January 26, 2026
In this case, the Royal Court considered the enforcement of two security interests under the Security Interests (Jersey) Law 2012.
The Claimant and the First Defendant entered a joint venture to acquire and develop prime land at Vauxhall Cross, London (the Site). The Site was acquired for £94m in 2016 through a Jersey incorporated company (PropCo). The sole shareholder of PropCo was another Jersey incorporated company (Intermediate). Intermediate was in turn owned by a further Jersey incorporated company (VCIL). The Claimant and First Defendant each owned 50% of the issued share capital in VCIL.
The First Defendant invested £35m to acquire its 50% shareholding in VCIL. In 2018, the First Defendant advanced a further £60m to VCIL pursuant to a Sharia-compliant Murabaha facility (the Murabaha). The parties to the Murabaha were VCIL, Intermediate, PropCo and the First Defendant (as lender).
At the same time the Murabaha was executed, two other agreements were executed. First, a share security interest agreement, whereby the Claimant granted to the First Defendant a security interest in the Claimant’s 50% shareholding in VCIL (the First Security Interest Agreement). The terms of the First Defendant also confirmed that it undertook to pay and perform the terms of the Murabaha as “primary obligor and not merely a surety”. Secondly, a general security interest agreement, whereby VCIL granted the First Defendant a security interest over all assets of VCIL, including VCIL’s shareholding in Intermediate (the Second Security Interest Agreement and together with the First Security Interest Agreement, the Security Interest Agreements).
The Murabaha matured in April 2019 but was extended twice; refinancing efforts failed amid Brexit uncertainty and COVID-19 disruption.
In May 2020, the First Defendant enforced the First Security Interest Agreement by appropriating the First Defendant’s shareholding in VCIL to a special purpose vehicle wholly owned by the First Defendant (the SPV). The Claimant’s shares in VCIL were appropriated by the First Defendant to the SPV for a nominal consideration of £1.00.
In December 2020, the First Defendant enforced the Second Security Interest Agreement and appropriated VCIL’s shareholding in Intermediate to the SPV. Similar to the enforcement of the First Security Interest Agreement, the First Defendant appropriated VCIL’s shareholding in Intermediate to the SPV for a nominal consideration of £1.00.
The Claimant issued proceedings claiming damages exceeding £21m and made allegations of bad faith, breach of partnership obligations, failure to obtain fair market value, unjust enrichment and other equitable remedies.
The Court found that a quasi-partnership/joint venture existed between the Claimant and the First Defendant. The Court noted that the relationship between the Claimant and First Defendant as partners did give rise to obligations of good faith between each other. However, the Court made clear that these obligations did not override the Security Interest Agreements.
The Court was satisfied that the enforcement of the First Security Interest Agreement was for a proper purpose.
The Court then went on to examine whether the First Defendant had discharged its obligations under Article 46 of the Security Interests (Jersey) Law 2012. That article imposes an obligation a secured party (in this case, the First Defendant) to amongst other things, take all commercially reasonable steps to determine the fair market value of the collateral and to act in other respects in a commercially reasonable manner.
Article 48 of the Security Interests (Jersey) Law 2012 also imposed an obligation on the First Defendant to provide a statement of account within 14 days of the collateral being sold or appropriated. That statement of account must show:
a. The gross value realised from the appropriation or the sale
b. The secured party’s reasonable costs incurred in relation to the appropriation or sale
c. The amount of any other reasonable expenses incurred by the secured party in enforcing the security
d. The net value of the collateral or net proceeds; and
e. The surplus owing by or debt owing to the secured party.
In the First Defendant’s statement of account, following the enforcement of the First Security Interest Agreement (the Statement of Account), it stated that for the purposes of the enforcement of the First Security Interest Agreement, the First Defendant had valued the Claimant’s shareholding in VCIL at £21,067,743.10. That statement of account also indicated that the First Defendant had incurred costs of nearly £512,00.00 in enforcing the First Security Interest Agreement. This indicated that net proceeds of £20,589,777.58 had been set against the Claimant’s liability under the Murabaha to £44,160,907.42.
The Court expressed its concerns regarding the amount of costs the First Defendant had incurred in enforcing the First Security Interest Agreement and invited the parties to agree an appropriate sum which is objectively reasonable.
