Burdale Financial Ltd v Agilo Master Fund Ltd

This is the trial of a Part 8 claim brought by one claimant (“the Senior Creditor”) against the defendant (“the Junior Creditor”). It is also the hearing of a preliminary issue in a Part 7 claim brought by another claimant (“the Debtor”) against the Junior Creditor. The Part 8 claim and the preliminary issue raise points of construction of a deed dated 16 June 2006 (“the Intercreditor Deed”) regulating the relationship between the Senior Creditor, the Junior Creditor and the Debtor. Injunctive relief is also sought.

The Debtor and other group companies (together “the Obligors”) had the benefit of finance arrangements from their previous bankers, HSBC Bank plc (“HSBC”), under a facility agreement which, in its original form, was dated 22 April 2004. It has been amended a number of times but, for present purposes, it is necessary only to mention an amendment letter dated, like the Intercreditor Deed, 16 June 2006 (“the 16 June 2006 Letter”; the facility agreement as amended being “the Facility Agreement”).

The Intercreditor Deed and the 16 June 2006 Letter formed part of a series of related transactions under which the Obligors’ facilities from HSBC were refinanced by facilities from the Senior Creditor. A residual part of HSBC’s lending (“the Junior Debt”) was left in place on the terms of the Facility Agreement; the Junior Debt was assigned to the Junior Creditor on 20 November 2007. The Junior Creditor is bound to the terms of the Intercreditor Deed as the result of a separate accession deed dated 26 November 2007 entered into by it.

One of the facilities provided by the original facility agreement was a term loan of £3.6 million repayable in full by 21 February 2009. As a result of amendments, the facility had, by October 2005, become one repayable on demand. The arrangements recorded in the 16 June 2006 Letter show a Junior Debt of £2.5 million up to 31 January 2007, reducing to £2 million from that date, repayable in accordance with the previous terms of the facility (as varied) but subject to the terms of the 16 June 2006 Letter. There is a dispute between the Junior Creditor on the one hand and the Senior Creditor and the Debtor on the other, about whether the Junior Debt is repayable on demand. It is, on any footing, due for payment by 28 February 2009. If it is not payable on demand, then it is clear that the Junior Debt can be declared to be immediately due and payable on the happening of various events of default as set out in Clause 4.5 of the 16 June 2006 Letter. There is no need for prior notice to be given of an intention to make demand for payment of, or otherwise to enforce, the debt.

The Intercreditor Deed was made between the Obligors, HSBC and the Senior Creditor. The Junior Creditor is now bound by its terms. In the event of any inconsistency between the Intercreditor Deed and certain other documents, including the Facility Agreement, the terms of the Intercreditor Deed prevail.

The principal purpose of the Intercreditor Deed was expressed, in Clause 2, to be that the Senior Debt and the Junior Debt should rank in a specified order namely first, a large tranche of the debt owing to the Senior Creditor, secondly the Junior Debt and a specified fee owing to the Senior Creditor and thirdly, any remaining Senior Debt.

By Clause 3, the Obligors gave undertakings, until the Senior Discharge Date (being the date on which that part of the Senior Debt in the first priority has been paid in full), to the Senior Creditor designed to preserve those priorities (in particular not to pay, repay or prepay any of the Junior Debt).

By Clause 5, the Junior Creditor gave undertakings to the Senior Creditor also designed to preserve those priorities (in particular, not to make demand or receive payment in respect of the Junior Debt) except with the previous consent in writing of the Senior Creditor or as otherwise permitted under the Intercreditor Deed itself. That is a reference to Clauses 6 and 11. Clause 6, it is common ground, is on the facts irrelevant for present purposes. If the Junior Creditor does in fact receive payment then it is required, upon demand, to pay the same amount (after allowing for the costs or recovery) to the Senior Creditor up to the amount still owing to the Senior Creditor.

