Urban Ventures Ltd v Simon Robert Thomas and Nicholas O'Reilly as Administrators of the Black Ant Company Ltd ((in Administration)) and Billsop Properties Ltd ((in Administration)) and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice David Richards,Lord Justice Lindblom,Lord Justice Beatson |
| Judgment Date | 29 January 2016 |
| Neutral Citation | [2016] EWCA Civ 30 |
| Docket Number | Case No: A3/2014/1508 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 January 2016 |
[2016] EWCA Civ 30
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION, COMPANIES COURT
NICHOLAS STRAUSS QC (SITTING AS A DEPUTY JUDGE OF THE HIGH COURT)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Beatson
Lord Justice Lindblom
and
Lord Justice David Richards
Case No: A3/2014/1508
Gary Cowen (instructed by Moon Beever) for the Appellant
Marcia Shekerdemian QC (instructed by DLA Piper UK LLP) for the 1 st Respondents
Ben Valentin (instructed by Freshfields Bruckhaus Deringer LLP) for the 2 nd Respondent
Hearing date: 8 December 2015
"Tacking" describes the means by which a creditor, with a charge securing an original advance, is able to use the charge to secure a further advance and so obtain priority for the further advance over sums secured by any second or subsequent charge. Because of the potential prejudice to the interests of the holders of second or subsequent charges, first equity and then statute have severely restricted the circumstances in which tacking will be permitted. The issue on this appeal is whether, in the particular circumstances of the case, any further advances were made by the holder of first charges on various properties. Only if the proper legal conclusion on the undisputed facts is that further advances were made, will the restrictions on tacking be engaged. The judge at first instance held that no further advances were made, so that the priority of the first charges remained unchanged. The holder of second charges on the properties appeals against that decision, with permission given by Sir Timothy Lloyd.
Section 48 of the Land Registration Act 2002 provides that charges over registered land rank in the order of their registration. That is subject to the restrictions on tacking contained in sections 49 and 50. Section 49(1)-(5) provides the circumstances in which a further advance may be secured by the higher-ranking charge. Section 49(6) provides that "Except as provided by this section, tacking in relation to a charge over registered land is only possible with the agreement of the subsequent chargee." It is common ground that none of the circumstances specified in section 49(1) – (5) in which the tacking of "further advances" is permitted applies in the present case. The statutory position as regards other property is similar, but more shortly stated: see section 94(1) of the Law of Property Act 1925.
In the present case, the borrowers were two companies, The Black Ant Company Limited (TBAC) and Billsop Properties Limited (Billsop). Three properties owned by TBAC and one property owned by Billsop were the subject of first charges in favour of Dunbar Assets plc (Dunbar) and second charges in favour of the Appellant, Urban Ventures Limited (Urban). Although the details of the borrowings secured on each of these properties differ, the submissions before the judge at first instance, and before this court, have proceeded by reference to the borrowings secured by charges on one property owned by TBAC, a freehold property known as The Former Balham Bowling Club, Ramsden Road, London SW12 (the property). It appears that no issue arises in respect of the property owned by Billsop because the parties entered into a deed of priorities which governed the priorities as between their respective advances.
TBAC and Billsop became insolvent and were placed in administration on 15 August 2011. In the course of 2012, the administrators sold each of the four properties, realising gross proceeds of £7,312,500. Distributions totalling £6,641,000 have been made to Dunbar by the administrators. The administrators hold a further amount of approximately £200,000, pending the outcome of this appeal. There remains a shortfall of some £3,464,000 due to Dunbar and, therefore, unless Urban succeeds on this appeal, there are no funds available to meet any part of its outstanding advances.
By a facility letter dated 28 September 2006, Dunbar agreed to make available to TBAC a loan facility in the sum of £2.47 million. The purpose was stated to be, as to £2.3 million, to refinance current borrowings with Heritable Bank and, as to the balance of £170,000, to roll-up interest until 30 June 2007. The facility letter is headed "Loan Facility — No.13 Account". The Indebtedness, defined to mean all monies from time to time due or contingently due to Dunbar from TBAC or any third party in connection with the facility, was repayable on demand but, in the absence of such demand, the facility was to remain available until 30 June 2007 after which date Dunbar would "consider renewing the Facility for a further period, on terms to be negotiated". Drawdown of the facility was to be made in one drawing not later than two months after the date of the letter. Interest was payable at the rate of 3% over Dunbar's base rate, subject to a minimum base rate of 4% per annum, and would be charged and become payable on a quarterly basis. Security for the Indebtedness was to consist of a first legal charge over the property, a first floating charge over all of TBAC's assets and undertakings and a personal guarantee in a principal sum of £500,000. The facility was drawn down on 26 October 2006 and on the same day a first legal charge over the property was executed, securing in standard terms all monies for the time being and from time to time due from TBAC to Dunbar. The charge was expressed to be a continuing security to Dunbar notwithstanding any settlement of account. It was registered with the Registrar of Companies on 31 October 2006 and with the Land Registry, as a first-ranking charge on the title of the property, on 10 November 2006.
By Heads of Terms dated 20 December 2006, Urban agreed to lend to TBAC the sum of £650,000 at a rate of interest of 30% per annum (payable as to half the interest by quarterly payments and as to the balance on the last day of the 12 month term of the loan) and secured by a second charge on the property. Clause 6 provided that at the end of the loan period, if both parties were agreed, "the contract will be renewed for at least another 12 month period by way of a new contract on terms no less favourable than those in this contract". Clause 7 provided that if either party wished to terminate the contract at the end of the loan period, six weeks notice prior to the end of the loan period should be given in writing and the loan capital and interest accrued was to be repaid in full on the last day. The second charge in favour of Urban was contained in a CH1 document dated 21 December 2006 and, with the consent of Dunbar, it was registered on the title of the property in January 2007.
On 9 March 2007, Urban agreed to provide a second loan facility of £450,000 to TBAC, at an interest rate of 25% per annum, secured by a third charge on the property executed on 12 March 2007 and registered on the title on 25 May 2007.
By a series of letters dated 28 June 2007, 1 February 2008, 16 September 2008 and 29 December 2008, the loan facility provided by Dunbar was extended. Each letter is headed "Loan Facility — No.13". Each letter refers to the facility letter dated 28 September 2006 and each states that "we are pleased to confirm that subject to the Indebtedness remaining payable upon demand, the facility shall remain available to you until" a date specified in each letter. The date specified in the last of these letters was 30 June 2009. Each letter refers to "the terms and conditions of this letter to amend the terms of the facility" and provides that "all other terms and conditions as specified in our facility letter dated 28 September 2006 continue to apply".
Dunbar provided to TBAC a facility letter dated 26 March 2009, which was signed as agreed and accepted on behalf of TBAC on 28 March 2009. Like the facility letter dated 28 September 2006, it was headed "Loan Facility — No.13 Account". Its text followed almost exactly the terms of the facility letter dated 28 September 2006, except that the amount of the facility was shown as £2,593,400 and the purpose of the facility was stated...
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