Manolete Partners Plc v Sampson Coward LLP
| Jurisdiction | England & Wales |
| Judge | Master Teverson |
| Judgment Date | 13 January 2023 |
| Neutral Citation | [2023] EWHC 37 (Ch) |
| Docket Number | Case No: BL-2022-000347 |
| Court | Chancery Division |
[2023] EWHC 37 (Ch)
DEPUTY Master Teverson
Case No: BL-2022-000347
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (Ch)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Joseph Curl KC (instructed by TLT LLP solicitors) for the Claimant
Siân Mirchandani KC (instructed by Caytons Law LLP solicitors) for the Defendant
Hearing dates: 24 October and 9 November 2022
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
DEPUTY Master Teverson
By application notice dated 6 April 2022, the Defendant, Sampson Coward LLP, seeks (i) an order pursuant to CPR 24.2 for summary judgment on parts of the Claimant's case as referred to in the witness statement of Sam Moore made in support of the application, (ii) an order pursuant to CPR 3.1(2)(a) that the time for the Defendant to submit a Defence to the parts of the claim which are not subject to the summary judgment application is extended until a reasonable time after the hearing of the summary judgment application, and (iii) an order that the Claimant pay the Defendant's costs of any part of the claim in respect of which summary judgment is awarded and of the application, in both cases to be assessed on the standard basis if not agreed.
The application was heard before me on 24 October 2022 and adjourned part heard until 9 November 2022 for submissions in reply. The hearing on 24 October was in person. The hearing on 9 November was a remote hearing. The Defendant/Applicant was represented by Siân Mirchandani KC. The Claimant/Respondent by Joseph Curl KC.
As this is a summary judgment application made prior to the filing of a Defence, I shall set out the facts giving rise to the claim by reference to the Particulars of Claim. I do this in order to provide a summary of the facts relied on in support of the claim. I am not to be interpreted as making any findings of fact.
The Claimant, Manolete Partners PLC, is the assignee of the claims of UK Property and Land Specialists Limited (in liquidation) (“UKPALS”) and Nero Developments Limited (in liquidation) (“Nero”) together referred to as “the Companies”.
The principal activity of the Companies was the acquisition and development of building projects in the Salisbury area. UKPALS was incorporated on 28 September 2010. Nero was incorporated on 3 October 2015. Nigel Jeremy Weir (“Mr Weir”) owned 100% of the shares in each Company at all material times.
The Companies went into administration on 10 January 2019. In the case of UKPALS, the Administrators were appointed by Strategic Residential Developments Limited (“SRD”) and in the case of Nero by UK Property Development Solutions Limited (“UKPDS”). The Companies went into compulsory liquidation on 3 December 2021.
SRD was incorporated on 20 September 2013. UKPDS was incorporated on 12 October 2015. I shall refer to them together as “the Lenders”. The Lenders had the same directors. The Lenders issued high yield investment bonds to individual private retail investors. The bonds were marketed by Hypa Management LLP (“Hypa”), a fund manager. The proceeds of the investment bonds issued were lent by the Lenders to the Companies. A total of £5,271,700 was lent by SRD to UKPALS and a total of £4,492,000 by UKPDS to Nero.
The Defendant is a firm of solicitors based in Salisbury. The Defendant was instructed by UKPALS to act as its solicitor in relation to the financing it was to receive from SRD and the related land acquisitions.
Between 30 August 2013 and 29 November 2013 a suite of documents was negotiated and drafted to put in place a commercial structure between UKPALS and SRD under which SRD would make secured loans to UKPALS and the Defendant would act as escrow agent.
The documentation included a loan agreement made between SRD as the Lender and UKPALS as the Borrower (“the UKPALS Loan Agreement”) under which SRD agreed to make available a facility of up to £20 million to UKPALS. It also included an escrow letter dated 29 November 2013 under which the Defendant agreed and undertook to act as escrow agent.
By clause 1.1 of the UKPALS Loan Agreement, the Defendant, in its capacity as UKPALS's solicitor was to maintain with HSBC (i) the First Escrow Account with the Defendant's Client Account details and reference number 10005; (ii) the Second Escrow Account with the Defendant's Client Account details and reference number 10006; and (iii) the Security Account with the Defendant's Client Account details and reference number 10009.
