Court of Session orders repayment of funds made under share pledge and loan agreement

The case turned on a loan given by the pursuer to the defender, but with the additional presence of a share purchase agreement; a share pledge and loan agreement; and the intention that the pursuer would take ownership of a company owned by the defender.

Ownership never transferred, and it was established in evidence that in fact all of the shares in the company have now been transferred to a third-party. It was a matter of agreement that €701,525.41 had been paid by the pursuer to the defender as a loan.

There were arguments from each party in respect of whether there were breaches in terms of the SPLA and SPA. In the event, the pursuer did not establish that repayment was due as a result of the agreements between the parties.

Success for the pursuer founded on the House of Lords case Nielsen v Stewart 1991 SC (HL) 22. In that case both the Inner House and the House of Lords confirmed that, where a contract of loan is silent on the provisions for repayment, the loan is repayable on demand.

The court did not agree with the defender that there was any agreement to the contrary. Lord Lake concluded “The case for the pursuer is therefore simply that he has demanded payment of the sums, there is therefore an obligation to make payment and that payment has not been made. There is no need for consideration of breach of either agreement.”

William Frain-Bell KC and Kenneth Young, advocate, appeared for the pursuer, instructed by MBM Commercial LLP. Tony Jones KC (solicitor advocate) appeared for the defender, instructed by Brodies LLP.