In July 2016 the peer-to-peer lending company Lendy Ltd facilitated a loan to Q.E.D. Developments Limited. Lendy were acting as agent for some 4,900 retail investors who collectively financed a facility of £14.3m, secured by a First Charge against a site known as the former Sunbeam Factory in Wolverhampton. The loan description on the Lendy website describes the site as:
… a former industrial premises constructed towards the end of the 19th Century and was known for its production of Sunbeam Motorcycles. The property had been vacant for over 10 years, before being purchased for development.
https://lendy.co.uk/loans/252
The Sunbeam factory is one of Wolverhampton’s most iconic industrial buildings and is a project backed not only by the city community but has the overwhelming support of the council as they are keen to see its regeneration being that in the centre of Wolverhampton’s regeneration zone.
The BBC reported in 2014 that the ‘transformation plan’ to develop the site had been approved by Wolverhampton City Council with QED’s director Mr Liam Brian Wordley quoted as saying he was looking forward to “starting work immediately” to bring “this fantastic building back to life“.
The development ultimately failed and the borrowing company and owner of the site Q.E.D. Developments Limited was placed into administration on 12th Nov 2018 with Carl Jackson and Simon Campbell from insolvency firm Quantuma appointed as Joint Administrators.
The essence of Mr Wordley’s claim against Lendy and Saving Stream Security Holding Limited (the company that holds the security on behalf of the investor lenders) is that false representations were made by them and on their behalf regarding agreements they claimed to have reached with prospective lenders to provide the money that was due under the loan facilities (and specifically the Development Loan).
It is also claimed that Lendy and SSSHL breached the Development Loan agreement by failing to procure timely payments of the various tranches of the Development Loan (which, says Mr Wordley, resulted in delays, cost increases and eventually QED’s default under its agreements). As a result, says Mr Wordley, the personal guarantee and the security over the Car Park are unenforceable and he is entitled to damages for having been deprived of its control.
An additional claim is that “Lendy failed to communicate in a way that was fair, clear and not misleading” which it’s said is breach of FCA rules.
These allegations are denied by Lendy and SSSHL.
The December 2021 Hearing
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At an attended hearing at the High Court in Birmingham on 14th December 2021 Lendy and SSSHL made an application for summary judgment on three of the issues contained within the particulars of claim. It is understood that currently a total of six contentious issues exist and are set for trial in November 2022.
The court was told there were two loans currently in existence: A so-called land loan of £6.6m which had been used to consolidate existing debt used to purchase the underlying property and a development loan of up to £6.12m, payable in tranches to enable, as the name suggests, redevelopment of the site.
Matthew Weaver, the barrister representing the applicants Lendy and SSSHL, mused that the judge was “not a newcomer to the affairs of Lendy”. His Honour Judge Rawlings had presided over a 4-day-trial in June of 2021 resolving issues between Lendy and the investors in a directions hearing. The difference, the judge explained, is that this is a case about the relationship between Lendy and a borrower not between Lendy and the investors.
In simple terms, Lendy’s application for summary judgment is that certain claims have no real prospect of success at trial and the court “should grasp the nettle” and decide them in Lendy’s favour now. Mr Weaver said the “application had been carefully crafted to ensure only those three issues that have no real prospect have been identified.” Andrew George QC, representing Mr Wordley, contended that the issues identified were not appropriate to be decided today and should go to trial where the judge could “consider these matters in the round”.
Explaining that this “is a straightforward summary judgment application” Mr Weaver refuted the “huge amount of protestation that this application is in some way a less than fair tactic, something dark and mysterious” and he also refuted that this was an attempt to avoid disclosure of documents saying in no uncertain terms that this was a “remarkable statement in circumstances where it’s been suggested that the professional administrators, who are officers of the court, are seeking to gain an advantage by deliberately concealing documents from the court in the course of this litigation.”
The First Issue
Does Mr Wordley have a real prospect of establishing that it was a condition of each loan that there were, at the point of completion of the Loan Agreement, lenders who had, as per Recital A and clause 2 of the Loan Agreement, agreed and authorised Lendy to agree as agent on their behalf, to lend to QED the aggregate amount of the loan on the terms of the Loan Agreement?”
Recital A – “The Lenders have agreed to provide the Borrower with a loan as set out in this
agreement.”
Clause 2 – “The Lenders agree to lend to the Borrower the aggregate amount of the Loan on the terms of the Loan Agreement and in the proportions that they have agreed with the Agent.”
The first issue as pleaded is “it was a condition of each loan that, at the point of completion, Lendy had committed funding in place in the total amount of and for the term of the proposed loan.“
Mr George QC explained that their pleaded phrase ‘committed funding in place’ did not mean Lendy had to have had the funds for the £6.12m development loan “locked in a treasure trust not doing anything for a whole year” but that the funds should have some sort of certainty behind them.
Reference was made to a witness statement of a Mr Benjamin Daniel Lloyd, the mortgage broker who introduced Lendy to Mr Wordley. He reportedly said
In my experience, lenders do not contractually commit to fund projects when they don’t have the financial capability to meet those commitments. I would not have recommended Lendy to the Company if I had known that funds were not in place and that there was a risk that it would not be able to fulfil the drawdowns under the Development Loan…”
Ben Lloyd, MD of Pure Property Finance and Pure Advisory Group (Previously Pure Commercial Finance)
Mr Wordley goes one step further and describes it as “commercial suicide” for QED to have entered the loan if funds had not been committed at the outset. Their written submissions continue:
The whole point of the Development Loan was that it enabled a development project to commence and proceed; unless there were contractual agreements to provide the funding for the entirety of that project (subject to attaining the relevant milestones) it would make no sense at all to accept and spend an initial tranche.
