Mayfair Capital Residential 2 LLP v Reim Katch Securities Ltd

On a summary judgment application, the court may determine a short contractual construction issue where it has the necessary evidence and there is no real prospect of a different outcome at trial. Contractual interpretation is a single, iterative exercise directed to the objective meaning of the language, read in the context of the contract as a whole and its commercial setting. Business common sense cannot override clear language or justify adding words. A specific contractual provision may qualify a general provision where that is the natural construction of the agreement. A declaration should be granted only where it has utility and resolves a real and present dispute.

The claimant junior lender sought summary judgment and declaratory relief concerning an intercreditor deed of priorities. The dispute concerned whether a permitted-payments clause, under which the junior lender was to receive 50 per cent of net sale proceeds until receiving £1.5 million, continued to operate after the appointment of receivers.

The claimant also sought payment or an account concerning proceeds from the sale of a flat. Factual disputes concerning another sale and allegations of bad faith were not suitable for summary determination. The central issue was whether the deed, properly construed, caused the permitted-payments clause to cease on enforcement.

1. Summary judgment. The construction issue was suitable for summary determination. The court had the material necessary to decide it, and the suggestion that further evidence might emerge did not identify relevant admissible evidence capable of affecting construction. The approach in Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch) was applied.
2. Contractual interpretation. The court had to ascertain the objective meaning of the language chosen by the parties, reading the intercreditor deed as a whole and balancing text, context, commercial consequences and business common sense. The exercise was iterative. Clear language could not be overridden, and the court could not add words merely because the bargain later appeared inconvenient. The principles in Wood v Capita [2017] UKSC 24 were applied.
3. Construction of the deed. The permitted-payments clause was specific and qualified the general application-of-proceeds clause. Its wording contained no stop provision on default or enforcement. “Disposal” included involuntary disposals and was not limited to the pre-enforcement period. The appointment of receivers therefore did not terminate the permitted payments. They continued until the junior lender had received £1.5 million, after which the general priority provisions applied.
4. Declaration and equitable relief. A declaration had utility because it clarified the parties’ rights and assisted the borrower, receivers and potential purchasers. The declaration was granted. No order for payment or an account concerning Flat 15 was made because the equitable claim was inadequately pleaded and the necessary relief was absent from the prayer.
5. Summary judgment was granted on the narrow construction issue. The disputes concerning bad faith and Flat 13 remained for trial, and costs were to be addressed after submissions.

Not stated in the judgment.