RAEL HODES v JACK FRANKEL
[2023] EWHC 442 (Ch)
Rael Hodes & Anor v Jack Frankel & Ors
10 June 2024
[2024] EWHC 1311 (Ch)
High Court
Someone lent money, but a condition wasn't met for the loan to be forgiven. The borrower claimed the loan was paid or didn't have to be paid back, but the court said the loan wasn't paid and the lender can get their money back, minus some earlier payments.
Key Facts
- •Rael Hodes and Caleo Capital (Pty) Ltd lent Jack Frankel and Jacob Dreyfuss £650,000 under a Personal Loan Agreement (PLA) in February 2017.
- •The loan was intended to fund an investment in Edgewater (Hampshire) Limited, a property investment company.
- •The PLA contained a condition precedent requiring further agreements (a company loan agreement, a waterfall agreement, and a shareholders' agreement) to be executed.
- •This condition was never met.
- •Frankel and Dreyfuss argued that the loan was discharged by payment or conduct, or that Hodes was estopped from claiming repayment.
- •Subsequent distributions of funds from Edgewater were made to Hodes and Caleo, described as 'dividends,' despite Caleo not being a registered shareholder.
- •The shares in Edgewater were ultimately transferred from Waterpeak (owned by Frankel and Dreyfuss' wife) to Frankel and Dreyfuss personally.
- •The property was sold in 2023 without consultation with Hodes and Caleo.
Legal Principles
An agreement, including a variation of an existing agreement, can be formed without particular formality.
Defendants' submissions (paragraph 105)
Estoppel by representation requires: a representation of fact; that representation was made; a contradictory later position; inducement and detriment to the party raising the estoppel; and the representation was made by the party sought to be estopped.
Spliethoff's Bevraschingskantoor BV v Bank of China Limited [2016] 1 All ER (Comm) 1034 at [155]
An estoppel may arise from silence where a reasonable person would expect the other party to clarify their position.
Ted Baker Plc v Axa Insurance UK Plc [2017] EWCA Civ 4097 at [72]-[77]
Estoppel by convention may arise where parties act on a shared assumption of facts or law, and it would be unjust to allow one party to deny that assumption.
Republic of India v. India Steamship Co Ltd (No 2) [1998] AC 878 at 913E-G
Outcomes
Judgment for Hodes against Frankel and Dreyfuss for repayment of £650,000 under the PLA.
The condition precedent in the PLA was not satisfied, and there was no agreement to vary the terms of the PLA by conduct or otherwise. The defences of discharge by payment, consent, conduct and estoppel failed.
Credit must be given for sums received by Hodes and Caleo.
These payments were interim dividends that were paid in anticipation of the arrangements being finalized and are prima facie returnable to Waterpeak.
Waterpeak holds the relevant shares in Edgewater beneficially; Hodes and Caleo have no interest.
The grant of a beneficial interest was contingent upon the satisfaction of the condition in the PLA, which did not occur.