Bank & Clients Plc v King & Anor

There are two applications before the Court. In the first application the Claimant (“the Bank”) seeks summary judgment against the First and Second Defendants under two Personal Guarantees dated 31 October 2016. In the second, the Bank seeks a worldwide freezing injunction against both Defendants.

The application for a freezing order was the first to be issued, on 18May 2017, and came before Blair J. at a with notice hearing on 16 June 2017. The Defendants were represented by Mr Richard Gillis QC and Mishcon de Reya (“Mishcon”) at this hearing. In the event, the application was adjourned, with the Defendants providing undertakings that were subsequently incorporated in a Consent Order sealed on 23 June 2017. Blair J. considered that it would be sensible to resolve the question of the Defendants’ obligations under the Personal Guarantees at an early stage. The Consent Order accordingly provided that the Bank was to file any application for summary judgment with respect to its debt claim under the Personal Guarantees on or before 19 June 2017.

The summary judgment application was issued on 19 June 2017 and both applications were listed for hearing on 21-22 August 2017. The application was supported by the First Witness Statement of the Bank’s Chief Executive, Pedro Errazuriz. The Defendants each filed a witness statement on 10 July 2017. The Claimant subsequently served two further witness statements in support of the summary judgment application.

On 27 July 2017 the Bank issued an application for third party disclosure from Ve Interactive Ltd (“Ve”) which was granted by Order of HHJ Waksman QC on 10 August 2017. Some of that disclosure has been exhibited to witness statements served on behalf of the Bank.

The applications were adjourned shortly before the August hearing because the Defendants issued IVA proposals, the effect of which was to place a moratorium over these proceedings. The IVA process was terminated when it became apparent that the Defendants had failed to disclose the existence of a major creditor (in excess of £5 million) and the IVA Chairman withdrew his consent to act as nominee.

On 7 and 9 November 2017 Mishcon provided the Claimant with Notices of Change of Legal Representative in respect of both Defendants. The Defendants thereafter ceased to have legal representation. It would appear that they owed substantial sums to Mishcon.

The Claimant provided the Defendants with electronic copies of the hearing bundles and their skeleton arguments on 15 November 2017.

At 1554 on Friday, 17 November 2017, Mr. Brown emailed the Court in the following terms:-

“...Despite the elaborate pleadings of K&S please expect communication from Martin Adrian King on behalf of us both, shortly, against this wholly unjustified claim brought by B&C against us. Having exhausted resources against this frivolous claim we will be seeking an adjournment of the hearing since we have both filed Bankruptcy Applications with the Official Receiver and expect them to be approved shortly...”

Shortly afterwards Mr King emailed the Court and confirmed that the Defendants had filed Bankruptcy Applications (which he attached) and that they would be seeking an adjournment of the hearing. The attachments showed that Mr Brown had filed his application for bankruptcy on 13 November and that Mr King had filed his application later, on 17 November 2017.

Mr King represented himself at the hearing before me on 20 and 21 November 2017. He struck me as being highly intelligent and was very articulate. Mr Brown did not attend. I was informed by Mr King on the first day of the hearing that Mr Brown was in Spain, was unwell, and could not afford to come to the hearing. On the second day Mr King told me that Mr Brown had wanted to attend that day but that he was still unwell.

I declined an application to adjourn or stay the proceedings for the reasons set out in my ruling on 20 November 2017. I was advised on 21 November 2017 that a Bankruptcy Order had been made in respect of Mr King on the previous day and was asked to take this into account. That order does not affect my decision to allow the applications to proceed. I would have reached the same conclusion had Bankruptcy Orders in respect of both Defendants been made shortly before the hearing of the applications.

The Bank is a private bank which offers loans to medium and large businesses, in addition to providing savings and deposit accounts for retail and business clients. The Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

The Defendants were both closely involved in the management of Ve. Ve is a London-based company specialising in online advertising and e-commerce software products. In 2016 it was regarded in the market as a unicorn company, with a perceived value of over £1 billion. Mr Brown was Ve’s CEO at the relevant time and had been a director of Ve since its start up in 2009. Mr King became a director in 2011. He resigned in September 2016 because he was facing criminal proceedings brought by HMRC (he was later acquitted). He nevertheless remained closely involved with the management of Ve and was a major shareholder.

