[2025] EWHC 2107 (Comm)

On 8th September 2023, the Claimant issued proceedings against the Borrower in respect of the funds advanced in the sum of US$42,914,420.46, which by reason of recoveries was reduced to US$31,212,019.46). The Borrower filed and served a defence and counterclaim. These proceedings were purportedly settled by a Settlement Deed dated 11th April 2024. The First and Second Defendants do not accept the validity of the Settlement Deed.

By a letter dated 13th October 2023, Quinn Emanuel on behalf of the Claimant informed the First and Second Defendants that they had not engaged with the Claimant since the signing of the Facility Agreement and recommended that they take independent legal advice. Quinn Emanuel later said in that letter that:

“In view of Mr Valmorbida’s failure to repay the Loan, we note that it is now, regrettably, increasingly likely that our client will be required to make demand upon you in respect of your guarantees. That is particularly so given that Mr Valmorbida has not made a single repayment towards the Loan, and has instead determined to expend the resources available to him commencing wasteful litigation. For the avoidance of any doubt, we are instructed to take all available steps to recover the Loan, including enforcing the personal guarantees if required.”

By letters dated 11th December 2023, the Claimant made demands under the personal guarantees upon the Defendants as follows (emphasis in the original):

“…

5.

Pursuant to the Demand Letter, we notified the Borrower that the Outstanding Loan, together with all other fees and expenses due under the terms of the Finance Documents (including costs incurred by the Lender in enforcing its rights under the Finance Documents) had become immediately due and payable and demanded the immediate repayment to the Lender of all such sums on or before 12 October 2021. The Borrower has failed to comply with the demand for payment per the terms set out in the Demand Letter and to repay all outstanding amounts borrowed under the Facility together with any other amounts then outstanding in full on the Final Repayment Date pursuant to Clause 7.1 of the Facility Agreement (the “Relevant Events of Default”).

6.

Pursuant to the demand contained in letters dated 7 March 2023 (into which the Borrower was copied) to each of the following Corporate Obligors: AZRV Holdings Ltd, Areval UK Properties Ltd, Aussie Rules Bahamas Ltd, Untitled-1 Copyright Limited and Untitled-1 Holdings Limited (the “Demanded Corporate Guarantors”) (the “Corporate Guarantor Demand Letters”), we demanded repayment of the Outstanding Loan, together with all other fees and expenses due under the terms of the Finance Documents (including costs incurred by the Lender in enforcing its rights under the Finance Documents) on or before 18 March 2023.

7.

In the circumstances, we are entitled to certain rights and remedies pursuant to Clause 19 (Guarantee and Indemnity) of the Facility Agreement, which include (but are not limited to) requiring you to repay the amount of the Loan, together with accrued interest thereon and all other amounts accrued or outstanding (collectively, the “Outstanding Loan”), to us, subject to agreed limits.

Demand for Outstanding Debt

8.

To date, no payments have been made to the Lender under or in connection with the Finance Documents. The Borrower and the Demanded Corporate Guarantors have failed to comply with the conditions imposed and demands made by the Lender in the Demand Letter and the Guarantor Demand Letters (as applicable) …

9.

Having enforced our rights in accordance with Clause 19.7.2 of the Facility Agreement we now hereby demand from you in accordance with all applicable terms of the Finance Documents, the repayment to the Lender in the amount of USD 2,500,000, immediately and in any event before the Expiry Date. Payment details are set out in Schedule 2. This demand shall continue until such time as all amounts due under or in connection with the Finance Documents are irrevocably and unconditionally discharged and shall remain in full force and effect notwithstanding any revisions, corrections or supplements made by the Lender to the Current Statement or to any other calculations contained in this letter and notwithstanding any future statements of accounts or demands provided to any of the Obligors …”

In April 2024, the Claimant and the Borrower entered into a settlement, with the Borrower admitting by a letter dated 11th April 2024 in full his liability in the sum of US$31,212,019.46 as of 6th December 2023 (and interest accruing thereafter). The Borrower’s counterclaim and his claim for an account were discontinued.

