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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> The Funding Corporation Block Discounting Ltd v Lexi Holdings Plc [2008] EWHC 985 (Ch) (08 May 2008) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2008/985.html Cite as: [2008] NPC 57, [2008] 2 BCLC 596, [2008] EWHC 985 (Ch) |
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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THE FUNDING CORPORATION BLOCK DISCOUNTING LIMITED |
Claimant |
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- and - |
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LEXI HOLDINGS PLC (In Administration) |
Defendant |
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Mr Philip Marshall QC and Mr Andrew Bruce (instructed by DLA Piper UK LLP, 3 Noble Street, London EC2V 7EE) for the Defendant
Hearing date: 30th April 2008
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Crown Copyright ©
Mr Justice Briggs :
INTRODUCTION
"In some cases there will be a dispute over the existence, validity or nature of the security which the applicant is seeking leave to enforce. It is not for the court on the leave application to seek to adjudicate upon that issue, unless (as in the present case, on the fixed or floating charge point) the issue raises a short point of law which it is convenient to determine without further ado. Otherwise the court needs to be satisfied only that the applicant has a seriously arguable case."
"It is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better."
"In cases where the issue is one of construction the respondent often seeks to persuade the court that the case should go to trial by arguing that in due course evidence may be called that will shed a different light on the document in question. In my view, however, any such submission should be approached with a degree of caution. It is the responsibility of the respondent to an application of this kind to place before the court, in the form of a witness statement, whatever evidence he thinks necessary to support his case. Where it is said that the circumstances in which a document came to be written are relevant to its construction, particularly if they are said to point to a construction which is not that which the document would naturally bear, the respondent must provide sufficient evidence of those circumstances to enable the court to see that if the relevant facts are established at trial they may have a bearing on the outcome."
As will appear, those observations are of direct relevance to the present case, provided that in the transposition from CPR Part 24 to paragraph 43(6)(b) of Schedule B1 to the Insolvency Act 1986 it is appreciated that for "respondent" (to a Part 24 application) it is necessary to read "applicant" (for permission to proceed).
THE FACTS
"10. …In fact Barclays were of course more than simply aware of our proposed funding arrangements with TFC, because at my specific request James Sackett of Barclays (who was at that time a Senior Relationship Manager with Barclays) reviewed TFC's documentation (i.e. the receivables facility letter and Master Receivables Discounting Agreement) before those agreements were entered into. I understood from my conversations with Mr Sackett that TFC's draft lending documentation and proposed security was discussed and approved with the team at Barclays which was specifically responsible for Barclays' credit facility with Lexi. (The Lexi team were in the same department as Mr Sackett – which department was under the overall management of Mr Peter Richardson.)
11. In addition Barclays was of course TFC's own banker. James Sackett was the manager responsible on behalf of Barclays for TFC's credit facility with Barclays. As appears from the extract of TFC's revolving facility agreement which is at pages 34-35 of SB1, it was a condition of TFC's credit facility with Barclays that Barclays had to approve any of TFC's lending facilities over a sum of £5M. For this reason my recollection is that I sent the draft funding agreements with Lexi twice to Mr Sackett – the second time specifically to get his approval to the proposed Lexi credit facility under the terms of TFC's own facilities with Barclays. Again I recall that verbal confirmation of Barclays' approval was given to me by James Sackett prior to TFC formalising their arrangements with Lexi.
12. There is absolutely no doubt in my mind that Barclays were thus fully aware of all aspects of our intended facility agreement with Lexi. Barclays was aware and had copies of the relevant proposed agreements, and understood that the proposed facility concerned short term bridging funding arrangements up to an initial figure of £5M, with security being provided in the form of first legal charges over specific properties."
"1. The Security Trustee as Mortgagee hereby surrenders and releases the Released Property to the Mortgagor or (if the Mortgagor should have conveyed the Released Property to a third party on or before the date hereof) to the person to whom the estate or interest of the Mortgagor in the Released Property which was charged by the Charges is now vested freed and discharged from the Charges and all claims and demands thereunder.
2. If such conveyance by the Mortgagor shall have been completed on the date hereof the Deed shall take effect immediately after the completion of such conveyance.
3. Nothing herein contained shall prejudice or affect the security of the Security Trustee under the Charges in respect of the remaining property comprised therein or the obligations of the Mortgagor or the rights of the Security Trustee thereunder.
The Schedule Above Referred To
Any bridging loans made after the date hereof by the Mortgagor to third parties which have been financed in full by The Funding Corporation Block Discounting Ltd pursuant to a facility agreement dated on or about the date of this deed of release."
(a) Default judgment against Shaid Luqman for £59 million plus interest.
(b) Summary judgment against Waheed Luqman for £41 million plus interest.
(c) Judgment for an account for breach of fiduciary duty as directors of Lexi against Monuza and Zaurian Luqman.
(d) Judgment in default against all Lexi's purported customers in the bridging loan transactions in issue, save for Beverley Holden.
(e) The setting aside pursuant to section 320 of the sales by Lexi to the purported customers (Serton, Halfway Ltd and Charyn International SA) of all the properties purportedly offered as security for the bridging loans, save for 23 Whitehart Gardens, and the registration of Lexi as proprietors of those properties.
(f) The sale of all the security properties relevant to this application for the aggregate sum which I have described, which now constitutes the fund in issue.
ANALYSIS
"deed of release from Barclays Bank plc in respect of a Deeds (sic) of Charge dated 6th December 2001 and 7th April 2004 (pro-forma to follow)"
"Any bridging loans made after the date hereof by [Lexi] to third parties which have been financed in full by [TFC] pursuant to a facility agreement dated on or about this deed of release."
Mr Marshall took the following three short points.
(1) The relevant facility agreement (namely the Master Agreement dated 1st December 2004) was not "on or about" the date of the Deed of Release, namely 18th March 2005.
(2) None of Lexi's purported customers under the assigned bridging loans were "third parties" since they were neither independent of Lexi nor parties to arm's length loan transactions, but rather connected parties engaged in a fraud.
(3) None of the bridging loans to Lexi's purported customers were "financed in full" by TFC since: (a) TFC never paid more than 90% of the amount of the bridging loan and (b) TFC's money was not made available to any of the purported borrowers by way of bridging loan.
"Third Party… means with respect to any Agreement, any person who is a hirer, buyer or borrower under such Agreement;"
Within that phrase, "Agreement" means, or at least included, the bridging loan agreements in question.
"The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words of syntax:"
And later:
"The "rule" that words should be given their "natural and ordinary meaning" reflects the common-sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had."
"Any rights acquired bona fide for value without actual notice of the contravention by any person who is not a party to the arrangement or transaction would be affected by its avoidance."
If TFC had otherwise acquired proprietary rights as a result of the assignments made by Lexi pursuant to the Master Agreement, in relation to any of the properties whose sales by Lexi to Serton, Halfway and Charyn infringed section 320, then those rights ought not to have been adversely affected by the avoidance of those sales. TFC was not, as I have said, a party to the proceedings by which the Administrators obtained the setting aside of those sales and would, on the face of it, be entitled to have those orders set aside, having been made without regard to TFC's rights and without prior notice to TFC. In the present circumstances TFC does not suggest that it is now necessary to reinstate those transactions, with all the attendant complications and inconvenience which that process would entail. It would be sufficient simply to recognise TFC's rights as reflected in a claim to the proceeds of the sales achieved by the Administrators. I agree, and Mr Marshall did not seriously suggest otherwise.