sahota would like to have a without prejudice discussion on this or a formal response via lawyers. Mr Sahota responded “Without prejudice is fine, then the lawyers can do what they need to after.”

40. Mr Grant ceased working for the Second Applicant in October 2024. Mr Swarup says that in preparation for that departure, the Second Applicant’s Chief Commercial Officer, Simon Gretton Watson, took over discussions with the Respondent in around September 2024. Mr Gretton explains in his witness statement that on 30 September 2024, Mr Sahota telephoned Mr Gretton requesting that a payment be made by 4 October 2024 equal to half of the figure on the Statement, with the remaining amount to be paid by the end of the month. Mr Gretton says that as he had not been previously involved in this matter or familiar with the “status” of the Statement, he responded later that evening by phone and text message saying that any agreement of the Turnover Statement required Board approval.

41. There then followed an exchange of Microsoft Teams messages: i) On 12 September 2024 (timed at 15.12), Mr Sahota messaged Mr Swarup and Mr Grant saying: “Hi both Do you have an update for me, my Solicitor is chasing for the signed documents and her invoice payment please” ii) In response that same day (timed at 16.12), Mr Grant replied: “Hi Mandeep, the IC is tomorrow and so can give and update. We don’t intend to sign any documents as we are planning to make the necessary payments after approval and receipt of funds. Hope that helps Craig”

42. On 3 October 2024, Mr Grant presented the Statement to the Executive Management Team at which Mr Swarup was present. Mr Swarup says that “significant concerns were raised about the Respondent’s revenue recognition and very high debtors position, high salary costs, and elevated rate of client churn”. The details of those concerns are set out at paragraph 37 of Mr Swarup’s first statement. Mr Swarup’s evidence is that “[c]onsequently, the Executive Management Team proposed offering the Respondent a payment to show good faith whilst the Board considered how to conduct a forensic audit of the businesses figures.”

43. On 4 October 2024 (at 11.19), Mr Gretton telephoned Mr Sahota and explained the Executive Management Team’s proposal, which Mr Sahota rejected. Mr Gretton raised the issues identified by the Executive Management Team regarding debtors and bad debt risk. There were further telephone discussions between Mr Gretton and Mr Sahota on 7, 8 and 22 October 2024, details of which are set out at paragraph 8 of Mr Gretton’s witness statement.

44. On 16 October 2024, the Respondent’s solicitors (Askews Legal LLP) served statutory demands upon each of Applicants, both in the sum of £393,202.71 comprising the figure of £378,818 set out in the Statement and interest thereon. The statutory demands, which are essentially in identical terms, state that the Turnover Statement in respect of Year 1 Consideration was agreed between the parties on 16 May 2024. I note that this was the date of the telephone discussion between Mr Sahota, Mrs Sahota, Nasir Khatri and Ritika Patidar referred to above, when the figures on the Statement were discussed. The Applicants have not taken issue with the date of 16 May 2024 given on the statutory demand.

45. On 1 November 2024, the Second Applicant wrote to the Respondent “to formally dispute the statutory demand”. The reasons for disputing the statutory demands as set out in that letter were that “no formal approval for this payment was issued by our Board, and several critical concerns remain outstanding that impact the validity of any payment under the APA terms.” The letter goes on to say that the primary issues affecting the Year 1 payment include headcount costs, uncollected debts and high client churn. The letter describes these as “unresolved concerns”.

46. The Applicants instructed solicitors (HCR Law) on 5 November 2024. On 6 November 2024, HCR wrote to the Respondent’s solicitors, referring to the grounds of dispute set out in the letter dated 1 November 2024 and adding that the Applicants were not insolvent and are able to pay their debts as and when they fell due, and alleging breach of fiduciary duty against Mr and Mrs Sahota in their capacities as directors of the First Applicant due to a conflict of interests. HCR’s letter invited the Respondent to withdraw the statutory demands by 3pm that same day, otherwise an application to restrain presentation would be issued. The application to issue was issued later that day. By a consent order dated 13 November 2024, the Respondent undertook not to present a winding up petition against the Applicants pending determination of their application.

