John Dilworth v Wosskow Brown Solicitors LLP
| Jurisdiction | England & Wales |
| Judge | Briggs |
| Judgment Date | 22 April 2024 |
| Neutral Citation | [2024] EWHC 903 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2022-BRS-000024 |
[2024] EWHC 903 (Ch)
CHIEF INSOLVENCY AND COMPANIES COURT JUDGE Briggs
(Sitting as a Judge of the High Court)
Case No: BL-2022-BRS-000024
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BRISTOL
BUSINESS LIST (ChD)
Bristol Civil Justice Centre
Redcliff Street, Bristol, BS1 6GR
James Pearce-Smith (instructed by BARTONS SOLICITORS) for the Claimants
Steven Fennell (instructed by WOSSKOW BROWN SOLICITORS) for the Defendants
Hearing dates: 26, 27, 28 March 2024
Approved Judgment
This judgment was handed down remotely at 10.30am on [date] by circulation to the parties or their representatives by e-mail and by release to the National Archives.
(Sitting a Judge of the High Court Chancery Division)
This judgment was handed down remotely at 10.00am on 22 April 2024 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
The question for the court is whether two loan facility agreements were discharged or partially discharged following an agreement that was to replace an obligation to repay.
The first loan agreement was entered into by Mrs Dilworth and the First Defendant on 18 June 2010 (the “First Loan”). The First Loan was supported by personal guarantees given by the Second to Fifth Defendants. The personal guarantees made them primary obligors in the event of the First Defendant's default which was specified in the First Loan instrument. The sum lent under the facility was £200,000.
A second loan agreement was entered into by Mr Dilworth in July 2010 on similar, but not the exact same, terms (the “Second Loan”). The facility provided was £300,000. Again the Second Loan was supported by personal guarantees given by the Second to Fifth Defendants. And the personal guarantees made them primary obligors in the event of the First Defendant's default which was specified in the loan instrument. Any distinctions between the terms of the First Loan and Second Loan (together the “Loans”) are not relevant for the purpose of this matter.
The Claimants are married. They are not professional lenders. The First Defendant is a firm of solicitors, with limited liability registered as a limited liability partnership under registered number OC318985. The Second to Fifth Defendants were partners in the First Defendant at the time of the loans.
The Claim
It is common ground that Mrs Dilworth advanced the sum of £200,000 to the First Defendant by way of a payment of £200,000 in about July 2010.
The purpose of the loan facility was to provide working capital to the firm of solicitors and to provide money to pay the general expenses incurred in promoting the business.
It is also common ground that Mr Dilworth advanced the sum of £300,000 to the First Defendant by way of a payment of £200,000 on 22 July 2010 and four payments of £25,000 between about 26 and 30 July 2010. The purpose of the Second Loan mimicked the purpose of the First Loan.
Interest payments were initially made in the sum of £1,666.67 each month in respect of the First Loan.
As regards the Second Loan, the First Defendant made monthly payments of £2,500 until February 2020.
On 3 December 2020 Mrs Dilworth provided written notice under the clause 6.1 of the facility agreement which provides as follows:
“Subject to clause 6.3 the Facility is repayable in tranches of not less than £25,000 subject to either party serving 3 months written notice on the other requesting or offering repayment as appropriate PROVIDED THAT no such notice shall be served within 12 months from the date hereof and the Borrower shall not be bound to make a repayment in excess of £25,000 in any 2 month period.”
Clause 6.2 provided for a “Repayment Event” which included “any breach by the Borrower of any of its payment or other material obligations under this letter.”
The First Defendant failed to make the repayments pursuant to clause 6.1. No payments of £25,000 have been made.
Consequently, on 1 April 2021 notice of a Repayment Event was served on the First Defendant in accordance with clause 6.3 and demand made for the whole sum due, namely £200,000 with the contractual interest.
The Second Loan made by Mr Dilworth included a clause 6.1 provision where 3 months written notice was to be served for the repayment of capital in tranches of £25,000.
As with the First Loan, the Second Loan included a “Repayment Event” for any breach of the First Defendant's obligations to pay. A “Repayment Event” entitled the lender to cancel the facility, declare all capital and interest under the agreement to be immediately due and payable, and make demand.
