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Proving the loan

Covenant for payment dependent on making loan

C sought, amongst other things, repayment of 40,250 pursuant to a covenant for repayment contained in a legal charge. D sought to avoid liability (a) on the basis that the charge was unenforceable as having been procured by undue influence or void on the basis of non est factum, and (b) on the basis that the sum claimed had not in fact been lent to him.
In a lengthy and factually complex judgment, the judge dismissed the undue influence claim. Having cited Royal Bank of Scotland v Etridge (No 2) [2002] AC 773 and BCCI v Aboody [1990] 1 QB 923 he considered that Cs conduct had not been unconscionable and that there had been equality of risk for equality of reward. He also dismissed the non est factum claim on the basis that there had been no fundamental mistake of the kind necessary for the plea to succeed.
On the claim on the covenant for payment contained in the legal charge, the judge held that notwithstanding the principle of estoppel by deed, it was well established that a receipt for money, though contained in a deed, was not conclusive that the money has not in fact been paid (Halsburys Laws, 4th Edn, Vol 13, para 223). It followed that to the extent that the sum claimed had not been lent by C to D, it could not be recovered by C in reliance on the covenant for payment contained in the legal charge. On the facts the judge found that there had been no loan on which the covenant for repayment in the legal charge could bite, and accordingly dismissed the claim.

Rosenfeld v Rawnsley [2004] EWHC 2962 (Ch)

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