Jak Property Jersey Limited (a company registered in Jersey) v Together Commercial Finance Limited [2025] EWHC 2442 (Ch)

Jak Property Jersey Limited (a company registered in Jersey) v Together Commercial Finance Limited [2025] EWHC 2442 (Ch)

Jamal Demachkie acted for Together Commercial Finance Limited (Together), the successful Defendant. This case concerns a dispute as to priorities between two lenders, both of whom lent to Mulbury Homes (Greg Street) Limited (Mulbury) and taken security in the form of legal charges over land in Salford, owned by Mulbury.

The Claimant (JAK) lent money secured by a first legal charge against a property. As part of this loan, JAK entered into a ‘development services agreement’ allowing Mulbury to raise finance for redevelopment, for which the third party funder was to receive a ‘first legal charge’ and be offered ‘unencumbered security’ in respect of the property.  The Mulbury approached Together who agreed to loan moneys for the purposes of this development, secured by a legal charge.  Together and JAK entered into a ‘deed of postponement’ which purported to postpone the JAK charge behind the Together charge.  However this deed of postponement also included a curious provision which allowed JAK to recover all moneys secured by its charge if it called in its loan first “notwithstanding the priority of [Together’s] First charge”.  The development failed; JAK called in its loan and asserted that the effect of this clause was to reverse the priority.  Together argued that the clause did no such thing; it was merely a ‘for avoidance of doubt’ provision to explain that JAK’s debt was not subordinated to that of Together (and to allow JAK to receive payment from the borrower even if the Together loan had not been paid in full). In the alternative, Together argued that the deed should be rectified on the grounds of common mistake. There was insufficient equity in the property to satisfy both debts, so this was largely a case of ‘winner takes all’.

HHJ Cawson KC (sitting as a Judge of the High Court) agreed with Together.  Given the two competing interpretations, it was permissible for the court to consider ‘commercial common sense’ when construing the deed of postponement.  JAK’s interpretation would defeat the object of the deed; it would also lead to an odd situation in which there would be ‘a race to determine the respective loan agreements in order to secure priority’, which could not have been objectively intended.  Although the clause could be said to offend the ‘presumption against surplusage’ in a contract, such a presumption was weak and of no real value in this context.  Together’s interpretation was to be preferred.  In the alternative, the Judge also went on to consider rectification, finding that the parties had a common intention for the clause to operate in the manner contended by Together.  He held that there was a sufficient ‘outward expression of accord’ found in emails discussing the deed as a whole; although there was no express communication concerning the meaning of this contentious clause, this was because the understanding was ‘so obvious as to go without saying’.  The court, therefore, would have rectified the deed if, in law, it had the meaning advanced by JAK.

The effect of the decision was to ensure that Together remained the first charge holder and was entitled to priority in respect of the proceeds of sale of the property.

Article by Lina Mattsson