Sub 20 Ltd v Royalton Investment Limited & Ors

Summary judgment is appropriate where the defendant has no realistic prospect of successfully defending the claim and there is no compelling reason for a trial. A lender is generally entitled to insist on payment in accordance with its contractual rights, rather than accept proposed business plans or further funding arrangements. A mortgagee that exercises a power of sale must obtain a fair and proper price and must not sell at an unreasonable undervalue. However, the mortgagee owes no general duty to exercise its security rights, or to do so at a particular time. Security rights are not held on trust for the borrower, although any surplus after full repayment must be properly accounted for.

Sub 20 Ltd advanced loan funding to Royalton Investment Ltd in connection with motor yacht business interests associated with James Frangi. Royalton was the borrower, and the other defendants were guarantors and indemnifiers under the loan documents, side letters and deeds of covenant.

The loan was in default, and the claimant sought summary judgment for unpaid principal, contractual interest, fees, expenses and legal costs. The defendants did not participate in the application, although correspondence and communications were placed before the court as potential defences. The central issues were whether those matters disclosed any realistic defence, whether the claimant owed duties concerning proposed business plans or the realisation of security, and whether the sums claimed were contractually due.

1. Application granted. The claimant was entitled to final judgment under Civil Procedure Rules 1998, Part 24. The defendants had no real prospect of successfully defending the claim and there was no compelling reason for a trial.
2. The court applied the summary judgment approach referred to in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch): a defence must have more than a fanciful prospect of success, assessed both factually and legally. The contractual documents were clear, and the principal debt and guarantors’ liabilities were prima facie established.
3. The lender owed no contractual or other arguable obligation to endorse, accept or act upon proposed business plans instead of exercising its contractual right to demand full payment. Commercial disagreement about the plans did not constitute a defence.
4. A mortgagee exercising a power of sale must obtain a fair and proper price at the time of sale and must not sell at an unreasonable undervalue. The mortgagee nevertheless owes no duty to exercise security rights, or to determine when they should be exercised. The claimant therefore had no arguable liability arising from its conduct concerning the sale of the Mantra.
5. The security rights were not held on trust for the borrower or guarantors. If realisations exceeded the indebtedness, the claimant would have to account for any surplus, but the evidence disclosed no realistic prospect that the proposed realisations would discharge the debt in full.
6. The duty of a claimant’s advocate where defendants do not participate was considered by reference to Hirbodan Management Company & Anor v Cummins Power Generation Limited [2021] EWHC 3315 (Comm). The claimant had fairly drawn the potential points against its application to the court.
7. Judgment was entered jointly and severally for the principal debt of US$26,768,000, contractual interest of US$5,999,791.61, and fees, expenses and legal costs of US$56,774.25 and £595,847.67. Post-judgment interest accrued jointly and severally at 8%, subject to payment and pro tanto discharge between defendants.