BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
KING'S BENCH DIVISION
COMMERCIAL COURT
Rolls Building, Fetter Lane, London, EC4A 1NL |
||
B e f o r e :
(Sitting as a Deputy High Court Judge)
____________________
YAMADA LIMITED |
Claimant |
|
- and - |
||
(1) SETARA HOLDINGS INC (2) SETARA GROUP INC. (3) LYNK DO BRASIL SERVICOS FINANCEIROS LTDA (4) BP TOKEN PRODUCTS DIGITAIS LTDA (5) ENRICO CRASSO (6) TARIQ NAJAM (7) STEFANO CASTAGNOLA (8) SOHAIL NAJAM |
Defendants |
____________________
Maria Mulla (instructed by Withers LLP) for the 1st – 4th and 6th – 8th Defendants
Kendya Goodman (instructed by Buckles Solicitors LLP) for the 5th Defendant
Hearing dates: 22 and 23 October 2024
Draft judgment circulated to parties: 27 November 2024
____________________
Crown Copyright ©
STEPHEN HOFMEYR KC:
Introduction
The legal principles
i) The court must consider whether the claimant has a 'realistic' as opposed to a 'fanciful' prospect of success: Swain v Hillman [2001] 1 All ER 91;
ii) A 'realistic' claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8];
iii) In reaching its conclusion the court must not conduct a 'mini-trial': Swain v Hillman;
iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10];
v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;
vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725."
"However, where the court holds that there is a defect in a pleading, it is normal for the court to refrain from striking out that pleading unless the court has given the party concerned an opportunity of putting right the defect, provided that there is reason to believe that he will be in a position to put the defect right. …"
Background
(1) According to Section 2.1 of the Settlement Agreement the Borrower undertook to pay in cash by means of a wire transfer of immediately available funds to the Lender (a) four hundred thousand US Dollars (USD 400,000) on 11 November 2022 ("Initial Payment") and thereafter (b) two million US Dollars (USD 2,000,000) on the 16th of December 2022 (the "Last Instalment Payment").
(2) According to Section 3.1 of the Settlement Agreement the Guarantors irrevocably and unconditionally agreed (a) that their obligations under the Loan Agreement (i) would remain in full force and effect until full settlement of the Debt and (ii) would not be affected by the entering into and execution of the Settlement Agreement and (b) that the guarantees provided under the Loan Agreement would be extended to cover the aggregate of the Initial Payment and the Last Instalment Payment.
(3) Recital B to the Settlement Agreement acknowledged that an Event of Default had occurred on 7 October 2022 when the Borrower "failed to repay the Term Loan together with accrued and unpaid interests …".
(4) Recital D of the Settlement Agreement recorded that the Borrower had informed the Lender of its intention to settle, compromise, and finally resolve, upon the terms and conditions set forth in the Settlement Agreement, all of the disputes and potential disputes between them in connection with the Debt and the Loan Agreement (the "Disputes").
The Application
Common ground
The defences
(1) The Borrower operates in Brazil and the United States specialising in the provision of global merchant account solutions and payment gateways for ecommerce. It runs a brand known as "BP Wallet" which processes payments on behalf of merchants on an online platform.
(2) It is required by Brazilian guidelines to hold a minimum amount of guarantees (known as "rolling reserve") against its business in Brazil. Whilst for the most part the Borrower had historically used internal funding, as its business expanded it needed to increase its rolling reserve in Brazil.
(3) In around March 2022, the Borrower wished to expand its business into Europe where it hoped to "onboard" high calibre merchants that it was unable to "onboard" in Brazil. In this context it was in discussions with Optimum Complexity Limited ("Optimum") who wished to enter into "a joint venture" with the Borrower. The individuals with whom the Borrower dealt were Mr Federico Cirulli ("Cirulli") and Mr Pietro Andrea Calandruccio ("Calandruccio").
(4) Optimum wished to incorporate a joint venture vehicle with the Borrower which would be used to establish and operate a European business. This would allow the Borrower significantly to expand its volume of business.
(5) The joint venture "was crystallised" in a Letter of Intent dated 26 May 2022 between Optimum and the Borrower (the "LOI").