A considerable amount of the judgment concentrated on the valuation that should be attributed to the Site which in turn influenced the value that should have been attributed to the Claimant’s shareholding in VCIL.
The Court was presented with various expert reports and those experts were subject to cross examination.
The Court determined that the value attributed to the Claimant’s shareholding in VCIL in the Statement of Account was incorrect and concluded that the appropriate value was £12,973,999.00. This was because:
a. The Court accepted the expert evidence from the Claimant that the value of the Site at the point the First Security Interest Agreement was enforced was £95.5m.
b. From this figure, the Court deducted the outstanding debt under the Murabaha and other liabilities within the joint venture structure to arrive at a net asset value attributable to VCIL.
c. The Court then applied a 50% discount to the net asset value attributable to VCIL to reflect the Claimant’s 50% shareholding in VCIL. This calculation produced the figure of £12,973,999.00 which the Court held represented the fair market value of the Claimant’s shares in VCIL at the point that the First Security Interest Agreement was enforced. The Court ordered that the Statement of Account be corrected to reflect this value.
The Court noted that as a result of its findings, the Claimant will receive £12,973,999.00 if and when the Site and or the company or companies directly or indirectly owning the Site are sold, so long as the Site is sold for £95.5m or more. The Court noted that if the Site is sold for less than £95.5m, the Claimant will receive a lesser sum depending upon the final sale price, provided that the price is sufficient to discharge the debt under the Murabaha.
In respect of the enforcement of the Second Security Interest Agreement, the Court was not satisfied that the enforcement of the Second Security Interest Agreement was for a proper purpose. The Court concluded that the enforcement of the Second Security Interest Agreement was simply to obstruct a theoretical claim that the Claimant had against VCIL in respect of a shareholder loan the Claimant provided to VCIL. The Court concluded that it was theoretical as there was a clause in the Second Security Interest Agreement which provided that until the First Defendant had been fully repaid the amounts owed under the Murabaha, the Claimant was not entitled to make any claim against VCIL.
As such the Court ruled that the enforcement of the Second Security Interest Agreement was void and any costs incurred by the First Defendant in consequence of enforcing the Second Security Interest Agreement could not be added to the Murabaha and instead had to borne by the First Defendant.
Despite declaring the enforcement of the Second Security Interest Agreement to be void the Court concluded that no compensation should be awarded to the Claimant. This is because the effect of the enforcement of the Second Security Interest was limited as the Claimant had no value or equity in the structure by that stage, because the First Security Interest Agreement had been enforced.
Observations on the other claims brought by the Claimant
The other claims brought by the Claimant including unjust enrichment, implied terms, and equitable remedies failed.
This judgment confirms that the Security Interests (Jersey) Law 2012 is a self-contained code in relation to the taking of security. It grants secured parties with wide powers of enforcement and a wide discretion as to how to proceed with enforcement and are entitled to have regard to their own interests. The Court confirmed that the effect of the Security Interests (Jersey) Law 2012 is that there is no space to imply the equitable duties that derive from the English law of mortgages.
It also emphasises that when a secured party does enforce its security it should ensure robust independent valuations are carried out in relation to the collateral and that its costs of enforcing are reasonable. It is quite clear from this judgment that the Court will not hesitate in passing comment on whether it considers the costs incurred to enforce the security are reasonable or not.
In this case, the Royal Court considered the enforcement of two security interests under the Security Interests (Jersey) Law 2012.
The Claimant and the First Defendant entered a joint venture to acquire and develop prime land at Vauxhall Cross, London (the Site). The Site was acquired for £94m in 2016 through a Jersey incorporated company (PropCo). The sole shareholder of PropCo was another Jersey incorporated company (Intermediate). Intermediate was in turn owned by a further Jersey incorporated company (VCIL). The Claimant and First Defendant each owned 50% of the issued share capital in VCIL.
The First Defendant invested £35m to acquire its 50% shareholding in VCIL. In 2018, the First Defendant advanced a further £60m to VCIL pursuant to a Sharia-compliant Murabaha facility (the Murabaha). The parties to the Murabaha were VCIL, Intermediate, PropCo and the First Defendant (as lender).
