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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Rivertrade Ltd v EMG Finance Ltd & Ors [2015] EWCA Civ 1295 (21 December 2015) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2015/1295.html Cite as: [2015] EWCA Civ 1295

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Hon Mr Justice Mann
[2013] EWHC 3745 (Ch)

		Royal Courts of Justice Strand, London, WC2A 2LL
		21/12/2015

Lord Justice Kitchin:

Introduction

1. In these proceedings the claimant ("Rivertrade") sought an order requiring the third defendant ("Holdings") to repay a loan of £300,000. It also claimed that it was entitled to enforce security which had been given for the loan. This security took the form of the benefit of a contract (in the form of monies receivable under it) made between the first defendant ("Finance") and a Malaysian entity called Ranhill Berhad ("Ranhill").
2. On 25 November 2011 Rivertrade obtained summary judgment on its claim in respect of the loan. The question whether Rivertrade was entitled to enforce the security remained very much in dispute, however. Two issues arose which are of particular relevance on this appeal. The first concerned the extent of the security. Rivertrade contended that it had been agreed that it was entitled to security over all of the monies receivable under the Ranhill contract ("the Ranhill proceeds" or "the Ranhill receivable") and further, that all of the Ranhill proceeds had been assigned to it. The defendants responded that if and in so far as the agreement and assignment were effective, there was only an agreement to give Rivertrade security over 35% of the Ranhill proceeds and that only this part of the proceeds was ever assigned.
3. The second concerned the effectiveness of the agreement and assignment. Finance was the counterparty to the Ranhill contract and so was, prima facie, the appropriate assignor. However, the loan agreement and assignment were executed by Holdings, and Finance was not a party to these transactions on the face of the relevant documents. Further, in May 2008, that is to say over one year before the date of the loan, Finance had assigned all of its receivables to Holdings, and Holdings had in turn assigned those receivables to the fourth defendant ("Forburg"). Prima facie, therefore, Holdings had nothing it could assign by way of security.
4. The action came on for trial before Mann J in May 2013. It occupied eight hearing days. On 28 November 2013 he gave judgment in favour of Rivertrade. He found that the agreement provided for 100%, and not merely 35%, of the Ranhill proceeds to be asssigned as security for the loan. He also found that the circumstances gave rise to an estoppel by convention which had the effect of debarring Finance and Forburg from asserting title to the Ranhill proceeds against Holdings, and therefore from asserting that Holdings was not an appropriate assignor; and further, that Forburg was estopped from asserting that it had any title to the Ranhill proceeds which was higher than that of Rivertrade. He continued that to allow those companies to behave otherwise would falsify the assumption on which all parties were operating in the relevant period and that it would do so in a manner which would be quite inequitable. It followed that Rivertrade was entitled to apply all of the Ranhill proceeds towards satisfaction of the judgment it had earlier obtained.
5. There is a further aspect of the claim which I must also mention at this stage. In or about July 2009 Finance began proceedings in Malaysia against Ranhill to recover the Ranhill proceeds. Rivertrade funded that litigation. It was successful and, in March 2010, judgment was obtained against Ranhill in the sum of $600,000. These moneys were paid by Ranhill but then frozen in Malaysia pending judgment in this action. Mann J held that it had been agreed that Rivertrade could recover from these moneys the costs and expenses it had incurred in connection with the Ranhill proceedings.
6. Forburg, the second defendant, Mr Shailesh Govindia, and Finance filed a notice of appeal against the judgment of Mann J and his consequential order but Finance has played no further part in the appeal, was not represented at the hearing and, so we were told, has now been dissolved. We have only heard submissions on behalf of Forburg and Mr Govindia. They contend that:

i) the judge wrongly found that Rivertrade was entitled to security over 100% of the Ranhill proceeds;

ii) it was not open to the judge to find that an estoppel by convention operated in the way that he did in light of the way the case was pleaded and argued;

iii) the judge erred as a matter of law in concluding that an estoppel by convention could and did have the effect of providing Rivertrade with effective security over the Ranhill proceeds; and

iv) the judge erred in finding that there was an agreement that Rivertrade could recover the costs and expenses it had incurred in connection with the Malaysian proceedings from the Ranhill proceeds.