47. I turn now to consider the grounds upon which the Applicants say that the sum set out in the statutory demands is disputed. Ground 1 – No formal board approval from the Applicants for the Turnover Statement

48. In their letter dated 1 November 2024 challenging the statutory demands, the Second Applicant says “following a review, it has been determined that no formal approval for this payment was issued by our Board…”. The point is not expanded further there.

49. In his evidence in support of the application, Mr Swarup says that the Turnover Statement was not formally agreed by either the First or Second Applicants because: i) The First Applicant did not have a quorum of directors pursuant to its Articles of Association to be able to approve the Turnover Statement as Mr and Mrs Sahota would be conflicted and unable to vote on any decision due to the interest in the transaction; and ii) Mr Swarup, in his capacity as director of the Second Applicant, did not formally approve the figures on the Turnover Statement for it to be issued; and iii) The figures were not agreed by the Executive Management Team of the holding company who would be advancing funds via its investor.

50. Mr Swarup says this means that the Turnover Statement has not yet been agreed or determined in accordance with the APA.

51. The First Applicant has Model Articles of Association under the Companies Act 2006, which includes the following provisions: “7. Directors to take decisions collectively (1) The general rule about decision-making by directors is that any decision of the directors must be either a majority decision at a meeting or a decision taken in accordance with article

8.

8. Unanimous decisions (1) A decision of the directors is taken in accordance with this article when all eligible directors indicate to each other by any means that they share a common view on a matter. (2) Such a decision may take the form of a resolution in writing, copies of which have been signed by each eligible director or to which each eligible director has otherwise indicated agreement in writing. (3) References in this article to eligible directors are to directors who would have been entitled to vote on the matter had it been proposed as a resolution at a directors’ meeting. (4) A decision may not be taken in accordance with this article if the eligible directors would not have formed a quorum at such a meeting.

11. Quorum for directors’ meetings (1) At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. (2) The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two. (3) If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision— (a) to appoint further directors, or (b) to call a general meeting so as to enable the shareholders to appoint further directors.

14. Conflicts of interest (1) If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decision-making process for quorum or voting purposes.”

52. The Second Applicant’s articles are a modified form of the Model Articles. It includes a provision at article 7(2) that if the Second Applicant “only has one director for the time-being, … [then] the general rule [at regulation 7(1) above] does not apply, and the director may for so long as he remains the sole director take decisions without regard to any of the provisions of the articles relating to directors’ decision-making.”

53. Mr Swarup says (at paragraph 38 of his second statement) that he has not “formally authorised the issue of the Turnover Statement, on behalf of the Second Applicant because it has not been approved by the Executive Management Team and Kartesia.”

54. Mr Fagan, in his careful submissions, described the First Applicant’s obligation to pay the Year 1 Consideration payment as being subject to a condition precedent which had not yet been triggered. He argued that paragraph 4 of Schedule 5 of the APA requires the First and Second Applicants to act “independently but in unison” to procure a turnover statement. The Applicants will each need to make a decision, he argues, that the Turnover Statement is approved and its delivery is also approved. Such a condition can only be made in accordance with each of the Applicants’ articles of association and requiring either a board resolution or a shareholder resolution. The Second Applicant cannot bind the First Applicant as they are separate entities and the true primary obligation to pay the Year 1 Consideration lies with the First Applicant, who must therefore authorise the Draft Turnover Statement itself. Accordingly, the argument continues, as no authorised procurement and delivery of a Turnover Statement has taken place, no agreement under paragraph 4 of Schedule 5, APA has taken place, the condition precedent under clause 3.1.2, APA has not been triggered and, therefore, no debt is due from the First Applicant.

