IN THE MATTER OF EQUITY & PROVIDENT LIMITED v IN THE MATTER OF THE INSOLVENCY ACT 1986 [2002] EWHC 186 (Ch)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
[2002] EWHC 186 (Ch)Case No Case No: 3141 of 2001Venue Royal Courts of Justice, Strand, London, WC2A 2LL
Between
IN THE MATTER OF EQUITY & PROVIDENT LIMITEDIN THE MATTER OF THE INSOLVENCY ACT 1986
Before
Mr Justice PattenMr. M. Gibbon (instructed by the Treasury Solicitor for the Secretary of State)Mr. L. Tamlyn (instructed by Class Law for the Company)Date 19 February 2002
[1]Mr Justice Patten: Introduction This is a petition presented by the Secretary of State for Trade and Industry which seeks the winding up of Equity and Provident Ltd. ("the Company") on grounds of public interest. Under s.124A of the Insolvency Act 1986 the Secretary of State has locus to present a petition if she considers on the information provided to her that it is expedient in the public interest that the Company should be wound up. The court has jurisdiction to make a winding up order on these grounds if it forms the opinion on the totality of the evidence presented at the hearing of the petition that it is just and equitable so to do.[2]The petition in its amended form relies upon the following allegations as constituting grounds for winding up the Company in the public interest: i) Its failure to co-operate with the requests for information made by the Secretary of State pursuant to the powers contained in s.447 of the Companies Act 1985; ii) The misleading nature of the motor warranty which constitutes the main business of the Company. Under the terms and conditions of the warranty the Company is not obliged to do more than to consider any claims made. There is no obligation to make payment. The warranty product is available to be purchased online from the Company's website but nowhere on the website (it is alleged) was there any indication of the terms and conditions of the warranty; and iii) The Company's manner of conducting business. This includes allegations that the Company placed on its website a business plan soliciting investments in the Company of up to £1.5 million without being authorised to conduct investment business under the Financial Services Act 1986 and falsely claimed in the business plan that certain legal and other professional advisors were to become non executive directors.[3]Before I come to the details of these allegations and the response of the Company to them it is necessary by way of background to mention something of the procedural history leading up to the effective hearing of the petition and the known facts about the Company.[4]The Company was incorporated on 16 th May 1997. Its registered office is at 2, Lansdowne Row, No. 12 Berkeley Square, London W1. These are the premises of Citybox, a firm which operates a mailbox service. The unchallenged evidence of Mr. Dennis Price, a member of the Investigation Branch of the Company Law and Investigations Directorate of the DTI who carried out enquiries into the running of the Company, was that the Company maintains a mailbox at this address which was applied for by Mr. Shahrooz Ghassemian on 12 th February 1998.[5]From the date of its incorporation until he resigned on 8 th June 1998 Mr. Ghassemian was the sole director of the Company. The file maintained by the Registrar of Companies indicates that on that date he was replaced by Equity & Provident LLC ("EPLLC"). This is a corporation registered in Delaware, USA. The form 288 filed at Companies House for the appointment of EPLLC was signed by Mr. Ghassemian and dated 8 th June 1998. The report of the Official Receiver who was appointed provisional liquidator of the Company on 16 th May 2001 in circumstances I will come to a little later in this judgment indicates that the form was not filed until 17 th May 2000, two months after the incorporation of EPLLC on 17 th March 2000. When this point was put to Mr. Ghassemian in cross-examination he said that EPLLC was formed in 1998 and a registration number allocated but that the formalities of incorporation were not completed until March 2000. Be that as it may the information provided by the Company's solicitors to the Official Receiver in a letter dated 24 th July 2001 discloses that the directors of EPLLC are three syndicates (Danville Syndicate, Westwood Syndicate and Sycamore Syndicate). Mr. Ghassemian owns ten per cent of the shares of EPLLC through a holding in the Sycamore Syndicate but this is said to have been acquired in January 1999 after EPLLC had taken control of the Company.[6]Mr. Ghassemian also provided the Official Receiver with an e-mail address for EPLLC and one for a Mr. Robert Ooshi who is said to be a shareholder in the Sycamore Syndicate. The e-mail address appears to be the same ( bobooshi@ureach.com ). E-mails sent to EPLLC by the Official Receiver in July 2001 were replied to by an autoresponder which merely promised a reply from the corporation within seven working days. Eventually on 28 th August 2001 an e-mail signed by Robert Ooshi and sent from the same e-mail address stated that:
"We had a few people, who ran Equity & provident limited in the UK, but as a result of the petition they left and we have no way of contacting them to get information that you seek. In Delaware we do not have Directors. There is no such title given to anyone. I hope to be able to give you our new office details by mid November when we will be installed in new offices. Previously our officer were at 2113 Greenbrook Avenue, Dover, Delaware 19901, but we have since last month moved, and temporarily do not recommend posting mail as it is susceptible to getting lost."
[7]On 29 th November 2001 the Official Receiver sent a further e-mail to EPLLC with a notice requiring the submission of a statement of affairs and the delivery of the Company's records. An e-mail in reply from Mr. Ooshi stated that access was required to the Company's website in order to access the documents. Until May 2001 the Company operated a website with the domain name equity-provident.com. The evidence is that this was registered to Equity and Provident (neither Limited nor LLC as such) and that the contact name for billing and administrative purposes was Mr. Ghassemian. The Company's solicitors have provided the Official Receiver with a copy of the licence granted by EPLLC as domain owner to the Company which entitles the Company to use the domain. It is dated 29 th May 1998 and was signed by Mr. Ooshi on behalf of EPLLC and by Mr. Ghassemian on behalf of the Company.[8]Following the Official Receiver's appointment as provisional liquidator of the Company arrangements were made to divert the website to a page within the Insolvency Service's own website. In June 2001 action was taken whereby this divert was rendered ineffective and attempts to access the Company's website resulted in a forbidden message being displayed. The Company's solicitors have denied in correspondence that Mr. Ghassemian was personally responsible for this but it seems to me obvious that this has been done by someone connected either to the Company or to EPLLC. Moreover to date EPLLC has provided none of the information regarding the Company which was requested by the Official Receiver nor has any postal address for EPLLC been provided.[9]The latest information on the website provided in a report from the Official Receiver dated 17 th January 2002 is that it is now functioning once again and can be accessed by the general public. These steps have again been taken without the consent of the Official Receiver.[10]The Company has a nominal share capital of £100 divided into ten shares of £10 each. Two shares have been issued which are shown registered in the name of EPLLC. The Secretary of the Company since 1997 has been Mrs. Hamila Ghassemian, the mother of Mr. Shahrooz Ghassemian. She lives at 56 Chatsworth Court, Pembroke Road, Kensington which is also the address of her son.[11]The principal business of the Company was the sale to members of the public on-line via its website of motor warranty plans. Although at all material times the Company also offered motor insurance, buildings and contents insurance, and travel insurance it is accepted by the Secretary of State that (in the case of motor and home insurance) this business was referred to a firm of brokers (Professional Insurance Brokers) and in the case of travel insurance to Select Insurance Intermediaries Limited for whom the Company acted as agents. No complaint is made about this. It is the motor warranties which have given rise to controversy in this case.