BL-2023-MAN-000072 - [2025] EWHC 2442 (Ch)

Fecha: 11-Sep-2025

Background

Background

By an agreement dated 26 October 2018 and made between Mulbury (1) and JAK (2) (“the JAK Loan Agreement”), JAK agreed to provide Mulbury with a “secured term loan” of £1,200,000 to purchase the Property.

Relevant terms of the JAK Loan Agreement included the following:

The definitions in clause 1.1 thereof included:

“Development Services Agreement”, as meaning “a development services Agreement to be entered into between [Mulbury and JAK] in agreed form in relation to the Property.”

“Event of Default” as meaning “any event or circumstance listed in clause 11”.

“Loan” as meaning “the principal aggregate amount of £1,200,000”.

ii)

Clause 7.1 thereof provided that Mulbury should repay “the Loan” in full:

“(a)
in the circumstances outlined in clause 10 of the Development Services Agreement;
(b)
if there is an Event of Default or a Potential Event of Default;
(c)
if, by the Longstop Date, the Loan does not fall due for repayment either pursuant to clause 7.1(a) or 7.1(b) (above) then the Loan shall be repayable on the Longstop Date.”

iii)

Clause 11 thereof set out some twenty specific “Events of Default”. Clause 11.19 provided that at any time after an Event of Default, JAK might, by notice to Mulbury, amongst other things, declare the Loan to be immediately due and payable.

The intention behind the JAK Loan Agreement was to fund the purchase by Mulbury of the Property on the basis that Mulbury would then borrow further monies from a third party lender to fund the development of the Property such that, following the subsequent sale of developed plots on the Property and after repayment of the monies borrowed for development, JAK would be repaid the money lent to fund the purchase of the Property out of the proceeds thereof, together with a share (£650,000) of the development profit, before Mulbury received any part of the proceeds of sale.

It was in this context that, on 11 February 2019, JAK (1) and Mulbury (2) entered into the Development Services Agreement. There is an issue between the parties, to which I will return, as to whether the Development Services Agreement is an admissible aid to the interpretation of clause 13 of the Deed of Postponement. Subject to this point the following provisions of the Development Services Agreement are of particular relevance:

Clause 10 thereof was concerned with the distribution of the “Net Sale Proceeds” arising following the development of the Property with the benefit of the development finance provided by a third party lender. In essence, it provided that Mulbury should hold the “Sales Proceeds” on trust to apply the same, after payment of the sums provided for by clauses 10.2 and 10.3, “in the following priority order”, namely to pay all sums due and payable pursuant to or in connection with the development finance “obtained in accordance with clause 19”, and thereafter to pay all sums due and payable to JAK pursuant to the JAK Loan Agreement and then what was due to JAK in respect of the “Fixed Profit Share” (i.e. a sum of £650,000), before the payment of the balance (if any) to Mulbury.

ii)

Clause 19 thereof provided, amongst other things, that:

Pursuant to clause 19.1, Mulbury would: “as soon as reasonably practicable after the date of this Agreement (but only once all relevant information is available to Mulbury) approach reputable third party funding institutions to seek offers of finance for the Development (Footnote: ¹) and use all reasonable endeavours to secure the same in the best terms reasonably obtainable in accordance with this clause 19.”

Pursuant to clause 19.3, JAK would: “use reasonable endeavours to cooperate with Mulbury to procure agreement of a funding offer for the funding of the construction of the Development as soon as reasonably practicable”.

Pursuant to clause 19.4, JAK agreed that: “a charge with first priority over the Property will be offered as unencumbered security to assist Mulbury in obtaining the most preferential terms possible for the provision of development finance for the Development, provided that JAK’s charge shall be subordinated to such security, but shall otherwise remain in place.”

On the same day, 11 February 2019, Mulbury executed a charge over the Property in favour of JAK (“the JAK Charge”). Thereunder:

By clause 1, Mulbury agreed to pay to JAK on demand all of the “Owner’s Obligations”, where the latter were defined as all of Mulbury’s liabilities to JAK present, future, actual or contingent and whether incurred alone or jointly with another, including interest and expenses as referred to in clauses 1.1 and 1.2.

ii)

By clause 2, Mulbury, as a continuing security for the payment on demand of the “Owner’s Obligations” and with full title guarantee charged the Property and all its interests therein to JAK.

10.

Mulbury subsequently identified Together as third party provider of finance to fund the development of the Property as provided for by clause 19 of the Development Services Agreement.

11.

On 28 April 2020:

Together provided Mulbury with a bridging loan of £188,112 (net advance £150,000) under a loan agreement of that date (which had been signed on behalf of Mulbury on 20 April 2020). Mulbury subsequently borrowed further monies from Together. On 3 December 2020, Mulbury and Together entered into a “Further Advance Agreement”, stating that a further advance of £197,000 was being made that day, and recording that a total of approximately £1.75 million had been drawn down to date (“the Together Loan”). It is to be noted that on 17 April 2020, Together had provided written “offers in principle” in respect of a loan advance of £150,000 and a “maximum facility” of £3,050,000. Each such document identified the security to be provided by Mulbury as including a “1st charge” over the Property.

ii)

Mulbury granted Together a debenture, and also a legal charge over the Property which was registered at HM Land Registry on 7 May 2020 (“the Together Charge”).

iii)

JAK and Together entered into the Deed of Postponement.

12.

