Co-founder of the Karen Millen fashion chain Kevin Stanford has lost a battle over multi-million pound loans secured on a prestigious Knightsbridge property.
Asplin J ruled in favour of Icelandic credit institution LBI HF, assignee of the mortgage of 39 Ennismore Gardens, London SW7, which seeks an order for the possession of 39 Ennismore Gardens and judgment against Stanford for more than £21m including interest.
The judge has yet to make an order in the case, but rejected the entrepreneur’s claims that the loans are not due and payable as a result of oral agreements with original lender Landsbanki Luxembourg (LLux) that they would be repayable only from his share of the profits arising from a joint venture to develop properties in India that ultimately failed.
She also rejected his counterclaim against LLux which he hoped would operate by way of set-off to extinguish the sums owed in respect of the loans and leave him with an award of damages exceeding £50m.
The judge said that the matter arose originally out of the banking relationship between LLux and Stanford, and in particular two loans it advanced to him – one in March 2007 for €4,500,000 (the “Courchevel Loan Agreement”) and a second of £13,500,000 in November 2007 (the “Ennismore Loan Agreement”) in order to enable Stanford to finance the purchase of 39 Ennismore Gardens and 25 Ennismore Mews, London, SW7.
Stanford granted a legal charge to LLux over 39 Ennismore Gardens to secure the mortgage under which LL’s parent company LBI seeks possession of 39 Ennismore Gardens. LBI and LL are both currently in liquidation.
The judge said: “Mr Stanford is a highly experienced British entrepreneur who co-founded the Karen Millen fashion chain and, amongst other things, was formerly the majority owner and chairman of the All Saints clothing chain.
“LBI and LLux contend that Mr Stanford has not made any payments in respect of interest under the loan agreements since 21 November 2008 and that this failure to pay interest constitutes an event of default under the terms of the loan agreements, in respect of which the maturity dates have also passed. However, despite demand for repayment, the loans and interest thereon have not been repaid.”
The judge said that it seemed that Stanford “does not challenge the alleged indebtedness in relation to the Ennismore Loan Agreement at all”, and found that, on the balance of probabilities, LBI had proved its case in respect of the Courchevel Loan Agreement, save for a small amount of interest it had treated as capital.
Rejecting Stanford’s claims that the loans had not become payable, she said: “It seems to me that although the loans were extended against the background of enthusiasm about the profitability of the joint venture and there was an expectation that it would be possible to repay them from that part of those profits which might be distributed to Mr Stanford, which everyone hoped would be considerable, there was no actual agreement as to the alleged main obligations or terms, which were neither determined nor determinable. Nor was it the common will of the parties that anything that had been said would form a legally binding agreement.”
And she said that, under Luxembourg law, Stanford could not proceed with the counterclaims against LLux’s claim because he did not file a proof of debt in respect of it before the bar date and so the debts which were assigned were not susceptible to set off.
She added: “Mr Stanford cannot raise the counterclaims against the assignee, LBI.”
LBI H.F. (in winding-up proceedings) v Stanford Chancery (Asplin J) 25 November 2014
David Alexander QC and Stephen Robins (instructed by Morrison & Foerster (UK) LLP) for the Claimant
John McDonnell QC and Robert Bourne (instructed by Richard Slade & Co) for the Defendant
David Allison QC (instructed by Hogan Lovell International LLP) for the Part 20 Defendant