[12]When the petition was presented on 15 th May 2001 it alleged in terms that by the sales of motor warranty policies the Company appeared to be conducting unauthorised insurance business. It also contained the allegations of failure to co-operate and the complaints about the manner in which the business was conducted which remain part of the Secretary of State's case. The petition was supported by an affidavit of Mr. Price sworn on 15 th May 2001 which states that the motor warranty business is the area which the Company wishes to expand and which has been the subject matter of complaints. In paragraphs 36-39 of his affidavit Mr. Price refers to enquiries made by the Financial Services Authority into the Company's warranty business. In November 2000 the FSA wrote to the Company reminding it that it was not authorised to transact insurance business under the Insurance Companies Act 1982 and requesting information on the products offered so as to enable it to form a view as to whether unauthorised insurance business was being carried out. This provoked lengthy correspondence between the Company and the FSA in which the Company insisted (as appears to be the case) that it consulted counsel (Mr. William Bojczuk) about the motor warranty scheme and was confident that it did not constitute insurance business.[13]Part of the FSA enquiry concentrated on the website biznet.maximzer.com which apparently contained details of warranty products that in the view of the FSA did amount to insurance. This site was accessed by the FSA by carrying out a search under the Company's name using the Google search engine. In a letter dated 30 th November 2000 Mrs. Hamila Ghassemian (whose name appears as a signatory on all the correspondence with the FSA) expressed surprise that this site had been accessed because it was a "private website" which only contained expired information. The FSA was invited to direct its enquiries to the main website at www.equity-provident.com.[14]On 27 th December 2000 the FSA requested Mrs. Ghassemian to supply a copy of the "typical warranty issued to your customers, together with a copy of any literature or other document which forms a contract between your business and a subscriber. I am particularly interested to see a copy of the relevant terms and conditions." This request was pursued in a further letter on 16 th January 2001 but the request of the FSA was not complied with. Instead beginning on 19 th January 2001 the FSA began to receive by fax correspondence from an S. Langroody (Esq.) with an address in Dublin, California asking (without reference to the Company) how as regulators the FSA defined the terms: "1. Insurance. 2. Carrying out Insurance Business. 3. Insurance Policy and/or Contract of Insurance. 4. Warranty." and asking the FSA to reply by fax to number 001-509-355-1049. The letter was signed S. Langroody in lower case letters using a typed italicised font.[15]Although not in terms a letter from the Company this enquiry was in almost identical terms to one contained in the letter to the FSA from Mrs. Ghassemian dated the 11 th January 2001. The FSA not unnaturally in the circumstances advised Mr. Langroody to seek legal advice and asked him if he had any connection with a UK company. In reply they received what can only be described as a bizarre letter referring the FSA to the judgment in Medical Defence Union v Department of Trade which it subsequently transpired formed the basis of Mr. Bojczuk's advice to the Company and Mr. Ghassemian's submissions to this court when he sought unsuccessfully to obtain the discharge of the appointment of the provisional liquidator. Both the letter of 22 nd January 2001 to which I have referred and a further letter sent by fax to the FSA from Mr. Langroody on 24 th January 2001 contained the fax footer "EQUITY AND PROVIDENT". Once this was pointed out to Mr. Langroody by the FSA he replied denying that he had any connection with the Company and saying that no such name was programmed on his machine.[16]During his cross-examination Mr. Ghassemian was asked about this. It was put to him and he accepted that in his passport his surname is given as Ghassemian-Langrody and that the electoral register of 56 Chatsworth Court includes the names of Shahrooz Ghassemian and Shahrouz Langroody as well as that of Mrs. Hamila Ghassemian. Mr. Ghassemian accepted that both were his names and that a Sartipi Langroody whose name also appears on the electoral register for the same address was his mother. Mr. Ghassemian also referred to Mr. Shahram Langroody, a relative who was a shareholder in one of the syndicates behind EPLLC. Mr. Ghassemian said that since (but not before) the proceedings began he had contacted this Mr. Langroody who had confirmed that it was he who had corresponded with the FSA in the letters I have referred to. When asked why these letters bore the fax footer "EQUITY AND PROVIDENT" Mr. Ghassemian replied that this may have been because he (Mr. Langroody) could have used an EPLLC fax machine in the USA. He then suggested as an alternative that the fax footer was printed onto the incoming faxes by the FSA's own fax machine. When asked why Mr. Langroody should have denied any connection with the Company when he was a shareholder in its only director (EPLLC) Mr. Ghassemian said that he did not know why Mr. Langroody should have lied. In conclusion he denied being the author of the letters.[17]I do not believe one word of this evidence. It seems to me obvious that the correspondence purportedly written by Mr. Langroody was designed to obtain some clarification from the FSA of its view of the scope of the provisions of the Insurance Companies Act which might assist the Company in the queries which the FSA had raised. To suggest that a letter written in similar terms only a few days later was an unconnected coincidence and that Mr. Langroody referred to English case law unprompted by Mr. Ghassemian or the Company simply defies belief. The more I listened to Mr. Ghassemian the more convinced I became that he was the author of this correspondence and was tripped up when the fax footers were brought to his attention. I also have no doubt as will become apparent when I come to deal with other aspects of this petition that he was responsible for the earlier correspondence to the FSA from his mother and has acted at all material times as a de facto director of the Company in all its relevant dealings with the FSA and the DTI.[18]The original petition also contained an allegation that in August 2000 the Office of Fair Trading wrote to the Company complaining that a marketing leaflet for its motor warranty products was misleading and that the standard terms and conditions were potentially in breach of the Consumer Contracts Regulations 1999. This remains part of the petition in its amended form which is relied upon only as part of the relevant trading history. As the petition records the Company's response was that the product referred to had not been sold for a long time and this has not been challenged by the Secretary of State. Its relevance, however, is that in her affidavit of 21 st May 2001 sworn in answer to the petition Mrs. Ghassemian confirmed that the insurance based product to which the OFT was referring had been replaced by a new warranty product which was not a policy of insurance and not therefore insurance business. Extensive reference is made in her affidavit to the decision of Sir Robert Megarry V-C. in Medical Defence Union Limited v Department of Trade [1980] Ch 82 which as I already indicated was the case referred to in the correspondence between the FSA and Mr. Langroody. In paragraph 14 of her affidavit Mrs. Ghassemian went on to emphasize that the new warranty product gave the customer no more than a right to have his or her claim considered at the sole discretion of the Company.[19]By the time Mrs. Ghassemian swore her affidavit the DTI had applied for and obtained ex parte the appointment of the Official Receiver as provisional liquidator of the Company. This occurred on 16 th May 2001. On 24 th May 2001 Mr. Ghassemian made an application to discharge the order of Lawrence Collins J appointing the provisional liquidator. Hart J adjourned the application to 5 th June 2001 to allow the Secretary of State to file evidence in reply to that of Mrs. Ghassemian. I observe in passing that Mr. Ghassemian told Hart J that he had been appointed an officer of the Company and produced a letter signed by a Mr. Meadows on company notepaper which stated that Mr. Ghassemian had been appointed as what is described as a director of affairs at an EGM held on 17 th May 2001. I shall return to the subject of Mr. Meadows when I come to consider the allegation of failure to co-operate.[20]The terms and conditions of the new warranty product were exhibited to Mrs. Ghassemian's affidavit despite her earlier failure to provide them when requested to do so by the DTI and the FSA. The Secretary of State therefore requested an adjournment to allow the document to be analyzed and its effect on the allegations in the petition considered. The learned judge acceded to this application. As a consequence the DTI carried out further investigations. On 31 st May 2001 Mr. Price swore a further affidavit detailing the results of a search which he carried out on 15 th March 2001. In that affidavit he says that he specifically tried to obtain details of the warranty terms and conditions on-line and in particular condition 15 which sets out the limited nature of the rights conferred by the warranty. His evidence is that he was unable to do so. From this he invited the court to conclude that a customer purchasing the warranty on-line would be unaware of the true nature of the product he was purchasing.[21]On the basis of this evidence an application was made to amend the petition by deleting the allegations that the Company was conducting unauthorised insurance business and by substituting a new allegation that the public was being misled as to the true nature of the warranty. The critical allegation about warranties is contained in what is now paragraph 16 of the amended petition which states as follows:
