‘Repayable on demand’ means precisely what it says

Sometimes the actual meaning of a phrase is the obvious one. The Chancery Division has considered this issue, dismissing an appeal in Murfet and another v Property Lending LLP and another [2024] EWHC 2787 (Ch). The case concerned an appeal against refusal to set aside statutory demands based on personal guarantees under two loans given to the respondents by the appellants in 2021. Each loan comprised a facility letter and standard terms and conditions in substantially the same form. Clause 7.2 of each facility letter provided that notwithstanding the provisions for repayment or discharge of the liabilities – defined as all sums due to the lender – or any other provision of the agreement, the liabilities were repayable on demand. A court may set aside a statutory demand where the debt is disputed on grounds which appear to be substantial or where it is satisfied on other grounds that the demand ought to be set aside. The debtor must show a genuine triable issue (Crossley-Cooke v Europanel (UK) Ltd [2010] EWHC 124 (Ch)). The judge at first instance decided the lender could demand full repayment of the loans at any time without any reason. The appellants argued this issue could not be determined without evidence of the intention of the parties and required a trial. Clause 7.2 had to be looked at in light of the factual matrix, ie the entirety of the agreement and surrounding facts. The appeal judge considered that the words of 7.2 could not be clearer in stating that outstanding advances were to be repaid on demand. The requirements for obtaining further funding under the agreement were not linked to a demand for repayment and there was no unstated implication that the same provisions applied. The agreement did not include any unworkable events of default allowing advances to be called in which was a strong argument that clause 7.2 should be given its plain meaning. There was no lack of commercial sense in clause 7.2 and while it might operate to the disadvantage of the borrower it is not the job of the court to mend a bad bargain. Not every contractual power or discretion is subject to a requirement that the decision-maker must act rationally, in good faith and take relevant factors into account when reaching its decision (Braganza v BP Shipping Ltd [2015] 4 All ER 639). A mortgagee is under no duty to refrain from exercising its rights because doing so may cause loss to the mortgagor (UBS AG v Rose Capital Ventures Limited [2019] 2 BCLC 47). Louise Clark is a property law consultant and mediator