This binding letter of intent ("Letter") will confirm our prior discussions regarding the terms and conditions pursuant to which JV Partner 1, or any of its affiliates, subsidiaries, successors or assignees, will enter into a business combination ("Proposed Transaction") with JV Partner 2 in relation to the incorporation and operation of a joint venture vehicle for the purpose of operating a fully integrated acquiring and payment facilitation business ("JV Vehicle"). This Letter is intended to create binding legal and contractual obligations of the Parties (as below defined) with respect to matters set forth herein, and upon the breach by a Party of its obligations in any material respect, the injured Party shall have such rights and remedies with respect thereto as are available to it under applicable law. The JV Partner 1 and the JV Partner 2 may individually be referred to herein as a "Party" or collectively as the "Parties".
1. Definitive Agreement; Binding Effect. The Parties have engaged in negotiations and reached agreement in principle to enter into one or more agreements (the "Definitive Agreement") to reflect the Proposed Transaction. The terms and conditions attached hereto as Exhibit A sets forth the agreement of the Parties in principle with respect to the Proposed Transaction, and will form the basis of the Definitive Agreement. The Definitive Agreement will contain mutually agreeable terms and conditions consistent with this Letter.
2. Negotiation of Amendment. The Parties shall use commercially reasonable efforts to complete negotiations and execute the Definitive Agreement as quickly as reasonably possible following the execution for acceptance of this Letter and in any case within one (1) month as from said acceptance. Until the Definitive Agreement is executed, the Parties agree that the provisions of this Letter (including the attached Exhibit A) shall govern their relationship. Upon execution and delivery of the Definitive Agreement, this Letter shall be superseded thereby and the rights and obligations of the Parties with respect to the Proposed Transaction shall thereafter be governed by the Definitive Agreement.
3. Good Faith. The Parties shall act in good faith to carry out the Proposed Transaction, shall not interfere with the business of the other Party, shall not neglect or materially alter their respective current businesses, and shall cooperate fully and completely to carry out the intent of the Proposed Transaction.
4. Confidentiality. This Letter is being delivered with the understanding that the Parties, together with their respective officers, directors, managers, members, representatives, agents, owners and employees, each agree to use their best efforts to keep the existence of this Letter and its contents confidential. Any information, including but not limited to data and business information, written or otherwise, ("Information"), furnished or disclosed by one Party to the other for the purpose of the contemplated transaction herein, will remain the disclosing Party's property until the closing of the Proposed Transaction. All copies of such Information in written, graphic or other tangible form must be returned to the disclosing Party immediately upon written request if the transaction contemplated herein is not consummated. Unless such Information was previously known to receiving Party free of any obligation to keep it confidential, or has been or is subsequently made public by the disclosing party or a third party, it must be kept confidential by the receiving party, will be used only in performing due diligence for the Proposed Transaction, and may not be used for other purposes except upon such terms as may be agreed upon between the Parties in writing.
5. Expenses. Each Party shall be responsible for their own fees and expenses incurred as part of the Proposed Transaction and the transactions contemplated under this Letter, including but not limited to, legal fees, accounting fees, investment banking fees and related expenses.
6. Announcements. No announcement shall be made regarding a pending or completed transaction or agreement between the Parties without the prior written consent of both Parties.
7. Governing Law Dispute Resolution and Jurisdiction. This Letter shall be governed by and construed in accordance with the laws of England. All disputes, controversies or claims ("Disputes") arising out of or relating to this Letter shall in the first instance be the subject of a meeting between a representative of each Party who has decision making authority with respect to the matter in question. Should the meeting either not take place or not result in a resolution of the dispute within fifteen (15) business days following notice of the Dispute to the other Party, then the dispute shall be resolved in a proceeding to be held before the English competent courts.
8. Multiple Counterparts. This Letter may be executed in multiple counterparts, each of which may be deemed an original. It shall not be necessary that each Party executes each counterpart, or that any one counterpart be executed by more than one Party so long as each Party executes at least one counterpart.
9. Expiration. This LOI shall expire if not accepted by the JV Partner 2 by 12:00 p.m. CET on 26th May 2022.
If the terms and conditions of this Letter are acceptable, kindly execute a copy hereof where indicated below and return it to us or before 12:00 p.m. CET on 26th May 2022.
1. Parties
Optimum Complexity Ltd. or any of its affiliates, subsidiaries, successors or assignees; and Setara Holdings Inc.
2. Scope of the Agreement
Incorporation, operation and management of a joint venture vehicle ("JV Vehicle") for the purpose of operating a fully integrated acquiring, payment facilitation and advance business ("Business").
3. Equity and Financing
As from the incorporation date the shares capital of the JV Vehicle shall be allocated as follows:
JV Partner 1 20%
JV Partner 2 80%
All shares for the time being unissued in the JV Vehicle shall, before they are issued, be offered for subscription to all the holders of shares (i.e. JV Partner 1 and JV Partner 2 in proportion (as nearly as may be) to the nominal amount of their existing holdings of shares).
