“13. It was a condition of the Loan Facility that there was a retained sum of£409,500 for the monthly interest payments. It can be seen from the Statement of Account at Exhibit 8, SR1 that the sum of£45,500 was applied to the Loan Facility from the retained interest on the 14th of every month. 14. As to the retained interest: a. Kept in a separate account. b. Belonged to the Defendant. c. Applied to the Claimant’s account on the 14th of each month. d. Before that application, the Claimant has no interest in those monies.” a. Kept in a separate account. b. Belonged to the Defendant. c. Applied to the Claimant’s account on the 14th of each month. d. Before that application, the Claimant has no interest in those monies.”
“i. West One may deduct the Retained Interest, in one or more instalments, and apply it to the sums due it, per the terms of the Facility; ii. Subject to a UK Court Order being granted, West One may make use of, take into possession, deal with, market and sell, the Property in accordance with the UK Court Order and its wider legal rights; iii. Subject to a UK Court Order being granted, West One may receive all proceeds generated by the sale of the Property and deduct and retain, per the terms of the Facility, the Principle Loan Amount, any Additional Interest and costs, fees, charges, expenses and other sums due to it, excluding legal fees, expenses or disbursements, per the terms of the Facility;”
“9.1 Security becomes enforceable following certain events The security constituted by this deed shall be immediately enforceable if: 9.1.1 an Event of Default occurs, or 9.1.2 any of the Secured Liabilities shall not be paid or discharged when the same ought to be paid or discharged by the Borrower (whether on demand or at scheduled maturity or by acceleration or otherwise, as the case may be), or 9.1.3 the Borrower shall be in breach of any of its obligations under the Facility Letter, this deed or under any other agreement deed or document between the Borrower and the Lender, or 9.1.4 any representation, warranty or statement made, repeated or deemed made by the Borrower in, or pursuant to, any of the Facility Letter or this deed is (or proves to have been) incomplete, untrue, incorrect or misleading in any material respect when made, repeated or deemed made. 9.2 Discretion After the security constituted by this deed has become enforceable, the Lender may, in its absolute discretion, enforce all or any part of that security at the times, in the manner and on the terms it thinks fit, and take possession of and hold or dispose of all or any part of the Charged Property.”
“6.1. The Borrower shall repay the Debt and any other amount payable under the Agreement by the Repayment Date.”
“7.1. The Lender may refuse to make the Loan or require the Borrower to prepay the Debt and all other amounts payable under the Agreement, if: 7.1.1. any change in law or regulation or in the way any court or regulatory authority interprets or applies any law or regulation, or 7.1.2. any direction, request or requirement (whether or not having the force of law) from any monetary agency, central bank, or governmental or regulatory authority, or 7.1.3. any judgment, order or direction of any court, tribunal or authority binding on the Lender, makes it unlawful for the Lender to make the Loan or allow the Debt to remain outstanding.” 7.1.1. any change in law or regulation or in the way any court or regulatory authority interprets or applies any law or regulation, or 7.1.2. any direction, request or requirement (whether or not having the force of law) from any monetary agency, central bank, or governmental or regulatory authority, or 7.1.3. any judgment, order or direction of any court, tribunal or authority binding on the Lender, makes it unlawful for the Lender to make the Loan or allow the Debt to remain outstanding.”
“5.3. For the computation of interest on the Debt, the period commencing on and including the Drawdown Date up to and including the Repayment Date shall be divided into successive periods of one month ("Interest Periods"). Each Interest Period (other than the first) will start at the end of the previous Interest Period.”
“13.1.Each of the events or circumstances set out in Schedule 1 is an Event of Default. 13.2. At any time after an Event of Default has occurred and is continuing, the Lender may, by giving notice to the Borrower: 13.2.1. cancel the Lender’s obligation to make the Loan if it has not already been made, or 13.2.2. make the Debt and all other amounts payable or outstanding under the Agreement or the Transaction Documents immediately due and payable whereupon they shall become immediately due and payable.” 13.2.1. cancel the Lender’s obligation to make the Loan if it has not already been made, or 13.2.2. make the Debt and all other amounts payable or outstanding under the Agreement or the Transaction Documents immediately due and payable whereupon they shall become immediately due and payable.”
