BMF Assets No. 1 Ltd v Sanne Group PLC

The court dismissed an application for an injunction brought by BMF Assets No. 1 Limited that would have prevented specified respondents from taking steps to obstruct the discharge or application of sums said to be held on behalf of four Issuer companies. The judge found the application to be totally without merit because there was no admissible evidence of the alleged trade sale to Tilman or of receipt of sale proceeds, the claimant lacked standing to pursue the remedy relied upon (including under clause 5(d) of the notes' terms and conditions), and the factual case was internally inconsistent and supported by documents of doubtful authenticity. The judge also held that purported "de facto" appointments of directors did not establish that those persons became directors and that the attempts to alter company registers at Companies House were unauthorised.

The court further found the application was, in substance, an attempt to stymie legitimate litigation already before the court (including committal and strike-out proceedings), and that the cross-undertaking in damages was unreal. The application to join Ms Dilnot QC was dismissed as contingent on the injunction. The claimants were ordered to pay costs on the indemnity basis and the court made procedural directions for the strike-out applications and an order requiring identity evidence for future applications by named persons/entities to avoid abuse of process.

This is an application in the Financial List brought by BMF Assets No. 1 Limited seeking an injunction to prevent a range of respondents from taking steps to obstruct the discharge, release or application of funds said to be held on behalf of four securitisation Issuers (Business Mortgage Finance 4–7 plc), and seeking joinder of Ms Dilnot QC for the purposes of that injunction.

Background and parties

• The Issuers are special purpose vehicles in a securitisation, their shares being held by a holding company (BMF Holdings Ltd) ultimately subject to charitable trusts. The Notes are governed by a trust deed and terms and conditions and the Issuers' assets are charged in favour of the Note Trustee.
• The litigation arises after a long series of attempts by third parties to interfere with the Issuers' governance and assets, including purported changes of directors and filings at Companies House. The court had earlier given a February 2021 judgment ([2021] EWHC 171 (Ch)) and ICC Judge Jones in July 2021 declared that Sanne-employed officers were the true directors of BMF 3 and BMF Holdings.

Nature of the relief sought

• An injunction preventing the respondents (corporate and natural persons) from taking steps to obstruct or prevent application or release of funds said to be held by the applicant on behalf of the Issuers until trial or further order.
• Joinder of Ms Dilnot QC as a party for the purposes of the injunction.

Issues framed by the court

• Whether there was admissible evidence of a trade sale to Tilman and of receipt of sale proceeds by the applicant.
• Whether there was a serious issue to be tried on the substantive allegations, including compliance with clause 5(d) of the notes' terms (the early redemption/auction procedure).
• Whether the claimant had standing to bring the application and whether alleged beneficial owners have direct fiduciary or enforcement rights against the Issuers or their directors.
• The legal effect of the alleged appointments of "de facto" directors and the validity of Companies House filings.
• Whether the application was an abuse of process or an attempt to impede ongoing litigation, and whether any cross-undertaking in damages was realistic.

Court's reasoning and conclusions

• The evidence presented was internally inconsistent, often lacked source or provenance, and in key respects (the sale contract and bank receipts) was unsupported: there was no contract produced and no bank evidence evidencing receipt of proceeds; confidentiality explanations were unpersuasive.
• The assets alleged to have been sold were subject to a deed of charge in favour of the Note Trustee and the terms and conditions prohibit sale without the Note Trustee's consent; the asserted auction/redemption procedure in clause 5(d) had not been followed, undermining any plausible legal foundation for the remedy sought.
• The applicant lacked standing: it was not a Noteholder and there was no evidence of an enforceable interest enabling it to invoke the contractual remedy it relied upon; noteholders act collectively through the Trustee under the trust deed and terms and conditions.
• Alleged "de facto" directors cannot simply make themselves directors by unilateral assertion; the multi-factorial test for de facto directorship was not satisfied and the court accepted prior declarations identifying the Sanne officers as the true directors.
• The application was in substance aimed at preventing the Issuers from conducting legitimate proceedings (including committal and strike-out applications) and would, if granted, cause unascertainable damage to the Issuers; the cross-undertaking was not credible.
• Accordingly, there was no serious issue to be tried, the injunction was refused, the joinder application dismissed and the claimant ordered to pay costs on an indemnity basis; procedural directions were given for the strike-out applications and an order was made requiring future applicants from a specified group to file witness evidence of identity when issuing proceedings to address abuse of process.

The judgment also emphasised the court's power under its inherent jurisdiction to protect itself from abusive litigation, subject to Article 6 proportionality constraints (citing Bhamjee v Forsdick & Ors [2003] EWCA Civ 1113), and set out tailored measures short of pre‑issue hearings to verify identity for certain named persons/entities.

The application for an injunction is dismissed. The judge concluded there was no serious issue to be tried because the evidence of a trade sale and receipt of proceeds was inadmissible or absent, the claimants lacked standing to invoke the contractual redemption mechanism (clause 5(d)), purported de facto director appointments were ineffective, and the application was in substance an attempt to impede legitimate litigation. The joinder of Ms Dilnot QC is dismissed. Costs are awarded to the respondents and certain issuers on the indemnity basis. The court gave directions for strike-out proceedings and ordered that specified named applicants must file witness evidence attesting identity when issuing further proceedings.