Business Mortgage Finance 6 Plc v Roundstone Technologies Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Nugee |
| Judgment Date | 22 October 2019 |
| Neutral Citation | [2019] EWHC 2917 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No: FL-2019-000013 |
| Date | 22 October 2019 |
[2019] EWHC 2917 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
FINANCIAL LIST
Court No 5
Rolls Building
7 Rolls Building
Fetter Lane
London EC41 1NL
Mr Justice Nugee
Claim No: FL-2019-000013
Mr T Smith QC and Mr A Riddiford appeared on behalf of the Claimant.
Mr J Nkafu appeared on behalf of the Defendant.
APPROVED JUDGMENT
. This is the trial of a Part 8 claim. It is a follow-on from a previous action in the Financial List, the short title of which is Business Mortgage Finance 6 Plc v Greencoat Investments Limited and Others, which was heard and determined by Zacaroli J and in which he handed down a reserved written judgment on 31 July of this year.
. In that action, the claimant, which I will call “BMF6”, and which is the claimant in this action as well, sought declaratory and other relief against a number of defendants in relation to arrangements, the details of which I will have to come to, which had the ostensible effect of enabling the defendants to obtain control of a securitisation structure and Zacaroli J was persuaded to grant those declarations. Indeed, by the time it came to the hearing before him, counsel then appearing for the defendants accepted that the various steps which he deals with in this judgment were, in fact, invalid and did not oppose the relief that he granted in respect of, at any rate, the first nine of ten declarations.
. The tenth declaration, however, was as to the validity of certain transactions. That would include a sale of certain charged assets ostensibly by a receiver appointed over BMF6's assets pursuant to a charge and the purchaser under that sale was Roundstone Technologies Limited, a BVI company, which was not a party to that action. In those circumstances Zacaroli J limited his declaration in relation to the validity of that aspect of the matter to the parties before him, but accepted that he could not pre-judge any questions which might arise if Roundstone, as I will call it, sought to contend that it was entitled to the benefit of the sale and purchase agreement.
. In those circumstances BMF6, having succeeded against the then defendants, brought this second action by way of Part 8 claim, the only defendant being Roundstone, in order to obtain corresponding relief against Roundstone. BMF6 has appeared by Mr Tom Smith QC, who has taken me through the documents and the arguments in considerable detail.
. Roundstone appeared today by Mr Julius Nkafu. His original application to me first thing this morning was to adjourn the trial for 24 hours to enable other counsel who had been instructed, but who today has been engaged in the Court of Appeal, to appear tomorrow. For reasons that I gave in a very short judgment this morning, I allowed Mr Smith to deploy the evidence and arguments that he wished to rely on, indicating that as there was a full verbatim transcript of the proceedings I would give the defendant an election, if it so wished, when Mr Smith had finished addressing me, to have the remainder of the hearing adjourned to tomorrow so that counsel of the defendant's choice could appear, but only on the terms that the defendant should in any event pay the costs thrown away by the claimant of such an adjournment on an indemnity basis.
. In the event, Mr Nkafu's instructions were not to seek an adjournment on those terms and he relied on a written skeleton argument, unsigned, but I was told prepared by Roundstone in-house but which had the approval of counsel, as encapsulating the points that Roundstone wished to make and, since all those points had been anticipated by Mr Smith in his opening submissions to me, I did not require Mr Smith to reply.
. The background is quite complex but I will state it as shortly as I can. BMF6 is the Issuer of six classes of Notes under a securitisation structure originating in 2007. The underlying assets which have been securitised are a portfolio of mortgage loans.
. The documents which gave effect to the structure include a Trust Deed which was entered into between BMF6 and BNY Corporate Trustee Services Limited, that Trust Deed being dated 18 May 2007, which I will refer to as “the Trust Deed”, as well as a Deed of Charge also dated 18 May 2007, also entered into between BMF6 and BNY Corporate Trustee Services Limited, which I will refer to as “BNY”, and indeed a number of other parties, which contained various provisions in favour of the Trustee. In particular it contained in clause 2 a covenant by the Issuer (ie BMF6) to pay monies which would become due to the order of the Trustee and it granted security to the Trustee in the form of fixed security over certain assets, principally the mortgages and the loans secured by the mortgages and a floating security over the whole of its undertaking.