"The effect of the terms and conditions in that policyholders have no guarantee that, even if they satisfy all other conditions to make a claim, they will receive any payments; nor is there any indication of the criteria which will be applied in exercising that discretion. Nowhere on the Company's website is there any indication that the policy is anything other that a straightforward warranty policy whereby payment of a premium ensures cover provided that the repairs in question fall within the policy condition: on the contrary, the website states that the policy offers "peace of mind"
. There is no mention that the customers' entitlement is merely to have their claims considered and that payment is subject to the Company's discretion."[22]On 5 th June 2001 the Company's application to discharge the provisional liquidator came before Mr. Peter Leaver Q.C. (sitting as a Deputy High Court Judge). Once again Mr. Ghassemian sought to represent the Company. Mr. Leaver was not satisfied that permission should be given to allow Mr. Ghassemian to do so at the hearing but in the exercise of his discretion he allowed him to make submissions. Having heard Mr. Ghassemian the Deputy Judge refused to discharge the provisional liquidator and granted the Secretary of State permission to amend the petition. There then followed a further extraordinary turn of events. On the morning of 6 th June Mr. Ghassemian telephoned Mr. Leaver's clerk and told him that a member of the Lord Chancellor's Department had been in court on 5 th June and had subsequently telephoned Mr. Ghassemian to say that Mr. Leaver should have disqualified himself from hearing the application because he was a director of IMRO. Mr. Leaver then arranged through the Clerk of the Lists for the case to be relisted before him on 7 th June. In the meantime Mr. Leaver's clerk had attempted without success to verify with the Lord Chancellor's Department what he had been told by Mr. Ghassemian. This was complicated by the fact that Mr. Ghassemian said that he did not know the name of the official to whom he had spoken.[23]When the parties appeared before Mr. Leaver on 7 th June Mr. Ghassemian made submissions to the effect that there was a legitimate concern that the Deputy Judge may not have been impartial. He therefore invited Mr. Leaver to set aside his order and to remit the matter for rehearing before another judge. After hearing argument Mr. Leaver declined to do so. I mention this matter not because it has had any practical consequences but because it represents a further example in my judgment of the lengths to which Mr. Ghassemian is prepared to go in order to seek to obtain the result he wants. I am more than satisfied that the suggestion that he was telephoned by a member of the Lord Chancellor's Department was a complete fabrication on the part of Mr. Ghassemian. It seems to me most unlikely that any member of the Lord Chancellor's Department would have been in court to hear an application which was not even listed to be heard by Mr. Leaver but which was transferred to him by the Applications Judge (Etherton J) when Mr. Leaver became unexpectedly free to assist with applications. I also find it impossible to believe that a member of the Lord Chancellor's Department would contact a party to the application without first communicating with the judge. The reality is that Mr. Ghassemian invented this story in a vain attempt to obtain a rehearing of his unsuccessful attempt to discharge the provisional liquidator. Failure to co-operate[24]This has always been one of the two principal complaints against the Company and it remains unaffected by the amendments to the petition. Under Section 447 (3) of the Companies Act 1985 the Secretary of State is empowered to authorise an officer to require a company to produce such documents as the officer may specify. In his first affidavit Mr. Price sets out the steps which he took to investigate the Company and to obtain production of relevant documents under the authority of the Secretary of State. These included the enquiries about the registered office of the Company to which I have already referred. On 6 th March 2001 Mr. Price also visited 56 Chatsworth Court in an attempt to speak to Mrs. Ghassemian. The door was not answered and he posted through the letterbox a letter setting out the terms of his authority and requesting her to contact him.[25]On 14 th March 2001 Mr. Price telephoned the firm of MRI Moores Rowland who had prepared the Company's accounts for the year ending 31 st May 1999. He was told that the firm was no longer retained by the Company which now used the services of Guy Mayers Accounting Services Limited. Mr. Price then went to the premises of this company in the Portobello Road and spoke to Mr. Mayers. Mr. Mayers produced his file which contained documentation supplied by the Company to enable him to draw up the accounts for the year ended 31 st May 2000. This included bank statements for the Company's accounts with Lloyds Bank and the Bank of Ireland together with cheque and paying in books. Amongst this material was an invoice relating to some office premises rented by the company at the Macmillan House Business Centre at 96 Kensington High Street. A subsequent visit to these premises on 16 th March revealed that the company had vacated their office in the Centre some two years previously.[26]Earlier on 8 th March 2001 Mr. Price attempted to telephone the Company on the number 07020 961202 which was the contact number provided by Mr. Ghassemian to Citybox, the mail box service which constitutes the Company's registered office. The phone was answered by a man who said that Mr. Ghassemian was not in his office and suggested that Mr. Price should either leave a message or ring back the following day. Mr. Price telephoned at about 10am the following day and was again told Mr. Ghassemian was not available but that someone would call back. Mr. Price left his name and telephone number and was then rung back some 20 minutes later by a man who gave his name as Peter Meadows. This is the same name as the person who appeared to have signed the letter of authority from Mr. Ghassemian to appear before Hart J on 24 th May 2001.[27]Mr. Meadows then proceeded to tell Mr. Price that Mr. Ghassemian had nothing to do with the Company and that Mrs. Ghassemian was out of the country making arrangements to wind down the Company's activities in the UK. When asked by Mr. Price if he had any management responsibility Mr. Meadows responded "Yes and no". He supplied Mr. Price with a fax number at which he could be contacted (070 5068 6508) which is the number on the Company's printed notepaper. Later that day Mr. Price faxed Mr. Meadows a letter containing a copy of his authority and a list of the documents which the Secretary of State required to be produced. These included financial records, promotional literature, copies of all agreements and contractual terms and conditions used in the conduct of everyday business, all correspondence with the Company's website designer and a record of all customers complaints.[28]The request for documentation was replied to by Mr. Meadows the same day. Mr. Price was referred to the website for copies of the Company's promotional literature but most of the requests for accounting and other financial records met with the response:
"Please refer to Companies House"
. None of this material was in fact available from that source. Mr. Meadows' letter concluded with the following sentence:
"Over the next few weeks and thereafter you will find that contacting me or anyone else will be very difficult as I told you we're winding down certain parts of the company."
[29]Mr. Price faxed to Mr. Meadows a reply (also dated 9 th March 2001) pointing out that none of the 13 items requested was available from Companies House and asking for the documents to be produced at a meeting which he proposed should take place on 12 th March. This request received the following response from Mr. Meadows:
"What I have is a uncomplete draft copy of what's filed at Companies House which is why I pointed you at their direction. If they haven't got what you need then unfortunately for you neither have I. I'm not being evasive its just your list is so weird that I didn't even know we had to maintain the answers to those things at any moment in time. I mean why do you care who designs or gives us access to the internet. Therefore you may like to rearrange your Monday afternoon timetable as me turning up at your office for no apparent reason is a waste of my time and yours. Having said that I wouldn't mind poping over at some time in the future to see Michael Heseltine's old office if that's possible (I'm a bit of a fan of his). He's quite good isn't he."
