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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Kumar v LSC Finance Ltd [2023] EWHC 1439 (Ch) (09 June 2023) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2023/1439.html Cite as: [2023] EWHC 1439 (Ch) |
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BUSINESS AND PROPERTY COURTS IN BIRMINGHAM
BUSINESS LIST
B e f o r e :
Sitting as a High Court Judge
B E T W E E N:
____________________
| RAJINDER KUMAR |
Claimant |
|
| -and- |
||
| LSC FINANCE LIMITED |
Defendant |
|
| -and- |
||
| MANJIT KUMARI |
Third Party |
|
| -and- |
||
| LALIT RAM VERMA |
Fourth Party |
____________________
Counsel for the Defendant – Mr Pomfret
Trial 11-14 April 2023
Handed down 9 June 2023
____________________
Crown Copyright ©
Judge Rawlings:
INTRODUCTION
The Parties and associated companies
The case in summary
(a) were Regulated Mortgage Contracts under FSMA ("RMC" and "RMCs") because Mr Kumar told LSC that the plan was to build one home for the personal use of each of Mr Kumar, Mrs Kumari and Mr Verma on each of the three plots of adjoining land to be acquired and developed by them with the use of funds advanced to them by LSC. They say that, because LSC is not authorised to conduct regulated business, the Pattingham Loan Agreements are unenforceable under Section 26 of FSMA;
(b) in the alternative, it was represented and/or agreed by LSC that the time for payment of the Pattingham Loans would be extended beyond the 12 months allowed in the Pattingham Loans Agreements; and
(c) the Pattingham Loan Agreements give rise to an unfair relationship under Sections 140A-B CCA.
(a) the balance which LSC says is owing by Mr Kumar and Mr Verma for money advanced to them by LSC to purchase and develop Plot 1 and Plot 2 respectively (LSC's position, as against Mrs Kumari being that the debt owed by her to LSC for monies advanced by LSC for the purchase of Plot 3 was discharged from the proceeds of sale of the Pattingham Land, sold by the Receivers appointed by LSC);
(b) the balance owing by Mr Kumar to LSC for money advanced by LSC to ADL and ACL which LSC say Mr Kumar promised to pay to LSC under deeds of guarantee and indemnity executed by Mr Kumar in favour of LSC for the obligations of ADL and ACL to LSC;
(c) the balance owing by Mrs Kumari to LSC for money advanced by LSC to ADL which LSC say Mrs Kumari promised to pay to LSC under a deed of guarantee and indemnity executed by Mrs Kumari in favour of LSC for the obligations of ADL to LSC; and
(d) the balance owing by Mr Verma for money advanced by LSC to ACL which LSC say Mr Verma promised to pay to LSC under a deed of guarantee and indemnity executed by Mr Verma in favour of LSC for the obligations of ACL to LSC.
BACKGROUND
MR KUMAR/MRS KUMARI/MR VERMA'S CASE
The Pattingham Land
(a) it advanced to Mr Kumar, under Loan 524, for Plot 1: (i) £49,000 towards the purchase of Plot 1; and (ii) £155,000 towards the cost of developing the Pattingham Land. As at the date of demand (25 January 2019) LSC say that Mr Kumar owed it £241,140.66 for principal, interest and costs and that interest has continued to accrue thereafter;
(b) it advanced to Mrs Kumari, under Loan 525, for Plot 3, £49,000 to assist Mrs Kumari in purchasing Plot 3. As at the date of demand (25 January 2019) LSC say that Mrs Kumari owed it £60,957.48 for principal, interest and costs and that interest continues to accrue thereafter. That debt was repaid out of the proceeds of sale of the Pattingham Land apportioned by it to Plot 3; and
(c) it advanced to Mr Verma, under Loan 526, for Plot 2, £95,500 to assist Mr Verma to purchase Plot 2. As at the date of demand (25 January 2019) LSC say that Mr Verma owed it £118,400.61 in relation to principal, interest and costs.
(a) a telephone conversation he says he had with Mr Turner in late September/early October 2017 when he says Mr Turner telephoned him and asked him if he wanted to borrow any more money. Mr Kumar says that he told Mr Turner that he was looking at the Pattingham Land to provide personal homes for himself, his wife and his son and that he did not want the Pattingham Land to be acquired and developed in the name of a limited company, because he did not want the personal homes of himself, his wife and his son to be owned by a limited company. Mr Kumar says that Mr Turner responded by saying that it would be difficult to arrange for funding in the names of individuals, rather than a limited company, but that he would revert to Mr Kumar. Mr Kumar says that he later received a telephone call from Mr Turner, who confirmed that LSC could provide the funding but he would need Andrew Taylor ("Mr Taylor") of ACS Surveyors Ltd ("ACS") to value the Pattingham Land before LSC could decide whether they would provide funding for it to be purchased/developed;
(b) in early October 2017 at a meeting at the Pattingham Land, Kumar showed Mr Taylor the plans for the three plots on the site and told him that the houses were intended as family homes. Mr Kumar says that he believes Mr Taylor will have told LSC about his intention to build family homes on the site; and
(c) on 18 December 2017 Mr Kumar met with Mr Turner and Mr Morley and told them that he was buying the Pattingham Land to construct personal homes on and would be seeking planning permission for this.
(a) credit was provided to Mr Kumar, Mrs Kumari and Mr Verma as individuals;
(b) the obligation to repay was secured on the Pattingham Land;
(c) at least 40% of the land for each of the three plots was intended to be used in connection with a dwelling; and
(d) whilst the Pattingham Loan Agreements contain declarations that the loans were for business purposes:
(i) the declarations refer to Articles 60 C and 60 D of the RAO (applying to regulated consumer credit agreements and regulated consumer hire agreements) and not to Article 61 (applying to RMCs); and
(ii) LSC knew or had reason to suspect that the Pattingham Loans were not being entered into predominantly for business purposes because:
- LSC had previously arranged lending to Aureation Properties Limited ("APL"), ADL and ACL but the Pattingham Loans were made to Mr Kumar, Mrs Kumari and Mr Verma as individuals;
- clause 12 of the General Terms refer to the "Borrower" being a limited company, demonstrating that it was unusual for LSC to lend monies to individuals; and
- LSC was made aware of the purposes of the loans on numerous occasions.
(a) a representation that LSC would extend the date for repayment of the Pattingham Loans to enable the planning permission to be changed and the three properties to be constructed; and/or
(b) an agreed variation to the written terms of the Pattingham Loans as to the date of repayment; and/or
(c) a collateral agreement to extend the date for repayment of the Pattingham Loans.
(a) Mr Kumar was re-assured that the date for repayment of the Pattingham Loans would be extended beyond 12 months as LSC was aware that Mr Kumar would require more than 12 months to complete the building work on the Pattingham Land;
(b) from August 2018, LSC refused to allow further drawdown of monies under the Pattingham Loan Agreements causing further delay in completion of the building work. There were no proper grounds for such refusal;
(c) LSC unfairly appointed Receivers to take possession of and sell the Pattingham Land;
(d) LSC allowed the Pattingham Land to be sold at an undervalue; and
(e) the interest payable under the Pattingham Loan Agreements to LSC, under clause 6.4 of the General Term was compound interest of 3% per month.
230/232 Lichfield Road
Loan 440
(a) amount to express or implied terms of the agreement for Loan 440 and the ADL Guarantees that the term of Loan 440 would be extended to 24 months (expiring on 5 April 2019) ; alternatively
(b) Mr Kumar/Mrs Kumari relied on those representations to their detriment in entering into loan 440 and the ADL Guarantees and in consequence, LSC is estopped from seeking the repayment of Loan 440 before 5 April 2019.
(a) breached the terms of that loan which prevented ADL from completing the development of 230/232 Lichfield Rd and repaying the loan;
(b) committed a repudiatory breach of the ADL Guarantees;
(c) breached the implied term of the ADL Guarantees that LSC would not render performance of the ADL Guarantee impossible;
(d) made an actionable misrepresentation entitling Mr Kumar and Mrs Kumari to set aside the ADL Guarantees; and
(e) breached the estoppel by representation.
Loan 505
(a) amount to express or implied terms of the agreement for Loan 505 and the ADL Guarantees that the term of Loan 505 would be extended to 5 April 2019; alternatively;
(b) Mr Kumar/Mrs Kumari relied on those representations to their detriment in causing ADL to enter into Loan 505, increasing their liability under the ADL Guarantee and LSC is therefore estopped from seeking the repayment of Loan 505 before 5 April 2019.
(a) breached the terms of Loan 505 which prevented ADL from being able to complete the development of 230/232 Lichfield Road by April 2019 and repay Loan 505;
(b) breached the implied term of the ADL Guarantees that it would not render performance of the ADL Guarantees impossible ; and
(c) breached the estoppel by representation.
Loan 517
Daley Road-Loan 466
236 Lichfield Road – Loan 494
(a) give rise to express or implied terms of Loan 494 that the date for repayment of that loan would be extended to 18 months; alternatively
(b) ACL, Mr Kumar and Mr Verma acted to their detriment in reliance on the representations in causing ACL to enter into Loan 494 and in entering into the ACL Guarantees and that LSC is estopped from seeking payment any sooner than 18 months from the date of Loan 494 (i.e. prior to 3 May 2019).
(a) a breach the terms of Loan 494, which prevented ACL from obtaining planning permission and increasing the value of 236 Lichfield Road to enable ACL to refinance it;
(b) a repudiatory breach of the ACL Guarantees entitling Mr Kumar and Mr Verma to repudiate them;
(c) a breach of the implied term of the ACL Guarantees that LSC would not render performance of the ACL Guarantees impossible;
(d) an actionable misrepresentation entitling Mr Kumar and Mr Verma to set aside the ACL Guarantees; and
(e) a breach of the estoppel by representation.
Emerald Close Loan 587
Agreement of 17 November 2018
LSC'S CASE IN RELATION TO MR KUMARI'S CLAIM AND MR KUMAR/MRS KUMARI/MR VERMA'S DEFENCE TO LSC'S COUNTERCLAIMS/ADDITIONAL CLAIMS
The Pattingham Loan Agreements
(a) Mr Kumar/Mrs Kumari/Mr Verma did not tell LSC that they intended to build houses on the Pattingham Land for their personal use;
(b) the loan offers of 28 October 2017 state that neither the borrowers nor any connected party had any intention to occupy the Pattingham Land;
(c) the Pattingham Loan Agreements declared that the borrowers were entering into those agreements for business purposes and they would not have the protection and remedies available to them if they were regulated agreements under FSMA or the CCA. Mr Kumar/Mrs Kumari/Mr Verma are estopped by those representations from asserting that the loans are RMCs;
(d) the valuation prepared by Mr Taylor makes no mention of any intention by the borrowers to occupy the Pattingham Land and says that less than 40% of the total land at the date of inspection was being used in connection with a dwelling. Whilst this confirms the position at the date of the valuation, its purpose was to confirm the regulatory position (ie that the loans would be unregulated) had Mr Taylor been aware (as Mr Kumar asserts he was) of the intention of the borrowers to occupy the houses as their personal homes, then Mr Taylor could be expected to have referred to this in his valuation, because it would be relevant to the valuation of the Pattingham Land and the regulatory status of the loans;
(e) in a subsequent application to refinance the Pattingham Land it was represented to the prospective lender, by Mr Kumar, that he, Mrs Kumari and Mr Verma did not intend to live on the Pattingham Land;
(f) the development plans for the Pattingham Land and Mr Taylor's valuation report refer to 4/5 houses being built on the Pattingham of land and not 3;
(g) Mr Henry Morris ("Mr Morris") Mr Kumar's architect, has confirmed that he was not told that it was the intention of the borrowers to live in the houses to be built on the Pattingham Land (other than Mr Kumar in the house to be built on Plot 1); and
(h) Mr Kumar said, at the time that the Pattingham Loans were advanced, that the reason why the Pattingham Land was to be put in the individual names of Mr Kumar, Mrs Kumari and Mr Verma was to assist in obtaining the removal of the existing planning restriction which required the occupants of the houses to live and work on the Pattingham Land.
(a) the meeting took place on 14 December 2017;
(b) the alleged representations could not amount to express or implied terms of the loan agreements because they are contradicted by the written loan agreements which provide that the loans must be repaid within 12 months. Mr Kumar/Mrs Kumari/Mr Verma have not applied to rectify the loan agreements and the parole evidence rule prevents them from asserting that the terms of their loan agreements with LSC are different from the written terms of the loan agreements; and
(c) the alleged representations could not amount to a collateral agreement because: (i) at most they are a statement of future intent made before the formal agreements were entered into which agreements do not mention them; (ii) clause 2.6.1 of the General Terms incorporated into each loan agreement requires any amendments to be in writing and signed by all the parties; and (iii) any extension of time to repay loans advanced by LSC was always dealt with by formal written amendment as evidenced by: - the loan agreement for Loan 494 which, at clause 4.5 of the written terms stated that the borrower could seek a six-month extension of the date for repayment which could be granted at the sole discretion of LSC; and - Loans 440, 505 and 517 for 230/232 Lichfield Road which were extended by a side letter signed by all the parties.
(a) The alleged representations can be no more than an indication of future intention and there is no evidence that, if the representations were made, the representor did not believe at the time the representation was made, that the loans would be extended; and
(b) the effect of the pleaded variations or collateral agreements could only be, at most, that LSC would have a discretion to extend.
(a) The only failure to honour a drawdown request which has been identified is the drawdown request that was made on 14 August 2018. At that time the final date for repayment of Loans 494, 505 and 517 for 230/232 Lichfield Rd and Loans 466, 546 and 583, for Daley Road had expired without any repayment being made. LSC was entitled to refuse to advance further funds against drawdown request in relation to the Pattingham Loans as a result of those Events of Default in relation to the 230/232 Lichfield Road and Daley Road Loans;
(b) LSC responded to the drawdown request on 17 August 2018 by saying that future drawdowns had been suspended pending a satisfactory conclusion of the position in relation to 230/232 Lichfield Road (completion of the flats and repayment of the loans); and
(c) Mr Turner has confirmed that LSC became aware at that time that the groundworks contractor had not been paid in respect of various sites and Mr Kumar has admitted not paying that contractor, further justifying LSC's refusal to honour the drawdown request made on 14 August 2018.
(a) the argument that they do amount to unfair relationships is based upon the argument that LSC had given assurances that they would extend the Pattingham Loans beyond the 12 month terms set out in Pattingham Loan Agreements, which LSC denies;
(b) there was no agreement allowing a further 10 months for the Pattingham Loans to be refinanced and even if some such representation was made, it would amount to a mere waiver which could be withdrawn by LSC at any time and it would not be unfair for LSC to do so; and
(c) the appointment of Receivers would not be unfair if LSC was entitled, as it was, to take enforcement action.