“1 NON-PAYMENT The Borrower: 1.1 is late in paying any sum payable by the Borrower under the Agreement, the Transaction Documents the Security or under any other agreement, deed or document between the Borrower and the Lender, the amount unpaid is at least equal to two months’ interest payable under Clause 5.1 to 5.6, and the Borrower has failed to remedy the breach within a reasonable time of the Lender requesting the Borrower to do so; or 1.2 fails to repay the Debt and any other amount payable under any other provision of the Agreement by the Repayment Date.” “8 ILLEGALITY All or any part of any of the Agreement, any Transaction Document or any Guarantee becomes invalid, unlawful, unenforceable, terminated, or ceases to have full force and effect, unless such invalidity, unlawfulness, unenforceability, termination or ceasing to have force and effect occurs as a result of negligence or any unlawful act or omission on the part of the Lender.” “12 MATERIAL ADVERSE CHANGE Where any event occurs (or circumstances exist) which, in the reasonable opinion of the Lender, is likely to materially and adversely affect: 12.1 the Borrower’s ability to perform all or any of the Borrower’s obligations under, or otherwise comply with, the terms of the Agreement or the Transaction Documents or any of them; or 12.2 the Guarantor’s ability to perform all or any of the Guarantor’s obligations under, or otherwise comply”
“6.1. The Borrower shall repay the Debt and any other amount payable under the Agreement by the Repayment Date.”
“4. The claim concerns loan notes with a face value, excluding interest, of approximately€400 million , which were issued by the Company and are held by Shushary. The notes are governed by English law and are subject to the exclusive jurisdiction of the English court. They are also secured over various assets owned by the Company and its associates. Because of a proposed refinancing, the Company wishes to redeem the notes held by Shushary before their maturity date in September 2023. The trouble is that because of the sanctions in place against VTB and Shushary, the sums required to redeem the notes cannot be paid to or for the benefit of Shushary. Accordingly, the Company is asking for an order that moneys be paid into court and it would then be for Shushary to apply for the moneys to be released from there, when and if sanctions are lifted. The Company also seeks a declaration that it is not liable for default interest on the notes because it has been unable to pay interest to Shushary in accordance with the Subscription Agreement while the sanctions have been in place.”
“50. Mr. Robins put it another way, that the concept of a failure to pay within clause 10.4 presupposes that it is lawful for the obligors to pay the debt. If the debt cannot lawfully be paid, whilst it would be right to say that the obligors are not permitted to pay the debt, it would be inaccurate to say that they have failed to pay it. He referred to some old case law on bills of exchange and an inability to pay during wartime. Undersection 57 of the Bills of Exchange Act 1884 , the court has power to award interest where a debtor has failed to pay a bill of exchange. In a series of cases decided during wartime, the courts held that there is no failure to pay in circumstances where payment would be unlawful as a result of the creditor being an enemy alien. The reason in these cases is that a debtor cannot be said to be in default of an obligation if the performance of the obligation would be unlawful. Rather, for the period in which the performance would be unlawful, the obligation is suspended. Default will only occur if non-performance continues after the point in time in which performance has become legally possible. 51. The authorities he referred to were: Hugh Stevenson and Sons Limited v Aktiengesellschaftfur Cartonnagen-Industrie, [1918] A.C. 239, 256; Biedermann v Allhausen & Co[1921] 37 TLR 662 , a decision of Darling J; and NV Ledeboter and Van der Held's Textielhandel v Hibbert[1947] KB 964 , per Morris J. Those cases were effectively summarised in McGregor on Damages, 21st Edition, paragraph 30-022, which records that "the act which would have constituted the breach of duty was the very thing which the defendant could not lawfully do. The defendant was therefore not in default".”
“52. That does seem to me to be analogous to the situation that I have before me here. On5th April 2023 , Zacaroli J expressed the preliminary view that the Company had the better of the argument on this point and said that it would be "a harsh construction” to suggest that the Company was fixed with default interest when it was at all times willing and able to pay, but was prevented from doing so by sanctions. 53. I agree. In my view, the correct construction is that in these circumstances, the Company has not become liable to pay default interest.”