With no legal commitments in respect of the balance of the Development Loan, the risk that (as transpired) QED would be left high-and-dry with a half-finished project and financial commitments it needed to, but could no longer afford to, service was obviously immense.
Mr Weaver was asked by the Judge about a hypothetical loan from Barclays Bank under the same terms and conditions as those relied upon here. On the assumption that Barclays would have “no difficulty with funds being available… It wouldn’t be open for Barclays to turn round and say ‘you’ve met the conditions but we’re not going to lend you the money'” he said.
HHJ Rawlings asked “if the clause had been intended to mean the funds were all available on day 1 there could have been a clause to say you can’t have a draw down until you have funds available.“
Mr Weaver replied saying that the “commerciality of that is nonsense. You couldn’t expect a p2p company to say ‘we provide you with nothing until we are able to provide it’” which prompted laughter from a number of people in the court room.
The Second Issue
The Second Issue concerns the nature and extent of the obligations of the various lenders.
Does Mr Wordley have a real prospect of establishing that the obligations owed by QED under the Land Loan and the Development Loan (and secondarily by Mr Wordley himself under the Personal Guarantee) were owed only to those lenders who had, at the point of completion of the Loan Agreement, agreed and authorised Lendy to agree as agent on their behalf, to lend to QED a part of the aggregate amount of the loan on the terms of the Loan Agreement?
In written submissions it is said this is effectively an alternative case in circumstances where there were some lenders who had so agreed in respect of their part of the loan but not sufficient lenders to cover the entirety of the promised Development Loan.
The second issue as pleaded is “if and to the extent that QED owed obligations to lenders by the Standard Terms or the specific loans documents at all, it owed its obligations only to those lenders who had committed funding at the point of completion“.
A suggestion that QED only had an obligation to repay amounts due to those who had invested in the first tranche of the loan, in this case some £505k, just “doesn’t make commercial sense” said Mr Weaver, “otherwise every borrower of development loans wouldn’t repay them“. Mr George QC denied this was the case submitting that there wasn’t “some lacuna in the law … the law of unjust enrichment are in play. It is simple not right to say that when a contract is void there is no remedy [for the lenders]”.
The Judge commented that either Mr Weaver was right and the developer is not getting a cast iron commitment of funds, or Mr Wordley is right and there are problems with repayment of the loan. Suggesting that “either interpretation has problems with the commercial sense” HHJ Rawlings said “perhaps P2P lending is not a suitable format for development loans.”
Mr Weaver replied that “it might be by the time the courts see every case that comes out of Lendy everyone shares the view that P2P lending and development loans are not great bedfellows”. Many Lendy investors might share that sentiment too.
The Third Issue
Does Mr Wordley have a real prospect of establishing that Lendy represented by the repeated provision of its standard contractual documents, in connection with each loan, that there were, at the point of completion of the Loan Agreement, lenders who had agreed and authorised Lendy to agree as agent on their behalf, to lend to QED the aggregate amount of the loan on the terms of the Loan Agreement?
This is a misrepresentation claim that Lendy, prior to completion of the loan “had committed funding securely in place, in the total amount of and for the term of the proposed loan”.
Describing the claim as “embarrassing by its lack of particularity” Mr Weaver said the “obvious starting point is this – there is no claim for misrepresentation if one cannot identify the representation itself“. In written filings made prior to the hearing Mr Weaver also said that “if any such representations were made, they were made by Lendy as agent for the lenders and, therefore, made by the lenders.”
Mr George QC submitted that this was not a suitable matter for summary judgment as misrepresentation “is a developing and highly sensitive area of the law”. A trial judge would have to look at the whole factual matrix to grasp the issues. Asking “why does it matter if only 8.1% of the loan is committed?” he considered that “£500k will be spent on commencing the development” resulting in “financial commitments that would have been entered into” including builders who you “are obligated to pay”. “No one would take the first tranche without contractually binding promises for more money” he concluded.
HHJ Rawlings indicated he would be in a position to hand down judgment on Friday 17th December at Noon and this blog will be updated then.
***Update: The court did not facilitate remote access to the hearing. Enquiries are ongoing.
Written Submissions
Following a written request to the court under the ‘Open Justice’ Principle the mouseinthecourt received the parties Skeleton Arguments.
This is the applicants (Lendy & SSSHL) Skeleton Argument:
This is the respondents (Mr Liam Wordley) Skeleton Argument:
The July 2021 Hearing
This was a two-hour Costs and Case Management Conference hearing before District Judge Augustine Rouine.
Total costs budgeted:
Claimant: £436,630.90 (includes provisional disclosure figure).
For D1&D2 (Lendy and SSSHL): £173,469.33 (excluding disclosure)
For D3 (the receivers): £158,409.50 (excluding disclosure)
It was ordered that there should be two trials. One to examine the facts, the second to determine quantum. Ie the first trial could determine that there had been a sale at undervalue, the second trial would determine the damages, if any, that arise from that.
The first trial, with a time-estimate of 5 days, is scheduled to take place between October 2022 and March 2023.
A 2-hour-hearing to determine issues surrounding disclosure was scheduled to take place on the first available date between Aug 16th and Nov 30th 2021.
Mouse in the Court 
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