[30]At the same time Mr. Price sought and obtained information from the Company's bankers. On 8 th March 2001, only a day before Mr. Meadows had denied any connection between Mr. Ghassemian and the Company, Mr. Ghassemian had written to Lloyds Bank on Company notepaper describing himself as director. He had applied to the bank for a loan of £210,000 which he intended should be guaranteed under the DTI SBS Small Firms Guarantee Scheme. The key document provided to Lloyds Bank was a copy of a Business Plan. This indicates that "the Director" intended to make £110,000 of his own resources available to the Company which with the loan of £210,000 would be used "to mass market our warranties". Particulars of the motor warranty plans and their attractions are set out in some detail and at page 5 of the document the following statement is made:
"Mr. William Bojczuk QC has drafted the Warranty Contract such that it does not fall foul of UK laws on the Warranty being classed as an insurance product and thus require an authorised underwriter, which is why the product attracts Value Added Tax as opposed to Insurance Premium Tax. Hence, income derived from sales will all remain within the remit of the company and not be shared with any third parties. Save for overhead and claims payouts, the funds will be able to be investigated as and when appropriate in the future."
[31]On page 10 of the Business Plan under the heading "Our Management and whose Doing what" it states that "the Company will be headed by Shahrooz Ghassemian who set-up and is fully committed to running the Company." Mr. Ghassemian is also listed as the point of contact for further information earlier in the document with the fax number which Mr. Meadows gave to Mr. Price and with an e-mail address of Shahrooz@equity-provident.com . His CV is also contained as an appendix to the Plan. This says that from 1997 to the present time he has been involved with the set up and operation of the Company.[32]The Bank of Ireland produced a copy of the application form completed by Mr. Ghassemian in order to open up the Company's account with that bank. In it he describes himself as a director of the Company with a salary of £25,000 although the Company's accounts for the years ended 31 st May 1999 and 31 st May 2000 do not record such a salary being paid.[33]The apparent contradictions between the information contained in these documents and that provided to Mr. Price by Mr. Meadows are dealt with in Mr. Ghassemian's witness statements of 29 th June and 23 rd October 2001. In his first witness statement he denies that he and Mr. Meadows are one and the same and says that he was not responsible for Mr. Meadows' statement that he (Mr. Ghassemian) had nothing to do with the Company. In his second witness statement he repeats his denial that Peter Meadows was an alias for himself but accepts that the responses of Mr. Meadows to the DTI's request for information were "inadequate, misleading and plain wrong". These letters were, he says, written by Mr. Meadows without previously conferring with Mr. Ghassemian or his mother.[34]These points were put to Mr. Ghassemian in cross-examination. He said that Mr. Meadows was an Australian who answered an advertisement on the Company's website for a vacant position. He worked not for the Company but for EPLLC in its offices at the Angel in Islington. However he carried out some work for the Company during this time. When it was put to Mr. Ghassemian that the search carried out by the Official Receiver on EPLLC indicated that the corporation had never traded he said that the report was wrong and that the corporation had acted as brokers. He said that the number (07020 961202) dialed by Mr. Price was the number of the Angel office. Mr. Ghassemian was then asked about two letters dated 17 th and 21 st May 2001 written by Mr. Meadows to the Treasury Solicitor following the service of the petition. In the first letter Mr. Meadows states that the allegations of carrying out an insurance business were incorrect in the light of the current terms and conditions of the motor warranty. The letter says that a copy of those terms and conditions "will be made available to you and general customers at large and which we currently sell". In the second letter there are extensive quotations from the judgment in Medical Defence Union v Department of Trade coupled with what can only be described as a threat to operate the motor warranty business from abroad via the Internet and so avoid "this type of hassle". On the second page of this letter the following explanation was given as to why the terms and conditions of the motor warranty contract had not been provided as requested:
"You are correct in that I did not sent the DTI guy the contract because he is not a lawyer, he does not know what to look for if at all. Neither does the FSA individual who contacted us. These are people who have little expert knowledge of these matters or matters in general and can easily get confused. Nonetheless the contact was sent to the DTI Insurance Directorate as it was known then and approval of its terms was received. I am not sure if you have a copy, as it was not exhibited which is why I am attaching you a version. But you need a copy of the above case transcripts before you read our terms. We have never been against making available the contract, we are against making it available to unqualified people."
[35]It was pointed out to Mr. Ghassemian that the letters were signed by Mr. Meadows using the same type font as the letters to the FSA from Mr. Langroody which I dealt with earlier in this judgment. The letters from Mr. Meadows to the Treasury Solicitor are also headed "Without Predjudice" ( sic ) and this same misspelling is repeated in a later letter to the Treasury Solicitor from Mr. Ghassemian dated 7th June 2001. Mr. Ghassemian's response was that the "Without Predjudice" heading had been cut and pasted on to his own letter. When asked why Mr. Meadows had not appeared to give evidence Mr. Ghassemian admitted that no effort had been made to secure his attendance.[36]I am satisfied on the evidence that none of the letters written by Mr. Meadows to Mr. Price and to the Treasury Solicitor was the unassisted work of Mr. Meadows. Even if Mr. Meadows exists (which I doubt) it seems to me to be unlikely in the extreme that the formulation of a response to the DTI and later the Treasury Solicitor would have been delegated to a casual employee of the US shareholder corporation rather than dealt with by the person who in his submission to Lloyds Bank was content to portray himself as the founder and director of the Company. The reality in my judgment was that Mr. Ghassemian used the fiction of Mr. Meadows as a convenient method of distancing himself from the DTI enquiries just as he used the alias of Mr. Langroody as an attempt to obtain some advantage in his dealings with the FSA. The correspondence allegedly written by Mr. Meadows is not that of a person whose first language is English. There are a number of infelicities of expression which are unlikely to have been used by a genuine Mr. Meadows. For example the letter of 17 th May refers to the "different" between a warranty and an insurance policy and "the time from where" the contract was an insurance policy. It concludes by expressing the hope that "you will not embarrass us in operate from international jurisdictions". I have reached the conclusion that all of this correspondence was written by Mr. Ghassemian and that he must take full responsibility for the untrue statements made about Mr. Ghassemian's involvement in the Company, the refusal to comply with the requests for documents and information made by Mr. Price and the deliberate attempts to discourage the DTI enquiries and subsequent proceedings with threats to take the business abroad and to set up other companies. This culminated in the letter from Mr. Meadows to the Treasury Solicitor dated 21 st May which contained the following passage:
"You go on to say that we would be very "keen" to forward a copy of the contract if we are not selling an insurance policy. Again what we're keen on is to sell our product, we're not keen on necessarily selling from the UK (especially with all this type of hassle). We can sell from anywhere. But sell we will come what may. You need to ask yourselves what you want to achieve. I believe it is to prevent us selling what you think is an insurance contract to UK motorists. We know that it isn't and in any event you cannot possibly achieve your aim. At the very most what you can achieve is to wind up a limited company. We can set up another, and another, and so on, whose going to stop me? You should look at a way of solving the problem not just shifting it from one entity to another, and by pissing us off (if you pardon the expression) you make us more determined to show you up."