Towards the end of October 2016 Ve was facing what Mr Brown described as “short term but immediate funding issues and money was urgently needed”. The Defendants approached the Bank and a meeting was set up on Friday, 28 October. The Defendants attended the Bank’s office and met Mr Errazuriz and Mr Bridel of the Bank. The Defendants advised the Bank that £2 million was needed as a short term bridging loan to be used for the purchase of the ve.com domain name, the acquisition of a company and for working capital prior to Ve obtaining new equity of up to £50 million. The Defendants indicated that they had been offered funding by one of Ve’s existing shareholders, Ve Vegas Investors IV LLC (“Ve Vegas”), but that they were reluctant to accept this as it was being offered on a “down round” basis.

At this meeting it was agreed in principle that the Bank would provide a loan of £2.15 million to Ve, that the loan would be repayable on demand and in any event by 31 March 2017, and that it would be secured by fixed and floating charges over Ve’s assets and guaranteed by way of personal guarantees from each of the Defendants as well as a number of corporate guarantors. There is an issue between the parties as to whether certain representations were made by the Bank at the meeting and I will return to this below.

Following the meeting the bank corresponded with the Defendants and Ve with regard to the loan and the personal guarantees. The Bank sought information as to the nature and extent of Ve’s and the Defendants’ assets and liabilities. On 29 October 2016 Mr King responded to the Bank’s requests for further information regarding Ve and later that day identified the holders of a number of convertible loan notes and the sums advanced by them. Ve Vegas was the second largest note holder, having advanced £5 million to Ve.

Later on 29 October 2016 Mr Errazuriz asked the Defendants each to provide an individual signed statement of net worth in which they were to list every one of their assets worth more than £100,000, together with details of its location, value and, if any, of co-owners together with percentages of ownership. Mr King responded that evening, attaching an Assets and Liabilities spreadsheet in which he valued his Personal Net Worth as over £92 million and the Net Corporate Assets of 55 Prestige Ltd., a company in which he was closely interested, as just under £15 million.

Mr Brown had by then returned to Spain. He wrote to the Bank at 1725 on 30 October 2016 and made what he described as some straight-forward comments. He advised that it would not be possible to get Ve Vegas to subordinate their loan because they were “part of the group that would love a down round to steal some stock”. Loan subordination was therefore a “no go” although he indicated that Ve would be prepared to allow a debenture to be filed and for Ve Vegas then to be approached for the purposes of subordination. Mr Brown also stated that the joint asset accounts at the Pictet bank in Switzerland were essentially out of his reach. He concluded by saying that the choice for the Bank was either to advance to Ve and “trust us on a post closing basis” or to loan the money to himself and Mr King personally and advance the funds to Ve. He observed that the Bank would be heavily over-collateralized and that this should suffice personally.

At 2043 Mr Errazuriz wrote to his solicitors at King & Spalding (“K&S”) to record the headline points that had been agreed with the Defendants by telephone. The Defendants were copied into this email. The headline points were as follows:-

There then followed a lengthy meeting between the Bank and their lawyers, Ve and their in-house lawyers and Mr King at the offices of K&S on 31 October 2016. The meeting started at about 0730. Mr King told me that he did not arrive until about 1300 because of the criminal case in which he was involved, although he gives the impression in his witness statement that he arrived with the Ve team. During the course of the day Mr Brown signed a power of attorney at Madrid Airport which authorised Mr King to sign the facility documents on his behalf. At 0739 that morning Mr Brown sent the Bank an email which summarised and valued his assets. The total value of these was £366.45+ million.

The Facility Agreement and other related Finance Documents were executed at about 1600 on 31 October 2016. Mr Errazuriz says that Mr King, Mr Tikaram (Ve’s CFO) and Ve’s two in-house lawyers spent several hours considering the documentation in private.

On the following day, 1 November 2016, Mr Jack Wolton, one of Ve’s in-house lawyers, emailed Mr King to summarise the key terms in the Facility Agreement in order to understand the key rights and obligations of Ve and the Defendants as guarantors. The email was copied to Mr Brown. Following his summary Mr Wolton advised as follows:-

“...As we all knew before signing, this agreement is very one-sided as we were not given any scope or time to negotiate it so ideally we should aim to repay the loan and end this relationship as soon as possible. Please note that B&C is able to call for repayment of the loan in a number of circumstances prior to 31 March 2017.

