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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Glaxosmithklene Export Ltd v UK (Aid) Ltd [2003] EWHC 1090 (Ch) (15 May 2003) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2003/1090.html Cite as: [2003] EWHC 1090 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Neutral Citation Number [2003] EWHC 1090 (Ch)

		Royal Courts of Justice Strand, London WC2A 2LL
		15 May 2003

Mr Justice Blackburne:

Introduction

1. This is the hearing of a contested winding-up petition. The petitioner, GlaxoSmithKline Export Limited ("GSK"), is the export arm of the multinational pharmaceutical group formed by the merger of Glaxo Wellcome and SmithKline Beecham which is now known as GlaxoSmithKline plc. The respondent company is UK Aid Limited ("the company"). GSK alleges in its petition that the company is indebted to it in the sum of £5,421,768.41 (plus interest) arising out of the non-payment of invoices - in respect of pharmaceutical goods sold and delivered to the company - dated between 14 September 2001 and 15 May 2002. The sum was calculated after giving credit for £140,149.93 in respect of VAT wrongly included in certain earlier invoices. The company denies that it is indebted to GSK. On the contrary, it claims that it has overpaid GSK to the extent of around £300,000.
2. According to the winding-up petition, the company was incorporated in September 1996 and has an issued share capital of £100. I am told very little about it. Its business includes the supply of medicinal drugs to relief aid agencies, NGOs, charities and others in the Crimea, Ukraine and Belarus.
3. The petition debt and the company's cross-claims arise out of dealings conducted principally by Mr Richard Jones on behalf of GSK and Mr Martin Mitchell on behalf of the company. Between early April 2000 and 31 December 2002 (when he left GSK's employment) Mr Jones was a commercial manager working as part of GSK's Central and Eastern Europe team. Mr Mitchell is the company's managing director. The company's evidence in opposition to the petition consists of six witness statements by Mr Mitchell. GSK's evidence consists of two witness statements by Mr Jones and four witness statements by Steven Rix who is employed as senior in-house counsel by another company within the GlaxoSmithKline group. There are extensive exhibits to the statements. Much of that evidence was before the court on an unsuccessful application by the company to restrain GSK from presenting its petition. I come to that episode in my narrative of events.

The law

4. I remind myself that I am concerned to determine whether the petition is founded on an undisputed debt. If the petitioner establishes his debt then the court may, and ordinarily will, make a winding-up order unless there is some good reason not to do so, for example, a short adjournment to enable the petition debt to be paid. If, on the other hand, the petition debt is the subject of a genuine dispute founded on substantial grounds, then the petition ought to be dismissed since it is not, or at any rate is not ordinarily, the function of the Companies Court in disputed debt cases to determine whether the petitioner can establish the debt on which his petition is founded. I remind myself that the mere fact that the company disputes the petitioner's debt does not, without more, lead to a dismissal of the petition. As Oliver LJ observed in Re Claybridge Shipping Co SA [1981] Com LR 107 at 109:

"…it is only too easy for an unwilling debtor to raise a cloud of objections on affidavits and then to claim that, because a dispute of fact cannot be decided without cross-examination, the petition should not be heard at all but the matter should be left to be determined in some other proceedings."

5. Where the debt is disputed, the court must determine whether, on the evidence, there is substance to the dispute. So also must it where the company asserts cross-claims as well. The fact that the evidence may be detailed and substantial in volume (as to some extent is the case here) does not absolve the court from undertaking this task. If, after considering the evidence, the court comes to the view that the evidence asserted by or on behalf of the respondent company is simply incredible - that it carries no conviction - the court should be free to find (as it may when exercising its summary judgment powers under CPR Pt 24) that the challenges to the petition debt are not founded on any substantial grounds and give judgment accordingly. See Re a Company (No 006685 of 1996) [1997] 1 BCLC 639 at 645, 649 (a decision of Chadwick J). None of this was a matter of controversy between the parties before me.

The background

6. In considering whether GSK's claim is genuinely disputed, it is instructive, as it usually is in disputed debt cases, to see how the company reacted from the time that GSK first began to press its demands.
7. The trading relationship between the parties goes back to 1997. The practice evolved whereby the company would make large lump sum payments to GSK for goods supplied rather than match its payments to coincide with the amount claimed under one or more particular invoices. Thus it paid £400,000 on 11 October 2001 and a further £600,000 on 20 December 2001.
8. By March 2002 the relationship between the parties was running into difficulties. The company had made no payments during January and February. GSK claims that on 1 March 2002 Mr Jones sent an e-mail to Mr Mitchell and his fellow director (and chairman of the company) Les Silverman, proposing that the company's dollar account be closed and that trading be confined to the sterling account. A copy of the e-mail was before the court. Having pointed out that the sterling account had an outstanding balance of £3,711,532.03 of which £1,593,228.50 was already due for payment (the difference being attributable to the fact that the company had 90 days from invoicing to make payment), the e-mail proposed that the following payments be made "to ensure that future deliveries go ahead as planned": (1) an immediate payment of $335,229.93 (in order to close the dollar account), (2) £400,000 by 8 March and (3) £500,000 by the end of March.
9. The company denies receiving that e-mail. But the fact is that on 15 March 2002 it made a payment of $335,229.93 (ie in the very amount which Mr Jones had requested in order to close the dollar account) and on 25 March it made a payment of £400,000. It did not pay the £500,000. Indeed it failed to make any further payments. (In a note sent to me after the hearing, Mr Arnold, who appeared for the company, indicated that Mr Mitchell had informed him during the hearing that "he [Mr Mitchell] remembered a telephone conversation with Mr Jones in which it was agreed that the company would make the payments referred to".)
10. On 2 April 2002, Mr Jones e-mailed Mr Mitchell and Mr Silverman to say that the company's debt now stood at £4,553,960.84 of which £2,127,930 was overdue. He acknowledged that a large percentage of this was in respect of VAT which the company was claiming back from HM Customs and Excise. (The position about VAT is explained later.) It sought a date by which the company expected to be able to make the VAT payment to GSK for which it had made a claim to HM Customs and Excise and set out a programme for payments during April with a view to reducing what was overdue from the company to £1.3 million odd.
11. The company claims that during the weeks leading up to early April, it was (in the words of Mr Arnold appearing for the company) "clamouring for a meeting" with Mr Jones at which to discuss the accounting position but that various projected meetings were cancelled by Mr Jones. GSK disputes this. It is common ground, however, that a meeting took place at the company's offices at Waltham Abbey on 11 April. The meeting was attended by Mr Mitchell and Mr Silverman on behalf of the company and Mr Jones on behalf of GSK.
12. Mr Mitchell says that he produced a typed agenda for that meeting, items 1 to 3 of which were as follows:

"1. Credits and discounts to be applied immediately.

2. Reconciliation of account - my calculations are that we are in a credit situation.

3. Formal agreement - we need a written agreement for future discounts and FOC goods [ie goods supplied free of charge] we cannot go through this performance again, year after year."

