Iain Lawrie Shearer and Others v Spring Capital Ltd (First Defendant) (a) Tenon Pension Trustees Ltd and and Another (Second Defendants) (a) Tenon Pension Trustees Ltd and and Another (Third Defendants)
| Jurisdiction | England & Wales |
| Judge | Mr Daniel Alexander QC,and |
| Judgment Date | 17 October 2013 |
| Neutral Citation | [2013] EWHC 3148 (Ch) |
| Docket Number | Case No: HC13B00958 |
| Court | Chancery Division |
| Date | 17 October 2013 |
Mr Daniel Alexander QC
Sitting as a Deputy Judge of the Chancery Division
Case No: HC13B00958
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building
Fetter Lane
London EC4
Mr Edward Francis (instructed by Edwin Coe) for the Claimants
Mr James Aldridge (instructed by Harbottle & Lewis) for the Defendants
Hearing date: 9–10 October 2013
INTRODUCTION AND BACKGROUND
In 2011, the first two claimants ("Mr Shearer" and "Mr Dawes") were enjoying large country houses and expensive London flats while bogus solicitors were attempting to collect money due on high interest loans on behalf of their money-lending business, Logbook Loans. They could hardly have imagined that, in 2013, they would be asking real solicitors to invoke equity on their behalf to escape the burden of interest rates on their own debts which are at a level which Logbook Loans' erstwhile customers might have thought modest.
Mr Shearer and Mr Dawes were (and perhaps, subject to sterilization of their assets, still are) rich men who are now subject to IVAs. Logbook Loans, in which they were shareholders, was active in the sub-prime lending market. That business came to an end when the companies' consumer credit licenses were revoked, because it was discovered that undue pressure had been exercised on borrowers by the companies sending letters threatening proceedings which pretended to be from solicitors. The companies' actions were heavily criticized by the regulators and by the First Tier Tribunal.
Mr Shearer and Mr Dawes now find themselves in the position of sub-prime borrowers, as guarantors of loans to these failed companies. These loans carry interest at 35% per annum, compounded quarterly. Mr Shearer has described that interest rate as "penal" in his evidence. Such a description might come as a surprise to some of Logbook Loans' former customers, who were charged interest rates in excess of 400% albeit on smaller, shorter term, loans.
Mr Shearer and Mr Dawes regard the 35% rate as so onerous that they have attempted to stop interest on the debt running altogether by raising money from elsewhere and then trying to tender payment of the sums due to pay it off. Their existing lender and mortgagee, the first defendant, a fish processing company now also engaged in financing, has not allowed them off the hook. It had originally contracted for the underlying loans to continue until 2017, earning healthy rates of interest. It is a relatively well-secured lender enjoying an advantageous default interest rate against these guarantors and has some incentive not to make it easy for Mr Shearer and Mr Dawes to bring the interest stream to an end by validly tendering payment.
Whatever its underlying reasons for doing so, the first defendant has denied that the tender made on behalf of Mr Shearer and Mr Dawes was valid and claims that interest has continued to accrue at the default rate on the underlying loans of 35% p.a. compound on the outstanding balance, which, in February 2013, was said to exceed £3 million. The sums at stake in this action are therefore fairly large: some £20,000 a week (or more) for which Mr Shearer and Mr Dawes are personally liable. The first defendant has threatened to enforce against the security it holds. Mr Shearer and Mr Dawes say there has been "oppressive" conduct by their lender in not staying its hand, something which, again, might be of interest to some former customers of Logbook Loans.
These circumstances have given rise to this case and applications which involve a rather specialised sub-branch of the law of mortgages.
The issues and the claim
The claim is made as a CPR Part 8 redemption action whereby the claimants claim a number of declarations as to the sums owing by them to the defendants and a series of orders requiring the defendants to release and discharge a number of securities for loans advanced by the defendants. Among the claims is one that no interest should be payable from the date of the tender.
One significant issue in the action is whether the tender of the outstanding sum on the loans to the first defendant purportedly made on their behalf by their solicitors Edwin Coe in a letter dated 12 February 2013 was valid. There are other issues as to whether the sums claimed by way of debt were correctly calculated and are in fact due under the various loan and related agreements governing them, including the extent to which an acknowledged figure for the debt is even open to challenge.
Invalidity of tender
Although the case as a whole ranges wider, these applications focus primarily on the validity of the tender.
The first defendant, contends that it is clear that the tender was invalid and that the court should so decide now, leaving the other accounts for trial. The claimants contend that it is arguable that the tender was valid and that there is at least an issue fit to go to trial on the point. They contend that, because there is a triable issue and, in any event because they say that funds were and are available to repay the debt, an interim injunction should be granted to stop the first defendant from enforcing any of the various securities.
Thus stated, the points may appear narrow and capable of easy and summary resolution on established principles. The first defendant points to the fact that, in an 18 th century case, the Lord Chancellor decided a dispute of this kind in less than two pages and that heavy weather should therefore not be made of it.
However, as will appear, because of the nature of the tender and subsequent events, the case raises issues which are not wholly straightforward. In particular, how the law of equitable relief from interest following a tender of the outstanding sum should be applied in the context of a modern debt refinancing where a borrower has to raise money to be able to pay off an existing loan and there are certain mechanics involved in sorting out the transfer of the debt.
These issues arise for four main reasons in this case. First, Mr Shearer and Mr Dawes proposed to pay off the debt by taking on new debts. This meant that the new lenders would need to have the securities held by the first defendant released in a satisfactory way either before or at the same time as making the new money available to the claimants to pay off the debt. This in turn meant that the availability of the money to back the tender would have to be conditional, for practical purposes, upon simultaneous release of the securities. Second, however, the tender was not, in terms, expressed as being conditional and it was not made clear until later that the money was coming from a new financing arrangement and could not or would not be provided save on release of the existing security. Third, the way in which the tender was made did not provide a real opportunity for the first defendant to consider the proposed release documentation before the sum in question was proffered. Fourth, the tender did not, in terms, offer any sum in respect of costs.
Each of those points is said to be in tension with fundamental requirements of the law relating to tender in equity which requires the borrower to tender the whole sum due including costs (if payable) without any conditions, themselves to be and to remain unconditionally ready, willing and able to pay the sum as well as cases suggesting that it is a requirement of validity that the borrower give the lender enough time before the tender is made to approve draft release documentation.
Summary of the parties' contentions
First defendant's contentions
The first defendant contends that the way in which the money was to be provided and the way in which the tender was made, individually and in combination, mean that the requirements for a valid tender were not arguably satisfied in this case and the sooner that this is decided, the better. It contends that these requirements are made entirely clear by the case law and it is neither possible, in the light of the authorities, nor desirable as a matter of legal policy for there to be any significant flexibility in their application: certainty and clarity are needed.
It accepts that there may be exceptional situations, such as arose in the recent case of the Privy Council, Cukurova Finance International Limited v. Alfa Telecom Turkey Limited [2013] UKPC 20, in which a lender wrongfully frustrates the making of an effective tender, where the court may relieve the borrower of a duty to pay interest after tender has been attempted but has failed. It contends that such cases are truly exceptional and that the present case comes nowhere close.
The first defendant contends that there is no basis for an injunction restraining enforcement of the securities other than on the footing that the tender was valid and that, in any event, none should be granted. If such should be granted, it should only be on stringent terms including a fortified cross-undertaking and an undertaking not to act in breach of any of the agreements concerning the existing security.
Claimants' contentions
The claimants submit that the tender was at least arguably valid. They say that there needs to be some "give" in the law to permit borrowers, old lenders and new lenders to sort out the administrative arrangements of getting money into the right accounts, approving...
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