At the same time the Murabaha was executed, two other agreements were executed. First, a share security interest agreement, whereby the Claimant granted to the First Defendant a security interest in the Claimant’s 50% shareholding in VCIL (the First Security Interest Agreement). The terms of the First Defendant also confirmed that it undertook to pay and perform the terms of the Murabaha as “primary obligor and not merely a surety”. Secondly, a general security interest agreement, whereby VCIL granted the First Defendant a security interest over all assets of VCIL, including VCIL’s shareholding in Intermediate (the Second Security Interest Agreement and together with the First Security Interest Agreement, the Security Interest Agreements).
The Murabaha matured in April 2019 but was extended twice; refinancing efforts failed amid Brexit uncertainty and COVID-19 disruption.
In May 2020, the First Defendant enforced the First Security Interest Agreement by appropriating the First Defendant’s shareholding in VCIL to a special purpose vehicle wholly owned by the First Defendant (the SPV). The Claimant’s shares in VCIL were appropriated by the First Defendant to the SPV for a nominal consideration of £1.00.
In December 2020, the First Defendant enforced the Second Security Interest Agreement and appropriated VCIL’s shareholding in Intermediate to the SPV. Similar to the enforcement of the First Security Interest Agreement, the First Defendant appropriated VCIL’s shareholding in Intermediate to the SPV for a nominal consideration of £1.00.
The Claimant issued proceedings claiming damages exceeding £21m and made allegations of bad faith, breach of partnership obligations, failure to obtain fair market value, unjust enrichment and other equitable remedies.
The Court found that a quasi-partnership/joint venture existed between the Claimant and the First Defendant. The Court noted that the relationship between the Claimant and First Defendant as partners did give rise to obligations of good faith between each other. However, the Court made clear that these obligations did not override the Security Interest Agreements.
The Court was satisfied that the enforcement of the First Security Interest Agreement was for a proper purpose.
The Court then went on to examine whether the First Defendant had discharged its obligations under Article 46 of the Security Interests (Jersey) Law 2012. That article imposes an obligation a secured party (in this case, the First Defendant) to amongst other things, take all commercially reasonable steps to determine the fair market value of the collateral and to act in other respects in a commercially reasonable manner.
Article 48 of the Security Interests (Jersey) Law 2012 also imposed an obligation on the First Defendant to provide a statement of account within 14 days of the collateral being sold or appropriated. That statement of account must show:
a. The gross value realised from the appropriation or the sale
b. The secured party’s reasonable costs incurred in relation to the appropriation or sale
c. The amount of any other reasonable expenses incurred by the secured party in enforcing the security
d. The net value of the collateral or net proceeds; and
e. The surplus owing by or debt owing to the secured party.
In the First Defendant’s statement of account, following the enforcement of the First Security Interest Agreement (the Statement of Account), it stated that for the purposes of the enforcement of the First Security Interest Agreement, the First Defendant had valued the Claimant’s shareholding in VCIL at £21,067,743.10. That statement of account also indicated that the First Defendant had incurred costs of nearly £512,00.00 in enforcing the First Security Interest Agreement. This indicated that net proceeds of £20,589,777.58 had been set against the Claimant’s liability under the Murabaha to £44,160,907.42.
The Court expressed its concerns regarding the amount of costs the First Defendant had incurred in enforcing the First Security Interest Agreement and invited the parties to agree an appropriate sum which is objectively reasonable.
A considerable amount of the judgment concentrated on the valuation that should be attributed to the Site which in turn influenced the value that should have been attributed to the Claimant’s shareholding in VCIL.
The Court was presented with various expert reports and those experts were subject to cross examination.
The Court determined that the value attributed to the Claimant’s shareholding in VCIL in the Statement of Account was incorrect and concluded that the appropriate value was £12,973,999.00. This was because:
a. The Court accepted the expert evidence from the Claimant that the value of the Site at the point the First Security Interest Agreement was enforced was £95.5m.
b. From this figure, the Court deducted the outstanding debt under the Murabaha and other liabilities within the joint venture structure to arrive at a net asset value attributable to VCIL.
c. The Court then applied a 50% discount to the net asset value attributable to VCIL to reflect the Claimant’s 50% shareholding in VCIL. This calculation produced the figure of £12,973,999.00 which the Court held represented the fair market value of the Claimant’s shares in VCIL at the point that the First Security Interest Agreement was enforced. The Court ordered that the Statement of Account be corrected to reflect this value.
