Kirsty Amanda Mary Louise Cadogan v Kevin Andrew Cadogan & Ors
[2024] EWHC 165 (Ch)
Sheila Burns v Fred Bridge & Anor
18 October 2024
[2024] EWHC 2620 (Ch)
High Court
A woman and a loan company disagreed over the meaning of a contract about house sale proceeds. The judge decided the contract meant the loan company could keep more money than the woman thought. The judge also decided the loan company did not act badly in selling the houses. There may be a small check on how much the loan company spent.
Key Facts
- •Sheila Burns (Claimant) sought determination of the interpretation of a 'Lender's Debt' clause in a 2019 Deed of Priorities and whether Property Funding Limited (PFL, Second Defendant) obtained the best price when selling three houses.
- •The 2019 Deed of Priorities involved Mrs. Burns, PFL, and Fred Bridge (First Defendant).
- •PFL sold the houses for £1,345,000 gross.
- •PFL claimed a shortfall, while Mrs. Burns argued for a surplus based on the deed's interpretation and an alleged undervalue sale.
- •A bankruptcy order was made against Mr. Bridge.
- •The dispute centered on the meaning of 'interest' and 'costs' in the 'Lender’s Debt' definition, capped at £850,000 plus interest and costs.
- •Mrs. Burns' witness statement significantly breached Practice Direction 57AC.
- •PFL's expert report was not relied upon due to lack of funding.
Legal Principles
Contractual interpretation involves a unitary exercise to ascertain the objective meaning of the language used, considering background knowledge reasonably available to the parties.
Adaptive Spectrum and Signal Alignment Inc v British Telecommunications plc [2023] EWCA Civ 451
Effect should be given to every word in a clause, and words should not be added, changed, or removed unless ambiguity remains.
Multi-Link Leisure Developments Ltd v North Lanarkshire Council [2010] UKSC 47
Background knowledge considered in interpretation is limited to what a reasonable observer would expect both parties to have known; negotiations and subjective intentions are inadmissible.
Challinor v Juliet Bellis & Co [2013] EWHC 347 (Ch)
A mortgagee selling mortgaged property has an equitable duty to take reasonable precautions to obtain the best price reasonably obtainable; the remedy for breach is an account of what should have been received.
Silven Properties Ltd v Royal Bank of Scotland plc [2004] 1 WLR 997
A mortgagee does not relieve himself of his duty by placing the sale in the hands of reputable agents; he must ensure they act with reasonable care.
Fisher and Lightwood’s Law of Mortgage 15th Edn
Capitalized interest retains its quality as interest.
Inland Revenue Commissioners v Oswald [1945] 1 AC 360
Section 105 of the Law of Property Act 1925 outlines the order of application of proceeds from a mortgagee sale.
Law of Property Act 1925, s. 105
Outcomes
'Interest' in the 'Lender’s Debt' definition refers to compound interest as charged between PFL and Mr. Bridge under the 2019 Loan Agreement.
The language of the deed doesn't indicate interest between PFL and Mrs. Burns; it's more logical to interpret it as a cap on PFL's priority, encompassing all monies and liabilities up to £850,000, including compound interest. The court considered the objective contemplation of the parties and the commercial context.
'Costs' encompasses all costs, charges, and expenses PFL is entitled to as mortgagee, not just legal costs.
Ambiguity exists regarding the meaning of 'costs'; commercial common sense dictates that it includes all recoverable costs, charges, and expenses, not just legal costs. The court considered the potential for absurd results if a narrower interpretation were applied.
PFL did not breach its duty to obtain the best price reasonably obtainable for the houses.
The sale price was within the margin of error of the expert valuation; there's insufficient evidence to show that PFL failed to take reasonable care or that further marketing efforts would have yielded a significantly higher price. The court considered the evidence presented by both parties, including the expert valuation and the circumstances surrounding the sale.
An account will be taken of PFL's deductions from the proceeds of sale to verify recoverability of the claimed costs.
Concerns exist that some costs may not be recoverable, therefore an account is necessary to determine the correct figures. However, this may be academic depending on the recalculated interest amount.