On 28th June 2024, Quinn Emanuel on behalf of the Claimant wrote separate letters to each of the First and Second Defendants referring to the correspondence issued by the Claimant in respect of the Borrower’s indebtedness and their obligations under the personal guarantees, and seeking the First and Second Defendant’s confirmation by 12th July 2024 that they will pay the sums due within 30 days, failing which the Claimant intends to commence proceedings without further reference to them.

The First and Second Defendants have not paid the sums demanded by the Claimant.

By a letter dated 31st July 2024, the Claimant wrote to the Borrower and the First and Second Defendants, and others, with reference to the Facility Agreement purporting to appoint, pursuant to clause 40.2.2 of the Facility Agreement, a replacement agent (Law Debenture) for the service of process in place of Areval UK Properties Ltd (“Areval”), who had been appointed under clause 40.2.1(a) of the Facility Agreement but was dissolved on 13th June 2023. The letter stated that:

“…

3.

Pursuant to clause 40.2.1(a) of the Facility Agreement, each Obligor appointed Areval UK Properties Ltd (Areval) to act as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document.

4.

Areval was dissolved at Companies House in England and Wales on 13 June 2023 and can therefore no longer act as agent for the service of process for any Obligor.

5.

We are writing to inform you that the Lender has therefore exercised its right pursuant to clause 40.2.2 of the Facility Agreement to appoint another agent for the service of process for each Obligor and has appointed Law Debenture Corporate Services Limited (of 8th Floor, 100 Bishopsgate, London EC2N 4AG) (Law Debenture) to act as agent for the service of process under the Facility Agreement in connection with each Finance Document for each of the Borrower, PC, MV, ZS and each Corporate Obligor. Law Debenture has accepted such appointment …”

According to Mr Khatoun’s first witness statement (para. 107) and his second witness statement (para. 15), this letter was sent by email to the addresses specified in clause 31.2 of the Facility Agreement and to the First and Second Defendant’s New York and Miami Beach addresses, and the letter sent to the New York address was tracked and signed for. The United States Postal Service (“USPS”) confirmed that the letter to the Miami Beach address was “left with an individual at the address” on 13th August 2024 (although the USPS confirmation does not refer to the precise terms of the Miami Beach address).

According to Ms Ho’s first witness statement (para. 51), the First and Second Defendants did not receive notice of the appointment of Law Debenture until 11th October 2024. There is a USPS confirmation of the letter having been left at the Miami Beach address on 8th October 2024.

On 1st August 2024, the Claimant commenced the current proceedings by issuing a Claim Form against the Defendants seeking the payments due under the personal guarantees issued by the Defendants.

On 7th August 2024, at 3.31 pm, Quinn Emanuel on behalf of the Claimant purported to serve these proceedings on the Defendants by service on Law Debenture, a London-based process service agent appointed by the Claimant purportedly under the terms of the Facility Agreement. That day, at 3.58 pm, Law Debenture replied stating that they have “accepted service of process on behalf of Ms Zara Simon, Mr Philip Ean Cohen and Ms Maria Therese Valmorbida”. According to Mr Khatoun’s first witness statement (para. 110) and his second witness statement (para. 15), a letter was sent by email, courier and first class mail to the email addresses and the New York and Miami Beach addresses listed in clause 31.2 of the Facility Agreement.

On 23 August 2024, Quinn Emanuel, on behalf of the Claimant, filed certificates of service of the proceedings upon Law Debenture on 7th August 2024 (Mr Khatoun’s first witness statement, para. 111).

On or around 4th September 2024, according to Ms Ho’s first witness statement (at para. 46-47), the First and Second Defendants received the Claimant’s letter dated 7th August 2024 at their residential addresses in Florida from Quinn Emanuel and were not aware that any agent was purportedly appointed to accept service of process on either of their behalf before 4th September 2024 (the First and Second Defendants state that they were not aware of the Claimant’s letter dated 31st July 2024 appointing Law Debenture until 11th October 2024) (Ms Ho’s first witness statement, para. 51).