4. JV Vehicle governance and other Business-related matters
The Definitive Agreement will contain customary undertakings in relation to the governance of the JV Vehicle and the operation of the Business customary for a transaction of this size and nature including without limitation, mutual exclusivity, capital and further finance, tag-along and drag-along rights, defined process for disposal and purchase of shares including without limitation transfer restrictions, formation of board, appointment of officers, board and shareholders reserved matters, right of information, managers of the subsidiaries of the JV Vehicle (if any), responsibility matrix, compensation for officers, confidentiality, events of default, escalation procedures, non-circumvention and no-solicitation, remedies and penalties for breaches, exit strategy and minority protection rights, compensation for the introduction of the pre-existing business
5. Representations and Warranties; Covenants; Conditions
The Definitive Agreement will contain such representations and warranties, covenants and conditions of the Parties as are customary for a transaction of this size and nature. Certain representations and warranties may apply only to one Party, but not the other. Reasonable additional representations and warranties or covenants may be requested by either Party as a consequence of its due diligence, investigation or otherwise.
6. Indemnification; Remedies
The Definitive Agreement will include usual and customary mutual, limited indemnification for breaches of representations and warranties, covenants and other undertakings, with a survival period. No officer, director, employee or stockholder of any of the Parties will be liable under the indemnification provisions of the Definitive Agreement. No claim for indemnification will be payable unless and until all such claims, in the aggregate, exceed USD 10,000, in which case all claims shall be paid without regard to that minimum.
7. Undertaking and responsibility of JV Partner 1
JV Partner 1 shall make available to the JV Vehicle its relationships and expertise in the financial sector, including its experience in establishing and managing regulated entities, for the purpose of establishing and operating the mutually desired Business.
JV Partner 1 will be in particular responsible for:
A. Sourcing an acquirer that meets the following requirements, within 6 months:
i. High Risk processing
ii. Rate to be sub 2.2%
iii. Payment D+1
iv. Payments may be made, at a later stage, back through the wallet
v. Scalable to US$ 1 billion per month
vi. Processing in: EUR, GBP, USD
vii. Standard reporting dashboard; and
viii. Required API: Reporting, Subscription, Authorization, Charging, Refunds, Chargeback reports
B. Providing expertise in the banking and financing transaction with regards to structuring the JV Vehicle together with any associated/affiliated vehicles to become an acquirer in its own right within 12 months, subject to regulatory approval.
C. Providing access to funding to allow the expansion of the Business as needed and mutually agreed between the Parities, which shall include but not limited to:
i. Development Staff
ii. Management Staff
iii. Customer Support
iv. Licensing
v. Compliance
D. Subsequent access to banking solution development that will allow the JV Vehicle to become a holistic solution provider through direct bank-to-bank, instant deposits in the US, European Union, UK and Asia.
8. Undertaking and responsibility of JV Partner 2
A. Within 50 business days as from the incorporation of the JV Vehicle, JV Partner 2 shall contribute all the existing companies, technology and expertise (including all IP and relevant licenses/certifications) related to the Business.
B. In addition, JV Partner 2 shall be responsible for:
i. PCI compliance for all processing and storage of customer data and payment information
ii. Secure on-boarding process to comply with personal data sovereignty laws
iii. Onboarding of merchants for the mutual business
iv. Upgrading wallet interface for customer ease of use
v. Facilitating integration of wallet for APM's
vi. Development of a more responsive UI/UX system for merchants and clients
vii. Provision of required information and KYC to enable establishment of a PayFac level operation
viii. Develop tech for further mitigation of AML
ix. Plug-in, client side hosted, software to mitigate AML and friendly fraud
x. Managing Fraud through transaction laundering
xi. Technical oversight of the integration of new acquiring and payment platforms with the existing JV Partner 2 core system
xii. Development of a merchant dashboard for detailed report generation and access to a unified reporting process
xiii. Delivery of processing volumes in excess of EUR 100 MM per month, no later than 6 months following the establishment of the new acquiring relationship.