His typed notes of the meeting are as follows:

"Credits and discounts - we are fed up waiting for these to be applied, what is happening? RJ [Mr Jones] said he will do it this month, but he will not be dictated to. We say - we have this problem every year, we want it resolved. Before we have another meeting, we want this in writing for confirmation and also future proposals as to how business will be conducted. In effect we want a proper agreement or contract. We also want a meeting with RJ' s superiors. RJ says that he can do this - but not till later in the month. He arranges a meeting for April 25. Because of the fact that he cannot reconcile the account, all other business is put back until the next meeting. RJ departs."

The accuracy, indeed the authenticity, of that note (and others produced by Mr Mitchell) is not accepted by GSK. It suspects that the note has been compiled sometime after the event. There is nothing to suggest that Mr Jones received copies of Mr Mitchell's typed agenda or meeting notes. Indeed, Mr Mitchell has not suggested that he supplied copies of them to Mr Jones (or GSK).

13. Instead, Mr Jones wrote the following letter, dated 12 April, to Mr Mitchell:

"Further to our meeting yesterday, I would like to arrange another meeting with UK Aid for Gintas Storpirstis (area general manager, Baltics, Ukraine, Moldova GSK) and I, to discuss how we can resolve the issues that we are both currently facing.

As I stated in the meeting, we are committed to continuing business with your company and both Gintas and I would like us to focus on this as the output for our meeting on 25 April.

I was disheartened by the meeting we had yesterday and am concerned that UK Aid are not willing to pay for goods already delivered and, in addition, outstanding VAT repayments. The total amount of debt is currently £4,610,953.34.

I trust you agree that it is all to our benefits that we reach a mutually beneficial and prompt resolution to these issues."

14. Mr Mitchell responded to that letter four days later on 16 April. He said this:

"It appears from the content [of Mr Jones's letter] that not only have you totally misunderstood the current situation but also you have totally misrepresented it. To this extent, as agreed at the meeting of April 11, we await your written proposals in order to discuss them more fully prior to any meeting."

15. The following is a typed note, prepared by Mr Mitchell, he says on 18 April, of a telephone conversation which he had with Mr Jones the previous day:

"Richard [Jones] telephoned me from the Ukraine to discuss matters regarding the issues. I stated that I had received his letter of April 12 and had replied to it accordingly. I told him that he had totally misrepresented the situation and intentionally misunderstood it. I told him that it was obvious that the letter had been written for other eyes only and that he was working from a hidden agenda. He assured me that he wanted to continue business and that the meeting of April 25 with Gintas was still confirmed and that he would send us his written proposals shortly as he wanted to have everything sorted out this month as he was going on holiday at the end of April. He said that he would call me upon his return to the UK after he had written to me."

16. The meeting fixed for 25 April did not take place. There is a dispute over who cancelled it and why.
17. Instead, on 30 April 2002, Mr Storpirstis wrote to the company to say that the debt then outstanding, relating to unpaid invoices up to and including 18 January 2002, was £3,418,832.03 and that, in accordance with the payment terms for goods sold to the company (90 days from the date of invoice), a further £1,192,121.31 would fall due for payment under invoices dating back to 28 February 2002. He called for "immediate payment" of the sum then outstanding. He stated that, in the meantime, GSK would not be trading with the company until the debt had been received in full.
18. By his letter in reply dated 7 May 2002, Mr Mitchell spoke of what appeared to him to be "a considerable misunderstanding", complained of the failure of Mr Jones to honour appointments to meet to discuss "the current debt" and claimed that the amount claimed by GSK was "totally incorrect due to the majority of the invoices being incorrectly priced, discounts not being applied and additional FOC [free-of-charge] Goods which we have not received". He complained of problems caused to the company arising out of GSK's failure to provide VAT credits, complained that, despite the company indicating in January 2002 that all future orders should be postponed until April, it had continued to make deliveries in February and March and warned that it was imperative that continuity of supply was maintained to enable repayments to be continued and that "any interruption to this would result in repayments being withheld ... leaving our company financially exposed". He referred to broken promises by Mr Jones to send the company written proposals and asserted that Mr Jones's letter of 12 April "totally misrepresented the current situation" and had apparently "been written for 'other eyes' only". Towards the end of the letter, he wrote that:

"I would reconfirm that our company is not refusing to repay GSK nor has it refused to meet with its representatives. To reiterate our proposal, it is important that there is a continuity of trading and as such we are prepared to repay an agreed debt over a 12-month period from future sales, payment for goods to be upon delivery and an agreed additional payment each month to amortise the debt."

Mr Arnold submitted that, read in context, that passage was not an admission that the company was indebted to GSK; rather, its reference to "an agreed debt" was to an agreed debt, if any. I am bound to say that that is not how the letter reads to me. The letter seems to assume an indebtedness on the part of the company, although how much is left unstated.

19. Be that as it may, rather than endeavour to explain in writing precisely what the company's calculation was to controvert GSK's assertion of £4.6 million of company indebtedness, the company appears to have done nothing. Since, according to item 2 of Mr Mitchell's agenda for the meeting of 11 April, he had already made a calculation of the position which showed that the company was in credit (a point reiterated in paragraph 44 of his fifth witness statement), an explanation showing that the company owed nothing should not have proved difficult. Instead it was left to GSK to take up the matter again.
20. It did so with a further letter from Mr Storpirstis. Dated 19 July 2002, the letter, after rejecting the company's proposal (in its letter of 7 May) "to repay an agreed debt over a 12-month period" while continuing to order further goods, stated that the outstanding debt (in accordance with the invoices enclosed with the letter) was £5.6 million. It also stated that GSK was no longer willing to tolerate the situation and demanded payment within seven days, failing which it threatened proceedings without further notice. This was the second such demand that GSK had made.
21. The company's response, dated 26 July, was to find it "extraordinary" that it had taken GSK two months "to address this matter and reply to us" following Mr Mitchell's letter of 7 May. It complained that GSK had shown "a total lack of understanding" and speculated that Mr Jones had not fully informed Mr Storpirstis of the "full circumstances". It continued:

"With regard to the debt, the invoices that you have attached are incorrect, as the prices were never agreed and the discounts and FOC goods not applied, in addition invoices going back to early 2000 have still not been rectified. Again, all this can be substantiated."

It concluded by suggesting that Mr Storpirstis re-read Mr Mitchell's letter of 7 May and suggested, once more, a meeting "to discuss matters".

22. At the same time as he wrote to Mr Storpirstis, Mr Mitchell also wrote to a Mr Ferrer, a more senior employee of GSK. After complaining that Mr Ferrer was not aware of the "full situation" and specifically of Mr Jones' trading methods, and after asserting that the debt claimed was "totally inflated" and had been created to boost Mr Jones's sales figures, Mr Mitchell wrote this:

"You will appreciate from the contents of our letter dated May 7, 2002 that we are trying to resolve matters and that to date we have been ignored. It is most surprising that we are being treated in this manner, as we have always endeavoured to achieve budgets set by GSK and up until March of this year, have been very successful.

