BL-2024-000734 - [2025] EWHC 2166 (Ch)

The Claimants say that Paragraph 1.11.1 as drafted only required the chargor to provide information as to certain types of assets – specifically, real property or fixed assets secured by the Debenture (and not the business of Glint more generally) (“the Fixed Assets Limitation”). It is accepted that there is no such limitation as regards the notification obligation arising under paragraph 1.11.3.

The basis of this argument seems to be as follows. The definition of the term “Secured Assets” is

“all the assets, property and undertaking for the time being of the Obligors subject to the Security created by, or pursuant to, this deed (and references to the Secured Assets shall include references to any part of them);”

And “Security” is defined as

“any mortgage, charge (whether fixed or floating, legal or equitable), pledge, lien, assignment by way of security or other security interest securing any obligation of any person, or any other agreement or arrangement having a similar effect”

The last part of the definition of Secured Assets means that, where the term is used, which part of the Secured Assets is being referred to in any clause of the Guarantee and Debenture will depend on the context. Thus, for example, in clause 5.4 (which refers to leasing and letting of the chargor’s property, the term “Secured Assets” is used to refer only to those assets which are capable of being leased or let. There are a number of other such usages in the charge document.

The Claimants therefore suggest that the term “Secured Assets” as used in paragraph 1.11.1 could mean something other than all secured assets. Their argument is that by necessary implication, this reference must be to only those secured assets which can be said to have a “location, condition, use and operation”. This, they say, can only be true of assets which are fixed assets.

They also suggest that this proposed interpretation is supported by the meaning given to the term “Secured Assets” in paragraph 1.11.2, which are expressly described as those Secured Assets which can be “inspected” and “examined” after entry on to the Obligors’ premises. I can see no reason why this approach should be adopted – the Claimants accept that the term “Secured Assets” can have different meanings in different contexts within the same agreement, and this seems to me to be simply an incidence of that usage.

The Defendants say that this interpretation is inconsistent with the clear words of the Guarantee and Debenture. There is no dispute that the security created by the Deed comprised: (a) a fixed charge pursuant to sub-clause 3.1.1 to 3.1.10, over all of the property of the Claimants as described in those sub-clauses; and (b) a floating charge pursuant to clause 3.1.11 over all undertaking and all property assets and rights of the chargors present and future not subject to the fixed charges. The term “Secured Assets” therefore prima facie includes all of the assets of the chargor. The issue here is as to whether the use of the words “location, condition, use and operation” has the effect of changing the meaning of that term in this context.

This is one of a number of arguments put forward by the Claimants which rely very heavily on the use of the words “location, condition, use and operation”. It therefore seems to me to be sensible to discuss in general terms how these words should be interpreted in construing the agreement as a whole.

As a preliminary point, the charge here is a floating charge, and is capable of attaching to any and every form of property. It would be very difficult for a draftsman in the context of something like the Information Obligations to envision each and every form of asset which might come into the hands of the chargor, and to employ a form of words that would be appropriate for that type of asset. My initial reaction is therefore that it would be wrong to place too much reliance on the specific words used, where the general sense is clear.

The Claimants argue that, since this is a professionally drafted agreement, a narrowly textual approach must be the correct one. However, I think it is clear from the context of the production of this agreement that that is not entirely correct. The Claimants themselves point out that the genesis of the Guarantee and Debenture was a document first agreed between Glint and Brahma where Brahma had provided finance for the purchase of certain fixed assets - indeed, they plead that “the majority of the financing provided by Brahma (i.e. to borrowers other than the Claimants) was made in connection with the acquisition of real property and/or in circumstances where security over real property was provided;” and “the templates for the Facility Agreement and the Guarantee and Debenture derived from drafts or previous agreements that Brahma or its owner had used in connection with financing involving real property.”

It is clear that in such a context, the drafting of paragraph 1.11.1 would be appropriate and typical. It is also accepted that at a later stage, in exchange for further funding relating to the business generally, the Guarantee and Debenture was expanded into a floating charge over the whole undertaking of the Claimants.

What the Claimants argue is therefore, in effect, that it was (or must have been) the intention of the parties that the rights to information should remain confined to the specific assets financed by the earlier financing, and that the addition of the floating charge would not have triggered any expansion of the right to information. I am unable to accept this argument, as it makes no commercial sense. The effect of the drafting of the paragraph in the context of the fixed charge is to give the lender rights of information as to the assets which he is funding, and which constitute his security. I think it entirely clear that the same principle would have been expected to apply when the scope of the charge was expanded. Not only would this be in accordance with ordinary commercial practice, but it seems positively perverse to argue that a lender under a floating charge would not have intended to have rights of information as regards not only all of the assets of the company, but also to all of the assets and liabilities which together make up what is, in fact his security – the net value of the company.

I therefore do not think that the Claimants have any valid argument on this point. Applying the approach set out by Lord Hodge JSC, I think it is clear that the paragraph should be interpreted on the basis that the intention of the parties was to give the holder of the floating charge the rights to information which would ordinarily be given to the holder of a floating charge, and that those rights are to information as to the assets and liabilities of the grantor of the charge. The literalistic approach of limiting the paragraph to the narrow scope of the words used not only runs contrary to commercial common sense, but is undermined by the fact that there is a clear explanation as to why words which do not accord with this construction might have come to be employed. This last point is, I think, important – where a phrase is crafted by the parties themselves and used for the first time, it should prima facie be given its literal meaning. However, where there is a context which explains why a phrase which is not in perfect accord with the context in which it is used, Lord Hodge’s logic suggests that it should be construed in order to give effect to the presumed intentions of the parties.

I am therefore satisfied that there is no valid basis for the argument that the use of the words “location, condition, use and operation” in clause 1.11.1 implies any reduction in its scope to only physical assets and, again, I do not think that this proposition rises even the level of arguability.

The Claimants put forward a secondary argument on this point, that being that because the assets subject to a floating charge are not appropriated to the charge until it crystallises, prior to that point the assets are not charged assets. This is an error of law – see In re Spectrum Plus Ltd [2005] UKHL 41 per Lord Walker at [139]) “Under a floating charge… the chargee does not have the same power to control the security for its own benefit. The chargee has a proprietary interest, but its interest is in a fund of circulating capital”, citing Worthington’s Proprietary Interests in Commercial Transactions (1996) pp 74-77).

Finally, I note that for this purpose the negotiating background between the Claimants and the original lender is of no assistance in the construction of the Guarantee and Debenture in circumstances where (a) the Guarantee and Debenture was executed as a deed; (b) the Guarantee and Debenture were public documents registered at Companies House and (c) they were expressed to be assignable by the Lender.