Clause 11 is the provision of central importance. It reads as follows:

“11 Restriction of Enforcement

Until the Senior Discharge Date the Junior Creditor will not, without the prior written consent of the Senior Creditor:

(a)

accelerate any of the Junior Debt or otherwise declare any of the Junior Debt prematurely due or payable;

(b)

save as permitted pursuant to Clause 6.3, enforce the Junior Debt by attachment, set-off, execution or otherwise;

(c)

have any right to crystallise any floating charge in any of the Junior Security Documents;

(d)

have any right to enforce any security or guarantee conferred by the Junior Security Documents by sale, possession, appointment of a receiver or administrator or otherwise;

(e)

petition for (or vote in favour of any resolution for) or initiate or take any steps with a view to any winding up, bankruptcy, insolvency, liquidation, reorganisation, moratorium, administration, dissolution or any analogous proceedings or any voluntary arrangement or assignment for the benefit of creditors or any similar proceedings involving any Obligor whether by petition, convening a meeting, voting for a resolution or otherwise; or

(f)

bring or support any other legal proceedings against any Obligor,

unless

(i)

the Junior Creditor has first given the Senior Creditor not less than 45 days’ written notice of its intention to take such action and it commences the first step of such action during the months of January, February or March in any year; or

(ii)

such action is against any Obligor against which the Senior Creditor has taken enforcement action; or

(iii)

such action is taken against an Insolvent Obligor where the Senior Creditor has not taken any enforcement action against such Insolvent Obligor for 3 Business Days after it became an Insolvent Obligor.”

On 19 March 2008, the Junior Creditor wrote two letters. One (“the Default Letter”) was addressed to the Debtor; the other (“the Notice”) was addressed to the Senior Creditor. These letters were written in an attempt to implement the process laid down in Clause 11 of the Intercreditor Deed in order that the Junior Creditor would be able to accelerate the Junior Debt and seek to enforce payment.

The Default Letter refers to the original facility agreement and the 16 June 2006 Letter. It records that Events of Default as set out in Clause 4.5(a)(viii) and Clause 4.5(a)(xiii) of the 16 June 2006 Letter have occurred and are continuing. It is not accepted by the Senior Creditor or the Debtor that such Events of Default have occurred or are continuing: that is not a matter for present decision by me. It is noted that the Loan made available under the original facility agreement is repayable on demand pursuant to Clause 3.4(b) of a letter of amendment dated 14 February 2006: although that letter does so provide, it is not accepted by the Senior Creditor or the Debtor that the Junior Debt is repayable on demand; it is said that the 16 June 2006 Letter, which supersedes the earlier letters of amendment, makes it clear that the Junior Debt is not repayable on demand. That, again, is not a matter for present decision by me, although I would remark that significant parts of the 16 June 2006 Letter would appear to be wholly otiose if the construction contended for by the Junior Creditor is correct. The Default Letter goes on to say this in paragraph 4:

“…….if the Events of Default referred to above have not been remedied to our satisfaction or waived by us (in our absolute discretion) on or before 5^th May 2008, we will require [the Debtor] to repay all monies (whether by way of principal, interest, fees or otherwise) outstanding in respect of [the Junior Debt] on that date.”

The right to take any further action, including the right to crystallise any floating charge and the right to enforce any guarantee is expressly reserved.

The Notice refers to the Intercreditor Deed. Paragraph 2 is in the following terms:

“Pursuant to Clause 11(i) of the Intercreditor Deed, we hereby give you notice that one or more events of default have occurred and are continuing under [the Facility Agreement] and that:

(i)

Not less that 45 days after the date of this letter we intend to accelerate the Junior Debt or otherwise declare the Junior Debt prematurely due or payable and/or take such other actions as are contemplated by Clause 11(b) to 11(f) (inclusive) of the Intercreditor Deed; and

(ii)

We have commenced the process of taking such action referred to in (i) above by issuing the enclosed letter to [the Debtor]” [that letter being the Default Letter].

According to the Junior Creditor, the Default Letter falls within the meaning of the words “the first step of such action” in the second limb of Clause 11(i). That step is not, however, the action referred to in the phrase “intention to take such action” in the first limb of Clause 11(i); rather, that action is what will be completed when, after 5 May, the Junior Creditor accelerates the Junior Debt. According to this argument, the Junior Creditor has given the required 45 days notice of intention, since 5 May is more than 45 days after 19 March, and the first step in the action has already taken place, on 19 March, within the permitted January to March window. It is said that the result of this construction reflects a commercial approach to the Intercreditor Deed, whereas the construction contended for by the Senior Creditor and the Debtor does not.