Background

7. Forburg, Holdings and Finance were all companies in the EMG group of companies which carried on business providing corporate financial services. Finance, a Jersey company, was a wholly owned subsidiary of Holdings, another Jersey company, which was itself a wholly owned subsidiary of Forburg, a BVI company. The directors of Forburg, Holdings and Finance included a Mr Paul Hofer who, as will be seen, signed some of the relevant documents and gave evidence at the trial on behalf of Rivertrade. However, the controlling mind behind all of the companies in the EMG group was Mr Govindia. He was centrally involved in all of the transactions in issue in these proceedings and was the effective decision maker in the EMG group. The others directors, including Mr Hofer, more or less did his bidding.
8. Rivertrade, a UK company, was the investment vehicle of Mr John Kinder. He first became involved with the EMG group in 2007. At that time Mr Govindia was seeking funds to support the EMG group and Mr Kinder agreed to provide £500,000 in the expectation that he would receive some shares in a group company, probably in Holdings. Those shares never materialised.
9. In April 2008 Mr Govindia needed further funds to deal with critical cash flow problems in the EMG group and approached Mr Kinder again. Initially Mr Kinder was not enthusiastic but eventually agreed to lend £500,000 on terms which were agreed in May of that year. In outline, Mr Kinder agreed to lend £500,000 to Forburg until 30 November 2008. Forburg agreed to provide Rivertrade with security in the form of an assignment of the benefit of an agreement referred to as the Intelcan/Brasov transaction. Further and importantly, Rivertrade insisted upon an assignment to Forburg via Holdings of all transaction fees due to Finance. As a result, on 20 May 2008 Finance executed an assignment to Holdings in these terms:

"Assignment of Transaction Revenue to Cover Loan Repayment Plus Interest

We write to confirm that we hereby assign to [Holdings] all transaction revenues pertaining to all it's signed mandates to cover the repayment of Loans plus interest received by [Holdings] from [Forburg] for working capital purposes of [Holdings] and its Subsidiaries."

10. On the same day, Holdings executed an assignment to Forburg in these terms:

"Assignment of Transaction Revenue to Cover Loan Repayment Plus Interest

We write to confirm that we have received an assignment of all transaction revenues from [Finance] pertaining to all it's [sic] signed mandates to cover the repayment of Loans plus interest received by [Forburg] for working capital purposes required by [Holdings] and its Subsidiaries.

[Holdings] hereby assigns in its entirety the above said assignments received from [Finance] to [Forburg] to cover the repayment of the Loans plus interest received from you."

11. At the end of 2008 the EMG group was still in serious financial difficulties. The term of the May 2008 loan expired on 30 November 2008 but Rivertrade agreed an extension for six months. This did not meet the needs of the group, however. Accordingly, Mr Govindia approached Mr Kinder for further financial support. On 23 December 2008 Mr Kinder agreed to provide a further £200,000 by way of a loan to Holdings for a term of two months, repayable on 1 March 2009. This loan was secured by a pledge of bonds in an entity called LML India.
12. It is convenient at this point to mention the Ranhill transaction. In January 2008 Finance agreed to provide financial services to Ranhill in return for a retainer of $100,000 per month, expenses and a success fee. By the end of 2008, a sum in excess of $640,000 was said to be due and owing to Finance under the terms of this agreement.
13. In March 2009 the finances of the EMG group were still in a parlous state. Holdings was now in default of the December 2008 loan agreement and monies were needed to pay rent, salaries and other critical creditors. On 10 March 2009 Rivertrade served a notice of default in relation to the December 2008 loan agreement and on 25 March issued a demand that the LML India bonds be liquidated and that any shortfall be met from the receivables due to the EMG group under the terms of the Intelcan/Brasov agreement.
14. In the light of these difficulties Mr Govindia approached Mr Kinder for yet further funds. Negotiations continued until, eventually, the parties reached agreement by an e-mail exchange on 16 April 2009. This agreement was modified shortly afterwards by a further agreement reached by an e-mail exchange on 19 April. The essential terms of these agreements may be summarised as follows. Rivertrade agreed to lend to Holdings £200,000 in five tranches; one of £100,000 to be paid on 16 April and four each of £25,000 to be paid on 28 April and 13, 20 and 27 May. It was agreed that 35% of the monies receivable from Ranhill, that is to say the Ranhill proceeds, should stand as security for the loan, together with the LML India bonds. Rivertrade also made a contingent commitment to lend a further £100,000 in early June if the EMG group had made sufficient progress in securing payment of monies due to it from its customers.
15. The judge gave careful consideration to the parties to the April agreements. On Mr Kinder's side, it was accepted that Rivertrade was the contracting party. On EMG's side, Holdings was clearly a contracting party as the recipient of the loan. But so too was Finance as the party entitled to the Ranhill proceeds, and Forburg for it agreed to the terms of the transaction and to the provision of the security, including 35% of the Ranhill proceeds. The judge continued that Mr Govindia had authority to act and was acting for all of these companies in negotiating the terms of the agreements.

The June agreement

16. Negotiations between Mr Govindia and Mr Kinder continued through May and June 2009 until a further agreement was reached. This agreement is contained in four documents to which I must now refer.

The facility letter

17. The first is a facility letter from Rivertrade to Holdings dated 18 June 2009. It is headed "Loan Facility in the sum of £200,000 (the "Facility")". Clause 1 contains various definitions. In particular, the "Borrower" is defined as Holdings; and "Drawdown Notice" is defined as a notice in the form set out in the schedule to the letter. The agreement then provides, so far as relevant:

"2. Amount and availability

2.1 The total amount to be advanced (the "Loan") under this Facility shall be restricted to £200,000…and shall be made available as listed below.

