Bedford Investments Ltd v Mr Nicholas James Sellman
| Jurisdiction | England & Wales |
| Judge | Pearce |
| Judgment Date | 31 March 2021 |
| Neutral Citation | [2021] EWHC 799 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | LM-2020-000090 |
| Date | 31 March 2021 |
[2021] EWHC 799 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
LONDON CIRCUIT COMMERCIAL COURT (QBD)
HIS HONOUR JUDGE Pearce
LM-2020-000090
and
Giles Wheeler QC (instructed by Freeths LLP) for the Claimant
Francesca Perselli (instructed by Mr Mike Rattenbury, in house solicitor) for the Defendant
Hearing date: 11 February 2021
This judgment was handed down in private at 10am on 31 March 2021. I direct that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic.
| Introduction | 3 | |
| Background | 3 | |
| The Loan Agreement | 5 | |
| The Guarantee | 7 | |
| The Issues | 8 | |
| Relevant Law | 10 | |
| Submissions | Issue 1 — validity of assignment | 18 |
| Issue 2 — set off | 20 | |
| Issue 3 — penalty interest | 23 | |
| Issue 4 — onerous term | 24 | |
| Issue 5 — construction of the interest clauses | 24 | |
| Issue 6 — estoppel | 25 | |
| Issue 7 — construction of the guarantee | 27 | |
| Issue 8 — other compelling reason | 28 | |
| Discussion | Issue 1 — validity of assignment | 28 |
| Issue 2 — set off | 29 | |
| Issue 3 — penalty interest | 30 | |
| Issue 4 — onerous term | 32 | |
| Issue 5 — construction of the interest clauses | 32 | |
| Issue 6 — estoppel | 33 | |
| Issue 7 — construction of the guarantee | 34 | |
| Issue 8 — other compelling reason | 35 | |
| Conclusion | 35 |
Note: Page references in this judgment are to the electronic (PDF) page number (not the page number printed on the page), are in bold and are preceded by “HB” to avoid confusion with the lettering on the printed page numbers.
Introduction
The Claimant brings this claim under a guarantee given by the Defendant as security for a loan of £1,072,500 made to Kingsway Land Development LLP (“Kingsway”). The loan fell due for repayment in full on 22 February 2018 but Kingsway fell into default by failing to repay any of the principal when it became due. Subsequent to Kingsway's default, the Claimant took an assignment of both the loan and the guarantee. By this application, the Claimant seeks summary judgment in respect of its claim against the Defendant as guarantor of Kingsway's obligations under the loan.
The Claimant relies on witness statements from Ms Lindsey Clegg dated 28 October 2020 and 15 January 2021. The Defendant relies on his own statement dated 17 December 2020.
Background
Kingsway was incorporated by the Defendant and Mr Guillaume De la Gorce on 7 November 2014. The intended purpose of the company was to purchase land in Bedford (defined in the relevant agreements as “the Property”) with a view to developing and selling it. Kingsway was owned in equal shares by Homes of England Ltd (a company which is solely owned by Mr De la Gorce) and Nick Sellman (Holdings) Ltd (a company solely owned by the Defendant until 16 July 2019, since when it has been solely owned by Res Progressio Holdings Ltd, a company which in turn is solely owned by the Defendant).
Mr De la Gorce has been named as the defendant to an additional claim in these proceedings that the Defendant has issued. The additional claim has not yet been served.
In 2015, Kingsway entered into a short-term bridging loan facility with Lendy Limited for £945,000. That loan was refinanced by a new loan facility agreement (“the Loan Agreement”) entered into between Kingsway and LendInvest Private Finance General Partners Ltd (“LendInvest PF”), acting on behalf of LendInvest Income Limited Partnership (“LendInvest ILP”) on 23 May 2016 in the sum of £1,072,500 for a term of 12 months.
The terms of the Loan Agreement provided for two alternative bases for the calculation of interest, the Standard Rate (3% per month) and the Concessionary Rate (1.25% per month). The appropriate rate of interest to be applied is a significant argument within this litigation. The Loan Agreement was secured by a charge on the Property and by personal guarantees from the Defendant and Mr De la Gorce. The guarantee from the Defendant (“the Guarantee”) appears in the hearing bundle. That from Mr De la Gorce does not. Insofar as it is relevant to the issue before the Court, I assume that his guarantee is in similar terms to that of the Defendant.
It is the Claimant's case that on 9 December 2016, LendInvest PF assigned its rights under the loan agreement and the guarantee to LendInvest Capital SARL (“LuxCo”). The term of the loan was extended by a written agreement between LuxCo, Kingsway, the Defendant and Mr De la Gorce so that repayment in full was due on 22 February 2018. Although Kingsway continued to make monthly payments of interest until June 2018 (albeit that some were made late), Kingsway defaulted on its obligation to repay the loan in full on 22 February 2018, as indicated above, and has not made any payments at all since June 2018.