The Senior Creditor and the Debtor say that that is not simply a strained construction of Clause 11(i) but an impossible one. The Default Letter is not an actual acceleration of the Junior Debt nor does it declare the Junior Debt prematurely due or payable; rather, it is simply an indication that the Junior Debt will be accelerated or otherwise be declared prematurely due or payable if payment is not made by 5 May 2008. The Senior Creditor and the Debtor submit that the action referred to in the phrase “intention to take such action” is a reference to the acceleration or declaration which, on any view, has not yet taken place. The actual acceleration or declaration (unless delayed until January 2009) cannot therefore be relied on as “the first step” in Clause 11(i) since it did not take place in January to March. They also submit that the Default Letter cannot be viewed as the “first step” since it is not a step of such action at all, let alone the first step.

Alternatively, the Senior Creditor and the Debtor submit that if the Default Letter is a “first step of such action”, then Clause 11(a) must be referring not just to the actual act of acceleration or declaration, but must be referring to a process beginning with the Default Letter and ending with the acceleration or declaration. In that case, the first step (ie the Default Letter) has, they accept, been given within the permitted January to March window. However, they say, obviously correctly, that the Junior Debtor did not give 45 days notice of its intention to send the Default Letter. Since, on this hypothesis, the Default Letter is part of the process of acceleration or declaration, Clause 11(i) has not been complied with since, according to them, the notice period must be at least 45 days prior to the first step in the process.

I am reminded by Counsel for the Junior Creditor of the well-known principles governing the construction of commercial contracts such as the Intercreditor Deed, citing in his skeleton argument the oft-cited passage from the speech of Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896 at 912-3 which I do not need to cite yet again.

It is suggested that the court is faced with “a clause (Clause 11 of the Intercreditor Deed) and a collection of contracts, which present significant difficulties of interpretation”. It may or may not be that there are difficulties of interpretation which could, in some circumstances, need to be resolved. But the question of construction which I need to resolve does not appear to me to present much difficulty, at least not any difficulty which ordinary canons of construction are unable to resolve without the need to distort the ordinary meaning of language. I rather suspect that the other area which has given rise to an issue between the parties – whether the Junior Debt is repayable on demand or not – is equally devoid of significant difficulties of construction.

It is, of course, correct to say that the Intercreditor Deed does not fall to be construed in a vacuum. The factual and commercial background is part of the matrix against which the exercise of construction must be carried out. As to that, I have already described the general background to the Intercreditor Deed and I have described its provisions, setting out the detail of Clause 11. Two aspects are worth emphasising.

First, the Intercreditor Deed was executed at the same time, and as part of the same transaction or series of transactions, as the 16 June 2006 Letter. They interlink to some extent in the sense that the Intercreditor Deed needs to be viewed in the context of the overall financing of the Obligors’ businesses and in particular the terms of the Facility Agreement.

Secondly, the Intercreditor Deed and the 16 June 2006 Letter were the latest part of a longer history. There were the original facility agreement and the several amendments which had previously been made to it; there had also been default entitling HSBC to demand payment although it had not in fact done so. Under the new arrangement, HSBC was retaining only part of its debt (ie the Junior debt) with the Obligors re-financing the major part of their borrowings with the Senior Lender.

In these circumstances, the Intercreditor Deed expressly provides that its principal purpose is to govern the priorities as between the Senior Creditor and the Junior Creditor. There can be no doubt that the Senior Creditor is the more powerful of the two having, in particular, the power to give or withhold its consent to the exercise by the Junior Creditor of such of its rights against the Obligors as fall within Clauses 11(a) to (f).

There is one other aspect of the factual matrix which I should mention. It relates to the cyclical pattern of borrowing by the Obligors throughout the financial year and the possible explanation for the presence of the January to March window in Clause 11(i). I do not propose to spend a great deal of time on it since, in my view, it has very little impact on the question of construction.

The financial year-end of the Debtor is 28 February. The evidence filed on behalf of the Claimants shows, for the year-ends February 2005 and 2006, borrowing at its lowest levels in mid-February. It climbs fairly steadily to its highest levels in October or November, declining again to the low levels in February. For the year ending February 2007, the borrowing is flatter, again with the lowest level in February, rising to a high in mid-April, declining to a similar low level in June, and then following the same pattern as the previous two years, but at a much lower total level. The picture for the year ending February 2008 is also flatter than for the two years ending in February 2005 and 2006, with total levels lower than the corresponding months of 2006/7. There is a high at the end of March (rather than mid-April) following which there is a slight fall through to mid-May, after which the pattern is the same as previously.

