Battlebridge Group Ltd v Amala Equity Ltd & Anor

A contractual variation must be established on the evidence and construed in its commercial context. A party cannot rely on an alleged condition for payment where the contemporaneous correspondence, pleadings, witness evidence and commercial structure do not support it. Under a non-recourse loan, the lender’s remedy is confined to the agreed collateral, but unauthorised dealings with that collateral may give rise to a claim for its value. The court may grant an injunction requiring collateral to remain in the contractually designated account where the evidence leaves proper protection necessary.

The claimant advanced a claim arising from a limited recourse loan agreement under which the defendants were to lend £3.69 million secured against shares. The defendants advanced only £2 million, retained or dealt with some collateral shares, and contended that payment of the balance was conditional on satisfactory checks concerning the underlying company. The claimant also sought recovery of the value of 60,000 shares sold before any advance had been made, an injunction concerning the remaining collateral, and judgment against the second defendant after an amendment based on the first defendant being his façade. The court determined the contractual and collateral issues at first instance.

1. Contractual variation and the loan balance. The alleged agreement that the balance of the loan would be payable only if Mr Kelly’s checks proved satisfactory was rejected. The correspondence contained repeated demands for payment without any response asserting that the balance was not due. The pleaded condition lacked support in Mr Kelly’s witness statement. The alleged variation also made little commercial sense because the loan would be reduced substantially while the collateral and promissory note remained largely unchanged. Battlebridge was therefore entitled to the balance, subject to the engagement fee.
2. Assessment of evidence. Given the lapse of time, the court assessed the witnesses by reference to the objective documents, their motives and the overall probabilities, endorsing the observations in The Ocean Frost [1958] 1 Lloyd's Reps 1. Mr Livingstone-Raper’s evidence was preferred where consistent with the documents, while Mr Kelly’s evidence was considered evasive and unsupported by contemporaneous material.
3. Unauthorised disposal of collateral. The parties accepted that 493,708 shares should have been returned. The sale of 60,000 shares before any advance or accrued interest had no legitimate basis. Battlebridge was entitled to recover their value, £102,000.
4. Remaining collateral and remedy. Although the court was not persuaded that the remaining shares had not been placed in the designated account, the defendants’ inadequate disclosure and the history of the matter justified an injunction requiring them to continue holding the shares there. Because the loan was non-recourse, the defendants were entitled to look only to the collateral for any legitimate remedy and not to a monetary judgment on the counterclaim.
5. The amendment advancing the personal claim against Mr Kelly was allowed, and the case proceeded on the basis that the Irish company was his façade. Judgment followed on the claimant’s substantive claims, with the counterclaim dealt with on the non-recourse basis.

First instance decision. No appellate history is stated in the judgment.