10 March 2020
Lending Focus - March 2020 – 3 of 7 Insights
Bal Mohinder Singh (B) commenced proceedings against his son, Jasminder Singh, who was Chairman and CEO of the Edwardian Hotels Group. The Group includes the Radisson Blu Edwardian hotels and the prestigious May Fair hotel. B claimed that he had a right to partition certain properties owned by the Group because they were subject to a common inheritance constructive trust.
B was unable to fund the proceedings himself. Instead, his daughter's husband, Mr Abbhi (AB), agreed to finance the litigation, initially informally but then on the terms of a loan agreement dated 10 June 2012.
B's existing solicitor became ill. His barrister suggested that one of his contacts, Mr Slade (S), could take over the conduct of the litigation.
S alleged that at an initial meeting around 11 July 2013, AB and S discussed the fact that B could not pay S's fees. AB therefore agreed to pay S's fees and disbursements and no monies were taken on account. B signed S's retainer letter and the litigation went ahead. However, B lost in the High Court.
Following that, AB refused to settle S's fees, leaving some £317,000 outstanding. S commenced proceedings against AB.
AB contended that the oral bargain was never struck. On the facts, the judge was not persuaded of this.
AB then argued that the oral agreement was a guarantee, and that it fell foul of s4 Statute of Frauds 1677.
The judge, however, characterised the agreement as an indemnity which fell outside s4 and was therefore enforceable, despite the fact that it had not been put into writing.
AB appealed to the Court of Appeal.
AB submitted that the arrangement was a 'see to it' guarantee, relying on Associated British Ports v Ferryways NV  EWHC 1265 (Comm) and  EWCA Civ 189.
The wording in the guarantee referred to in Associated British Ports read as follows:
"we assume full responsibility for ensuring (and shall so ensure) that, for seven years from the date of this letter the Company (i) has and will at all times have sufficient funds and other resources to fulfil and meet all duties, commitments and liabilities entered into and/or incurred by reason of the Agreement as and when they fall due and (ii) promptly fulfils and meets all such duties, commitments and liabilities."
AB submitted that similarly, his promise to pay was not actionable until B was in default under the retainer.
AB also criticised the 'judge's focus' on AB and his wife's personal interest in the outcome of the litigation.
Finally, he argued that his liability and B's liability to pay were co-extensive: he could not be liable to pay more than B. This reinforced the secondary nature of AB's liability.
Judgment in favour of S:
Although S won, reducing the funding arrangements to writing would have been a more prudent initial course of action, putting the matter beyond doubt.
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