In his first witness statement on behalf of the Debtor, the group finance director (who has been in post since March 2004), explains that the business is highly seasonal. There is an important selling period in the run up to Christmas. Some major customers commit to product selections in March of each year and it is from that point that orders begin to flow. There is a steady build up of orders of stocks of expensive raw material which enables production to gear up to meet the anticipated orders. The group needs to carry stock for many customers based on forecast demand. The slowest months for orders are always January to March and the busiest are August to October. November is the biggest month for actual sales, followed by October. The cycle is such that from March to the autumn, there is a drawdown on the group’s revolving facilities as cash is used to pay for stocks and suppliers; from July through to November, there is an increase in receivables as orders are placed and fulfilled. He explains that with this cycle, the period during which the group’s secured lenders can get the clearest view of how the group has performed is during the first quarter of the financial year-end. He says that after the end of March, and progressively through the year, enforcement action by the Junior Creditor would be disadvantageous to the Senior Creditor because the group would have drawn down more of the Senior Creditor’s facility and the money would have gone out, but the group would hold stock which might have an impaired value on a forced sale, or receivables which might be more difficult to recover following enforcement by a secured creditor. He says that this is his understanding of the commercial rationale for clause 11 being drafted in the way which it was, and why it would have been in the interests of the Senior Creditor for the initiation of any acceleration or enforcement of the Junior Debt to be limited to the first quarter of the year. I note that the group finance director expresses this to be his understanding without explaining why that is so or the source of that understanding, accepting that he was not directly involved in the negotiations.

To the same effect is the evidence of one of the directors of the Senior Creditor. He says that the best time, from the perspective of the Senior Creditor, for an enforcement action to take place is immediately after the Christmas trading period when the group’s working capital requirements are at their lowest because of the high volume of seasonal sales. At subsequent times of year, the group’s working capital facilities are called on far more heavily and the position of a senior lender is far weaker. Without the restriction which one finds in Clause 11(i), the Junior Creditor would be able to force the Senior Creditor into taking action at a time in the trading cycle which is least beneficial to it and which would not give effect to its status as Senior Creditor.

The managing principal of the Junior Creditor does not agree with that explanation. However, neither he nor the Junior Creditor itself were involved in the negotiations which led to the June 2006 arrangements (the facility provided by the Senior Creditor, the 16 June 2006 Letter and the Intercreditor Deed in particular) since the assignment of the Junior Debt to the Junior Creditor did not take place until November 2007. He says that the financial data provided by the Debtor to the Junior Creditor setting out the extent of its borrowings on a month by month basis demonstrates that the drawdown does not increase from the end of March. He says that the business of certain group subsidiaries follows different seasonal patterns, one subsidiary in a particular sector of the market making most of its sales in the summer. He refers to certain monthly data which were presented to the Junior Creditor by the Debtor in March 2008. They show the actual figures as I have already described them for the year-end February 2008. But they also show a budget for 2008/9 and a forecast for 2009/10. It is true that the budget and the forecast show a different pattern of borrowing. The budget shows a decline from the beginning of February to mid-July, then an increase (nearly back to the February level) to October, followed by a very slight decline to early January with a sharp decline in February 2009 (when the Junior Debt falls due for repayment in any event). The forecast for 2009/10 shows a virtually flat level from February to July, and then follows the same shape (at a lower total level) as the budget for the previous year. This budget and this forecast were made available to the Junior Creditor in March 2008. There is no evidence of when they were prepared or when the pattern of borrowing which they suggest was first formulated.

The group finance director of the Debtor has responded to that evidence. He explains by reference to the same material as is relied on by the managing principal of the Junior Debtor why, in his view, the trade is indeed cyclical in the way which he had previously explained. He says that the pattern in 2006 (ie for the year ending February 2007) is slightly distorted because of the refinancing which took place with the Senior Creditor and the need for the Debtor to effect a sale and lease-back of one of the group’s properties, coupled with the significant liquidation of stock so as to complete the refinancing.

The explanation of the group finance director of the Debtor strikes me as entirely plausible and not inconsistent with the evidence. In any event, even if the evidence can be read, so far as the budget and forecast are concerned, as showing that the anticipated and intended projections for the relevant years are inconsistent with the pattern as described, that does not provide any support for a suggestion that, in June 2006, it could be said that the Senior Creditor would have been better off, or no worse off, in accepting a different window for commencement of action from the January to March window actually specified. The fact is that Clause 11(i) provides the window which it does. The Junior Creditor has provided, in my judgement, no explanation at all for why Clause 11(i) adopts that period, let alone an explanation which, in commercial terms, drives one towards the construction of Clause 11(i) for which it contends rather than that for which the Senior Creditor and the Debtor contend.