The Claims under the ADL/ACL Guarantees
(a) Mrs Kumari/Mr Verma cannot rely upon misrepresentation or estoppel by representation, unless they can show that representations were made to them on behalf of LSC and no representations were made to them (Mrs Kumari says that representations were "forwarded to her" but does not say how);
(b) Mrs Kumari says that she entered into the ADL Guarantees in reliance on representations, so only representations made in relation to Loan 440 to ADL can be relevant as all other alleged representations in relation to loans to ADL were made after Mrs Kumari entered into her ADL Guarantee. Similarly Mr Verma can only have relied on representation made in relation to Loan 494 made to ACL as all other alleged representations in relation to loans to ACL were made after Mr Verma entered into his ACL Guarantee;
(c) the ADL/ACL Guarantees contain a notice advising the guarantor entering into them to take legal advice before signing the guarantee;
(d) the alleged oral representations conflict with the written terms of: (i) Loan 440 entered into by ADL on the same date as the ADL Guarantees; and (ii) Loan 494 entered into by ACL on the same date as the ACL Guarantees; and
(e) an independent solicitor provided a letter in respect of each guarantee confirming that he had advised the guarantor upon the terms and effect of the ADL/ACL Guarantees.
(a) LSC relies on the written terms of the ADL/ACL Loan agreements which provide that they can only be varied if the variation is in writing and signed by all the parties and the asserted oral variations/collateral agreements in respect of the ADL/ACL Loans would conflict with the written terms of the ADL/ACL Loan agreements;
(b) there is no basis for finding that the ADL Guarantees have been varied or are subject to collateral agreements, because the date for repayment of the loans is a matter for the ADL loan agreements and not the ADL Guarantees and would contradict the express terms of the ADL Loan Agreements; and
(c) as for the ACL Guarantees: (i) Loan 494 for 236 Lichfield Road was extendable by its terms for 6 months but ACL did not serve a notice under clause 1.5 requesting an extension of the loan for 6 months (such a request could have been refused in any event by LSC in its absolute discretion); and (ii) no representation or agreement to extend Loan 587 for Church Green/Emerald Close is asserted. LSC say that it was entitled to demand repayment of this loan on 12 November 2018 in spite of the fact that its final date for repayment was 25 June 2019, because there was an Event of Default in relation to other facilities (including on ACL's Loan 494).
(a) LSC contended that it is entitled to charge normal interest as well as interest at the Default Rate from the date of demand; and
(b) LSC contended that it is entitled, under the terms of the ADL Guarantees and the ACL Guarantees to claim against Mr Kumar/Mrs Kumari/Mr Verma for increases in the debt owed to it by ADL/ACL after LSC demanded payment from them under the ADL Guarantees and ACL Guarantees.
REPRESENTATION
THE ISSUES
(a) Mr Kumar's claims against LSC
(b) LSC's counterclaim and additional claims against Mrs Kumari and Mr Verma
(c) Mr Verma's additional claim against LSC
Concessions in closing arguments
(a) the claims of Mr Kumar/Mrs Kumari/Mr Verma that the oral representations that Mr Kumar said were made to him by Mr Turner and Mr Morley on behalf of LSC which amounted to: (i) variations to the loan agreements; (ii) collateral contracts; (iii) actionable representation; or (iv) an estoppel were not pursued. As a result of Mr Say's concession that those matters would not be pursued it is no longer necessary for me to determine issues 2- 4 and 11 – 14 inclusive or the first part of issue 15 (in respect of Loan 587, was the demand valid);
(b) Issue 5 (Is the enforcement action taken in respect of the Pattingham Loan Agreements unlawful? What is the effect of the same if so?) is only pursued on the basis that the Pattingham Loan Agreements were RMCs; and
(c) Issue 17 was no longer pursued other than as part of Issues 8 and 16.
(a) for the purposes of Issue 6, following a default, LSC was only entitled to charge Default Interest and not Default Interest and Standard Interest; and
(b) for the purposes of Issue 9 the liabilities of the guarantors crystallised at the date of demand such that their guarantee liabilities should be calculated as the sum owed by ADL/ACL to LSC at the date of demand plus interest thereafter at the rate of 3% per month. This means that any debt incurred by ADL/ACL to LSC after the date of demand under the guarantees is not to be added to the guarantee liabilities of Mr Kumar/Mrs Kumari/Mr Verma.
WITNESSES
(a) Mr Kumar;
(b) Mrs Kumari;
(c) Mr Verma;
(d) Rimmal Dhillon ("Mr Dhillon");
(e) Harpreet Singh ("Mr Singh"); and
(f) Ragbhir Singh Kang ("Mr Kang").
(a) Mr Turner;
(b) Mr Morley; and
(c) Mr Morris
Mr Kumar
Mrs Kumari
Mr Verma
(a) in respect of Loans 524, 525 and 526, for the Pattingham Land he went to the meeting on 18 December 2017 with his father and Mr Turner/Mr Morley at which he says Mr Kumar made it clear that the houses to be built on the Pattingham Land would be for the personal use of Mr Kumar/Mrs Kumari/Mr Verma and Mr Turner said that the loans could be extended to 24 months if required;
(b) in relation to Loan 494 for 236 Lichfield Road, Mr Kumar told him that the loan offer for Loan 494 was for 12 months but that Mr Turner had said that LSC would extend it to 18 months but would allow 24 months if planning permission had been obtained for the development of 15 - 18 flats within the 18 months; and
(c) He overheard a telephone conversation between Mr Turner and Mr Kumar when Mr Turner said that LSC would be flexible and the term of the loan could be extended.
Mr Dhillon
Mr Singh
Mr Kang
Mr Turner
(a) initially it was intended that the lending for the Pattingham Land would be made to a limited company, however the Pattingham Land had existing planning permission for four houses with a restriction that the occupants must both live and work on the Pattingham Land. Mr Kumar wanted to remove the live/work planning restriction and to do this he wanted to acquire the Pattingham Land in the personal names of himself, his wife and his son, so that separate applications could be made to remove of the work/live planning restriction for each plot. Mr Kumar would go first and apply for removal of the planning restriction for the house to be built on his plot, if that application was granted, then his wife and his son would apply to remove the restriction from their plots;
(b) LSC normally provides loans repayable after 12 months. If after 12 months everything is proceeding satisfactorily and the borrower seeks an extension, LSC will assess that request and may grant it, however if things are not proceeding satisfactorily then an extension will not be granted;
(c) Mr. Turner and Mr Morley met with Mr Kumar at Whitaker Park on 14 December 2017, no promise was made at that meeting that LSC would allow Mr Kumar enough time to finish the Pattingham Land development. At no point during that meeting did Mr Kumar say that the Pattingham Land was going to be for his family home or homes, LSC would not have lent to him, if he had said this;
(d) LSC first refused to allow further drawdowns of the Pattingham loans when it found out that groundworks company was owed over £100,000 for work done on that site, which LSC was funding the development of. If people on site were not being paid then this meant that the money advanced by LSC to pay them was being diverted elsewhere;
(e) Mr Kumar tried to refinance the Pattingham Loans with various companies and he had a decision in principle from a lender to advance money to a limited company to refinance the LSC loans, rather than to individuals;
(f) Loans 440/505/517 - 230/232 Lichfield Road; (i) he does not recall any conversation before Loan 440 was entered into about extending the loan. The terms of each loan are set out in formal documents and he would not say anything that deviated from those formal documents. He does not recall saying not to worry about the paperwork or that the loan will be extended. LSC grants extensions in writing, it would never do so verbally; (ii) Loan 440 was meant to cover the whole cost of constructing the flats, but as construction neared the end ADL was short of money to complete it which led to LSC agreeing to advance Loan 505 and then Loan 517 to fund the costs of completing the construction of the flats; and (iii) ADL defaulted on repayment of Loans 440/505/517 and it became clear that there were problems on both the 230-232 Lichfield Road site and the Daley Road site. ADL could not refinance the loans and had missed payments. The flats at 230-232 Lichfield Road had still not been completed in spite of the extra loans being advanced.
(g) Loan 466 - Daley Road: LSC considered extending the term of the loan but never did because it was apparent that there were problems in finalising the flats at 230-232 Litchfield Road. He has no recollection of a telephone call at some point after 11 July 2017 when it is alleged that he agreed that the term of the loan would be extended;
(h) Loan 494 - 236 Lichfield Road: (i) the loan was advanced to redevelop a house and large garden into flats; (ii) the loan was called in together with the other loans when payments to the ground workers were missed; and (iii) he does not recall saying that dates for repayment are not "hard dates". The date for repayment of the loan was not extended; and
(i) Loan 587 - Emerald Close: (i) Mr Kumar got planning permission to construct a bungalow; and (ii) LSC agreed to advance money to fund the construction work, this was part way through when the loan was called in because it was cross collateralise with other loans that were called in.
Mr Morris
(a) he is an architect who has been involved in working for Mr Kumar on a number of projects;
(b) one of those projects involved the Pattingham Land; and
(c) Mr Kumar asked him to sign a witness statement in opposition to an application by LSC for summary judgment but he refused to do so because the draft witness statement produced by Mr Kumar for him to sign was not true. Contrary to the content of that draft witness statement: (i) he has never met Mr Taylor or Mr Turner in person; (ii) he was never involved in a conversation with Mr Taylor about the valuation of the Pattingham Land; and (iii) he was aware that Mr Kumar had mentioned he wanted Plot 1 for a house for himself and his family to live in, but Plot 2 was not for his son, it was a business project with Mr Kumar intending to retain Plot 1 for himself.
Mr Morley
(a) he is the Managing Director of LSC.
(b) he does not recall a meeting with Mr Kumar in December 2017, or saying that LSC would be flexible and give him extra time to complete the build on the Pattingham Land. If that had been agreed it would be documented he would never agree anything like that verbally;
(c) Mr Kumar did not say that the Pattingham Land would be used for his families' homes, that would be a regulated lend which LSC would never have entered into;
(d) he did not agree to give a 10 month extension for the repayment of all outstanding loans; and
(e) he did not agree verbally to extend the time for repayment of Loan 494 for 236 Lichfield Road. Everything LSC does is documented.
HONESTY/CREDIBILITY OF WITNESSES
"15. An obvious difficulty which affects allegations and oral evidence based on recollection of events which occurred several years ago is the unreliability of human memory.
16. While everyone knows that memory is fallible, I do not believe that the legal system has sufficiently absorbed the lessons of a century of psychological research into the nature of memory and the unreliability of eyewitness testimony. One of the most important lessons of such research is that in everyday life we are not aware of the extent to which our own and other people's memories are unreliable and believe our memories to be more faithful than they are. Two common (and related) errors are to suppose: (1) that the stronger and more vivid is our feeling or experience of recollection, the more likely the recollection is to be accurate; and (2) that the more confident another person is in their recollection, the more likely their recollection is to be accurate.
17. Underlying both these errors is a faulty model of memory as a mental record which is fixed at the time of experience of an event and then fades (more or less slowly) over time. In fact, psychological research has demonstrated that memories are fluid and malleable, being constantly rewritten whenever they are retrieved. This is true even of so-called 'flashbulb' memories, that is memories of experiencing or learning of a particularly shocking or traumatic event. (The very description 'flashbulb' memory is in fact misleading, reflecting as it does the misconception that memory operates like a camera or other device that makes a fixed record of an experience.) External information can intrude into a witness's memory, as can his or her own thoughts and beliefs, and both can cause dramatic changes in recollection. Events can come to be recalled as memories which did not happen at all or which happened to someone else (referred to in the literature as a failure of source memory).
18. Memory is especially unreliable when it comes to recalling past beliefs. Our memories of past beliefs are revised to make them more consistent with our present beliefs. Studies have also shown that memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time.
19. The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. This is obvious where the witness is a party or has a tie of loyalty (such as an employment relationship) to a party to the proceedings. Other, more subtle influences include allegiances created by the process of preparing a witness statement and of coming to court to give evidence for one side in the dispute. A desire to assist, or at least not to prejudice, the party who has called the witness or that party's lawyers, as well as a natural desire to give a good impression in a public forum, can be significant motivating forces.
20. Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. A witness is asked to make a statement, often (as in the present case) when a long time has already elapsed since the relevant events. The statement is usually drafted for the witness by a lawyer who is inevitably conscious of the significance for the issues in the case of what the witness does nor does not say. The statement is made after the witness's memory has been "refreshed" by reading documents. The documents considered often include statements of case and other argumentative material as well as documents which the witness did not see at the time or which came into existence after the events which he or she is being asked to recall. The statement may go through several iterations before it is finalised. Then, usually months later, the witness will be asked to re-read his or her statement and review documents again before giving evidence in court. The effect of this process is to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be true or false, and to cause the witness's memory of events to be based increasingly on this material and later interpretations of it rather than on the original experience of the events.
21. It is not uncommon (and the present case was no exception) for witnesses to be asked in cross-examination if they understand the difference between recollection and reconstruction or whether their evidence is a genuine recollection or a reconstruction of events. Such questions are misguided in at least two ways. First, they erroneously presuppose that there is a clear distinction between recollection and reconstruction, when all remembering of distant events involves reconstructive processes. Second, such questions disregard the fact that such processes are largely unconscious and that the strength, vividness and apparent authenticity of memories is not a reliable measure of their truth.
22 In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth."
(a) the relevant events happened some years ago;
(b) Mr Kumar's relies on what he says he discussed and agreed with Mr Turner, Mr Morley and others; and
(c) LSC places its reliance upon the documents as contradicting Mr Kumar's evidence and lack of documentary evidence to support it.
Mr Kumar
(a) Loan 440 dated 6 April 2017 for 230-232 Lichfield Road – £1,342,500. Mr Kumar says that in January 2017 Mr Turner told him that the loan agreement would say that Loan 440 was for 12 months but LSC would extend it for a further 12 months and will work with Mr Kumar and be flexible and the Mr Kumar should not worry about the "legals";
(b) Loan 466 dated 3 August 2017 for Daley Road – £914, 000. On 11 July 2017 Mr Turner phoned him and said that if Loan 466 were put through ADL it would run concurrently with a Loan 440 and so ADL would have 21 months to repay it;
(c) Loan 494 dated 3 November 2017 for 236 Lichfield Road- £119, 000. On 25 September 2017, Mr Turner sent a formal offer for a loan to enable ACL to acquire 236 Lichfield Road, which was repayable 12 months after it was advanced. Mr Kumar sent an e mail to Mr Turner, copied to Mr Morley, in which he said "terms are still for 12 months and would certainly mean a default in this timescale. I will need the repayment time increased." Mr Turner and Mr Morley then had a telephone conversation with Mr Kumar, during the course of which: (a) Mr Turner stated that LSC would give ACL 18 months to repay Loan 494, to allow planning permission to be obtained to develop the site, after which LSC intended to grant a development facility and a loan to clear Loan 494, from the uplift in the value of the land created by the obtaining of planning permission; and (b) Mr Morley and Mr Turner told Mr Kumar "we will work with you these are not hard dates, they are extendable and we will grant you a new facility to clear the current loan and to build the new block of flats." Mr Turner then sent Mr Kumar an amended formal loan offer on 26 September 2017 under cover of an email which stated "please see amended formal offer attached. It is a 12 month term that can be extended to 18 months with no extension fee but monthly interest must be serviced after month 12".