In relation to personal guarantees, please note that B&C can call upon you to satisfy Ve’s obligation under the Facility Agreement without having to try to enforce such obligations against Ve first ...”

There were a number of events of default following the conclusion of the Facility Agreement. These included:-

The Facility Agreement was amended on 3 March 2017 (“the Amendment Facility Agreement”). The amendments came about because Ve was going to sell its shares to a corporate vehicle called Treyew Limited (“Treyew”) and needed the Bank’s agreement in order to do so. The sale of these shares was prohibited by the terms of the Facility Agreement.

It is clear from their evidence, and from what Mr King told me at the hearing, that the Defendants believe that they were unfairly forced to resign from Ve as a result of what they say was manoeuvring by a Mr Barrowman, who was a shareholder of Ve. Treyew was controlled by Mr Barrowman or companies within his group. It would appear that Mr Barrowman had raised concerns (with which the Defendants do not agree) about Ve’s corporate governance and about the channelling of Ve funds to the Defendants, their private companies and other beneficiaries. The circumstances in which control in Ve came to be transferred to Treyew is of no relevance to the issues with which I am concerned. The use to which Ve funds were put is, however, material to the Freezing Injunction Application.

The Amendment Facility Agreement was concluded at Ve’s offices on 3 March 2017. Settlement Deeds between Ve, Treyew and each of the Defendants were also agreed on that day.

HMRC submitted a petition for Ve’s winding up on 3 April 2017. A petition for the appointment of an administrator was submitted to the High Court and Ve entered into administration on 24 April 2017. Ve was later sold for US$2 million as a pre-packaged going concern by its administrators, Smith & Williamson.

On 25 April 2017 the Bank issued an acceleration notice to Ve pursuant to clause 16.5 of the Facility Agreement and demanded payment of all amounts that were then owed to the Bank. On the same day the Bank also wrote to the Defendants and demanded payment of those amounts in accordance with the terms of the Personal Guarantees.

The Facility Agreement provided that the Bank agreed to make available to Ve a sterling term loan facility in an aggregate amount equal to £2.2 million and that Ve would apply all amounts borrowed under the Facility towards (a) the Purchase of the Domain name, (b) the acquisition of Just Premium BV, and (c) to finance working capital and other general corporate purposes. Clause 7.3 of the Facility Agreement provided that

“... The Borrower shall pay the Lender a work fee of GBP1,000,000 ... on the date when all amounts in respect of the Facility Loan are repaid in full (whether mandatorily, voluntarily, at maturity or by acceleration) ...”

Attached to the Facility Agreement was a Deed pursuant to which the Defendants charged to the bank all of the Ve shares owned by them by way of a first equitable mortgage.

The two Personal Guarantees were in materially identical terms and provided in relevant part as follows:-

“...2.1 In consideration of the Bank making, or continuing to grant, loans to, giving credit or granting banking facilities, accommodation or time to [Ve] as the Bank in its absolute discretion sees fit, the Guarantor guarantees to the Bank, whenever an Obligor does not pay any of the Guaranteed Obligations when due, to pay on demand the Guaranteed Obligations.

2.2

The Guarantor as principal obligor and as a separate and independent obligation and liability from his or her obligations under clause 2.1, agrees to indemnify and keep indemnified the Bank in full and on demand from and against all and any losses, costs, claims, liabilities, damages, demands or expenses suffered or incurred by the Bank arising out of, or in connection with, any failure of an Obligor to perform or discharge any of its obligations or liabilities in respect of the Guaranteed Obligations ...

...

3.1

This Guarantee is and shall at all times be a continuing security and shall cover the ultimate balance from time to time owing to the Bank by the Obligors in respect of the Guaranteed Obligations..

3.3

The Bank shall not be obliged before taking steps to enforce any of its rights or remedies under this Guarantee:-

(a)

to take any action or obtain judgment in any court against any Obligor or any other person; or

(b)

to make or file any claim in a bankruptcy, liquidation, administration or insolvency of any Obligor or any other person; or

(c)

to make, demand, enforce or seek to enforce any claim, right or remedy against any Obligor or other person ...

...

