Contractual interpretation by administrators and common sense (Avery-Gee and others v Sibley and others)

Article summary

Restructuring and Insolvency analysis: The High Court held that the joint administrators of a collapsed peer-to-peer lending company, FundingSecure Ltd, were not permitted to pay the company five percent of any security asset realisation on defaulting loans before monies were repaid to lenders (investors). This case provides a summary of the principles of contractual construction and an insight into judicial approach to arguments based on commercial common sense. In construing the contract, the judge held that internal ambiguities were to be read against the company, as was the fact that the investors’ interpretation led to a sensible outcome which fit better with the commercial reality of the situation as reflected by the parties’ respective abilities to assess the risks involved in their dealings. This result was crucial to thousands of investors who stood to lose millions where FundingSecure Ltd had overvalued the security on their loans meaning there was not enough money to pay back investors....