“In considering the claim for interest made in this action it is, in my judgment, necessary to bear in mind that it is a claim for damages for breach of contract. Section 57 of the Bills of Exchange Act, 1882, lays down what is the measure of damages to be applied in the normal case when a bill is dishonoured. In the present case, although the defendant did not perform his contractual obligation to meet the bill at maturity, he could not lawfully have done so. Apart from the position at common law, there was express statutory provision which prohibited him from paying the plaintiffs. In these circumstances, in my opinion, he is not liable in damages for having failed to pay. He was obliged not to pay. There seems to me to be something incongruous in asking the court to award damages against a man for failing to do what the law forbade him to do. This, in my view, disposes of the claim which is made.”
“It was submitted by Mr. Ashworth on behalf of the plaintiffs that the defendant had had the use of the plaintiffs' money for five and a half years, and that it would be only reasonable that he should pay interest. It was further submitted that the defendant could have paid the Custodian, but, in my judgment, none of these considerations can result in deflecting inquiry from an issue whether damages for breach of contract ought to be awarded against the defendant. There is a distinction in principle, in my opinion, between cases where interest becomes payable by way of damages for non-payment, and cases where interest is payable by reason of express agreement.”
“In the course of the argument two American cases were called to the attention of your Lordships—Hoare v. Allen (1) and Brown v. Hiatts. (2) These cases have not, in my opinion, any direct bearing in this appeal, and I should require further research and investigation before accepting them as an authority that interest is not payable though there is a stipulation for its payment. In such a case it is difficult to see any difference in principle between the payment of interest and the payment of a capital sum. The case of Du Belloix v. Lord Water-park (3) illustrates this point. This was an action on a promissory note which did not contain a stipulation for payment of interest. In the absence of such a stipulation the judge directed the jury that interest was damage for the detention of the debt, and that the question whether it should be allowed was peculiarly for their consideration. The jury found a verdict only for the principal sum named in the note. The Court held that the jury had been rightly directed and that the question of interest was entirely for them. In the course of his judgment Abbott C.J. said : “But there is another objection to the plaintiff's recovering interest on the debt, for during the greatest part of that time he was an alien enemy, and could not have recovered even the principal in this country." My Lords, in my opinion this dictum would not apply either to a case in which there is a stipulation for interest, or where there is a fiduciary relationship between the parties on the dissolution of a partnership.”
“Where, at the time the bill or note would in the ordinary course have become payable, whether on maturity or on demand, it has been illegal to pay money to the person entitled because that person was an alien enemy, interest has been held to run only from the time payment again became legal.”
“Some difficulty, however, has arisen because of the treatment of these decisions in The Berwickshire.93 In that case, which involved the tortious sinking of a ship owned and manned by then alien enemies, interest was awarded as damages on the value of the ship and of the seamen’s effects from the date of the tort in 1940 and not from the date in 1944 when the claimants ceased to be alien enemies. Lord Merriman P, although declaring himself not to be concerned to express any opinion whether the bills and notes cases were rightly decided,94 treated them unenthusiastically and in particular pointed out that the dicta in their Lordships’ speeches in Stevenson v Aktiengesellschaft für Cartonnagen Industrie 95 were hardly in their favour.96 It is submitted, however, that the bills and notes cases present an exceptional situation, and are properly decided for the reason that the act which would have constituted the breach of duty was the very thing which the defendant could not lawfully do. The defendant was therefore not in default 97 and consequently did not become liable to pay damages at all until the claimant ceased from being an alien enemy. This rationale appears from Morris J’s judgment in Ledeboter v Hibbert,98 where he said that there seemed to him: “… to be something incongruous in asking the court to award damages against a man for failing to do what the law forbade him to do” , and also in Lord Atkinson’s speech in Stevenson v Aktiengesellschaft für Cartonnagen Industrie,99 where he said that the principle upon which the bills and notes cases 100 appeared to him to be based was: “… that interest is in the nature of damages payable by the debtor by reason of his withholding his debt, his default in not paying his debt, and since during war he cannot lawfully pay his debt to an alien enemy without committing a crime, he is not in any default in omitting to pay it, and should not therefore be mulcted in damages for not doing what he cannot do lawfully.”101” “… to be something incongruous in asking the court to award damages against a man for failing to do what the law forbade him to do” , “… that interest is in the nature of damages payable by the debtor by reason of his withholding his debt, his default in not paying his debt, and since during war he cannot lawfully pay his debt to an alien enemy without committing a crime, he is not in any default in omitting to pay it, and should not therefore be mulcted in damages for not doing what he cannot do lawfully.”101”
“This reasoning can only apply where the defendant’s primary obligation is itself to pay money and reaches neither cases of tort, such as The Berwickshire,102 where the duty imposed by the general law is invariably something other than the payment of money, nor all other cases of breaches of contract where the duty arising from the promise is not to pay money but, for instance, to deliver or accept goods under a contract of sale. And, even where the primary obligation is to pay money, this reasoning should not apply where the defendant is in breach in not paying before payment became illegal; it is therefore submitted that a different conclusion might be reached where the claimant became an alien enemy after the claimant’s cause of action had arisen by reason of a failure to pay the bill or note on maturity or on demand.103 Nor, finally, does this reasoning apply where, although the primary obligation is to pay money, the claim is not one for damages so that no default need be shown.104 Indeed in cases with facts similar to those such as Biedermann v Allhausen 105 and Ledeboter v Hibbert 106 themselves, the subsequently more developed principles of unjust enrichment might profitably be explored by claimants for a possible ground of recovery.”