Accordingly, I approach the question of construction aware of the background which I have explained, and conscious of the fact that Clause 11(i) provides for a window of January to March for taking “the first step”. However, considerations of the trading cycle and pattern of debt do not point in favour of the construction for which the Junior Creditor contends. Whether they, in fact, point in the other direction is a matter which I will return to later.

In considering Clause 11 as a whole two matters should be noted.

First, paragraphs (a) to (f) vary in the type of action they envisage. On the one hand, paragraphs (a) and (c) appear to refer to single events taking place at a point of time – when a notice of acceleration is given or when a declaration is made. Similarly, the crystallisation of a floating charge is an event which will take place at a point of time. On the other hand, paragraphs (b), (d) and (e) appear to include not only events taking place at a point of time (such as effecting a set-off or issuing a petition for winding-up) but also processes which have a beginning and an end, although there may be room for debate in any particular case when the process begins and when it ends. Take for example enforcement of the Junior Debt by a process such as the obtaining of a charging order and its subsequent enforcement. The process may begin with an application to the court for a charging order over a particular property and end with the sale of the relevant property. Paragraph (f) appears to relate to an event which takes place at a point of time (such as issuing a claim form or adding the name of Junior Creditor to a list of supporting creditors on a winding-up petition) where the event is question is only part of a larger process.

Secondly, the provisos in Clause 11(i) to (iii) are worded in such a way as to cover all of the actions found in paragraphs (a) to (f). The wording of Clause 11(i) is not to be construed as if it applied only to the particular paragraph which, on the facts of a particular case, is in question.

The first limb of Clause 11(i) envisages a written notice by the Junior Creditor of its “intention to take such action”. Unless it has “first given” such notice (of at least 45 days), the Junior Creditor is not permitted without the written consent of the Senior Creditor, to take “such action”. The reference to “such action” is clearly a reference back to an action specified in one or more of paragraphs (a) to (f). It is clear that the notice must specify the action which it is intended to take: it would not, for instance, be possible to rely on a notice communicating an intention to accelerate the debt as justifying the bringing of legal proceedings (within paragraph (f)) unless the notice also communicated an intention to bring proceedings.

It is, in my judgment, correct to view acceleration as an event which takes place at a point in time; that conclusion, in the context of paragraph (a), is supported by reference to the other limb of paragraph (a) (the phrase “or otherwise declare any of the Junior Debt prematurely due or payable”) which clearly refers, I think, to an event which takes place at a point in time. To accelerate the Junior Debt (or to declare any part of it prematurely due) is not to effect a process which takes place over a period of time. In referring to “such action”, the first limb of Clause 11(i) is, I consider, referring to the act of acceleration which takes place at a point of time.

The second limb of Clause 11(i) refers to “the first step of such action”. It does not refer to the first step towards such action, or to a step which is preliminary to that action. Having identified the action as the act of acceleration, the Default Letter is not, according to the Senior Creditor and the Debtor, properly described as the first step of such action. It is at most a preliminary step before such action will be taken.

In this context, it is to be noted that there is no legal obligation on the Junior Creditor to write such a letter to the Debtor before taking action. Were it not for Clause 11, the Junior Creditor would be able to make a demand for payment (either without qualification, or if there has been an event of default, depending on which construction of the 16 June 2006 Letter is correct). It is said on behalf of the Junior Creditor that it is standard commercial practice to write a letter of that sort before actually demanding payment in order to give the debtor an opportunity to remedy its default. The only evidence of that is an assertion to that effect by the managing principal of the Junior Creditor. Of course I accept that it may be the case that such a letter is written even in cases where the relevant documentation does not require it (which it sometimes will): a lender might well be willing to continue to lend providing that a default is remedied. However, if it is meant, in saying that this is standard commercial practice, that the practice is universal, I would not accept the assertion made as establishing that as a fact. If it means no more than that the practice is sometimes adopted, indeed often adopted, I would say that it does not assist in resolving what is “the first step of such action”. It does not in any way cast doubt on the conclusion that the Default Letter is not the first step in the acceleration of the Junior Debt.

