JAK Property Jersey Limited v Together Commercial Finance Limited [2025] EWHC 2442 (Ch)

[2025] EWHC 2442 (Ch)

Case No BL-2023-MAN-000072

IN THE HIGH COURT OF JUSTICE

Venue BUSINESS AND PROPERTY COURTS IN MANCHESTER

BUSINESS LIST (ChD)

Venue Manchester Civil Justice Centre

1 Bridge Street West,

Venue Manchester M60 9DJ

Date 26/09/25

Before

HHJ CAWSON KC

SITTING AS A JUDGE OF THE HIGH COURT

Between

JAK PROPERTY JERSEY LIMITEDClaimant

TOGETHER COMMERCIAL FINANCE LIMITEDDefendant

Samuel Hodge (instructed by JMW Solicitors LLP) for Claimant

Jamal Demachkie (instructed by Priority Law Limited) for Defendants

Hearing dates

9-11 September 2025

Approved Judgment

This judgment was handed down remotely at 10.30am on 26 September 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

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Meaning of clause 13 of the Deed of Postponement 21

[1]This case concerns a dispute as to priorities between two lenders, namely the Claimant, JAK Property Jersey Limited (“JAK”), and the Defendant, Together Commercial Finance Limited (“Together”), both of whom lent to Mulbury Homes (Greg Street) Limited (“Mulbury”) and took security in the form of legal charges over land off Simpson Grove, Leigh Road, Boothstown, Salford registered at HM Land Registry with title number MAN 333201 (“the Property”), owned by Mulbury.

[2]More specifically, the dispute concerns the true meaning and effect of clause 13 of a Deed of Postponement dated 28 April 2020 and made between JAK and Together (“the Deed of Postponement”). In the event that I interpret clause 13 of the Deed of Postponement in JAK’s favour, and conclude that the effect thereof is to alter the priority in favour of Together otherwise provided for by the Deed of Postponement in circumstances provided for thereby, the question then arises as to whether Together is entitled to an order that clause 13 be rectified so that the effect thereof is not otherwise to disturb the priorities as provided for by the Deed of Postponement.

[3]As explained below, I consider Together’s interpretation of clause 13 of the Deed of Postponement to be the correct interpretation thereof. It is not, therefore, strictly necessary for me to consider Together’s case in rectification. However, in case I should be wrong on the question of interpretation of clause 13, I have considered Together’s case in rectification and concluded that Together would, in these circumstances, be entitled to an order for rectification.

Rectification 60

[4]Samuel Hodge of Counsel appeared on behalf of JAK, and Jamal Demachkie of Counsel appeared on behalf of Together. I am grateful to them both for their focused and well argued submissions.

Background

[5]By an agreement dated 26 October 2018 and made between Mulbury(1) and JAK

(2) (“the JAK Loan Agreement”), JAK agreed to provide Mulbury with a “secured term loan” of £1,200,000 to purchase the Property.

[6]Relevant terms of the JAK Loan Agreement included the following: i) The definitions in clause 1.1 thereof included: a) “Development Services Agreement”, as meaning “a development services Agreement to be entered into between [Mulbury and JAK] in agreed form in relation to the Property.” b) “Event of Default” as meaning “any event or circumstance listed in clause 11”. c) “Loan” as meaning “the principal aggregate amount of £1,200,000”. ii) Clause 7.1 thereof provided that Mulbury should repay “the Loan” in full:

“(a) in the circumstances outlined in clause 10 of the Development Services Agreement; (b) if there is an Event of Default or a Potential Event of Default; (c) if, by the Longstop Date, the Loan does not fall due for repayment either pursuant to clause 7.1(a) or 7.1(b) (above) then the Loan shall be repayable on the Longstop Date.” iii) Clause 11 thereof set out some twenty specific “Events of Default”

. Clause 11.19 provided that at any time after an Event of Default, JAK might, by notice to Mulbury, amongst other things, declare the Loan to be immediately due and payable.

[7]The intention behind the JAK Loan Agreement was to fund the purchase by Mulbury of the Property on the basis that Mulbury would then borrow further monies from a third party lender to fund the development of the Property such that, following the subsequent sale of developed plots on the Property and after repayment of the monies borrowed for development, JAK would be repaid the money lent to fund the purchase of the Property out of the proceeds thereof, together with a share (£650,000) of the development profit, before Mulbury received any part of the proceeds of sale.

[8]It was in this context that, on 11 February 2019, JAK(1) and Mulbury

(2) entered into the Development Services Agreement. There is an issue between the parties, to which I will return, as to whether the Development Services Agreement is an admissible aid to the interpretation of clause 13 of the Deed of Postponement. Subject to this point the following provisions of the Development Services Agreement are of particular relevance: i) Clause 10 thereof was concerned with the distribution of the “Net Sale Proceeds” arising following the development of the Property with the benefit of the development finance provided by a third party lender. In essence, it provided that Mulbury should hold the “Sales Proceeds” on trust to apply the same, after payment of the sums provided for by clauses 10.2 and 10.3, “in the following priority order”, namely to pay all sums due and payable pursuant to or in connection with the development finance “obtained in accordance with clause 19”, and thereafter to pay all sums due and payable to JAK pursuant to the JAK Loan Agreement and then what was due to JAK in respect of the “Fixed Profit Share” (i.e. a sum of £650,000), before the payment of the balance (if any) to Mulbury. ii) Clause 19 thereof provided, amongst other things, that: a) Pursuant to clause 19.1, Mulbury would:

“as soon as reasonably practicable after the date of this Agreement (but only once all relevant information is available to Mulbury) approach reputable third party funding institutions to seek offers of finance for the Development "Development" was defined by clause 1 of the Development Services Agreement as meaning: "the construction on the Property of 20 residential units and necessary and ancillary facilities and infrastructure including access roads and installation of water drainage sewage gas and electricity telecommunications service infrastructure." and use all reasonable endeavours to secure the same in the best terms reasonably obtainable in accordance with this clause 19.” b) Pursuant to clause 19.3, JAK would: “use reasonable endeavours to cooperate with Mulbury to procure agreement of a funding offer for the funding of the construction of the Development as soon as reasonably practicable”. c) Pursuant to clause 19.4, JAK agreed that: “a charge with first priority over the Property will be offered as unencumbered security to assist Mulbury in obtaining the most preferential terms possible for the provision of development finance for the Development, provided that JAK’s charge shall be subordinated to such security, but shall otherwise remain in place.”

[9]On the same day, 11 February 2019, Mulbury executed a charge over the Property in favour of JAK (“the JAK Charge”). Thereunder: i) By clause 1, Mulbury agreed to pay to JAK on demand all of the “Owner’s Obligations”, where the latter were defined as all of Mulbury’s liabilities to JAK present, future, actual or contingent and whether incurred alone or jointly with another, including interest and expenses as referred to in clauses 1.1 and 1.2. ii) By clause 2, Mulbury, as a continuing security for the payment on demand of the “Owner’s Obligations” and with full title guarantee charged the Property and all its interests therein to JAK.

[10]Mulbury subsequently identified Together as third party provider of finance to fund the development of the Property as provided for by clause 19 of the Development Services Agreement.

[11]On 28 April 2020: i) Together provided Mulbury with a bridging loan of £188,112 (net advance £150,000) under a loan agreement of that date (which had been signed on behalf of Mulbury on 20 April 2020). Mulbury subsequently borrowed further monies from Together. On 3 December 2020, Mulbury and Together entered into a “Further Advance Agreement”, stating that a further advance of £197,000 was being made that day, and recording that a total of approximately £1.75 million had been drawn down to date (“the Together Loan”). It is to be noted that on 17 April 2020, Together had provided written “offers in principle” in respect of a loan advance of £150,000 and a “maximum facility” of £3,050,000. Each such document identified the security to be provided by Mulbury as including a “1st charge” over the Property. ii) Mulbury granted Together a debenture, and also a legal charge over the Property which was registered at HM Land Registry on 7 May 2020 (“the Together Charge”). iii) JAK and Together entered into the Deed of Postponement.

[12]In the lead up to the execution of the Deed of Postponement significant correspondence passed between the parties. For the purposes thereof, Primas Law (“Primas”) acted on behalf of JAK, Priority Law Limited (“Priority”) acted on behalf of Together, and Beyond Corporate acted on behalf of Mulbury. In addition, Elisabeth Williams, the Legal Director of Mulbury sent and received correspondence. In the course thereof, Beyond Corporate acted as, in effect, a post box as between Primas and Priority acting as a conduit for correspondence relating to the Deed of Postponement. It is common ground that this correspondence is not admissible for the purposes of interpreting the Deed of Postponement. I therefore say nothing further about it at this stage, but it will be necessary to return to it in some detail when considering Together’s alternative rectification case.