“Thus interest was awarded in Wolff v Oxholm (1817) 6 M. & S. 92 where interest was payable by the express terms of the bill; and in Stevenson v Aktiengesellschaft für Cartonnagen Industrie [1918] A.C. 239 (which was a claim not on a bill but for a share of the profits of a partnership) where there was a fiduciary relationship between the parties. Contrast Lord Parmoor in the latter case, where he said that in his opinion the view expressed in Du Belloix v Waterpark (1822) 1 Dow. & Ry. 16 against the award of interest during the period in which it could not lawfully be paid “would not apply either to a case in which there is a stipulation for interest, or where there is a fiduciary relationship between the parties on the dissolution of a partnership”: [1918] A.C. 239 at 259–260.”
“86 I have concluded that the answer to the conundrum lies in focusing on precisely what section 44(2) applies to, namely civil proceedings to which a person “would, in the absence of this section, have been liable in respect of the act”
“89 It is far less apparent that section 44 should protect a debtor from an action to recover a debt which is otherwise lawfully due but which has not been paid in the reasonable belief that its payment would be in breach of sanctions. Absent sanctions, the debtor would expect to have to pay that sum in the normal course. Exposure to a claim to recover it is not a new financial exposure which might pressurise payment. It is a pre-existing liability. The mischief at which section 44 is aimed (as confirmed by the Explanatory Notes) is not present. 90 The wording of section 44 also supports an interpretation that would allow proceedings to recover a debt. This is because a claim for debt is just that: it seeks payment of the debt. While the inevitable trigger for the claim is that the debtor has not paid, the action is not an action for the non-payment as such (which is the relevant omission for section 44 purposes) and can therefore be said not to be “in respect of” it. Rather, it seeks recovery of an amount which is owed irrespective of any action or inaction in purported compliance with sanctions.”
“28. In principle, in my judgment, the section could therefore provide protection against insolvency proceedings based on a failure to pay a debt. In such a case, what is sought by the creditor is not mere payment or enforcement of the debt, but something more, an important additional element of which is, in substance, proof of the debtor’s failure to pay the debt when due, despite demand, which is the basis upon which the court might hold that he is insolvent, and thus liable to the collective process of bankruptcy. In other words, in the case of bankruptcy proceedings, unlike the case of proceedings on or to recover a debt, the fact of non-payment as such is material to the case and to the outcome. Put simply, a person cannot be said to be insolvent and made bankrupt because of his failure to pay a debt in circumstances where his very failure to pay the debt was a result of his reasonable belief that payment would be in breach of the Regulations.”
“9.1 Security becomes enforceable following certain events The security constituted by this deed shall be immediately enforceable if: 9.1.1 an Event of Default occurs, or 9.1.2 any of the Secured Liabilities shall not be paid or discharged when the same ought to be paid or discharged by the Borrower (whether on demand or at scheduled maturity or by acceleration or otherwise, as the case may be), or 9.1.3 the Borrower shall be in breach of any of its obligations under the Facility Letter, this deed or under any other agreement deed or document between the Borrower and the Lender, or 9.1.4 any representation, warranty or statement made, repeated or deemed made by the Borrower in, or pursuant to, any of the Facility Letter or this deed is (or proves to have been) incomplete, untrue, incorrect or misleading in any material respect when made, repeated or deemed made. 9.2 Discretion After the security constituted by this deed has become enforceable, the Lender may, in its absolute discretion, enforce all or any part of that security at the times, in the manner and on the terms it thinks fit, and take possession of and hold or dispose of all or any part of the Charged Property.”