By clause 2.1, SRD was to make available to UKPALS a term facility of up to £20 million.
By clause 3.2, all amounts advanced by SRD pursuant to clause 3.1 were to be paid by SRD into the Security Account. Clause 3.1 contained an automatic drawdown or sweep provision. The Security Account as defined was to be in the name of the Borrower.
By clause 6.1, UKPALS would pay interest to SRD at the rate of 12% per annum.
By clause 7.2, not less than three calendar months before each date on which interest was payable, UKPALS was to procure that the amount held in the First Escrow Account was at least equal to the interest payable on that date until that interest had been paid to SRD.
By clause 7.3, upon any Disposals as defined in clause 1.1, by UKPALS of assets of UKPALS subject to security interests created by the Debenture, UKPALS was to immediately pay an amount equal to 75% of the “net value of the consideration pursuant to a Disposal” into the Second Escrow Account.
The First and Second Escrow Accounts as defined in clause 1.1 were to be accounts in the name of the Borrowers' Solicitors. The Borrowers' Solicitors were defined in clause 1.1 as the Defendant. By contradistinction, the Security Account as defined in clause 1.1 was to be an account in the name of the Borrower.
By an escrow letter dated 29 November 2013 (“the UKPALS Escrow Letter”) and executed on behalf of the Defendant by two of its partners the Defendant agreed to act as escrow agent in relation to the Escrow Account in accordance with the instructions and subject to the terms and conditions set out in the letter.
Paragraph 1.1 recorded that the purpose of the escrow letter was to set out the terms on which the Defendant had agreed to act as escrow agent in relation to the loan by SRD to UKPALS pursuant to the UKPALS Loan Agreement.
By paragraph 2.1 the Defendant agreed to open immediately an interest-bearing instant access deposit account with the Escrow Account Bank in its name and subject to any interest payment pursuant to clause 7.2 of the UKPALS Loan Agreement being deposited in the Escrow Account to deal with such proceeds on the terms set out in the letter.
By paragraph 3.1 the Defendant further agreed that so long as any amount due to the Lender 1 under the UKPALS Loan Agreement was outstanding, it would not release any sums from the UKPALS Escrow Account except (a) pursuant to an instruction (defined as a “Lender Notice”) in writing or, (b) as expressly permitted by paragraphs 4.3 and 5.1 of the UKPALS Escrow Letter, neither of which exceptions are applicable to any claim made in the Particulars of Claim or, (c) as ordered by a court or legal or regulatory authority of competent jurisdiction.
By paragraph 6.1, the Defendant undertook to perform only such duties as were specifically set out in that letter.
It is to be inferred from a contemporaneous exchange of emails that a second escrow letter was executed by the Defendant in relation to UKPALS, probably in relation to the intended Second Escrow Account.
In paragraph 37 of the Particulars of Claim it is pleaded that despite the intention and expectation in the UKPALS Loan Agreement that there should be three escrow accounts 2, the Defendant set up and operated a single escrow account on the Defendant's Client Account which it named “Strategic Rd Escrow 1/10005 Bond Monies”. This is defined in the Particulars of Claim as (“UKPALS Escrow Account”).
In Paragraph 38 of the Particulars of Claim it is pleaded that the Defendant's operation of the UKPALS Escrow Account was subject to the terms of the Defendant's agreement and undertaking set out in the UKPALS Escrow Letter.
Between 4 November 2015 and 3 December 2015, a similar, but not identical, suite of documents was prepared and executed relating to the lending between UKPDS as lender and Nero as borrower. The Nero Loan Agreement dated 3 December 2015 provided for the Defendant to maintain the following accounts with HSBC: (i) the Security Account
In paragraph 48 of the Particulars of Claim it is pleaded that the Defendant set up and operated a single escrow account on the Defendant's Client Account which it named “Nero Developments Limited/12612 Escrow Account” (“Nero Escrow Account”).
In paragraph 49 it is pleaded that the Defendant's operation of the Nero Escrow Account was subject to the terms of the Defendant's agreement and undertaking set out in the Nero Escrow Letter.
In paragraph 50 it is pleaded that the Defendant did not operate either the UKPALS Escrow Account or the Nero Escrow Account as it had agreed and undertaken to do by the Escrow Letters.
In paragraph 51 it is pleaded that the Defendant allowed the Escrow...
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