9. Timing
a) Signing. The Parties will use their best efforts to sign the Definitive Agreement within one (1) month as from the execution and acceptance of the Letter unless otherwise agreed in writing between the Parties.
b) Closing. Subject to the execution of the Definitive Agreement, the Parties will use their best efforts to close the Proposed Transaction and incorporate the JV Vehicle as soon as reasonably possible following the execution of the Definitive Agreement and in any case not later than one (1) month as from such execution date unless otherwise agreed between the Parties ("Closing"). On the Closing date the Parties will execute any document, notice, form, letter, deed or agreement which may be necessary, incidental or ancillary to the incorporation of the JV Vehicle and completion of the Proposed Transaction contemplated therein
(1) Secondly, they contend that clause 4 of the Loan Agreement is governed by section 3 of the Unfair Contract Terms Act 1977 ("UCTA") and fails to satisfy the reasonableness test pursuant to section 11(1) of UCTA (paragraph 56.1 of the Amended Defence and Counterclaim).
(2) Thirdly, the Guarantors contend that they are entitled to rescind the Loan Agreement on the ground that it was induced by a pre-contractual misrepresentation (paragraph 56.2 of the Amended Defence and Counterclaim). Despite the long list of representations asserted at paragraph 75 of the Amended Defence and Counterclaim, Counsel for the Defendants clarified at the hearing that the only representation relied upon by the Defendants is the statement made by Mr Calandruccio, set out at paragraph 75.4 of the Amended Defence and Counterclaim, that "one of our holding company will act as lender".
The Lender's response
The LOI
(1) The document is described as a "letter of intent". It outlines the intention of the two parties to the letter of intent (Optimum and the Borrower) to enter into "a business combination", defined as a "Proposed Transaction". Self-evidently, the LOI is the precursor to a future transaction which will involve "the incorporation and operation of a joint venture vehicle" – the "JV Vehicle" – "for the purpose of operating a fully integrated acquiring and payment facilitation business".
(2) The nature of the LOI as a precursor to a future transaction is confirmed by the words of clause 1:
a) "the Parties [i.e. Optimum and the Borrower] have engaged in negotiations and reached agreement in principle to enter into one or more agreements (the 'Definitive Agreement') to reflect the Proposed Transaction" (emphasis added).
b) Exhibit A contains the agreement of Optimum and the Borrower in principle with respect to the terms and conditions of a future transaction (the "Proposed Transaction").
c) The terms and conditions at Exhibit A "will" form the basis of the future "Definitive Agreement".
d) The Definitive Agreement "will" contain mutually agreeable terms and conditions consistent with the LOI.
(3) The nature of the LOI as a precursor to a future transaction is also confirmed by the words of clause 2. Optimum and the Borrower are each obliged to use commercially reasonable efforts to "complete" negotiations and "execute" the Definitive Agreement as quickly as reasonably possible "following" the execution for acceptance of the LOI. Until the execution of the Definitive Agreement, the LOI (including Exhibit A) would govern the relationship between Optimum and the Borrower. Upon execution and delivery of the Definitive Agreement, the LOI would be superseded.
(4) The language in which the LOI is framed excludes any possible argument to the effect that the LOI doubles as the "Proposed Transaction" or the "Definitive Agreement".
(5) On its face the LOI is an agreement between Optimum and the Borrower. It comes from Optimum, which is identified as "JV Partner 1", and is addressed to the Borrower, which is identified as "JV Partner 2". It is signed on behalf of Optimum and signed as "accepted and agreed" on behalf of the Borrower. It states expressly that the LOI is "intended to create binding legal and contractual obligations of the Parties (as below defined)", where "the JV Partner 1 and the JV Partner 2 may individually be referred to herein as a 'Party' or collectively as the 'Parties'."
(6) There is nothing in the LOI which might suggest that the LOI is an agreement to which an entity other than Optimum and the Borrower is a party. On the contrary, the LOI does anticipate that the future transaction to which the LOI is a precursor may not be made between the Borrower and Optimum, but between the Borrower and "any of [Optimum's] affiliates, subsidiaries, successors or assignees". See the opening paragraph of the LOI and clause 1 of Exhibit A. The fact that the Lender and Optimum were companies in common control (if it be a fact) is therefore irrelevant when it comes to determining the parties to the LOI and does not assist the Defendants.
Implied terms of the Loan Agreement
"On demand" guarantees
Enforceability of clause 4 of the Loan Agreement
(1) It is not explained in the Amended Defence and Counterclaim why the Defendants allege that section 3 of the Unfair Contract Terms Act 1977 applies.
(2) Nor is it explained on what basis it is asserted that clause 4 of the Loan Agreement fails the reasonableness test.
(3) It is not suggested that the allegation goes to only a part or parts of Clause 4 and, accordingly, it must be treated as going to the whole of Clause 4.