“You are further in breach of the above clauses because the sanctions placed on you are, in our reasonable opinion, likely to materially and adversely affect your ability to perform your obligations under the Agreement and Transaction Documents, including but not limited to your ability to pay, release or procure the release of your monthly mortgage instalments or all of the monies due under the Loan upon expiry of its term.”
“23. The Claimant was prohibited from applying the retained interest in the usual way on14 December 2023 as a consequence of the OFSI notice. To do so would have been to deal with an economic [resource] belonging to a sanctioned person, and specifically to pay, release, or procure the payment of any funds, and the Claimant had no ability to accept funds from the Defendant. As such at that time the Loan Facility was in default for breach of the payment obligation and by virtue of the fact the Defendant was a designated person the Claimant would be in breach of the regulations if it applied the retained interest in the manner the Loan Facility intended. The Defendant’s designation was also a material adverse change as it was highly likely, following the Defendant’s designation, that she would not be able to maintain the interest payments and redeem the loan when it fell due.”
“38. When the Defendant’s loan, valued in excess of£4 million , fell into default, the Claimant – a specialist bridging lender – was required to act swiftly and proportionately to protect both its financial and legal position. Loans of this size cannot remain in default indefinitely without causing serious harm to a lender’s commercial operations. Interest accrues at a substantial rate (in this case 1% and 1.15%), quickly diminishing the equity in the security property. This situation is not only adverse to the lender’s interests, but is also to the detriment of the borrower, whose liability increases with each passing month of inaction. 39. The Claimant is not a deposit-taking institution; it is a privately funded lender with its own institutional funders to whom it owes duties of transparency, performance, and accountability. A prolonged default with no repayment, no possession, and no agreed path forward is highly prejudicial in the context of funder covenants and audit requirements. A single non-performing loan of this scale can impact the Claimant’s ability to access funding, affect the interest rates applied to new credit lines, and jeopardise other transactions. This prejudice is real, material, and was worsening by the day as this matter stagnated without cooperation from the Defendant. This is why I was so intent to resolve with the Defendant over the telephone, but it was clear there was no progression.”
“There has been no material adverse change in its financial condition (consolidated if applicable) since the date of this Loan Agreement”
“356. There is some academic writing on this point which supports this view. The Encyclopaedia of Banking Law says at F[1862] that, “It is considered that normally an adverse change in financial condition would be material if the change would have caused the bank not to lend at all or to lend on significantly more onerous terms, eg, as to margin, maturity or security”
“Any event or circumstance which in the opinion of [ATT] has had or is reasonably likely to have a material adverse effect on the financial condition, assets or business of [CFI].”
“54 Turning now to the central issue, namely whether ATT established that it had formed the requisite opinion, it might at first sight seem surprising that ATT be required to prove that it had formed the opinion that the award had had a “material adverse effect on the financial condition, assets or business” of CH. This could be said to be a fairly obvious conclusion. After all, it had been expressed and explained in a letter written on behalf of ATT and signed by its sole director, and seems really self-evident on the facts. 55 While those points undoubtedly would have made it very difficult indeed to challenge the rationality or honesty of the opinion, they do not meet the point that there must be some admissible evidence at the trial to show that the Board of ATT had formed the opinion described in clause 17.16. The clause virtually entitles one contractual party, ATT, to be judge in its own cause on the issue of whether the clause is satisfied, and, if it is so satisfied, has a potentially drastic effect on the economic position of the other contractual parties, CH and CFI. Accordingly, it is only right that the court has to be convinced by admissible evidence that ATT did in fact form the requisite opinion, as well as being convinced that that opinion was honest and rational.”
