Summary of Opinion — Judge Lake

Factual and Procedural Background

The action was brought by the Pursuer against the Defender seeking repayment of two sums: $350,000 and €350,000, said to be either loans or sums by way of unjust enrichment. In February 2021 the Defender was the sole shareholder of Company A and proposed to sell shares to the Pursuer. Because Company A was FCA‑licenced as an electronic money institution, transfers triggering a change of control required FCA approval. The parties executed three agreements: (i) a 22 February 2021 agreement for purchase of 9% of shares for €76,500; (ii) a Share Purchase Agreement (SPA) dated 21 July 2022 for purchase of 91% of shares for €750,000; and (iii) a Share Pledge and Loan Agreement (SPLA) dated 21 July 2022 under which the Pursuer would lend €700,000 and the Defender would pledge 91% of the shares as security. The SPLA records a payment of $350,000 to the Defender and a payment of €350,000 on 12 August 2022. The parties agreed by joint minute that the Pursuer made loan payments to the Defender of $412,572.88 on 21 August 2021 and $356,504.31 on 22 July 2022, totalling €701,525.41 when expressed in euros. The action is brought under the SPLA for repayment. The proof was on oral evidence from the two parties; the court found both witnesses unreliable for much of their evidence. The court concluded the Pursuer is entitled in principle to repayment but could not reconcile the sums pleaded with the payments admitted and therefore put the case out for parties to address what orders should be made.

Legal Issues Presented

1. Whether an Event of Default occurred under the SPLA entitling the Pursuer to immediate repayment.
2. Whether breach of the SPA (or incorporation of the SPA into the SPLA) could constitute an Event of Default or otherwise give rise to repayment obligations.
3. Whether the SPLA contained an implied term (or otherwise) that the loan was repayable on demand if shares were not transferred by the longstop date or if the Defender demanded additional payment.
4. Whether there was a total failure of consideration or unjust enrichment entitling the Pursuer to restitution.
5. Whether formalities (including foreign law) affected validity/enforceability of the pledge of shares.
6. What expenses order should be made and whether contractual provision warranted an indemnity/agent‑client style award.

Arguments of the Parties

Pursuer's Arguments

• The Defender breached the SPA by demanding additional payment and this amounted to an Event of Default under the SPLA permitting immediate enforcement and recovery.
• The SPA was integral to the SPLA (the SPLA referred to the SPA as an integral part) so breach of the SPA counted as breach of the SPLA.
• The Defender was in wholesale breach of the SPA and SPLA (including failure to transfer/pledge shares and failure to submit FCA forms by specified dates), entitling repayment.
• Alternatively, if contractual remedies were not available, there had been total failure of consideration or unjust enrichment and the Defender should repay.
• Pursued an expenses award based on Clause 13 of the SPLA, seeking indemnity/agent‑client style recovery of legal costs rather than party‑party expenses.

Defender's Arguments

• No Event of Default had occurred; the reference to "this agreement" in the SPLA did not encompass the SPA.
• The Pursuer withdrew the FCA application, making regulatory progress impossible; accordingly the Defender did not fail in any obligation to seek approval.
• Formalities and foreign law issues (Cypriot law) might affect the validity of any pledged shares; the SPLA contains warranties and a Cypriot opinion was relied on.
• The decision in Nielsen v Stewart was said to apply only "in the absence of agreement to the contrary".

Table of Precedents Cited

Court's Reasoning and Analysis

The court first considered whether an Event of Default had been proved under the SPLA. It rejected the Pursuer's contention that "this agreement" in the SPLA's definitions could include the SPA and concluded that, had the parties intended breaches of the SPA to constitute Events of Default, that would have been expressed directly. The court found Clause 3.1 to be an expression of intent rather than an enforceable obligation to transfer shares. Because both witnesses were generally unreliable, the court was unable to make credible findings about the Defender's efforts to obtain FCA approval, the forms he submitted, or documents said to have been delivered on execution.

The court accepted that sums had been advanced by way of loan and, applying Nielsen v Stewart, held that absent an agreed repayment date the loans are repayable on demand. The court therefore did not need to establish contractual breach to order repayment. The unjust enrichment claim failed because the court found no enrichment established. As to formalities and foreign law (Cypriot) arguments about the pledge, the SPLA expressly governed by the laws of the United Kingdom meant the court need not determine the Cypriot opinion issues in the circumstances before it.

Because of irreconcilable discrepancies between the sums identified in the parties' joint minute and the sums pleaded/conclusions ($350,000 and €350,000 v $412,572.88 and $356,504.31, and a total in euros agreed by the parties), the court declined to grant decree in any specific sum and put the case out for parties to be addressed on what orders should be made.

Holding and Implications

The Pursuer is entitled in principle to repayment of the sums advanced (repayable on demand), but the court did not grant decree because the precise sums could not be reconciled; the case is put out for submissions on the appropriate orders.

Consequences for the parties:

• The contractual breach/Event of Default claims were not proved and were therefore not necessary to establish repayment.
• The loans are impliedly repayable on demand under the principle in Nielsen v Stewart as applied by the court.
• The unjust enrichment claim was dismissed for lack of proven enrichment.
• Formalities/foreign law issues regarding validity of the pledge were not determined.
• Expenses will be awarded to the Pursuer on a party‑party basis; the court rejected the Pursuer's submission that Clause 13 required a blanket indemnity/agent‑client style award.
• No new legal precedent was established; the court applied existing principles and left resolution of precise accounting/orders to further submissions.