Indeed, I doubt that the position would be any different if the Facility Agreement had actually required the Junior Creditor to give the Debtor an opportunity to remedy any default before demanding payment, but that may depend on the precise wording of such a requirement.

It is said by the Junior Creditor that, although the action described in paragraph (a) is the actual acceleration which takes place at a point of time, the Default Letter was indeed the first step of such action. There can be no doubt, in my judgment, that the words “such action” where they appear in each limb of Clause 11(i) refer to the same “action”. Accordingly, if the Default Letter is “the first step of such action”, it must be part of “such action”. In my judgment, however, “such action” is a reference, in the context of paragraph (a), to the actual acceleration of the Junior Debt (or to a declaration that it is prematurely due) and the Default Letter is not a step of such action. It does not therefore form “the first step of such action” within the meaning of Clause 11(i).

However, I should consider the position if that is wrong. One approach, then, is to view the Default Letter and the subsequent acceleration of the Junior Debt as a process which starts with the Default Letter and ends with the actual acceleration. In that case, sending the Default Letter would, so it seems to me, be to do something which is prohibited, namely accelerating the Junior Debt. I do not consider that the Junior Creditor would be able, logically, to say both that, by sending the Default Letter, it is not accelerating the debt and also that it has taken the first step in such action ie accelerating the debt. A parallel can be drawn with the example already mentioned of a charging order under paragraph (b). By issuing proceedings to obtain such an order, the Junior Creditor would be embarking upon the process of enforcing the Junior Debt. Enforcement would not be complete, at earliest, until a charging order nisi had been obtained. But quite clearly, from the time of issue of proceedings until the obtaining of the order, the Junior Creditor would be enforcing the debt. Paragraph (b) prevents it not simply from completing the enforcement process but, by providing it shall not enforce the Junior Debt, prevents it from taking any step in the process of enforcement. However, by taking proceedings that is precisely what it would be doing. Similarly, on the hypothesis that acceleration is not simply an event taking place at a point of time but is a process beginning with the Default Letter, the sending of the Default Letter is a step of that very process and, in effecting it, the Junior Creditor is doing precisely that which it is prevented by paragraph (a) namely to accelerate the Junior Debt.

Since, on this hypothesis, sending the Default Letter would be something otherwise prohibited by paragraph (a), it is authorised under clause 11(i) only if the Senior Creditor has been given 45 days notice of the intention to send it which was clearly not done.

The Junior Creditor seeks to avoid this result by arguing that “such action” in the first limb of Clause 11(i) is a reference to the completion of such action. On this approach, “such action” does not take place until acceleration is complete but “the first step in such action” is the Default Letter which is the first step in the process leading to acceleration. In my judgment, it is an entirely artificial and strained construction to read a requirement for notice of “its intention to take such action” as a requirement for notice of intention to complete such action rather than to start the process which is part of, and not simply preliminary to, that action. If the Default Notice is properly to be regarded as part of the process of acceleration (which is the hypothesis here under consideration – if it is not part of that process, it is not, for reasons already given the first step at all), then the natural reading of Clause 11(i) is, I have no doubt, that notice of intention must be given before the process is started.

I do not consider, contrary to the submission made on its behalf, that there is anything of assistance to the Junior Creditor to be found in the presence of the words “it commences” before “the first step” in the second limb of Clause 11(i). I accept that those words may add nothing in the present case – the first step of the acceleration will also be the last step. But that could be so even on the construction favoured by the Junior Creditor: for instance, the Junior Creditor might simply have given 45 days’ notice on 1 December 2007 of its intention to accelerate 46 days later in which case the actual acceleration would then be the only step.

Returning to the point left open in paragraph 29 above and in the light of the reasoning above, it is not necessary to determine whether the considerations of the trading cycle and pattern of borrowing support the conclusion or not. The answer to the issue of construction is in my view clear even if it is not possible to rely on those factors.

In my judgment, the submissions made on behalf of the Senior Creditor and the Debtor are correct for the reasons which I have given. They are to be preferred to the submissions on behalf of the Junior Creditor which I consider owe more to an attempt to impose a construction which justifies the result sought rather than to an attempt to discover the true construction and then to see what result follows.

I will therefore make the declarations sought in the Claim Form in the Part 8 claim and paragraphs 5B and 5C of the Claim Form in the Part 7 claim.