“17. As to paragraph 13: (a) It is not admitted that the LTC ‘accompanied’ the Mortgage. No particulars are pleaded concerning that assertion and sub-paragraphs 8(e)(i) and 8(e)(ii) above are repeated, (b) The LTC isits not referred to nor mentioned in the Mortgage. (c) If the intended meaning of paragraph 13 is that the Mortgage incorporates the LTC then by reason of the above that assertion is denied. (d) There is no pleaded case that the LTC is said to be a contractual document binding on the Defendant. (e) In the circumstances the LTC is irrelevant. (f) If necessary, the Defendant will rely at trial to on the LTC for its meaning and effect. (g) For the avoidance of doubt, if the Claimant’s case is (which is not pleaded) that the Defendant’s ability to perform her remaining obligation under the extended loan is materially and adversely affected by her current designation under the Notice then that is denied because: (i) For the reasons set out in paragraph 16 the Defendant is under no obligation to pay monthly interest payments to the Claimant. The interest due under both the original loan and the extended loan was retained by the Claimant from the principal loan amount advanced to the Defendant. (ii) The Defendant’s obligation to pay the outstanding capital arises on13 July 2024 and not beforehand. (iii) Both parties can (and in the Defendant’s case haswill) apply for a licence license on the grounds and in the manner described in paragraph 15(f) above and a copy of an appropriately redacted OFSI Licence Application was previously provided to the Defendant.” (a) It is not admitted that the LTC ‘accompanied’ the Mortgage. No particulars are pleaded concerning that assertion and sub-paragraphs 8(e)(i) and 8(e)(ii) above are repeated, (b) The LTC isits not referred to nor mentioned in the Mortgage. (c) If the intended meaning of paragraph 13 is that the Mortgage incorporates the LTC then by reason of the above that assertion is denied. (d) There is no pleaded case that the LTC is said to be a contractual document binding on the Defendant. (e) In the circumstances the LTC is irrelevant. (f) If necessary, the Defendant will rely at trial to on the LTC for its meaning and effect. (g) For the avoidance of doubt, if the Claimant’s case is (which is not pleaded) that the Defendant’s ability to perform her remaining obligation under the extended loan is materially and adversely affected by her current designation under the Notice then that is denied because: (i) For the reasons set out in paragraph 16 the Defendant is under no obligation to pay monthly interest payments to the Claimant. The interest due under both the original loan and the extended loan was retained by the Claimant from the principal loan amount advanced to the Defendant. (ii) The Defendant’s obligation to pay the outstanding capital arises on13 July 2024 and not beforehand. (iii) Both parties can (and in the Defendant’s case haswill) apply for a licence license on the grounds and in the manner described in paragraph 15(f) above and a copy of an appropriately redacted OFSI Licence Application was previously provided to the Defendant.”
“23. Paragraph 19 does not plead any breach of any obligations said to have been owed by the Defendant to the Claimant. Paragraph 19 merely seeks to narrate the content of the Claimant’s letter of19 January 2024 to the Defendant. Without prejudice to the Defendant’s primary position that paragraph 19 narrates the contents of a letter rather than properly pleads a case against the Defendant, the Defendant pleads as follows: (a) It is admitted that the Claimant wrote to the Defendant on19 January 2024 . (b) It is denied that the Defendant was or is in breach of the LTC Schedule 1 and/or clauses 7 and/or 11 of the LTC and/or clause 9 of the Mortgage for the reasons stated in paragraphs 17 and 18 above. (c) The Defendant is not and was not in breach of clause 9 of the Mortgage because there has been no Event of Default as defined by the Mortgage. Further, the Defendant is not in breach of its payment obligation to the Claimant. Paragraphs 16, and 22 and 22A above are repeated. (d) As set out in paragraph 13(c) above the Defendant’s remaining payment obligation is to pay to the Claimant (or arrange to discharge) the sum properly due under the Agreementof£4,218,696.00 no later than13 July 2024 . TheIn the absence of a relevant OFSI licence (which has been applied for) the Defendant is legally prevented by the Regulations from making such a payment to the Claimant.Defendant is not in breach of that obligation. (e) The Defendant’s current status as a designated person under the Regulations does not render the contractual arrangements between the parties illegal. Paragraph 18 above is repeated. (f) The Defendant’s current status as a designated person pursuant to the Regulations does not amount to a material and adverse change within the meaning of the LTC. Paragraph 17 above is repeated. (g) As set out in paragraph 15 above, either party may apply to the OFSI for a licencelicense to dispense with the prohibition contained in Article 11 of the Regulations in respect of the sum due to be paid by13 July 2024 . As stated, the Defendant intends to apply for such a licencelicense. (h) It is therefore denied that the Defendant had any or any lawful basis