LIST OF ISSUES
From the order of HHJ Rawlings (sitting as a High Court Judge) dated 21 December 2020
Model 1 Loans and Model 1 Terms1. Do the Model 1 Investors (in their capacity as such) have any claim other than an unsecured provable claim against Lendy?
2. Do the proceeds of security of a Model 1 Loan form part of Lendy’s general estate?
3. As regards its contractual liability to Model 1 Investors pursuant to the Model 1 Terms, is Lendy liable to each Model 1 Investor only to the extent that Lendy is repaid by a borrower under, or makes recoveries in respect of, the relevant Model 1 Loan which that Model 1 Investor has funded?
4. If the answer to the question in issue 3 is ‘yes’, should the Model 1 Investors’ contractual claims be valued in an amount equal to the gross proceeds received by Lendy for the relevant Model 1 Loan or the net proceeds of that Model 1 Loan (taking into account the costs of realisation)?
Model 2 Loans and Model 2 Terms
Interpretation, Incorporation and Consumer Rights
5. On a proper construction of clause 6.3 of the Model 2 Loans, is the borrower required to pay the default interest to (i) the relevant Model 2 Investors and/or Model 2 Transferees, (ii) to Lendy (as principal) or (iii) in any other manner?
6. Were any of the relevant clauses in the Model 2 Terms not properly incorporated into the contract between Lendy and Model 2 Investors (on the basis that they were onerous or unusual or otherwise?)
7. Do any of the relevant clauses in the Model 2 Terms constitute ‘unfair terms’ under Part 2 of the Consumer Rights Act 2015? Fiduciary Duties, Proprietary Rights and Fairness Rules
8. Has Lendy breached any of its fiduciary duties regarding its charging fees, interest and/or the Service Charge for its own account in connection with the Model 2 Loans? If so:
(a) what is the appropriate form of relief for Model 2 Investors and/or the Model 2 Transferees;
(b) is Lendy entitled to an equitable allowance to cover its costs as agent; and
(c) if the answer to the question in issue 8(b) is ‘yes’, how should that allowance be calculated in principle?
9. Based upon the answers to the questions in issues 5 to 8, do the Model 2 Investors and/or the Model 2 Transferees have a legal or equitable proprietary interest in any of the following:
(a) any default interest payable by a borrower to Lendy under a Model 2 Loan;
(b) all standard interest payable by a borrower to Lendy under a Model 2 Loan;
(c) any of the fees payable by a borrower to Lendy pursuant to a Model 2 Loan; and
(d) the Service Charge?
10. Do the Model 2 Investors and/or Model 2 Transferees hold proprietary rights to the proceeds of any claims by Lendy against third parties relating to Model 2 Loans, such that those proceeds do not form part of Lendy’s general estate?
11. If the Model 2 Investors and/or the Model 2 Transferees do not hold a proprietary right to a particular asset listed in issue 9 or 10, should the Administrators refrain from taking advantage of Lendy’s strict legal rights regarding those assets for the benefit of the Model 2 Investors and/or Model 2 Transferees pursuant to: (i) the Ex Parte James Rule; or (ii) the Unfair Harm Provision?
Distribution of Security Proceeds
12. Which liabilities of the borrower properly constitute Secured Liabilities?
13. Based upon the answer to the question in issue 12, should the Secured Liabilities be discharged pro rata between Lendy on the one hand, and Model 2 Investors and/or Model 2 Transferees on the other hand, or in some other manner?
14. Are the Administrators constrained from taking advantage of Lendy’s strict legal rights to recover amounts for its own account pursuant to clause 21.1 of the Model 2 Debenture pursuant to: (i)
the Ex Parte James Rule; or (ii) the Unfair Harm Provision?
Unsecured Claims
15. Do the Model 2 Investors and/or the Model 2 Transferees (in their capacity as such) have any unsecured provable claims against Lendy?
Administrators’ Proper Costs and Expenses16. How should the Administrators’ proper costs and expenses in relation to administering, enforcing and recovering Model 2 Loans be met if:
(a) the Model 2 Investors and/or the Model 2 Transferees hold proprietary rights to any or all of the particular assets listed in issues 9 or 10, or both;
(b) the Administrators are not entitled to an equitable allowance;
and
(c) the Administrators’ proper costs and expenses in dealing with and distributing the Model 2 Investors’ and/or the Model 2 Transferees’ property cannot be met from Lendy’s general estate?
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