TC09518 - [2025] UKFTT 00528 (TC)

Critical to the determination of this appeal is the interpretation of the legal effect of the deed of novation (Novation Deed)entered on 16 March 2021 between the Appellant, Thermoline and PHSW. The relevant terms we need to interpret provide:

“BACKGROUND

(A)

[Thermoline] is the lender under a loan with [the Appellant] (Loan)

(B)

[Thermoline] has advanced monies to [the Appellant] under the Loan which … are outstanding at the date of this deed.

(C)

This deed sets out the terms and conditions on which the parties agree [Thermoline] will transfer by novation all of its rights and obligations under the Loan to [PHSW].

Agreed terms

1.

Definitions and interpretation

Debt: the principal amount of £512,713.89 … owing by [the Appellant] to [Thermoline] under or in connection with the Loan which are outstanding at the Novation date.

Novation Date: the 31 December 2020

Payment Amount: the amount specified in the Payment Letter to be paid by [PHSW] to [Thermoline] (or left outstanding on inter-company loan account between [Thermoline] and [PHSW]) on the Novation Date in consideration of the novation to be effected under this deed.

Payment Letter: a letter from [Thermoline] to [PHSW], substantially in the form set out in Schedule 1, referring to the novation to be effected under this deed and specifying, amongst other things, the Payment Amount.

…

3.

Novation

3.1

The parties agree that on and from the Novation Date:

(a)

subject to clause 3.3 [Thermoline] irrevocably and unconditionally releases [the Appellant] from all [the Appellant’s] obligations under the Loan, … including its obligation to repay the Debt to [Thermoline] and [Thermoline’s] rights against [the Appellant] shall be cancelled;

(b)

[the Appellant] irrevocably and unconditionally releases [Thermoline] from [Thermoline’s] obligations under the Loan, … and the Appellant’s rights against [Thermoline] shall be cancelled;

(c)

subject to clause 3.3 [PHSW] shall acquire rights, title, interest and benefits in and to the Debt and the Loan which are identical in character to the entire rights, interest and benefits in and to the Debt and the Loan which [Thermoline] had;

(d)

[PHSW] undertakes to perform obligations toward [the Appellant] under the Loan which are identical in character to the obligations under the Lone which [Thermoline] had; and

(e)

[PHSW] shall be substituted for [Thermoline] as a party to and bound by the terms of the Loan.

3.2

[The Appellant] agrees that on and from the Novation Date (an in consideration of the release in clause 3.1(a)) it shall:

(a)

repay the Debt; and

(b)

subject to clause 3.3, pay … amounts owing in respect of the Loan

In each case to [PHSW] on the due dates in accordance with the terms of the Loan.

3.3

The parties agree that, with effect on and from the Novation Date:

(a)

[PHSW] shall set up an inter-group loan account with [Thermoline] in the amount of the Loan; and

(b)

[Thermoline] no longer has any rights or recourse in or to any obligations or liability of [the Appellant] in respect of … amounts owing in respect of the Debt accrued up to but excluding the Novation Date.

3.4

On the Novation Date, [PHSW] shall agree to owe the amount of the Debt to [Thermoline] on intercompany loan account in accordance with the Payment Letter.

4.

Confirmation and indemnity

[Thermoline] and [PHSW] agree and confirm that with effect on and from the Novation Date:

(a)

[Thermoline] no longer has any rights or obligations in relation to the Debt with [the Appellant], but will have rights in relation to the subsequent intra-group debt owed to it by [PHSW] as detailed in clause 3.3(a) above;

…”

The Payment Letter, in the form annexed as Schedule 1 was also signed on 16 March 2021 and provided, as far as relevant:

“We refer to the executed deed of novation (Novation Deed) dated 16th of March 2021 under which [Thermoline] has agreed to novate its entire rights and obligations (including in respect of the Debt) under the loan between [Thermoline] and [the Appellant] (Loan) to [PHSW]. …

We write to set the amount of, and arrangements for, the payment of the Payment Amount of £512,713.89 (as at 31 December 2020).

…

The Payment Amount shall be a debt due to [Thermoline] by [PHSW] and shall be recorded as an intra group loan between the companies.

[PHSW] agrees that, once paid, the Payment Amount (or any part of it) payable under this letter will not be refundable under any circumstances. The Payment Amount will not be subject to deduction, counterclaim or set off, or otherwise affected by any claim or dispute relating to any other matter …”