(d) Loan 505 dated 29 November 2017 for 230-232 Lichfield Rd - £140, 500 to develop 2 additional flats. Prior to the loan being entered into Mr Turner said that LSC would work with Mr Kumar and the repayment date will be extended to April 2019;
(e) Loan 517 dated 9 January 2018 for 230-232 Lichfield Rd - £104,500, additional funds needed to complete the flats. On 9 January 2018, Mr Turner told him not to worry about the paperwork, LSC would work with him and the repayment date for Loan 517 would be extended to April 2019;
(f) Loans 524, 525 and 526 dated 17 January 2018 for the Pattingham Land - £309,000 to Mr Kumar to purchase and develop Plot 1, £615,000 to Mr Verma to purchase and develop Plot 2; and £309,000 to Mrs Kumar to purchase and develop Plot 3. On a number of occasions before entering into the loan agreements reassurances were given to Mr Kumar that the 12 month period would be extended to allow completion of the development and on 14 December 2017, Mr Kumar told Mr Morley that he would find it difficult to get planning permission changed and complete the construction of three houses by January 2019. Mr Morley replied "you know we are flexible we will give you extra time to complete your project";
(g) Loan 587 dated 25 June 2018 for Emerald Close - £94,500. In his defence to LSC's claim, Mr Kumar asserted that when LSC made demand for repayment loan 587 it was not due for payment. At trial, Mr Kumar was asked whether he asserted that any representation was made that Loan 587 would be extended. Mr Kumar said that he was not asserting that any such representation was made. As Loan 587 was advanced on 25 June 2018 and was repayable on 24 June 2019 (according to the terms of the loan agreement) time for repayment had not passed when LSC demanded that ACL repay loan 587 on 12 November 2018. In demanding repayment of Loan 587, LSC relied on the failure of ACL to repay the loan 494 on its due date of 3 November 2011 ; and
(h) on 17 November 2018, Mr Morley agreed that LSC would allow Mr Kumar 10 months to refinance all the outstanding loans.
(a) as I mention in more detail in (c) below, the evidence of Mr Kumar of those representations being made is not referred to in any document and the only witness who supports Mr Kumar's case that any of the representations were made is Mr Verma (Mr Kumar's son) who says that he recalls Mr Morley making the representation set out at paragraph 102 (f) . I have commented on the reliability of the evidence of Mr Verma below, where I find that his evidence provides little support for Mr Kumar's evidence of what Mr Morley said.
(b) whilst Mr Kumar claims to have a good memory of the representations made to him by Mr Turner and Mr Morley about extending the period for repayment of loans, the credibility of that assertion was undermined by:
(i) Mr Kumar's evidence about the meeting in December 2017 with Mr Morley and Mr Turner which forms an important part of Mr Kumar's case. Mr Kumar says he told Mr Morley/Mr Turner about intending to build 3 houses on the Pattingham Land to be occupied by him and his family and he asserts that Mr Morley made the representation referred to in paragraph 102 (f) above. The meeting is not however mentioned at all in Mr Kumar's original Particulars of Claim and the witness statements of Mr Kumar and Mr Verma assert that the meeting took place on 18 December 2017, whereas in cross examination they both accepted that it had taken place on 14 December 2017;
(ii) Mr Kumar was asked whether the alleged representation referred to in paragraph 49.7 of his witness statement, that Mr Kumar should not worry about the legals was made in relation to Loan 505 and 517, as it was unclear which, Mr Kumar said he could not recall;
(iii) at the start of his evidence, Mr Kumar said that he wished to amend paragraph 59 of his trial witness statement, which referred to representations made on behalf of LSC in relation to Loan 466. Mr Kumar said that the first part of that paragraph was correct in referring to Loan 466, but the second part should refer to Loan 505. The second part of paragraph 59 says that Mr Kumar asked Mr Turner why the repayment date was being brought forward and Mr Turner said that rather than have two different repayment dates for the same company, for which, Mr Kumar says, repayment terms of up to 24 months had already been agreed, all the loans would be documented as repayable on the same date but then extended simultaneously by 12 months to be repayable on the same date. It was pointed out to Mr Kumar that paragraph 49.23 of his Amended Reply and Defence to Re-amended Defence and Counter Claim appeared to make the same mistake, in referring to Mr Turner saying that Loan 466 would run concurrently with Loan 440 and ADL would have 21 months to pay it. Mr Kumar said that he had made the mistake because he had just come out of hospital and had got things mixed up. This may be true for what Mr Kumar accepted was a mistake either in Mr Kumar's Amended Reply and Defence to Re-amended Defence and Counter Claim or his witness statement, but not both, because the pleading was signed in June 2021 and the witness statement in September 2022. Confusion about which alleged conversation related to which loan undermines the credibility of Mr Kumar's evidence as to the content of oral conversations; and
(iv) in paragraph 243 of Mr Kumar's trial witness statement he refers to e mailing Mr Turner and Mr Morley on 31 August 2018 to request a meeting, which subsequently took place. When asked in cross examination, Mr Kumar could not recall where the meeting had taken place.
(v) looking at the oral evidence in isolation, I prefer the evidence of LSC's witnesses, Mr Turner and Mr Morley to that of Mr Kumar and Mr Verma. Mr Turner and Mr Morley broadly accepted that they could not recall the content of their conversations with Mr Kumar but gave evidence as to LSC's practice of only to agreeing to extend the date for payment of loans in writing. Their evidence as to this practice does not require Mr Turner or Mr Morley to recall what was actually said during the course of their conversations with Mr Kumar and is not subject to the factors noted by Leggatt J in Gestmin as making the recollection of witnesses of oral conversations unreliable. In this case the unreliability of Mr Kumar's evidence as to the content of the index conversations with Mr Turner and Mr Morley is illustrated by the matters I refer to in (i) – (iii) above;
(c) the documentary evidence in the bundle, both in what it does contain and in what it does not contain, contradicts or is inconsistent with Mr Kumar's evidence that the representations referred to in paragraph 102 above were made and is consistent with Mr Turner and Mr Morley's evidence as to LSC's practice of only agreeing to extend the date for repayment of loans in writing:
(i) there are written agreements for each loan made to ADL/ACL/Mr Kumar/Mrs Kumari/Mr Verma consisting of a formal loan offer and a loan agreement. Each loan offer and each loan agreement has been signed on behalf of LSC as lender and by or on behalf of each of the borrowers. Each formal loan offer clearly states that the date for repayment of the loan is 12 months after the date of the first drawdown. Each loan agreement consists of Specific Terms that apply only to that loan and General Terms. The Specific Terms provide that the date for repayment of the loan is 12 months after the date of first drawdown and the General Terms provide that no amendment to the terms of the loan is valid unless in writing and signed by or on behalf of LSC and the borrower. The scheme of the documents is therefore that the date for repayment is stated in the written loan documents and can only be altered by a written document signed by or on behalf of the borrower and LSC (consistent with what Mr Turner and Mr Morley say is LSC's policy);
(ii) Mr Kumar accepts that he was advised by his own solicitors on all of the loans which are the subject matter of the proceedings, except loan 517, and upon entering into the ADL Guarantee and the ACL Guarantee and that his solicitors were provided with the formal loan offers, loan agreements, ADL Guarantee and ACL Guarantee. Mr Kumar suggested however that his solicitors were instructed simply to "deal with the paperwork" rather than to advise upon the terms of the loans. It is not entirely clear what Mr Kumar meant by this, but he said in cross-examination that he did not tell his solicitors that LSC had orally agreed to extend the dates for repayment of the loans beyond the 12 month period specified in the loan documentation and therefore he was not advised that, as those oral agreements were inconsistent with the written loan documentation, the oral agreements might prove to be unenforceable;
(iii) none of the alleged oral representations/agreements are referred to in any email or other correspondence passing between LSC and Mr Kumar or Mr Kumar and LSC (there being no correspondence between LSC and Mrs Kumari/Mr Verma) and no document refers to any of the oral representations/agreements alleged by Mr Kumar. This is all the more remarkable given that:
- ADL applied to LSC for an additional £140,500 to build two additional flats at 230-232 Lichfield Road, which application became the subject matter of Loan 505. On 15 November 2017 Mr Turner emailed Mr Kumar to ask him whether ADL required additional time to complete the two flats as well as the additional funds. Mr Kumar did not respond to this email. Mr Kumar was asked about his failure to respond and he initially suggested that he did not respond because extra time was not needed, because Mr Turner, in his email, was referring to whether ADL needed extra time beyond 5 April 2019. However after he was taken to other documents, Mr Kumar conceded that Mr Turner must be asking in his email whether ADL needed additional time beyond 5 April 2018 (the date for repayment specified in the signed loan offer and loan agreement). As it was Mr Kumar's case that he knew that 12 months would be insufficient to complete the construction of the flats at 230- 232 Lichfield Road and Mr Turner agreed, before Loan 440 was completed that LSC would extend the time for repayment by a further 12 months, it is inconsistent with Mr Kumar's case for him not to have responded to Mr Turner's e mail of 15 November 2017 that ADL would need the 12 month extension to 5 April 2019 which Mr Turner had agreed it would grant or at least some extension to 5 April 2019;
- on 2 August 2018 Mr Turner sent an email to Mr Kumar in which he said that the Daley Road loans (466, 536 and 583) fell due for payment the following day and he suggested LSC could only offer a three month extension to the date for repayment. Mr Kumar accepts that he did not respond to that email to point out that, on his case, LSC had agreed to extend the Daley Road loans to April 2019. Mr Kumar said he did not do so because he did not want to "wind LSC up" by pointing this out to them;
- In August 2018 Mr Kumar offered to pay £1.6m to LSC (backed by an offer of refinance from Lloyds Bank for £1.5m) to redeem the LSC loans advanced to fund 230 - 232 Lichfield Road (Loans 440, 505 and 517). LSC rejected that offer, however Mr Kumar did not point out that LSC, on his case, had reneged on its agreement to extend the time for repayment of those loans to 5 April 2019. Mr Kumar said that LSC had got him "under their thumb" and for that reason he did not mention that they had reneged on their promise to extend time for repayment; and
- Mr Kumar said that he met with Mr Morley and Mr Turner at the beginning of September 2018 (he could not remember where). I asked Mr Kumar whether, at that meeting he had complained to Mr Morley/Mr Turner that they have agreed to extend time for repayment of the three 230-232 Lichfield Road loans to 5 April 2019. Mr Kumar said that he had done so, but they said they would not extend time for repayment of the loans and he did not refer to the promise to extend time for repayment of the loans after the meeting because there was "no point". I find it incredible that Mr Kumar would not mention, to Mr Turner or Mr Morley, in any of his emails sent in August or September 2018 that they had agreed to extend the date for payment of loans for 440, 505 and 517 by 12 months, if they had in fact done so;
(iv) the time for repayment of loans 440, 505 and 517 was extended from 5 April 2018 to 10 August 2018 by side letter dated 27 April 2018 which was signed on behalf of LSC and on behalf of ADL by Mr Kumar. Mr Kumar was asked in cross-examination why, if on his case LSC had agreed that they would grant a 12 month extension to the date for repayment of loans 440, 505 and 517, the side letter only provided for a four-month extension. Mr Kumar replied (unconvincingly in my view) that the 12 month extension was being provided in stages and that he signed the letter because he been asked to do so;
(v) Mr Turner sent to Mr Kumar a formal offer letter for Loan 494 (236 Lichfield Road) showing that it was repayable 12 months after the first advance. On this occasion Mr Kumar did respond to that email to say that he needed longer than 12 months to repay the loan. The Loan Offer was then amended to provide that ACL could apply for a 6 month extension to the date for repayment of the loan 494, which LSC could, at its sole discretion grant. This is inconsistent with Mr Kumar having told LSC, as he says he did, that he needed more time to repay the loans for 230-232 Lichfield Road, Daley Road and the Pattingham Land and LSC agreeing orally that it would extend the time for repayment (to the extent noted by me in paragraph 102 above). It is inconsistent, because the written Loan Offers and Loan Agreements, state the date for repayment is 12 months from first drawdown and do not even provide an option for the borrowers to ask for an extension as they did on Loan 494;
(vi) Mr Say referred to the three loans that LSC advanced to Mr Kumar and Mrs Kumari in partnership, to develop the land at Church Green having been repaid 1 month and 8 days after the date stated in the loan documents as the date for repayment. Mr Say says there was no side letter extending the time for repayment of these loans so the date for repayment must have been extended by oral agreement, contrary to the evidence of Mr Turner and Mr Morley that LSC's practice was only to extend time for repayment of a loan by written agreement signed on behalf of LSC and the borrower. However, Mr Kumar accepted that LSC had charged default interest on the three loans for the 1 month and 8 days. LSC would only be entitled to do that, if the loan was in default and it would not be in default if LSC had orally extended time for the repayment of this loan to the date of its actual repayment. Mr Kumar accepted that he had paid the default interest charged by LSC without complaint, he said he did so because it was only a few thousand pounds and it was not worth disputing in light of his ongoing relationship with LSC. Far from being a point in favour of the Mr Kumar's case, the redemption of the three loans advanced by LSC for the development of the land at Church Green and the charging of default interest for one month and 8 days is consistent with the evidence of Mr Turner and Mr Morley that LSC only ever agreed to extend the time for repayment of a loan by written agreement signed on behalf of LSC and the borrower.
(d) it is, in my judgment, inherently unlikely that Mr Turner or Mr Morley would agree or represent, on behalf of LSC, before loan documents were signed and loans advanced, that LSC would extend the date for repayment of the loans by 12 months (or for long enough to enable the Pattingham development to be completed) after the date specified for repayment in the loan documents (12 months) without knowing what the circumstances would be on the anniversary of the first advance of those loans. That they would not do so is supported by the term included in Loan 494 that ADL could request an extension of the date for repayment of 6 months which LSC could grant or refuse in its absolute discretion;
(e) it is unlikely that Mr Kumar would have a very reliable memory of precisely what was said to him by Mr Morley/Mr. Turner in 2017/2018 as he purports to have. Mr Kumar said, in cross examination, that the reason why he had such a good memory of at least some of the conversations was because they had changed his life but, assuming in Mr Kumar's favour that what he was relating to the court is his honest recollection of those conversations:
(i) as Leggett J noted in paragraph 16 of his judgement in Gestmin, it is an error to suppose that the stronger the witnesses recollection appears to be the more accurate it is;
(ii) the conversations which Mr Kumar says that he had with Mr. Turner/Mr Morley, on the face of it, do not appear to have been treated by him as important at the time (for example he took no steps to ensure that they were reflected in the loan documents that he signed or refer to them in his email correspondence with them). They only became important when, on Mr Kumar's case, LSC reneged on those representations/agreements sometime after the conversations took place, by not extending the date for repayment of the loans, even then, Mr Kumar did not send any communication to Mr. Turner or Mr Morley complaining that they had reneged on the representations/agreements that Mr Kumar said they made and he did not even raise this verbally (see paragraph 103 (c) (iii) above) until a meeting in September 2018, long after LSC demanded repayment of the relevant loans; and
(iii) Mr Kumar's recollection of conversations may well have been "overwritten" by the process of engaging in these proceedings resulting in Mr Kumar "recollecting" representations/agreements being made that were not in fact made, which suit his case that Mr Turner and Mr Morley misled him. For example Mr Kumar did not include reference to what on his case was the important meeting of 18 December 2017 (in fact taking place on 14 December 2017) in his initial Particulars of Claim. Mr Kumar's explanation, in cross examination, that he was acting as a litigant in person when the Particulars of Claim were drafted and when he instructed solicitors, they wanted far more detail from him, is unconvincing given the importance of what Mr Kumar claims was said at the meeting; and
(f) I have noted that Mr Kumar's assertion that he had a good memory of the oral agreements/representations is undermined by the matters mentioned by me in paragraph 103 (b) above and critically the documentary evidence strongly supports LSC's case that the date for repayment of the loans was as recorded in the loan documents and any agreed extension of that date would be recorded in a document signed by or on behalf of LSC and the borrower. The absence of any reference at all, in any document, to the oral representations/agreements that Mr Kumar alleges were made, including no contemporaneous written complaint by Mr Kumar that LSC had reneged on those oral representations/agreements strongly suggests that those oral representations/agreements were not made.
