![CR-2024-005081 - [2025] EWHC 2374 (Ch)](https://backend.juristeca.com/files/emisores/logo_O3rEzCI.png){kind=logo}
Ground 1 – Debt is disputed
Ground 1 – Debt is disputed
The first ground advanced by the Company is that it says the Petition debt is disputed as not being due and payable. Mr Boch for the Company essentially relied on 3 points under this head. First, he says that there was no event of default under the Loan Agreement. Second, he says that no notice under the Loan Agreement was given. Third, he says that notice was not served on the Company. The effect of each of these, Mr Boch says, is that the Petitioner’s liability under the Guarantee has not arisen.
On the first of these grounds, Mr Boch says that the Petitioner has not to date made clear what the event of default was. He says that if the default was failure to repay the loan when due, then clause 4.1 of the Loan Agreement is in point. Mr Boch says that clause 4.1 is unclear and is internally contradictory. As to this, he submits that:
Clause 4.1.1 refers to the “term” of the facility and gives a timeframe of 90 days from the date of drawdown in accordance with clause 2. However, Mr Boch says, clause 2 is silent as to repayment;
Clause 4.1.2 says the loan must be repaid in full by way of a single payment upon sale of all the goods purchased with the loan. Mr Boch emphasises the word “all” in this passage;
Finally clause 4.1.3 refers to payment by instalments on the basis set out in Appendix 1. However, Appendix 1 includes no terms as to instalment payments as it appears to be a pro forma template document;
Mr Boch submits that the interaction between these provisions is unclear and unsatisfactory. He also says that as there is an apparent right to repay in instalments, there is an argument that the Loan Agreement contains an error in respect of which an application for rectification may be made.
The effect of this is that the Company submits there has been no event of default within the meaning of clause 11.1 of the Loan Agreement.
Second, the Company says that even if an event of default has occurred, the Petitioner has not given notice in compliance with clause 11.2. That provision says that the consequence of an event of default is that the Petitioner may by notice declare that (a) the loan and any other amount due or becoming due is immediately due and payable and/or (b) it intends to exercise any or all of its rights, remedies, powers or discretions under the Loan Agreement or the other finance documents (which includes the Guarantee). Mr Boch submits that Mr O’Reilly relies only on communications given by email and that none of them specifically comply with either of the two requirements of clause 11.2 that I have mentioned. Since no notice has been given, it is submitted, the loan is not “immediately due and payable”.
Third, Mr Boch submits that even if the Petitioner could show that proper notice was given by email, this does not comply with the notice requirements of clause 15 of the Loan Agreement, which provides that any notice given under the agreement must be given in writing, signed and delivered by hand, or by first class post or other next working day delivery service.
The Company’s argument is that if any of these points are true, then the Company’s liability under clause 3 of the Guarantee does not arise.
Mr McCracken for the Petitioner kept his written submissions concise. He said that the matter was straightforward and in reality this was a very simple issue. He accepted that the salient provisions as regards the terms of the arrangements are to be found at paragraph 4 of the Loan Agreement. In oral submissions, Mr McCracken submitted that:
The drawdown requests which are before the Court show that the Company acknowledged that the drawdown terms were 90 days;
Emails between the parties, including the email dated 5 July 2023, show that the parties conducted their relationship on the basis of 90 days repayment terms, with any extension being expressly negotiated and fees paid;
Mr O’Reilly’s evidence (at paragraph 9.8 of his statement) is that clause 4.1.1 of the Loan Agreement makes clear that repayment must be within 90 days and this is consistent with the parties’ conduct with drawdown requests. As such, the Company is now trying to re-interpret clause 4 in a different manner to how the parties acted upon it;
The reality of the contractual relationship is that the Petitioner granted to the Company’s subsidiary a 90-day on demand finance arrangement, which has not been repaid within the 90 days or on demand.
I was also referred to the email communications between the parties following the seizure of stock on 3 August 2023, in which Mr Chesney did not raise any objection to what had happened in Cork.
Having considered the evidence before me and the parties’ submissions, in my judgment I am satisfied that there is a genuine dispute on substantial grounds as to whether the Petition debt was due and payable at the time the Petition was presented. Clause 4.1 of the Loan Agreement is problematic. It is internally inconsistent and does not make complete sense in the form it was drafted. The proper interpretation of that clause is not a matter which is suitable for determination in this court. The court will need to consider all the admissible circumstances and disclosure and oral evidence is likely to be needed for the court to make a determination on this issue. Based upon the material that has been placed before me, it is not possible or appropriate for this issue to be decided in the context of insolvency proceedings.
Similarly, I am satisfied that, on their face, none of the emails to which Mr O’Reilly refers in his evidence set out the specific matters which are provided for in clause 11.2 of the Loan Agreement. As such, there is a genuine and substantial dispute as to whether or not notice has been given to the Company under the Loan Agreement.
Furthermore, even if I am wrong on that second point, there is plainly a genuine and substantial dispute on the third ground as to whether or not the emails sent by Mr O’Reilly constitute a valid notice for the purposes of clause 15 of the Loan Agreement. In this regard I note that: (a) it is arguable that the emails have not been “signed” within the meaning of clause 15.1; and (b) clause 15.2 does not include email as a method of delivery permitted under the Loan Agreement. This is, again, plainly not a matter which is suitable for determination by way of winding up proceedings in this court.
Under those circumstances, I am satisfied that there is a genuine and substantial dispute as to whether the loan was due and payable at the time the Petition was served. This is not a matter which is suitable for determination in this court and I will therefore dismiss the Petition.