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

It is JAK’s case that that the common intention was that, notwithstanding the other terms of the Deed of Postponement, the JAK Charge should have priority in the event of the JAK Loan Agreement determining ahead of the agreement relating to the Together Loan.

In support of this are said to be the two “stipulations” alleged to be given by Mr Kamani to Mr Marzouk. In addition, so far as common intention is concerned, particular reliance is placed by JAK upon Together and Priority’s response to the proposal that a new clause 10 be added to the initial draft that provided for consultation before any steps were taken by Together in relation to the recovery of its debt or the enforcement of its security. Mr Hodge, on behalf of JAK, submitted that the reason that Together consistently rejected the form of wording proposed on behalf of JAK was because it was doubtless concerned that Together having to consult JAK prior to Together demanding as against Mulbury would give JAK a “tipoff” as to Mulbury’s defaulting position, and thus of Together’s ability and intention to treat Mulbury as in default, and determine its loan agreement, which would alert JAK, and enable JAK to determine the JAK Loan Agreement before Together was able to take any action. In the event, Together ultimately agreed to limit its obligation to engage with JAK to one of merely notifying JAK, but only after a time that Together had become entitled to enforce. As Together was entitled to enforce the Together Charge when an “Event of Default” had occurred, this would have entitled Together to call in, and thus end the term of its loan, before JAK determined the JAK Loan Agreement. In short, it is submitted that in protecting itself in this way, Together must have known and understood, and thus intended, that clause 13 should have the effect contended for by JAK.

For the above purposes, reliance is placed by JAK upon a number of the items of correspondence referred to above in which Together, through Priority, sought to push back against the original wording for clause 10 proposed on behalf of JAK. However, particular reliance is placed on the email dated 23 April 2020 from Ms Ward to Beyond Corporate in which she explained that her client was not agreeable to clause 10, explaining: “They feel it would compromise their collection abilities.” It is submitted on behalf of JAK that this points to a concern that Together would be compromised in its ability to recover its debt through the enforcement of its security in priority to that of JAK.

I am not persuaded that either party, in the period leading up to or at the time of the execution of the Deed of Postponement intended that clause 13 should have the effect now contended by JAK. To the contrary, I consider it more likely that the reason for the introduction of clause 13 by Primas on behalf of JAK was to meet the second of the objectives that I referred to in paragraph 43 above, namely to ensure that it was recorded that the subordination provided for by the Deed of Postponement related simply to the security provided for by the Together Charge and the JAK Charge and not the underlying debts secured thereby.

I reach this conclusion for the following reasons.

Firstly, I do not accept that Mr Kamani gave the two stipulations to Mr Marzouk that he contends that he did give. I consider it more likely that Mr Kamani has honestly, but falsely, sought to reconstruct in his own mind what he considers, now, he might have said to Mr Marzouk at the relevant time. More convincing, I consider, is Mr Kamani’s acceptance that he would have expected consistency between clause 19.4 of the Development Services Agreement and the Deed of Postponement, with clause 19.4 clearly anticipating that the development funder would have unencumbered security to which JAK’s security was subordinated. In this respect, it is significant that Together’s own loan documentation consistently referred to Together taking first charge security.

I consider that the Development Services Agreement must be the starting point to any consideration of the intentions of the parties to the Deed of Postponement. Clause 19.4 thereof very clearly provided that the development funder should have unencumbered security to which JAK’s security was to be subordinated. It would, I consider, require some reasonably strong evidence as to some contrary intention, or as to an intention that there should be some significant inroad into the priority anticipated by clause 19.4 of the Deed of Postponement for the Court to accept that the parties intended clause 13 of the Deed of Postponement to take effect in the way contended by JAK.

In the course of submissions, Mr Hodge sought to play down the significance of clause 13 of the Deed of Postponement, and the contention on behalf of Together that it fundamentally undermined the priority provided for by clause 8 of the Deed of Postponement. However, whilst less potent perhaps than it would have been had clause 10 provided for Together to consult rather than simply notify prior to enforcement, nevertheless, I consider that clause 13 still does, on JAK’s interpretation thereof, significantly undermine the priority of the Together Charge anticipated by clause 19.4 of the Development Services Agreement. Given the many circumstances in which an “Event of Default” might have arisen under clause 11 of the JAK Loan Agreement in the event of concern arising as to Mulbury’s ability to pay its debts, it was always relatively easy, as proved to be the case, for JAK to get in first and obtain priority contrary to the intent of clause 19 of the Development Services Agreement.

In practice, of course, the question of priority was only likely to matter in circumstances in which concerns might have arisen as to Mulbury’s ability to pay its debts, and the parties might have considered seeking to enforce their security. Mr Hodge submitted that, in practice, given that it was providing development finance on the terms that it was, and Mulbury was not liable to make any ongoing payments to JAK, then it would be Together that would first become alert as to any financial difficulties of Mulbury and so could always get in first. However, there can have been no certainty as to that and the nature of the relationship between JAK and Mulbury, and as to what JAK knew of Mulbury’s financial position, was not explored or developed in evidence.