Mrs Kumari
(a) in her witness statement in support of her application to set aside a statutory demand served upon her by LSC, Mrs Kumari did not assert that Mr Kumar had told her that Loan 440 was repayable after two years, but only that the loan was not due when receivers were appointed by LSC;
(b) during his cross examination, Mr Kumar accepted that he had sent an e mail to Mr Turner, in November 2017 telling him that he anticipated completing the construction of the flats at 230-232 Lichfield Road and repaying Loan 440 in December 2017/January 2018 (some 9 or 10 months after first draw down). Mr Kumar said that he had said that because the works were going well at the time. It is unlikely that Mr Kumar would have told Mrs Kumari that ADL had 2 years to repay Loan 440 from first draw down when, according to the Loan Agreement dated 6 April 2017, for Loan 440 signed by Mr Kumar on behalf of ADL, ADL only had 12 months and Mr Kumar anticipated, 7 months after Loan 440 was entered into that it would be repaid after 9/10 months; and
(c) it is inherently unlikely that Mrs Kumari took no interest in how much Loan 440 or 466 were for or what they were for, but only when they were repayable.
Mr Verma
(a) he went to a meeting which he said took place on 18 December 2017 with his father and Mr Turner/Mr Morley at which he says that Mr Kumar made it clear that the houses to be built on the Pattingham Land would be for the personal use of Mr Kumar/Mrs Kumari/Mr Verma and Mr Turner said that the loans could be extended to 24 months if required; and
(b) in relation to Loan 494 for 236 Lichfield Road, he overheard a telephone conversation between Mr Turner and Mr Kumar when Mr Turner said that LSC would be flexible and the term of the loan would be extended.
(a) Mr Verma, like his father claimed to have a good recollection of what was said at the meeting, but he got the date of the meeting wrong, he accepted that it had taken place on 14 December 2017, not 18 December 2017, undermining the reliability of his memory;
(b) it was the evidence of Mr Turner and Mr Morley that, they both knew that lending to individuals to purchase or develop houses for those individuals to occupy, rather than to sell as part of a business, was regulated lending which LSC was not authorised to carry on and that therefore, had Mr Kumar told them that he intended to build homes for him and his family to occupy on the Pattingham Land they would not have agreed that LSC would lend money to Mr Kumar/Mrs Kumari/Mr Verma for that purpose. I consider it likely that Mr Turner and Mr Morley would both have known (for reasons I explain in more detail in considering their credibility below) in September/October 2017, that lending to individuals to purchase or develop houses for those individuals to occupy was regulated lending which LSC was not authorised to carry out and for that reason it was unlikely that they would have agreed to LSC lending money to Mr Kumar/Mrs Kumari/Mr Verma for this purpose;
(c) Mr Verma signed an Offer Letter dated 28 October 2017 and a Pattingham Loan Agreement dated 17 January 2018. The Offer Letter stated that it was a condition precedent to monies being advanced that Mr Verma confirmed that neither he nor any connected party will occupy the property or plan to occupy the property in the future. The Pattingham Loan Agreement contained a declaration (see paragraph 134 below) that Loan 526 to Mr Verma was for business purposes. Mr Verma was advised on the content of the Loan Agreement for Loan 526 by Murria & Co solicitors, on the face of it, including upon the declaration in the Loan Agreement that he was entering into the Loan Agreement for Loan 526 wholly or predominantly for the purposes of a business and would not therefore have the benefit of protections afforded by FSMA/CCA; and
(d) there is a difference between the representation that Mr Kumar says was made at the meeting in December 2017 about extending the date for repayment of the Pattingham Loans and who made it and the representation that Mr Verma says were made. Mr Kumar says that Mr Morley said "you know we are flexible we will give you extra time to complete your project", whereas Mr Verma says that it was represented by Mr Turner that the date for repayment of the Pattingham Loans would be extended to 24 months if required. Those differences undermine the reliability of Mr Verma's evidence and therefore the support that it provides for Mr Kumar's evidence (or vice versa). In addition, the documentary evidence (or lack of it) which I consider to be more reliable (for the reasons articulated by Legatt J (as he then was) in Gestmin, than what Mr Verma says is his recollection of what was said, does not support Mr Kumar/Mr Verma's evidence that any oral promise or representation was made, that the date for repayment of the Pattingham Loans would be extended beyond the 12 months allowed in the Pattingham Loan Agreements (as noted in paragraph 103 (c) above).
(a) when Mr Verma was asked about the conversation that he said he overheard between his father and Mr Turner and how he knew which loan it related to he said that he "imagined" it would be about 236 Lichfield Road, but he did not explain why he imagined that;
(b) the Offer Letter and Loan agreement dated 3 November 2017 for Loan 494 confirmed that the loan was repayable 12 months after drawdown but could be extended at LSC's sole discretion for 6 months. The Offer Letter was amended to provide that it could be extended for 6 months after Mr Kumar had told Mr Turner (see paragraph 103 (c) (v) above) that he did not believe that he could complete the development of 236 Lichfield Road and pay back the loan within 12 months. Mr Kumar then signed both the Offer Letter and the Loan Agreement for Loan 494 on behalf of ACL, it is unlikely in those circumstances that Mr Kumar would have told Mr Verma that LSC had agreed to extend the date for repayment of Loan 494 for 12 months or that Mr Verma would have overheard Mr Turner telling Mr Kumar that Loan 494 would be extended, when the option to extend it for 6 months was, according to the Loan Agreement to be at LSCs sole discretion; and
(c) Higgs & Sons, solicitors were provided with the ACL Loan Offer, ACL Loan Agreement for Loan 494 and ACL Guarantees, for Mr Kumar and Mr Verma to sign to guarantee the debt owed by ACL to LSC. Higgs & Sons provided a letter dated 10 November 2017 to confirm that they had advised Mr Verma on the content of his ACL Guarantee and its implications. Mr Verma said that he imagined that he would have told Higgs & Sons that Mr Kumar had told him that Loan 494 would be extended by LSC by 12 months, if he did, then it is inconceivable in my judgment that Higgs & Sons would not have told him that any oral agreement made on behalf of LSC to extend the term of Loan 494 (which Mr Verma was guaranteeing) was unlikely to be enforceable.
Mr Dhillon
(a) when it was put to Mr Dhillon that, as a solicitor, he ought to know that causing the company of which he was a director to borrow money, which was not for the benefit of the company, but for his personal benefit, was a breach of the duty that he owed to that company as its director, Mr Dhillon said that the loan was for the benefit of the company because part of the extension to his house was occupied as an office for the benefit of its business, saving it substantial amounts of rent. In re-examination, upon being encouraged to do so, Mr Dhillon sought to play down the amount of the benefit that the company derived from the loan, saying that it occupied only a small proportion of the extension. Mr Dhillon's evidence therefore seemed to change according to the point that he was trying to make;
(b) the loan documents for the loan to Olympia Transport Limited were not disclosed and therefore I have been unable to consider what is said in the loan documents (which it appears Mr Dhillon signed on behalf of Olympia Transport Limited) about the purpose of the loan. I cannot determine therefore what was said in the loan documents about the purpose of the loan and whether, on Mr Dhillon's evidence, he misrepresented the purpose of the loan in the loan documents and Mr Dhillon could not be cross examined on the content of the loan documents; and
(c) in the final paragraph of Mr Dhillon's witness statement, he says "In lieu of this, I believe the defendant was aware that I would be using the funds raised against my company (Olympia Transport Ltd) to allow me to complete my personal home extension project". Mr Dhillon agreed that "In lieu of this" should read "In view of this" and this was an error in his statement which he claimed to have typed himself (except for the standard wording of the statement of truth, confirmation of compliance and certificate of compliance sections which were, he said, added to what he had typed). The difficulty with that is that exactly the same mistake is made in the final paragraph of Mr Kang's statement and for reasons that I will explain in dealing with the credibility of Mr Kang's evidence, I am satisfied that Mr Kumar produced at least the last paragraph at least of Mr Dhillon and Mr Kang's witness statements in spite of Mr Dhillon and Mr Kang giving evidence that they typed the text of their own witness statements, this undermines the credibility of Mr Dhillon's evidence.
Mr Singh
(a) when he was asked, in cross examination, about the plans that he saw Mr Kumar show to Mr Taylor and Mr Morris in October 2017 at the Pattingham Land, Mr Singh initially said that they were architects plans, but when he was shown architects plans in the bundle attached to the valuation of ACS dated 18 October 2017 (showing four houses rather than three), Mr Singh then suggested that the plans Mr Kumar had were more basic than that. It was then suggested to Mr Singh that what he might have seen was the land registry plans for the Pattingham Land as they existed at the date of the site visit (October 2017) with three derelict farm buildings on it. Mr Singh then appeared to be unclear as to what he had seen and, as I will mention in due course, no plans have been produced with drawings of three (rather than four) houses on them;
(b) Mr Kumar/Mrs Kumari/Mr Verma did not complete their purchase of the Pattingham Land until January 2018. It is unclear therefore why Mr Singh would have been erecting fences around the Pattingham Land, on the instructions of Mr Kumar, three months before the Pattingham Land was purchased, which is the explanation given by Mr Singh, in his witness statement for being there in October 2017;
(c) Mr Morris, in his witness statement says he has never met Mr Taylor and, as I will explain in due course, I found Mr Morris to be a credible witness and I accept his evidence on this point; and
(d) the ACS valuation of the Pattingham Land dated 18 October 2017 states that it is based on a site visit that took place on 3 October 2017. Mr Kumar says that this is when he, and therefore Mr Singh went to the Pattingham Land. The content of the ACS Valuation (which I refer to in some detail in paragraph 153 below) is inconsistent with Mr Kumar having told Mr Taylor, during that inspection that he intended to build 3 houses on the Pattingham Land, because the valuation refers to four houses being built and attaches plans for 4 houses, one on Plot 1, two on Plot 2 and one on Plot 3.
Mr Kang
(a) the wording of the first part of the final paragraph of Mr Kang's witness statement is identical to the first part of the final paragraph of Mr Singh's witness statement (containing the same mistake in saying "In Lieu of this" instead of "In view of this"). In the case of Mr Kang there is a record of the history of the creation of his witness statement which records: (i) "document created by Rajinder Kumar 2022-09-17 12:07; (ii) document e mailed to [email protected] - 2022-09-2017 – 12:08 and [email protected] entered name as signing 2022-09-17 1:35. Mr Kang sought to explain that he had e mailed the witness statement that he typed to Mr Kumar so that Mr Kumar could create a PDF copy of it for him to sign. I found that explanation unconvincing because it was not offered until Mr Kang was taken to the record of the history of the creation of the witness statement and Mr Kang was unable to explain why he needed a PDF copy of his witness statement as opposed to a word copy and why he could not create his own PDF. It also did not explain why the first part of the final paragraphs of both the witness statement of Mr Kang and Mr Sing is identical and contains the same mistake. I am satisfied, in the case of Mr Kang, that Mr Kumar created his witness statement, contrary to Mr Kang's evidence that he created it himself, this is consistent with the record of the creation of his witness statement which says it was created by Mr Kumar and explains why the same mistake appears in the final paragraph of the witness statements of Mr Kang and Mr Sigh; and
(b) the mere fact that, according to the evidence of Mr Kang, reference was made, during the phone call, by Mr Kumar to the lending being in Mr Kumar's personal name (and it is common ground that the Pattingham Loans were made to Mr Kumar, Mrs Kumari and Mr Verma personally, rather than to a limited company) does not imply that the houses to be built on the Pattingham Land were to be occupied by Mr Kumar, Mrs Kumari and Mr Verma, even though, in the final paragraph of Mr Kang's witness statement (in my judgment written by Mr Kumar) Mr Kang says that he believes that it does.
Mr Turner
Mr Morley
Mr Morris
(a) he had approached LSC to obtain finance for a proposed joint venture between him and Mark Worthington (the site manager at 230-232 Lichfield Road) to develop land at "Marble Alley" and he had used Mr Taylor to produce a valuation of Marble Alley;
(b) he had carried out professional work for LSC as an architect after being introduced to them by Mr Kumar;
(c) he was angry about Mr Kumar not paying professional fees that were due to him of around £8,000; and
(d) he therefore saw LSC as a potential source of both finance and professional work and was angry with Mr Kumar and this motivated him to refuse to sign the witness statement that Mr Kumar sent to him and instead sign the witness statement sent by LSCs solicitors.
ISSUE 1 Are the Pattingham Loan Agreements or any one of them RMCs under FSMA and therefore unenforceable?
What is a RMC?
"(3) In this Chapter—
(a) …a contract is a "regulated mortgage contract" if, at the time it is entered into, the following conditions are met—
(i) the contract is one under which a person ("the lender") provides credit to an individual or to trustees ("the borrower");
(ii) the contract provides for the obligation of the borrower to repay to be secured by a mortgage on land in the EEA;
(iii) at least 40% of that land is used, or is intended to be used—
(aa) in the case of credit provided to an individual, as or in connection with a dwelling;
but such a contract is not a regulated mortgage contract if it falls within article 61A(1) or (2)."
"investment property loan" is a contract that, at the time it is entered into, meets the conditions in paragraphs (i) to (iii) of article 61(3)(a) and the following conditions—
(a) less than 40% of the land subject to the mortgage is used, or intended to be used, as or in connection with a dwelling by the borrower or (in the case of credit provided to trustees) by an individual who is a beneficiary of the trust, or by a related person; and
(b) the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower;"
" For the purposes of this article, if an agreement includes a declaration which—
(a) is made by the borrower, and
(b) includes—
(i) a statement that the agreement is entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower,
(ii) a statement that the borrower understands that the borrower will not have the benefit of the protection and remedies that would be available to the borrower under the Act if the agreement were a regulated mortgage contract under the Act, and
(iii) a statement that the borrower is aware that if the borrower is in any doubt as to the consequences of the agreement not being regulated by the Act, then the borrower should seek independent legal advice,
the agreement is to be presumed to have been entered into by the borrower wholly or predominantly for the purposes specified in sub-paragraph (b)(i) unless paragraph (4) applies."
"(4) This paragraph applies if, when the agreement is entered into—
(a) the lender (or, if there is more than one lender, any of the lenders), or
(b) any person who has acted on behalf of the lender (or, if there is more than one lender, any of the lenders) in connection with the entering into of the agreement,
knows or has reasonable cause to suspect that the agreement is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower."