(4) Nor is there any allegation in the Amended Defence and Counterclaim as to the consequences which would follow a finding of unreasonableness.
Nevertheless, the thrust of the allegation is tolerably clear.
4. GUARANTEE AND INDEMNITY
4.1 Guarantee and indemnity.
Each Guarantor irrevocably and unconditionally jointly and severally:
(a) guarantees to the Lender punctual performance by the Borrower and the other Guarantor of all that Loan Party's obligations under the Loan Documents;
(b) undertakes with the Lender that whenever the Borrower does not pay any amount when due under or in connection with any Loan Document, it and the other Guarantor shall immediately on demand pay that amount as if it was the Borrower; and
(c) agrees with the Lender that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal, it will, as an independent and primary obligation, indemnify the Lender immediately on demand against any cost, loss or liability it incurs as a result of the Borrower not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Loan Document on the date when it would have been due. The amount payable by a Guarantor under this indemnity will not exceed the amount it would have had to pay under this clause if the amount claimed had been recoverable on the basis of a guarantee.
4.2 Continuing guarantee. This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by the Borrower under the Loan Documents, regardless of any intermediate payment or discharge in whole or in part.
4.3 Reinstatement. If any payment by the Borrower or any discharge given by the Lender is avoided or reduced as a result of insolvency or any similar event:
(a) the liability of the Borrower shall continue as if the payment, discharge, avoidance or reduction had not occurred; and
(b) The Lender shall be entitled to recover the value or amount of that security or payment from the Obligor, as if the payment, discharge, avoidance or reduction had not occurred.
4.4 Waiver of defences. The obligations of each Guarantor under this clause 4 will not be affected by an act, omission, matter or thing which, but for this clause 4.4, would reduce, release or prejudice any of its obligations under this clause 4 (without limitation and whether or not known to it or the Lender) including:
(a) any time, waiver or consent granted to, or composition with, the Borrower;
(b) the release of the Borrower or any other person under the terms of any composition or arrangement with any creditor of any member of the group to which it belongs;
(c) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, the Borrower or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security;
(d) any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of the Borrower or any other person;
(e) any amendment, novation, supplement, extension restatement (however fundamental and whether or not more onerous) or replacement of a Loan Document or any other document or security including, without limitation, any change in the purpose of, any extension of or increase in any facility or the addition of any new facility under any Loan Document or other document or security;
(f) any unenforceability, illegality or invalidity of any obligation of any person under any Loan Document or any other document or security;
(g) any insolvency or similar proceedings; or
(h) this Agreement or any other Loan Document not being executed by, or binding against, any person.
4.5 Guarantor intent. Without prejudice to the generality of Clause 4.4 (Waiver of defences), each Guarantor expressly confirms that it intends that this guarantee shall extend from time to time to any (however fundamental) variation, increase, extension or addition of or to any of the Loan Documents and/or any facility or amount made available under any of the Loan Documents.
4.6 Immediate Recourse. Each Guarantor waives any right it may have of first requiring the Lender (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from that Guarantor under this Clause 4.6. This waiver applies irrespective of any law or any provision of a Loan Document to the contrary.
4.7 Appropriations. Until all amounts which may be or become payable by the Borrower under or in connection with the Loan Documents have been irrevocably paid in full, the Lender (or any trustee or agent on its behalf) may:
(a) refrain from applying or enforcing any other monies, security or rights held or received by the Lender (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and no Guarantor shall be entitled to the benefit of the same; and
(b) hold in an interest-bearing suspense Account any monies received from any Guarantor or on Account of any Guarantor's liability under this Clause 4.7.
4.8 Deferral of Guarantors' rights. Until all amounts which may be or become payable by the Borrower under or in connection with the Loan Documents have been irrevocably paid in full, no Guarantor will exercise any rights which it may have by reason of performance by it of its obligations under the Loan Documents or by reason of any amount being payable, or liability arising, under this Clause 4:
(a) to be indemnified by the Borrower;
(b) to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Lender under the Loan Documents or of any other guarantee or security taken pursuant to, or in connection with, the Loan Documents by the Lender;
(d) to bring legal or other proceedings for an order requiring the Borrower to make any payment, or perform any obligation, in respect of which any Guarantor has given a guarantee, undertaking or indemnity under this Clause 4;
(e) to exercise any right of set-off against the Borrower; and/or
(f) to claim or prove as a creditor of the Borrower in competition with the Lender.