In the lead up to the execution of the Deed of Postponement significant correspondence passed between the parties. For the purposes thereof, Primas Law (“Primas”) acted on behalf of JAK, Priority Law Limited (“Priority”) acted on behalf of Together, and Beyond Corporate acted on behalf of Mulbury. In addition, Elisabeth Williams, the Legal Director of Mulbury sent and received correspondence. In the course thereof, Beyond Corporate acted as, in effect, a post box as between Primas and Priority acting as a conduit for correspondence relating to the Deed of Postponement. It is common ground that this correspondence is not admissible for the purposes of interpreting the Deed of Postponement. I therefore say nothing further about it at this stage, but it will be necessary to return to it in some detail when considering Together’s alternative rectification case.

13.

So far as the terms of the Deed of Postponement are concerned, for the purposes of interpreting clause 13 thereof, the following provisions are of relevance:

Clauses 1 to 6 identified the Property and defined Mulbury as “the Chargor”, Together as “the First Chargee”, the Together Charge as “the First Charge”, JAK as “the Second Chargee”, and the JAK Charge as “the Second Charge”.

ii)

Clause 7 defined “the Advance” as being: “All sums due to, or owing from time to time and in addition interest thereon together with all costs, charges and expenses secured by the First Charge.”

iii)

Clause 8, headed “POSTPONEMENT”, provided as follows:

“8.1
The Second Chargee hereby postpones the Second Charge to the First Charge such that the First Charge will rank in priority to the Second Charge as a continuing security PROVIDED that the amount of the priority hereby conferred shall not exceed the Advance.
8.2
The Second Chargee acknowledges that the amount outstanding under the First Charge may fluctuate from time to time but notwithstanding such fluctuations, it is agreed that the priority of the First Charge shall remain the Advance.”

iv)

Clause 9, headed “CONSENT”, provided as follows:

“9.1
The First Chargee hereby consents to the creation or subsistence of the Second Charge and confirms that the creation or subsistence of the Second Charge does not constitute a default by the Chargor.
9.2
The Second Chargee hereby consents to the creation or subsistence of the First Charge and confirms that the creation or subsistence of the First Charge does not constitute a default by the Chargor.
9.3
The First Chargee and the Second Chargee hereby request the Registrar at Land Registry to make such entries on the Register(s) of Title to the Property so as to record the priorities of the charges referred to herein.”

Clause 10, headed “ENFORCEMENT”, provided as follows:

“10.1
If the First Chargee has become entitled to enforce the First Charge and intends to enforce the First Charge, then the First Chargee shall serve written notice to that effect on the Second Chargee in advance of taking any such enforcement action.”

vi)

Clause 11, headed “DURATION”, provided as follows:

“This deed shall cease to have effect when the Advance has been irrevocably and unconditionally paid and discharged in full.”

vii)

Clause 12, headed “RESTRICTIONS ON ASSIGNMENTS”, provided as follows:

“The First Chargee may not assign any of its rights, or transfer any of its rights or obligations, under this deed, the First Charge or any associated security document without first requiring the assignee or transferee to execute and deliver to the Second Chargee in a deed (in a form satisfactory to the Second Chargee) in which the assignee or transferee agrees to be bound by the terms of this deed.”

viii)

Clause 13, headed “EXPIRY OF TERM”, provided as follows:

“It is hereby agreed and declared between the First Chargee and the Second Chargee that if the term of the loan agreement associated with the Second Charge comes to an end before the term of the loan agreement associated with the First Charge all sums due and payable by the Chargor pursuant to the Second Charge will be paid to the Second Chargee in accordance with the loan agreement associated with the Second Charge notwithstanding the priority of the First Charge provided by this deed.”

14.

In the event, although Mulbury drew down very significant sums from Together for development finance in addition to the £1.2m borrowed from JAK for the purchase of the Property, the development proved unsuccessful, possibly as a consequence of the Covid 19 pandemic.

15.

On 3 August 2022, by a letter of that date from its current Solicitors, JMW Solicitors LLP, JAK identified some six Events of Default under the JAK Loan Agreement, namely under clauses 11.1, 11.8, 11.9 (x2), 11.17 and 11.18 thereof. By this letter, JAK purported to declare the JAK Loan immediately due and payable pursuant to clause 11.19 of the JAK Loan Agreement and stated that the same was immediately due and payable pursuant to clause 7.1.

16.

By a letter dated 21 February 2023, Together made demand on Mulbury in respect of an outstanding balance of £2,206,056.44. The letter stated that if payment was not received by 22 February 2023, then Together would have no alternative other than to consider enforcement of its security, reference being made to commencement of possession proceedings or the appointment of an LPA receiver.

17.

In the event, JAK presented a winding up petition against Mulbury and obtained a winding up order against it. Although the petition has not been produced in evidence, I would note that this would be an unusual step for JAK to have taken had it considered its security to have priority.

18.

On the other hand, Together proceeded to appoint an LPA receiver who subsequently sold the Property at a price considerably below the amount secured as against it, leaving a deficiency, at least for the second ranking secured creditor.

19.

By agreement between the parties, £1.2m has been retained pending the determination of the present proceedings and the contest between the parties as to whether the Deed of Postponement confers priority on JAK or upon Together of their respective charges.

20.

At the hearing on 9-11 September 2025, in addition to submissions from Counsel, I heard oral evidence from Jalaludin Abdullah Kamani (“Mr Kamani”), a director of JAK, Ian James Pickering (“Mr Pickering”), Together’s Director of Development Funding, and Wallace Martin Bury (“Mr Bury”), a former director of Mulbury. It will be necessary to return to consider their evidence in more detail when considering Together’s alternative rectification case. Whilst the witness evidence is of some assistance in explaining the background to the Deed of Postponement, it is of limited assistance, if any, for the purposes of interpreting clause 13 of the Deed of Postponement given that the court is not, for this purpose, concerned with the subjective intentions of the parties or their prior negotiations.