Contract – Construction – Redaction – Respondent serving statutory demand on appellant requiring payment of unsecured balance due under loans – Appellant appealing against refusal to set aside statutory demand – Whether appellant establishing genuine triable issue – Appeal dismissed
The respondent served a statutory demand on the appellant requiring payment of a debt representing the unsecured balance of £4,089,772.54 due under loans originally made to the appellant by a bank under a series of facility letters. The respondent claimed to have acquired title to the loans by assignment, and it was also the registered assignee of 21 legal charges over residential properties mostly in Liverpool which the appellant had originally granted to the bank as security for the loans.
When the appellant applied to set aside the statutory demand, the respondent put in evidence a heavily redacted version of the deed of assignment on the basis that the deed was a confidential document and that the redacted parts were not relevant to the issue before the court. Further, the respondent’s solicitor gave assurances to the court that he had inspected an unredacted version of the deed, and that the unredacted parts established that the bank’s rights under the facilities had been effectively assigned. However, the sale and purchase agreement (SPA) and the novation agreement were not disclosed. The appellant argued that there was a genuine triable issue about the respondent’s title to the underlying debts but the court rejected that argument: [2019] EWHC 2646 (Ch).
On appeal, the appellant argued that the version of the deed of assignment on which the respondent relied to found its title in its statutory demand was heavily redacted so that it was not possible to properly construe the deed of assignment as passing title to the bank’s rights against the appellant to the respondent.
Held: The appeal was dismissed.
(1) The deed left no room for any reasonable doubt that the loans to the appellant, and the rights of the bank in relation to the loans and the charges securing them, were prima facie included in the assignment. A witness statement from a partner of an established law firm, signed with a statement of truth, and exhibiting a deed of assignment and clearly stating that, pursuant to that deed, the bank’s rights in respect of a loan document were assigned to the claimant, was sufficient evidence upon which the court was entitled to rely. There was no evidence before the court which called into question the veracity of the witness statement: Promontoria (Chestnut) Ltd v Iliad Group Ltd [2017] EWHC 2332 (QB) followed.
On an application to set aside a statutory demand, the burden lay on the applicant to establish the existence of a substantial dispute. The creditor did not have to begin by proving its title to sue. There was nothing to suggest that the terms of the SPA had any relevant impact, by the date of the statutory demand, on the apparently clear assignment of title to the appellant’s loans and the securities for them effected by the deed. There was nothing to displace the natural conclusion from the unredacted parts of the deed of assignment that the appellant’s loans, and all the bank’s rights in relation to them, were thereby transferred from the bank to the respondent.
(2) Where the court was called upon to resolve a question of construction of a contractual document, the document should normally be placed before the court as a whole, and it was not for the parties or their solicitors to make a pre-emptive judgment about what parts of the document were irrelevant. In general, irrelevance alone could not be a proper ground for redaction of part of a document which the court was asked to construe. There had to be some additional feature, such as protection of privacy or confidentiality, which could be relied upon to justify the redaction.
It was seldom appropriate for one party unilaterally to redact provisions in a contractual document which the court was being asked to construe merely on grounds of confidentiality. If it was obvious that the provisions in question would be completely irrelevant to the issue of construction, and if the reasons for taking that view could be clearly and fully articulated by the solicitor acting for the party seeking the redaction, the court was inclined to accept that the redaction might be defensible. But the reason why it would be defensible was that the provisions were clearly irrelevant. Confidentiality alone was not a good reason for redacting an otherwise relevant provision in a contractual document which the court had to construe.
(3) In the present case, the court was concerned with an application by the appellant to set aside a statutory demand. He had the burden of showing the existence of a substantial dispute about the title of the respondent to demand payment. Apart from his complaints about the redactions in the deed of assignment, the appellant had been unable to produce any credible evidence casting doubt on the title of the respondent to the debts, and he would be fully protected by section 136(1) of the Law of Property Act 1925 if he paid the money demanded.
This was not a case where the respondent had to prove its title to sue the appellant and, even if it were, the respondent would only need to rely on the deed of assignment to establish the absolute assignment of the relevant debts to it by the bank. It was only in that limited sense that a question of construction of the deed of assignment arose. Furthermore, since the appellant was not himself a party to the deed, or to the SPA which preceded it, the question related to a transaction between third parties rather than to an agreement under which the appellant assumed his own rights and obligations.
In that context, the redactions to the deed of assignment faded into relative insignificance. The unredacted parts of the deed were sufficient to show that title to the appellant’s debts was assigned by the bank to the respondent. The redactions were far more extensive than necessary. In a different context, the respondent might arguably have been precluded from placing reliance on the deed of assignment in its redacted form. However, the redactions had not caused any injustice to the appellant, and the doubts raised about the respondent’s title to demand payment from him were unfounded.
Hugh Sims QC and Graham Sellers (instructed by Joanna Connolly Solicitors) appeared for the appellant; Jamie Riley QC and James McWilliams (instructed by Addleshaw Goddard LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Hancock v Promontoria (Chestnut) Ltd