Mr. Ghassemian's later description of his correspondence (presumably on advice) as "inadequate, misleading and plain wrong" is an entirely accurate criticism of his own behaviour.[37]There is one further aspect of the complaint about non co-operation which I need to mention. On 6 th April 2001 Mrs. Ghassemian replied to the letter which Mr. Price delivered to 56 Chatsworth Court on 6 th March. The letter enclosed draft accounts for the period to 31 st May 2000 but no other documents. This reply is said by the Secretary of State to be inadequate and in part misleading. It fails to refer to the motor warranty business; it says that there has been no correspondence with the banks; and it states that " we do not enlist the services of an auditor" when the Company had instructed MRI Moores Rowland and subsequently Guy Mayers Accounting Services Limited to prepare its accounts. Mrs. Ghassemian states in her affidavit of 21 st May 2001 that although the Company did instruct these accountants to prepare annual accounts it did not require them to carry out an audit. In his second witness statement Mr. Ghassemian asserts that his mother did not attempt to mislead anyone and was attempting to provide the information which she believed was being sought. I have little doubt that the correspondence between Mrs. Ghassemian and the DTI, like that between her and the FSA, was written by Mr. Ghassemian. The signatures on Mrs. Ghassemian's letter to the FSA of 16 th November 2000 and that of Mr. Ghassemian on his letter of 8 th March 2001 to Lloyds Bank are all but identical and there is no evidence that Mrs. Ghassemian ever played an active or indeed any real role in the running of the Company. All the evidence to which I have referred points to Mr. Ghassemian as the directing mind of the Company and the author of the correspondence which I have to consider. That said the allegations made in respect of the letter of 6 th April really add nothing of substance to the complaint made about the correspondence involving Mr. Meadows and I need say no more about them. Motor Warranties[38]As I have already indicated the petition was amended to allege that the public was misled about the terms of the warranty based upon a search on the Company's website which was carried out by Mr. Price on 15 th March 2001. His evidence was that he was unable to locate the terms and conditions on the site. In her affidavit of 21 st May 2001 Mrs. Ghassemian alleges that the terms and conditions were supplied to and approved (with some slight corrections) by the DTI Insurance Directorate in 1998. There is evidence in the form of a letter from Mr. Richard Butters of the FSA that he did have a conversation with Mr. Ghassemian in about 1998 in general terms as to whether a warranty scheme might conflict with the relevant legislation on insurance companies but Mr. Butters is clear that the Company did not submit a written proposal for the DTI (later the FSA) to examine. On 25 th May 2001 the Treasury Solicitor wrote to Mr. Ghassemian asking for copies of his correspondence with the DTI in 1998 but no reply to that letter has been received.[39]This evidence is strongly contested in Mr. Ghassemian's first witness statement of 29 th June 2001. He says that in April 1999 he sought advice from his solicitor, Mr. Howard Epstein of Class Law as to whether he could lawfully operate a motor warranty scheme. Mr. Epstein instructed Mr. Bojczuck of Counsel who advised that the scheme could not operate by means of an insurance policy and that in order to avoid this the terms and conditions of the warranty must make it clear that the Company retains a discretion as to whether or not to meet warranty claims. On the basis of this advice a website was created on which the terms and conditions (drafted in accordance with Counsel's advice) were set out. They were accessible via a hyperlink on the homepage of the website and the site was so designed as to require a potential customer to scroll down through the terms and conditions before being able to purchase a warranty online. Further details of this are contained in paragraph 11 of the witness statement. In a later affidavit (sworn on 27 th June 2001) Mr. Peter Bott, who was Mr. Price's Case Supervisor, referred to a search on the website which he carried out on 5 th March 2001. Although he did not make a printout of the pages which he visited he says in that evidence that he does not recall the hyperlinks referred to by Mr. Ghassemian.[40]On 25 th March 2001 and again on 14 th May 2001 Mr. Price had printed out several pages of the website. These are (www.equity-provident.com/msg2.htm) headed "Products in Detail" which give information about the types of warranty available but do not include any reference to the terms and conditions. There is however a reference to complete and in-depth listings of the products being available by going to the "On-line Products" option choosing a warranty plan and then clicking on the relevant band of plan. At the end of the pages printed off by Mr. Price is the following. "Q17. What do I do now to buy On-Line? Click on 'On-line Cover from the left hand side option. Then select the Warranty you're interested in, the rest will become self-explanatory." Mr. Ghassemian says in his witness statement that this evidence is incomplete. He produces as an exhibit to his statement various pages printed from the website which bear the date of 16 th December 1999. As can be seen from the exhibits to Mr. Price's affidavit this is the date recorded when a printout from a website is made. Mr. Ghassemian's evidence is that on the home page there was a hyperlink to "On-line Products" which when clicked brought up another page (www.equity-provident.com/catalog.htm) on which four types of warranty plan were specified. By selecting any one of the four plans the customer was automatically directed onto the page containing the terms and conditions (www.equity-provident.com/itmidx1.htm). At the foot of the terms and conditions was a box for the insertion of the customer's e-mail address followed by two buttons labeled "I agree" and "I decline". There is in fact no hyperlink on the homepage marked "online products" but Mr. Ghassemian was I believe referring to the link labelled "On-line Cover" which is referred to in the extract quoted above from the page printed off by Mr. Price.[41]The dispute about the contents of the website is taken further in Mr. Ghassemian's second witness statement of 23 rd October 2001. In paragraph 15 of that statement Mr. Ghassemian confirms that by clicking on the link "Motor Warranty" on the homepage one brought up the pages accessed and printed off by Mr. Price on 6 th March and 14 th May 2001. If the customer clicked on "On-line Cover" he was taken to the "On-line Products" page. By selecting a particular warranty the customer would then be taken to the page containing the terms and conditions culminating in the "I agree" and "I decline" buttons. If the customer clicked "I agree" he was sent an e-mail from the Company to the address he had entered. This e-mail offered to the customer an opportunity of cancelling his order. The customer was also given a 21-day cooling off period in which he could change his mind and obtain a refund of his money.[42]Mr. Ghassemian says in his witness statement that he is unable to explain why Mr. Price failed to access the terms and conditions page but that the statistics chart relating to Mr. Bott's search on 5 th March 2001 show that he spent over 33 minutes on-line and that he visited page www.equity-provident.com/itmidx1.htm which in Mr. Ghassemian's exhibited printout is the terms and conditions page. He therefore asserts in terms that the evidence of Mr. Bott was false in so far as it attests to there having being no terms and conditions on the website at the date of his visit.[43]Mr. Bott replied to this evidence in his second affidavit sworn on 20 th November 2001. He expressed some hesitation about accepting the time of his search (9:12 to 9:45am) shown on the statistics chart because it was carried out from his own computer in his flat and would have necessitated his returning to his flat soon after going to work. However Mr. Bott very fairly accepts that his recollection of the search (during which no printout was made) is not sufficiently clear to enable him to dispute Mr. Ghassemian's account of the pages which he opened. This was the position he maintained in cross-examination.[44]The evidence about the contents of the website contains one final twist. Following a request from the Company's solicitors the Secretary of State disclosed further documentation on 6 th December 2001 including correspondence between the FSA and the DTI in January 2001 about the Company's failure to provide information about the nature of its motor warranty business. This includes the correspondence with Mrs. Ghassemian and subsequently Mr. Langroody to which I have already referred. As part of the FSA's enquiries a printout of pages from the company's website was made on 15 th January 2001. The significance of this is that it predates the searches of Mr. Price and Mr. Bott but postdates the printout of 16 th December 1999 exhibited to Mr. Ghassemian's witness statement. It is also relevant to the assertion contained in both of Mr. Ghassemian's witness statements that the state of the website at the time of the FSA enquiries late in 2000 can be seen from an examination of 15 floppy disks containing backup copies of the website. According to Mr. Ghassemian's witness statements when signed these disks show that the site remained un-amended from February 2000 until April 2001.