2.2 The drawdown under the Facility shall be at the discretion of the lender but shall not exceed in aggregate the amount of the Facility. Such drawings must be made by means of a Drawdown Notice, such notice to be received by Rivertrade Limited no later than two Business Days before the date of drawdown.

2.3 Entirely at the discretion of Rivertrade Limited and contingent on the continuing and positive progress on Investment Banking Mandates and taking into consideration alternative sources of funding, this facility may be increased by a further £100,000 from June 2009.

3. Period & repayment

3.1 The Loan is to provide short-term liquidity and shall be repaid to Rivertrade Limited immediately on demand.

…

5. Security

5.1 As security for the performance by the Borrower of its obligations pursuant to this Loan Agreement and in consideration of the monies advanced the Borrower hereby assigns deposits and pledges and charges to and in favour of Rivertrade Limited the [LML bonds].

5.2 As security for the performance by the Borrower of its obligations and pursuant to this Loan Agreement, and in consideration of the monies advanced the Borrower hereby assigns to Rivertrade Limited the receivable due from Ranhill Berhad (Malaysia) of $644,744 held in the name of EMG Finance Limited in accordance with the terms of the Assignment Agreement between the parties of the same date.

5.3 As security for the performance by the Borrower of its obligations pursuant to this Loan Agreement and in consideration of the monies advanced the Borrower hereby assigns to Rivertrade Limited up to 35% of the fees generated from the Brasov/Mecano mandated deals until such time as the Loan plus interest have been paid.

5.4 The security held by Rivertrade Limited shall be unconditionally released upon full repayment of all the principal and interest monies due to Rivertrade Limited under this Loan Agreement and any other loan agreement that Rivertrade Limited and John Kinder/Rivertrade Limited has entered into with the Borrower. For purpose of identification the loans outstanding at time of execution of this agreement are:

(a) £500,000 loan from John Kinder to Forburg Limited dated 14^th May 2008 the liability of which and the obligation therein has been taken over by [Holdings]

(b) £200,000 loan from Rivertrade to [Holdings] dated 4^th December 2008…"

18. Clause 6.3 provides for the issue of shares in Holdings to Mr Kinder and Mr McGrath, another investor, with an option for Forburg to buy back the shares within two years. Clause 9 is an English law clause. Clause 10 reads:

"10. Acceptance

Please indicate your acceptance of this Facility on the terms and conditions set out herein by signing and returning, to Rivertrade Limited, the enclosed copy of this Facility Letter, no later than 19 June 2009, after which this offer will lapse if unaccepted. The returned copy of this Facility Letter, duly signed, must be accompanied by:

10.1 Copies of the Board Minutes of a meeting of your Board of Directors approving, inter alia, the acceptance of the Facility."

19. The version of this document produced at the trial by Rivertrade bears the signature of Mr Kinder on behalf of Rivertrade, that of Mr Hofer on behalf of Holdings, and that of Mr McGrath.

The assignment letter

20. This is a letter from Holdings to Rivertrade dated 18 June 2009 and it reads:

"Dear Sirs

Re: EMG Holdings v Ranhill Berhad

This letter confirms that we are currently issuing legal proceedings against Ranhill Berhad for the total sum of $644,744. These proceedings are taking place in Malaysia and it is anticipated that judgment will be awarded in our favour.

In consideration of the security provided by us pursuant to a loan facility agreement between us dated 19^th day of April 2009 ("the agreement") and in particular clause 5.2 we hereby agree to pay to you any and all monies recovered in the aforementioned proceedings in repayment of any of the loans set out in the agreement, limited only to the amount owed therein.

It is further agreed that this security held by you shall be unconditionally released upon full repayment of all monies due to you as set out in clause 5.4 of the agreement.

For the avoidance of doubt we also confirm that Paul Hofer has the duly authorised power and authority from our company to sign this Agreement on our behalf.

Yours faithfully, …"

21. The letter is signed by Mr Hofer on behalf of Holdings. As the judge noted, the reference to the loan facility agreement of 19 April 2009 is almost certainly a mistake. There was an exchange of e-mails on that date relating to the agreements reached in April but the references to clauses 5.2 and 5.4 match the facility letter of 18 June 2009. That is plainly the agreement to which the parties intended to refer.

The Forburg letter

22. This is a letter from Rivertrade to Forburg dated 1 June 2009 and it reads:

"Dear Sirs

Ref. Loan for £500,000 for Forburg dated 14^th May 2008

1) This loan was originally due for repayment on 30^th November 2008.

2) On 28th November 2008 the loan repayment deadline was postponed to 31^st May 2009.

3) As of 31^st May 2009 no repayment has been received so Forburg is in default of its obligations.

