[2025] EWHC 2107 (Comm)

By the Facility Agreement dated 14th June 2021 (as amended), the Claimant provided a term loan facility of US$33,410,000 to the Borrower, who drew down the advance on the same date. The terms of the Facility Agreement, as amended, included the following provisions:

“…

1.

Definitions

1.1

In this Agreement:

…

Obligor means the Borrower and each Guarantor …

3.

Obligors’ Agent

3.1.1

Each Obligor (other than the Borrower) by its execution of this Agreement irrevocably appoints the Borrower to act on its behalf as its agent in relation to the Finance Documents (the Obligor’s Agent) and irrevocably authorises:

(a)

the Borrower on its behalf to supply all information concerning itself contemplated by this Agreement to the Lender and to give all notices and instructions, to make such agreements and to effect the relevant amendments, supplements and variations capable of being given, made or effected by any Obligor notwithstanding that they may affect the Obligor, without further reference to or the consent of that Obligor; and

(b)

the Lender to give any notice, demand or other communication to that Obligor pursuant to the Finance Documents to the Borrower,

and in each case the Obligor shall be bound as though the Obligor itself had given the notices and instructions or executed or made the agreements or effected the amendments, supplements or variations, or received the relevant notice, demand or other communication.

3.1.2

Every act, omission, agreement, undertaking, settlement, waiver, amendment, supplement, variation, notice or other communication given or made by the Obligors’ Agent or given to the Obligors’ Agent under any Finance Document on behalf of another Obligor or in connection with any Finance Document (whether or not known to any other Obligor and whether occurring before or after such other Obligor became an Obligor under any Finance Document) shall be binding for all purposes on that Obligor as if that Obligor had expressly made, given or concurred with it. In the event of any conflict between any notices or other communications of the Obligors’ Agent and any other Obligor, those of the Obligors’ Agent shall prevail …

9.

Interest

9.1

Calculation of Interest

Subject to Clause 11.1 (Lender’s Minimum Return), the rate of interest on the Loan for each Interest Period is 17 % (seventeen per cent) per annum.

9.2

Capitalisation of Interest

Interest on each Loan shall be capitalised on the last day of each Interest Period when it shall become Capitalised PIK Interest and added to the outstanding Principal Amount at such time.

Interest shall be calculated on the basis of the actual number of days elapsed in the relevant Interest Period and on the basis of a 360 day year …

19.

Guarantee and indemnity

19.1

Guarantee and Indemnity

Each Guarantor irrevocably and unconditionally jointly and severally:

(a)

guarantees to the Lender punctual performance by each other Obligor of all that Obligor’s obligations under the Finance Documents (including for the avoidance of doubt pursuant to any Upside Sale Arrangement and Royalties Arrangement);

(b)

undertakes with the Lender that whenever another Obligor does not pay any amount when due under or in connection with any Finance Document, that Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and

(c)

agrees with the Lender that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify the Lender immediately on demand against any cost, loss or liability it incurs as a result of an Obligor not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document on the date when it would have been due. The amount payable by a Guarantor under this indemnity will not exceed the amount it would have had to pay under this Clause 19 if the amount claimed had been recoverable on the basis of a guarantee.

19.2

Continuing guarantee

This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents (including for the avoidance of doubt pursuant to any Upside Sale Arrangement and Royalties Arrangement), regardless of any intermediate payment or discharge in whole or in part.

19.3

Maximum Amount

Notwithstanding any other provision of this Clause 19 or any other provision of the Finance Documents, the maximum aggregate liability of each Personal Guarantor and the total amount recoverable from each Personal Guarantor (including without limitation, all interest, commission, fees, other charges and all legal and other costs, charges and expenses) under the Finance Documents (including pursuant to the enforcement of any Security Document) shall not exceed $2,500,000 (two million, five hundred thousand dollars) … [this provision was amended in respect of the First Defendant to be the lesser of US$2,500,000 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)”]