. The Deed of Charge contained at clause 11 power for the Trustee to appoint a receiver in the following terms:
“11.1 At any time after the Security becomes enforceable or if any person who is entitled to do so presents an application for the appointment of an administrator of the Issuer, gives notice of intention to appoint an administrator of the Issuer, or files such a notice with the court, the Trustee may appoint such person or persons (including an officer or officers of the Trustee) as it thinks fit to be receiver or receivers of the Charged Property or any part or parts thereof (a ‘Receiver’).”
. There were various other provisions in the Deed of Charge which I will in due course have to return to.
. The events with which this action is concerned are set out in detail in Zacaroli J's judgment, the neutral citation number of which is [2019] EWHC 2128 (Ch) and anyone who wishes to look at the detail can have regard to his judgment which, as I say, was a reserved judgment and sets things out in more detail and with more precision than I will be able to. But, as there appears, a company called Greencoat Investments Limited claimed to have acquired a large number of the Notes, at any rate to the extent of having a tender offer for the Notes accepted. The settlement date under its tender offer was originally in February but was extended to at least 10 July 2019.
. As Zacaroli J explains (see [9]):
“Under the terms of the Tender Offer, until the settlement date, the original holder of the Notes retained all rights to vote in respect of the Notes.”
. There was an announcement under which Greencoat Investments Limited, which I will call “GIL”, offered to make an initial payment in order to obtain rights from the Noteholders but there was before Zacaroli J, and there is before me, no evidence that any such payment was made or any rights transferred.
. At [13] of his judgment, Zacaroli J sets out the various steps which were taken by the defendants, who were GIL and various other parties to the transactions, and they started with the purported appointment by GIL of two other companies, Greencoat Holdings Limited, which I will call “GHL”, and Portfolio Logistics Limited, which I will call “PLL”, as co-trustees of the Notes. That was on 20 June 2019.
. Among the other steps are step iii) of 27 June 2019, when those two companies, GHL and PLL, purported to declare that the Security under the Deed of Charge was immediately enforceable; step iv) when they purported to appoint a Mr Fitzsimons as receiver over BMF6's portfolio of loans and associated security; and step v) when they purported to resolve that BNY be removed as Trustee. I do not think I need refer to the other steps which are there set out.
. It later transpired, however, that in addition to that on 27 June 2019 GHL and PLL purported to appoint a Mr Oyekoya as receiver and that on the next day, 28 June 2019, Mr Oyekoya, acting as receiver for BMF6, executed a Sale and Purchase Agreement dated 28 June 2019 in favour of Roundstone. This contained an agreement for sale and purchase and I should refer to a number of its provisions. By clause 2.1, headed “Agreement for Sale and Purchase”, it was provided:
“Subject to the terms and conditions of this Agreement, the Seller agrees to sell and the Purchaser agrees to purchase on the Purchase Date all right, title, interest and benefit of the Seller in the Receivables listed in clause 2.2.1 to 2.2.3 (inclusive) on the terms set out in clause 2.2 (Sale).”
. Clause 2.2, headed “Sale”, reads:
“The Seller, with full title guarantee, hereby agrees to sell to the Purchaser all beneficial (and in the case of clause 2.2.3 legal) right, title, interest and benefit present and future of the Seller to the fullest extent possible under applicable law, of the Seller in
2.2.1 the Charged Property, including, without limitation, all monies and distributions received in respect of thereof;
2.2.2 the Charged Obligation Documents and any related security therefore; and
2.2.3 all monies standing to the credit of the Bank Accounts.”
. Clause 2.3, headed “Method of effecting the sale”, reads:
“The sale of the Seller's right, title, interest and benefit in the Receivables specified in clause 2.2.1 and clause 2.2.2 (the ‘Trust Receivables’) will be effected by the Declaration of Trust granted by the Seller in favour of the Purchaser.
The sale pursuant to clause 2.2.3 shall be by way of absolute assignment and transfer and accordingly the Seller hereby assigns and agrees to assign and transfer to the Purchaser to the fullest extent possible under applicable law, the Seller's right, title, interest and benefit in the Receivables specified in clause 2.2.3 with effect from the Purchase Date.”
. Clause 4 provides for the consideration, which consists of a Purchase Price of £237 million divided into £1, called “the Initial Consideration”, and the balance, called “the...
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