16.15

On and at any time after the occurrence of an Event of default the Lender may by notice to the Borrower: ...

...

(b)

declare that all or part of the Facility Loan, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable ...”

“Guaranteed Obligations” are defined in Clause 1.1 as “... all monies, debts and liabilities of any nature from time to time due, owing or incurred by [Ve] and any other Obligor to the Bank on any current or other account under or in connection with present or future loans or financial accommodation provided by the Bank to [Ve] ...” “Obligor” is defined in the Facility as meaning Ve, the Ve subsidiaries as Corporate Guarantors and the Defendants as Personal Guarantors.

Asset Lists were appended to each of the Personal Guarantees and are described in Clause 6.9 as “a complete list of all assets with an individual value in excess of £100,000 owned by the Guarantor, including the value of each asset, the current location of each asset and details of any joint ownership of each asset, including the percentage ownership of such joint owner”.

The Amended Facility Agreement provided for Treyew to become a Corporate Guarantor and required repayment of the Loan to be made in six consecutive quarterly instalments, with the first instalment to be paid on 31 December 2017. A new Clause 7.3 was substituted for the original clause.

“... 2.3 ...

7.3

Work Fee

The Borrower shall pay the Lender a work fee of GBP1,000,000 ... which shall be fully earned on the date hereof and paid in three equal instalments of GBP 333,333 ... on 31 March 2017, 30 June 2017 and 30 September 2017; provided, if the Borrower repays the Facility Loan in full (whether mandatorily, voluntarily, at maturity or by acceleration), any unpaid work fee shall be immediately due and payable to the Lender ...

...

5.1

Guarantee Confirmation

On the date hereof:

each Obligor agrees that it is bound as “Obligor” by the terms of the Facility Agreement, as amended hereby, and each other Finance Document to which it is a party; and each Guarantor confirms that the guarantee granted by it pursuant to the applicable Personal Guarantee, or Treyew Share Charge, as applicable, continues in full force and effect...

...provided, further, the Lender agrees to use its commercially reasonable efforts to enforce and realise on the Personal Guarantees before enforcing its rights and remedies with respect to the Treyew Share Charge...”

The Court will only grant summary judgment against a defendant if it considers that the defendant has no real prospect of successfully defending the claim and that there is no other compelling reason why the case should be disposed of at trial: CPR Part 24.2.

The principles to be applied on an application for summary judgment are uncontroversial and were summarised by Lewison J. (as he then was) in Easyair Ltd v Opal Telecom [2009] EWHC 339 at [15]:-

The Defendants assert that they are not liable under the Personal Guarantees because of representations or collateral warranties or promises that were allegedly made to them by Mr Errazuriz on 28 October 2016. These are summarised at paragraph 49 of Mr. Brown’s first witness statement as follows:-

“...We did not want to provide personal guarantees. However, we agreed to do so because Mr Errazuriz made it very clear to us that:

1.

The Loan would be secured in the form of a fixed and floating charge on Ve; and

2.

In the event that any action had to be taken against us personally, the Claimant would first seek to enforce against the share security charged to secure Ve’s liabilities under the loan; and

3.

We should not worry about the guarantees and that they would be a back-up if Ve (a) were in default under the Facility Agreement and (b) did not pay the Claimant following such default ...”

I will refer to these as the “alleged representations” and to the individual representations as representations 1, 2 and 3.

The alleged representations are said by Mr Brown to have made by the lifts in the lobby of the Bank’s offices after the Defendants had left the meeting in circumstances where the Bank had indicated that it would not be able to perfect the corporate security required in the limited time available before 31 October. Mr Errazuriz is said to have run after the Defendants and advised that if the Defendants could offer some personal assets as security for the loan then this would provide sufficient comfort to the Bank’s credit committee to approve the proposed loan pending the corporate security being perfected. The Defendants agreed to pledge their shares (which Mr Brown says were worth a small fortune). There were then discussions about the pledging of the shares and the Bank’s requirement for additional personal security, including personal guarantees, during the course of which Mr Errazuriz made the alleged representations.