(a) the conditions set out in Article 61 (3) (a) (i) – (iii) are met by all of the Pattingham Loan Agreements;
(b) the question I need to decide is whether the Pattingham Loan Agreements, or any of them are investment property loans as defined by article 61A (6) ("Investment Property Loans");
(c) if the presumption under Article 61(3) does not apply, then LSC must prove, on the balance of probabilities, that it was the intention of Mr Kumar and/or Mrs Kumari and/or Mr Verma of the one part and LSC of the other part that the Pattingham Loan Agreements or some of them would be Investment Property Loans; and
(d) if I decide that the presumption under article 61A (3) applies (that the Pattingham Loan Agreements were entered into wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower) then that presumption is rebutted if Mr Kumar and/or Mrs Kumari and/ or Mr Verma persuade me, on the balance of probabilities, of the matters set out in Article 61A (4) and LSC must still prove that less than 40% of the land subject to the mortgage is used, or intended to be used, as or in connection with a dwelling by the borrower.
My approach to Issue 1
(a) I will decide if the declaration contained in each of the Pattingham Loan Agreements (which are in identical form) complies with Article 61A(3);
(b) I will decide if Article 61A (4) applies; and
(c) I will decide whether the Pattingham Loans or any of them were in fact Investment Property Loans, applying the burden of proof as summarised in paragraph 132 (c) and (d) above.
Do the declarations in the Pattingham Loans comply with Article 61A (3) ?
Declaration for exemption relating to business (if an individual) (articles 60C and 60O of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001)"
- "I am entering into this agreement wholly or predominantly for the purposes of a business carried on by myself or intended to be carried on by myself.
- I understand that I will not have the benefit of the protection of any remedies that would be available to me under the Financial Services and Markets Act 2000 or under 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 140 B 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 doubts as to the consequences of the agreement not being regulated by the Financial Services and Markets Act 2000 or the Consumer Credit Act 1974, then I should seek independent legal advice.
- By signing these Specific Terms you confirm that you have been given the opportunity to seek legal advice on the nature and extent of the liabilities and obligations assumed by you as the borrower under the General Terms and these Specific Terms….".
Does Article 61A (4) of RAO apply?
(a) Mr Kumar says that during his first conversation with Mr Turner in late September/early October 2017 about LSC lending money to acquire and develop the Pattingham Land, he told Mr Turner that he wanted to acquire the Pattingham Land in personal names, rather than in the name of a limited company, to build personal houses on for himself and his family. Mr Kumar's evidence is supported by the evidence of Mr Kang who says that he was in Mr Kumar's car when the index conversation took place between Mr Kumar and Mr Turner;
(b) at a meeting 3 October 2017, at the Pattingham Land, when Mr Taylor was valuing the Pattingham Land, between Mr Taylor (valuer), Mr Morris (architect) and Mr Kumar, Mr Kumar showed Mr Taylor plans for the construction of three houses on the Pattingham Land and told Mr Taylor that the houses were to be occupied by him and his family and he believes that Mr Taylor will have passed this information on to LSC. Mr Kumar's evidence is supported by the evidence of Mr Singh who says that he was present during the meeting and overheard Mr Kumar telling Mr Taylor about his intentions and showing him plans for three houses; and
(c) at the meeting which Mr Kumar says took place on 18 December 2017 (in fact 14 December 2017) with Mr Turner and Mr Morley, Mr Kumar told Mr Turner and Mr Morley that he planned to build personal houses for himself and his family on the Pattingham Land. This evidence is supported by Mr Verma.
(a) "In accordance with recent written instructions from Rajinder Kumar…. to provide a market valuation report for and on behalf of LSC …"
(b) "Extending to two acres or thereabouts, the site, a former egg production unit with three brick built poultry sheds constructed thereon….. these have planning consent in place for conversion to form two number detached and two semi-detached dwelling houses which will each be a live work unit, with residential accommodation and business space attached thereto. It is the borrowers intention to re-submit this planning consent to remove the live-work use, however this will not be a straight forward exercise and will require each unit to be held on separate titles, and further each will require an application to be submitted.";
(c) "Floor Area:"…Block one- 5,100 sq ft to single dwelling; Block two- 4,400 sq ft to 2 dwellings; Block 3 three- 3,500 sq ft to a single dwelling";
(d) "Mortgage Regulation: less than 40% of the total land area at the date of inspection being used as or in connection with a dwelling";
(e) "The borrower has taken advice and believes that once purchased, and based upon advice he believes that with the backing of the parish council, there is a strong chance that the individual units can each be converted to pure residential use."; and
(f) three separate plans are attached of what was proposed to be built upon each of the three plots showing one building on each of Plot 1 and Plot 3 with residential space and work space and (contrary to the description in the valuation of two semi-detached properties on Plot 2) two detached properties with a gap between them are shown on the plans for Plot 2, with residential space and work space in each of the detached properties.
(a) I have found that (in spite of the lack of experience of Mr Turner at the time) both Mr Turner and Mr Morley would have known, in January 2018, that LSC was not authorised to make loans to individuals for them to use to build houses for their own occupation. As Mr Turner and Mr Morley did agree that LSC would make the Pattingham Loans to Mr Kumar/Mrs Kumari/Mr Verma, I consider that it is unlikely that Mr Morley and Mr Turner would have agreed that LSC would make those loans, if Mr Kumar had told them that it was intended that the houses to be built on the Pattingham Land, once built would be occupied by Mr Kumar, Mrs Kumari and Mr Verma;
(b) I have found that Mr Kang's evidence provides no support for Mr Kumar's evidence that he told Mr Turner, in late September/early October 2017 that he intended to build homes on the Pattingham Land for himself and his family to occupy;
(c) I have found that Mr Verma's evidence provides no material support for Mr Kumar's evidence that he told Mr Turner and Mr Morley at a meeting in December 2017, that he intended to build three houses on the Pattingham Land for himself and his family to occupy; and
(d) in assessing the credibility of Mr Kumar's evidence I have dealt at some length with the evidence he gave about representations and agreements being made and entered into by Mr Turner and Mr Morley, on behalf of LSC, that the date for repayment of loans advanced by LSC would be extended. I concluded that Mr Kumar's evidence was unreliable although I made no finding that he gave dishonest evidence. In relation however to Mr Kumar's assertions that he told Mr Turner in late September/October 2017 and Mr Turner and Mr Morley in December 2017 that the houses which were to be constructed on the Pattingham Land would be used by Mr Kumar and his family for their own occupation, I have come to the conclusion that this does not represent his honest recollection for the reasons set out in paragraphs 156 – 163 below.
(a) Mr Morris was adamant that he has never met Mr Taylor. I have accepted that evidence. Mr Morris says that he produced a drawing for Mr Kumar, in May 2018, of the house to be built on Plot 1, on Mr Kumar's instructions, and he says that Mr Kumar told him that that house would be occupied by Mr Kumar and his son. Mr Morris produces a copy of the drawing and I have already explained that the drawing which Mr Morris exhibits to his witness statement, shows a "Lalit" wing of the house to be built on Plot 1, which I have accepted indicates the part of the house to be occupied by Mr Verma, consistent with Mr Morris's evidence that Mr Kumar told him, in May 2018 that at least Mr Kumar and Mr Verma would occupy the house to be built on Plot 1;
(b) I have found that the evidence of Mr Singh provides no support for Mr Kumar's assertions that a meeting took place on 3 October 2017 at the Pattingham Land between Mr Kumar, Mr Morris and Mr Taylor and that Mr Kumar told Mr Taylor/Mr Morris at that meeting about his intention that the houses on the Pattingham Land would be occupied by Mr Kumar and his family;
(c) As for Mr Kumar's evidence:
(i) he has never produced any drawing showing three houses to be built on the Pattingham Land, notwithstanding that he says that he showed such a drawing to Mr Taylor/Mr Morris at the meeting in October 2017;
(ii) he accepts that the planning permission in place in October 2017 and January 2018 was for four houses to be built on the Pattingham Land (two on Plot 2) and that even after Shropshire County Council revoked that planning permission, because the three dilapidated poultry sheds had been demolished, he re-applied for planning permission for four houses (two on Plot 2) rather than three houses;
(iii) the ASC Valuation says that it was prepared following a visit to the Pattingham Land on 3 October 2017. Mr Kumar say that he (and Mr Singh) met Mr Taylor and Mr Morris at the Pattingham Land when Mr Taylor was carrying out his inspection for the purposes of his valuation. The ACS Valuation dated 18 October 2017 is inconsistent with Mr Taylor having been shown plans by Mr Kumar with three houses on them and being told that those houses are to be occupied by Mr Kumar and his family;
(iv) on 30 October 2018, Bridging Loans Limited made an offer to APL to lend it the sum of £1,600,000, of which £600,000 would be advanced to enable APL to acquire the Pattingham Land (by redeeming the LSC Pattingham Loans) and the balance of £1m was to be released in stages to fund development work. Clause 12 of the loan offer says it has been made on the basis of representations that it is not the intention of APL or a related person to use at least 40% of the property as or in connection with a dwelling. Mr Kumar accepted that he procured this offer, intending to use the funds to repay the Pattingham Loans and build out the site and acceptance of it would mean that the houses, once built on the Pattingham Land could not be occupied by him or his family. He explained that, in order to refinance the Pattingham Loans he had had to give up his plan that he and his family would occupy the houses to be built on the Pattingham Land. I did not find this explanation convincing and find that the loan offer procured by Mr Kumar from Bridging Loans Limited is inconsistent with his case that he/Mrs Kumari/Mr Verma intended, 9 months earlier to occupy the houses intended to be built on the Pattingham Land; and
(v) Mr Kumar has not produced a single document (including correspondence) which refers to there being an intention to build three house instead of four on the Pattingham Land and the only document produced which suggests that any of the houses to be built on the Pattingham Land were intended to be occupied by Mr Kumar or his family is the plan produced by Mr Morris, in May 2018, 5 months after the Pattingham Loan Agreements were entered into, which I have accepted only reflects a proposal that Mr Kumar and his family would occupy the house to be built on Plot 1 and not the other plots.
(a) the formal loan offers dated 28 October 2017 state that confirmation is required that neither the borrower nor any connected parties will occupy the Pattingham Land at any point in the future. Mr Kumar said that he did not read that part of the offer letter. Mrs Kumari and Mr Verma signed offer letters in identical terms containing the same requirement. It is unlikely that none of them read that requirement before signing the offer letters, which requirement they clearly could not meet if they really intended to occupy the house(s) to be built upon their respective plots; and
(b) the Pattingham Loan Agreements themselves contain the declarations that I have already referred to that "I am entering into this agreement wholly or predominantly for the purposes of a business carried on by myself or intended to be carried on by myself." Whilst I have found that the declaration as a whole does not comply with the requirements of Article 61A (3) this part of the declaration is inconsistent with Mr Kumar/Mrs Kumari/Mr Verma intending to occupy their respective plots of the Pattingham Land as their homes. Whilst I note the existing planning permission for the Pattingham Land, to construct four houses, was subject to the restrictions that the occupants of those houses must both live and work there and if that planning permission were complied with there would be an element of business use, nonetheless it was the stated intention of Mr Kumar, in the ACS Valuation, which he did not resile from, that he intended to apply to remove the work /live restriction so that the occupation would be purely residential. It formed no part of any of Mr Kumar/Mrs Kumari/Mr Verma's cases that they intended to carry on any business from the houses they said that they intended to occupy on the Pattingham Land and the declaration signed by each of them in the Pattingham Loan Agreements are inconsistent with the houses to be built on their respective plots being intended to be their domestic homes.
(a) Mr Turner's evidence, that Mr Kumar told him that Mr Kumar believed that acquiring the Pattingham Land in the names of three individuals rather than a single limited company would assist in obtaining the removal of the work/live planning restriction is supported by the ACS Valuation which says "It is the borrower's intention to re-submit the planning consent to remove the live – work use, however this will not be a straightforward exercise and will require each unit to be held on separate titles, and further each will require an application to be submitted."; and
(b) prior to the Pattingham development, Mr Kumar's practice was (apart from the first development which he undertook at Church Lane in partnership with Mrs Kumari) to carry out developments through limited companies. It would not be necessary for the Pattingham Land to be acquired in the names of Mr Kumar/Mrs Kumari/Mr Verma (and for them to borrow money from LSC to acquire those plots and build houses upon them, at their own risk) in order for them to acquire ownership of the properties built upon them. The site could have been acquired by ADL or ACL or another company controlled by the family, the houses built and mortgages taken out by Mr Kumar/Mrs Kumari/Mr Verma to acquire the houses, if they could afford them (as they would have to do in order to repay the Pattingham Loans in any event).
(a) at the time that Mr Kumar, Mrs Kumari and Mr Verma entered into the Pattingham Loan Agreements (January 2018) they lived together and for reasons I explain further below I am not satisfied that any of them provided a plausible reason as to why, in January 2018, they each wanted very large and expensive, detached houses to live in on the Pattingham Land;
(b) the plan produced by Mr Morris in May 2018 showed a wing of the property to be built on Plot 1 was to be occupied by Mr Verma (identified as "the Lalit wing"). When this point was put to Mr Kumar in cross examination he did not deny that the plan was created in May 2018, on his instructions, or that it showed a wing of the house to be built on Plot 1 to be occupied by Mr Verma. Mr Kumar said that although Mr Verma would live in the same house on Plot 1 as Mr Kumar and Mrs Kumari initially, Mr Verma would need a separate home of his own when he got married. There was no suggestion however that, in January 2018, there was any prospect of Mr Verma getting married in the foreseeable future. Building an expensive house for Mr Verma to occupy at some point in the future if and when he got married would only be a tenable thing to do if Mr Kumar and/or Mrs Kumari and/or Mr Verma were extremely wealthy and in my judgment, on the evidence, in January 2019, they were very far from that;
(c) Mr Verma was asked what his income was in January 2018 and he said that the income he received from his father, Mr Kumar, was around £12,500 per annum, but he supposed that he would have to have a substantial salary increase (from his father) in order to cover the mortgage upon the property to be built on Plot 2. That answer did not ring true. If Mr Verma truly intended to bear the financial burden of refinancing the Pattingham Loan made to him by LSC of £615,000 plus interest, merely so that he could have a house to move into if and when he got married, then he would have to have a better plan than that as to how he was going to afford it;
(d) it was not suggested that Mrs Kumari would be living separately from Mr Kumar, rather Mrs Kumari said that she wanted "personal space" for herself where family and friends could visit her separately from Mr Kumar. She suggested that she needed this personal space because of the care she had to provide for Mr Kumar, because of his poor health. In January 2018, Mrs Kumari was studying Public Health at Wolverhampton University and so had no income and she does not suggest that, she stood any chance of obtaining a job with a substantial income, once she completed that course. On that evidence there was no realistic prospect of Mrs Kumari obtaining a mortgage based on her income to pay back the £309,000 lent to her by LSC plus interest, to acquire a very large detached house, merely to give her "personal space"; and
(e) Mr Kumar did not suggest that he had any income, in January 2018, other than from the property development projects being undertaken by ADL/ACL. Whilst, in January 2018, it may have appeared that those projects would produce substantial profits for ADL/ACL which could be paid to Mr Kumar/Mrs Kumari/Mr Verma in salary or dividends (perhaps even enough to fund the repayment of the Pattingham Loans plus interest) those profits would be nothing like enough, in my judgement, to make it plausible that Mr Kumar/Mrs Kumari/Mr Verma really intended, in January 2018, to build one house for each of them on the Pattingham Land when one of those houses clearly was big enough to accommodate all of them.