On 13 December 2018, LuxCo purported to assign its rights under the loan and the guarantee to LendInvest Finance No. 1 Ltd which in turn and on the same day purported to assign those rights to the Claimant. By further written agreement dated 13 August 2019, LendInvest ILP, LendInvest PF, LuxCo, LendInvest Finance No 1 Ltd and the Claimant purported to agree for the avoidance of doubt that all rights under the Guarantee were assigned to the Claimant with effect from 13 December 2018.
On 4 June 2019, the Claimant made formal demand for repayment of the loan. The redemption figure given in that demand was £2,504,769.34, a figure based upon the Standard Rate. This demand was repeated on 18 June 2019.
The Claimant made a demand of the Defendant for payment of £2,805,454.81 under the Guarantee on 17 October 2019 ( HB 200). The Defendant has not made any payment pursuant to the guarantee and Kingsway itself remains in default. By these proceedings, the Claimant claims from the Defendant, as the guarantor of Kingsway's liabilities, the outstanding capital and interest which is due from Kingsway under the loan.
In the meantime, the Property has been marketed. On 3 February 2021, Kingsway exchanged contracts for the sale in the sum of £2.5 million. Completion is subject to certain conditions and has a long stop date of 16 April 2021.
It is common ground that, since the formation of Kingsway, the relationship between the Defendant and Mr De la Gorce has soured. Within these proceedings, the Defendant brings a counterclaim against the Claimant (and pleads the Additional Claim against Mr De la Gorce) contending that the claim on the guarantee is part of a lawful means conspiracy, alternatively unlawful means conspiracy, to injure the Defendant.
The Loan Agreement
The terms of the Loan Agreement are contained in two documents:
a) A document at HB134 headed “Loan Particulars” dated 23 May 2016, which includes sections headed “Conditions Precedent” and “Special Conditions”.
b) A document at HB140 headed “The LendInvest Loan Conditions.”
Clause 7 of the LendInvest Loan Conditions provides:
“ Interest
7.1 The Borrower shall pay interest on the Loan for each Interest Period at the Standard Rate provided that if and for so long as:
7.1.1 The Borrower makes punctual payment of all payments of Interest and other amounts due under this Agreement; and
7.1.2 The Borrower does not otherwise breach the Agreement; and
7.1.3 No Notification Event has occurred
the Interest Rate will be reduced to the Concessionary Rate specified in the particulars subject to a minimum interest charge in respect of each Advance for the Minimum Loan Term.
7.2 It is agreed that the amount of Interest Retention specified in the Particulars deducted from the first Advance has been calculated on the assumption that the Concessionary Rate will apply with the Borrower to make punctual payment and not otherwise breach the Agreement and that no Notification Event will occur but, in the event that these conditions are not met the Interest Rate will increase to the Standard Rate with interest then backdated and charged at the Standard Rate for the whole of the period commencing on and including the Drawdown Date of the first Advance up to and including the Repayment date, including the Interest Retention Period, and will be paid:
7.2.1 immediately in respect of any Interest which is current or has already passed and
7.2.2 in accordance with Clause 7.4 in respect of any future Interest period…
The phrase “Notification Event” is defined in Schedule 3 of the LendInvest Loan Conditions and includes the failure to pay any sum due under the contract, a variety of other events relating to non-compliance by the Borrower with the contract, misrepresentations by the Borrower or any guarantor and various other acts of default. By no means all of the events there referred to would amount to any breach of the loan agreement by the Borrower. For example, clause 5.2 covers the situation where “ the Borrower commences negotiation, or enters into any composition or arrangement, with one or more of the Borrower's creditors with a view to rescheduling any of the Borrower's Indebtedness…”
Clause 8 of the LendInvest Loan Conditions provides:
“Standard Rate of Interest
8.1 If the Borrower fails:
8.1.1 to repay the Loan in full by 2pm on the Repayment Date (with any payment received after 2pm on the Repayment Date to be treated as not received until the next Business Day);
8.1.2 to pay any sum or amount which it is obliged to pay under this agreement or the Transaction Documents when it is due (and repayment of such amount is received after 2pm on the date it is due for payment and is treated as not received until the next Business Day)
the Borrower shall pay interest...
To continue reading
Request your trial
-
Heritage Travel and Tourism Ltd v Lars Windhorst
...679 (QB) (5% uplift); Biosol Renewables UK Ltd v Lovering [2021] EWHC 71 (Comm) (1.5% per month); Bedford Investments Ltd v Sellman [2021] EWHC 799 (Comm) (standard rate 3% per month, concessionary rate 40 [1962] AC 600. 41 [1963] 2 QB 104. See, more recently, Lombard North Central plc v......