on which to demand the sums of£3,160,443,80 or any sum from the Defendant. Accordingly, it is denied that the sum demanded in the Claimant’s letter of19 January 2024 is recoverable from the Defendant or otherwise enforceable. It is noted that the sum demanded by the Claimant in correspondence differs from the amount referred to in paragraph 9B of the Amended Particulars of Claim. (i) It is therefore denied that the Claimant has any legitimate grounds on which to seek possession of the Property. (j) Accordingly, the Claimant’s conduct is and was at all relevant times irrational and thereby in breach of the Rationality Obligation. (jj) To the extent necessary, paragraph 22A above is repeated. (k) Accordingly, save as is inconsistent with the foregoing paragraph 19 is denied.” (a) It is admitted that the Claimant wrote to the Defendant on19 January 2024 . (b) It is denied that the Defendant was or is in breach of the LTC Schedule 1 and/or clauses 7 and/or 11 of the LTC and/or clause 9 of the Mortgage for the reasons stated in paragraphs 17 and 18 above. (c) The Defendant is not and was not in breach of clause 9 of the Mortgage because there has been no Event of Default as defined by the Mortgage. Further, the Defendant is not in breach of its payment obligation to the Claimant. Paragraphs 16, and 22 and 22A above are repeated. (d) As set out in paragraph 13(c) above the Defendant’s remaining payment obligation is to pay to the Claimant (or arrange to discharge) the sum properly due under the Agreementof£4,218,696.00 no later than13 July 2024 . TheIn the absence of a relevant OFSI licence (which has been applied for) the Defendant is legally prevented by the Regulations from making such a payment to the Claimant.Defendant is not in breach of that obligation. (e) The Defendant’s current status as a designated person under the Regulations does not render the contractual arrangements between the parties illegal. Paragraph 18 above is repeated. (f) The Defendant’s current status as a designated person pursuant to the Regulations does not amount to a material and adverse change within the meaning of the LTC. Paragraph 17 above is repeated. (g) As set out in paragraph 15 above, either party may apply to the OFSI for a licencelicense to dispense with the prohibition contained in Article 11 of the Regulations in respect of the sum due to be paid by13 July 2024 . As stated, the Defendant intends to apply for such a licencelicense. (h) It is therefore denied that the Defendant had any or any lawful basis on which to demand the sums of£3,160,443,80 or any sum from the Defendant. Accordingly, it is denied that the sum demanded in the Claimant’s letter of19 January 2024 is recoverable from the Defendant or otherwise enforceable. It is noted that the sum demanded by the Claimant in correspondence differs from the amount referred to in paragraph 9B of the Amended Particulars of Claim. (i) It is therefore denied that the Claimant has any legitimate grounds on which to seek possession of the Property. (j) Accordingly, the Claimant’s conduct is and was at all relevant times irrational and thereby in breach of the Rationality Obligation. (jj) To the extent necessary, paragraph 22A above is repeated. (k) Accordingly, save as is inconsistent with the foregoing paragraph 19 is denied.”
“55 While those points undoubtedly would have made it very difficult indeed to challenge the rationality or honesty of the opinion, they do not meet the point that there must be some admissible evidence at the trial to show that the Board of ATT had formed the opinion described in clause 17.16. The clause virtually entitles one contractual party, ATT, to be judge in its own cause on the issue of whether the clause is satisfied, and, if it is so satisfied, has a potentially drastic effect on the economic position of the other contractual parties, CH and CFI. Accordingly, it is only right that the court has to be convinced by admissible evidence that ATT did in fact form the requisite opinion, as well as being convinced that that opinion was honest and rational.”
“There has been no material adverse change in its financial condition (consolidated if applicable) since the date of this Loan Agreement”
“356. There is some academic writing on this point which supports this view. The Encyclopaedia of Banking Law says at F[1862] that, “It is considered that normally an adverse change in financial condition would be material if the change would have caused the bank not to lend at all or to lend on significantly more onerous terms, eg, as to margin, maturity or security”
“13. It was a condition of the Loan Facility that there was a retained sum of£409,500 for the monthly interest payments. It can be seen from the Statement of Account at Exhibit 8, SR1 that the sum of£45,500 was applied to the Loan Facility from the retained interest on the 14th of every month. 14. As to the retained interest: a. Kept in a separate account. b. Belonged to the Defendant. c. Applied to the Claimant’s account on the 14th of each month. d. Before that application, the Claimant has no interest in those monies.” a. Kept in a separate account. b. Belonged to the Defendant. c. Applied to the Claimant’s account on the 14th of each month. d. Before that application, the Claimant has no interest in those monies.”