Were the Pattingham Loans or any of them in fact Investment Property Loans?
Estoppel
"15. When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean… And it does so by focussing on the meaning of the relevant words… in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions…, (iii) the overall purpose of the clause,,,, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions.
16. For present purposes, I think it is important to emphasise seven factors.
17. First, the reliance placed in some cases on commercial common sense and surrounding circumstances ….should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision……
18. Secondly, when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning…. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. If there is a Specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve.
19. The third point…. is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made….
20. Fourthly, while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed…..
21. The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties….
22. Sixthly, in some cases, an event subsequently occurs which was plainly not intended or contemplated by the parties, judging from the language of their contract. In such a case, if it is clear what the parties would have intended, the court will give effect to that intention…." [the seventh point was only relevant to the Specific clause in the contract before the Supreme Court].
"13. Textualism and contextualism are not conflicting paradigms in a battle for exclusive occupation of the field of contractual interpretation. Rather, the lawyer and the judge, when interpreting any contract, can use them as tools to ascertain the objective meaning of the language which the parties have chosen to express their agreement. The extent to which each tool will assist the court in its task will vary according to the circumstances of the particular agreement or agreements. Some agreements may be successfully interpreted principally by textual analysis, for example because of their sophistication and complexity and because they have been negotiated and prepared with the assistance of skilled professionals. The correct interpretation of other contracts may be achieved by a greater emphasis on the factual matrix, for example because of their informality, brevity or the absence of skilled professional assistance. But negotiators of complex formal contracts may often not achieve a logical and coherent text because of, for example, the conflicting aims of the parties, failures of communication, differing drafting practices, or deadlines which require the parties to compromise in order to reach agreement. There may often therefore be provisions in a detailed professionally drawn contract which lack clarity and the lawyer or judge in interpreting such provisions may be particularly helped by considering the factual matrix and the purpose of similar provisions in contracts of the same type…..
14. On the approach to contractual interpretation, the Rainy Sky and Arnold cases were saying the same thing".
(a) Mr Pomfret placed most reliance upon the declaration appearing under the signatures of the parties in the Specific Conditions which I have already set out in full in paragraph 134 above. His case is that the declaration alone makes it clear that it was the intention of the parties to the Pattingham Loan Agreements at the time they were entered into that they would be Investment Property Loans and that the remaining provisions to which he refers are consistent with that intention;
(b) clause 3 of the Specific Terms sets out conditions precedent to the drawdown of funding subsequent to the first drawdown (to fund the development). Clause 3.1 refers to the borrower providing LSC with a copy of the Agreed Plan defined as "the detailed architects drawings and specifications for the development in form and content acceptable to and approved by or on behalf of the Lender (as may be updated or varied from time to time with the approval of the Lender)"; and clause 3.2 "a copy of the Development Planning Permission" is defined as "the planning permission relating to the development delivered to the Lender as a condition precedent to the first drawdown";
(c) clause 17 .1 (b) of the General Terms provides "Where the facility is to be drawn down by the Borrower in respect of a development the Borrower will procure that the development is carried out: …(b) in accordance with the Agreed Plans, Requisite Consents, Development Planning Permission, Development Budget and Construction Documents;
(d) clause 12.17 of the General Terms which I have set out in paragraph 159 above;
(e) clause 12.25 of the General Terms which provides that "the Borrower represents and warrants at the date of the agreement that…. Each of the representations and warranties in this clause 12…. is deemed to be repeated by the Borrower… at the date of each Drawdown Request, the date of any Drawdown and on each date that interest is payable or capitalised under the agreement…. by reference the facts and circumstances existing on each such date.";
(f) clause 17.13 of the General Terms provides "The Borrower may not make any variation to the Agreed Plans….. or the Development Budget without the written consent of the Lender unless [certain conditions are met]; and "…the Borrower notifies the Lender of the variations in advance";
(g) clause 17.18 of the General Terms which provides "the borrower must not amend or vary the Development Planning Permission or apply for any such amendment or variation without prior written consent of the Lender"; and
(h) clause 18.2 of the General Terms provides "Each of the events or circumstances set out in this clause 18…is an Event of Default…. there is a breach of …. clause 17".
(a) The Pattingham Loan Agreements satisfy the requirements of Article 61A (3) of RAO and are therefore RMCs. The declaration set out under the signatures of the parties in the Specific Terms do not satisfy the conditions of Article 61A (3) of RAO and therefore cannot be relied upon to show that it was the intention of the parties that the Pattingham Loan Agreements would be Investment Property Loans under Article 61A and therefore an exception to Article 61(3). The intention of the parties was therefore that the Pattingham Loan Agreements would be RMCs;
(b) Clause 12.17 of the General Terms only requires the valuation to be accurate at the date of the valuation;
(c) Clause 17.1 of the General Terms, in referring to "Agreed Plans" could refer to the plan of Plot1 prepared by Mr Morris which shows that the house to be built on Plot 1 was to be occupied by the borrower (Mr Kumar); and
(d) Clause 15.9 of the General Terms provides that "the Borrower must ensure all buildings and erections from time to time upon the Property and all fittings, plant and machinery on the Property are in, and are maintained in:…..(b) such repair, condition and order as to enable them to be let in accordance with all applicable laws and regulations……". This says Mr Say is inconsistent with the development being sold to a third party, as LSC maintain was the intention of the parties.
(a) I start from the premise that it must have been the intention of the parties that some purpose would be served by the declaration;
(b) it is common ground that the declaration is in precisely the form that it would be required to be in in order to be exempt an agreement from the regulations in RAO relating to consumer credit agreements and consumer credit hire agreements (if the Pattingham Loan Agreements were consumer credit agreements or consumer hire agreements, which they are not) ;
(c) Article 61A (6) of RAO (see paragraph 129 above) provides that an Investment Property Loan is a contract which meets the conditions in Article 61 (3) for a RMC but:: (i) less than 40% of the land, subject to the mortgage is used or intended to be used as a dwelling by the borrower; and (ii) the agreement is entered into wholly or predominantly for the purpose of a business;
(d) I have found that the declaration does not satisfy the requirements of Article 61A (3) (which, if satisfied would mean that there would be a presumption in favour of LSC that the requirements of Article 61A(6... (ii) are met) for the reasons set out in paragraphs 134 – 143 above. The question of whether the reasonable reader of the declaration would think the intention of the parties was that the Pattingham Loan Agreements would meet the conditions of Article 61A(6) is however different from the question of whether the declaration complies with Article 61A (3);
(e) the first paragraph of the declaration says that "I am entering into this agreement wholly or predominantly for the purposes of a business carried on by myself or intended to be carried on by myself." I am satisfied that this statement clearly shows that it was the intention of the parties to the Pattingham Loan Agreements that they would satisfy the requirement of Article 61A (6) (ii) namely that the agreements were entered into wholly or predominantly for the purpose of a business carried on by the borrower; and
(f) Mr Say argued that, even if the Pattingham Loan Agreements were intended to be entered into wholly or predominantly for the purpose of a business, it was still possible that the requirement of Article 61A (6) (i), namely that: "less than 40% of the land, subject to the mortgage is used or intended to be used as a dwelling by the borrower" may not be met. Whilst I would accept that it is theoretically possible for the parties to have intended that the Pattingham Loan Agreements should be entered into wholly or predominantly for the purpose of a business, but yet 40% or more of the land subject to the mortgage would be used as a dwelling by the borrower: (i) a reasonable person, in my judgement, would conclude that using or intending to use 40% or more of the property for a dwelling would not be consistent with the property being used wholly or predominantly for business purposes, absent there being anything at all in the Pattingham Loan Agreements suggesting that the borrowers intended to use the Pattingham Land for a dwelling at all (and there is no such suggestion, Mr Say has not contended that there is); and (ii) it has never formed any part of Mr Kumar and/or Mrs Kumari and/or Mr Verma's case that they intended to use their respective plots of the Pattingham Land for any business purpose.
ISSUE 5 Is the enforcement action taken in respect of the Pattingham Loan Agreements unlawful? What is the effect of the same if so?
ISSUE 6 Is LSC entitled to claim interest and default interest from Mr Kumar on a compounded basis in light of the agreements entered into between the parties?
(a) clause 1.3 of the Specific Terms provides that interest shall accrue at the Interest Rate
(b) "Interest Rate" is defined in the Specific Terms as 1.2% per month;
(c) clause 1.2 of the Specific Terms provides that, in the event that any Specific Term contradicts any General Term, the Specific Term shall apply;
(d) clause 6.1 of the General Terms provides that the Borrower shall pay interest on the Loans at the Interest Rate and clause 6.2 that interest shall accrue daily at the Interest Rate and shall be payable in accordance with the Specific Terms;
(e) only clause 6.4 the General Terms provides for 3% per month to be paid. It provides that "If the Borrower fails to make any payment due under a Finance Document on its due date for payment interest on the unpaid amount shall accrue daily, from the date of non-payment to the date of actual payment ….. at 3% per month; and
(f) clause 6.4 does not however say that the rate of 3% per month replaces the Interest Rate in the events set out in that paragraph and clause 6.4 of the General Terms is therefore contradicted by clause 1.3 of the Specific Terms and clause 1.3 of the Specific Terms prevails over clause 6.4 of the General Terms, in accordance with the provisions of clause 1.2 of the Specific Terms.
ISSUE 7 - Is there an unfair relationship between the parties?
"(1) The court may make an order under section 140B in connection with a credit agreement if it determines that the relationship between the creditor and the debtor arising out of the agreement (or the agreement taken with any related agreement) is unfair to the debtor because of one or more of the following–
(a) any of the terms of the agreement or of any related agreement;
(b) the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement;
(c) any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement).
(2) In deciding whether to make a determination under this section the court shall have regard to all matters it thinks relevant (including matters relating to the creditor and matters relating to the debtor)."
…
(9) If, in any such proceedings, the debtor or a surety alleges that the relationship between the creditor and the debtor is unfair to the debtor, it is for the creditor to prove to the contrary."
(a) Mr Kumar was re-assured that the date for repayment of the Pattingham Loans would be extended beyond 12 months, as LSC was aware that Mr Kumar would require more than 12 months to complete the building work on the Pattingham Land;
(b) from August 2018, LSC refused to allow further drawdown of monies under the Pattingham Loan Agreements causing further delay in completion of the building work. There were no proper grounds for such refusal;
(c) LSC unfairly appointed Receivers to take possession of and sell the Pattingham Land;
(d) LSC allowed the Pattingham Land to be sold at an undervalue; and
(e) the interest payable under the Pattingham Loan Agreements to LSC, under clause 6.4 of the General Term was compound interest of 3% per month.
Re-assurance that the date for repayment of the Pattingham Loans would be extended beyond 12 months
Refusing to allow further drawdown of monies under the Pattingham Loan Agreements from August 2018
LSC unfairly appointed Receivers to take possession of and sell the Pattingham Land.
LSC allowed the Pattingham Land to be sold at an undervalue
(a) prior to marketing the Pattingham Land for sale the Receivers agreed to allow Mr Kumar, until 17 April 2019 to pay the sums owed to LSC under the Pattingham Loans;
(b) on 11 April 2019, Mr Kumar's solicitors notified the Receivers that Mr Kumar had an offer of funding to purchase the Pattingham Land for £492,000. The Receivers removed the Pattingham Land from an auction due to take place on 25 April 2019 and sent an e mail to Mr Kumar's on 26 April 2019 stating that completion of Mr Kumar's purchase must take place no later than 22 May 2019 as the property would be placed in a further auction due to take place on 23 May 2019 ;
(c) on 13 May 2019 Mr Kumar's solicitors confirmed that he would purchase the Pattingham Land on or before 22 May 2019, but on the basis that his offer would be reduced to £400,000, but then on 23 May 2019 Mr Kumar's solicitors notified the Receivers that he was unable to purchase the Pattingham Land; and
(d) the Receivers sold the Pattingham Land, on 27 August 2019, by private sale for £380,000.
(a) Mr Kumar was allowed a reasonable opportunity to bid for the Pattingham Land himself;
(b) there is no criticism of the steps taken by the Receivers to obtain the best price reasonably obtainable for the Pattingham Land, as at 27 August 2019;
(c) any valuation represents an opinion of the valuer as to the value of the land at a given date (here 27 August 2019). Ultimately the value of land depends upon what purchasers with the funds to pay for a property are willing to pay for it. Absent any case as to how the Receivers failed to take reasonable steps to obtain proper market value, the difference of £38,000 between Mr Morison's opinion as to what the Pattingham Land was worth on 27 August 2019 and the price actually obtained does not lead me to conclude that the Receivers sold the Pattingham Land at an undervalue and therefore that LSC allowed the PAttingham Land to be sold at an undervalue.
The interest payable under the General Terms was compound interest of 3% per month.
Summary of factual findings
(a) I am not satisfied that Mr Morley or Mr Turner provided any reassurance to Mr Kumar that the date for repayment of the Pattingham Loans would be extended beyond 12 months;
(b) LSC did refuse a drawdown request made by Mr Kumar on 14 August 2019 which was supported by a Monitoring Surveyors Report of 15 August 2018. LSC was not contractually entitled to refuse the drawdown request.
(c) LSC appointed Receivers over the Pattingham Land on 31 January 2019 after demanding payment of the Pattingham Loans on 29 January 2019. LSC were entitled to do so, in accordance with the Pattingham Loan Agreements;
(d) Mr Kumar has not however proved that the Pattingham Land was sold at an undervalue and therefore he has not proved that LSC allowed it to be sold at an undervalue; and
(e) in the event that a sum of money which fell due for payment under the Pattingham Loan Agreements was not paid on its due date, interest was chargeable under clause 6.4 of the General Terms at 3% per month, compounded.
Unfair Relationship – The Law
"Section 140A is deliberately framed in wide terms with very little in the way of guidance about the criteria for its application, such as is to be found in other provisions of the Act conferring discretionary powers on the courts. It is not possible to state a precise or universal test for its application, which must depend on the court's judgment of all the relevant facts. Some general points may, however, be made. First, what must be unfair is the relationship between the debtor and the creditor. In a case like the present one, where the terms themselves are not intrinsically unfair, this will often be because the relationship is so one-sided as substantially to limit the debtor's ability to choose. Secondly, although the court is concerned with hardship to the debtor, subsection 140A(2) envisages that matters relating to the creditor or the debtor may also be relevant. There may be features of the transaction which operate harshly against the debtor but it does not necessarily follow that the relationship is unfair. These features may be required in order to protect what the court regards as a legitimate interest of the creditor. Thirdly, the alleged unfairness must arise from one of the three categories of cause listed at sub paras (a) to (c). Fourthly, the great majority of relationships between commercial lenders and private borrowers are probably characterised by large differences of financial knowledge and expertise. It is an inherently unequal relationship. But it cannot have been Parliament's intention that the generality of such relationships should be liable to be reopened for that reason alone."