55. In considering this ground, I return to the terms of the APA itself. There is simply no requirement in clause 3.1, clause 3.2 or Schedule 5 for there to be any board resolution or shareholder approval. The APA is, in my view, perfectly clear in its terms. It is a professionally prepared and highly detailed document. The parties must be taken to have meant what they have agreed to in their written contract. Schedule 5, paragraph 4 sets out a clear process requiring both the First and Second Applicants (“the Buyer and the Buyer Guarantor”) to procure that a Turnover Statement is prepared (paragraph 4) and then delivered (paragraph 4.3) to the Respondent within 20 Business Days of the last day of the relevant Turnover Period. Mr Sahota (as “Seller Representative”) then has 20 Business Days from receipt of the Turnover Statement (the “Review Period”) to deliver to the First Applicant a written notice stating whether or not he agrees with the Turnover Statement. If Mr Sahota failed to deliver an “Objection Notice” within the Review Period, then the Turnover Statement is contractually deemed to be agreed pursuant to paragraph 4.5.

56. In my judgment, the Statement plainly constitutes a Turnover Statement for the purposes of paragraph 4 of Schedule

5. I reject as wholly unrealistic and inherently implausible the Applicants’ assertion that the Statement was merely a draft Turnover Statement because: i) There is no provision in the APA for the production of a draft turnover statement or for a draft to be agreed informally between the parties before the Applicants’ boards formally approve the Turnover Statement; ii) This would be entirely inconsistent with the very specific contractual timeframes established by paragraph 4 for the procurement, delivery and agreement (or otherwise) of the Turnover Statement; iii) There is nothing in the exchange of emails in May 2024 which suggests that the very detailed Turnover Statement which had been prepared by the Applicants and provided to the Respondent was merely a draft. One would have expected the Applicants to have clearly stated that this was merely a draft if that is what they intended. It is clear from the email exchange that the Turnover Statement was then discussed between the parties prior to being finalised and agreed; iv) Stepping back, it seems quite unrealistic to suggest that Mr and Mrs Sahota would have engaged in discussions regarding detailed figures on turnover if it was only intended that those would be draft figures, subject to further approval by the Applicants’ boards. In the contractual context of the APA, this does not make sense and is inherently implausible. It appears from the APA that the parties, understandably, wished to have the deferred consideration due under the APA determined and paid without undue delay and this is precisely what the timescales set out in Schedule 5 achieve; v) The interpretation of the APA which the Applicants invite the court to find has no realistic prospect of succeeding. If the Applicants wished to make board approval a part of the process in paragraph 4, then they should have specified that before signing the APA.

57. It is relevant to note that Mr Swarup was copied into the emails on 14 and 17 May 2024. He was therefore (or should have been) fully aware of the discussions that were taking place and the production of the turnover statement, as well as the fact that there was no reference to it being a draft. It is clear from the subsequent emails and messages from Mr Sahota that he believed that the Statement was not a draft document and that the Turnover Statement had been agreed. Despite being aware of this, it is telling that Mr Swarup did not correct Mr Sahota in that belief.

58. Furthermore, the Microsoft Teams exchange between Mr Sahota and Mr Swarup on 1 July 2025 and the Whatsapp message from Mr Swarup on 2 July 2025 each demonstrate that Mr Swarup was telling Mr Sahota that payment would be made, which can be only referring to the Year 1 Consideration which was now due following the agreement of the Year 1 Turnover Statement. It is completely implausible to suggest that these exchanges have any other meaning. There is no evidence before me to suggest otherwise.

59. The subsequent communications between Mr Sahota and Mr Grant/Mr Gretton after 2 July 2024 are of little assistance to the Applicants given that by this stage the Turnover Statement had been agreed in accordance with the APA, either by actual agreement from Mr Sahota or by deemed consent upon the expiry of the period of 20 Business Days following receipt of the Turnover Statement. In my judgment, the evidence of Mr Swarup that Mr Grant and Mr Gretton did not approve the Turnover Statement are entirely besides the point. By this time, the Turnover Statement had been agreed in accordance with the contractual mechanism provided for by the APA. In light of Mr Swarup’s messages dated 1 and 2 July 2024, this evidence appears to be a self-serving attempt retrospectively to change what had already been agreed.