The Bank strenuously denies that any such representations were made. It submits that the Defendants have no real prospect of success in relation to any case based upon these representations and relies on the following arguments:-

The starting point is that each Defendant is a principal obligor under his Personal Guarantee to the Bank. The Personal Guarantees were signed by the Defendants and, absent fraud or misrepresentation, they are bound by them. It is wholly immaterial whether they read the document or not before signing it: L’Estrange v F. Graucob Ltd. [1934] 2 K.B. 394, per Scrutton LJ at pp.403-404. The Personal Guarantees impose clearly defined obligations upon the Defendants to pay the Guaranteed Obligations on demand when payment has not been made by Ve. The Debt was accelerated by the Bank upon Events of Default and demands were made under the Personal Guarantees.

(1) No cogent case as to how the representations were made. The Bank submits that the Defendants do not give a clear account as to how the representations were made and that their evidence lacks the requisite level of detail. The Defendants were asked for further information as to the precise wording of the alleged representations but did not respond. Mr Brown’s evidence uses vague phrases such as “both parties clearly understood” and “clear understanding” without setting out the words that were used or any approximation of those words. Mr King gives no evidence at all about the substance of the alleged conversation, and simply endorses Mr Brown’s account. I agree that the evidence lacks precision but this, of itself, would be consistent with the sort of rough and ready conversation that Mr Brown says that the parties had when standing by the lifts in the lobby.

(2) The alleged representations were first raised at a very late stage. The first time that any reference was made to the alleged representations was in a letter from Mishcon to K&S dated 18 May 2017 (“the Mishcon letter”), just over three weeks after the Bank had demanded payment under the Personal Guarantees. There were many occasions before that when the Defendants both could, and in my judgment would and should, have referred to them had they in fact been made. These include: (a) following receipt of the Bank’s email to K&S at 2043 on 30 October 2016, in which the Bank summarised the agreement that had been reached with the defendants and Ve; (b) on 31 October 2016 when the Personal Guarantees were signed. It was readily apparent from the face of the documents that they imposed a primary obligation upon the Defendants; (c) on 1 November 2016, when Ve’s lawyer Mr. Wolton, spelled out the effect of the Guarantees in his mail to the Defendants; (d) during the course of correspondence between the Defendants and K&S when the latter sought to perfect and clarify the security that had been given by the Defendants to the Bank in correspondence dealing with the value of Mr Brown’s Spanish property, the value of Mr King’s supercar collection and cherished number plates; and, finally, (e) during the correspondence and discussions leading up to the conclusion of the Amended Facility Agreement, which both Defendants signed and which explicitly acknowledged that the Bank would use its commercially reasonable efforts to enforce and realise on the Personal Guarantees before enforcing its rights and remedies with respect to the Treyew Share Charge. Tracked changed versions of the Facility Agreements were sent to both Defendants before the meetings on 3 March 2017.

(3) The Defendants’ defences are a moving target. The first occasion upon which it was suggested that the Defendants had a defence to claims under the Personal Guarantees was in the Mishcon letter. A central plank of the defence raised in that letter was that the Bank had made a series of misrepresentations acting through Treyew. It is not, however, suggested in either of the Defendants’ witness statements that anything that was said on behalf of Treyew by Mr Barrowman affects their liability under the Amended Facility Agreement. Potential defences of duress and undue influence were also raised in the Mishcon letter. These too have not been proceeded with. I do not set a great deal of store by the fact that the defences narrowed by the time the Defendants came to make their witness statements. Mr Brown makes clear in paragraph 114 of his First Witness Statement that he reserves his position with regard to any dealings between the Bank and Treyew.

(4) The Defendants have made false statements in their evidence to the Court. The Bank points to two demonstrably inaccurate statements in the evidence of Mr Brown and one in the evidence of Mr King. Both Defendants assert that they did not see and were not aware of the Work Fee Agreement, which was part of the suite of documents agreed and signed (in this case by Mr Tikaram on Ve’s behalf) on 31 October 2016. A full set of executed finance documents was in fact sent by Mr Wolton to both Defendants on 21 November 2016. The email which he forwarded both attached and explicitly listed the Work Fee Agreement. Mr Brown also asserted that he was not aware that Treyew had agreed an extension to the facility from March 2017 to March 2019. That, however, is precisely what the Amended Facility Agreement provides. And, on 2 March 2017, the day before the Amended Facility Agreement was concluded, Mr Brown said this in an email

“... We still await the settlement agreements but one other issue is that whilst we are happy that B&C loan is pushed out two years we cannot consent to our personal guarantees being pushed out for two years as this ties up specific assets ...”