It is common ground that the First Defendant failed to make payments from 20 March to 20 July 2020. No repayments have been made since. In accordance with the loan facility written notice was served and demand for payment of all sums due was made on 22 July 2020 pursuant to clause 6.3 of the facility letter.
The sum demanded under the First Loan is £194,387.37.
Mrs Dilworth claims payment from the First Defendant alternatively the guarantors giving credit for any payments received since April 2021. Mr Dilworth makes the same claim.
The reason provided for non-payment following notice of a Repayment Event
The defence for non-payment of the sums demanded is that the due debt had been discharged or partially discharged in 2017 by agreement. As a result, the guarantors bear little or no liability.
Until closing submissions the pleaded case was that the 2017 agreement was made orally. I shall refer to this as the “2017 Agreement”.
The defence states that there had been a long business relationship between Mr Dilworth and First Defendant, and that it was usual for agreements to be communicated in an informal manner by telephone [paragraph 10]. It is not said that Mrs Dilworth had any direct dealings with the First Defendant, but that Mr Dilworth acted with her actual authority.
The circumstances in which the 2017 Agreement is said to have been made are a little unusual.
The First Defendant was investigated by the Solicitor Regulation Authority and the Third Defendant says he was concerned that the integrity of the Loans may be compromised, due to the intervention. It is pleaded [12]:
“During May and June 2017, a series of discussions by telephone and in person took place between the First Claimant and the Third Defendant, supplemented by e-mail correspondence. The Third Defendant no longer recalls the precise dates of such discussions, nor the precise contractual words used between the parties. The outcome of the said discussions was an oral agreement…between the Claimants (represented by the First Claimant) and the First Defendant (represented by the Third Defendant) as follows:
The Claimants would release the First Defendant from its liability to each of them under the [Loans].
In consideration of the said release, the First Defendant would procure that the Claimants receive 1,500 preference shares each in John Banner Centre Limited.” (emphasis added)
The written evidence given in connection with the 2017 Agreement by the Third Defendant is as follows:
“At the beginning of May 2017 I discussed with the First Claimant that the Personal Injury department of WBLLP would not be as profitable as it used to be and in order to safeguard his position it was agreed that he would convert £300,000 of the loans into preferential shares of the [John Banner Centre Limited] in the names of him and the Second Claimant in the sum of £150,000 each being 1,500 shares worth £100. On 3 May 2017, the First Claimant emailed me setting out the revised agreement on the basis that shares would be allocated in JBCL in place of his agreement with WB LLP. I responded on 3 May 2017 in confirmation. There was a further exchange of emails and on 22 May 2017 I emailed the First Claimant to advise that the shares had been issued and he responded by email on the same day that the shares should be split equally between himself and the Second Claimant. On 19 June 2017 I emailed the First Claimant with confirmation of the agreement that we had reached. In particular I advised the First Claimant that “the original loan was guaranteed by the then partners of WBLLP which consisted of Michael Wosskow, David Brown, Ian Brown and Sally Mallinson”. I went on to say that “Sally Mallinson had left the practice some three years ago and the ongoing guarantee would be continued by Michael Wosskow, David Brown and Ian Brown. I also sent a copy of this email to his solicitor, PJ Albury of Bartons… I met with the First Claimant in January 2018 and he emailed me on 15 January 2018 acknowledging that the share capital had been placed in JBCL and also making reference to the dividend payment and the best way of managing it…am firmly of the opinion that the original loan to WBLLP which was guaranteed by the Second, Third, Fourth and Fifth Defendants, was discharged and in its place an arrangement was reached whereby the Claimants were issued with shares and dividend payments were made to them.”
The pleaded case is that the holders of the preference shares in John Banner Centre Limited (the “Company”) would receive an annual dividend of £6-00 per share. As I understand it the annual dividend was calculated to equate to the interest payments due under the Loans.
Each preference share would be purchased at a cost of £100. No money would change hands. The consideration was the forgiveness of £300,000 due under the Loans.
In summary the position of the Defendants is that pursuant to the alleged...
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