Husband and wife lose £40,000 deposit in failed company purchase
A husband and wife who tried to buy a business have lost their £40,000 deposit after the High Court ruled they could not claim a refund when the deal fell through.
The couple wanted to buy a waste collection company. They were introduced to the sole shareholder and a tentative agreement was made that they would buy the business for £210,000.
The husband gave evidence that £110,000 was to be paid as a deposit, and that the shareholder had insisted that £70,000 be paid as cash. The couple were not allowed to conduct due diligence on the company's premises until it was paid.
They said there was no agreement that the deposit would not be refundable if the sale did not go ahead.
The couple’s bank statements showed payments of £40,000. They said they had paid the rest in cash but had received no receipts despite asking for them.
They drafted a document to record the sale agreement. The shareholder responded by providing his own set of terms and conditions, which included a clause that the deposit was non-refundable if they declined to complete the purchase.
The couple replied that this version did not accurately reflect the agreed terms. After carrying out due diligence, they had concerns about the company and decided not to proceed with the sale.
They sought the return of the deposit, but the shareholder insisted that it had been forfeited. The couple brought a claim for repayment of the deposit and sought a freezing injunction for £210,000 against the company.
The High Court ruled against them. It held that the sale agreement showed that the shareholder was the other party to the contract, not the company. Accordingly, the couple could not show a good arguable case against the company. On the face of it, it was a misconceived claim against the company and a misconceived application to freeze its assets.
Please contact Sing Li if you would like more information about the issues raised in this article or any aspect of company law.