Summary

The court refused to grant summary judgment in a claim by two borrowers for an order requiring their lender to release and discharge a number of securities for loans. The case raised serious triable issues concerning the validity of the tender of an outstanding sum where a borrower had to raise money to be able to pay off an existing loan and the availability of the money had to be conditional upon simultaneous release of security.

Facts

The first defendant lender (S) applied for summary judgment on, or strike out of, a redemption action brought by the claimant borrowers (C). C sought an interim injunction, restraining S from taking enforcement measures against any of C's assets which were charged to S.

C owned two sub-prime money-lending businesses which had borrowed money from S. The businesses went into liquidation and, as guarantors of the loans from S, C became sub-prime borrowers. The loans carried substantial interest. C attempted to stop interest from running by raising loans from the third and fourth claimants (J) to pay the sum outstanding under the loans. They sent a letter of tender to S, confirming that they held the relevant sum and indicating that the securities which S held in respect of the outstanding indebtedness would fall to be redeemed upon acceptance of the tender. They attached a "non-exhaustive" schedule of release documents for S's consideration. Although the new lenders would need to have the securities held by S released either before or at the same time as making the new money available to C, the tender did not make that clear. The tender did not, in terms, offer any sum in respect of costs. J's assets were charged to S and C had covenanted that no payments would be made to C from J without written consent from S. S denied that the tender made on behalf of C was valid and claimed that interest had continued to accrue. The issues in relation to validity of the tender were whether (i) the whole of the outstanding sum had to be offered; (ii) the money had been made available and kept aside for payment; (iii) conditions had been wrongly imposed.

Held

(1) There was a triable issue about whether the absence of a costs offer was fatal to the tender (see paras 131-137 of judgment). (2) The law had recognised a range of ways in which a tender might be backed and money put aside, but the authorities had not addressed the situation where a tender was made on the basis that a new lender was willing to provide the funds provided that it was substituted in the existing security immediately. There was a triable issue about that. There was also an arguable point about the legitimacy of treating the funds as being available for backing a tender when they had themselves been obtained in breach of covenants relating to the very security to be redeemed. That issue might affect whether equitable relief from the obligation to pay interest should be granted (paras 139, 154-167). (3) A valid tender had to be unconditional. However, there was a triable issue about the effect of a tender, if it was made conditional upon execution of a release document in a particular form but time was not expressly given to consider draft release documents. That issue was not governed by clear authority. The decision in Wiltshire v Smith 26 E.R. 854 did not lay down any general principle or suggest that, in every case, the provision of draft documents prior to tender was a condition of validity, Wiltshire considered. The trial judge might think that the court's equitable jurisdiction had to be adapted to a modern context of complex re-financings, where the problem might be lenders keeping borrowers from redeeming their assets with spurious objections. In any event, in the instant case there was a triable issue as to whether the tender was conditional upon the release documentation because the letter of tender could be construed as not insisting upon execution of the releases in precisely the form provided. If the drafts were simply treated as suggestions put forward by C, it would be much harder to say that the tender was invalid on that ground. Further, even if there was a requirement for time to be given to consider release documents, it was not clear that the law required re-tender after time had expired for consideration of them. There was also a scope for argument about the effect of a tender where the availability of the money to buy the debt was conditional upon simultaneous release of the security, even if the tender was not made expressly conditional upon simultaneous release (paras 168-178, 190-207, 219-230). (4) Various considerations pointed away from trying to decide the matter without a trial. The authorities did not lay down any general or strict rules on tender. There was a need for clarity and the matter required a wider view than could be provided during a relatively short hearing. The principles might have wider application and the court might wish to take account of the practice of modern lenders in fashioning its approach (paras 231-240). (5) An injunction would be granted until trial or further order, to restrain enforcement of the securities (paras 260-271).

Application for summary judgment and strike out dismissed, injunction granted