Challenging Validity: Receivers’ appointment under legal charge declared valid
Williams & Acland v Simm & Ors [2021] EWHC 121 (Ch)
In Williams & Acland v Simm & Ors [2021] EWHC 121 (Ch) Clarke Willmott successfully obtained summary judgment on behalf of professional receivers who had been appointed under a legal charge against development land.
A lender had advanced monies, pursuant to a facility agreement and subsequent loan agreements, to the defendant trustees who sought to develop a site they owned in that capacity for the benefit of the trust. The lending was secured by way of a legal charge. Subsequent failures to repay the sums lent led to the appointment of receivers under the terms of the legal charge. The trustees challenged the validity of the legal charge and the receivers’ appointment. They also argued that there had been a variation of any underlying agreement.
The defendants’ argued that the relevant loan documentation did not to impose any liability upon them as trustees but had imposed it on the trust itself. The effect of this, the defendants said, was that the documentation was ineffective to create any liability because a trust is not a legal person with an ability to assume legal rights and liabilities. Consequently, there could be no liability secured by the charge. This argument failed. The court carefully considered the law relating to the capacity of trustees to enter into legal obligations and construed the relevant provisions. It concluded that a reasonable objective observer with knowledge of the relevant background would have understood the language used to provide for some party to assume liability and would have understood it to be providing for the liability to fall on the defendants.
The argument that the legal charge was invalid due to a failure to obtain the beneficiaries consent also failed. The lender had placed reliance, as it was entitled to do, upon a certificate provided by the defendants’ solicitors who had confirmed on their behalf that the legal charge was in accordance with the terms of the trust. This certificate had overreached the interests of the beneficiaries.
The court also considered and rejected the defendants’ argument relating to an alleged variation. The receivers were successful in their reliance on an anti-oral variation clause requiring variations to be in signed and in writing. Here there was no such agreement in writing: while an exchange of emails had taken place there was no concluded agreement and any agreement in writing needed to contain all of the contractual terms. The court noted that an email signature may satisfy signature requirements but it must have ‘authenticating effect’. Here the wording used had removed any suggestion of this. Estoppel arguments also failed as minimum requirements had not been met. There had been no suggestion of any words or conduct unequivocally representing that any agreed variation was valid.
The court declared that the legal charge was validly granted and registered at HM Land Registry as security for the liabilities of the defendants under the loan agreements and was binding upon the defendants. The receivers had been validly appointed pursuant to the legal charge and the properties sold.
HHJ Cawson QC set out a review of the law in respect of capacity of trustees when entering into legal obligations and applied MWB Business Exchange Centres Ltd v. Rock Advertising Ltd [2019] AC 119.
Ellen Yeates, senior associate was instructed by the receivers in this matter, and the matter is on-going pending consolidated possession and injunctive proceedings.
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