“5.1. The Borrower shall pay interest on the Debt, at the Rate of Interest specified in the Offer, in respect of the period commencing on and including the Drawdown Date up to and including the Repayment Date, both before and after any judgment. 5.2. The amount of interest payable under clause 5.1 above may be retained (in whole or in part) from the Loan, and shall be applied in making monthly interest payments until such interest is exhausted. 5.3. For the computation of interest on the Debt, the period commencing on and including the Drawdown Date up to and including the Repayment Date shall be divided into successive periods of one month ("Interest Periods"). Each Interest Period (other than the first) will start at the end of the previous Interest Period. 5.4. Interest on the Debt in respect of each Interest Period shall be treated, for the purpose of the computation of interest under Clause 5.3, as being paid out of any Retained Interest on the first day of that Interest Period.”
“Account Number: 22808130 Date Opened:14 October 2022 Date Account frozen:09 December 2023 Mortgage Balance:£3,100,000 Retained Interest balance:£248,000 Last payment received to the account:14 November 2023 ”
“The mortgage is of course a liability of the designated person as opposed to an asset. However, in the interests of fullest possible disclosure: West One typically lends bridging loans on a “retained interest” basis. This means that a proportion of the total loan balance created at the point of origination is deemed “retained interest” with the net loan balance remitted as cash to the customer. In this case, we advanced to the customer sufficient net funds to redeem the original Credit Suisse mortgage. We also journalled a retained interest amount sufficient to cover the interest on our loan over the contractual term. The retained interest amount is a ledger entry within our systems – it is not backed by actual cash. Each month, on the contractual due date, we journal an amount equal to a monthly interest instalment from the retained interest ledger, into the revenue receipts ledger. At the point the loan is redeemed, the customer would repay the entirety of the gross loan advance – i.e. the net proceeds they received on day one, plus the retained interest balance. At the present moment, the loan is part way through its term. As such there is a positive balance in the retained interest ledger. Whilst this is not physical cash, and its only possible purpose is to pay the interest falling due on the loan each month, contractually it may be argued that it “belongs” to the borrower as it forms a technical part of the original loan advanced. To explain it another way, if the loan redeemed tomorrow, the customer’s final settlement statement would show repayment due of the net loan advance, repayment due of an amount of interest up to the point of redemption, and a credit amount equal to the proportion of retained interest relating to the remaining term of the loan to contractual maturity. As such we are disclosing it here for full transparency. We are presently taking legal advice to ascertain whether we need to freeze the operation of our ledgers, or whether this can continue as normal as it is simply a record-keeping exercise and involves no transfer of tangible value.”
“At the present moment, the loan is part way through its term. As such there is a positive balance in the retained interest ledger. Whilst this is not physical cash, and its only possible purpose is to pay the interest falling due on the loan each month, contractually it may be argued that it “belongs” to the borrower as it forms a technical part of the original loan advanced. To explain it another way, if the loan redeemed tomorrow, the customer’s final settlement statement would show repayment due of the net loan advance, repayment due of an amount of interest up to the point of redemption, and a credit amount equal to the proportion of retained interest relating to the remaining term of the loan to contractual maturity.”
“89 It is far less apparent that section 44 should protect a debtor from an action to recover a debt which is otherwise lawfully due but which has not been paid in the reasonable belief that its payment would be in breach of sanctions. Absent sanctions, the debtor would expect to have to pay that sum in the normal course. Exposure to a claim to recover it is not a new financial exposure which might pressurise payment. It is a pre-existing liability. The mischief at which section 44 is aimed (as confirmed by the Explanatory Notes) is not present. 90 The wording of section 44 also supports an interpretation that would allow proceedings to recover a debt. This is because a claim for debt is just that: it seeks payment of the debt. While the inevitable trigger for the claim is that the debtor has not paid, the action is not an action for the non-payment as such (which is the relevant omission for section 44 purposes) and can therefore be said not to be “in respect of” it. Rather, it seeks recovery of an amount which is owed irrespective of any action or inaction in purported compliance with sanctions.”