Mohammed Anverali Waljee, R (on the application of) v Secretary of State for the Home Department

Under Immigration Rules Appendix A, paragraph 45(d)(iii), a director’s loan agreement must itself set out that the loan is unsecured and subordinated to other creditors’ loans. The word showing does not permit the requirement to be met solely by inferences drawn from terms which do not state those matters.

This construction accords with the natural and purposive reading of the Rules and with the need for a points-based system to be administered efficiently and predictably. A decision-maker may therefore refuse points where the specified agreement does not clearly establish the required priority of creditors, even if the applicant has made a substantial investment.

The applicant, a Kenyan national, sought further leave to remain as a Tier 1 (Entrepreneur) Migrant. He relied on a £220,000 loan made to his company under a director’s loan agreement.

The Secretary of State refused the application because the agreement did not refer to the loan being unsecured and subordinated to other creditors’ loans. The refusal was maintained on administrative review. The applicant brought judicial review, contending that the agreement only had to show, rather than expressly state, those features and that its conversion-to-shares provisions achieved the required subordination.

The central issue was the meaning and application of paragraph 45(d)(iii) of Appendix A to the Immigration Rules.

1. The judicial review claim was dismissed. The Secretary of State was entitled to refuse the application and to maintain that refusal on administrative review.

2. The Rules are construed sensibly, according to their natural and ordinary meaning, in their context and purpose. The points-based system has hard-edged requirements, but its requirements must be applied realistically. That general approach did not assist the applicant because the relevant documentary requirement was unambiguous.

3. Paragraph 45(d)(iii) required the legal agreement itself to set out four matters: the loan terms, interest payable, loan period, and that the loan was unsecured and subordinated to other creditors’ loans. The requirement that the agreement be showing those matters did not mean that a caseworker had to infer the fourth matter from other contractual provisions. The Tribunal adopted the analysis in R. (Sajjad) v Secretary of State for the Home Department [2019] EWCA Civ 720.

4. The fourth matter was substantive rather than technical. It ensures that secured and unsecured third-party creditors have priority over the director’s debt, placing a director who lends money in the relevant insolvency position of an equity investor.

5. The agreement did not comply. It contained no statement that the loan was unsecured or subordinated. Its conversion provisions depended on an unidentified shareholder agreement, and its assignment and charging clause added uncertainty. Even an informed analysis of the agreement could not clearly establish the required status and priority of the loan.

• Upper Tribunal (Immigration and Asylum Chamber): Judicial review claim dismissed.
• Administrative review: The Secretary of State maintained the refusal on 5 June 2023.
• Secretary of State: The application for further leave to remain was refused on 6 May 2022.