Court of Appeal rule on “further advances”
Court of Appeal rule on “further advances”
Gary Cowen appeared for the Appellant in Urban Ventures v Thomas. The central issue of the case was whether a lender had, in issuing new facility letters whilst holding the benefit of a registered first legal charge, has made a new contract of loan (which would not be secured by the charge) or had merely varied the existing loan. The practical importance of the question lay in the anti-tacking provisions of the Land Registration Act 2002, ss 49 - 50, which limit the priority protection afforded to charges to advances made at the time of the charge and such further advances as the chargee was obliged to make at that time. The Appellant submitted that the new letters deemed the original charges repaid, and that the new facility letters represented further advances not protected by the earlier charge. The effect of the argument, if accepted, was that the second chargee then had priority. The Court of Appeal decided that, as no money changed hands as part of the transaction, what had been done did not represent an “advance”, and that the facility letters were a restatement of the terms of the original advance, and not a fresh one. The rule in Clayton’s case was considered by the Court of Appeal and distinguished on the grounds that it was limited to running accounts.
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