19.5

Waiver of defences

The obligations of each Guarantor under this Clause 19 will not be affected by an act, omission, matter or thing which, but for this Clause 19, would reduce, release or prejudice any of its obligations under this Clause 19 (without limitation and whether or not known to it or the Lender) including:

(a)

any time, waiver or consent granted to, or composition with, any Obligor or other person;

(b)

the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group or any other person;

(c)

the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Obligor or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;

(d)

any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;

(e)

any amendment, novation, supplement, extension, restatement (however fundamental and whether or not more onerous) or replacement of a Finance Document or any other document or security including, without limitation, any change in the purpose of, any extension of or increase in any facility or the addition of any new facility under any Finance Document or other document or security;

(f)

any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or

(g)

any insolvency or similar proceedings.

19.6

Guarantor intent

Without prejudice to the generality of Clause 19.5 (Waiver of defences), each Guarantor expressly confirms that it intends that this guarantee shall extend from time to time to any (however fundamental) variation, increase, extension or addition of or to any of the Finance Documents any new Finance Documents and/or any facility or amount made available under any of the Finance Documents for the purposes of or in connection with any of the following: business acquisitions of any nature; increasing working capital; enabling investor distributions to be made; carrying out restructurings; refinancing existing facilities; refinancing any other indebtedness; making facilities available to new borrowers; any other variation or extension of the purposes for which any such facility or amount might be made available from time to time; and any fees, costs and/or expenses associated with any of the foregoing.

19.7

Immediate recourse

19.7.1

Each Guarantor other than the Personal Guarantors waive any right it may have of first requiring the Lender (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 19. Subject to this Clause 19.7.1, this waiver applies irrespective of any law or any provision of a Finance Document to the contrary.

19.7.2

Before claiming from a Personal Guarantor under this Clause 19, the Lender must enforce its rights in respect of the Security granted over the Blue Chip Artworks, the Secured Vehicles and the Properties (other than the Hamptons Property) …

31.

Notices

31.1

Communications in Writing

Any communications to be made under or in connection with any Finance Document shall be made in writing.

Clause 31.2 Addresses

[As amended by the Cohen Email]

…

Any communication made or delivered to the Borrower in accordance with this Clause will be deemed to have been made or delivered to each of the Obligors …

31.3

Delivery

31.3.1

Subject to Clause 31.3.2, any communication or document made or delivered by one person to another under or in connection with any Finance Document will only be effective:

(a)

if by way of fax, when received in legible form within business hours; or

(b)

if by email when actually received or made available in readable form within business hours;

(c)

if by way of letter, when it has been left at the relevant address or three Business Days after being deposited in the post (first class postage prepaid) in an envelope addressed to it at that address;

and, if a particular department or officer is specified as part of its address details provided under Clause 31.2 (Addresses), if addressed to that department or officer.

31.3.2

Any communication or document to be made or delivered to the Lender will be effective only when actually received by the Lender and then only if it is expressly marked for the attention of the department or officer identified above (if so identified) …

38.

Borrower Declaration of High Net Worth

(Articles 60H(1) and 60Q of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001)

I confirm that I have received a copy of the statement of high net worth made in relation to me for the purposes of article 60H(1)(d) or article 60Q(c) of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

I understand that by making this declaration I will not have the benefit of the protection and remedies that would be available to me under the Financial Services and Markets Act 2000 or the Consumer Credit Act 1974 if this agreement were a regulated agreement under those Acts.

I understand that this declaration does not affect the powers of the court to make an order under section 140B of the Consumer Credit Act 1974 in relation to a credit agreement where it determines that the relationship between the lender and the borrower is unfair to the borrower.

I am aware that if I am in any doubt as to the consequences of making this declaration then I should seek independent legal advice …

40.

Enforcement

40.1

Jurisdiction of English Courts

40.1.1

The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute regarding the existence, validity or termination of this Agreement) or any noncontractual obligation arising out of or in connection with this Agreement (a Dispute).

40.1.2

The parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no party will argue to the contrary.