[13]So far as the terms of the Deed of Postponement are concerned, for the purposes of interpreting clause 13 thereof, the following provisions are of relevance: i) Clauses 1 to 6 identified the Property and defined Mulbury as “the Chargor”, Together as “the First Chargee”, the Together Charge as “the First Charge”, JAK as “the Second Chargee”, and the JAK Charge as “the Second Charge”. ii) Clause 7 defined “the Advance” as being:

“All sums due to, or owing from time to time and in addition interest thereon together with all costs, charges and expenses secured by the First Charge.” iii) Clause 8, headed “POSTPONEMENT”, provided as follows: “8.1 The Second Chargee hereby postpones the Second Charge to the First Charge such that the First Charge will rank in priority to the Second Charge as a continuing security PROVIDED that the amount of the priority hereby conferred shall not exceed the Advance. 8.2 The Second Chargee acknowledges that the amount outstanding under the First Charge may fluctuate from time to time but notwithstanding such fluctuations, it is agreed that the priority of the First Charge shall remain the Advance.” iv) Clause 9, headed “CONSENT”, provided as follows: “9.1 The First Chargee hereby consents to the creation or subsistence of the Second Charge and confirms that the creation or subsistence of the Second Charge does not constitute a default by the Chargor. 9.2 The Second Chargee hereby consents to the creation or subsistence of the First Charge and confirms that the creation or subsistence of the First Charge does not constitute a default by the Chargor. 9.3 The First Chargee and the Second Chargee hereby request the Registrar at Land Registry to make such entries on the Register(s) of Title to the Property so as to record the priorities of the charges referred to herein.” v) Clause 10, headed “ENFORCEMENT”, provided as follows: “10.1 If the First Chargee has become entitled to enforce the First Charge and intends to enforce the First Charge, then the First Chargee shall serve written notice to that effect on the Second Chargee in advance of taking any such enforcement action.” vi) Clause 11, headed “DURATION”, provided as follows: “This deed shall cease to have effect when the Advance has been irrevocably and unconditionally paid and discharged in full.” vii) Clause 12, headed “RESTRICTIONS ON ASSIGNMENTS”, provided as follows: “The First Chargee may not assign any of its rights, or transfer any of its rights or obligations, under this deed, the First Charge or any associated security document without first requiring the assignee or transferee to execute and deliver to the Second Chargee in a deed (in a form satisfactory to the Second Chargee) in which the assignee or transferee agrees to be bound by the terms of this deed.” viii) Clause 13, headed “EXPIRY OF TERM”, provided as follows: “It is hereby agreed and declared between the First Chargee and the Second Chargee that if the term of the loan agreement associated with the Second Charge comes to an end before the term of the loan agreement associated with the First Charge all sums due and payable by the Chargor pursuant to the Second Charge will be paid to the Second Chargee in accordance with the loan agreement associated with the Second Charge notwithstanding the priority of the First Charge provided by this deed.”

[14]In the event, although Mulbury drew down very significant sums from Together for development finance in addition to the £1.2m borrowed from JAK for the purchase of the Property, the development proved unsuccessful, possibly as a consequence of the Covid 19 pandemic.

[15]On 3 August 2022, by a letter of that date from its current Solicitors, JMW Solicitors LLP, JAK identified some six Events of Default under the JAK Loan Agreement, namely under clauses 11.1, 11.8, 11.9 (x2), 11.17 and 11.18 thereof. By this letter, JAK purported to declare the JAK Loan immediately due and payable pursuant to clause 11.19 of the JAK Loan Agreement and stated that the same was immediately due and payable pursuant to clause 7.1.

[16]By a letter dated 21 February 2023, Together made demand on Mulbury in respect of an outstanding balance of £2,206,056.44. The letter stated that if payment was not received by 22 February 2023, then Together would have no alternative other than to consider enforcement of its security, reference being made to commencement of possession proceedings or the appointment of an LPA receiver.

[17]In the event, JAK presented a winding up petition against Mulbury and obtained a winding up order against it. Although the petition has not been produced in evidence, I would note that this would be an unusual step for JAK to have taken had it considered its security to have priority.

[18]On the other hand, Together proceeded to appoint an LPA receiver who subsequently sold the Property at a price considerably below the amount secured as against it, leaving a deficiency, at least for the second ranking secured creditor.

[19]By agreement between the parties, £1.2m has been retained pending the determination of the present proceedings and the contest between the parties as to whether the Deed of Postponement confers priority on JAK or upon Together of their respective charges.

[20]At the hearing on 9-11 September 2025, in addition to submissions from Counsel, I heard oral evidence from Jalaludin Abdullah Kamani (“Mr Kamani”), a director of JAK, Ian James Pickering (“Mr Pickering”), Together’s Director of Development Funding, and Wallace Martin Bury (“Mr Bury”), a former director of Mulbury. It will be necessary to return to consider their evidence in more detail when considering Together’s alternative rectification case. Whilst the witness evidence is of some assistance in explaining the background to the Deed of Postponement, it is of limited assistance, if any, for the purposes of interpreting clause 13 of the Deed of Postponement given that the court is not, for this purpose, concerned with the subjective intentions of the parties or their prior negotiations. Meaning of Clause 13 of the Deed of Postponement The parties’ respective positions

[21]JAK’s case is that clause 13 of the Deed of Postponement is unambiguously clear to the effect that it means that JAK and Together have thereby agreed and declared that in the event of the term of the loan made by JAK to Mulbury coming to an end before the end of the term of the loan made by Together to Mulbury, then all sums due and payable to JAK will be paid to JAK notwithstanding the priority otherwise conferred upon the Together Charge by other provisions within the Deed of Postponement, thus reversing what would otherwise be the effect thereof in those particular circumstances. Thus, so JAK argues, it should, in respect of the monies due under the JAK Loan Agreement, be paid out of the net proceeds of sale of the Property in priority to Together.

[22]It is JAK’s case that one cannot introduce considerations of commercial common sense in order to find ambiguity in the wording of clause 13 that, so it is argued, does not otherwise exist. JAK emphasises the words “will be paid” in the context of “sums due and payable by the Chargor pursuant to the Second Change”, and submits that this unambiguously points to the enforcement of security, and thus priority in respect thereof.

[23]JAK complains that whilst it has pleaded out its case as to the meaning and effect of clause 13 in paragraphs 14 and 15 of its Particulars of Claim, Together has failed properly to engage with those paragraphs in paragraphs 18 and 19 of its Defence, or otherwise in its Defence and Counterclaim. It is said that although it asserts in paragraph 22 of its Counterclaim that clause 13 does not entitle JAK to receive the net proceeds of sale of the Property in priority to Together, it does not plead out a case as to the meaning of clause 13, or explain what, on its case, clause 13 is seeking to achieve. Points to this effect are taken in JAK’s Reply.

[24]Together had sought to explain its case as to the meaning of clause 13 in pre-action correspondence from its Solicitors, Priority, in particular in a letter dated 24 July 2023. In this letter, it was explained that Together’s interpretation of clause 13 was that:

“…this was included as a mechanism whereby JAK could receive funds directly from the Company notwithstanding their position as second charge holder. Whilst there is nothing ostensibly within the Deed that would prevent JAK from receiving funds from the Company to redeem its charge the inclusion of clause 13 within the Deed was intended to set this out for the parties in terms.”

[25]This line of argument was developed by Mr Demachkie, on behalf of Together, in his Skeleton Argument and in the course of submissions. In short, it was his case that clause 13 is an “avoidance of doubt” provision introduced to make clear that notwithstanding the priority provided for by the Deed of Postponement, in the event that JAK called in its loan and determined the JAK Loan Agreement prior to Together terminating the Together Loan, then it would be entitled to receive payment from Mulbury, and the debt due to it from Mulbury would not, itself, be subordinated to the debt due to Together so as to disentitle it from receiving payment before Together had been paid in full.

[26]It was Together’s case, in short, that: i) The wording of clause 13 of the Deed of Postponement is sufficiently ambiguous, in itself and without introducing notions of commercial common sense, to admit of both Together’s interpretation and JAK’s interpretation, and ii) Properly construed, having regard to, amongst other things, commercial common sense, the interpretation contended for by Together must be the right one, and reflect the true and proper meaning of clause 13.

Correct approach to contractual interpretation

[27]Mr Hodge on behalf of JAK, and Mr Demachkie on behalf of Together were each agreed that the law on contractual interpretation was definitively established by the trio of Supreme Court cases on the subject, namely Rainy Sky SA v Kookmin Bank

[2011] UKSC 50

;

[2011] 1 WLR 2900

, Arnold v Britton and others

[2015] UKSC 36

;

[2015] AC 1619

and Wood v Capita Insurance Services Ltd

[2017] UKSC 24

;

[2017] AC 1173

[28]Mr Hodge and Mr Demachkie sought to rely upon a number of specific passages from these cases. However, I propose to adopt the helpful summary of the relevant principles as set out by Birss LJ in Adaptive Spectrum and Signal Alignment Inc v British Telecommunications plc

[2023] EWCA Civ 451

at [18] to [20], where, having referred to these three Supreme Court cases, he went on to say:

“[18] There is no need to review these authorities or any others at any length. The guiding principle is that the task of the court is a unitary exercise involving an iterative process to ascertain the objective meaning of the language used by the parties to express their agreement (Wood v Capita at [10] per Lord Hodge). Or putting the same thing another way, it is a unitary process to ascertain what a reasonable person with all the background knowledge reasonably available to the parties at the time would have understood the parties to have meant (taken from Britvic Plc v Britvic Pensions [2021] EWCA Civ 867 at [29] (per Sir Geoffrey Vos MR). [19] A further aspect is that in this exercise the court can give weight to the implications of rival constructions by reaching a view as to which construction would be more consistent with commercial common sense (Wood v Capita at [11] per Lord Hodge), nevertheless it is important to see that this applies when there actually are rival constructions to consider (see Britvic, particularly Coulson LJ at [57] and Nugee LJ at [70]). It is much harder (one might say impossible) to weigh up implications against the meaning of clear language. That is because, as Lord Hodge also pointed out in [11], there is always the possibility that a party might have accepted something which with hindsight did not serve its interest. [20] A different issue, and not relevant in this case, is a situation in which clear language might be overridden because something has just gone wrong with the language (see Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 and also Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 93D-E about not attributing to the parties an intention which they plainly could not have had).”