This strongly suggests that Mr Brown, at least, was paying close attention to the various agreements that were going to be concluded on the following day, and knew full well that the loan facility was going to be extended and that it was proposed that the Defendants would remain liable under their Personal Guarantees for that period (as was actually agreed). It is also inconsistent with Mr Brown’s evidence that he did not follow what was going on at the settlement meetings, or understand the nature of the documents that he was being asked to sign on 3 March 2017, because he was too stressed and upset to do so.

(5) There is no documentary evidence to support the alleged representations. This is a similar point to the bank’s second argument. There is indeed no documentary evidence which supports the existence of the alleged representations.

(6) The alleged representations are contradicted by the contemporary evidence. The contemporary evidence is, in my judgment, inconsistent with the making of the alleged representations.

(7) The alleged representations are commercially fanciful. There is considerable force in this point. Personal Guarantees are an important source of collateral for Banks and other lenders. The Defendants are both very intelligent, experienced and sophisticated businessmen. As their Bankruptcy Applications show they had each previously committed themselves to personal guarantees for very much larger sums than those with which these applications are concerned and would have known what they were committing themselves to.

Although Ve had a high share value it was cash-starved, it was not profitable, and it was unable to defray its ordinary operating expenses. There was no guarantee that its shares would continue to retain their value and every reason to believe, as Mr Errazuriz says he did, that Ve was not financially stable. Why else would Ve need to raise £2 million over a weekend in order to provide cashflow? It is inherently implausible against this background that the Bank would have made the alleged representations and have conveyed the impression that the Personal Guarantees were simply required as back-up in order to give comfort to the Bank’s credit committee. It is also inherently implausible that the Defendants would have been induced to enter into the Personal Guarantees by the alleged statements. Although each case turns upon its own facts, I respectfully agree with the observations of Mr MH Rosen QC (sitting as a Judge of the High Court) in Gaind v Dunbar Assets Plc [2016] EWCH (Ch) at [34]-[36] to the effect that no reasonable businessman would have relied on oral statements about the need to have a guarantee to satisfy the credit committee or as a matter of policy regarding the enforcement of such a guarantee in light of the documents that were being entered into. They apply equally to the circumstances of the present case.

(8) The Defendants’ subsequent conduct is inconsistent with the alleged representations. The Bank’s key point under this heading is that the terms of the Amended Facility Agreement, which were agreed and signed up to by the Defendants, are inconsistent with the alleged representations. This is incontrovertible. The Amended Facility Agreement explicitly provided that the Bank would use its commercially reasonable efforts to enforce and realise on Personal Guarantees before enforcing its rights and remedies on the Treyew Share Charge. The Defendants seek to get round this point by saying that the amendments were not brought to their attention, that they were only presented with the signature pages of the key documents, and that they were in any event both too stressed to understand or focus on what was being agreed: Mr Brown because of the transfer of control in Ve, and Mr King because he had just been acquitted of all charges in the Crown Court on the 3 March 2017 and was in no state to focus on anything else. Both Defendants also complain about the fact that they had no independent legal advice. The contemporaneous correspondence shows, however, that the Defendants were aware that a proposal to extend the facility by two years was on the table, that they had expressly stated that they did not want the Personal Guarantees to remain in place for the extended term, and that this point was also made to K&S on their behalf by Mr Wolton in an email on 2 March 2017. This was not acceptable and on 3 March 2017 the Defendants were both sent drafts of the Amended Facility Agreement with tracked changes which clearly highlighted the proposed changes, including those in relation to the enforcing of the Personal Guarantees ahead of the Share Charge. The Defendants later signed the Amended Facility Agreement in those terms.

There is no merit in the argument that the alleged representations continued up until the conclusion of the Amended Facility Agreement. The exchanges between the parties are inconsistent with the existence of those representations, as is the Amended Facility Agreement itself.