The Court noted that as a result of its findings, the Claimant will receive £12,973,999.00 if and when the Site and or the company or companies directly or indirectly owning the Site are sold, so long as the Site is sold for £95.5m or more. The Court noted that if the Site is sold for less than £95.5m, the Claimant will receive a lesser sum depending upon the final sale price, provided that the price is sufficient to discharge the debt under the Murabaha.
In respect of the enforcement of the Second Security Interest Agreement, the Court was not satisfied that the enforcement of the Second Security Interest Agreement was for a proper purpose. The Court concluded that the enforcement of the Second Security Interest Agreement was simply to obstruct a theoretical claim that the Claimant had against VCIL in respect of a shareholder loan the Claimant provided to VCIL. The Court concluded that it was theoretical as there was a clause in the Second Security Interest Agreement which provided that until the First Defendant had been fully repaid the amounts owed under the Murabaha, the Claimant was not entitled to make any claim against VCIL.
As such the Court ruled that the enforcement of the Second Security Interest Agreement was void and any costs incurred by the First Defendant in consequence of enforcing the Second Security Interest Agreement could not be added to the Murabaha and instead had to borne by the First Defendant.
Despite declaring the enforcement of the Second Security Interest Agreement to be void the Court concluded that no compensation should be awarded to the Claimant. This is because the effect of the enforcement of the Second Security Interest was limited as the Claimant had no value or equity in the structure by that stage, because the First Security Interest Agreement had been enforced.
Observations on the other claims brought by the Claimant
The other claims brought by the Claimant including unjust enrichment, implied terms, and equitable remedies failed.
This judgment confirms that the Security Interests (Jersey) Law 2012 is a self-contained code in relation to the taking of security. It grants secured parties with wide powers of enforcement and a wide discretion as to how to proceed with enforcement and are entitled to have regard to their own interests. The Court confirmed that the effect of the Security Interests (Jersey) Law 2012 is that there is no space to imply the equitable duties that derive from the English law of mortgages.
It also emphasises that when a secured party does enforce its security it should ensure robust independent valuations are carried out in relation to the collateral and that its costs of enforcing are reasonable. It is quite clear from this judgment that the Court will not hesitate in passing comment on whether it considers the costs incurred to enforce the security are reasonable or not.
In this case, the Royal Court considered the enforcement of two security interests under the Security Interests (Jersey) Law 2012.
The Claimant and the First Defendant entered a joint venture to acquire and develop prime land at Vauxhall Cross, London (the Site). The Site was acquired for £94m in 2016 through a Jersey incorporated company (PropCo). The sole shareholder of PropCo was another Jersey incorporated company (Intermediate). Intermediate was in turn owned by a further Jersey incorporated company (VCIL). The Claimant and First Defendant each owned 50% of the issued share capital in VCIL.
The First Defendant invested £35m to acquire its 50% shareholding in VCIL. In 2018, the First Defendant advanced a further £60m to VCIL pursuant to a Sharia-compliant Murabaha facility (the Murabaha). The parties to the Murabaha were VCIL, Intermediate, PropCo and the First Defendant (as lender).
At the same time the Murabaha was executed, two other agreements were executed. First, a share security interest agreement, whereby the Claimant granted to the First Defendant a security interest in the Claimant’s 50% shareholding in VCIL (the First Security Interest Agreement). The terms of the First Defendant also confirmed that it undertook to pay and perform the terms of the Murabaha as “primary obligor and not merely a surety”. Secondly, a general security interest agreement, whereby VCIL granted the First Defendant a security interest over all assets of VCIL, including VCIL’s shareholding in Intermediate (the Second Security Interest Agreement and together with the First Security Interest Agreement, the Security Interest Agreements).
The Murabaha matured in April 2019 but was extended twice; refinancing efforts failed amid Brexit uncertainty and COVID-19 disruption.
In May 2020, the First Defendant enforced the First Security Interest Agreement by appropriating the First Defendant’s shareholding in VCIL to a special purpose vehicle wholly owned by the First Defendant (the SPV). The Claimant’s shares in VCIL were appropriated by the First Defendant to the SPV for a nominal consideration of £1.00.
In December 2020, the First Defendant enforced the Second Security Interest Agreement and appropriated VCIL’s shareholding in Intermediate to the SPV. Similar to the enforcement of the First Security Interest Agreement, the First Defendant appropriated VCIL’s shareholding in Intermediate to the SPV for a nominal consideration of £1.00.