If a Guarantor receives any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Lender by the Borrower under or in connection with the Loan Documents to be repaid in full on trust (with the intent that this shall not constitute a charge and to the extent it is able to do so in accordance with any law applicable to it) for the Lender and shall promptly pay or transfer the Lender or as the Lender may direct.
4.9 Release of Guarantor. A Guarantor shall be automatically released without any action on the part of the Lender from its obligations under this Section if all the Obligation have been repaid in full.
4.10 Merger, Consolidation and Sale of Assets of a Guarantor.
A Guarantor may not sell or otherwise dispose of all or substantially of its assets to, or consolidate with or merge with or into (whether or not such Guarantor is the surviving Person), another Person, other than the Borrower or another Guarantor.
Alleged misrepresentation
FC |
4 July 2022 at 6:06am |
Let me send u the email with the execution version And we talk later |
TN |
4 July 2022 at 6:06am |
Ok Sounds good |
TN |
4 July 2022 at 10:34pm |
IMG-20220704-WA0019.jpg (file attached) Who is Yamada Limited? |
AC |
4 July 2022 at 10:36pm |
One of our holding company, which will act as lender. Chat tomorrow. |
TN |
4 July 2022 at 10:40pm |
Alright. Assumed it was Optimum as haven't heard another name yet. No visibility of who is involved in Yamada. Hoping this doesn't raise questions on our side now but yeah we'll see tomorrow. Thanks for sending. I'm reviewing the proposals from Nick as well. I don't believe we have the information for Yamada on any of the letters for the purpose of this loan So please provide that before I have them finalized tomorrow as well. Can't afford another delay at this stage |
TN |
5 July 2022 at 5:28pm |
As said already, we've advanced funds to fill in the gap and keep business moving, which were supposed to be filled in by this loan amount. So part of this needs to pay back those amounts, as the function was fulfilled as a stop gap I want to be clear on that point as I don't want to be in breach based on accounting The point is still "technically" valid, but I'm trying to be concise |
(1) First, in concluding the Loan Agreement the parties agreed expressly that pre-contractual statements not included as express terms of the Loan Agreement could not be relied upon. Clause 12.7 of the Loan Agreement provides that "The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations among the parties about the subject matter of the Loan Documents merge into the Loan Documents." There are terms to similar effect in the Settlement Agreement (clause 5.1) and the Amendment Agreement (clause 7.10).
(2) Second, I am of the view that the Defendants would have entered into the Loan Agreement even if the representation had not been made and that it is fanciful to suggest the contrary. The identity of the Lender was not of material significance to the Defendants. It was a source of loan money to fund the need for increased "rolling reserve" which was of importance to them.
(3) Third, if, in reliance on the representation, the Sixth Defendant came to the conclusion that the Lender was a party to the LOI, his reliance on the representation would have been unreasonable. The representation was irrelevant to the terms of the Loan Agreement.
Set-off
(1) First, as I have already concluded, the Defendants do not have a prospect of success on their counterclaim. In the circumstances, they have nothing against which to set-off the Lender's claims.
(2) Second, the Defendants have not even attempted to formulate a claim to equitable set-off. Nowhere have they sought to explain why their counterclaim, assuming it to have merit, would impeach the Lender's demand so as to give rise to an equitable set-off defence. This is unsurprising in circumstances where there would be no realistic prospect of formulating a convincing case.
(3) Third, the Defendants appear to concede that, in the absence of a claim to equitable set-off, clause 2.6 would engage and defeat any defence of set-off.
(4) Fourth, the Defendants' reliance on UCTA is misconceived. Section 3 of UCTA is not engaged for the reasons stated at paragraph REF _Ref183464749 \r \h above; and, even if it were engaged, the Defendants do not have real prospects of establishing that clause 2.6 of the Loan Agreement is not a fair and reasonable term to have included in the Loan Agreement having regard the circumstances which were or ought reasonably to have been known to or in the contemplation of the parties when the Loan Agreement was concluded. Clause 2.6 is a carefully drafted provision which forms part of a complex commercial contract between sophisticated corporate entities based in Florida, Brazil and England, and individuals based in Italy, the United States of America and the United Kingdom, all of whom have regular access to legal advice and assistance. It has not been suggested that the relative bargaining position of the parties was unequal. Nor has it been suggested that the clause was not achieving a commercially reasonable objective. The Lender had a legitimate commercial interest in receiving payment under the Loan Agreement promptly when due and there was nothing unfair or unreasonable in requiring payment to be made without set-off. An anti- set-off provision is fairly standard in international commercial loan agreements.
Conclusion