Karunia Holdings Ltd v Creativityetc Ltd
| Jurisdiction | England & Wales |
| Judge | Halliwell |
| Judgment Date | 05 July 2021 |
| Neutral Citation | [2021] EWHC 1864 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: PT-2020-MAN-000195 |
[2021] EWHC 1864 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
PROPERTY TRUSTS AND PROBATE LIST (ChD)
HHJ Halliwell sitting as a Judge of the High Court
Case No: PT-2020-MAN-000195
Anthony Jones (instructed by Fieldfisher LLP) for the Claimant
Mr James Pickering QC (instructed by Ralli Solicitors LLP) for the Defendant
Hearing date: 27 th May 2021
APPROVED JUDGMENT
This judgment was handed down remotely by circulation to the parties' representatives by email. It will also be released for publication on BAILII. The deemed date and time for hand down is 5 th July 2021 at 2.30 pm.
(1) Introduction
The Claimant (“Karunia”) and the Defendant (“Creativityetc”) are each entitled to charges (“the Charges”) over properties at 73–87 Hillgate, Stockport, Manchester SK1 3AW (“the Properties”). Title to the Properties is registered at HM Land Registry and notice of the Charges has been registered together with a deed of priority dated 22 nd January 2015. By its Claim (“the Claim”) in these proceedings, Karunia seeks a declaration that the deed is void and an order removing all registered entries in respect of it. Creativityetc has filed a Defence and Counterclaim in which it takes issue with the entire factual and legal basis of the Claim.
This is my judgment on Creativityetc's application for summary judgment on the Claim, issued on the basis Karunia has no real prospect of success. Since the Claim is based on forgery, I must resolve whether Karunia has any real prospect of establishing the deed was forged and, if so, overcoming secondary issues based on the law of contract, deeds and estoppel. In the alternative, Creativityetc seeks security for costs. If I give summary judgment on the Claim, Creativityetc is content for the Counterclaim to be dismissed.
I shall also give judgment on a cross application, issued by Karunia following the circulation of a draft copy of Paragraphs [1] – [2] and [4] – [43] of this judgment. This is for the admission of new evidence. In giving judgment, I shall identify the principles governing such an application before determining whether the new evidence should be admitted.
(2) Background
Karunia is a limited company registered in Cyprus. At all material times, Mr David Rose was beneficial owner of its shares. Ms Eva Agathagelou (“Ms Agathagelou”) and Mr Stelios Sawidis held office as directors but Mr Rose has filed evidence in parallel proceedings (Claim no. E30MA138) for the redemption of Creativityetc's security contending that they did so as “nominee directors…effectively acting on [his] behalf”.
On 7 th May 2014, the Properties were charged to Karunia and, on 25 th June 2014, Karunia was registered as charge-holder. On 14 th January 2015, Mr Rose and Mr David Waxman were registered as proprietors.
At about this time Creativityetc confirmed it was willing to advance £240,000 to Karunia and an associated company, Dreadnought Limited (“Dreadnought”), subject to a personal guarantee from Messrs Rose and Waxman supported by a first charge over the Properties. It did so in a facility letter dated 16 th January 2015 (“the Facility Letter”) confirming that “the advance will be made when the formalities have been dealt with and the Security for the Loan completed…” and that “upon completion…the charge in favour of Karunia…will rank lower in priority to our charge over [the Properties]. To that end a Deed of Priority in our favour will be required”. By a Credit Agreement (“the Credit Agreement”) of even date, which incorporated – by reference – the provisions of the Facility Letter, it was provided that Karunia would provide Creativityetc with “a first legal charge” over the Properties. The Facility Letter and the Credit Agreement appear to have been counter signed on Karunia's behalf; they each bear Karunia's stamp together with Ms Agathagelou's signature. The Credit Agreement was signed as a deed and attested by Karunia's solicitor, Mr Eli Hunter Zrihan (“Mr Zrihan”) of Michael Hunter & Partners, Tel-Aviv, Israel. Mr Zrihan also endorsed the Credit Agreement with a certificate that he had independently advised Karunia and the same had been “properly executed…as a result of full and informed consent”.
By an email timed at 13:29 on 22 nd January 2015 (“the 22 nd January 2015 Email”), Mr Zrihan forwarded to Abbey Solicitors, on behalf of Creativityetc, a series of “original executed and witnessed loan documents”, including the Facility Letter and the Credit Agreement together with inter alia a first legal mortgage (“the Mortgage”), deed of priority (“the Original Deed of Priority”) and solicitors' undertakings (“the Solicitors' Undertakings”).