[45]In the printout made by the FSA the "Products in Detail" page is www.equity-provident.com/msg2.htm just as in the printout made by Mr. Price. But the FSA has also printed out pages including www.equity-provident.com/itmidx1.htm which contain the details of the four types of motor warranty listed on the On-line Products page at the address www.equity-provident.com/catalog.htm printed out by Mr. Ghassemian. It seems clear that by clicking on one of the four warranties on that page the customer was taken (in the case of the entity warranty) to itmidx1.htm in order to choose the band of warranty required and not directly to the terms and conditions as stated by Mr. Ghassemian in his evidence. In addition the terms and conditions pages exhibited by Mr. Ghassemian themselves bear the web address www.equity-provident.com/itmidx1.htm which as at 15th January 2001 was the on-line products page relating to the entity warranty. The Secretary of State contends that they could not have co-existed with the pages printed out by the FSA on a website whose content had remained unchanged since February 2000. Moreover Mr. Ghassemian's evidence that Mr. Bott accessed page itimdx1.htm on 5 th March 2001 confirms (in the light of the FSA printout) that he did not access the terms and conditions page.[46]Faced with this evidence Mr. Ghassemian made a third witness statement dated 14 th December 2001 stating that significant changes had taken place in the website in the summer of 2000 as indicated in a letter from Mrs. Ghassemian to the FSA dated 9 th January 2001. Although that letter does not detail the changes made it does refer to alterations being made during the middle part of 2000. At the start of his evidence Mr. Ghassemian also retracted the statements about the fifteen disks contained in paragraphs 9 and 42 of his first witness statement and restricted himself to saying the website had never contained a business plan of any nature at any time. The business plan is relevant to another complaint about the running of the Company which I shall come to later in this judgement. But for present purposes I am concerned only with the state of the disks. It was put to Mr. Ghassemian in cross-examination that the first time when he alleged that the terms and conditions were to be found on the Company's website was at the hearing on 5 th June 2001 by which time the Secretary of State was seeking leave to amend the petition to include an allegation about misleading the public. Mr. Ghassemian said that the terms and conditions were sent to the Treasury Solicitor by Mr. Meadows under cover of his letter of 21 st May 2001. Although that is correct that letter does not in terms refer to their being found on the website nor are the pages which were sent printouts from the website itself. Moreover in the earlier letter of 17 th May 2001 Mr. Meadows also refers to the terms and conditions being "made available to you and general customers at large" which is more appropriate as a reference to a printed document than to a page on a website.[47]Mr. Ghassemian was then asked about the structure and contents of the website. He said that by pressing the button labeled "On-line Products" on the catalog.htm page the customer was taken to the terms and conditions. When it was put to him that in his written evidence (paragraph 11 of his first witness statement and paragraph 15 of his second witness statement) he said very clearly that the "On-line Products" button was the hyperlink to the catlog.htm page itself and that the terms and conditions had to be accessed by selecting one of the four particular warranties he responded that the terms and conditions were part of the catalog.htm address. It was then pointed out to Mr. Ghassemian that this was not the web address on the printout of the terms and conditions page exhibited to his witness statement. He said that an expert witness could be called to explain this.[48]It seemed to me that there were obvious difficulties about accommodating the terms and conditions within the known pages of the website in the first half of 2001 unless the address www.equity-provident.com/itmidx.1.htm on the printout produced by the FSA had in December 1999 been used as the address for the terms and conditions and that the pages printed out by the FSA then used a different address. One possibility is that the web addresses were changed in the summer of 2000 as part of the modifications referred to in Mr. Ghassemian's third witness statement. This would solve the difficulty about the use of the same web address for different pages on the same site but it would not of itself resolve the other difficulty in Mr. Ghassemian's evidence that access to the terms and conditions page was obtained by selecting one of the four warranty plans. On the basis of the FSA printout this would appear to take a customer to the on-line Products page specifically dealing with the bands of the particular warranty and not the terms and condition of the warranty itself. However at the conclusion of Mr. Ghassemian's evidence Mr. Tamlyn (as counsel for the Company) applied for permission to put in an expert's report from a Mr. Stephen Goodman dealing with the contents of the 15 floppy disks. I acceded to this application on terms that the Secretary of State should be permitted to adduce expert evidence on the same matters and that the Company's solicitors should provide a witness statement setting out the dates and circumstances in which the 15 disks came into and remained in their possession.[49]On 18 th December 2001 Ms Joanne Jefferies of Class Law made a witness statement containing this information. She confirmed that when her firm was instructed in June 2001 Mr. Ghassemian handed over to them two boxes containing the 15 disks. These remained in their possession until 7 th December 2001 when Mr. Ghassemian asked for their return and they were handed back to him. The disks were returned to Class Law on Monday 10 th December 2001. On 14 th December 2001 Mr. Ghassemian again removed the disks from the custody of Class Law in order to obtain Mr. Goodman's expert report and the disks remained with Mr. Goodman until 19 th December. The Company's solicitors have not examined or copied the disks and cannot therefore comment on their contents. Prior to June 2001 they have no knowledge of the disks. I am therefore entirely dependent upon Mr. Ghassemian's evidence as to the state of the disks and what they contained prior to June 2001. It is also clear that the disks were lodged at Class Law some time after the hearing on 5 th June 2001 on which the Secretary of State was given permission to amend the petition by including the allegations that the terms and conditions were not accessible on the website.[50]When the hearing resumed earlier this term I was provided with evidence from two experts; Mr. Goodman on behalf of the Company and Mr. Craig Earnshaw on behalf of the Secretary of State. Although Mr. Goodman lives in the same block of flats as Mr. Ghassemian he has put in evidence to the effect that he has had no previous connection with him and the Secretary of State has not contended that I should not treat his evidence as that of an independent expert. Both experts met before the resumed hearing and helpfully compiled a joint statement setting out matters of agreement and the issues on which they were unable to agree. Given the measure of agreement between the experts Mr. Gibbon (for the Secretary of State) did not seek to cross-examine Mr. Goodman. Mr. Ghassemian (who by then was acting again for the Company himself) questioned Mr. Earnshaw about his expertise but none of this evidence took the matter any further.[51]What the expert evidence shows is that on the disks dated 21 st February 2000 to 25 th August 2000 all the copies of the file itmidx.1.htm are identical and that this file (as exhibited on the printout by Mr. Ghassemian) contains the terms and conditions of the warranty. The copies of this file on these disks all have the same "File Creation"; "Last Modified" and "Last Accessed" date of 12 th June 1999. On the disks dated 29 th September 2000 to 27 th April 2001 copies of the file itmidx.1.htm are also identical but the contents of the file correspond to the On-line Products Entity Warranty page printed out with that file name by the FSA on 15 th January 2001. The copies of that file also have a common File Creation, Last Modified and Last Accessed date of 24 th May 1999 which despite the date of the backup disks pre-dates the date and time attributes of the earlier versions of the web site. The file containing the terms and conditions on the disks dated 29 th September 2000 to 27 th April 2001 is catalog.htm which again has the same File Creation, Last Modified and Last Accessed date of 28 th September 2000. On the earlier disks that file contains the On-line Products page from which according to Mr. Ghassemian it is possible to get directly to the terms and conditions.