4) Rivertrade confirms a further extension of the loan until October 2009 on the following terms:

a. The liability for the repayment of this loan and your obligations therein is taken over by EMG Holdings Limited.

b. Repayment of the loan is secured against the fees received from the mandates for the Brasov/Intelcan airport deal and the Meccano/Sri Lanka railway deal.

c. In the event of either of these transactions being concluded Rivertrade will receive 100% of the proceeds until such a time as the full loan amount plus interest is repaid.

d. As per the letter dated 1^st June 2009, should there be any revenue from any other EMG transaction including the Ranhill legal claim and the LML Bond, such income will be divided 35% to Rivertrade, and 65% to Forburg or its nominee.

e. Forburg will secure a letter from EMG confirming these terms.

f. All other terms shall remain unchanged.

Please confirm your agreement…"

23. There is then a signature block for Mr Kinder to sign on behalf of Rivertrade although no signed copy was ever found. The letter was, however, initialled by Mr Hofer to indicate his agreement. Paragraph 4d refers to a letter dated 1 June 2009. Forburg and Mr Govindia contend and Rivertrade accepts that this must be a reference to the fourth document, the cover letter.

The cover letter

24. The cover letter was sent by Rivertrade to Holdings and Forburg and is dated 18 June 2009. It reads:

"Dear Sirs

I would like to confirm our understanding of the current position between [Holdings] and John Kinder/Rivertrade with regard to our loans and the issue of equity to John Kinder/Harvey McGrath.

1) Loans

Loan 1 (14^th May 2008) £500,000 plus interest to date. This loan is in default as from 31^st May. This loan is secured by the proceeds on the Brasov/Intelcan Airport deal…[Holdings] has agreed to take over this liability from Forburg Limited and its obligations therein which we are in agreement with. A letter concerning an additional extension of this loan is attached.

Loan 2 (24^th December 2008) £200,000 plus interest to date. This confirms that EMG is currently in default of this loan, which is secured by the LML Bond. This Bond, if sold, would first pay off Loan 2 plus interest. Any remaining amount would be used as further repayment schedule (see below).

Loan 3 (22^nd April 2009) secured by the LML Bond and the Ranhill legal claim. This loan is repayable on demand or payable from the receipt of the Ranhill claim or according to the repayment schedule (see below). The full agreement is attached to this letter.

Repayment schedule

A) From the fees generated from the Brasov/Intelcan Airport deal and/or Meccano rolling stock deal with Sri Lanka

- after repayment of Loan 1 65% will be paid to Forburg Limited or its nominee, and 35% to Rivertrade to cover any outstanding amount owed on Loan 1 and 3.

B) From the fees generated from any other transaction

35% will be repaid to Rivertrade until all loans repaid

65% will be paid to Forburg Limited or its nominee …"

Events after the June agreement

25. Proceedings by Finance against Ranhill began in Malaysia in or about July 2009. Finance was represented by a Malaysian law firm, Shearn Delamore, which had been identified by Mr Kinder. By arrangement with Mr Govindia, Mr Kinder provided instructions to Shearn Delamore, kept Mr Govindia informed about progress and, significantly, paid all the bills. At no stage did any of the defendants suggest that Mr Kinder was paying for the recovery of something he was not entitled to. On 16 March 2010 judgment was obtained against Ranhill in the sum of $600,000. At this point Mr Govindia revoked Mr Kinder's authority to provide instructions. As I have mentioned, the moneys have since been paid by Ranhill and were frozen pending the outcome of the trial of these proceedings.