With regard to the current debt, please be advised that this is totally incorrect and has been grossly over inflated by Richard Jones, who has wrongly priced invoices, ignored discounts and not applied FOC goods as promised. This has been ongoing since early 2000 despite his many promises to the contrary."

Mr Mitchell ended by stating that the company felt it imperative to discuss matters with a view to resolving the situation. He requested a meeting. But he no more attempted in his letter to Mr Ferrer to explain why the "current debt" was "totally incorrect" and had been "grossly over inflated" by Mr Jones, than he had in his letter to Mr Storpirstis.

23. GSK's response was to instruct solicitors, Theodore Goddard, who on 31 July wrote to the company to demand payment of £5.62 million (the sum then claimed to be outstanding). They stated that GSK did not see what purpose a meeting would serve "given that UK Aid is refusing to pay the outstanding amount yet has provided only the vaguest reasons for its refusal". They said that they were advising GSK what steps to take to recover the debt.
24. The company did not respond that letter. It is not suggested that it did not receive it. It was left once again to GSK to pursue the matter.
25. On 22 August Theodore Goddard wrote (and delivered by hand) the following letter:

"We refer to recent correspondence between GSK and you and, in particular, to GSK's letter to you of 19 July 2002, requiring payment of a debt of £5,620,981.60. We have recalculated the debt on the basis that invoices 505200 and 505201 [they are both dated 15 May 2002] are now due and that invoice 22299427 will in fact become due on 14October 2002 (90 days from the date of the invoice). The principal sum therefore now stands at £5,421,768.41.

Our client has provided us with a copy of your two letters to it of 26 July 2002 and your letter of 7 May 2002. In those letters, you have made a number of allegations in relation to the debt, including allegations that the debt is "grossly over inflated" that invoices have been wrongly priced, that discounts have been ignored and that free-of-charge goods have not been applied. However, you have not identified the invoices which you believe are incorrect nor have you quantified the amount which you dispute. In spite of your promise to substantiate your allegations you have not done so and our client does not believe that you have any genuine basis for disputing the outstanding amount."

The letter then ended by enclosing a statutory demand for £5,579,937.41 (inclusive of interest). It invited the company to take legal advice and, if it believed it had genuine grounds for disputing the amount of the debt, to state what invoices were disputed and why and the amount in dispute.