[52]A further curiosity revealed by the experts is that the version of the files "itmidx.2.htm", "itmidx.4.htm" and "msg1.htm" printed out by the FSA on 15 th January 2001 differs from the version of the same files contained on the same disks dated 29 th September 2000 to 27 th April 2001. In order to explain this anomaly Mr. Ghassemian produced at the adjourned hearing a copy of an e-mail dated 15 th January 2002 from a Mr. Rowland Turnbull who is said to be the website designer. According to this e-mail the site was re-designed "in parts" between August and October 2000. Further changes in the text and colouring of the three pages I have just mentioned were made on 4 th January 2001 and then discarded on 23 rd January 2001. This, Mr. Ghassemian says, explains why the pages printed out by the FSA on 15 th January 2001 differ from those on the disks. Mr. Turnball was not called to substantiate this in evidence and I am not prepared to accept the e-mail as a genuine statement of the position. No mention was made of further changes to the web site after the summer of 2000 until the experts noted the discrepancy between the contents of the disks and the FSA printout. I am afraid to say that I regard this as another fabrication by Mr. Ghassemian.[53]The time and date attributes of the files catalog.htm and itimdx1.htm are obviously important because they ought if correct to indicate when the contents of those files (if at all) were changed. It is critical to the Company's case to show that the terms and conditions contained now in catalog.htm were until September 2000 contained in file itmidx1.htm. One obvious difficulty however about the disks is that although the file creation and last modification date of the current version of catalog.htm is 29 th September 2000 the file creation and last modification date for the current version of itmidx1.htm is 4 th May 1999. This suggests that itmidx1.htm in the form printed out by the FSA in January 2001 had existed under that file name since May 1999. Yet from 12 th June 1999 a file with the same name is said to have come into existence containing the warranty terms and conditions. It was put to Mr. Ghassemian during his cross-examination that either in June or early December 2001 he altered the contents of the web site on the back-up disks so as to include files containing the terms and conditions. Both experts agreed that it was possible for someone to modify the date and time attributes of a file resident on a floppy disk of the kind used without leaving any evidence of having done so. Where they disagree is whether Mr. Ghassemian had either the time or the skill to do that. Since I have no evidence as to Mr. Ghassemian's precise level of computer skill it is difficult to form any sure conclusion about this based simply on the contents of the disks and the periods of access Mr. Ghassemian had to them once the amendments had been notified to him. But the possibility that the disks could have been modified coupled with the views which I have already formed about Mr. Ghassemian's inclination to deception have led me to conclude that I am unable to rely upon the disks as containing an accurate record of the contents of the Company's web site at any material time in the absence of some independent corroboration. This view is confirmed by the differences between the FSA printout and the content of the disks for the same period.[54]In his second witness statement Mr. Ghassemian says that the Company had sold about 150 warranties and despite the discretionary nature of the terms of payment has always met bona fide claims. He exhibits to his statement a selection of claims made and the documentation relevant to each claim. These include claim forms filled out by hand by individual customers. Also included in this material are said to be e-mails to the Company from customers querying why under the terms and conditions of the warranty the Company is not obliged to meet a claim. Mr. Ghassemian relies upon these e-mails as confirmation that the terms and conditions were made known to the customers at the time of their purchase of a warranty plan. The two most relevant e-mails are from a Mr. Alan Amoasi of 14 Sloane Avenue Mansions, London, SW3 and a Mr. Willem Schwabacher of Reigate, Surrey. In response to this evidence Mr. Price carried out searches on the electoral roll against these names. No entry was found for either Mr. Amoasi or Mr. Schabacher. Similar enquiries were made in relation to the customers who are listed by Mr. Ghassemian as having complained. Once again the primary sources of the enquiries made was the electoral roll and many of the individuals named on the warranty claim form could not be traced in this way at all. Of those who could be traced one (a Mr. Cradddock) said he was very dissatisfied with the service he received and another (a Mr. Charles) said that he had no complaint about the service. Five of the customers listed had died since the date of the claim. In the case of one these, a Mr. Patmore, the DTI was informed that he had never driven a car. This was put to Mr. Ghassemian as evidence that he had fabricated the evidence of claims but I am not prepared from this evidence to make any such finding. It seems to me most unlikely given the existence of genuine claimants that Mr. Ghassemian would have gone to the trouble of falsifying one or more additional claims. Moreover this evidence is not really critical to the central allegation made against the Company that the terms and conditions were both misleading and were not sufficiently notified to a potential customer on the web site. In relation to that allegation the most important part of this additional evidence comprises the two e-mails to which I have just referred. I have considerably more doubt about the reliability of this evidence. Neither Mr. Amoasi nor Mr. Schwabacher has been traced and in their absence I attach no weight to this evidence.[55]Finally in this context I should mention one other piece of evidence. When Mr. Bott searched the Company's website on 5 March 2001 he sent to the Company an e-mail containing an enquiry about the products they offered. On the same day he received an e-mail in reply confirming receipt of his enquiry. On 6 March Mr. Bott telephoned the company using the number on the website. He spoke to Mr. Ghassemian. The conversation was taped and I have been shown a copy of the transcript. After giving his name Mr. Bott asked Mr. Ghassemian a number of questions about the motor warranty offered and was told by Mr. Ghassemian that it was not an insurance policy. All that the Company did was to offer advice on the claim. Mr. Bott says that he felt that Mr. Ghassemian had guessed that he was part of the DTI investigation and it seems to me that he could easily have assumed this from Mr. Bott's e-mail address of peter@westminster2.demon.co.uk. However even if the true nature of the warranty could be discovered by telephoning Mr. Ghassemian that does not detract from the Secretary of State's real complaint which is that the terms and conditions were not made sufficiently obvious to potential customers by being placed on a prominent part of the website.[56]The evidence about the state of the website at the time of the visits by Mr. Bott and Mr. Price is obviously far from complete. It would have been sensible for Mr. Price to have made an extensive printout of all possibly relevant pages from the site which would have avoided the controversy about its contents. I am not however satisfied from Mr. Ghassemian's evidence that the terms and conditions were placed on the site earlier than last year even though they may have been in existence before then. The constant changes in Mr. Ghassemian's account of how the terms and conditions could be accessed and the complete failure of the Company to bring their existence on the website to the attention of the FSA and the DTI when first asked seemed to me to point very strongly to their having been added to the site following the amendments to the petition in June 2001. Although there may have been changes to the site in the summer of 2000 I do not believe that the terms and conditions were by then part of the site and that all that was done was the exchange of file names and addresses. When I come later in this judgment to consider the relief sought it will be on the basis that it was only under the pressure of these proceedings that the terms and conditions came to be displayed on the website. Investment business[57]This is not put forward as a sufficient ground in itself for the winding up of the Company and I can deal with it more shortly. The petition alleges that in or around November 2000 the Company placed on its website a document which solicited investment of up to £1.5 million. What is not in dispute is that on 1 November 2000 MRI Moores Rowland wrote to the FSA enclosing a copy of a business plan which they said had been placed on the internet. The plan is the same document which in an amended form was subsequently sent to Lloyd's Bank in connection with the Company's application for the £210,000 loan referred to in paragraph 30 of this judgment. The specific complaint by Moores Rowland was that on page 10 of the plan it stated that Miss Fiona Hotston-Moore of Moores Rowland was to be appointed a non-executive director of the Company along with Mr. Bojczuk (Counsel who had advised on the warranty terms and conditions) and Mr. Epstein of Class Law, the Company's solicitors. None of these individuals had in fact been asked or had consented to act as non-executive directors.[58]The copy of the plan exhibited to Mr. Price's affidavit includes as a first page what seems to be the opening page of the Company's website at www.equity-provident.com. In fact the business plans was not placed on this website at all and no very satisfactory explanation was given by Mr. Price as to why he used a page from the website as part of the exhibit.