Issue 1 – the meaning and effect of the June 2009 agreement

26. I now turn to the first of the issues arising on this appeal and begin with a little more background. The judge found that the four documents to which I have referred were agreed as a package in early July 2009 and together constituted the June 2009 agreement. Under the terms of the facility letter, Rivertrade agreed to lend to Holdings £200,000 and, at its discretion, a further £100,000. The £200,000 was lent and transferred in the tranches to which I have already referred but, by early July, Rivertrade had also exercised its discretion to lend the further £100,000 and these moneys had also been transferred.
27. It is apparent that the parties were at this time attempting to rationalise their lending arrangements, at least to some degree. Hence the facility letter and the cover letter refer to all three loans, that is to say, the May and December 2008 loans and the loan facility the subject of the June agreement, termed "loan 3" in the cover letter. Moreover, the Forburg letter, which was directed to the May 2008 loan, explained that Forburg was in default but that Rivertrade would extend the term of the loan to October 2009 on the terms set out in that letter and to which I must return.
28. That brings me to the critical question, namely the extent of the security that Holdings agreed to provide over the Ranhill proceeds in return for the loan the subject of the June agreement. Mr Buttimore, who has appeared on this appeal on behalf of Forburg and Mr Govindia, as he did below, submits that it is plain that the parties agreed that only 35% of the Ranhill proceeds should stand as security and that the judge fell into error in failing so to find. In support of that submission he points to the April agreements which clearly provided that only 35% of the Ranhill proceeds should stand as security and argues that this arrangement was carried forward into the June agreement. In that regard he focuses particularly on the terms of the cover letter and the Forburg letter. However, it seems to me that the correct place to start is the facility letter, for this is the document which purports to deal expressly with the terms of that facility and it does so in some detail.
29. The issue of security is addressed in clause 5. This makes provision for security of three different types. Clause 5.1 requires the deposit the LML bonds. Clause 5.2, the key clause for the purposes of this aspect of the appeal, purports to assign to Rivertrade the Ranhill receivable, says it is currently held by Finance and specifies that the assignment is to be "in accordance with" the assignment letter. Clause 5.3 purports to assign up to 35% of the proceeds of the so called Brasov/Mecano agreements. Finally, clause 5.4 provides that all of this security is to be released upon full repayment of the principal and any accrued interest due to Rivertrade under the agreement and all other loan agreements between the parties, including the May and December 2008 agreements.
30. Clause 5.2 is, to my mind, unequivocal. It refers to the Ranhill receivable as a whole, specifies its value in precise terms ($644,744) and says it is assigned as security. By contrast, clause 5.3 is directed to the benefit of other agreements, the Brasov/Mecano agreements, and specifies that, in their case, only 35% of the fees are assigned as security. The difference in wording is striking and, on the basis of this document, against the background of the persistent failure by the EMG group to meet its loan obligations, I have no doubt that a reasonable person would conclude that by this time it was the common intention of the parties that the whole of the benefit of the Ranhill agreement should be assigned to Rivertrade by way of security, subject to the terms of clause 5.4.
31. The assignment letter is to the same effect. It states at the outset that "we are currently issuing legal proceedings against Ranhill", although these proceedings were in fact issued in the name of Finance as the contracting party. It continues that, in consideration of the loan facility provided under the June agreement, any and all monies recovered in the Ranhill proceedings are to be paid to Rivertrade by way of security. Once again, this language is plain and unambiguous.
32. The Forburg letter is, as I have said, directed to the May 2008 loan. It records that Rivertrade is prepared to extend the term of the loan on the five terms set out in paragraph 4. The first is that liability for the loan is taken over by Holdings. The second and third terms must be read together and provide that repayment of the loan is to be secured by an assignment of the benefit of the Brasov/Intelcan agreement (to which the parties had already agreed) and a further agreement referred to as the Meccano/Sri Lanka Railway deal. Further, Rivertrade is to receive 100% of the proceeds of each of these agreements until the whole of the loan (and all accrued interest) has been repaid. Nothing turns on the fifth and sixth terms and I need say no more about them.
33. That leaves the fourth term and this is the one on which Mr Buttimore particularly relies. It says:

"As per the letter dated 1^st June 2009, should there be any revenue from any other EMG transaction including the Ranhill legal claim and the LML bond, such income will be divided 35% to Rivertrade, and 65% to Forburg or its nominee."

34. It is accepted that the reference to the letter of 1 June 2009 is a reference to the cover letter, and Mr Buttimore submits that, when read with the cover letter, this term clearly reveals the parties' intention that only 35% of the Ranhill proceeds should stand as security for the June 2009 loan.
35. I agree that the Forburg and cover letters must be read together. I would go further: all four documents must be read together. But I do not accept that this fourth term should be interpreted in the manner for which Mr Buttimore contends. The Forburg letter is directed to the May 2008 loan and it records Rivertrade's agreement to an extension of that loan on the five specified terms. Two of those terms (the second and third) require an assignment of the whole of the benefit of the Brasov/Intelcan and the Meccano/Sri Lanka railway agreements. By contrast, the fourth provides that should there be any revenue available from any other agreement, including the Ranhill agreement, then 35% of that revenue is to be used to discharge any remaining liability in respect of this loan. This fourth term has nothing whatever to do with the provision of security for the June 2009 loan. As will be seen, this is entirely consistent with terms of the cover letter.
36. Turning now to the cover letter, the first section summarises the general position of the three loans. It records first, that the May 2008 loan is secured by an assignment of the whole of the benefit of the Brasov/Intelcan agreement; second, that the December 2008 loan is secured by an assignment of the LML bonds; and third, that the June 2009 loan is secured by an assignment of the LML bonds and the Ranhill proceeds. It continues in respect of the June 2009 loan:

"This loan is repayable on demand or payable from the receipt from Ranhill claim or according to the repayment schedule"

