Red River UK Ltd v Sheikh
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rimer,Lord Justice Lloyd,Lady Justice Arden,Sir Anthony Clarke |
| Judgment Date | 28 April 2009 |
| Neutral Citation | [2008] EWCA Civ 1592,[2009] EWCA Civ 643 |
| Docket Number | Case No: A3/2007/2793,Case No: A3/2007/2793,4,5 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 April 2009 |
[2008] EWCA Civ 1592
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION
(MR JUSTICE MANN and MR JUSTICE BRIGGS)
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Rimer
Case No: A3/2007/2793,4,5
Mr Hugo Page QC and Mr Marc Beaumont (on 28 August 2008) for the Defendants/Applicants
Mr Philip Newman (on 15 December 2008) (instructed by direct access) for the Defendants/Applicants
Mr Meares (on 15 December 2008) (instructed by Messrs Isadore Goldman) for the Claimants/Respondents
(As Approved)
These are three renewed applications for permission to appeal. They first came before me on 28 August 2008 when I heard the argument on one application presented by Mr Hugo Page QC and adjourned the other two. Those two were presented by one of the two applicants, Ms Anal Sheikh, a solicitor, who appeared in person and sought, and was given, time to prepare a supplemental skeleton argument in support of the applications. I said I would give an oral judgment on Mr Page's application at the same time as I ruled on the two adjourned applications. The applications have been re-listed today, a longer gap than I had expected.
The claimants are (1) Red River UK Limited (“Red River”) and (2) Ismail Dogan (“Mr Dogan”). They are the respondents to the proposed appeals. The defendants are (1) Anal Sheikh and (2) Rabia Sheikh, and I hope they will forgive me if, for clarity and brevity, I refer to them by their respective initials. RS is AS's mother. They are the applicants.
Mr Dogan is the majority shareholder in Red River, in which RS has a 35% shareholding. Red River's only asset is a development site acquired in 2004. That property is subject to an “all moneys” legal charge in favour of the Bank of Scotland (“the BoS”) under a debenture of 11 August 2004. It prevents Red River from creating any charge over the property without the BoS's consent. The claimants and defendants, who presumably once had a good commercial relationship, have fallen out. Their claims and cross-claims resulted in a settlement agreement dated 29 June 2007, which followed a mediation. Any hope that it would resolve their differences was short-lived. It quickly led to further litigation.
By Clause 1 of the settlement agreement, the claimants were to pay the defendants £1.2m: £300,000 before 31 July 2007 and the balance (with interest on both payments) by 29 December 2009, with interest payments to be paid monthly starting in August 2007. By Clause 2, AS agreed within seven days to deliver up documentation enabling the removal of two restrictions on the title to the property that prevented its disposal without the defendants' consent. That documentation was to be held to their order until payment of the £300,000. AS also agreed to procure the transfer to Mr Dogan of RS's Red River shares. That was also to be done within seven days and the documentation delivered for that purpose was to be held to RS's order until payment of the £300,000.
By Clause 3, Red River agreed, on payment of the £300,000 and the provision of the clause 2 documentation, to enter into a legal charge in favour of the defendants “in a form approved by the Bank of Ireland and reasonably acceptable to [AS]”, being a charge which limited the sums to be advanced by the Bank of Ireland (“the BoI”) to £1.75m. Whilst the defendants argue to the contrary, it can be said, as the claimants do say, that the settlement agreement contemplated a composite transaction under which the BoI was to refinance Red River's indebtedness and was to have a first charge providing security up to a capped limit and the defendants were to have a second charge securing the £900,000 and interest. The settlement agreement provided no detail as to the terms of the second charge beyond that it would entitle the defendants to demand repayment if Red River defaulted in any payment. That referred, presumably, to the interest payments.
