Bexhill Uk Ltd v Abdul Razzaq
| Jurisdiction | England & Wales |
| Judge | Lord Justice Aikens,Lady Justice Black,Lord Justice Ward |
| Judgment Date | 24 October 2012 |
| Neutral Citation | [2012] EWCA Civ 1376 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2011/2753 |
| Date | 24 October 2012 |
[2012] EWCA Civ 1376
Lord Justice Ward
Lord Justice Aikens
and
Lady Justice Black
Case No: A3/2011/2753
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BIRMINGHAM DISTRICT REGISTRY
QUEEN'S BENCH DIVISION
HHJ SIMON BROWN QC
IBM40039
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Robin Rathmell (instructed by Silk Route Legal) for the Respondent
Mr Robert Leonard (instructed by Bolt Burdon Solicitors) for the Appellant
Hearing dates : 23rd of July 2012
The Background to the appeal.
This appeal is from an Order of HHJ Simon Brown QC dated 11 October 2011, following a two day trial of certain issues on 6–7 October 2011 in the Birmingham Mercantile Court. Bexhill UK Limited, the current respondents, whom I shall call "Bexhill", had claimed against Mr Abdul Razzaq, the current appellant, whom I shall call Mr Razzaq, an order for possession of a commercial property called 342 Londonderry Road, Oldbury, West Midlands, of which Mr Razzaq was the registered proprietor ("the Property"). But, as the judge said in [1] of his judgment, this outwardly simple claim has a more complicated commercial background which gives rise to the issues on appeal. That background needs explanation.
Bexhill is a company that provides "premium credit funding" to insurance brokers. This enables insurance brokers to offer to their clients, insureds under insurance policies, the facility to pay their annual insurance premiums (which are, of course, due to the insurers) by instalments, rather than in one, annual, lump sum. In the present case the system worked as follows: Mr Razzaq traded as an insurance broker. He and his wife were the owners and directors of RSA Premium Credit Limited ("RSA"). That company was used by Mr Rassaq to provide premium credit facilities for his clients, the insureds. Clients of Mr Rassaq would enter into a credit premium agreement with RSA, whereby RSA funded the immediate payment of the full annual insurance premium and the client insureds would then repay the annual premium amount to RSA (doubtless plus interest) in instalments over the year.
In order that RSA could fund the payment of the whole annual premium "up front" to the insurer whilst the clients repaid the amount of the premium (plus any interest) to RSA in instalments, RSA would borrow the necessary funds from Bexhill. Bexhill entered into a "Facility Agreement" with RSA dated 23 June 2006, ("the Bexhill FA"), to which Mr Razzaq was also a party as "guarantor".
Under clause 5 of the Bexhill FA, RSA agreed to grant to Bexhill a "security interest" over "all its present and future undertaking and assets" as "security for all amounts owing from time to time" by RSA to Bexhill under the Bexhill FA "…and any other relevant documents". Under clause 38.1 of the Bexhill FA, Mr Razzaq, as guarantor, guaranteed to Bexhill the due and punctual payment by RSA of "all moneys from time to time owing" to Bexhill "…hereunder". Mr Razzaq also agreed, under clause 38.2, that in the event of default of RSA paying any moneys payable under the Bexhill FA to Bexhill, he would "…immediately upon demand…" pay to Bexhill the amount of such moneys.
Mr Razzaq gave to Bexhill a legal charge dated 28 March 2007 over the Property. This charge was stated in the Charge document to be a "charge by way of legal mortgage as security for the payment of…one hundred and forty thousand pounds payable on demand" and the lender was identified as Bexhill. In fact, Bexhill had not loaned £140,000 or indeed any sum to Mr Razzaq personally. Bexhill's case before the judge was that this Charge was given by Mr Razzaq as security for his obligations as guarantor under the Bexhill FA and that this was the common intention of the parties when the Charge was executed. The judge heard evidence and argument on that point and concluded, at [11] of his judgment, that the parties had intended that the Property would be a security for Mr Razzaq's personal guarantee (given by clause 38 of the Bexhill FA) in respect of sums owed by RSA to Bexhill. But he also concluded that the Charge only operated as security for up to a maximum for Mr Razzaq's liability of £140,000. Those conclusions have not been appealed.