37. The repayment schedule which follows is divided into two paragraphs, A) and B). The first deals with the fees from the Brasov/Intelcan and Meccano/Sri Lankan Railway agreements and says that, after repayment of the May 2008 loan, 35% of these fees may be used to cover any outstanding amount due in respect of the June 2009 loan. By this I understand the parties to have agreed, in accordance with the Forburg letter, that all of the fees from these agreements are to stand as security for the May 2008 agreement and it is only surplus fees, if any, that are to be distributed in accordance with the specified percentages to meet any outstanding liability of the EMG group under the June 2009 loan.
38. The second paragraph of the schedule deals with fees generated from any other transaction, and says that these too are to be distributed in accordance with the specified percentages until all loans are repaid. Mr Buttimore submits it is clear from this wording that the parties intended that the Ranhill proceeds should be divided in accordance with the specified percentages for all purposes, and so only 35% of those proceeds can be used to meet Holdings' liability in respect of the June 2009 loan.
39. I reject that submission for two reasons. First, the terms of these four documents were agreed as a package and so the parties must have intended them to be consistent one with another. Moreover, the terms of the facility letter and the assignment letter are directed specifically to the June 2009 loan and admit of no doubt as to their meaning. They make it clear that the whole of the benefit of the Ranhill agreement is to stand as security. The interpretation of the cover letter for which Mr Buttimore contends would be inconsistent with that meaning.
40. Second, the cover letter must itself be read as a whole. In dealing with the June 2009 loan, termed "Loan 3", it says that this is secured by the Ranhill legal claim, not, it is to be noted, 35%, of the Ranhill proceeds, as in the case of the April agreements. It then continues that this loan is repayable from the receipts from the Ranhill claim or according to the repayment schedule. I believe that any reasonable person reading this paragraph against the background to which I have referred would understand the parties intended the word "or" in this context to be introducing two alternatives, namely that the loan is repayable from the Ranhill proceeds or according to the second paragraph of the schedule. Moreover, this interpretation is, so it seems to me, entirely consistent with the general scheme of the June 2009 agreement for, as has been seen, in the case of the May and December 2008 agreements, the parties agreed that each was secured by all of the proceeds of various agreements or the LML bonds and, to the extent, there was any surplus, it was to be distributed in accordance with that schedule.
41. I therefore believe the judge came to the right conclusion in relation to the first issue. The parties agreed that the whole of the Ranhill receivable was to stand as security for the June 2009 loan.

Issue 2 – the pleading point

42. As I have explained, Rivertrade faced the difficulty that Finance was the counterparty to the Ranhill transaction. Moreover, in 2008, Finance had assigned its receivables to Holdings, and Holdings had assigned them on to Forburg. Accordingly, on the face of it, Holdings had nothing it could assign to Rivertrade. However, the judge found that it would be unjust to allow any EMG company to resile from the assumption that underpinned the June 2009 agreement and they were all estopped by convention from doing so. Mr Buttimore contends that this finding was not open to the judge, for it was neither pleaded nor argued.
43. I am unable to accept this submission. During the course of the trial Rivertrade sought and was granted permission to amend its re-amended reply to allege that Forburg participated in the June 2009 agreement; was fully aware of the contents of all four documents which together constituted that agreement; benefited from that agreement; and permitted Rivertrade to proceed and to advance monies knowing of its belief and expectation that it would receive a valid assignment of the unencumbered Ranhill proceeds. In these circumstances, the pleading continued, Forburg was precluded from disputing the existence and effectiveness of the assignment.
44. During closing submissions, Rivertrade amplified and expanded upon this contention. It argued that Forburg participated in both the April 2009 agreements and the June 2009 agreement. It also submitted that it was the common intention of all of the parties to the June 2009 agreement that the Ranhill proceeds would be assigned to Rivertrade; that all of the defendants, including Forburg, represented to Rivertrade that the Ranhill proceeds would be transferred free from any encumbrance; that it was the intention of all of the defendants that Rivertrade should act on those representations by advancing further monies; that Rivertrade did in fact act on those representations by advancing further monies; and that Rivertrade has suffered detriment thereby. It followed, continued Rivertrade, that the defendants, including Forburg, could not go back on the assumption upon which Rivertrade was proceeding and that they were estopped by convention from doing so; and further, that the circumstances gave rise to a promissory or proprietary estoppel.
45. In my judgment this pleading, as elaborated in submissions, provided an adequate basis for the judge to proceed in the way that he did. If the defendants were concerned that the submissions advanced on behalf of Rivertrade amounted to a departure from its pleaded case then they should have raised an objection at the time and asked the judge to rule on it. For my part, I am doubtful such an objection would have been upheld; but had it been upheld then I am sure it would have been met with a further amendment to the pleading which would have been allowed, for there can be no suggestion that the defendants would have been prejudiced in any way thereby. As it was, however, the judge considered the pleaded case in light of the submissions he heard, and in my judgment there is no basis for contending before this court that he took a course that was not open to him.