[29]As to the use of business or commercial common sense as an aid to interpretation, the high watermark in the three Supreme Court cases that I have referred to is, almost certainly, Rainy Sky SA v Kookmin Bank (supra). However, as Mr Hodge highlighted on behalf of JAK, it is important to note what Lord Clarke JSC, with whom the other members of the Court agreed, said in the latter case in this regard at [21] and [23]: “21. … If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other.” [My emphasis]. … 23. Where the parties have used unambiguous language, the court must apply it. This can be seen from the decision of the Court of Appeal in Co-operative Wholesale Society Ltd v National Westminster Bank plc

[1995] 1 EGLR 97

.” …

[30]Further, as Lord Neuberger JSC made clear in Arnold v Britton (supra) at [19], commercial common sense is not to be invoked retrospectively. As he put it:

“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.”

[31]In support of his contention that the Development Services Agreement is not an admissible aid to construction of clause 13 of the Deed of Postponement, Mr Hodge relies upon what was said by Lord Neuberger JSC in Arnold v Britton (supra) at [21]:

“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. Given that a contract is a bilateral, or synallagmatic, arrangement involving both parties, it cannot be right, when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties.”

[32]Mr Hodge latched onto the final words of this passage, and the observation that it cannot be right to take into account a fact or circumstance known to only one of the parties. Whilst this is a point that I will return to, Mr Hodge’s essential point is that the evidence suggests that Together did not have a copy of the Development Services Agreement until after the terms of the Deed of Postponement had been agreed, and the relevant documentation had been signed, albeit that a copy thereof had been obtained by the time of the formal execution of the Deed of Postponement.

[33]However, I consider this to be an unduly restrictive approach that reads too much into the wording used by Lord Neuberger JSC towards the end of the passage that I have referred to and takes such wording out of context. Earlier in the passage, Lord Neuberger had referred to “facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties”, and this is consistent with earlier authorities such as, for example, the exposition of the relevant principles of the modern law of interpretation by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society

[1998] 1 WLR 896

at 912-913. When considering the admissible background for the purposes of interpretation, he said:

“Subject to the requirement that it should have been reasonably available to the parties and the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.”

[34]As Mr Demachkie points out, extending the admissible background to facts reasonably available to the parties, even if not actually known by them, is consistent with the objective approach to the exercise of contractual interpretation. I consider that the position is accurately reflected in the observation of Hildyard J in Challinor v Juliet Bellis & Co

[2013] EWHC 347 (Ch)

at [277], where he said that the admissible background is limited to the “knowledge a reasonable observer would have expected and believed both contracting parties to have had”.

[35]A further difference of approach as between Mr Hodge on behalf of JAK, on the one hand, and Mr Demachkie on behalf of Together, on the other hand, relates to the approach of the court to surplus language.

[36]Mr Hodge drew my attention to the proposition of the law set out in Lewison on Interpretation of Contracts, 8th Edition, at paragraph 7.24, namely:

“In interpreting a contract all parts of it must be given effect where possible and no part of it should be treated as inoperable or surplus.”

[37]Mr Hodge developed his submissions by reference to Re Strand Music Hall Company Limited (1865) 35 Beav 154, at 159, where Sir John Romilly MR observed that:

“The proper mode of construing any written instrument is to give effect to every part of it, if this be possible, and not to strike out or nullify one clause in a deed, unless it be impossible to reconcile it with another and more express clause in the same deed.”

[38]In addition, Mr Hodge referred to Welsh Water v Corus UK Limited

[2007] EWCA Civ 285

, which involved a consideration as to whether the parties had intended a particular provision to have contractual effect, or whether the relevant provision was merely recording or declaratory of a particular state of affairs. At [13], Moore-Bick LJ observed that what, in his view, pointed most strongly to the conclusion that the parties intended the relevant provision to have contractual effect was the very fact that they chose to include it in the relevant contract.

[39]These authorities are relied upon by Mr Hodge in support of the proposition that the presumption must be that parties to the Deed of Postponement intended clause 13 to have contractual effect, that is in providing that the priority otherwise provided for by the Deed of Postponement should not apply in the particular circumstances of the JAK Loan Agreement determining first, rather than intending that clause 13 should simply record, “for the avoidance of doubt”, that the debt provided for by the JAK Loan Agreement should be payable without any subordination to the Together Loan so far as payment, as opposed to enforcement of security was concerned.

[40]However, Mr Demachkie, on behalf of Together, referred me to Lewison (supra) at 7.28 et seq, where reference is made to other authorities that question the utility of a presumption against surplusage. Thus, for example: i) In Total Transport Corp v Arcadia Petroleum Ltd

[1998] 1 Lloyd’s Rep 351

at 357, Staughton LJ commented that: “It is well established that the presumption against surplusage is of little value in the interpretation of commercial contracts.” ii) In Antigua Power Co Ltd v AG of Antigua and Barbuda [2013] UKPC Lord Neuberger said that: “… On issues of interpretation, arguments based on surplusage are rarely of much force.” iii) In Beaufort Developments (NI) Ltd v Gilbert-Ash (NI) Ltd

[1999] AC 266

at 274B-D, Lord Hoffmann, when discussing a JCT Standard Form, described “the argument from redundancy” as “seldom … entirely secure” because of “a lawyer’s desire to make sure that every conceivable point has been covered”.

[41]Having regard to the authorities as a whole, I consider that I must exercise caution in applying any presumption against surplusage, and whether any such presumption is to be applied must depend upon a careful consideration of the particular provision, its wording and its context within the particular contract. The proper

Meaning of Clause 13 of the Deed of Postponement

[42]I consider that there is sufficient lack of clarity in the wording of clause 13 to mean that the interpretation of the meaning thereof cannot simply be decided on the basis that the wording of clause 13 is so clear and unambiguous in itself that the issue must be decided in JAK’s favour.

[43]I consider that the wording of clause 13 points to there being two possible reasons for it being included as a provision of the Deed of Postponement: i) Firstly, as JAK contends, in order to provide that the general priority in favour of the Together Charge provided for by clause 8 of the Deed of Postponement should not apply in the particular circumstances of the loan granted pursuant to the JAK Loan Agreement being determined before the Together Loan; and ii) Secondly, to make clear, for the avoidance of doubt, that the priority as between charges provided for by clause 8 of the Deed of Postponement should not affect the ability of JAK to recover its debt otherwise than by enforcement of the JAK Charge should the JAK Loan Agreement be determined before the Together Loan. As to this, I consider that I am entitled to have regard to the fact that it is not uncommon in a deed of priority or other document regulating priorities as between creditors to provide not only for security to be subordinated, but also for the underlying debts behind the security to be subordinated such that the junior creditor is not entitled to recover their debt until the senior creditor has been paid in full. One can understand why the parties to the Deed of Postponement might have wanted to make sure that JAK’s debt was not subordinated to that of Together in this sort of way.

[44]So far as the wording of clause 13 is concerned, it might be said that the reference to “the term” of the two loans is somewhat odd given that they were not fixed term loans, but there was no real disagreement between the parties that the reference to the respective “terms” coming to an end, is a reference to the determination of the respective loan agreements, e.g. upon the happening of an “Event of Default” in the case of the JAK Loan.

[45]The language that is really an issue is the wording: “… all sums due and payable by the Chargor pursuant to the Second Charge will be paid to the Second Chargee in accordance with the loan agreement associated with the Second Charge”.

[46]One can see JAK’s point that the reference to sums due and payable “pursuant to the Second Charge” and the reference to “will be paid” might be said to point to the enforcement of the JAK Charge rather than simply recoverability of the debt secured thereby. However, as against this, the reference is to the sums “due and payable” pursuant to the Second Charge, rather than, specifically, to enforcement of the latter as security, and the wording goes on to provide that the relevant sums “will be paid” in accordance with the JAK Loan Agreement, rather than talking specifically in terms of recovery through enforcement of security which is what clause 8 of the Deed of Postponement is all about.

[47]This does, to my mind, provide sufficient ambiguity of language to require a wider exercise than simply a consideration of the wording of clause 13 in order to ascertain its true meaning and effect.

[48]I consider that, if anything, the wording of clause 13 points against an intention to affect the priority as between charges provided for by clause 8 and other provisions of the Deed of Postponement given that it does not talk, in terms, about the enforcement of the relevant charges, but rather in terms of payment of the underlying debt. Surely if it had been intended that clause 13 would reverse the priority as between the two charges in the event of the JAK Loan Agreement determining first, it would have more clearly said so by saying that the JAK Charge might, in those circumstances, be enforced in priority to the Together Charge.

