Timothy Piers Horlick & Ors v Diogo Jose Henriques Cavaco & Ors

A borrower remains primarily liable for express contractual repayment obligations despite the existence of a guarantee, unless a clear and effective agreement provides otherwise. A later loan agreement does not release or supersede an earlier agreement merely because its accounting schedule includes an earlier advance, particularly where the parties and borrowers differ.

A Braganza duty is implied only where necessary and where the contract confers a discretion affecting both parties’ interests. A commercial right to accept or reject funding may instead be absolute. Contractual good-faith negotiation clauses are generally unenforceable where they lack objective content. Unjust enrichment will generally be unavailable where it would undermine a contractual allocation of risk.

The claim arose from a long-running mining venture in Mozambique. The Trust sought repayment from JVC under a March 2012 loan agreement. Development Capital Limited claimed expenses and a success fee from PMSA under an engagement agreement. Timothy Horlick also claimed restitution from PMSA for payments said to have benefited it.

JVC defended the loan claim by relying on estoppel, release and alleged secret commissions. The other claims raised issues concerning contractual expiry, limitation, implied rationality duties, good-faith negotiation and unjust enrichment. The court determined the contractual and restitutionary claims at first instance.

1. March 2012 loan. JVC and Mr Cavaco were jointly and severally liable for repayment of the £150,000 loan, the £75,000 Redemption Premium and contractual interest. The alleged oral assurance that repayment would come only from fundraising or Richard Horlick’s guarantee was not made. The contemporaneous agreements were inconsistent with that case, and the evidence did not establish reliance or inducement. A guarantee of a loan does not imply that the borrower is relieved from its primary contractual liability.
2. Release. The June 2015 Agreement superseded the July 2011 Agreement, not the March 2012 Agreement. The parties to the agreements differed, the Trust was not a party to the June 2015 Agreement, and JVC was not named in it. Clause 2.2 of the March 2012 Agreement preserved JVC’s liability even if the other borrower were released. There was therefore no waiver, release, discharge, satisfaction or compromise of JVC’s liability.
3. Secret commissions. The payments to Mr Cavaco and associates were not secret commissions. They were understood by the claimants to relate to the mining project, expenses or services, and Mr Cavaco was acting as a principal borrower and project participant rather than as JVC’s agent. JVC was not entitled to rescission.
4. Expenses. The engagement continued after its stated expiry by conduct and/or estoppel. However, expenses incurred before 14 October 2013 were statute-barred under section 5 of the Limitation Act 1980, and no sufficient written acknowledgment under sections 29 and 30 extended time. The remaining expenses were not adequately proved as out-of-pocket expenses incurred in connection with the engagement. The claim failed.
5. Success fee and Braganza duty. The success fee was conditional on completion of an equity fundraising transaction expected to be at least US$30 million. No such transaction occurred. The engagement gave PMSA an absolute commercial right to decide whether to enter into funding arrangements, not a contractual discretion engaging a Braganza duty. The claim based on irrationality therefore failed. The alternative good-faith negotiation clause was not engaged and, in any event, lacked sufficient certainty to be enforceable.
6. Unjust enrichment. The payments were made within contractual schemes allocating risk between the claimants and other borrowers or guarantors. A restitutionary claim against PMSA would make it a quasi-guarantor and undermine those arrangements. The claim also failed for evidential reasons, including failure to prove payment, enrichment or expenditure at the claimant’s expense. The March 2012 Loan Claim succeeded against JVC; all remaining claims were dismissed.