The defendants did not within seven days, or even by 31 July 2007, deliver the documents necessary to remove the restrictions. In consequence, the transaction did not proceed so as to enable Red River to pay the £300,000 by then due, which it intended to raise out of the BoI facility. Briggs J recorded in paragraph 8 of his judgment – the subject of one application before me – that Mr Page's explanation of why AS had refused to comply with clause 2 was because of what she regarded as the claimants' unreasonable refusal to lodge the second legal charge for exchange. Her concern was that there should be no moment when the property was affected neither by the restrictions nor by the second charge.
That impasse led on 22 August 2007 to the issue by the claimants of the present proceedings for the delivery up by the defendants of the required documents and damages. They followed that up with an interim application to Kitchin J on 3 September 2007 for delivery up. By then the BoI had offered an advance of £1.75m to the claimants, who had executed in escrow a legal charge in its favour which was being held by the claimants' solicitors. The defendants' main concern was that it should not secure more than £1.75m lest their second charge might give them inadequate security. Their position, with which the claimants' disagreed, was that the correct construction of the settlement agreement was that the BoI's intended priority was to be up to a maximum amount of £1.75m including interest and costs.
The application to Kitchin J was resolved by a consent order in Tomlin form (“the consent order”). The Schedule to it provided for the delivery of the required documentation by the defendants to the claimants' solicitors by 10 September and for those solicitors to hold it to the defendants' order pending (a) the payment of £300,000, (b) the execution of the second legal charge, and (c) the execution of a deed of priority dealing with the respective rights of the BoI and the defendants. It also resolved the issues between the parties as to the terms of the legal charge and the deed. Paragraph 4 of the Schedule included undertakings (i) by the defendants to enter into a deed of priority containing four listed provisions, and (ii) by the claimants to use reasonable endeavours to procure the BoI to enter into such a deed. The order required the defendants to use their best endeavours to provide their comments on the draft second charge and deed by 11 September or, at the latest, 13 September. Whatever the position under the settlement agreement, the defendants were contemplating a deal under which their legal charge ranked after the BoI charge and with a deed of priority.
The consent order included a liberty to apply as to carrying the scheduled terms into effect and a more general such liberty in the event of disagreement. Pursuant to those liberties the claimants restored the matter before Briggs J on 20 September 2007. The defendants had by then provided some of the documentation required by the consent order but not, it was said, all of it. The claimants also wanted directions as to the form of the second charge, as to which the parties could not agree; and as to the deed of priority, in respect of which there was a complaint that the defendants had failed to provide their comments. The defendants wanted changes to the deed, to which it was said the BoI was not prepared to agree. The claimants asked the judge to settle the form of charge and deed.
AS appeared in person before Briggs J and made it clear that the defendants wanted the settlement agreement to be performed. What she wanted at that stage was an adjournment so as to bring on inter alia an application for an order for the payment of the £300,000. Her application for an adjournment was refused. AS's further point was that there was no point in the court settling the second charge and deed because, if they were settled in accordance with her assertion as to the true construction of the settlement agreement and consent order, the BoI would not agree to them or enter into the first charge. That point did not deter Briggs J from embarking on what was asked of him: the parties, in his view, would have to take the risk as to the BoI's response.
Briggs J concluded that AS had reached the view that the performance of the settlement agreement by the completion of the composite transaction was unlikely to serve the defendants' interests. He settled the terms of the second legal charge. He did not also settle the deed of priority but did make rulings on issues raised by AS as to the extent to which it was or was not compliant with paragraph 4 of the Schedule to the consent order. The exercise involved his rejection of all but three of her points of objection, which resulted in three amendments. He set a deadline of noon on Friday 21 September for the delivery by the defendants of Form UN 2 that was necessary to procure the withdrawal of the restrictions on the title to the property that had been entered by AS and to remove any pending applications for entries on it. He made it clear that if there were any further arguments about the documents, the matter should be restored to him by no later than 3pm on 21 September.
The defendants complied with the obligation to deliver Form UN2. Following the hearing before Briggs J, the claimants overnight amended and engrossed the second legal charge in the form he had settled it in readiness for the completion of the refinancing arrangements between Red River and the BoI. They also sought and...
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