(9) Representations 1 and 2 fail as a matter of law. The Bank’s final point is that representations 1 and 2 must fail in any event in light of the decision of the Court of Appeal in Peekay Intermark Ltd v Australia & New Zealand Banking Group [2006] EWCA Civ 386 (“Peekay”). In Peekay the claimant had been led to believe in ought and ready pre-contractual discussions that he would be entering into an investment of a certain kind. The Final Terms and Conditions (“FTCs”), which he signed, provided for an investment of a different kind. The claimant would have been expected to read the FTCs before he signed them and had he done so he would have appreciated that that investment was not what he had been led to expect. The Court of Appeal held that in these circumstances the claimant had been induced to enter into the contract not by any representation on the part of the defendant but rather “by his own assumption that the investment product to which [the FTCs] related corresponded to the description he had previously been given”: per Moore-Bick LJ at [52].

I consider that the reasoning of the Court of Appeal in Peekay is applicable to the present case. The Defendants rely on a rough and ready conversation on 28 October 2016 at which several representations were allegedly made. They signed Personal Guarantees on 31 October 2016 which were inconsistent with those representations and were not, on the Defendants’ case, what they had been led to expect. It was incumbent upon the Defendants to read the draft Personal Guarantees before they agreed to them. Mr King says that he signed the Personal Guarantees on his and Mr Brown’s behalf “on the understanding that the documents reflected the prior discussions with the [Bank] and the representations made by Mr Errazuriz”. If that evidence is to be taken at face value he must be taken to have assumed that the Personal Guarantees reflected the alleged rough and ready discussion on 28 October 2016. Had he taken the trouble to read the terms he would have appreciated that the Personal Guarantees were in very different terms to those discussed previously. It follows from this that any claim based on representation 1 or representation 2 is bound to fail.

The Bank claims the sum of £3,540,304.77 in debt, calculated as follows:-

No issue is taken with the figures as figures. The Defendants do, however, assert that the Work Fee is a “fiction” and does not in any event fall within the definition of “Guaranteed Obligation” in the Personal Guarantees. There is no merit in these arguments. The Work Fee is certainly high, but then the Bank was being asked to advance a considerable sum of money at short notice. The Defendants were well aware of the Bank’s terms and they agreed to them. The Work Fee also falls squarely within the definition of “Guaranteed Obligation” – it is a sum, debt and liability due in connection with the Loan.

In light of my findings above I am satisfied that the Defendants have no real prospect of successfully defending the claims against them and that each Defendant is liable to the Bank in the sum of £3,540,304.77 under the Personal Guarantee which he signed. The Defendants’ defences carry no degree of conviction and there is no other compelling reason why the case should be disposed of at trial.

The Bank seeks a world-wide freezing injunction preventing the Defendants from removing, disposing or dealing with assets up the value of £3,540,304.77. It asserts that it is at risk of being unable to satisfy any judgment due to the unjustified disposal of assets.

The Defendants submit that there is no evidence at all that there is any risk that their assets will be dissipated. They further say that they have no assets and that it would be inappropriate for injunctive relief to be granted in light of their respective actual or pending bankruptcies. I will consider these points in turn.

The applicable principles are well known. The applicant needs to adduce solid evidence to support his assertion that there is a real risk that the judgment will go unsatisfied. Relevant factors include: the ease with which any assets may be moved or disposed of; the defendant’s past or existing credit record and whether there is a history of default in honouring debts; the running up of liabilities and not paying them or incurring liabilities beyond the defendant’s means; evidence of dishonesty or behaving with an unacceptably low standard of commercial morality giving rise to a feeling of uneasiness about the defendant: see Gee on Commercial Injunctions (6^th Ed) at §§12-033-12-055 as approved by Gloster LJ in Candy v Holyoake [2017] EWCA Civ 92 at [34]; and, in particular, Thane Investments v Tomlinson [2003] EWCA Civ 1272 at [28] and AH Baldwin & Sons v Al-Thani [2012] EWHC 3156 at [31]. I have kept these principles well in mind when considering this application.

The Bank relies on no fewer than fourteen different facts and matters in support of the risk of dissipation. Each of these is said to go the Defendants’ unacceptably low standards of morality. In some instances, the Bank asserts that the matters upon which they rely are evidence of dishonesty and fraud on the part of the Defendants.

It is unnecessary for me to consider each and every one of the matters to which the Bank refers. This is because I am satisfied that a sufficient risk of dissipation has been made out when considering just a handful of them.