The Claimant issued proceedings claiming damages exceeding £21m and made allegations of bad faith, breach of partnership obligations, failure to obtain fair market value, unjust enrichment and other equitable remedies.
The Court found that a quasi-partnership/joint venture existed between the Claimant and the First Defendant. The Court noted that the relationship between the Claimant and First Defendant as partners did give rise to obligations of good faith between each other. However, the Court made clear that these obligations did not override the Security Interest Agreements.
The Court was satisfied that the enforcement of the First Security Interest Agreement was for a proper purpose.
The Court then went on to examine whether the First Defendant had discharged its obligations under Article 46 of the Security Interests (Jersey) Law 2012. That article imposes an obligation a secured party (in this case, the First Defendant) to amongst other things, take all commercially reasonable steps to determine the fair market value of the collateral and to act in other respects in a commercially reasonable manner.
Article 48 of the Security Interests (Jersey) Law 2012 also imposed an obligation on the First Defendant to provide a statement of account within 14 days of the collateral being sold or appropriated. That statement of account must show:
a. The gross value realised from the appropriation or the sale
b. The secured party’s reasonable costs incurred in relation to the appropriation or sale
c. The amount of any other reasonable expenses incurred by the secured party in enforcing the security
d. The net value of the collateral or net proceeds; and
e. The surplus owing by or debt owing to the secured party.
In the First Defendant’s statement of account, following the enforcement of the First Security Interest Agreement (the Statement of Account), it stated that for the purposes of the enforcement of the First Security Interest Agreement, the First Defendant had valued the Claimant’s shareholding in VCIL at £21,067,743.10. That statement of account also indicated that the First Defendant had incurred costs of nearly £512,00.00 in enforcing the First Security Interest Agreement. This indicated that net proceeds of £20,589,777.58 had been set against the Claimant’s liability under the Murabaha to £44,160,907.42.
The Court expressed its concerns regarding the amount of costs the First Defendant had incurred in enforcing the First Security Interest Agreement and invited the parties to agree an appropriate sum which is objectively reasonable.
A considerable amount of the judgment concentrated on the valuation that should be attributed to the Site which in turn influenced the value that should have been attributed to the Claimant’s shareholding in VCIL.
The Court was presented with various expert reports and those experts were subject to cross examination.
The Court determined that the value attributed to the Claimant’s shareholding in VCIL in the Statement of Account was incorrect and concluded that the appropriate value was £12,973,999.00. This was because:
a. The Court accepted the expert evidence from the Claimant that the value of the Site at the point the First Security Interest Agreement was enforced was £95.5m.
b. From this figure, the Court deducted the outstanding debt under the Murabaha and other liabilities within the joint venture structure to arrive at a net asset value attributable to VCIL.
c. The Court then applied a 50% discount to the net asset value attributable to VCIL to reflect the Claimant’s 50% shareholding in VCIL. This calculation produced the figure of £12,973,999.00 which the Court held represented the fair market value of the Claimant’s shares in VCIL at the point that the First Security Interest Agreement was enforced. The Court ordered that the Statement of Account be corrected to reflect this value.
The Court noted that as a result of its findings, the Claimant will receive £12,973,999.00 if and when the Site and or the company or companies directly or indirectly owning the Site are sold, so long as the Site is sold for £95.5m or more. The Court noted that if the Site is sold for less than £95.5m, the Claimant will receive a lesser sum depending upon the final sale price, provided that the price is sufficient to discharge the debt under the Murabaha.
In respect of the enforcement of the Second Security Interest Agreement, the Court was not satisfied that the enforcement of the Second Security Interest Agreement was for a proper purpose. The Court concluded that the enforcement of the Second Security Interest Agreement was simply to obstruct a theoretical claim that the Claimant had against VCIL in respect of a shareholder loan the Claimant provided to VCIL. The Court concluded that it was theoretical as there was a clause in the Second Security Interest Agreement which provided that until the First Defendant had been fully repaid the amounts owed under the Murabaha, the Claimant was not entitled to make any claim against VCIL.
As such the Court ruled that the enforcement of the Second Security Interest Agreement was void and any costs incurred by the First Defendant in consequence of enforcing the Second Security Interest Agreement could not be added to the Murabaha and instead had to borne by the First Defendant.