The Mortgage was signed as a deed by Ms Agathagelou, as director, and Hive Management Services Ltd (“Hive”), as company secretary. Their signatures were un-dated but, again, attested and certified by Mr Zrihan. It again bore Karunia's stamp.
On its face, the Original Deed of Priority was also signed as a deed by Ms Agathagelou, as director, and Hive, as company secretary. It again bore Karunia's stamp. Ms Agathegelou's signature was in manuscript and Hive's was typed. Unlike the Mortgage, Mr Zrihan's attestation clause and certificate were not incorporated. Karunia expressly agreed that Creativityetc's security would rank ahead in priority postponing its own security to the Mortgage.
The Solicitors' Undertakings were contained in a letter dated 22 nd January 2015 from Mr Zrihan, on behalf of Michael Hunter & Partners to Abbey Solicitors on behalf of Creativityetc. They were in the following form.
“We the solicitors acting for the Borrowers Karunia Holdings Ltd and Dreadnought Ltd confirm that we hold the properly executed originals of the documents attached to this email (‘the Loan Documents’). We irrevocably undertake to send these to you today by safe courier and/ or DHL and to hold to your order, certified copies of each document in the event that the original documents are lost or delayed during delivery.
We irrevocably confirm that our clients agree to be immediately bound by the terms of the Loan Documents irrespective of the physical delivery to you of the originals…..
This undertaking will take immediate effect but only once your client Creativityetc Ltd has authorised you to disburse the funds in accordance with their Facility Letter dated 16 January 2015 (being one of the Loan Documents attached) and that you have initialled the transfers detailed in it, including one to this firm for not less than £103,000.”
Following the 22 nd January 2015 Email, Creativityetc authorised the release of the sum of £240,000. It did so later that day.
Mr Zrihan then posted or purported to post the original “Loan Documents” to Abbey Solicitors. However, for reasons that are obscure, the Original Deed of Priority appears to have been amended before it was posted so as to alter the date assigned to the Facility Letter in the Definitions Section. This involved substituting 20 th for 16 th January 2015. There is no evidence another facility letter was issued on 20 th January 2015, certainly not a facility letter in revised terms. The new date is thus likely to have been introduced in error and it is plain that the parties intended to refer to the Facility Letter. It was not suggested that it could have been intended to refer to anything else. Moreover, it was incorporated in a reference which had no material bearing on the operative provisions of the deed itself. However, the alteration was endorsed with the initials of Ms Agathagelou and, upon receipt, Mr Stephen Henesy initialled the alteration and signed the amended Deed (“the Amended Deed of Priority”) in his capacity as director of Creativityetc. Once that was done, the Amended Deed of Priority was to be construed in the light of the surrounding circumstances and the reference to 20 th January 2015 construed as a reference to 16 th January 2015. It did not give rise to any material change in relation to the rights and obligations of the parties.
Copies of the Mortgage and the Amended Deed of Priority were then sent to HM Land Registry and, on 4 th February 2015, notice of the same was registered on the Charges Register for the Properties.
As part of the loan arrangements, Karunia had agreed to grant Creativityetc a debenture over its assets. It did so but the debenture was not initially registered in Cyprus. Mr Stephen Henesy has filed a witness statement confirming that, at a meeting in Cyprus, in August 2015 his uncle, Mr Nick Henesy, was invited to sign another copy of the Deed of Priority (“the Third Version”) in connection with the registration formalities in Cyprus. He apparently did so in Mr Stephen Henesy's name with his authority. The debenture was subsequently registered. It is unclear how and, if so, to what extent the Third Version was utilised in connection with the registration formalities.
On 5 th May 2017, Creativityetc formally demanded repayment. On 5 th July 2017, it commenced legal proceedings against Karunia and, on 4 th September 2017, obtained judgment, in default, for £268,103.75. Judgment has not been set aside and this amount remains outstanding together with statutory interest.
Creativityetc also took steps to place Karunia in receivership and, on 12 th May 2017, Mr Ioannis Moditis was appointed receiver. There is an issue about the lawfulness of his appointment. In any event, his appointment has been terminated or is in the process of being terminated.
(3) The Claim
By these proceedings — issued on 21 st December 2020 — Karunia seeks “a declaration that a Deed of Priority dated 22 nd January 2015…made between [Karunia] and [Creativityetc] affecting [the Properties] is void by reason of fraud” and “an order...
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