Cheyne Finance Plc, Re [2007] EWHC 2116 (Ch) (12 September 2007)

Cheyne Finance Plc, Re [2007] EWHC 2116 (Ch) (12 September 2007)

Clause 12.1(b) of the Security Trust Deed is to be construed in accordance with the 'pay as you go' construction: Receivers must pay Senior Obligations as they fall due in full, then use any surplus for provision against future Senior Obligations. This construction aligns with the express objective in Clause 10.2 and the commercial purpose of the agreement, and is not displaced by fairness concerns arising from the narrow definition of Insolvency Event.

Citation
[2007] EWHC 2116 (Ch)
Parties
Receiver: Nicholas Edwards, Neville Kahn and Nicholas Dargan (Deloitte & Touche LLP); Beneficiary: Party A; Beneficiary: Party B
Jurisdiction
England and Wales
Judgment Date
12 September 2007
Procedural Posture
Application for Directions in Receivership / Judgment on Urgent Application
Outcome
Application granted; construction issue resolved in favour of 'pay as you go' construction.
Legal Topics
Receivership Directions, Interpretation of Security Trust Deed, Priority of Payments, Insolvency Event Definition
Insolvency Company Law Contract Receivership Directions Interpretation of Security Trust Deed Priority of Payments Insolvency Event Definition

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Parties

Nicholas Edwards, Neville Kahn and Nicholas Dargan (Deloitte & Touche LLP)

Receiver

Party A

Beneficiary

Party B

Beneficiary

Procedural Posture

Application for Directions in Receivership / Judgment on Urgent Application

Legal Issues

  1. 1 Proper construction of Clause 12.1(b) of the Security Trust Deed regarding payment and provision for Senior Obligations prior to an Insolvency Event
  2. 2 Whether 'pay as you go' or 'pari passu' construction applies before an Insolvency Event

Ratio Decidendi

Clause 12.1(b) of the Security Trust Deed is to be construed in accordance with the 'pay as you go' construction: Receivers must pay Senior Obligations as they fall due in full, then use any surplus for provision against future Senior Obligations. This construction aligns with the express objective in Clause 10.2 and the commercial purpose of the agreement, and is not displaced by fairness concerns arising from the narrow definition of Insolvency Event.

Court Disposition

Application granted; construction issue resolved in favour of 'pay as you go' construction.

Orders

  • Receivers to apply Clause 12.1(b) in accordance with 'pay as you go' construction; further submissions to be heard on form of order.