Despite declaring the enforcement of the Second Security Interest Agreement to be void the Court concluded that no compensation should be awarded to the Claimant. This is because the effect of the enforcement of the Second Security Interest was limited as the Claimant had no value or equity in the structure by that stage, because the First Security Interest Agreement had been enforced.
Observations on the other claims brought by the Claimant
The other claims brought by the Claimant including unjust enrichment, implied terms, and equitable remedies failed.
This judgment confirms that the Security Interests (Jersey) Law 2012 is a self-contained code in relation to the taking of security. It grants secured parties with wide powers of enforcement and a wide discretion as to how to proceed with enforcement and are entitled to have regard to their own interests. The Court confirmed that the effect of the Security Interests (Jersey) Law 2012 is that there is no space to imply the equitable duties that derive from the English law of mortgages.
It also emphasises that when a secured party does enforce its security it should ensure robust independent valuations are carried out in relation to the collateral and that its costs of enforcing are reasonable. It is quite clear from this judgment that the Court will not hesitate in passing comment on whether it considers the costs incurred to enforce the security are reasonable or not.
In this case, the Royal Court considered the enforcement of two security interests under the Security Interests (Jersey) Law 2012.
The Claimant and the First Defendant entered a joint venture to acquire and develop prime land at Vauxhall Cross, London (the Site). The Site was acquired for £94m in 2016 through a Jersey incorporated company (PropCo). The sole shareholder of PropCo was another Jersey incorporated company (Intermediate). Intermediate was in turn owned by a further Jersey incorporated company (VCIL). The Claimant and First Defendant each owned 50% of the issued share capital in VCIL.
The First Defendant invested £35m to acquire its 50% shareholding in VCIL. In 2018, the First Defendant advanced a further £60m to VCIL pursuant to a Sharia-compliant Murabaha facility (the Murabaha). The parties to the Murabaha were VCIL, Intermediate, PropCo and the First Defendant (as lender).
At the same time the Murabaha was executed, two other agreements were executed. First, a share security interest agreement, whereby the Claimant granted to the First Defendant a security interest in the Claimant’s 50% shareholding in VCIL (the First Security Interest Agreement). The terms of the First Defendant also confirmed that it undertook to pay and perform the terms of the Murabaha as “primary obligor and not merely a surety”. Secondly, a general security interest agreement, whereby VCIL granted the First Defendant a security interest over all assets of VCIL, including VCIL’s shareholding in Intermediate (the Second Security Interest Agreement and together with the First Security Interest Agreement, the Security Interest Agreements).
The Murabaha matured in April 2019 but was extended twice; refinancing efforts failed amid Brexit uncertainty and COVID-19 disruption.
In May 2020, the First Defendant enforced the First Security Interest Agreement by appropriating the First Defendant’s shareholding in VCIL to a special purpose vehicle wholly owned by the First Defendant (the SPV). The Claimant’s shares in VCIL were appropriated by the First Defendant to the SPV for a nominal consideration of £1.00.
In December 2020, the First Defendant enforced the Second Security Interest Agreement and appropriated VCIL’s shareholding in Intermediate to the SPV. Similar to the enforcement of the First Security Interest Agreement, the First Defendant appropriated VCIL’s shareholding in Intermediate to the SPV for a nominal consideration of £1.00.
The Claimant issued proceedings claiming damages exceeding £21m and made allegations of bad faith, breach of partnership obligations, failure to obtain fair market value, unjust enrichment and other equitable remedies.
The Court found that a quasi-partnership/joint venture existed between the Claimant and the First Defendant. The Court noted that the relationship between the Claimant and First Defendant as partners did give rise to obligations of good faith between each other. However, the Court made clear that these obligations did not override the Security Interest Agreements.
The Court was satisfied that the enforcement of the First Security Interest Agreement was for a proper purpose.
The Court then went on to examine whether the First Defendant had discharged its obligations under Article 46 of the Security Interests (Jersey) Law 2012. That article imposes an obligation a secured party (in this case, the First Defendant) to amongst other things, take all commercially reasonable steps to determine the fair market value of the collateral and to act in other respects in a commercially reasonable manner.
