Urban Ventures Ltd v Thomas & ors

For tacking purposes, a further advance requires payment of money on terms of repayment, or an agreed transaction having that legal effect. Keeping an existing loan outstanding, restating its terms, capitalising unpaid interest, or increasing the stated facility to reflect accrued interest does not, without more, create a further advance. Whether a later facility letter varies or replaces an earlier contract is not decisive. A replacement may still relate only to the existing advance. A running-account analysis requires payments into the account. Without repayment, payment, or an agreed deemed repayment and re-lending, the statutory restrictions on tacking are not engaged.

TBAC and Billsop owned properties subject to first charges in favour of Dunbar and subsequent charges in favour of Urban. Dunbar’s original facility was later renewed by successive facility letters, with the stated facility increased to reflect accrued interest and fees. The companies entered administration and the priority of the charges became material on the sale of the properties.

The High Court, in Urban Ventures Ltd v Thomas [2014] EWHC 1161 (Ch), held that the renewed facilities did not involve new or further advances. Urban appealed, arguing that the later letters replaced the original loan and that capitalised interest and fees were further advances. The central issue was whether Dunbar had made, or was to be treated as having made, further advances capable of being tacked.

The appeal was dismissed unanimously. Lord Justice David Richards gave the leading judgment, with Lord Justice Lindblom and Lord Justice Beatson agreeing. Dunbar retained priority as first chargee for the advance made in October 2006.

1. Variation or replacement. The existence of a new contract is not decisive. Even if the March 2009 facility letter replaced the earlier facility, it could still be a new contract relating only to the existing advance. The later letters were in any event restatements of the original facility, with relatively minor variations.
2. Meaning of further advance. An advance is payment of money on terms that it will be repaid. No money was paid by Dunbar after the original advance, no repayment was made by TBAC, and there was no agreement that the existing loan should be treated as repaid and immediately re-lent. Continuing or leaving an existing loan outstanding is not making a new or further advance.
3. Running account. Clayton’s Case (1815-15) 1 Mer 572, with reference to Deeley v Lloyds Bank [1912] AC 756, did not assist Urban. The running-account principle depends on payments into the account, which were absent here.
4. Interest and fees. Unpaid interest remained interest and was not a further advance without an express arrangement. Fees contractually due under the original facility were likewise not further advances. The court left open whether renewal fees created as new liabilities fell within the charging provision for the purposes of Land Registration Act 2002, section 49, or, by parity of reasoning, section 94(1) of the Law of Property Act 1925. That issue was academic and had not been argued.
5. Since no further advance was made, tacking did not arise and Dunbar retained its priority over Urban’s charges.

1. Court of Appeal (Civil Division): The appeal was dismissed. The court held that no further advance had been made and that Dunbar retained priority.
2. High Court of Justice, Chancery Division, Companies Court: In [2014] EWHC 1161 (Ch), the deputy judge held that the later facility letters did not involve new advances.