Whitehall Capital Ltd v Land South East Ltd
| Jurisdiction | England & Wales |
| Judge | Davis-White |
| Judgment Date | 03 February 2022 |
| Neutral Citation | [2022] EWHC 190 (Ch) |
| Docket Number | Case No: BL-2021-LDS-000017 |
| Year | 2022 |
| Court | Chancery Division |
[2022] EWHC 190 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
BUSINESS LIST (ChD)
Leeds Combined Court Centre
1 Oxford Row, Leeds LS1 3BY
HH JUDGE Davis-White QC
(sitting as a Judge of the High Court)
Case No: BL-2021-LDS-000017
Mr Victor Steinmetz (instructed by DLA Piper LLP) for the Claimant
Mr David Evans (a former director of the Defendant) for the Defendant
Hearing date: 21 September 2021
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.
HH JUDGE Davis-White QC
HH Judge Davis-White QC:
This Part 8 Claim seeks declaratory relief as to the meaning of a side letter entered into between the parties. On the basis that its construction of the side letter is correct, the claimant seeks payment of some £213,000 said to be due to be paid to it under the side letter from the proceeds of sale of a Property owned by the defendant when such sale completes. The dispute between the parties is one as to construction of the side letter.
The claimant, Whitehall Capital Limited (the “Claimant” or “WCL”), is a company incorporated in the British Virgin Islands. Its primary business is the making of short-term loans or bridging loans against the security of real property.
The main evidence in this case on behalf of WCL comes from Mr Anthony Bodenstein, its founder and one of its directors.
In November 2018, an English incorporated company, Whitehall Lending Limited (“WHLL”) was set up. Mr Bodenstein is its main shareholder and one of its directors. WHLL carries on the same core business as WCL and was set up in circumstances where the large majority of transactions being carried out by WCL related to UK real property such that it made it sensible to have a UK company making and managing the relevant loans. After November 2018, loans have been made by WHLL rather than WCL.
The defendant, Land South East Limited (the “Defendants” or “LSEL”) carries on business buying and selling real estate and purchasing and developing properties.
The main evidence on behalf of the Defendant comprises a witness statement of Mr David Evans (“Mr Evans”), a former director of the Defendant who had an involvement in the relevant history of the matter on behalf of the Defendant.
Before me, the Claimant was represented by Mr Victor Steinmetz of Counsel. Until shortly before the trial before me, the Defendant had solicitors on the record, Bermans (2012) Limited. Those solicitors ceased to act shortly before the trial and came off the record at about 4pm the day before the trial commenced. The Defendant now acts in person. At the start of the trial, Mr Cunningham, a director of the Defendant, confirmed that it would like Mr Evans to speak for it. To the extent necessary, I gave permission for Mr Evans to address the court on behalf of the Defendant.
I am grateful to Mr Steinmetz for the number of helpful documents he put before the court including of course his skeleton argument and authorities bundle. I am also grateful to him for his helpful and concise oral submissions. Mr Evans represented the Defendant with skill and moderation. I am grateful to him too.
I should point out that Mr Evans' written submissions, served with little time to be considered before the hearing, appeared to contain a number of submissions based on factual assertions that were not contained in the evidence.
The Background
In about July 2015 the Defendant, then ERSG Land South East Limited, purchased for development a twin tower block in Poole, Dorset for a sum of some £2.8 million or so. This was funded in part by Mr Evans and in part by a facility from an entity referred to in the evidence as “Dragonfly”. The site address was 1, 3, 5 and 7 Serpentine Road and land on the West Side of Serpentine Road, Poole (the “Property”). It is also known as “St Johns House”.
Revised planning permission was obtained after the acquisition. Two possible plans were then pursued by the Defendant in tandem. One was to develop the Property and to sell units on the open market. The alternative was to undertake a joint venture with a housing association whereby the association would fund the development and take ownership of the site when completed.
In about July 2018, LSEL was looking for new capital to pay off its existing indebtedness thus giving it time either to obtain secured development funding itself to complete the development of the Property or to finalise a deal with a housing association along the lines that I have referred to.
LSEL was introduced to WCL at this time. On 4 September 2018 the parties entered into a written secured loan facility agreement (the “Loan Agreement”). The facility was for a one year loan (less a day) of just over £2.8 million. Although the purpose of the loan was defined as being for the purchase of property this was not in fact the purpose of the loan. Rather the purpose was as I have stated, namely to pay off earlier lending. WHLL had not at this time been set up.
It was a condition of the loan that the same was guaranteed by LSEL's then parent company and that that guarantee was also secured by a Second Legal Charge over certain land and buildings at Bradford Street, Birmingham. This security was duly entered into. Also as part of the security package for the loan, on 4 September 2018, LSEL entered into a legal mortgage of the Property and a debenture in favour of WCL.
There is a certain amount of dispute about the detail and about the appropriate characterisation of the position during the period of the WCL contractual facility and the circumstances of the eventual default that I mention below. At the end of the day it did not seem to me that most of these differences were material for the purposes of the issue of construction that I have to resolve. I refer to the more contentious disputes of fact below.
Following default under the Loan Agreement, fixed charge receivers were appointed over the Property by WCL by a written appointment dated 2 December 2019. They were subsequently discharged later that month following payment by LSEL of a sum of £60,000, towards default interest owed under the Loan Agreement and with a view to LSEL achieving a sale and/or refinancing of the Property.
Negotiations then took place between Cynergy Bank (“Cynergy”) and LSEL with a view to Cynergy Bank re-financing the loan under the Loan Agreement. As matters ended up, Cynergy was not prepared to re-finance the entire WCL loan as in principle it had been envisaged that it would. This seems to have been as a result of the valuation placed on the Property by valuers acting for Cynergy. The result was that there was a shortfall of some £155,000 or so between the re-financing monies that Cynergy was prepared to provide and the sums required to discharge the WCL loan under the Loan Agreement.
By about 23 January 2020, as evidenced by an email of that date from Mr Bodenstein to Mr Evans, it was then agreed in principle that WHLL would, in effect, refinance that part of the WCL debt that would not be met from the Cynergy loan. That new loan would be from WHLL and would be secured by a charge. Mr Bodenstein was also looking for a guarantee, as WCL had had in relation to the Loan Agreement. As the existing guarantee would not carry over, Mr Bodenstein sought a new parent company guarantee or one from Mr Evans personally. At this stage Mr Bodenstein was apparently of the belief that Cynergy would not object to a second charge on the Property ranking after its charge.
Mr Evans was not able to offer a personal guarantee, instead what he was offering was that repayment would be made from future sale proceeds of the Property:
“If the property can be sold or developed as we all believe then I have offered this to cover any shortfall. However I have nothing more I can offer so to agree to this would be fraudulent. At the time of agreeing the previous PG as stated above I had funds available and the PG was also joint with a third party. As such the refinance and confirmation that any balance will be covered from the future receipts on the sale of St. Johns is where we are at the moment. You need to decide whether £3,270,000 this week with the £155,000 at the point of sale is acceptable or whether because I cannot make a commitment I cannot keep, you will be better off looking to sell the property hoping that a third party purchaser will agree with the basis of the valuation we have managed to achieve with Colliers and that any professional fees do not destroy any...
To continue reading
Request your trial