Issue 3 - estoppel by convention

46. Mr Buttimore also submits that the judge erred as a matter of law in concluding that estoppel by convention could have the effect of debarring Finance from asserting its title, such as it was, against Holdings, and in holding that Forburg was estopped from asserting that it had a title which was better than that of Holdings or that it had a right to the Ranhill proceeds that was higher than that of Rivertrade.
47. There was no real dispute as to the relevant legal principles and we were referred by both parties to the formulation of the doctrine in the speech of Lord Steyn in Republic of India v India Steamship Co Ltd [1998] AC 878 at 913-914, which, as the judge noted, was cited with approval by Carnwath LJ in ING Bank v Ros Roca [2012] 1 WLR 472 at [57]:

"It is settled that an estoppel by convention may arise where parties to a transaction act on an assumed state of fact or law, the assumption being either shared by them both or being made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption ... It is not enough that each of the two parties acts on an assumption not communicated to the other. But it was rightly accepted by counsel for both parties that a concluded agreement is not a requirement for an estoppel by convention."

48. As Mr Buttimore also realistically accepted, it is now well established that an estoppel by convention may enlarge the effect of an agreement by binding the parties to an interpretation which would not otherwise be correct.
49. The reasoning of the judge as to how the doctrine applied in this case is set out in his judgment at [209]:

[209] In my view Mr Buttimore's predicated facts all existed, though in a more wide-ranging form than in his formulation, and they give rise to an estoppel by convention. The doctrine applies in the following manner.

(i) The June transaction was designed to embody the principles of the April transaction. That earlier transaction clearly embodied, and agreed, the concept of effective security over the Ranhill proceeds (albeit limited to 35%).

(ii) The earlier transaction was one in which all the relevant companies in the group joined by agreement, or at the very least by acquiescence and implicit signification of approval - see above. The idea that they would be seeking finance, proffering security and yet holding back that security because of a debenture (or because of historic assignments up the group) is contrary to common sense and commercial propriety. I do not think that Mr Govindia (who was the principal person involved) or Mr Hofer (who had some lesser involvement) harboured those reservations. They assumed that the security would be effective, probably not thinking at that stage about mechanics. Mr Govindia represented Forburg for these purposes - see above.

(iii) There was therefore at that stage a common assumption, plainly communicated between the parties (because it was of the essence of the transaction) that there was, and would be, effective security over the Ranhill proceeds.

(iv) Nothing changed in that assumption between then and the June transaction, save that the amount standing as security increased to 100%. It is true that by then the Finance debenture was referred to between the parties, but in a sense that reinforces the assumption. The parties assumed it would not be an obstacle. When proposals were made for a deed of postponement in July they were made because of the assumption, not because the assumption did not exist.

(v) The assumption was shared by all the directors of the relevant EMG companies, who had the objective of saving the group through the loan that Mr Kinder was offering. It was in the interests of all of Forburg, Holdings and Finance that it be given, and the directors had an eye to all three businesses when conducting the deal. The assumption should be attributed to them wearing all hats, and to Mr Govindia wearing his hat as representative of the entire group.

(vi) Mr Hofer was indeed acting as agent in initialling the Forburg letter. The existence of that letter demonstrates that Forburg was party to the overall arrangement. He was still a director when he initialled it.

(vii) The reference to Finance in the Facility Letter demonstrates that the individuals who were directors of that company (and principally, for these purposes, Mr Hofer and Mr Govindia) had that company in mind and should be taken as entertaining an assumption about the validity of the security in that capacity as well as in their capacity as the directors of the other companies.

(viii) I doubt if Mr Govindia was being deliberately silent about what he knew to be blots on the title of Rivertrade to security over the Ranhill proceeds. He shared the assumption of Rivertrade as to what the June documents had achieved in this respect. But if he was being deliberately silent, he acquiesced in, and indeed probably encouraged, the assumption of Rivertrade in this respect.

(ix) Rivertrade acted on that assumption by continuing to lend money, and by financing the Ranhill proceedings both before and after the June transaction. It is inconceivable that Mr Kinder would have done that if had not believed Rivertrade had got security over that asset. There would be no reason for Rivertrade to have funded the litigation (and indeed given instructions in relation to it) absent such an interest. All the EMG companies (including Forburg) must have known and appreciated that.

50. In my judgment these findings are fatal to Mr Buttimore's submissions. He accepted that in June 2009 Finance held no more than the bare legal title to the Ranhill receivable. Indeed, it was the case of the parties for whom he appears, Mr Govindia and Forburg, that all receivables had been assigned in May 2008 from Finance to Holdings and then from Holdings to Forburg. Accordingly, prior to the 2009 agreements, Forburg was the holder of at least the beneficial title to the Ranhill receivable. Moreover, on the judge's findings, Forburg and Holdings were, with Rivertrade, parties to the June 2009 agreement. Further, for the reasons I have given, I have no doubt that it was the common intention of the parties to the June 2009 agreement that the benefit of the whole of the Ranhill receivable should be transferred to Rivertrade. It follows that this is not a case in which an estoppel is relied upon to create an enforceable right where none previously existed. It is instead one of those cases in which the estoppel is relied upon to bind the parties to an agreement to an interpretation which would not otherwise be correct.
51. That point aside, I am satisfied that the judge approached the case in an entirely conventional way. He found that the parties were proceeding on the common underlying assumption that Rivertrade would have effective security over the Ranhill proceeds; this assumption was communicated between the parties; and Rivertrade acted on that assumption by continuing to lend monies and by financing the Ranhill proceedings. In light of all of these circumstances I am satisfied that the judge was entitled to find that it would be unjust to allow any EMG company to resile from that position.