26. The statutory demand set out by reference to a scheduled table what the invoices were to which the sums claimed related. The company's reply to this was a letter from Mr Mitchell dated 27 August asserting that the debt was disputed and saying that its response would be forwarded within 21 days as requested.
27. On 11 September, Bates Wells & Braithwaite (whom the company had instructed in the meantime) wrote, in response to the statutory demand, to deny that the company was indebted to GSK. It did so by reference to two tables which the company had prepared. The first - Table 1 - dealt with the invoices which were the subject of the statutory demand. The table claimed that, so far from the correct amount owing in respect of the deliveries of goods to which those invoices related being (exclusive of VAT) £4,880,088.35 (as stated on the face of those invoices but ignoring VAT), the true sum owed for the goods (exclusive of VAT) was £1,742,820. It reached this figure by asserting that the unit prices for the various goods which had been supplied were below those stated on the relevant invoices and by applying (in most cases) a discount to the reduced unit prices so specified by it and claiming that, in addition, a proportion of the products supplied should have been free of charge. In the case of one invoice, it claimed that 500 units of the product (Zeffix) had been wrongly included. The second table - Table 2 - related to consignments of goods which had been invoiced to the company between January 2001 and August 2001. The invoices for those goods had not featured in the statutory demand because GSK accepted -indeed it avers - that the goods in question had been paid for in full. The company nevertheless claimed (as it had with regard to the unpaid invoices set out in Table 1) that the unit prices charged for these goods should have been less than those claimed on the invoices, that discounts were applicable and that GSK had failed to give credit for proportions of the goods delivered which, it claimed, should have been free of charge. By reworking the figures in question and querying what it stated was a double invoice, the Table calculated £1,839,652 as the amount by which GSK had been overpaid by the company in respect of those invoices. Deducting the sum which it conceded it owed to GSK according to Table 1 from the sum said to have been overpaid to GSK under Table 2, the company asserted that, so far from being indebted to GSK in the sum claimed by the statutory demand, GSK was indebted to it in the amount of the difference, namely £96,832.
28. In their letter, Bates, Wells & Braithwaite, maintained that the agreement between the company and GSK was that repayments would be made against a repayment schedule set out by GSK and not against invoices. They asserted that this agreement had been in force since 1998, had been faithfully adhered to and was consistent with the discounting and FOC goods arrangements that the parties had reached. Their letter went on to say that, in many cases, invoices were rendered anything up to three months late. They put GSK to proof of the agreements reached in respect of each supply of goods. They stated that the company was willing to attend a further meeting and asserted that many issues arose in respect of the trading relationship between the parties which would need to be addressed. In a separate letter, the solicitors sought an undertaking that GSK would not present a winding-up petition based on the statutory demand, failing which the company would apply to the court for an injunction to restrain its presentation.
29. On 7 October, Theodore Goddard responded to Bates Wells & Braithwaite's letter of 11 September. They denied that the invoices submitted did not accurately reflect the terms of supply agreed between the parties. Accepting that purchase orders or other contractual documents evidencing the terms agreed were not signed but rather that the orders were placed for the most part at face-to-face meetings between Mr Jones and Mr Mitchell and/or Mr Silverman, they explained the internal GSK procedures for processing the orders after the orders had been agreed at such meetings and exhibited a quantity of internal GSK documentation by way of substantiation. They pointed out that the company was attempting to reopen invoices long since paid (some more than a year previously) and that it was only when GSK refused to extend the company's credit any further and sought payment of outstanding sums that the company had queried any of the invoices. They went on to deny that GSK had agreed to provide discounts both by reducing unit prices and providing FOC goods and said that the practice, introduced in the later stages of their trading relationship, of the company making payment by reference to a repayment schedule - ie by periodic lump sum payments - rather than on an invoice by invoice basis, was purely concerned with me company's cash flow and in any event was irrelevant to the amount of the company's indebtedness for the goods which it had accepted. They also pointed out that, if the company had genuinely believed that the invoices it received did not accurately reflect what was agreed, it would have said so at the latest on receiving the relevant invoice rather than after being served with a statutory demand.
30. Bates Wells & Braithwaite replied at length to Theodore Goddard's letter on 17 October. They asserted that there was a risk that Mr Jones, with whom (on GSK's side) the company had exclusively dealt "may have withheld information from more senior personnel within GSK Export which information would confirm our client's position and show clearly that certain key matters have been dealt with by Mr Jones in a way which is unlikely to have been in accordance with GSK Export's usual business practices. They went onto say that the company's belief was that Mr Jones was acting to protect his own position and that his actions were designed to maintain or enhance his career prospects and bonus payments. They stated that one of the reasons for his eagerness in increasing orders from the company was his desire to prop up GSK's Ukrainian market which, they said, had suffered substantial losses. They went on to explain at greater length the matters which resulted, they said, in Mr Jones failing to report correctly the agreements reached with the company "thus providing a false picture and false accounting position within GSK Export's books". They asserted that the invoices rendered did not accurately reflect the terms reached by the parties, both as to the price agreed and as regards other terms, such as the allocation of FOC goods. They said that the practice of the company signing purchase orders ceased when Mr Jones took over the running of the company's account in early 2000 and asserted that this had happened at Mr Jones's request on the footing that, without a written order, GSK would have more flexibility to apply FOC goods when it suited GSK's budgets and markets.
31. The solicitors went on to instance how, according to GSK' s invoices, product prices could fluctuate dramatically and stressed that the company made payment by reference to the agreed schedule, rather than against invoices, so that it could not be said that the company was seeking, as regards the invoices referred to in its Table 2, to reopen invoices that it had already paid. Issue was then taken over the circumstances in which the breakdown in the trading relationship had occurred. They claimed that this had resulted from Mr Jones's failure, despite being pressed over many months to do so, to bring into account, inter alia, the additional FOC goods. They alleged that Mr Mitchell has asked for a postponement or cancellation of further deliveries in January to March 2002 and had raised the question of outstanding free-of-charge goods but that Mr Jones had indicated that for reasons connected with GSK's financial year-end (31 March 2002) the free-of-charge goods could not be "applied" until after the year-end. They alleged that the company had reluctantly agreed to this "on the basis that the credits would be applied immediately after 31 March 2002". They pointed to the fact that, although by the start of 2002, the company's credit limit was £1 million which, they claimed, the company was working within taking account of outstanding FOC goods "to be applied", GSK then delivered goods valued, according to the invoices rendered, at £3.5 million and that the invoices in question (for goods supplied between January and March 2002) were received by the company "in a batch after the final delivery was made in March 2002". They added that invoices for a particular product (as Avandia) were first provided under cover of the statutory demand. They queried how GSK's system of credit control could result in the company enjoying by late March 2002 an apparent credit, according to the invoices, of £5.5 million, and inferred that this was only so because of the understandings that existed between Mr Jones and the company with regard to discounts, free of charge goods and the like.
32. On 22 October 2002, having failed to make any payment in response to the statutory demand and faced with the threat of winding-up proceedings, the company issued an application to restrain presentation by GSI~ of a winding-up petition. Evidence was filed for and against. Mr Mitchell's evidence reflects the various matters raised in the lengthy letter of 17 October from Bates Wells & Braithwaite. Exhibited to Mr Mitchell's second witness statement were revised versions of Tables 1 and 2. They threw up an increased balance in the company's favour, this time of £l10,000. (In the course of the hearing before me, a further calculation was provided, yielding – on various assumptions - a credit balance of around £300,000.) The application came before Judge McGonigal sitting as a judge of the High Court on 21 November 2002.
33. Among the many matters dealt with in the evidence before the court was a claim by GSK that, over and above the goods sold to the company which were the subject of the unpaid invoices, it had supplied free of charge various quantities of one particular product called Combivir. The company accepted that this was so. (I come to the significance of this in more detail later.) In the event, the hearing concerned itself simply with whether GSK could show that the company had not given credit for the value of those goods in its calculations. The sum involved, taking the unit prices of the goods in question at the lower figure asserted by the company, was £119,000. For its part, the company contended that the goods in question represented "previous credits going back to 1999 and 2000" (ie predating the invoices dealt with even in Table 2). In short, it contended that the value of those goods fell to be offset against earlier overpayments.
34. In the course of a short judgment, Judge McGonigal stated that there was no evidence to support the company's contention with regard to those free-of-charge goods. The result was that, even assuming everything else in the company's favour, the company's net claim against GSK of £110,000 odd (as it then stood) was exceeded to the extent of £8,000 odd by the value of supplies to the company of Combivir delivered free of charge (the hearing concerned itself with just six such deliveries, although there were others) for which the company was obliged to give credit. On this basis the judge refused to restrain presentation of a winding-up petition.
35. The petition was presented the following day and advertised on 5 December. On the morning of its return date, 29 January 2003, the company paid the sum of £8,000. It also paid GSK's costs of the application heard on 21 November which Judge McGonigal had awarded against it.
36. The company has not since sought to make good the want of evidence supporting its claim that the deliveries to it of Combivir which it had received free of charge indeed represented credits going back to matters prior to 2001. That still left unresolved all of the other issues raised by the company in answer to the petition debt. This is because, at the hearing to restrain presentation of the winding-up petition, the judge had not expressed any view on those issues. Indeed he had declined to hear argument on them. It is those matters which now fall for decision on this, the effective hearing of the winding-up petition.
37. The question which I have to decide is whether, as GSK through Mr Lopian contends, the challenges raised by the company to the petition debt are no more than a smokescreen and are not advanced in good faith and on substantial grounds or whether, as the company through Mr Arnold contends, they give rise to genuinely triable issues which cannot be resolved on the hearing of a winding-up petition. The challenge is to the prices invoiced to it by 05K. It is not suggested that the company did not receive the goods to which the invoices related or that the goods were in any way defective.

The company's stance

38. The company's fundamental position is that the parties' trading relationship was not governed by the terms apparent from the face of the invoices on which the petition debt is founded. There are three main elements to this stance: it claims, first, that the unit prices agreed to be paid for the goods sold to it were in every case less than the unit prices set out on the face of the invoices; it claims, secondly, that it was also entitled (in the case of most of the products) to a 10 per cent discount on those reduced prices; it claims, thirdly, that, over and above the free-of-charge supplies of Combivir which it accepts it received and for which it must give credit (such free-of-charge goods being the subject of quite separate invoices), it was entitled to receive free of charge a proportion of the goods which were the subject matter of the disputed invoices. As I have already mentioned, the adjustments to the invoiced prices consequent upon these matters are reflected in the calculations appearing in (the revised) Tables 1 and 2.
39. It contends that the various discounts, credits and free-of-charge goods to which it says it was entitled were the subject of oral agreements - some at face-to-face meetings, others over the telephone - arrived at from time to time, principally between Mr Mitchell and Mr Jones. It contends that the various oral agreements and understandings which it reached with GSK (through Mr Jones) together with other aspects of the trading relationship between the parties culminating in the breakdown in April 2002 raise conflicts of evidence between itself and GSK (since there is a great deal of what the company says that GSK disputes) which cannot be resolved without cross-examination of the parties involved and cannot properly therefore, given the practice of the Companies Court as outlined above, be determined summarily on the hearing of this winding-up petition. Accordingly, it seeks dismissal of the petition.
40. In his evidence, Mr Mitchell identifies the occasions when, according to him, the prices, discounts and FOC terms were agreed for the various categories of product to be purchased by the company from GSK. A feature of that evidence is that, although in three cases Mr Mitchell points to a note in his own handwriting setting out the price said to have been agreed and in two other cases to a typed note from Mr Silverman to Mr Mitchell, there is no written communication either from the company to GSK or from GSK to the company confirming or otherwise acknowledging what Mr Mitchell says were the agreed terms of any given supply of goods.
41. In one case, that of Ventolin, Mr Mitchell claims that the unit price of $1.43 (equivalent to 95p assuming an exchange rate of $1.50 to the £) was agreed with Mr Jones's predecessor (a Ms McSwiggan) in December 1999. He points to an e-mail in which Ms McSwiggan informs the company that "the minimum price acceptable for Ventolin inhaler is US $1.43". Yet in a later (March 2000) e-mail, it is from Ms McSwiggan to a GSK colleague - but with a copy sent to the company, the Ventolin unit price is stated to be $1.64 (or £1 09 per unit). Even ignoring the unit prices for those goods set out on the actual invoices, it is not clear why the company says that the earlier, December 1999, unit price for those goods should prevail over the higher unit price identified in the later, March 2000, e-mail.
42. Another occasion on which prices and other items were said to have been agreed is at a meeting between the company and GSK on 3 October 2000. Mr Mitchell exhibits to his first witness statement what purports to be a typed note of the meeting. The note records that Mr Silverman and Mr Mitchell attended on behalf of the company and Mr Jones on behalf of GSK. The body of the note is as follows:

"PRICING STRUCTURE

The current pricing structure for antiretroviral products was discussed and a new price, structure was agreed. It was also agreed that this would incorporate a retrospective discount for the 3rd quarter forward order of 6,000 packs of Retrovir. This discount would be offset against the next quarter's orders. ($48,000). The outstanding credits for old discounts and returned stock would be reconciled on our account by the end of October. ($58,836.60)

The new prices agreed as follows

RETROVIR - £40.00 - LESS 10 per cent + FOC Goods (30 per cent)

EPIVIR - £60 00 - LESS 10 per cent + FOC Goods (30 per cent)

COMBIVIR - £70.00 - cannot go below this price at present therefore FOC Goods would be allocated on the following basis - per 1000 packs ordered - 200 packs FOC / 2000 packs ordered 400 packs FOC/ 3000 packs ordered 700 packs FOC

With Retrovir and Epivir it might be necessary to not have a discount but increase the FOC Goods.

It was anticipated that with the new pricing structure in place then UK AID were hopeful of placing orders in excess of £500,000 for the last quarter and UK AID were hopeful to be in a position to finalise these orders before the end of the month.

Repayment schedule - It was agreed that there were differences with regard to VAT reconciliations and credits Finance to send a list of VAT credits relating to each invoice, this will enable us to calculate the outstanding amounts on any invoice. A new six-month repayment schedule to be prepared by Richard.

SALES TARGETS

To increase as an incentive the agreed discounts/FOC goods will be applied retrospectively (usually at the end of each quarter).

This means that UK AID will be invoiced the usual market price and will have to maintain repayments at that level each quarter until the rebates/discounts are applied."

43. In his evidence, Mr Mitchell points to that note as setting out the terms for the sale to the company of Retrovir, Epivir and Combivir. He maintains that those were the terms for those products .which were unvaryingly applied throughout the subsequent period of their trading relationship. It was not, however, suggested that the company sent a copy of that typed note to GSK or Mr Jones. (GSK says only saw it for the first time in these proceedings and challenges its accuracy, contending that it bears no relationship to the true position.)
44. The company goes on to say that there was only one exception to the prices set out in that note. That concerned a supply of 4,000 packs of Combivir in February 2002 when, Mr Mitchell says, it was agreed that there should be an overall price discount of 90 per cent on the agreed price of £70 so that the price charged was effectively only £7 per pack. The invoice (No 499408) relating to those goods is based on a price of £150 per pack. The result is a huge discrepancy between the price for the goods as invoiced by GSK to the company, namely £600,000, and what the company says was the agreed price for them, namely £28,000. It represents a discount of just over 95 per cent.

That invoice is one of those upon which the petition debt is founded Mr Mitchell refers to a note in his office diary for 8 February 2002 of a call to Mr Jones. The note is in his handwriting. It refers to a "collapse" in the price of Combivir and then states "RJ [Mr Jones] says can't cancel the delivery as it is in shipping. Can't FOC the goods. Says he will invoice me at 10 per cent value to sort out problem". On the other hand, it was not suggested that a copy of that note or that an e-mail or letter confirming what was said in that conversation was ever sent to GSK. It was not suggested that when the invoice was delivered (in May 2002) invoicing the company at £150 per pack rather than, as Mr Mitchell claims in its note it had agreed to do, at effectively £7 per pack, the company wrote to (or otherwise communicated with) GSK (or Mr Jones) to point out that the invoice had grossly overstated the agreed price. The first particularised challenge to that invoice surfaced in Table 1 as part of the response to the statutory demand. GSK's response

45. GSK's response to what the company maintains with regard to the prices said to have been agreed for the various deliveries is to contend that none of these assertions can prevail over the invoices which (a) clearly identified the prices to be paid for each delivery of goods and (b) were sent to and received by the company. Fundamental to this response - and indeed to the petition - is that at the time the invoices were sent there was no challenge by the company to their accuracy. It is inconceivable, GSK contends, that if the company had considered that the invoices had overstated the agreed prices for the deliveries to which they related (and to the extent that they now claim) Mr Mitchell would not immediately have said so, pointing out in each case the extent of the error. Relevant to this, GSK says, is not that just one or two invoices are involved but that the company is seeking to maintain that over two dozen invoices stretching back to January 2001 are inaccurate.
46. GSK backs up its reliance upon the invoices by pointing to what it says was its practice, as soon as an order had been placed, of completing internal documentation for the purpose of processing that order. I was taken through examples of this. Paragraphs 10 to 19 of the first witness statement of Mr Rix describe in some detail how that process works from the completion of an internal order sheet to the despatch of the goods to the customer and the posting of an invoice for those goods. There is nothing in that documentation, it was pointed out, to give support for the wholly different price levels - and other incentives (discount and FOC goods) which the company says were agreed.
47. GSK point to a repayment schedule (it runs to five pages) covering payments to be made by the company during 2001. The schedule had been the subject of discussion and agreement between Mr Mitchell and Mr Jones in early 2001. It was created in or about early March 2001. The schedule shows, week by week, the invoice value of Epivir and Combivir which had either already been ordered by the time the schedule was created or which was expected to be ordered during the reminder of the year. It sets out a programme of payments by the company. The effect of the schedule is to ensure that payment is made in full for all current orders and that, in addition, an inroad is made into an outstanding balance of $2,050,167 due to GSK as at the start of 2001 so that the balance is reduced to $1,024,767 by the end of the year.
48. The amounts set out on the schedule (insofar as they relate to orders already placed at the time the schedule was prepared) are at the unit prices indicated on the relevant invoices (they feature in Table 2) and not those (greatly reduced in amount) which the company says were the true agreed prices. The company made payments in accordance with the schedule. The schedule is difficult to reconcile with the company's stance on this petition.
49. GSK also points to the fact that on one or two occasions it did happen to submit an incorrect invoice but that when this occurred it was quick to point out the error. One of those occasions concerned a delivery of 500 packs of Combivir made on or about 29 March 2001. The original invoice for that delivery (numbered 477904) indicated that they constituted an "urgent order". The unit price specified on the invoice was $100 resulting in an overall price for the 500 packs of $50,000 together with VAT. Three days earlier, Mr Jones had sent an e-mail to one of his GSK colleagues (a Ms Hayter) to say that the unit price for Combivir was £149 (and £66.50 for Epivir). A copy of that e-mail was sent to the company. Assuming a conversion rate of $1.50 to the £, £149 is $225 (as near as makes no difference). Whether as a result of that email or coincidentally, a replacement invoice (also numbered 477904) was subsequently sent out. It specifies $225 as the unit price and $112,500 as the overall cost of the delivery (together with VAT). The company received both the e-mail and the fresh invoice.
50. The company points to the original invoice (specifying $100 as the unit price) as correctly stating what it maintains was the agreed price for Combivir. GSK, by contrast, states that the explanation for the two invoices is that, in the haste of dealing with what, as the invoice indicates, was an urgent order, its staff made a mistake over the price to be charged and, on discovering that. It says that in referring to this incident the company is seeking to take advantage of the error that was made to support its case that the prices actually agreed were not those appearing on the invoices sent to it.