[49]Further, whilst clause 13 does begin by talking in terms of the parties agreeing the matters therein referred to, it also talks in terms of the parties declaring a certain state of affairs, which points more, I consider, to confirming something, for the avoidance of doubt than altering priorities.

[50]I agree with Mr Demachkie that there are other provisions of the Deed of Postponement which point, if anything, against the meaning contended for by JAK. In particular: i) There is nothing in either clause 8 or clause 9 to qualify or caveat those provisions as might have been the case had clause 13 had the effect contended for by JAK. Thus, for example, clause 8 might have been expressed as being “subject to clause 13 below”. ii) If clause 13 has the meaning contended for by JAK, then clause 10.1 might have cut two ways, and to have required JAK to give notice to Together of an intention to enforce, e.g. in a situation where it had gained priority over Together as a result of the JAK Loan Agreement being the first to determine. iii) It might be said that clause 12 is premised on the basis that Together would continue to have priority throughout, rather than being subject to a clause 13 with the meaning contended for by JAK.

[51]When it comes to a consideration of clause 13 within the overall commercial context of the Deed of Postponement, Together’s essential point is that clause 13 would serve to wholly, or at least significantly undermine the commercial purpose of the Deed of Postponement. The overall commercial purpose is that identified in paragraph 7 above as carried into effect by the terms of the Development Services Agreement, and as reflected, in particular, in clause 19 of the latter. In short, with a view to both Mulbury and JAK making a profit out of the development of the Property, development funding was to be attracted by JAK agreeing to subordinate its security over the Property to the security offered to the development funder so that the latter had unencumbered first charge security.

[52]The point is made by Mr Demachkie on behalf of Together that the circumstances in which JAK was entitled to determine the JAK Loan Agreement were extremely wide given the expansive definition of “Event of Default” in clause 11 of the latter. Thus, in a variety of circumstances, JAK could determine the JAK Loan Agreement before Together had taken any steps to determine the loan agreement in respect of the Together Loan, as in fact occurred, and thereby obtain priority in respect of the JAK Charge over the Together Charge. As Mr Demachkie put it, such a race to determine the respective loan agreements in order to secure priority cannot reasonably have been intended viewing the matter objectively.

[53]Mr Hodge argues that the effect of clause 13 is not to undermine the priority as between charges provided for by clause 8, but merely to provide that in certain circumstances JAK might be in a position to secure priority. However, was not the significance as to who had priority most likely to matter in the very situation where Mulbury was in some form of default, and therefore in circumstances in which JAK might have been in a position to win the race to determine the JAK Loan Agreement. In these circumstances, it does seem to me that clause 13 as sought to be interpreted by JAK does fundamentally undermine the value of the priority provided for by the other provisions of the Deed of Postponement.

[54]In the circumstances, I am satisfied that a consideration of the commercial circumstances, and notions of commercial common sense point firmly in favour of the interpretation contended for by Together.

[55]I am satisfied that the terms of the Development Services Agreement do provide part of the admissible background available to the Court in considering the commercial context, and what the parties, objectively considered, meant by the language that they used in clause 13. I reach this conclusion on the basis that the Development Services Agreement was a document reasonably available to both parties to the Deed of Postponement as evidenced by the fact that it was specifically referred to in the JAK Loan Agreement, which was provided to Together and/or its Solicitors at an early stage, and the fact that it was provided on request, as might have been expected, when Priority asked to see it in the circumstances leading up to the execution of the Deed of Postponement, even if Together or Priority did not have it at an earlier stage.

[56]I do not consider it necessary to rely upon the terms of the Development Services Agreement for the purposes of reaching the conclusion that I do as to the proper interpretation of clause 13 in that I consider that the relevant commercial context is otherwise sufficiently identified. However, a consideration of the Development Services Agreement, and clause 19 thereof in particular, does, I consider, reinforce the conclusion that I have reached. I consider this particularly so given that, by clause 19.4 thereof, JAK expressly agreed that a charge with first priority over the Property would be offered “as unencumbered security” to any funding institution to assist Mulbury in obtaining the most preferential terms possible for the provision of development finance.

[57]As to the question of surplusage of wording in clause 13, and whether it is to be presumed that the parties must have intended clause 13 to have some contractual effect rather than being included “for the avoidance of doubt”, I consider this to be one of those cases where presumption against surplusage of wording is of limited if any value given that one can identify an alternative purpose for including clause 13 in the Deed of Postponement than that contended by JAK, as I have identified in paragraph 43 above. To this extent, the wording of clause 13 is not surplus albeit that it has no operative effect as such.

[58]There is one final point that I should mention. It might be said that JAK’s own actions in seeking to wind up Mulbury rather than seeking to enforce the JAK Charge supports Together’s interpretation of clause 13 given that these are, prima facie, the actions of a party that does not believe that it is secured. However, the subsequent actions of the parties are not, generally speaking, admissible as an aid to construction. This makes sense given that the interpretation exercise is an objective one, that is not dependent upon the subjective intentions or understandings of the parties.

[59]In the circumstances, I do not consider that clause 13 falls to be interpreted as contended by JAK. Consequently, I do not consider that JAK is entitled to the declaration that it seeks. Rather, I consider that I should declare that, in consequence of the true interpretation of clause 13 of the Deed of Postponement, the Together Charge has priority over the JAK Charge in relation to its entitlement to be paid out of the proceeds of sale of the Property. Rectification Introduction

[60]My consideration of Together’s counterclaim for rectification proceeds on the basis that, contrary to my determination above, JAK is correct that the language of clause 13 is clear and unambiguous in its favour such that the effect of clause 13 is, unrectified, that as JAK determined the JAK Loan Agreement before Together terminated its loan agreement with Mulbury, JAK is entitled to priority as against Together in respect of the proceeds of sale of the Property.

[61]Together’s case as to rectification is pleaded in paragraph 23 of its Counterclaim, as follows:

“23. In the alternative to paragraph 22, if the meaning and effect of clause 13 of the Deed of Postponement is to somehow give priority to the JAK Charge (which is vehemently denied for the aforesaid reasons), Together asserts that the Deed of Postponement contained an error, which was a common mistake made by the parties to the contract. Together asserts that: a. This error is apparent from the fact that such an interpretation would defeat the object of the Deed of Postponement and would be contrary to the obligation on JAK, within the [Development Services Agreement], to offer the Property as unencumbered security, and to subordinate the JAK Charge behind that of any funding institution. b. This error was not discovered until on or around 17 May 2023 when JAK first put forward its proposed interpretation. c. Both Together and JAK had, since Together was first approached by Mulbury for a loan, intended that the Together Charge (and the right to use any sale proceeds to discharge that charge) would take priority to the JAK Charge. d. This common intention is evinced by virtue of, inter alia, the various discussions between the parties, the aforesaid [Development Services Agreement], and the remaining passages within the Deed of Postponement. e. This intention continued up to, and including, the execution of the Deed of Postponement, and which document (on the assumption that Together’s primary case is not accepted) failed to reflect the parties’ true intention for the reasons aforesaid. f. The executed Deed of Postponement should, for the reasons aforesaid, be rectified accordingly.” a. This error is apparent from the fact that such an interpretation would defeat the object of the Deed of Postponement and would be contrary to the obligation on JAK, within the [Development Services Agreement], to offer the Property as unencumbered security, and to subordinate the JAK Charge behind that of any funding institution. b. This error was not discovered until on or around 17 May 2023 when JAK first put forward its proposed interpretation. c. Both Together and JAK had, since Together was first approached by Mulbury for a loan, intended that the Together Charge (and the right to use any sale proceeds to discharge that charge) would take priority to the JAK Charge. d. This common intention is evinced by virtue of, inter alia, the various discussions between the parties, the aforesaid [Development Services Agreement], and the remaining passages within the Deed of Postponement. e. This intention continued up to, and including, the execution of the Deed of Postponement, and which document (on the assumption that Together’s primary case is not accepted) failed to reflect the parties’ true intention for the reasons aforesaid. f. The executed Deed of Postponement should, for the reasons aforesaid, be rectified accordingly.”

[62]On behalf of JAK, Mr Hodge took a number of pleading points, in particular: i) He complained that there was no plea of “outward expression of accord”, or any plea of the facts or basis upon which it was being said that there was an outward expression of accord; ii) He complained that the plea that the common intention was evinced by “various discussions between the parties, the aforesaid [Development Services Agreement], and the remaining passages within the Deed of Postponement”, was vague and unparticularised; and iii) He complained that there was no plea as to how clause 13 should read as rectified apart from a contention that clause 13 was an “error”, which should be “rectified accordingly”, which Mr Hodge took to mean that it was being asserted that clause 13 as a whole had been included by mistake and should be deleted.

[63]However, at paragraph 38 of his Skeleton Argument for trial, Mr Demachkie set out the wording that he maintained would give effect to the parties’ common intention, as follows:

“13. Expiry of Term It is hereby agreed and declared between the First Chargee and the Second Chargee that if the term of the loan agreement associated with the Second Charge comes to an end before the term of the loan agreement associated with the First Charge all sums due and payable by the Chargor pursuant to the Second Charge will be paidpayable to the Second Chargee in accordance with the loan agreement associated with the Second Charge notwithstanding, but without any alteration to, the priority of the First Charge provided by this deed.”