Secondly, I consider that JAK is reading too much into Together’s response to the first draft of clause 10 of the Deed of Postponement. I consider that the reference in the correspondence to the compromising of “collection abilities” is more likely to be a reference to the inconvenience and burden of having to consult with JAK prior to taking any steps in relation to the recovery by Together of its debt or the enforcement of its security. The giving of notice as ultimately provided for by clause 10 in the Deed of Postponement as executed, is considerably less onerous, particularly given that the obligation to give notice only arises when Together becomes entitled to enforce the Together Charge, and intends to enforce the latter. Support for this was provided by Mr Pickering’s evidence on this point. I accept that this is of limited value given Mr Pickering’s distance from the precise mechanics of the transaction. Nevertheless, his evidence that he considers that this was the issue that Together had with the first draft of clause 10, namely the inconvenience and burden of having to consult and the effect thereof on collection ability, is at least of some weight.

Thirdly, I consider the above to be supported by what one can glean of JAK’s intentions from what was said, and indeed what was not said, by Primas in correspondence on behalf of JAK. Of particular significance is what was said by Ms Williamson in an email dated 24 April 2020 (11:19) commenting upon clause 10 of the draft of the Deed of Postponement then in circulation. In commenting on the fact that the wording providing for consultation had been rejected by Together as “they feel it would compromise their collection abilities”, Ms Williamson said “however, they would have a first legal charge so that does not make sense.” This would be an odd thing for her to have said if it were considered, at the time, that Together was seeking to push back out of concern that the effect of clause 13 might be to reverse priorities. Further, as I see it, it makes little sense that Ms Williamson should have said that Together would have a first charge without any qualification if, in fact, clause 13 had been intended, at the time, to confer priority on JAK in the circumstances that JAK contend that it did.

I consider that the approach taken by Primas on behalf of JAK in correspondence is more consistent with an intention on the part of JAK and Together that clause 13 be included in the Deed of Postponement for the second of the reasons that I have identified in paragraph 43 above, namely in order to record that the subordination provided for by the Deed of Postponement related simply to the security provided for by the Together Charge and the JAK Charge and not the underlying debts secured thereby.

Fourthly, the other terms of the Deed of Postponement do, I consider, if anything, support the fact that the parties had the intention that clause 13 should take effect as an “avoidance of doubt” provision in relation to subordination of debts, rather than having the effect contended for by JAK. In this respect, I refer to the provisions of the Deed of Postponement that I consider support Together’s interpretation of the meaning of clause 3 of the Deed of Postponement as referred to in paragraph 50 above.

The court is, for the purposes of a rectification claim, entitled to have regard to the parties’ subsequent conduct in considering what their subjective intentions were at the time that they entered into the relevant instrument. I do regard it as potentially significant that, following the service of its letter of demand dated 3 August 2022, JAK sought to wind up Mulbury rather than seeking to enforce its security conferred by the JAK Charge. Mr Kamani was cross-examined about this and was unable to provide any helpful answer with regard to why JAK pursued this course. The circumstances in which JAK presented a winding up petition, and the basis upon which it did so, were not explored in evidence, and I am reluctant to attach too much weight thereto. Whilst I do not consider it to be a determinative factor, nevertheless I do consider that it provides some evidence about what JAK thought about the priority of the JAK Charge at the time of seeking to wind up Mulbury, and thus as to the parties’ intentions as to the effect of clause 13 at the time of the execution of the Deed of Postponement.

In conclusion, I am satisfied that in negotiating the terms of the Deed of Postponement, and up to the time of the execution thereof, the parties had the common intention that clause 13 should take effect as a form of “avoidance of doubt” provision that makes clear that the subordination provided for by the Deed of Postponement did not extend to the debts due from Mulbury to JAK and Together respectively, but only extended to the priority in respect of the security for the same, conferring priority on the Together Charge over the JAK Charge despite it being the second in time. I do not consider that it was the common intention of the parties that clause 13 should take effect so as to reverse the priority of the Together Charge over the JAK Charge otherwise provided for by the Deed of Postponement, whether in the event that JAK got in first in determining the JAK Loan Agreement before Together determined its loan agreement, or otherwise.

As Mr Hodge pointed out, the Court will generally require “convincing proof” with regard to an intention that contradicts the terms of a written agreement. However, how convincing that evidence needs to be will depend upon the facts of the case. Whilst the present Deed of Postponement was drafted by lawyers, it is not the best drafted of documents and contains a number of errors. Clause 13, itself, is not particularly well drafted. It is in this context that I consider that the evidence as to the parties’ true intentions is to be considered. I am satisfied that there is sufficiently convincing proof of the common intention that I have held existed.