51. I was also referred by Mr Lopian to a manuscript note, in Mr Jones's handwriting, of a meeting on 21 January 2002. GSK relies on this note as showing unit prices which match those for which the company was invoiced. For example, Combivir is marked at £150, and Epivir at £67. The company seeks to counter this by pointing to another of the products specified on that note, Zeffix, which according to the note had a unit price of £20 but was invoiced at a unit price of £30. It points also to another of the products referred to on the note, Ventolin, which appears to have a unit price of 0.93 pence per pack. That price, Mr Mitchell points out, accords with the price for which the company has consistently contended rather than with the price of £2.93 per pack which the company was charged in one of the invoices on which the petition debt is founded. GSK's reply is to point out that, for that particular order, the price actually invoiced was indeed 0.93p per pack (see invoice No 502041) and that it is nothing to the point that a quite separate order was at the price of £2.93 per pack. In any event, it says, the unit price, although it was once 93p per pack, had risen by March 2000 to $1.64 per pack (which is over £1 per pack) and had since risen above that price. I have earlier referred to this (see paragraph 41 above)

FOC goods

51. GSK draws particular attention to one of the essential elements of the company's stance, namely its assertion that, over and above what it claims were the agreed prices for the goods which it bought, it was entitled to receive a proportion of each order free of charge, for example 30 per cent of each order of Retrovir and Epivir and, roughly, 20 per cent on each order of Combivir above a minimum threshold order of 1,000 packs. Mr Lopian pointed out that implicit in the two tables which the company has produced (both in their Original and in their revised forms) is that the company was entitled to, but has not been given, credit for this free-of-charge benefit in the calculation of the price for each delivery to it. Thus, for every invoice referred to in those tables (except only for three orders of Dermovate cream, where the sums involved are relatively small, and the order for Combivir where the company claims that it was only to pay £7 per pack) there is a claim for free-of-charge goods.
52. In its evidence, GSK pointed out that the company had in fact received free-of-charge goods for each of its orders of Combivir and that it had received those goods as goods additional to the quantity of Combivir actually ordered. It explained that the company had been invoiced separately for these goods (for VAT purposes) but that otherwise they were delivered free-of-charge. In his evidence on behalf of GSK, Mr Rix explained that, having received those additional free of charge deliveries of Combivir but by claiming in respect of each order of Combivir a substantial free-of-charge element as well, the company was effectively double counting.
53. Mr Rix backed this up by referring to an e-mail which Mr Jones sent to the company shortly after he assumed responsibility for GSK's trading account with the company. Dated 13 April 2000, the e-mail (it was described in evidence as the "FOC calculator") records Mr Jones as saying:

"It is important that we all have the same understanding of how FOC goods are calculated. This will avoid any confusion in the future. I have attached a spreadsheet that will allow you to calculate the quantity that you need to order when receiving free of charge goods and the final price per unit that it will mean to you."

The e-mail then gives an example of how the new system is to work. It does so for a product called Zinacef, in respect of which the free-of-charge element is 30 per cent. The e-mail does not suggest that the free-of-charge concession was to be limited to particular products.

54. Mr Mitchell's initial response to this evidence was to assert that the FOC calculator "was not used and was irrelevant" and that "the procedure described in the ... e-mail [of 13 April 2000] just did not apply in the dealings between us". He added that "the FOC goods to which GSK's evidence referred" (ie the free of charge deliveries of Combivir which, by his fourth witness statement, Mr Mitchell conceded that the company had indeed received) represented previous credits going back to 1999 and 2000.
55. As I have already mentioned, at the hearing to restrain presentation of the petition, Judge McGonigal said that there was no evidence to support that last claim and, as I have also mentioned, the company has not since produced evidence to make it good. Moreover, GSK points to certain correspondence culminating in letters dated 14 December 2000 and 1 March 2001 to show that, as it happens, although there was a claim going back to before the time that Mr Jones had assumed responsibility for GSK's dealings with the company, the company did indeed receive a quantity of goods (mostly Epivir, some of which was provided free-of-charge and some of it at a discount of 21 per cent) to compensate it for that claim. The matter is referred to in Judge McGonigal's judgment. The sum involved was $163,836.60.
56. Over and above all of that, GSK has put in evidence the relevant invoices (and illustrated the position by reference to a coloured table) to show that on each occasion that the company placed an order for Combivir (the coloured table refers to no less than 16 occasions between November 2000 and January 2002) the company received - and was separately invoiced (for VAT purposes) for - a free-of-charge delivery of that product.
57. The obvious question to which this part of the company's contentions gives rise is: having received, as it accepts, a free-of-charge delivery of Combivir with each order for that product which the company placed with GSK, on what basis does the company claim to be entitled in addition to receive free-of-charge a proportion of each order of that product? In the course of argument I put this to Mr Arnold. I was given no satisfactory answer.
58. The result, GSK contends, is that, given the invoices actually sent out over so many months and given the absence of any kind of written challenge to them until Mr Mitchell's letter of 7 May 2002 (when the challenge was in the vaguest of terms and appeared, even then, to accept that there was an outstanding debt), it is simply incredible to suppose that from January 2001 onwards (and indeed from before then -see Mr Mitchell's letter dated 26 July 2002 to Mr Ferrer set out in paragraph 21 above) the parties were in truth trading on wholly different terms as to price.