[64]Over and above these pleading objections, it is JAK’s case that there is simply no cogent evidence to support a case as to common mistake as to the effect of clause 13, or a common intention that it should have an effect different to its proper construction as contended for by JAK, let alone there being any evidence of outward expression of accord in relation thereto.

The legal principles to be applied

[65]There was no real dispute between the parties as to the essential requirements for a claim in rectification based upon common mistake, save perhaps as to how an “outward expression of accord” might be expressed.

[66]The essential requirements were helpfully summarised in Swainland Builders Ltd v Freehold Properties Ltd

[2002] EWCA Civ 560

[2002] 2 EGLR 72

, per Peter Gibson LJ at [33]-[34], as follows:

“33. The party seeking rectification must show that: (1) the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified; (2) there was an outward expression of accord; (3) the intention continued at the time of the execution of the instrument sought to be rectified; (4) by mistake the instrument did not reflect that common intention. 34. I would add the following points derived from the authorities: (1) The standard of proof required if the court is to order rectification is the ordinary standard of the balance of probabilities. "But as the alleged common intention ex hypothesi contradicts the written instrument, convincing proof is required in order to counteract the cogent evidence of the parties' intention displayed by the instrument itself": Thomas Bates and Sons Ltd v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505 at page 521 per Brightman LJ. (2) Whilst it must be shown what was the common intention, the exact form of words in which the common intention is to be expressed is immaterial if in substance and in detail the common intention can be ascertained: Cooperative Insurance Society Ltd v Centremoor Ltd [1983] 2 EGLR 52 at page 54, per Dillon LJ, with whom Kerr and Eveleigh LJJ agreed. (3) The fact that a party intends a particular form of words in the mistaken belief that it is achieving his intention does not prevent the court giving effect to the true common intention: see Centremoor at page 55 A−B and Re Butlin's Settlement Trusts [1976] Ch 251 at page 260 per Brightman J.” (1) the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified; (2) there was an outward expression of accord; (3) the intention continued at the time of the execution of the instrument sought to be rectified; (4) by mistake the instrument did not reflect that common intention. (1) The standard of proof required if the court is to order rectification is the ordinary standard of the balance of probabilities. "But as the alleged common intention ex hypothesi contradicts the written instrument, convincing proof is required in order to counteract the cogent evidence of the parties' intention displayed by the instrument itself": Thomas Bates and Sons Ltd v Wyndham's (Lingerie) Ltd [1981] 1 WLR 505 at page 521 per Brightman LJ. (2) Whilst it must be shown what was the common intention, the exact form of words in which the common intention is to be expressed is immaterial if in substance and in detail the common intention can be ascertained: Cooperative Insurance Society Ltd v Centremoor Ltd [1983] 2 EGLR 52 at page 54, per Dillon LJ, with whom Kerr and Eveleigh LJJ agreed. (3) The fact that a party intends a particular form of words in the mistaken belief that it is achieving his intention does not prevent the court giving effect to the true common intention: see Centremoor at page 55 A−B and Re Butlin's Settlement Trusts [1976] Ch 251 at page 260 per Brightman J.”

[67]These requirements were more recently confirmed by the Court of Appeal in FSHC Group Holdings Limited v GLAS Corpn Ltd

[2020] Ch 365

, where the Court of Appeal considered, but rejected the argument that the common intention was a matter to be determined objectively, i.e. by reference to what an objective observer of the relevant communications passing between the parties would have thought their common intention to be. At [176], Leggatt LJ emphasised that where rectification is sought on the basis that the parties had a common intention in respect of a particular matter which, by mistake, the document did not accurately record, then it was necessary to show by evidence not only that each party to the contract had the same actual subjective intention with regard to the relevant matter, but also that there was an ““outward expression of accord” – meaning that, as a result of a communication between them, the parties understood each other to share that intention.”

[68]Further, as to “outward expression of accord”, at [73] Leggatt LJ referred to the fact that by insisting on the requirement of an outward expression of accord, the Court of Appeal in Joscelyne v Nissen

[1970] 2 QB 86

at 92 had made it clear that it was not sufficient for rectification to prove that each party privately and independently had the same intention as the other with regard to a particular provision of their contract, but rather that they had each had such intention, and that as a result of some communication between them, the parties understood each other to share that intention.

[69]However, Leggatt LJ recognised that the shared understanding might be tacit, provided that there was evidence of communication and actual understanding – see at [80]-[87]. As to the latter, Leggatt LJ, at [84], accepted as correct a statement in Chitty on Contracts, 33rd Edn (2018) at 3-064 that: … “The accord may include understandings that the parties thought so obvious as to go without saying, or that were reached without being spelled out in so many words.” At [87], Leggatt LJ added:

“provided that it is understood that on a claim for rectification the court is concerned with what the parties actually communicated to each other, and not with identifying their presumed intention by means of an officious bystander test, we consider that the formulation in Chitty is sound.”

[70]Other relevant points to note are: i) As stated in Snell’s Equity, 35th Edn at 16-017:

“It must appear that if rectified as claimed the instrument would accurately represent the true agreement of the parties at the time when it was executed. If there is doubt as to this, then rectification should be withheld.” ii) Where one is concerned with a corporate party, then the relevant intention will generally be that of the decision-maker who had the authority to bind the company, and not that of a mere negotiator unless they are the decision-maker. Thus, as explained in Hodge on Rectification, 2nd Edn at 4-112: “… it may be important to identify the person or persons who made the actual decision to enter into the transaction which purports to be recorded in or effectuated by the relevant document, and to consider their state of mind, in order to determine whether the party to the document for whom that person was acting was operating under a mistake at the time when it subscribed to the document.”

See Hawksford Trustees Jersey Ltd v Stella Global UK Ltd [2012] 2 All ER (Comm) 748 at [41].

The witnesses

[71]As a general observation, the representatives of JAK and Together called to give evidence, namely Mr Kamani and Mr Pickering, were somewhat distant from the process of negotiating the terms of the Deed of Postponement, and the detail of the transaction.

[72]So far as Mr Kamani is concerned, as he accepted under cross examination, at the relevant time he was involved in a number of other development projects, as well as being primarily involved in an online retail fashion business called “I Saw It First”. I consider that I must proceed on the basis that Mr Kamani had limited, if any, involvement in the day-to-day affairs of JAK. Further, he accepted that he delegated responsibility for negotiating and instructing Solicitors in relation to the JAK Loan and the subsequent agreements comprising the Development Services Agreement and the Deed of Postponement relating to the obtaining of development finance, to the Finance Director of JAK, Mohamed Marzouk (“Mr Marzouk”). Thus, as was clear from his evidence, he was not concerned with the detail of the relevant transactions. JAK did not call Mr Marzouk, who had also been Finance Director of other companies including that carrying on the I Saw It First business, as a witness because he and Mr Kamani have since terminated their business relationship. Neither did JAK call the Solicitors involved in the negotiations leading to the execution of the Deed of Postponement including, in particular, Katy Williamson of Primas (“Ms Williamson”), the Solicitor primarily involved on JAK’s behalf.

[73]Mr Kamani was asked under cross examination about clause 19.4 of the Development Services Agreement, and he appeared to accept that one might have expected consistency between the terms thereof, with its reference to the party providing development finance having unencumbered security to which the JAK Charge was subordinated, and the Deed of Postponement.

[74]In paragraph 16 of his witness statement, Mr Kamani referred to giving Mr Marzouk:

“… two stipulations which I asked him to deal with in respect of the Deed [of Postponement]. The things I insisted on being in the Deed were that it was okay to give Together first charge over the Property but that this should only be for the duration of JAK’s loan and that he should make sure that the Deed protected us from any defaults by [Mulbury] as far as possible.”

[75]This is evidence is relied upon by Mr Hodge on behalf of JAK in support of the case that in proposing clause 13 as an amendment to the Deed of Postponement, JAK intended that it should have the effect that JAK maintains that it had, namely to provide for the JAK Charge to have priority over the Together Charge in the event that the JAK Loan Agreement was terminated before the agreement relating to the Together Loan. In essence, it is said that Mr Marzouk must have acted on this instruction by ensuring that clause 13 was inserted to regulate the position on the termination of’ the JAK Loan Agreement, thereby making sure that the Deed of Priority did protect JAK: “from any defaults by [Mulbury] as far as possible”.

[76]However, I do not regard paragraph 16 of Mr Kamani’s witness statement to be reliable evidence that I can place significant weight upon. There is no record of what Mr Kamani is alleged to have said to Mr Marzouk. If this had been said by Mr Kamani to Mr Marzouk, then one might have expected it to have been reflected in a file note made by Primas in relation to the relevant transaction, but no such file note has been produced. Further, I consider any such instructions to be inconsistent with what Ms Williamson was saying contemporaneously in correspondence to which I shall return, and in particular an email dated 24 April 2020 (11:19).

