The case of Amari Lifestyle Ltd (trading as Amari Super Cars) v Warnes and others [2017] EWHC 1891 (Ch) concerned an application by the beneficiary of a charging order for an order for sale of a property. The property was subject to a number of prior charges which, if valid, would mean there was no point in ordering a sale of the property because it would not lead to any monies being recovered under the charging order.

Mr Warnes had purchased a property using a loan from a trust of which he and certain others were trustees. Mr Warnes had signed a legal charge over the property but in the execution box his position was stated as "Trustee" rather than "Borrower". In the legal charge document, the loan was stated to be repayable "upon sale of the Property". Counsel for the beneficiary of the charging order argued that these two issues meant that the trust's charge over the property was invalid.

The judge said that the question was whether a reasonable reader of the charge document, knowing the background to it, would have understood Mr Warnes to be signing only in his capacity as trustee of the trust (and therefore one of the lenders) or also as borrower. The judge took into account that the document had been dated on the same date it had been signed by Mr Warnes and was clearly intended to have effect on that date, and it could only have taken effect if signed by him as borrower, and found that he had signed the document in his personal capacity as borrower. The judge further found that the charge was valid notwithstanding it did not stipulate a specific time when the secured debt had to be repaid, it was simply repayable upon (and out of the proceeds of) a sale. It is not an essential characteristic of an equitable charge that the secured debt must be repayable at a specific time.

The case serves as a useful reminder to ensure that security documents are correctly executed, but may also provide some you with some comfort as it shows that documents may still sometimes be upheld where the correct formalities have not been complied with.

Key points

  • It is important to ensure that security documents are correctly executed, but in some cases all may not be lost where the correct formalities have not been complied with
  • A charge document was upheld even though it was not signed by the chargor in his personal capacity - he had signed in his capacity as trustee of the trust which was lending the secured obligations
  • It is not an essential characteristic of an equitable charge that the secured debt must be repayable at a specific time.