Article 48 of the Security Interests (Jersey) Law 2012 also imposed an obligation on the First Defendant to provide a statement of account within 14 days of the collateral being sold or appropriated. That statement of account must show:
a. The gross value realised from the appropriation or the sale
b. The secured party’s reasonable costs incurred in relation to the appropriation or sale
c. The amount of any other reasonable expenses incurred by the secured party in enforcing the security
d. The net value of the collateral or net proceeds; and
e. The surplus owing by or debt owing to the secured party.
In the First Defendant’s statement of account, following the enforcement of the First Security Interest Agreement (the Statement of Account), it stated that for the purposes of the enforcement of the First Security Interest Agreement, the First Defendant had valued the Claimant’s shareholding in VCIL at £21,067,743.10. That statement of account also indicated that the First Defendant had incurred costs of nearly £512,00.00 in enforcing the First Security Interest Agreement. This indicated that net proceeds of £20,589,777.58 had been set against the Claimant’s liability under the Murabaha to £44,160,907.42.
The Court expressed its concerns regarding the amount of costs the First Defendant had incurred in enforcing the First Security Interest Agreement and invited the parties to agree an appropriate sum which is objectively reasonable.
A considerable amount of the judgment concentrated on the valuation that should be attributed to the Site which in turn influenced the value that should have been attributed to the Claimant’s shareholding in VCIL.
The Court was presented with various expert reports and those experts were subject to cross examination.
The Court determined that the value attributed to the Claimant’s shareholding in VCIL in the Statement of Account was incorrect and concluded that the appropriate value was £12,973,999.00. This was because:
a. The Court accepted the expert evidence from the Claimant that the value of the Site at the point the First Security Interest Agreement was enforced was £95.5m.
b. From this figure, the Court deducted the outstanding debt under the Murabaha and other liabilities within the joint venture structure to arrive at a net asset value attributable to VCIL.
c. The Court then applied a 50% discount to the net asset value attributable to VCIL to reflect the Claimant’s 50% shareholding in VCIL. This calculation produced the figure of £12,973,999.00 which the Court held represented the fair market value of the Claimant’s shares in VCIL at the point that the First Security Interest Agreement was enforced. The Court ordered that the Statement of Account be corrected to reflect this value.
The Court noted that as a result of its findings, the Claimant will receive £12,973,999.00 if and when the Site and or the company or companies directly or indirectly owning the Site are sold, so long as the Site is sold for £95.5m or more. The Court noted that if the Site is sold for less than £95.5m, the Claimant will receive a lesser sum depending upon the final sale price, provided that the price is sufficient to discharge the debt under the Murabaha.
In respect of the enforcement of the Second Security Interest Agreement, the Court was not satisfied that the enforcement of the Second Security Interest Agreement was for a proper purpose. The Court concluded that the enforcement of the Second Security Interest Agreement was simply to obstruct a theoretical claim that the Claimant had against VCIL in respect of a shareholder loan the Claimant provided to VCIL. The Court concluded that it was theoretical as there was a clause in the Second Security Interest Agreement which provided that until the First Defendant had been fully repaid the amounts owed under the Murabaha, the Claimant was not entitled to make any claim against VCIL.
As such the Court ruled that the enforcement of the Second Security Interest Agreement was void and any costs incurred by the First Defendant in consequence of enforcing the Second Security Interest Agreement could not be added to the Murabaha and instead had to borne by the First Defendant.
Despite declaring the enforcement of the Second Security Interest Agreement to be void the Court concluded that no compensation should be awarded to the Claimant. This is because the effect of the enforcement of the Second Security Interest was limited as the Claimant had no value or equity in the structure by that stage, because the First Security Interest Agreement had been enforced.
Observations on the other claims brought by the Claimant
The other claims brought by the Claimant including unjust enrichment, implied terms, and equitable remedies failed.
This judgment confirms that the Security Interests (Jersey) Law 2012 is a self-contained code in relation to the taking of security. It grants secured parties with wide powers of enforcement and a wide discretion as to how to proceed with enforcement and are entitled to have regard to their own interests. The Court confirmed that the effect of the Security Interests (Jersey) Law 2012 is that there is no space to imply the equitable duties that derive from the English law of mortgages.
It also emphasises that when a secured party does enforce its security it should ensure robust independent valuations are carried out in relation to the collateral and that its costs of enforcing are reasonable. It is quite clear from this judgment that the Court will not hesitate in passing comment on whether it considers the costs incurred to enforce the security are reasonable or not.