[77]Further, given Mr Kamani’s involvement with a number of other transactions and businesses at the relevant time, I consider it inherently unlikely that Mr Kamani has an accurate recollection in relation to the alleged conversation with Mr Marzouk over 5 years ago. I note the observations of Leggatt J in Gestmin SGPS S.A. v Credit Suisse Limited

[2013] EWHC 3560 (Comm)

at [15] – [22] with regard to the unreliability of memory, and his caution to place limited, if any, weight 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.

[78]Although Mr Kamani may, in seeking to reconstruct in his mind what he is likely to have said to Mr Marzouk, have honestly persuaded himself that this is what he must have said to Mr Marzouk with regard to the Deed of Postponement, I do not consider that it can be regarded as reliable evidence particularly given what I consider to be its inconsistency with other evidence in the case.

[79]So far as Mr Pickering is concerned, again, he operated at a high level in relation to the detail of the relevant transaction. The correspondence shows that Robert Goodall, then Together’s Lending Director, and Diane Moore of Together, were more involved in the decision-making processes relating to the specific terms of the Deed of Postponement. They have both left Together and joined a rival lender, and were not called to give evidence, and nor was any representative of Together’s Solicitors, Priority. As the authorities indicate, in ascertaining the intentions of Together, what is relevant are the intentions of the decision-makers.

[80]Robert Goodhall, in his capacity as Lending Director, had overall control of the transaction on behalf of Together. However, Mr Pickering was Head of Development Funding, and in that capacity had some involvement in the transaction and was aware of the basis upon which Together was prepared to lend. I accept his evidence that, so far as he was concerned, the transaction was one in which Together obtained priority in respect of the Together Charge without qualification. Although he might not have been involved in the detail of the negotiations, this does provide at least some evidence as to Together’s intentions.

[81]It is a fair criticism of Mr Pickering’s witness statement that it duplicates an earlier witness statement prepared when the proceedings were proceeding by way of Part 7 claim, and that a significant amount of the language therein involves the making of argument and submission, and wording that plainly does not represent Mr Pickering’s own words. However, I do not consider that this detracts from his general position, which he confirmed under cross examination, that so far as he was concerned, Together was obtaining priority without qualification, and that he was aware of nothing to the contrary.

[82]So far as Mr Bury is concerned, I do not consider that his evidence really takes matters much further. He was simply able to confirm the general commercial rationale behind Together’s lending as development funder with priority in respect of its security but plainly was not able to assist with regard to the detail of the transaction, or any nuances in respect of such general commercial rationale.

[83]In the course of submissions, I was asked by both sides to draw adverse inferences from the fact that witnesses were not called who might have been expected to have been called to support the relevant parties’ respective cases as to their intentions behind clause 13 of the Deed of Postponement. I was referred to authority, including, in particular, Royal Mail Group Ltd v Efobi

[2021] UKSC 33

[2021] 1 WLR 3863

, at [41], per Lord Leggatt JSC. Plainly adverse inferences cannot be drawn from the failure to call solicitors involved in the transaction given the potential impact of legal advice privilege. As to whether adverse inferences should be drawn with regard to not calling other witnesses, it is necessary to bear in mind the reasons why witnesses have not been called. One can, in the circumstances, see why JAK might have been reluctant to call Mr Marzouk, and Together might have been reluctant to call Robert Goodall and Diane Moore, given that Mr Marzouk does not sound to have left JAK on particularly good terms, and Robert Goodall and Diane Moore now work for a rival lender to Together. In these circumstances, I do not consider it appropriate to draw adverse inferences one way or the other.

The pre-Deed of Postponement correspondence

[84]It is relevant to consider in some detail the correspondence between the parties leading up to the Deed of Postponement in that it does, I consider, provide insight into the respective parties’ intentions at the relevant time. As I have already noted, Primas did not, on behalf of JAK, directly communicate with Priority, acting on behalf of Together, but rather correspondence passed through the conduit of Mulbury’s Solicitors, Beyond Corporate. However, I am satisfied that all relevant correspondence sent on behalf of JAK or Together to Beyond Corporate was forwarded by the latter to the other party to the Deed of Postponement or its Solicitors.

[85]The relevant sequence begins with an email dated 1 April 2020 from Charlotte Ward of Priority (“Ms Ward”) to Zaeem Habib (“Mr Habib”) of Beyond Corporate, which attached a draft of the Deed of Postponement, described as “v2.20”. It is unclear where and by whom this draft originated or was created. The description of the draft suggests that it was not the first version thereof. In this draft, the provisions of the Deed of Postponement were not numbered, and it simply included what became clauses 1 to 9 unnumbered. This draft was subsequently forwarded by Beyond Corporate to Primas.

[86]By an email dated 16 April 2020, Ms Williamson of Primas sent a revised draft of the Deed of Postponement to Ms Williams at Mulbury. This revised draft added numbering to the provisions within the Deed of Postponement, added the words “(the “Advance”)” to the end of clause 7, and added new clauses 10, 11, 12 and 13. The new clauses 11, 12 and 13 remained in the Deed of Postponement as executed unaltered. However, clause 10 of this draft was in a different form to clause 10 as ultimately contained in the Deed of Postponement as executed. Essentially, it required Together to consult with JAK in the event that Together proposed to take any step in relation to the termination of its loan agreement with Mulbury or the enforcement of its security, including simply serving a demand for payment in relation “to the Advance”, other than a demand for payment on the due date.

[87]This must have been forwarded by Ms Williams to Mr Habib at Beyond Corporate, because he forwarded Ms Williamson’s revised draft to Ms Ward at Priority under cover of an email dated 16 April 2020. The accompanying response to enquiries made by Priority on behalf of Together referred, amongst other things, to the JAK Loan Agreement, to the principal sum due thereunder of 1.2 million pounds, to no interest being payable thereunder, and to clause 7 providing for the loan to be repaid in full.

[88]By an email dated 17 April 2020, Ms Ward replied to Mr Habib with proposed revisions to the revised version of the draft prepared by Ms Williamson of Primas. Ms Ward’s version left in the new clauses 11, 12 and 13 unaltered, but proposed a revision to clause 10, deleting the reference to Together being required to consult with JAK, and substituting the following:

“If the First Chargee has become entitled to enforce the First Charge and intends to enforce the First Charge, then the First Chargee shall first serve written notice to that effect on the Second Chargee as soon as practically possible.”

[89]Mr Hodge submits that this latter email is significant and that it supports a case that Ms Ward had, on behalf of Together, appreciated that clause 13 provided for the circumstances in which the priority otherwise provided for by the Deed of Priority would be reversed in JAK’s favour in the circumstances therein referred to of the JAK Loan Agreement terminating first, and by the proposed amendments sought to limit the circumstances in which priority might revert to JAK. This is disputed by Together.

[90]Ms Williams of Mulbury then forwarded the revised draft prepared by Ms Ward to Ms Williamson of Primas, posing the question:

“is this agreed now or do you wish to push back further?”

[91]By an email dated 20 April 2020, Mr Habib sent to Ms Ward further responses to enquiries made by Ms Ward on behalf of Together, including in relation to the terms of the JAK Loan Agreement. The response noted that interest was only payable in the event of default, and that clause 8 of the JAK Loan Agreement confirmed how payments became due.

[92]By email dated 17 April 2020 from Ms Williamson to Ms Williams, Ms Williamson forwarded a further revised version of the Deed of Postponement on behalf of JAK, revising clause 10 so as to restore the requirement for Together to consult, but deleting a couple of the circumstances in which Together might have been required to consult. In the body of the email, Ms Williamson said this:

“Attached as amended. I have agreed [Ms Ward’s] amends where possible but the remaining clauses cannot be removed. Particularly as the term of the Together loan could exceed that of JAK’s loan. As you will be aware, the remaining provisions do not heavily burden Together but are incredibly important for JAK.”

[93]It was ultimately common ground between the parties that the reference to “remaining provisions” in this latter email was a reference to the remaining provisions of the proposed revised clause 10, and not to other provisions, or proposed revised provisions of the Deed of Postponement.

[94]Significantly, perhaps, Ms Williamson’s email to Ms Williams of 17 April 2020 also attached a copy of the Development Services Agreement.

[95]On 20 April 2020, Mark Lupton (“Mr Lupton”) of Beyond Corporate forwarded a copy of the draft Deed of Postponement as last revised by Ms Williamson on behalf of JAK to Ms Ward at Priority, seeking confirmation that this could now be agreed. Ms Ward responded to this email by an email dated 23 April 2020 in which she said:

“Re Clause 10 - my client is not agreeable to this clause. They feel it would compromise their collection abilities. Re Clause 12 - my client is not agreeable to this clause. Their legal charge allows them to assign and they may want to in the future so this is not something they want to agree to.”

[96]This response was then passed on to Ms Williamson by an email dated 23 April 2020 from Ms Williams, leading to an important exchange of emails on 24 April 2020.

[97]On 24 April 2020 (11:19), Ms Williamson responded to Ms Williams as follows:

“JAK cannot proceed with the deed as amended by Together’s solicitors. They have now rejected clause 10 and clause 12 (but previously had only rejected clause 10). Clause 10 as I had amended provided that Mo would be consulted in the event that any enforcement action would be taken by Together. This has been rejected by Together as “they feel it would compromise their collection abilities” however, they would have a first legal charge so this does not make sense. In any event, some protection would need to be given to JAK who would have compromised collection abilities, at very least notification of any of the events listed in clause 10, rather than consultation as originally proposed.”

