[2025] EWHC 2107 (Comm)

Fecha: 08-Ago-2025

The First and Second Defendants’ submissions

139.

Mr Sims KC on behalf of the First and Second Defendants submitted that they have a real prospect of successfully defending the claims against them and the Court should exercise its discretion pursuant to CPR rule 13.3(1)(a) or (b) to set aside the default judgments for the following reasons:

(1)

The Court’s discretionary power to set aside a default judgment is expressed to be unconditional, the purpose being to avoid injustice.

(2)

The First and Second Defendants never became party to the Facility Agreement, either because (i) the circumstances of their signatures on a single piece of paper later attached to the Facility Agreement meant that they were not legally bound as parties to the Facility Agreement, or (ii) their signatures to the Facility Agreement were never released.

(3)

Without prejudice to the First and Second Defendants’ primary contention that they did not become party to the Facility Agreement, they have the following alternative defences:

(a)

The guarantee obligations under the Facility Agreement should be set aside on the grounds of economic duress and the reprehensible behaviour of the Claimant and/or due to the Claimant’s misrepresentations on the basis that the Borrower and the First and Second Defendants were misled about the Claimant’s true intentions, and the vulnerable position of the Borrower was manipulated by the Claimant to extract the guarantees on false pretences.

(b)

Material amendments to the Facility Agreement were made which were prejudicial to the First and Second Defendants and discharged them from their obligations under the guarantees in the Facility Agreement (Holme v Brunskill (1878) 3 QBD 495).

(c)

The Claimant was not entitled to make any demand before 14th December 2023 on a true construction of clause 19.7.2 of the Facility Agreement, because it was required first to complete, but had not completed, an enforcement of assets, or at least not on an arms-length basis, and any guarantee liability is now released.

(d)

The First Defendant’s personal guarantee was limited to the lesser of US$2.5 million and “the sum of (i) the initial utilisation ($32,960,000) less (ii) the sum of the amount of each payment made in respect of the Loan and the amount of each realisation made in respect of any Blue Chip Artwork, any Secured Vehicle and any Property (other than one belonging to Mr Cohen)”. The realisation values of the artwork, property and other security assets realised by the Claimant remains unclear and accordingly the value of the First Defendant’s personal guarantee cannot properly be ascertained.

(e)

The Second Defendant’s personal guarantee was conditional upon the realisation of a deposit for Clarendon Lodge. That sum was realised in April 2022, with a further security taken over a Hermes Trunk. As such, the Second Defendant’s personal guarantee should have been extinguished or at least pro tanto reduced as at the date of that sale.

(f)

The Claimant breached its warranties or duties to the First and Second Defendants as personal guarantors, including in particular in realising the secured assets to themselves or affiliated entities at an undervalue.

(g)

The Claimant has failed to provide a sufficient explanation or evidence in relation to the debts purportedly owed by the Borrower, and consequently, the First and Second Defendants, and so they claim an account.

(h)

The relationship between the Borrower and the Claimant arising out of the Facility Agreement is an unfair relationship for the purposes of section 140A of the Consumer Credit Act 1974 and orders under section 140B are sought.

(4)

The First and Second Defendants acted as promptly as possible upon discovering that the default judgments had been entered against them. Having received copies of the default judgments under cover of letter dated 13th September 2024 from the Claimant’s solicitors, the First and Second Defendants sought to instruct English solicitors and approached TKP on 14th September 2024; those instructions were formalised and confirmed on 24th September 2024; thereafter, TKP then sought to source and instruct Counsel, which involved some delay as their first choice of leading counsel was not available, which then led to the instruction of Mr Sims KC, which required the provision of “several thousand pages of correspondence and documentation”; leading counsel then prepared the draft defence and application; there was further delay when the First Defendant suffered a serious accident on 7th November 2024, which required the First Defendant to undergo four hours of surgery in New York on 9th November 2024; TKP were also in active correspondence with solicitors at Bird & Bird LLP requesting the release of files relating to the First and Second Defendants, but no copies of the files held by Bird & Bird LLP have been received (Ms Ho’s first witness statement, para. 67-75 and second witness statement, para. 84-91). The application was issued on 13th November 2024.

(5)

In the interim, the Claimant had the benefit of confirmation from the First and Second Defendants by their solicitors’ letter dated 9th October 2024, at the Claimant’s request, that “they are not taking steps to dissipate assets”, dissipation meaning “the deliberate making away with assets so as to frustrate the enforcement of a future judgment or to put assets out of the reach of a judgment”.