Background

In Urban Ventures Limited v The Black Ant Company Limited (in Administration) [2014] EWHC 1161 (Ch) the dispute involved two companies, Dunbar and Urban, who held legal charges over properties owned by The Black Ant Company Limited (the  debtor) in respect of loan facilities advanced to the debtor. Dunbar held the first legal charge, Urban the second. After Urban’s charge was registered at the Land Registry, Dunbar asked the debtors to sign a new facility letter replacing the original one. Although no further funds were advanced, the facility letter rolled up accrued interest and fees.

An issue arose as to which of the companies’ charges had priority when the debtor went into administration and the security properties were sold. Urban applied for a declaration that its charge would take priority on the basis that (i) Dunbar’s facility letters deemed the original advances repaid and ‘further advances’ made, and/or (ii) that the debiting of unpaid interest and fees to the accounts represented ‘further advances’.

Held

Urban’s application was dismissed. The judge held that facility letters which renewed an existing loan facility and rolled up accrued interest and fees did not amount to a further advance within s.49 Land Registration Act 2002.

The judge said that the ordinary meaning of ‘further advance’ is ‘an advance of further or additional funds’ and that it was clear that Dunbar were slightly altering the terms of the contract so that they complied with Dunbar’s up-to-date standard terms, rather than creating a new contract. As regards the purpose of the statutory provisions, the judge considered that it was ‘to ensure that priority is not obtained for an advance which a second mortgagee who had received truthful replies to normal enquiries would not know that the first chargee had made or was under an obligation to make’.

The following useful points arise from the judgment in this case:

  • The judge noted that there was no directly relevant authority on the meaning of ‘further advance’ so it was necessary to start with the language of the statutory provisions and their purpose.
  • The judge said that rolling up unpaid interest and fees could not sensibly be regarded as the making of a further advance.

Comment

This decision provides useful insight into the way in which the courts interpret the meaning of terms and phrases within statutes where there is no directly relevant authority for the same: the starting point will be will be the language of the statutory provisions and their purpose.