Construction of an 'all monies' legal charge

Construction of an 'all monies' legal charge

What does a recent decision from the High Court tell us about the scope and construction of an ‘all monies’ legal charge?

Original news

Ashwood Enterprises Ltd and others v The Governor and the Company of the Bank of Ireland [2014] EWHC 2624 (Ch)

The case considered whether or not a third party legal charge expressed as being 'all monies' could be construed more narrowly given the particular factual background.

What were the facts in this case?

On 26 June 2007, Bank of Ireland extended an initial facility of £27m to Inis Development Limited which was to develop a property held by two of its directors, the McFeelys, on trust for Ashwood Enterprises Limited (Ashwood). Inis' liabilities were secured by way of an 'all monies' third party legal charge over the property which was given by the McFeelys as mortgagors with Ashwood's consent. Ashwood also provided an 'all monies' guarantee of Inis's liabilities to the bank (the guarantee) and the McFeelys gave a personal guarantee.

A further facility of £10m was extended to Inis in May 2008 which was made for purposes which did not relate to the property.

In late 2008, the bank asked their lawyers to provide a summary of the finance documents relating to the property in connection with a proposed further borrowing. The email sent by the bank's lawyers initially stated that the legal charge only covered the initial facility of £27m. The email was then amended to make some corrections (including the impression that the legal charge was limited to the initial facility). It was claimed, however, that the wording of the corrected email could potentially still be read as stating that the legal charge only applied to the initial facility. The corrected email was then forwarded to the other side at the bank's request.

After seeing the board minutes relating to the proposed further borrowing, Ashwood raised concerns as to the scope of the guarantee, arguing that for

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About the author:

Miranda is a solicitor specialising in leveraged and acquisition finance. She trained at Hogan Lovells International LLP and qualified into the international banking and finance team. During her time at Hogan Lovells she worked on a variety of domestic and cross-border transactions, acting for both borrowers and lenders. She also experienced secondments to Barclays Bank PLC and Kaupthing Bank hf.