[98]The email went on to comment further with regard to clause 12, but this is of limited relevance for present purposes.

[99]Ms Williams then forwarded this latter email to Mr Lupton at Beyond Corporate saying that he was free to pass it on to Priority, and commenting:

“I agree with Primas comments, Together are being unreasonable.”

The relevant email was copied into Mr Bury of Mulbury, who forwarded it to Mr Goodall at Together, commenting:

“Could you please help. Kamanis are not being unreasonable her (sic) over what I (sic) pretty much a mute (sic) point.”

Mr Goodall then forwarded this latter email to Ms Ward and Diane Moore, copying in Mr Pickering, and saying:

“Based on previous comments, do you have any further thoughts?”

[100]Mr Lupton forwarded a copy of Ms Williamson’s email timed at 11:19 to Ms Ward commenting that he tended to agree with JAK’s position on the outstanding points. He further commented that:

“On the notification point, this is a reasonable stance to take from JAK’s point of view and a right to be notified is not overly onerous on Together and does not fetter their right to enforce.”

[101]Ms Ward then responded to Mr Goodall’s email, addressing a response to Robert Goodall and Diane Moore. She said as follows:

“Re Clause 10, I understand Elaine discussed with Diane [Moore], who was not happy to include a notification provision. Please feel free to give me a call if you would like to discuss this with me … I have reviewed with Tim and we are of the opinion that this would be a provision you could agree on the basis that the Deed only asks you to notify the second lender rather than consult with them. I understand you had concerns that your system is not built for giving this kind of notice, but if you forgot to give the notice then this would not be the end of the world. We do not believe this clause would prejudice your position nor fetter your right to enforce. In respect of Clause 12, it is not prohibiting you from assigning but is essentially saying that the company you assigned to will need to enter into a Deed of Covenant to confirm that they agreed to be bound by the DOP. We also think this is okay.”

[102]Further, Ms Ward responded to Mr Lupton’s email by replying to both him and Ms Williamson at Primas. She stated that Together had agreed to the changes “on the basis that we change consult to notify, as discussed.”

[103]This then led to the execution of the Deed of Postponement in its final form on 28 April 2020.

[104]There are a few further points that arise from the correspondence that has been produced: i) An enquiry attached to Ms Ward’s email to Mr Habib dated 17 April 2020 referred to Ms Ward needing to see:

“the Development Services Agreement referred to in the loan agreement itself in respect of the term/when the loan is due to be paid.”

This was duly provided, as we have seen, by Ms Williamson’s email to Ms Williams of 17 April 2020, so that it could then be provided to Priority. ii) The evidence suggests that the relevant loan documentation was signed by Together to await completion of matters by 20 April 2020, if not by 16 April 2020. Is Together’s case for rectification made out? Pleading points

Is Together’s case for rectification made out?

[105]The first matter to consider is the question of JAK’s pleading objections. As I have indicated, the key objections are the lack of detail and particularity in support of the averment that the parties evinced an intention that clause 13 of the Deed of Postponement should have the meaning and effect contended for by Together, the absence of a plea in respect of the required “outward expression of accord”, and the failure to plead the wording which it is alleged that a duly rectified clause 13 should contain.

[106]There is force in these pleading objections, but I do not consider that the force of the objections is sufficient to necessitate that the claim for rectification be dismissed on pleading points.

[107]So far as particularity as to how the requisite common intention was evinced, paragraph 23(d) of the Counterclaim does identify the Development Services Agreement, the other provisions of the Deed of Postponement and discussions between the parties. The lack of particularity in relation to the latter is unfortunate, but the case was further developed in Mr Demachkie’s Skeleton Argument, and I was addressed in some considerable detail by both parties at trial in relation to the significance to be attached to various items of correspondence passing between the parties (via Beyond Corporate and Mulbury). In the circumstances, I do not consider that the lack of particularity has prevented the Court from fairly considering the point.

[108]As to the failure to plead “outward expression of accord”, the issue was, again, covered in Mr Demachkie’s Skeleton Argument - see in particular paragraphs 30 and 34(2) thereof. Again, I consider that it was possible to fairly consider the relevant issues at trial, and difficult to see that JAK has, at the end of the day, been prejudiced by any pleading deficiency.

[109]So far as the wording of a rectified clause 13 is concerned, again the position has been covered by the wording referred to in paragraph 63 above, taken from paragraph 38 of Mr Demachkie’s Skeleton Argument.

[110]Against the above background, I consider the various matters required to be satisfied in order for Together to establish a case in rectification.

Common continuing intention

[111]It is JAK’s case that that the common intention was that, notwithstanding the other terms of the Deed of Postponement, the JAK Charge should have priority in the event of the JAK Loan Agreement determining ahead of the agreement relating to the Together Loan.

[112]In support of this are said to be the two “stipulations” alleged to be given by Mr Kamani to Mr Marzouk. In addition, so far as common intention is concerned, particular reliance is placed by JAK upon Together and Priority’s response to the proposal that a new clause 10 be added to the initial draft that provided for consultation before any steps were taken by Together in relation to the recovery of its debt or the enforcement of its security. Mr Hodge, on behalf of JAK, submitted that the reason that Together consistently rejected the form of wording proposed on behalf of JAK was because it was doubtless concerned that Together having to consult JAK prior to Together demanding as against Mulbury would give JAK a “tipoff” as to Mulbury’s defaulting position, and thus of Together’s ability and intention to treat Mulbury as in default, and determine its loan agreement, which would alert JAK, and enable JAK to determine the JAK Loan Agreement before Together was able to take any action. In the event, Together ultimately agreed to limit its obligation to engage with JAK to one of merely notifying JAK, but only after a time that Together had become entitled to enforce. As Together was entitled to enforce the Together Charge when an “Event of Default” had occurred, this would have entitled Together to call in, and thus end the term of its loan, before JAK determined the JAK Loan Agreement. In short, it is submitted that in protecting itself in this way, Together must have known and understood, and thus intended, that clause 13 should have the effect contended for by JAK.

[113]For the above purposes, reliance is placed by JAK upon a number of the items of correspondence referred to above in which Together, through Priority, sought to push back against the original wording for clause 10 proposed on behalf of JAK. However, particular reliance is placed on the email dated 23 April 2020 from Ms Ward to Beyond Corporate in which she explained that her client was not agreeable to clause 10, explaining:

“They feel it would compromise their collection abilities.”

It is submitted on behalf of JAK that this points to a concern that Together would be compromised in its ability to recover its debt through the enforcement of its security in priority to that of JAK.

[114]I am not persuaded that either party, in the period leading up to or at the time of the execution of the Deed of Postponement intended that clause 13 should have the effect now contended by JAK. To the contrary, I consider it more likely that the reason for the introduction of clause 13 by Primas on behalf of JAK was to meet the second of the objectives that I referred to in paragraph 43 above, namely to ensure that it was recorded that the subordination provided for by the Deed of Postponement related simply to the security provided for by the Together Charge and the JAK Charge and not the underlying debts secured thereby.

[115]I reach this conclusion for the following reasons.

[116]Firstly, I do not accept that Mr Kamani gave the two stipulations to Mr Marzouk that he contends that he did give. I consider it more likely that Mr Kamani has honestly, but falsely, sought to reconstruct in his own mind what he considers, now, he might have said to Mr Marzouk at the relevant time. More convincing, I consider, is Mr Kamani’s acceptance that he would have expected consistency between clause 19.4 of the Development Services Agreement and the Deed of Postponement, with clause 19.4 clearly anticipating that the development funder would have unencumbered security to which JAK’s security was subordinated. In this respect, it is significant that Together’s own loan documentation consistently referred to Together taking first charge security.

[117]I consider that the Development Services Agreement must be the starting point to any consideration of the intentions of the parties to the Deed of Postponement. Clause 19.4 thereof very clearly provided that the development funder should have unencumbered security to which JAK’s security was to be subordinated. It would, I consider, require some reasonably strong evidence as to some contrary intention, or as to an intention that there should be some significant inroad into the priority anticipated by clause 19.4 of the Deed of Postponement for the Court to accept that the parties intended clause 13 of the Deed of Postponement to take effect in the way contended by JAK.

[118]In the course of submissions, Mr Hodge sought to play down the significance of clause 13 of the Deed of Postponement, and the contention on behalf of Together that it fundamentally undermined the priority provided for by clause 8 of the Deed of Postponement. However, whilst less potent perhaps than it would have been had clause 10 provided for Together to consult rather than simply notify prior to enforcement, nevertheless, I consider that clause 13 still does, on JAK’s interpretation thereof, significantly undermine the priority of the Together Charge anticipated by clause 19.4 of the Development Services Agreement. Given the many circumstances in which an “Event of Default” might have arisen under clause 11 of the JAK Loan Agreement in the event of concern arising as to Mulbury’s ability to pay its debts, it was always relatively easy, as proved to be the case, for JAK to get in first and obtain priority contrary to the intent of clause 19 of the Development Services Agreement.