40.2

Service of Process

40.2.1

Without prejudice to any other mode of service allowed under any relevant law, each Obligor other an Obligor incorporated in England and Wales:

(a)

irrevocably appoints Areval [UK Properties Ltd] as its agent for service of process in relation to any proceedings before the English courts in connection with any Finance Document and Areval hereby accepts such appointment; and

(b)

agrees that failure by an agent for service of process to notify Borrower of the process will not invalidate the proceedings concerned.

40.2.2

If any person appointed as an agent for service of process is unable for any reason to act as agent for service of process, the Borrower must immediately (and in any event within five days of such event taking place) appoint another agent on terms acceptable to the Lender. Failing this, the Lender may appoint another agent for this purpose …”

As evident from a letter dated 14th June 2021 signed by Mr Jones and Ms Pamela Valasuo on behalf of the Claimant and addressed to the Borrower, certain conditions precedent to the Facility Agreement remained which were outstanding at the time of completion of the Facility Agreement; it was agreed that these outstanding items could be converted to conditions subsequent with an extended time frame for delivery. The said letter concluded by stating that the First and Second Defendants “are requested to countersign this agreement solely for the purposes of acknowledgement but the other parties hereto agree that this letter shall be binding in all respects amongst themselves, notwithstanding the lack of countersignature of either Mr Philip Ean Cohen or Ms Maria Therese Valmorbida”. I do not understand the First and Second Defendants to have countersigned this letter.

These conditions subsequent were not satisfied within the said time frame. So, a further extension to the time frame was agreed by a letter dated 5th July 2021. In that letter, the Claimant stated that:

“…

5.

It was a condition of the CP Conversion Letter that, until such time as a Condition or the Failed Items were satisfied, it or they (as applicable) would be a Condition Subsequent for the purposes of clause 27.13 (Events of Default, Conditions Subsequent) and failure to supply any of the Failed Items or Conditions in accordance with the agreed timescales would result in an Event of Default under and as defined in the Facility Agreement.

6.

As at the date of this letter (a) the amendment required at Paragraph 3 of this letter, (b) the Conditions and (c) the items marked “Outstanding” in the checklist annexed to this letter (items (a), (b) and (c) together being the “Outstanding Items”) remain outstanding.

7.

An Event of Default has now occurred under the Facility Agreement in respect of the Outstanding Items. Without prejudice to any of its rights under the Finance Documents, the Lender agrees to forbear from taking any further action if all of the Outstanding Items are provided in form and substance satisfactory to the Lender on or prior to the 12th July 2021 or, in the case of the Conditions set out in Paragraph 4 above, 16th July 2021 (or such later date as the Lender may communicate to the parties in writing) …”

Both of these letters dated 14th June 2021 and 5th July 2021 contained the following provision: “For the avoidance of doubt, no condition precedent under clause 5.1 or clause 5.2 of the Facility Agreement (or any other term of the Facility Agreement or any other Finance Document) or any breach of the term of (or the rights of any party under) a Finance Document or Event of Default is waived, suspended, cancelled, reduced or replaced by any of the terms of this letter and the Lender strictly reserves all of its rights under the Facility Agreement and all other Finance Documents”.

I understand that these conditions precedent and conditions subsequent were not satisfied, at least by 5th July 2021.

On 12th July 2021, in response to a request by the Claimant that the First and Second Defendants sign the letters amending the Facility Agreement, Mr Hallgarth stated that:

“For the avoidance of doubt, Phil and Maria are, as regards the Lender, bound by the existing Facilities Agreement as supplemented by the collateral contract established by the exchange of e-mails on the Sunday before utilisation. Each of the other parties, so far as I am aware, has also been made aware of the collateral contract. As was very clear from our discussions, the execution of the Facilities Agreement without an effective modification that took effect ab initio was unacceptable and the signatures to the Facilities Agreement were released on the basis of that collateral exchange.

Although there was a proposed time for documenting the amendments more formally, the changes contemplated by the collateral contract were not so time limited.”