Louis Dewfall

Louis Dewfall

Collaborateur senior

Read More
Louis Dewfall

Louis Dewfall

Collaborateur senior

Read More

6 septembre 2018

A good fit? The importance of ensuring finance documents align with each other

The High Court considered the application of administrators to determine the security interest of a lender.


Vision Games 1 Ltd (the Lender) entered into three development and sales agreements in 2013 and 2014 (the DSAs) with Relentless Software Ltd (RSL) and Relentless Vision 1 Ltd (RVL) pursuant to which the Lender made financing available to RSL for the development of video games (the Products) by RVL.

The financing documents contemplated that RVL would be a wholly-owned subsidiary of RSL. However, the restructuring of the group by way of share transfer to RSL never took place.


The DSAs obliged RSL and RVL to pay certain tax credits (the Tax Credits) owing to RSL to an RVL account (the Production Account). However, the DSAs did not expressly state how the Tax Credits should be dealt with, having been paid into the Production Account, other than to say that if RSL overpaid into the Production Account, then it should notify RVL; and RVL should repay the amount within 30 days.

The Production Account was also the account into which the Lender made payments to RVL on completion of certain milestones in the development of the Products. The monies would then be released by RVL to RSL to meet production costs, whenever RVL determined appropriate.

The Lender's security

As part of the financing, RVL granted the Lender a debenture (the RVL Debenture), which was expressed to create fixed charges over all book debts and all accounts of RVL. Under the RVL Debenture, RVL agreed to pay all book debts into a 'designated account' and prior to doing so, to hold all book debts on trust for the Lender.

RSL granted the Lender a security document that was stated to be a 'fixed charge' (the RSL Fixed Charge) and was expressed to create a fixed charge over 'all present and future book and other debts and monetary claims due or owing to [RSL] in respect of the Products'. Under the RSL Fixed Charge, RSL agreed to pay all book debts into a 'designated account' and prior to doing so, to hold all book debts on trust for the Lender.

Security for third parties

RSL required further funding. It entered into secured invoice financing arrangements with two other finance providers, Ultimate Finance Ltd (Ultimate) and Thincats Loan Syndicates Ltd (Thincats).

On 3 August 2016, RSL received a payment of £190,000 from HMRC in respect of Tax Credits. This was paid into an RSL trading account (not RVL's Production Account). On 8 August 2016, Ultimate, the holder of a qualifying floating charge, appointed administrators over RSL. The Lender sought to claim the Tax Credits in RSL's account; RSL's administrators brought the matter to court.

Key issues

The Lender's counsel submitted three main arguments:

  • The Tax Credits were 'book debts' for the purposes of the RSL Fixed Charge and were therefore subject to the fixed charge or otherwise held on trust by RSL for the Lender
    This was rejected by the court because the terms of the RSL Fixed Charge were clearly incompatible with the DSAs. However, the DSAs required payment of the Tax Credits into RVL's Production Account. The RSL Fixed Charge stated that all book debts should be paid into a designated RSL account. It was not possible to do both. The court resolved this misalignment between the funding and security arrangements by ruling that the DSA provisions, which specifically mentioned the Tax Credits, prevailed. The Tax Credits therefore fell outside the scope of 'book debts' as defined by the RSL Fixed Charge. They were not subject to the fixed charge in favour of the Lender.
  • RVL, rather than the Lender, had a trust over the Tax Credits. The DSAs obliged RSL to pay the Tax Credits into an account in the name of RVL; so, this passed an immediate beneficial interest to RVL
    The court rejected this argument. The obligation in the DSAs to pay the proceeds of the Tax Credits into the Production Account was imposed equally on RSL and RVL, not on RSL for the benefit of RVL. There was no indication of any intention that the parties intended to pass the beneficial interest in the monies to RVL. Consequently, no trust relationship was established. Although obiter as the Tax Credits were never paid into the Production Account, the judge found that even if this had happened, there would have been no transfer of any beneficial interest in them to RVL. RVL would, as between itself and RSL, have held them on resulting trust for RSL. RSL's claim to the Tax Credits was therefore not defeated by this argument.
  • The Lender and/or RVL had relied on assurances made by RSL, desisting from appointing a receiver to intercept the payments. They were entitled to a proprietary estoppel.
    This was rejected because the letters between RSL and the Lender did not suggest that the Lender had a proprietary interest in the Tax Credits. RSL agreed to pay the Tax Credits into a particular account. However, this was not sufficient to create a proprietary interest in those monies. Equally, the Lender's counsel was unable to prove that the Lender had placed reliance on this correspondence.


This case serves as a timely reminder that the documentation pertaining to a transaction should always be reviewed carefully and holistically. Consistency and clarity of drafting is paramount for certainty and in order to protect the lenders' interests.

Plant and another (administrators of Relentless Software Ltd) v Vision Games 1 Ltd and others [2018] EWHC 108 (Ch)

Call To Action Arrow Image

Latest insights in your inbox

Subscribe to newsletters on topics relevant to you.