[119]In practice, of course, the question of priority was only likely to matter in circumstances in which concerns might have arisen as to Mulbury’s ability to pay its debts, and the parties might have considered seeking to enforce their security. Mr Hodge submitted that, in practice, given that it was providing development finance on the terms that it was, and Mulbury was not liable to make any ongoing payments to JAK, then it would be Together that would first become alert as to any financial difficulties of Mulbury and so could always get in first. However, there can have been no certainty as to that and the nature of the relationship between JAK and Mulbury, and as to what JAK knew of Mulbury’s financial position, was not explored or developed in evidence.

[120]Secondly, I consider that JAK is reading too much into Together’s response to the first draft of clause 10 of the Deed of Postponement. I consider that the reference in the correspondence to the compromising of “collection abilities” is more likely to be a reference to the inconvenience and burden of having to consult with JAK prior to taking any steps in relation to the recovery by Together of its debt or the enforcement of its security. The giving of notice as ultimately provided for by clause 10 in the Deed of Postponement as executed, is considerably less onerous, particularly given that the obligation to give notice only arises when Together becomes entitled to enforce the Together Charge, and intends to enforce the latter. Support for this was provided by Mr Pickering’s evidence on this point. I accept that this is of limited value given Mr Pickering’s distance from the precise mechanics of the transaction. Nevertheless, his evidence that he considers that this was the issue that Together had with the first draft of clause 10, namely the inconvenience and burden of having to consult and the effect thereof on collection ability, is at least of some weight.

[121]Thirdly, I consider the above to be supported by what one can glean of JAK’s intentions from what was said, and indeed what was not said, by Primas in correspondence on behalf of JAK. Of particular significance is what was said by Ms Williamson in an email dated 24 April 2020 (11:19) commenting upon clause 10 of the draft of the Deed of Postponement then in circulation. In commenting on the fact that the wording providing for consultation had been rejected by Together as “they feel it would compromise their collection abilities”, Ms Williamson said “however, they would have a first legal charge so that does not make sense.” This would be an odd thing for her to have said if it were considered, at the time, that Together was seeking to push back out of concern that the effect of clause 13 might be to reverse priorities. Further, as I see it, it makes little sense that Ms Williamson should have said that Together would have a first charge without any qualification if, in fact, clause 13 had been intended, at the time, to confer priority on JAK in the circumstances that JAK contend that it did.

[122]I consider that the approach taken by Primas on behalf of JAK in correspondence is more consistent with an intention on the part of JAK and Together that clause 13 be included in the Deed of Postponement for the second of the reasons that I have identified in paragraph 43 above, namely in order to record that the subordination provided for by the Deed of Postponement related simply to the security provided for by the Together Charge and the JAK Charge and not the underlying debts secured thereby.

[123]Fourthly, the other terms of the Deed of Postponement do, I consider, if anything, support the fact that the parties had the intention that clause 13 should take effect as an “avoidance of doubt” provision in relation to subordination of debts, rather than having the effect contended for by JAK. In this respect, I refer to the provisions of the Deed of Postponement that I consider support Together’s interpretation of the meaning of clause 3 of the Deed of Postponement as referred to in paragraph 50 above.

[124]The court is, for the purposes of a rectification claim, entitled to have regard to the parties’ subsequent conduct in considering what their subjective intentions were at the time that they entered into the relevant instrument. I do regard it as potentially significant that, following the service of its letter of demand dated 3 August 2022, JAK sought to wind up Mulbury rather than seeking to enforce its security conferred by the JAK Charge. Mr Kamani was cross-examined about this and was unable to provide any helpful answer with regard to why JAK pursued this course. The circumstances in which JAK presented a winding up petition, and the basis upon which it did so, were not explored in evidence, and I am reluctant to attach too much weight thereto. Whilst I do not consider it to be a determinative factor, nevertheless I do consider that it provides some evidence about what JAK thought about the priority of the JAK Charge at the time of seeking to wind up Mulbury, and thus as to the parties’ intentions as to the effect of clause 13 at the time of the execution of the Deed of Postponement.

[125]In conclusion, I am satisfied that in negotiating the terms of the Deed of Postponement, and up to the time of the execution thereof, the parties had the common intention that clause 13 should take effect as a form of “avoidance of doubt” provision that makes clear that the subordination provided for by the Deed of Postponement did not extend to the debts due from Mulbury to JAK and Together respectively, but only extended to the priority in respect of the security for the same, conferring priority on the Together Charge over the JAK Charge despite it being the second in time. I do not consider that it was the common intention of the parties that clause 13 should take effect so as to reverse the priority of the Together Charge over the JAK Charge otherwise provided for by the Deed of Postponement, whether in the event that JAK got in first in determining the JAK Loan Agreement before Together determined its loan agreement, or otherwise.

[126]As Mr Hodge pointed out, the Court will generally require “convincing proof” with regard to an intention that contradicts the terms of a written agreement. However, how convincing that evidence needs to be will depend upon the facts of the case. Whilst the present Deed of Postponement was drafted by lawyers, it is not the best drafted of documents and contains a number of errors. Clause 13, itself, is not particularly well drafted. It is in this context that I consider that the evidence as to the parties’ true intentions is to be considered. I am satisfied that there is sufficiently convincing proof of the common intention that I have held existed.

Outward expression of accord

[127]Mr Demachkie submitted that outward expression of accord is demonstrated by the Deed of Postponement itself, and its interaction with the Development Services Agreement. However, I consider a difficulty with this is that Together was not a party to the Development Services Agreement, and the evidence suggests that Together might not have seen a copy thereof until after its representatives had signed the relevant loan documents.

[128]However, I do consider that outward expression of accord is demonstrated by the correspondence, and in particular Ms Williamson’s email dated 24 April 2020 (11:19) referring to Together having a first charge, and to its concerns in relation to clause 10 therefore not making sense. Although this email was sent to Ms Williams at Mulbury, the evidence shows that it was passed on to Priority, and thus to Together.

[129]Further, I consider that this is a case where the necessary outward expression of accord was, if not otherwise provided, provided by understandings that the parties thought so obvious as to go without saying, and which were reached without being spelled out in so many words. I consider that there was more likely than not to have been a tacit understanding reflected in the parties’ communications that the Together Charge would have unqualified priority. In circumstances in which there can, as I have found, only have been two reasons or purposes behind clause 13, as to which see paragraph 43 above, the tacit understanding must have been that clause 13 recorded that the subordination provided for by the Deed of Postponement related simply to the security provided for by the Together Charge and the JAK Charge and not the underlying debts secured thereby.

Continuing intention

[130]If, as I have found, the parties did have the requisite common intention to support Together’s rectification claim, then I am satisfied that that intention continued up to the time that the Deed of Postponement was entered into. There is no evidence or suggestion that there was any change in the parties’ intentions in the period immediately prior to the execution of the Deed of Postponement.

Mistake

[131]If the parties did have the common intention that I have held that they did have, then if as a matter of true interpretation thereof the effect of clause 13 of the Deed of Postponement was, contrary to my primary finding, to confer priority upon JAK in the event that the JAK Loan Agreement was terminated first, then I consider that it must follow that clause 13 of the Deed of Postponement so provided by mistake. Thus, I consider that this particular requirement is satisfied.

Terms of proposed rectified clause 13

[132]As referred to in paragraph 70(i) above, I am required to be satisfied that the proposed rectified clause 13 as set out in paragraph 63 above accurately represents the true agreement of the parties at the time when the Deed of Postponement was executed.

[133]If, as I have found, the common intention of the parties was that clause 13 of the Deed of Postponement should take effect so as to provide, for the avoidance of doubt, that the debt due to JAK would not be subordinated to that due to Together, and that the subordination provided for by the Deed of Postponement should only relate to the security provided by the JAK Charge and the Together Charge, then I am satisfied that the terms of the proposed rectified form of clause 13 do accurately represent the true agreement of the parties. Conclusion regarding

Rectification

[134]I am satisfied that Together has satisfied on the evidence the various requirements of its case in rectification, and that clause 13 of the Deed of Postponement ought to be rectified so that it reads as referred to in paragraph 63 above if, contrary to my primary submission, clause 13 falls to be construed in the way contended by JAK.

Overall conclusion

[135]I consider that the meaning and effect of clause 13 of the Deed of Postponement, properly interpreted, is that it does not confer priority upon JAK in any circumstance, and in the particular circumstances of the JAK Loan Agreement determining before the loan agreement between Together and Mulbury, and that it merely serves to provide, for the avoidance of doubt, that notwithstanding the priority of Together’s Charge provided for by the Deed of Postponement, JAK’s debt does not stand subordinated to the debt due from Mulbury to Together, and thus that JAK is not prevented from seeking to recover that debt subject, should it seek to enforce the JAK Charge, to the priority provided for by clause 8 of the Deed of Postponement.

[136]Should I be wrong in this question of interpretation, then I consider that Together has made out its case that clause 13 of the Deed of Postponement should be rectified, with the addition of the wording so proposed, so as to make it clear that clause 13 is solely concerned with seeking to provide, for the avoidance of doubt, that the debt due to JAK is not subordinated to that of Together.

[137]The consequence of this is that Together has first call upon the proceeds of sale of the Property prior to any entitlement of JAK thereto.