"(1) In relation to the fairness of the terms themselves:
a. whether the term is commonplace and/or in the nature of the product in question;
b. whether there are sound commercial reasons for the term;
c. whether it represents a legitimate and proportionate attempt by the creditor to protect its position;
d. to the extent that a term is solely for the benefit of the lender, whether it exists to protect him from a risk which the debtor does not face;
e. the scale of the lending and whether it was commercial or quasi-commercial in nature (a court is likely to be slower to find unfairness in high value lending arrangements between commercial parties than in credit agreements affecting consumers); and
f. the strength (or otherwise) of the debtors bargaining position;
g. whether the terms have been individually negotiated or are pro forma terms and, if so, whether they have been presented on a "take it or leave it" basis;
(2) In relation to the creditor's conduct before and at the time of formation:
a. whether the creditor applied any pressure on the borrowers to execute the agreement (if an agreement has been entered into with a sense of urgency it will be relevant to consider to what extent responsibility for this lay with the debtor, as distinct from the creditor);
b. whether the creditor understood and had reasonable grounds to believe that the borrower had experience of the relevant arrangements and had available to him the advice of solicitors;
c. whether the creditor had any reason to think that the debtor had not read or understood the terms; and
d. whether the debtor demurred at the time of formation over the terms he now suggests are unfair (this point has particular force if he did complain over other terms.
(3) In relation to the creditor's conduct following formation and leading up to enforcement:
a. whether any demand was prompted by an "improper motive" or was the consequence of an "arbitrary decision";
b. whether the creditor has shown patience and, before leaping to enforcement, has taken steps in the hope of reaching some form of accommodation (for example by attending meetings, engaging in correspondence and/or inviting proposals); and
c. whether the debtor has resisted attempts at accommodation by raising unfounded claims against the creditor.
"In the case of the two provisions that are at issue here by virtue of the master's order, it seems to me that individually and particularly together they impose a high charge at a high rate for the use of this facility but it is a rate that is clear on the face of the documents. It cannot be said to be buried in small print. It is there to be seen on the face of the documents in very legible print and something that can be clearly evaluated by somebody entering into those documents. In the present case, the defendants were legally advised. There is a separate certificate of a solicitor to the effect that he has advised them upon the contents of the document they were signing. Mr Dean is himself a lawyer, a barrister in private practice although not in the civil field. He and his wife are clearly intelligent consumers and able both to read and understand the documents themselves and to absorb the effect of the advice that they were given. They, therefore, must be taken to have known the bargain that they have made, and it seems to me they cannot say, and have not sought to say, that they were in any way misled by the documentation or did not understand what they were signing up for. The rate of interest, whether one adds the facility fee to it or not, is high. It is not, however, it seems to me, even in combination so high that it would lead the court to the conclusion that the relationship between the two parties to such an agreement was unfair even if the consumer was fully aware of all the terms he was entering into. There may, of course, be such cases but it seems to me that they would require a very much higher interest rate than even the combination of these two amounts gives rise to in this case. What the defendants signed up to was a stiff commercial bargain no doubt but it was not, in my judgment, an unfair one, and the relationship it created was not unfair by virtue of those terms."
"55. These sorts of considerations – the fact that the rate was clear and not buried in small print, that the borrowers knew what they were doing and were legally advised, that they were intelligent consumers and not misled – seem to me to be precisely the sort of considerations which were likely among other things to be relevant to the assessment of whether a relationship is unfair by virtue of a particular term and to have foreshadowed in advance, as it were the list of matters which Lord Sumption specifically refers to at [17] of Plevin:
"… the characteristics of the borrower, her sophistication or vulnerability, the facts which she could reasonably be expected to know or assume, the range of choices available to her, and the degree to which the creditor was and should have been aware of these matters."
56. In this case too, the judge found as facts – and it has not been suggested that he was wrong to do so – not only that the defendant was legally advised … but also that ….:
"She appears to know her own mind and is certainly not naïve when it comes to lending and mortgages, albeit that she may not have taken out a bridging loan before these two bridging loans. She knew that they were short term loans which had to be repaid."
And, … he found that the defendant told her solicitor that she was a businesswoman, and that although he explained it was a bridging loan and was risky "she was very keen to get the loan"; that she had significant property assets; and that "on her own evidence" … "she knew that the interest rate and other charges were high" and she "was experienced in mortgaging properties to raise funds and appears to have had some knowledge of the lending industry, changing mortgage providers for a better interest rate. She has a number of properties and was certainly not naïve or unsophisticated.
57. In those circumstances, it does seem to me that even if – which is not in fact clear from the judgment – HHJ Wulwik was looking to the decision of HHJ Cooke in Chubb v Dean as providing support for his conclusion that the 3% rate was not penal or unfair, it was not in the circumstances of this case impossible for him to find some support for his conclusion in a case which in certain respects was analogous…."
"Again there are some significant differences between that case and this. The borrowers in that case were said to be clearly intelligent, they were legally advised and Mr Dean was a barrister, albeit practising in a different area of law. The rate was the contractual rate and it was not "hidden away in the small print". The borrowers were fully aware of the bargain they had made, and that appears to have been an important issue. At [26] HHJ David Cooke referred to the rate of 1.85% per month, or 3.1% when combined with a facility fee on a short term bridging loan as "high". It was a "stiff commercial bargain" but, where the parties knew the bargain they were making, it was not unfair. It would require a "very much higher interest rate" for him to reach that conclusion. The rates being considered in that case were, however, very much lower than the rates being considered here."
and stated at paragraph 198:
"Given that I do not intend working through the issue of relief in the individual cases, it may assist if I summarise the factors that I have found relevant to unfairness when considering the interest rate (and any other charges).
(i) First there is the absolute level of the rate. I do regard 29% per month as very high. I appreciate that this is a high risk market for lenders, and the overall return has to justify the overall risk of lending. But that is not an answer in the individual case.
(ii) Secondly the relative rate. I agree with Ms Bala that the court should look at the market rate. This is to include charges so that the real costs rather than the headline interest rate is considered.
(iii) Thirdly, where the borrower was "fully aware" of the rate. No HCST borrower is going to have the benefit of legal advice, but HHJ Cooke's approach in Chubb reflects an important point. A rate which is high may not lead to an unfair relationship if the borrower knows or ought to know the bargain they are making, but the position may be different if they do not. Here it is relevant to look at how the rates are presented to the borrower in the course of the application process. The Defendant does quite a good job. The use of the tick box without the need to scroll down and the fact that none of the claimants reads the terms is a worry. But the overall cost of this borrowing is made plain.
(iv) Fourthly the potential for the borrower to suffer harm, particularly when that is something which was or ought to be known by the lender. Higher rates are likely to create a greater risk of harm for those who are marginally eligible. That in turn will affect the fairness of the relationship.
That is not an exhaustive list, and there may be other matters which arise in individual cases. The Claimants do not suggest that any unfairness arises from any of the other terms."
(a) it is the relationship between the lender and the borrower which must be unfair;
(b) although the court is looking at the hardship caused to the debtor, it will also take into account factors affecting the creditor;
(c) the unfair relationship must arise from one or more of the three categories mentioned in Section 140A (1) (a) – (c) namely: (i) the terms of the loan agreement; (ii) the way in which the creditor exercises their rights under the loan agreement; or (iii) any other thing done or not done by the creditor before or after the loan was entered into;
(d) Hamblin J (as he then was) in Deutsche Bank (Suisse) sets out a number of matters, by reference to those three categories that he considered may be relevant to deciding whether the relationship is unfair; and
(e) the fact that the creditor is likely to have greater financial knowledge and expertise than the debtor does not of itself make the relationship unfair.
(a) is the interest rate charged clear on the face of the loan documents;
(b) did the debtor obtain legal advice before entering into the loan agreement;
(c) the sophistication of the debtor and in particular whether they should be taken to understand the terms relating to interest contained in the loan agreement;
(d) was the rate of interest so high that it was unfair, even if the debtor was aware of and understood its terms; and
(e) the court may look at the market rate for similar loans.
(a) LSC refused a drawdown request made by Mr Kumar on 14 August 2019 which was supported by a Monitoring Surveyors Report of 15 August 2018. LSC have not shown why they were contractually entitled to refuse that drawdown request;
(b) LSC appointed Receivers over the Pattingham Land on 31 January 2019 after demanding payment of the Pattingham Loans on 29 January 2019. LSC were entitled to do so, in accordance with the Pattingham Loan Agreements; and
(c) in the event that a sum of money which fell due for payment under the Pattingham Loan Agreements was not paid on its due date, interest was chargeable under clause 6.4 of the General Terms at 3% per month, compounded.
LSC refusing to allow the drawdown request made on 14 August 2018
The appointment of Receivers to take possession of and sell the Pattingham Land
a. whether any demand was prompted by an "improper motive" or was the consequence of an "arbitrary decision";
b. whether the creditor has shown patience and, before leaping to enforcement, has taken steps in the hope of reaching some form of accommodation (for example by attending meetings, engaging in correspondence and/or inviting proposals); and
c. whether the debtor has resisted attempts at accommodation by raising unfounded claims against the creditor.
(a) 11 August 2018, Mr Kumar confirmed by email that he had put the Pattingham Land up for sale;
(b) on 17 August 2018 Mr Kumar's drawdown request of 14 August 2018 was refused because (I have found) of the failure of ADL to repay the loans made to it in relation to 230/232 Lichfield Rd and I have found that that refusal amounts to an unfair relationship between Mr Kumar and LSC);
(c) on 30 October 2018, Mr Kumar sent an email to Mr Turner forwarding to him an offer to refinance the Pattingham Loans from Bridging Loans Limited and an email from Mr Kumar's broker confirming that the refinance should be completed before the end of November 2018, however the refinance did not complete.
(a) Mr Kumar had, according to his e mail of 11 August 2018, been attempting to sell the Pattingham Land himself, he provided no evidence that he had achieved any success in doing so;
(b) it appears that Mr Kumar was, broadly contemporaneously with seeking a purchaser for the Pattingham Land, also seeking to refinance the Pattingham Loans, he obtained an offer of refinance but that offer did not proceed;
(c) by the time that LSC issued its demand and proceeded to appoint Receivers, Mr Kumar had been attempting to both sell the Pattingham Land and refinance the Pattingham Loans for several months but without success. There is no evidence that LSC was unwilling to accept a sale of the Pattingham Land or a refinance that repaid the Pattingham Loans;
(d) the Receivers gave Mr Kumar 3 months from the date of LSC's demand to refinance the Pattingham Loans and thereafter withdrew the Pattingham Land from auction, at least on one occasion, to allow Mr Kumar time to fund a purchase of the Pattingham Land; and
(e) I am satisfied that Mr Kumar was allowed a fair opportunity, taking into account the time he had both before and after demand and the appointment of Receivers to repay his Pattingham Loan, but he was unable, for whatever reasons to do so, and that, in those circumstances, the making of demand and appointment of Receivers in January 2019 did not give rise to an unfair relationship between Mr Kumar and LSC.
The rate of interest charged
(a) I accept that, looking at the Pattingham Loan Agreements (the Specific Terms and the General Terms) alone that it is difficult to determine if default interest is payable in addition to or only instead of the interest rate of 1.2% per month set out in the Specific Terms and defined as "the Interest Rate". As I have found however that default, interest, if it applies, applies in substitution for the standard rate of interest of 1.2% per month and not in addition to, I do not consider that that uncertainty gives rise to an unfair relationship, particularly when, in the case of Mr Kumar, he knew what rate of interest was charged when an LSC loan was not paid on time (see (b) below);
(b) as noted, the offer letter dated 28 October 2017, which Mr Kumar signed, does make it clear that default interest at 3% per month will be charged if the loan is not paid within the Loan Period, or the loan is in default;
(c) in paragraph 103 (c)(iv) above I refer to three loans advance by LSC to Mr Kumar and Mrs Kumari acting in partnership to develop land at Church Green. I noted that LSC had charged Mr Kumar/Mrs Kumari default interest of 3% per month for the one month and eight days which Mr Kumar/Mrs Kumari were late in repaying those loans. This means that even before signing the formal offer letter for the Pattingham Loans, Mr Kumar was aware both of the rate of default interest and when it was charged (and had personal experience of it being charged);
(d) Murria & Co acted for Mr Kumar in connection with completion of the Pattingham Loan Agreements and were at least available to advise Mr Kumar upon the terms of that agreement;
(e) although I would not describe Mr Kumar as a very experienced property developer, he had, before entering into the Pattingham Loan Agreements entered into eight agreements with LSC on behalf of ADL/ACL, or in partnership with Mrs Kumari and he was therefore accustomed, not only borrowing money on bridging finance terms to fund developments, but more particularly with borrowing money from LSC on its terms; and
(f) I have already explained that the default interest chargeable of 3% per month would not, of itself, make the relationship between LSC and the borrower unfair, if the borrower was aware of the rate and circumstances in which it would be charged. I am satisfied, in the case of Mr Kumar, that those conditions are met and that therefore the default interest of 3% per month does not give rise to an unfair relationship between LSC and Mr Kumar.
ISSUE 8 - To what relief are the parties entitled in relation to the Pattingham Loans if the relationship is unfair?
"(1) An order under this section in connection with a credit agreement may do one or more of the following—
(a) require the creditor, or any associate or former associate of his, to repay (in whole or in part) any sum paid by the debtor or by a surety by virtue of the agreement or any related agreement (whether paid to the creditor, the associate or the former associate or to any other person);
(b) require the creditor, or any associate or former associate of his, to do or not to do (or to cease doing) anything specified in the order in connection with the agreement or any related agreement;
(c) reduce or discharge any sum payable by the debtor or by a surety by virtue of the agreement or any related agreement;
(d) direct the return to a surety of any property provided by him for the purposes of a security;
(e) otherwise set aside (in whole or in part) any duty imposed on the debtor or on a surety by virtue of the agreement or any related agreement;
(f) alter the terms of the agreement or of any related agreement;
(g) direct accounts to be taken, or (in Scotland) an accounting to be made, between any persons."
(a) in the Monitoring Surveyor's Report, ASC had to certify that the value of the works carried out since the last inspection matched or exceeded the value of the drawdown request;
(b) there is the evidence of Mr Turner and the acceptance by Mr Kumar that a large amount of money was owed to the groundworks contractor and the groundworks contractor appears to have been unwilling to carry out further work without getting paid;
(c) Mr Kumar appears to have been able unable to fund the progress of works on the Pattingham Land other than from drawdowns provided by LSC; and
(d) so the evidence, sparce as it is supports the conclusion that very little progress would have been made towards completion of the Pattingham development if LSC had released the £13,500.
ISSUE 10 - What amounts are due to LSC under the Pattingham Loan Agreements and the guarantees in relation to the indebtedness of ADL and/or ACL, subject to any defences?
The Commitment Point
Introduction
(a) I will set out what Mr Say says about the Commitment Point;
(b) I will set out Mr Pomfret's response to the Commitment Point;
(c) I will decide whether Mr Kumar/Mrs Kumari's existing pleadings entitle them to raise the Commitment Point;
(d) if I decide that Mr Kumar/Mrs Kumari are not entitled to pursue the Commitment Point, based upon their existing pleadings, I will decide whether to grant Mr Kumar/Mrs Kumari permission to amend their pleadings to enable them to do so; and
(e) if I find that Mr Kumar/Mrs Kumari are entitled to pursue the Commitment Point, either: (i) under their existing pleadings; or (ii) by amending their pleadings I will decide whether or not Mr Say's argument succeeds.