[59]After receiving the complaint from Moores Rowland the FSA wrote to Mrs. Ghassemian on 20 November 2000 warning her that it was an offence under s.57(3) of the Financial Services Act 1986 for a person to issue an investment advertisement unless authorised to do so. No reply was received to that letter until 21 st December 2000 when Mrs. Ghassemian wrote stating that the Company's website was at www.equity-provident.com and that the FSA should refer to it for up to date information. In a subsequent letter of 9 th January 2001 Mrs. Ghassemian said that no business plan had been placed on that site. A similar denial is contained in her affidavit of 21 st May.[60]At the hearing before Hart J. on 24 th May 2001 Mr. Ghassemian said that a business plan had been placed on what he described as a "spoof" website but had not been placed there by the Company. In his first witness statement he said that the business plan had been placed by Moores Rowland on a password protected site of their own as part of the arrangements with the Company under which they were to prepare a business plan to assist the Company in obtaining investments. This evidence is contradicted by the information subsequently obtained from Miss Hotston-Moore. She says that her firm was not retained to prepare a business plan, did not prepare one and did not load one onto a website. Nor does the firm in fact have a website with restricted access set up for that purpose. Moores Rowland had never seen the business plans sent by them to the FSA until it was brought to their attention by a third party who had noticed the reference to the firm in it. The document was then referred to the firm's Compliance Officer who made contact with the FSA. The third party was Mr. David Floyd of Dawnay Day Corporate Finance Limited who received an unsolicited e-mail form Mr. Ghassemian on 30 th October 2000 inviting him to access the plan on the website http/my.genie.co.uk/shahrooz.bplan.[61]On 3 rd and 6 th November 2000 a partner in Moores Rowland telephoned Mr. Ghassemian and requested a copy of the letter in which Miss Hotston-Moore purportedly agreed to act as a non-executive director. Mr. Ghassemian refused to supply a copy. Moores Rowland then received a letter from the Company signed by Mr. Ghassemian dispensing with their services as accountants and indicating that the references to non-executive directors would be removed from the business plan. Mr. Ghassemian continues to contend that the sending of what he describes as a draft business plan to Mr. Floyd on an essentially private basis was not a breach of the Financial Services Act. No submissions have been made to me about that and I need express no view about it. The incident involving the business plan is really relied upon as further evidence of Mr. Ghassemian's willingness to make misleading statements as part of his running of the Company and it provides ample proof of this. Should the Company be wound up?[62]The power of the Court to wind up companies on public interest grounds needs to be exercised sparingly and with care. A balancing exercise has to be carried out by weighing the factors which favour winding up against the maters which are said to justify the company's continued existence. Had things remained as I believe they were prior to mid 1999 the choice facing the Court would have been comparatively easy. If the Company had been conducting unauthorised insurance business I would have needed little persuading that it should be wound up. Similarly so long as there continued to be a real failure to bring to the attention of the public the really very limited nature of the right which they are purchasing I would have been inclined to make a similar order. In order to avoid compliance with the requirements with the Insurance Companies Act Mr. Ghassemian has devised a product which is potentially if not actually worthless. A motor warranty is a well understood term to every car owner. As its name suggests it provides a guarantee to the car owner that defects in his vehicle of the type covered by the warranty will be made good at little or no cost to himself during the term of the warranty. Although Mr. Ghassemian's evidence was that most bona fide warranty claims are in fact met by the Company it is not open to the Company to deny that its customers are paying for no more than a right to have their claim considered when a payment to an authorised insurer would have guaranteed the claim.[63]If a business of this kind is to operate at all it can only be on the basis that there is no possibility at all of confusion at the time of purchase. I am not satisfied that a cooling off period (although obviously desirable) will necessarily prevent the public from purchasing a very different product from that usually described as a motor warranty. Very few people have either the time or the inclination to trawl through lengthy terms and conditions once the decision to purchase has been made. To meet this obvious criticism Mr. Ghassemian emphasised in his submissions that there had been few if any criticisms of the warranty terms and conditions in the past and that they were clearly displayed on the website and had to be accepted in terms before an order could be placed. If the petition were to be dismissed the Company would (he submitted) continue to trade on that basis.[64]In the absence of any undertakings by the Company the Court is faced with the straight choice between winding up the Company or dismissing the petition. For the reasons set out earlier in this Judgment I am satisfied that the relevant terms and conditions of the warranty were not accessible on the Company's website before June 2001 but I do accept that the website has been re-structured so as to make them clearly visible to anyone searching it with a view to purchasing one of the warranties on offer. There is however clear authority that a change in the business of a company so as to remove that aspect of it which is objectionable on public interest grounds does not remove the Court's jurisdiction to make a winding up order. Guidance on this point is contained in the judgment of the Court of Appeal in Re. Walter L. Jacob & Co. [1989] BCLC 345. That was a case in which the company gave misleading investment advice by recommending clients to purchase shares in US companies of which it was the vendor. The relationship between the company and the US companies was not disclosed. Prior to the hearing of the petition this business was discontinued. At p360f Nicholls LJ said this:
"Having regard to all these matters, I would have had no doubt, if the company had still been dealing in securities, that it was just and equitable that it should be wound up. Does the fact that the company ceased to carry on that business immediately before the petition was presented make a crucial difference? In my view it does not. It is, of course, an important factor to be taken into account. The investing public is no longer at risk from any future activities of the company. The company is no longer a member of FIMBRA. But it would offend ordinary notions of what is just and equitable that, by ceasing to trade on becoming aware that the net is closing around it, a company which has misconducted itself on the securities market can thereby enable itself to remain in being despite its previous history. The wishes of those who control such a company, that it should remain extant for other purposes will, normally, carry little weight in the balancing exercise. On the other hand, by winding-up such a company, the court will be expressing, in a meaningful way, its disapproval of such misconduct. Moreover, in addition to being a fitting outcome for the company itself, such a course has the further benefit of spelling out to others that the court will not hesitate to wind up companies whose standards of dealing with the investing public are unacceptable."
[65]In deciding whether I should mark the Court's disapproval of the way in which the business of the Company has hitherto been conducted it becomes relevant to take into account the other matters relied on in the petition. I have already set out at some length my findings about the way in which the FSA and the DTI enquiries were dealt with. It will be apparent from those parts of my judgment that I regard Mr. Ghassemian's conduct of the Company's affairs as wholly unacceptable. I am afraid to say that he struck me as both devious and dishonest and in short was willing to say or do anything to fend off the legitimate enquiries of the regulatory authorities. Although the Court has power under s.8 of the Company Directors Disqualification Act 1986 to disqualify a de facto director on grounds of unfitness that does not in my judgment preclude the exercise of the jurisdiction to wind up when it is clear that both the past and future conduct of the Company is in the hands of one man. The reality of this case is that the Company was set up and run by Mr. Ghassemian. It is he who is responsible for its reaction to the enquiries of the FSA and the DTI and for the other aspects of its conduct complained of in the petition. Although the failure to explain the terms and conditions on the website if taken in isolation might not justify a winding up order in the light of changes in the Company's current business practice the balance is tipped in favour of liquidation by a combination of two other factors: the quite unacceptable and deliberate refusal of the Company through Mr. Ghassemian to co-operate with the DTI investigation and the fact that no reliance can be placed upon Mr. Ghassemian to ensure that the business of the Company is properly run in the future.[66]I have come to the conclusion that the proper course is to wind up the Company and I will so order.

Cited in 11 later judgments

and 2 more of the most senior