The company's riposte

59. Faced with the inescapable fact that, until served with the statutory demand in August 2002, it had not explained in what respects the sums claimed in the unpaid invoices (some of which date back to September and October 2001) were inaccurate, much less explain why it had failed to raise any challenge to the fourteen or so invoices rendered to it between January and August 2001 (the accuracy of which is now the subject of challenge in accordance with the calculations appearing in (revised) Table 2), the company contends that there existed throughout this time an agreement or understanding between itself and GSK as to how they would account to each other. The contention is that there would be quarterly, or at any rate periodic, "reconciliations" so as to bring into account the various discounts, credits and free-of-charge goods to which, the company claims, it was all along entitled in respect of the various goods sold and delivered to it by GSK. It contends that this agreement or understanding was reached at the meeting between Mr Jones and the company on 3 October 2000 to which I have already referred and that it reflected an earlier understanding between itself and GSK going back to the time before Mr Jones became involved, ie prior to April 2000.
60. In support of this it points to the first three sentences of the first paragraph of the typed note of that meeting but, more especially, to the passage in that note under the heading "sales target". These parts of the note show, it claims, (1) that it was agreed that there would be periodic, usually quarterly, reconciliations of the account between them, (2) that such reconciliations were to take place precisely because the prices at which the company was to be invoiced would not, and would not be expected to, set out the prices agreed to be paid and (3) that, pending such periodic reconciliations, the company was expected to maintain payments at the invoice levels during the relevant quarterly period.
61. It contends that from 2001 onwards, Mr Mitchell had pressed Mr Jones to undertake such a reconciliation but that, on one pretext or another, Mr Jones had failed to do so and that this resulted, in April 2002, in the breakdown in the parties' trading relationship.
62. The company concedes that no reconciliation ever did take place of the trading that occurred after Mr Jones took over responsibility for GSK's dealings with the company. (There was the adjustment, finally agreed in early March 2001, in respect of the problem - referred to in the evidence as "the demand freeze" - that had occurred before Mr Jones' involvement; this was referred to by Judge McGonigal in his judgment refusing to restrain presentation of a winding-up petition; see also paragraph 56 above.) It is true also that there is very little in any of the documentation that I have seen to support the company's claim that, prior to the breakdown in trading relations in April 2002, it was pressing GSK for a reconciliation (quarterly or otherwise). The best that the company can point to is an "agenda" (produced by Mr Mitchell) for a meeting on June 8, 2001, item 7 of which is headed "rebates and discounts to date" and (2) an agenda (also produced by Mr Mitchell) headed "Agenda for Glaxo Meeting Sept 7 2002". Item 2 of that agenda reads "check invoices for additional rebates ie Combivir against Ventolin/Dermovate etc. Reconcile all discounts etc for 2001 to date".
63. It is not suggested that copies of these two documents were ever sent to GSK (or Mr Jones). They were first made available in the course of these proceedings. One's confidence in the authenticity of the second of the two documents is somewhat undermined by its date "Sept 7 2002". Mr Mitchell explains in his fourth witness statement (dated 19 November 2002) that he added "2002" to the date of the document after it had been pointed out to him (it is not clear exactly by whom or when) that there was no year on it. It was apparently intended to read "2001" The only other reference to a reconciliation is in Mr Mitchell's agenda for his meeting with Mr Jones on 11 April 2002. (See paragraph 12 above.) But by then relations were breaking down if they had not already done so It is not suggested that that document was sent to GSK (or Mr Jones) prior to being produced in evidence in these proceedings.
64. Moreover, the notion of a three-monthly or similar reconciliation is difficult to reconcile with the agreed repayment schedule. That schedule proceeds on the footing of the invoiced level of prices. It makes no provision for any downward adjustment, three-monthly or otherwise, to reflect what the company says was the actual prices agreed.
65. I put to Mr Arnold what the commercial object could possibly be of an arrangement under which, by agreement, GSK would invoice the company, and the company would pay, for the goods delivered at what, on the company's case, was a wholly inflated price only to have the parties get together three or so months later to revisit the price paid by applying what, the company contends, were p arced price reductions, discounts on those reduced prices and a substantial free-of-charge element in addition. Mr Arnold was unable to offer any explanation for this strange method of trading.

Three other matters

66. Before coming to my conclusions there are three other matters that I should mention. The first is the emphasis placed by the company on the discrepancy between the credit limit allowed to it by GSK of £1.9 million at the start of January 2002 (increased, it seems, to £3.5 million in March 2002) and its alleged indebtedness of £5.5 million odd by May 2002. The company questions how GSK could have allowed this to occur. GSK does indeed assert that the company's indebtedness rose very steeply. But whether or not GSK was wrong to extend so much credit to the company is irrelevant, it says, to whether the petition debt is well founded.
67. For what it is worth, an explanation for this sudden increase in GSK's claims is contained in paragraph 4 of Mr Rix's third witness statement. It amounts to this. First, GSK had wrongly credited the company with £860,000 odd of VAT (the precise figure is £861,118.26: see bundle B(1)/3188). Following the discovery of this in December 2001, GSK made an adjustment to reflect its failure to include this amount in what the company owed to it. The position here is that until March 2001 or thereabouts GSK would issue an invoice for the cost of a particular delivery of goods including the VAT relevant to that supply but would not expect to receive - and did not receive - the VAT in question. The VAT so charged would be accounted for on OSK' s periodic VAT returns. When the company sent GSK proof of export by it of the goods supplied to it by GSK - such proof coming in the form of air waybills – GSK would issue the company with a credit note for the amount of the VAT. It would then reclaim from HM Customs and Excise the VAT which it had paid. It appears that the so-called export house rules which regulated this practice changed with effect from 1 April 1999 although for some months after their introduction GSK failed to give effect to the change. Thenceforth, GSK was obliged to charge and recover from the company the VAT on its supplies (and then to account for that VAT in its periodic returns), leaving it to the company to recover the VAT so paid. It was only in October 2001 that GSK realised that there had been a change in the export rules. It led to a sudden increase in the company's liabilities to GSK. This sudden increase in liability was more apparent than real because, having adduced evidence of the export of the goods in question, the company was entitled to - and did - recover the VAT in respect of those goods from HM Customs and Excise: see paragraphs 2 to 6 of Mr Mitchell's fourth witness statement indicating a VAT repayment of £611,448.74 as at 6 June 2002. Indeed, one of the ironies of the company's stance is that, although it challenges the invoices as grossly inflating the prices for the products delivered to it, it seems nevertheless to have been content to rely upon the amounts set out in those invoices when seeking and obtaining its VAT repayments.
68. Secondly, GSK made a substantial delivery of goods in February 2002 but erroneously invoiced all of them as free-of-charge. The error had come about because the delivery had included 400 packs of Combivir (in the value of £60,000) which were intended to be free of charge although the remainder of the delivery (Combivir, Epivir and other goods) with an invoice value of £907,000 were not. As soon as the error was discovered corrective invoices were sent out: a free-of-charge invoice (for VAT purposes) for the 400 packs of Combivir intended to be supplied free of charge, and, separately, an invoice covering the remainder which, with VAT, came to £1,076,225. GSK's ledger account with the company was then adjusted by including that amount and the replacement invoices sent out in May 2002.
69. Thirdly, GSK delivered in error a quantity of Zeffix to the company in April 2002 which, it is common ground, the company had not ordered. However, the company has made no attempt to return the goods -instead it has simply kept them - and GSK has therefore invoiced the company for these additional goods. This happened in May 2002.
70. These three items had the effect of increasing the company's indebtedness to GSK by around £2 million of which approximately £1 million represented YAT which, as I have mentioned, it is open .to the company to recover upon submitting proof of export of the goods in question.
71. The second of the three matters is Mr Mitchell's reference to the fact that, as he admits in his evidence, Mr Jones kept notes of his face-to-face meeting with Mr Mitchell. The company complains that these notes, insofar as they still exist, have not been produced. It contends, as I understand it, that if the notes are still available and are produced, there may be some support in them for its stance, for example in relation to what was agreed at the meeting between Mr Jones, Mr Silverman and Mr Mitchell on 3 October 2000.
72. Thirdly, the company refers to the price charged for Ventolin as showing, it says, that GSK was happy to manipulate product prices when it suited it to do so. My attention, in this regard, was drawn to paragraph 4 of Mr Rix's second witness statement in which Mr Rix explains that the price of Ventolin was increased to £2 93 per pack but, at the same time, the price of Combivir was reduced from £150 per pack to either £125 or £100. He then explains:

