Wayne Murfet v Property Lending LLP

Hearing dates: 25 October and 5 November 2024

Approved Judgment

This judgment was handed down in open court on 5 November 2024 and by circulation to the parties or their representatives, by e-mail and by release to the National Archives

INTRODUCTION

This appeal arises as the culmination of a long series of hearings, but it is not necessary to recite the full history, merely that this is an appeal of the order of Chief ICC Judge Briggs (“ Judge Briggs”) dated 3 October 2023 (“ the Briggs Order”) pursuant to an ex tempore judgment (the “ Judgment”) given by him on the same date.

Judge Briggs was considering an application to set aside certain statutory demands. The statutory demands relied on personal guarantees given to the Respondents by the Appellants. The personal guarantees guaranteed the obligations of a property development company, XH Bury Ltd (the “ Borrower”) under two separate loans that were advanced respectively by the Respondents (which I shall also refer to as the “ Lenders” and each as a “ Lender”). The First Appellant is the sole shareholder and director of the Borrower and the second Appellant is his mother. The loans were made under two Facility Agreements each dated 8 April 2021 (the “ Facility Agreements”) and each comprising a facility letter (the “ Facility Letter”) and standard Terms and Conditions. Both lenders engaged the same firm of solicitors and both Facility Agreements are in substantially the same form at least as regards the matters to be considered in this case.

I will refer to the Appellants in their capacity as guarantors of the Borrower's liabilities under the Facility Agreement as the “ Guarantors”.

In the course of the Judgment, Judge Briggs made a number of findings against the Appellants and by the Briggs Order he dismissed the Appellants' application.

The Appellants appealed the Briggs Order in its entirety, originally citing eight separate grounds of appeal. The Appellants were originally denied permission to appeal by an order made on paper by Adam Johnson J on 16 January 2024. However, subsequently after the same judge heard oral argument on the matter, he gave permission through his order of 9 February 2024 (the “ Johnson Order”) to appeal on Grounds 2, 3, 4 and 11 (the “ Remaining Grounds”). He refused permission to appeal on all other grounds. Grounds 2, 3 and 4 were all concerned with the question of the proper meaning and effect of Clause 7.2 of the Facility Letter (defined below), and Ground 11, which related to the application of the Unfair Contract Terms Act 1977 (“ UCTA”).

The Appellants have called into question the reasoning of Adam Johnson J in dismissing Ground 6. Ground 6 was based on an argument that Judge Briggs erred in holding that the Respondents had valid reasons for calling in the loan and effectively terminating the lending agreement as the court had insufficient evidence to reach such a conclusion: the question of whether the development was progress or delayed was a factual issue which could only be determined after trial and the Judge had ignored some evidence and given undue weight to other evidence.

The Appellants argue that Adam Johnson J was illogical in allowing an appeal based on this ground as his reasons for doing so appeared to be based, or at least partly based, on a consideration that the point did not matter since Judge Briggs had found that under the Facility Agreement the Lender did not need to be able to show a reason for terminating the loan. The Appellants argue that this did not make sense as a reason to dismiss an appeal on this ground since Adam Johnson J had allowed other grounds of appeal to go forward which put in question Judge Briggs' finding that the Lender did not need to be able to show the reason for terminating the loan.

During the hearing, I said I would return to this point if I found in favour of the Appellants in relation to the Remaining Grounds, or any of them. In view of my findings below, this will not be necessary.

The Remaining Grounds may be summarised as follows:

i) Ground 2 was that Judge Briggs did not consider the principle of contra proferentem.

ii) Ground 3 was that Judge Briggs erred in holding that the Lender could demand full repayment at any time without any reason: this matter was a trial issue which could not be determined in the insolvency courts; it would depend on the intention of the parties, and so would require witness evidence; and as the Borrower was not a party to the insolvency proceedings, it was not possible for the court to reach any conclusion about the intentions of the Borrower.

iii) Ground 4 was that Judge Briggs was incorrect in holding that Clause 7.2 of the Facility Letter was a termination clause.

iv) Ground 11 was that Judge Briggs fell to consider the applicability of s.3 UCTA.

These Grounds were amplified in the skeleton argument provided by the Appellants and are discussed further below.

The overall case of the Respondents in response to these grounds is simple. In summary it is that Clause 7.2 of the Facility Letter, which stated amounts advanced under the Facility Letter to be “repayable on demand” was plain on its face in allowing the Borrower to recall the debt at any point. There was no ambiguity in this that would require any recourse to the factual matrix surrounding the Facility Letter, or which would allow the operation of the contra proferentem rule. S.3 of UCTA does not apply as the Facility Letter itself was not “standard terms of business” and in any case is only ever engaged in relation to exemption clauses and Clause 7.3 is not an exemption clause. Again, these points are developed further below.

RELEVANT LEGAL TESTS

The grounds on which the Court may set aside a statutory demand are set out in rule 10.5(5) of the Insolvency (England and Wales) Rules 2016. It has not been made plain as to which ground was being relied upon by the Applicants but it may be presumed that this is subparagraph (b):

“The debt is disputed on grounds which appear to the court to be substantial.”

It may also be that the Claimants would add ground (d):

“The court is satisfied on other grounds that the demand ought to be set aside.”

There was little disagreement between the parties as to the legal test to set aside a Statutory Demand. To set aside a Statutory Demand the debtor must show “a genuine triable issue” (see for example, In Crossley-Cooke v Europanel (UK) Ltd [2010] EWHC 124 (Ch), at [16]). The test has been authoritatively stated by Roth J in Collier v P&MJ Wright (Holdings) Ltd [2007] EWCA Civ 1329, [2008] 1 WLR 643.

“As being akin to that applicable to the test applied under CPR 24 for a reverse summary judgment, namely that there is “no real prospect of successfully defending the claim”.

Roth J proceeded to state at [20]:

“If the correct test was that of the balance of probability, it may be that on this appeal the Court would not interfere, but that is not the correct test. It is not appropriate on an application to set aside a statutory demand to conduct anything approaching a mini-trial.”

In applying the test of “no real prospect of defending the claim” it is helpful to consider the summary of the legal principles summarised by Lewison J (as he then was) in Easyair Limited (trading as Openair) v. Opal Telecom Limited [2009] EWHC 339 (Ch) [at 15] which may be further summarised as follows:

i) The Court must consider whether the respondent to the application has a “ realistic” as opposed to a “ fanciful” prospect of success i.e. one that carries some degree of conviction — a claim that is more than merely arguable.

ii) The Court must not conduct a “ mini-trial”. This does not mean that the Court must take at face value and without analysis everything that a respondent to the application says in his statements before the Court.

iii) The Court must take into account not only the evidence actually placed before it upon the application, but also the evidence that can be reasonably expected to be available at trial.

iv) Although a case may turn out at trial not to be complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus, the Court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case.

v) On the other hand, it is not uncommon for an application under CPR Part 24 to give rise to a short point of law or construction and, if the Court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should “ grasp the nettle” and decide it. If the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be.

As to point (iii) in this summary, that principle can be taken too far – a number of cases have warned against what Mr Parsons referred to as...