Judgment handed down in CPF One Limited & anor v Ortus Secured Finance I Limited

On 16 August 2023, Andrew Lenon KC (sitting as a Deputy Judge of the High Court) handed down judgment in CPF One Limited & anor v Ortus Secured Finance I Limited. Zoë Barton KC and Jia Wei Lee acted for the defendants, and were successful in obtaining summary judgment in their favour.

The parties were all participants or security trustees in a syndicated loan agreement. The borrower thereunder had defaulted. One of the defendants was a security trustee, who in that capacity entered into a settlement with the borrower. The settlement terms were such that the claimant, who was a junior participant in the syndicated loan structure, recovered nothing under the loan agreement.

The junior participant (and the former security trustee) sued the senior participant and the new security trustee, alleging that these defendants owed them fiduciary duties akin to those owed to successive mortgagors when exercising a power of sale and a duty of care pursuant to the Trustee Act 2000.

Their claim was struck out in its entirety. Andrew Lenon KC’s judgment contains important and interesting findings about the nature of a trustee’s duties when the trust instrument obliges them to act on the instructions of a beneficiary, as well as an extended analysis of the nature of both a mortgagee’s and a trustee’s duties in circumstances where there are other parties interested in the residue of a loan or security interest. It will therefore be of especial interest to commercial lenders, particularly those operating in the realm of property and development finance.