BHL v Leumi ABL Ltd [2017] EWHC 1871 (QB) (28 July 2017)

BHL v Leumi ABL Ltd [2017] EWHC 1871 (QB) (28 July 2017)

Leumi was contractually entitled to charge a collection fee under Schedule 6 paragraph 2 of the RFA, but the discretion to set the fee (up to 15%) had to be exercised in accordance with the Braganza Duty. Leumi failed to exercise this discretion properly, having simply imposed the maximum fee without any rational...

Source-derived case information.

Citation
[2017] EWHC 1871
Parties
Claimant: BHL; Defendant: Leumi ABL Limited
Jurisdiction
England and Wales
Judgment Date
28 July 2017
Procedural Posture
Commercial Contract Dispute / High Court Trial Judgment
Outcome
Claim allowed in part; counterclaim allowed in part
Legal Topics
Interpretation of Contract Terms, Penalty Clauses, Exercise of Contractual Discretion, Mistake of Law, Indemnity Agreements
Contract Law Commercial Law Interpretation of Contract Terms Penalty Clauses Exercise of Contractual Discretion Mistake of Law Indemnity Agreements

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Parties

BHL

Claimant

Leumi ABL Limited

Defendant

Procedural Posture

Commercial Contract Dispute / High Court Trial Judgment

Legal Issues

  1. 1 Whether Leumi was entitled to charge a 15% collection fee under the Receivables Finance Agreement (RFA)
  2. 2 Proper construction of Schedule 6 paragraph 2 of the RFA
  3. 3 Whether the collection fee clause was a penalty and unenforceable

Ratio Decidendi

Leumi was contractually entitled to charge a collection fee under Schedule 6 paragraph 2 of the RFA, but the discretion to set the fee (up to 15%) had to be exercised in accordance with the Braganza Duty. Leumi failed to exercise this discretion properly, having simply imposed the maximum fee without any rational process or estimation of likely costs. The court determined the appropriate fee by reference to what would have been a rational exercise of discretion. The collection fee clause was not a penalty. BHL was entitled to restitution of the overpaid sums, as payments were made under a mistake of law.

Court Disposition

Claim allowed in part; counterclaim allowed in part

Orders

  • Leumi to repay BHL the amount overpaid in respect of the collection fee, calculated as the difference between the sum paid and the sum properly due under a rational exercise of discretion.
  • BHL to pay Leumi the outstanding balance of the Current Account as determined by the court.