I start with the very last point relied upon by the Bank. The avowed (and contractually agreed) purpose of the Loan was, as I have set out above, to enable Ve to purchase a domain name and a company and to provide working capital pending the hoped-for injection of a further £50 million into Ve by another lender. On 31October 2016 the Bank paid £2,080,000 into a Ve NatWest bank account. The opening balance on that account was £507.88. By 2 November the balance had reduced back down to £190.55. Some of the withdrawals would appear to have been payroll related. Others were to other Ve interactive accounts. Substantial amounts, however, were disbursed to the Defendants themselves or to their own private companies. For example:-

There is further evidence that large sums of money were paid out by Ve to the Defendants on other occasions. I was shown a Ve bank statement in which payments of £1 million and £1,955 million were made to Mr Brown and Mr King respectively on 23 November 2015. Mr King pointed to a payment into the account from Ve which balanced the account at the end of the day and said that this was probably paid by Mr Brown from moneys received by a sale of shares. He told me that the payment to himself was a personal loan to enable him to cover his legal costs and to assist him in supporting his family and generating some “non-tainted” funds in the event that his other assets were deemed to be tainted following the HMRC prosecution. This is not an issue that I can resolve on the evidence that was before me save to say that it is a yet further example of the Defendants using Ve’s accounts for their own personal purposes. Many other such examples are given in the evidence of Mr Das for the Claimant.

Next, I am satisfied on the evidence that I have been shown that both Defendants gave misleading information as to the value of their assets in the Asset Lists that were appended to the Personal Guarantees and in the information which they provided to the Bank immediately before the conclusion of those guarantees. For example:

The Bank relies on a number of other items in the Asset Lists which are said to give a misleading impression of the value of those assets, in particular evidence as to the value of Mr Brown’s Spanish property and evidence as to the real value of Mr King’s (and 55 Prestige’s) supercar collection. The latter is a particularly stark example of overvaluation because Mr King did not reveal that the majority of the cars in which he claimed to have an equity were subject to hire purchase agreements.

I am satisfied that that the Defendants adopted what can most charitably be described as a wholly cavalier attitude when providing information to the Bank about the value of their assets. There is considerable force in the Bank’s submission that the Defendants were prepared to say whatever was necessary in order to persuade the Bank to lend to Ve.

In conclusion, I am satisfied there is solid evidence that the Defendants have behaved with unacceptably low standards of commercial morality in their dealings with Ve’s money as well as in their dealings with the Bank. I am also satisfied that there is a risk that the Defendants will dissipate their assets in order to avoid this judgment.

Mr King submitted that I should not give injunctive relief because there are no assets against which any injunction would bite. I do not agree. The fact that any assets caught by the injunction may be limited is not a reason for not granting one: see Antonio Gramsci v Recoletos [2011] EWHC 2242 QB at [29].

The bankruptcy proceedings are an important factor in considering whether to grant injunctive relief. It will often be appropriate to discharge, or not to make, a freezing order where the defendant is the subject of a bankruptcy order or has applied to be made bankrupt. The question I must ask myself is whether it is just and convenient to grant an injunction notwithstanding the actual or pending bankruptcy of these Defendants.

My attention was drawn to the helpful decision of Mr Richard Salter QC (sitting as a Judge of the High Court) in Eco Quest Plc v GFI Consultants Ltd and others [2014] EWHC 4329 (QB). In that case a freezing injunction was granted against the defendants even though bankruptcy orders had been made. The claim there was made in fraud. I was advised during the course of the hearing that the Bank intends to proceed against the Defendants in fraud even if I were to give judgment in debt. The Bank may well have a greater incentive to locate, trace and to bring into account the Defendants’ assets than any Trustee in bankruptcy.

In my view the just and convenient course here is to grant a freezing injunction in essentially the terms sought by the Bank. That injunction must, however, be appropriately framed so as to make it clear that any assets that are caught by the injunction will be held for the benefit of the creditors of the Defendants as a whole and not just the Bank. The order must also include a proviso which expressly permits the Trustee(s) in Bankruptcy to perform his or their duties for the creditors of each Defendant as a whole without further reference to this Court.

For the reasons that I have given above:-

I would be grateful if counsel for the Bank would, in consultation with the Defendants, draw up a draft Order which gives effect to this judgment.