60. It follows from this that I do not need to decide the various technical points raised by the Applicants concerning the applicability of section 40 of the Companies Act 2006, the rule in Turquand’s case (Royal British Bank v Turquand 119 ER 886) or the Applicants’ submissions on agency. In my judgment, these arguments all pre-suppose the necessity of prior board approval for the provision of a Turnover Statement under paragraph 4 of Schedule 5, APA, which I have rejected above. I also do not need to consider for the purposes of this application the question of ratification which the Respondent relies on in the alternative. Ground 2 – Applicants’ concerns regarding the Turnover Statement

61. The thrust of the Second Applicant’s letter dated 1 November 2024 was to raise concerns regarding the Turnover Statement on the grounds of headcount costs, uncollected debts and high client churn. This was also addressed in detail in Mr Swarup’s first statement but hardly featured in the Applicants’ submissions at the hearing before me.

62. I have already found that the Statement constitutes the Turnover Statement for the purposes of paragraph 4 of Schedule 5 of the APA. The effect of that is that it was not open to the Applicants to seek to challenge those figures later, as they are now seeking to do. Nevertheless, I will go on to make some further observations.

63. In relation to headcount, the Applicants say that headcount costs in the posttransaction business are so high that it “undermines the financial assumptions that underpin the Year 1 payment”. However, they do not identify any provision within the APA which would enable them now to challenge the Turnover Statement on those grounds.

64. As for uncollected debts, the Applicants say that “the APA implicitly assumes timely collection of invoices; however, a significant proportion of debtors are now over 90 days overdue, creating a considerable risk of overpayment under the current earnout structure.” This appears at best to be asserting that a term should be implied into the APA, however no argument for implying such a term was advanced at the hearing before me. In any event, the Applicants do not identify any provision within the APA which would enable them now to challenge the Turnover Statement on this ground.

65. As regards high client churn, the Applicants say that there has been “poor client retention, with a substantial number of clients entering liquidation or administration.” Again, the Applicants do not identify any provision within the APA which would enable them now to challenge the Turnover Statement on those grounds.

66. The “concerns” as regards the Turnover Statement have the air of a makeweight allegation, and I do not find that they give rise to a genuine dispute on substantial grounds for the purposes of the application. Ground 3 – alleged cross claim

67. By HCR’s letter dated 3 March 2025, the Applicants assert a cross-claim against the Respondent in the sum of approximately £200,000 on the ground that Advance Receipts under clause 6.1 of the APA are being, it is said, wrongfully retained by the Respondent in breach of the APA. Even if that cross-claim is valid, the net amount owing to the Respondent would substantially exceed the insolvency limit and this therefore provides no grounds for restraining a winding up petition.

68. I should add that running across the Applicants’ evidence are allegations that Mr and Mrs Sahota have acted in breach of their fiduciary duties to the First Applicant by preferring their own personal financial interests over the interests of the First Applicant. It is not suggested by the Applicants that this is a freestanding ground for restraining a winding up petition in this case. In any event, any claim for breach of duty against Mr and Mrs Sahota would be a claim against them personally, whereas the statutory demands in this case have been served by the Respondent. Conclusion

69. I am not satisfied that there is substance in the Applicants’ alleged dispute and in their refusal to pay the debt set out in the statutory demands. I consider that the grounds of opposition to the debt raised by the Applicants have no rational prospect of success. This is an example of a case where a “cloud of objections” has been raised to “obfuscate the real issues”. Despite the Applicants’ evidence, they have no arguable defence to the Respondent’s claim.

70. I will therefore dismiss the application.

71. I will invite counsel to agree a draft order addressing: (a) dismissal of the application; (b) whether any order needs to be made in relation to the Respondent’s undertaking not to present a winding up petition; (c) costs; and (d) any other directions that are needed.