Bexhill did not itself fund the sums it advanced to RSA under the Bexhill FA. Instead Bexhill, in turn, drew on a facility arrangement with Barclays Bank PLC ("Barclays"), which had been concluded on 20 March 2002. The Barclays-Bexhill Facility Agreement ("BBFA") was intended to cover many arrangements such as those between Bexhill and RSA. I will describe the BBFA in more detail below. Continuing with the terms of the Bexhill FA, clause 48 stated that (unless otherwise advised by Bexhill, which did not happen in this case) RSA was thereby notified that Bexhill had assigned to Barclays, pursuant to a debenture, (the "BB Debenture", to which I will also refer below) "…all its right title and interest in this [Bexhill FA] including all the rights and remedies in connection with the Finance Agreements [between RSA and its clients] and all proceeds and claims arising from this Agreement".
In Schedule 2 of the Bexhill FA there is a letter from Bexhill to RSA dated 20 June 2006. This records that, by a debenture dated 20 March 2002, (ie. the "BB Debenture"), Bexhill had "…assigned to Barclays Bank PLC…all its present and future right, title and interest in and to the [Bexhill FA]…including all rights and remedies in connection with the [Bexhill FA] and all proceeds and claims arising from the [Bexhill FA]". The letter also stated that Bexhill "irrevocably authorises and instructs [RSA] from time to time" to do various things set out in sub-paragraphs (a) to (e). These include (at (b)) "…to hold sums from time to time due and payable by you to us under the [Bexhill FA] to the order of [Barclays]"; and (under (d)) "…to comply with the terms of any written notice or instructions in any way related to or purporting to relate to the [BB Debenture], the sums payable to [borrowers of funds from RSA] or the debts represented thereby, which you receive from time to time from [Barclays] without any reference to or further authority from [Bexhill]…". This letter also stated that, by execution of the Bexhill FA, RSA acknowledged in favour of Barclays that RSA accepted "…the instructions and authorisations contained in this notice" and that RSA undertook "…to act in accordance with and comply with the terms of this notice". The letter was signed by Mr Razzaq on behalf of RSA and a copy was sent to Barclays. This letter was created pursuant to an obligation of Bexhill to Barclays under clause 3.3 and Schedule 2 of the BB Debenture, which I will deal with further below.
To complete the agreements between Bexhill, RSA and Mr Razzaq, I must refer to one more document. This is a Debenture dated 24 June 2006, ("the RSA Debenture") which RSA granted to Bexhill pursuant to clause 5 of the Bexhill FA, referred to above. By this document RSA agreed, on a demand in writing to RSA "…to pay or discharge to [Bexhill] all moneys and liabilities which shall for the time being…be due owing and incurred to [Bexhill] by [RSA] under the terms of any finance agreements pursuant to which [Bexhill] makes facilities available to [RSA]". Under clause 3 of the RSA Debenture, RSA charged various assets of RSA in favour of Bexhill. First, it granted a "first fixed charge" over all book debts and other debts due or owing to RSA "from time to time." Secondly, RSA granted a "first fixed charge" over "all agreements for the financing of insurance premiums" between RSA and its clients and "all receivables arising therefrom". Thirdly, RSA granted a charge "by way of legal mortgage" over "all freehold and leasehold property of [RSA] now vested in it…". That did not include the Property, of course, because that was owned by Mr Razzaq personally, not by RSA.
Next, I must describe the contractual documentation between Bexhill and Barclays. The BBFA, dated 20 March 2002 granted to Bexhill, (subject to conditions), two loan facilities, each up to a maximum aggregate principal amount of £2.5 million, to be used by Bexhill in financing "Bexhill Facilities". A "Bexhill Facility" is defined in the BBFA as a "properly documented factoring facility made by Bexhill to a Qualifying Retail Financier (a) in accordance with the Bexhill Facility Criteria and (b) for the purposes of financing Qualifying RF Loans". 1 There was apparently no debate before the judge on whether RSA constituted a "Qualifying Retail Financier" within the definition, nor whether the Bexhill FA constituted a "properly documented factoring facility" 2 between Bexhill and RSA as a QRF. There is also a definition of "Receivables". 3 It should be noted that this definition is not the same as that in the BB Debenture, which I will set out below. One of the conditions to which the BBFA was subject was that Barclays would have the benefit of the security created pursuant to the "Security Documents", which included a Debenture to be given by Bexhill to Barclays: see clause 2.2 of the BBFA.
Under the BBFA, Bexhill had to establish a "Collection Account", which was a specified account in a specified bank, into which Bexhill was obliged to pay directly all repayments, payments of interest and other charges made by QRFs in respect of sums borrowed by them under their facilities with Bexhill. The sums paid into the Collection Account were to be used to pay back the loans drawn down by Bexhill under the BBFA: see clause 8.3. Bexhill's ability to use funds paid...
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