Mr Say's submissions on the Commitment point
(a) Clause 2.3 of the ADL Guarantees provides that: "The maximum liability of the Guarantor under this clause shall not exceed the amount of the "Commitment" under the Facility Agreement plus interest, costs and expenses and other sums due under the remaining clauses of this Guarantee";
(b) the ADL Guarantees define the Facility Agreement as: "the facility agreement made between the Borrower and the Lender dated on or around the date of this guarantee";
(c) the Facility Agreement referred to in the ADL Guarantees is the agreement for Loan 440 because the ADL Guarantees are dated 6 April 2017 and the Loan Agreement for Loan 440 is also dated 6 April 2017;
(d) the General Terms incorporated into the Loan Agreement for Loan 440 define the "Commitment" as "the maximum aggregate amount of all monies available to the Borrower to be drawn down under the agreement as specified in the specific terms to the extent not cancelled, reduced or transferred by the lender under the agreement";
(e) the Specific Terms for Loan 440 define "commitment" as "£1,342,500 (One Million Three Hundred and Forty Thousand Five Hundred Pounds Stirling";
(f) the maximum liability under the ADL Guarantees at the date of execution of those guarantees was therefore £1,342,500;
(g) thereafter Loans 466, 505 and 517 were made to ADL and each of the Loan Agreements for those loans contained a declaration signed by Mr Kumar and Mrs Kumari that: "The guarantors each hereby confirm and acknowledge the terms of this agreement and that their respective liabilities and obligations under and pursuant to their guarantees extend to this agreement. Each guarantor further agrees and acknowledges that the lender has given each of them the opportunity to seek independent legal advice as to their respective liabilities and obligations under and pursuant to this agreement and their respective guarantees and that acknowledge the same of their own free will." (I will refer to these statements collectively as "the Confirmations and Acknowledgments");
(h) the effect of the Confirmations and Acknowledgments at the end of Loans 466, 505 and 517 was to extend the definition of "Commitment" to include the "Commitment" as defined in the Facility Agreements for each of those loans. In aggregate the cumulative amount of the Commitments under Loans 440 (£1,342,500), 466 (£914,000), 505 (£140,500) and 517 (£104,500) is £2,501,500; and
(i) although the ADL Guarantees provide that the guarantor is also liable for "costs, expenses and any other sums due under the remaining clauses of this Guarantee", LSC has not claimed any such sum and so at the date of the demands issued to Mr Kumar/Mrs Kumari (5 August 2020) only £2,501,500 was payable.
Mr Pomfret's submissions on the Commitment Point
(a) clause 2.3 of the ADL Guarantees properly interpreted provides that the maximum liability under those guarantees is the Commitments, plus interest, costs and expenses under the various ADL Facility Agreements and any other sums due under the remaining clauses of the ADL Guarantees;
(b) the ADL Guarantees contain a guarantee and a separate indemnity and clause 4.1 of the ADL Guarantees provides for the guarantor to pay LSC 3% per month interest from the date of demand or if earlier the date on which the relevant damage, losses, costs or expenses arose (my underlining added). The underlined words, says Mr Pomfret, show, bearing in mind that the ADL Guarantees operate as a guarantee and an indemnity, that interest runs under the ADL Guarantees from the date of default by ADL. This, says Mr Pomfret, is inconsistent with clause 2.3 limiting Mr Kumar/Mrs Kumari's liability under the ADL Guarantees to the Commitment, without interest; and
(c) clause 4.3 of the ADL Guarantees operates to ensure that interest charged to the guarantor is not charged to the guarantor both under the ADL Facility Agreements and the ADL Guarantees, to prevent double recovery, which Mr Pomfret suggests is also inconsistent with Mr Kumar/Mrs Kumari's liability under the ADL Guarantees being limited to the Commitment, without interest.
Have Mr Kumar/Mrs Kumari sufficiently pleaded the Commitment Point?
Should I grant permission to Mr Kumar/Mrs Kumari to amend their pleadings?
"The Claimant [or Third Party as the case may be] denies that the Defendant is entitled to the sums claimed pursuant to the statements of account appended to the Re-Amended Defence and Counterclaim, as the amount claimed in respect of the ADL guarantee exceeds the amount that the Defendant is entitled to claim pursuant to that guarantee. It is the Claimant's [or Third Party's] case that the amount that can be claimed under the ADL guarantee is capped by Clause 2.3 of the same to the amount of the commitment (i.e. the loan amounts). The maximum that could be demanded under the ADL guarantee at the date of that demand on 5 August 2020 was £2,501,500."
a. the amount involved is significant;
b. the Commitment Point is important, because the question of what limit (if any) is imposed by Clause 2.3 of LSC's standard form guarantee upon LSC recovering against a guarantor who has signed that standard form guarantee may be important to other proceedings involving the same standard form guarantee;
c. the case as a whole has involved a significant number of factual issues and the Commitment Point raised by the amendments does not add significantly to the complexity of the case overall;
d. the court's resources have already been allocated to deal with the Commitment Point, by virtue of the direction I made on 12 May for counsel to file and serve written submissions and in any event the financial value of the Commitment Point justifies the allocation of those resources;
e. no significant expense will be incurred in dealing with the Commitment Point.
f. LSC is not prejudiced by the late amendment as it involves a short point of pure law. No evidence is required;
g. the point was raised in Mr Say's skeleton argument on 4th April 2023, which was sufficient time for LSC to deal with it at trial;
h. the effect of denying permission to amend, if the point is well founded, is that LSC's claim under the ADL Guarantees will be grossly inflated, unjustly enriching LSC; and.
i. any prejudice can be cured by a costs order.
" (a) whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted;
(b) where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission;
(c) a very late amendment is one made when the trial date has been fixed and where permitting the amendment would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept;
(d) lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done;
(e) gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation;
(f) it is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay;
(g) a much stricter view is taken nowadays of non-compliance with the CPR and directions of the court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately and that the courts enable them to do so."
(a) the Commitment Point Amendment raises an issue of construction of the contractual documents entered into between the parties, there is no disagreement about which those documents are or what they say;
(b) evidence as to the subjective intention of the parties is not permissible as an aid to interpretation of contractual documents (see Arnold v Britton at paragraph 169 above) and whilst the factual background known to the parties at the date of execution of the relevant document would be admissible as an aid to their interpretation, Mr Pomfret has not suggested that there would have been any scope for relevant evidence of the background circumstances known to LSC/Mr and Mrs Kumar to have been produced as an aid to interpretation of the Commitment Point, had it been pleaded well before trial;
(c) Mr Pomfret has had an opportunity to consider the written submissions of Mr Say on the Commitment Point before making his own written submissions in response; and
(d) Mr Pomfret does not suggest in his written submissions that LSC has suffered or would suffer any prejudice in terms of responding to the Commitment Point, if I allow the Commitment Point Amendment, compared to the position LSC would have been in, if the Commitment Point had been pleaded long before the trial took place, he merely says that the application to amend is made far too late.
(a) Mr Pomfret is right that Mr Kumar/Mrs Kumari's pleadings are extensive and have been amended on a number of occasions. There is no good excuse for their delay in seeking permission to include the Commitment Point Amendment in their pleadings. The reason for the late application to amend appears to be that the point occurred to counsel (Mr Say) when he was preparing his skeleton argument. That is not a good reason;
(b) enforcing compliance with rules, practice directions and orders militates against granting permission, because if permission is granted too readily, then parties are not discouraged from failing to comply;
(c) some additional costs have been incurred by both parties in dealing with the Commitment Point and the application for permission to amend Mr Kumar/Mrs Kumari's pleadings to include the Commitment Point Amendment, in the form of the written submissions from counsel, and some additional court resources have been utilised in dealing with the Commitment Point/application to amend;
(d) I have found that there has been no prejudice to LSC in terms of putting forward its case in response to the Commitment Point, for the reasons already explained; and
(e) having considered the Commitment Point below, I have come to the conclusion (see paragraphs 271 – 291) that, if I grant permission for Mr Kumar/Mrs Kumari to make the Commitment Point Amendment, then this partial defence to LSC's claim against them under the ADL Guarantees would succeed reducing their liability under those guarantees, as at the date of demand (5 August 2020) by £3,066,895.61, from £5,568,395.61 to £2,501,500 and with a consequent reduction in interest charges applied by LSC thereafter.
Does the Commitment Point succeed (on the basis that I have given permission for the Commitment Point Amendment)?
Liability for Loan 440
(a) I am satisfied that the "Facility Agreement" is the facility agreement for Loan 440. I am satisfied of this because: (i) the definition of Facility Agreement in the ADL Guarantees is "the facility agreement" in the singular indicating a single facility agreement, rather than multiple facility agreements; and (ii) the facility agreement for Loan 440 is dated 6 April 2017, the same date as the ADL Guarantees, whereas Loans 466, 505 and 517 are dated 3 August 2017, 29 November 2017 and 9 January 2018 respectively. Only the facility agreement for Loan 440 therefore answers the description in the definition of Facility Agreement in the ADL Guarantees of "the facility agreement between the Borrower and the Lender, dated on or around the date of this guarantee";
(b) the Facility Agreement for Loan 440 consists of the Specific Terms and the General Terms. The General Terms define the Commitment as "…the maximum aggregate amount of all monies available to the Borrower to be drawn down under the Agreement as specified in the Specific Terms to the extent not cancelled, reduced or transferred by the Lender under the agreement. " The Specific Terms define the "Commitment" as "….£1,342,500….". I am satisfied that the "Commitment" under Loan 440 is £1,342,500.
283. Mr Pomfret refers to clause 2.2 of the ADL Guarantees which provides a separate obligation for Mr Kumar/Mrs Kumari to indemnify LSC against "all and any losses, costs, claims, liabilities, damages, demands and expenses suffered or incurred by the Lender arising out of, or in connection with, the Guaranteed Obligations not being recoverable for any reason or any failure of the Borrower to perform or discharge any of its obligations or liabilities in respect of the Guaranteed Obligations". Mr Pomfret says that clause 4.1 provides for the Guarantor to pay interest at 3% per month from the date of demand under the guarantee or "…if earlier the date on which the relevant damages, losses, costs or expenses arose in respect of which demand is made…". Mr Pomfret says that LSC incurred loss as a result of ADL failing to pay sums falling due under the ADL Facility Agreements, that loss is recoverable under clause 2.2 and that, in accordance with clause 4.1 interest at 3% per month is payable from the date of such loss. These clauses, suggests Mr Pomfret, put the meaning of clause 2.3 beyond doubt, because they show that interest is intended to be charged to the guarantor from the date on which LSC incurs a loss and not only from the date of demand.
(a) although not an aid to construction I note that, if I had found that the meaning of clause 2.3 was ambiguous, such ambiguity should be resolved in favour of Mr Kumar/Mrs Kumari;
(b) I have no evidence before me of any facts or circumstances known to the parties when the ADL Guarantees were executed, relevant to the proper construction of clause 2.3 of the ADL Guarantees;
(c) commercial common sense does not dictate that the limit which may be demanded under the ADL Guarantees should be anything other than £1,342,500 (plus interest, costs, expenses and any other sums due under the ADL Guarantees);
(d) LSC has not claimed that any costs or interest or other sums are due to it under the ADL Guarantees, prior to demand; and
(e) whilst LSC may have intended that the ADL Guarantees should cover interest accruing on the sum of £1,342,500 advanced under Loan 440 from the date of the advance of the funds, up to the date of demand, as Lord Neuberger made clear in Arnold v Britton, evidence of the subjective intention of the parties must be disregarded.
Liability for Loans 466, 505 and 517
(a) the Confirmation and Acknowledgements at the end of the Facility Agreements for Loans 466, 505 and 517, merely state, in general terms, that " The Guarantors each hereby confirm and acknowledge the terms of this agreement and that their respective liabilities and obligations under and pursuant to their guarantees extend to this Agreement.";
(b) The "respective liabilities and obligations" of Mr Kumar and Mrs Kumari under the ADL Guarantees is defined as the "Guaranteed Obligations" which, at the date of execution of the ADL Guarantees was limited to "the Commitment" being the amount advanced by LSC to ADL under Loan 440 only (see paragraph 2 above). It is difficult to see how the parties can have objectively intended that the Confirmation and Acknowledgements of Mr Kumar and Mrs Kumari that their respective liabilities and obligations under the ADL Guarantees, which I have found are limited, by clause 2.3, to the amount of advance in relation to Loan 440, should not be so limited in relation to Loans 468, 505 and 517. The "Commitment" as defined in the Facility Agreements for Loans 466, 505 and 517 is: 466 - £914,000; 505 - £140,500; and 517 - £104,500);
(c) in so far as there is ambiguity about whether Mr Kumar/Mrs Kumari's liability under the ADL Guarantees was intended to be limited to the amount of the Commitment specified in each of the Facility Agreements containing the Confirmation and Acknowledgements, that ambiguity should be resolved in favour of Mr Kumar/Mrs Kumari, by limiting their liability to the Commitments under the Facility Agreements for Loans 466, 505 and 517;
(d) I have no evidence before me of any facts or circumstances relevant to the construction of the Confirmation and Acknowledgements when read in conjunction with the terms of the ADL Guarantees;
(e) commercial common sense does not assist me in determining whether the parties intended that the Confirmation and Acknowledgements would be limited to the Commitments under Loans 466, 505 or 517 or not so limited. It would make commercial sense both for the liability of Mr Kumar/Mrs Kumari under the ADL Guarantees to be limited to the Commitments (plus interest, Costs, expenses and any other sums due under the remaining Clauses of the ADL Guarantees") or to encompass all of the liabilities of ADL to LSC under those Facility Agreements; and
(f) as noted for Loan 440, whilst LSC may have intended that the ADL Guarantees should not be limited to the amount of the original advances, I must disregard evidence of LSC's subjective intent.
The remaining points on Issue 10
(a) interest should be charged on the ADL/ACL debts guaranteed by Mr Kumar/Mrs Kumari/Mr Verma, at 1.2% per month compounded from the date of the relevant advances until the date upon which the loans fell due for repayment, in accordance with the contractual terms and thereafter at 3% per month compounded;
(b) Given Mr Pomfret's concession (see paragraph 82 (b) above) no additional debts incurred by ACL/ADL to LSC after the date upon which demand was issued to the guarantors shall be added to those guarantee debts; and
(c) £13,500 is to be deducted from Mr Kumar's Pattingham Loan, as at 15 August 2018, in calculating the amount owing by Mr Kumar under his Pattingham Loan.
ISSUE 15 – Are Mr Kumar, Mrs Kumari and Mr Verma entitled to any relief by reason of their allegation that LSC sold the mortgaged property (Emerald Close) at an undervalue?
ISSUE 16 - In the event that Mr Verma's mortgage in respect of Plot 2 of the Pattingham Land is held to be an RMC and/or Issues (2) and (3) above are established in relation to the Mr Verma's Pattingham Loan, what relief is Mr Verma entitled to?