"The reason for these changes is that there were times when GSK wished to show the values of sales for certain groups of products was increasing. Their reason for increasing the price of Ventolin, an anti-asthmatic product, was to raise the value of sales for respiratory products. UK Aid was aware of what was going on and was also aware that they were receiving discounts on Combivir which in fact far outweighed the increases brought about by increase in the unit price of Ventolin."

Mr Arnold submitted that this merely goes to show that GSK did indeed provide very generous credits (in that particular case to the extent of at least £120,000) and that GSK operated very flexibly in relation to how it priced its products. There is no reason, he submitted, why the company should have received this benefit unless, as Mr Mitchell stated in his evidence, it was part and parcel of an overall adjustment, or reconciliation, of the accounting position between them.

Conclusions

73. Although GSK advances a very powerful case against the company based upon the unpaid invoices, especially given the company's failure to respond in any substantive way to GSK's demands for payment until after being served with a statutory demand; I entertain sufficient doubts about the matter to cause me to feel unable to say with confidence that there is no substance to the disputes which the company has raised. To reject the company's claim that the prices agreed were not those appearing from the face of the invoices involves not just a rejection of Mr Mitchell's repeated and detailed assertions that, for reasons, he says, concerned with Mr Jones's wish to increase GSK's turnover in its dealings with the company in eastern Europe, the parties had agreed to make retrospective (downward) adjustments to the higher levels at which the goods were being invoiced to the company to reflect the various discounts, rebates and other terms which they had agreed, but also a conclusion that the documents to which Mr Mitchell refers, admittedly all of them internal to the company, evidencing what he says were the terms actually agreed (notably the typed note of the meeting on 3 October 2000) are false, ie that they have been produced with a view to presenting a false account of the company's dealings with OSK. That is not a conclusion that I feel I should reach on what is, after all, a summary proceeding where there has been no cross-examination of either Mr Jones or Mr Mitchell unless it is perfectly plain that that is what has happened or, as Mr Lopian endeavoured to persuade me, because those documents and Mr Mitchell's assertions cannot stand in the face of subsequent documents or conduct on the part of the company. Although I entertain doubts about the genuineness of some of those documents and about the accuracy of some at least of Mr Mitchell's assertions, I cannot say simply from a reading of a series of witness statements and from an examination of the invoices and other documents, that they are to be dismissed as either false or, if genuine, that they have been overtaken by subsequent events.
74. Quite what the course of dealing was between the parties in the early months of 2002 is far from clear. On any view there was a degree of confusion on GSK's part over what deliveries were to be made and the invoicing of those deliveries. It is also noteworthy that none of the deliveries (neither those on which the petition debt is founded nor those which are the subject of challenge in the company's Table 2 calculation) was preceded by a signed purchase order from the company it is common ground that the parties' dealings were conducted at face-to-face meeting or over the telephone. Indeed, it is the absence of any signed purchase orders that lies at the root of this dispute.
75. Moreover it is apparently the case and, to my mind, unsatisfactory given the extent of the evidence filed, that Mr Jones, now no longer with GSK, has not made available the notes which he took of the various meetings he had with Mr Mitchell except his brief note of the meeting with him on 21 January 2002. The figures appearing on that note are not wholly reconcilable with the prices claimed in the ensuing invoices. It is true that the repayment schedule of the previous year is based upon the invoice prices of the goods to which it relates (it does not cover all of the types of product supplied by GSK to the company) and contains no suggestion of any subsequent "reconciliation". On the other hand the payments for which it provides are in round sums rather than in the particular amounts of any given invoice and this is how, over the months, the company did indeed make payment. Such a mode of payment is not necessarily inconsistent with an understanding that, at some stage, there would be a reconciliation of the amounts paid with the amounts due. Belated though the company was in its detailed response to GSK's demands for payment, it made clear from the outset that it did not accept as accurate the invoices which GSK had sent to it and, when its response to the demands was forthcoming, that response was detailed and although it has since been refined (and some of the figures reworked) the company has remained broadly consistent in its approach.
76. It is true that it is very difficult to understand why, in addition to separately invoiced free-of-charge deliveries of Combivir, the company should also be entitled, as it claims, to a free-of-charge element in the price it was to pay for that product. On the other hand, it is difficult to see, although there may well be a good explanation, why, if GSK is correct, the only product among the range that it supplied to the company which attracted any kind of discount or rebate was Combivir (and then only to the extent of free-of-charge deliveries equivalent to 10 per cent of each order placed): the FOC calculator set out in Mr Jones's letter of 30 April 2000 indicated that the "calculator" was to apply generally to goods ordered by the company and suggested, if only by the example given, that the level of discount would be rather more than 10 per cent.
77. It may well be, as Mr Lopian submitted, that the company's defence to the petition is no more than a carefully spun cloud of unmeritorious objections but, as I have stated, I cannot say with any confidence on the evidence that I have seen that this is clearly the case. At the end of the day, I remain of the view, despite Mr Lopian's persuasive submissions, that this is a case where, in all the circumstances, OSK should first establish its debt against the company by a judgment of the court, before seeking to enforce those claims by recourse to the court's jurisdiction to wind up. Critical to this will be the evidence of Mr Jones for GSK and that of Mr Mitchell and, to a lesser extent, Mr Silverman for the company. I have considered whether I can identify some amount above the statutory minimum which, on any view, is due from the company to GSK which would justify the making of a winding-up order. I do not feel, given the range of the dispute, that I can. It follows therefore that the petition must be dismissed.