Issue 4 – the costs of the Ranhill proceedings

52. I can deal with this point quite shortly because, as Mr Buttimore accepted, if we were against him thus far, the outcome of the appeal on this issue could have no practical benefit for Mr Govindia and Forburg because their only potential assets are the Ranhill proceeds and these will be exhausted in meeting the defendants' liabilities in respect of the June 2009 loan.
53. In summary, Rivertrade sought to recover the costs it incurred financing the pursuit of the proceedings against Ranhill in Malaysia in the name of Finance. The basis of the claim was not clearly spelled out in the pleadings although the particulars of claim did contain an allegation that, in breach of the April and June 2009 agreements, the defendants had failed to reimburse Rivertrade for these costs. Further, the judge received little assistance by way of argument at the trial, although it was suggested on behalf of Rivertrade that the costs were recoverable in restitution. The judge expressed his conclusions in this way:

"264. …. In the absence of argument and clarity as to the scope of this claim it is not possible to give a clear money judgment. However, I accept that in 2009 Mr Kinder or Rivertrade did fund the litigation against Ranhill (there is some email traffic which confirms Mr Kinder's evidence that he did). There was no express agreement as to the basis on which this was done. However, in my view there must have been an implied term of the agreement with Mr Govindia that Rivertrade would do this to the effect that it would be reimbursed for its expenditure in trying to get in the Ranhill proceeds. It cannot seriously be contended that Rivertrade was making a present of the sums paid. If the claim were successful the benefit of the expenditure would ultimately accrue to the benefit of the EMG group by getting in an asset. The fact that that asset is used to discharge a debt does not matter. It still operates for the benefit of the group. All that supports the existence of an implied term. I am sure that both Mr Kinder [sic] and Rivertrade would have testily suppressed the officious bystander appropriately. I also find that it was an implied term that Rivertrade should be at liberty to reimburse itself from the Ranhill proceeds. That, again, is something falling within the officious bystander test, though I suspect that those proceeds will not be sufficient to satisfy both the debt and the costs.

265. It follows that Rivertrade has a right to recover sums spent as against Finance (that is logically the company which would be taken to undertake the obligation to pay). I so determine. I am unable, on the evidence shown to me, to find at the moment that the £7,765 was the correct sum. I shall direct an inquiry as to the amount spent by Rivertrade in this manner. That is a more appropriate way of dealing with the matter than simply finding that the detailed facts have not been proved. I trust that the parties will be able to agree the sums so that conducting the inquiry will not actually be necessary.

54. Mr Buttimore submits it was not open to the judge to make these findings for the claim was never properly pleaded. Moreover, he continues, the implied term could only have given rise to a claim against Holdings.
55. I accept that Rivertrade's case was not formulated in the pleading in precisely the manner in which it was analysed by the judge. But the pleading did allege that Rivertrade was entitled to have its costs repaid under the terms of the loan agreements between the parties. I am also of the view that the judge was placed in a difficult position by the paucity of submissions made to him at the trial although it is understandable how this came about, for this was the last of a very large number of issues upon which he was addressed and with which he had to deal. In the end he was, in effect, left to decide this issue for himself and that is what he proceeded to do. Moreover, I believe the judge's reasoning is, in substance, plainly right. Mr Govindia, acting on his own behalf and on behalf of Finance and Forburg, agreed with Rivertrade and Mr Kinder that Rivertrade or Mr Kinder would finance the pursuit of the proceedings in the name of Finance against Ranhill in Malaysia. As the judge explained, if the proceedings were successful the benefit of that expenditure would ultimately accrue to the EMG group. Further, it cannot seriously be contended that Rivertrade and Mr Kinder were making a present of the moneys they paid. In these circumstances it must have been an implied term of the agreement that Rivertrade and Mr Kinder would be reimbursed by Finance for their expenditure, and it must also have been an implied term of the agreement that Rivertrade and Mr Kinder could reimburse themselves from the Ranhill proceeds. I have no doubt that these terms represent the obvious but unexpressed intention of the parties.

Conclusion

56. For all of the reasons I have given, I would dismiss this appeal.

Lord Justice Ryder:

57. I agree.

Lord Justice Moore-Bick (Vice-President of the Court of Appeal Civil Division):

58. I also agree.