Introduction -

In Torre Asset Funding Ltd v Royal Bank of Scotland Plc [2013] EWHC 2670 (Ch), the claimant (“Torre”) was a lender in a financing structure which included super senior, senior, senior mezzanine, junior mezzanine B1 (“B1”) and junior mezzanine B2 (“B2”) debt. The B1 and B2 financing was documented in a junior mezzanine facility agreement (“MFA”) as well as an intercreditor deed (“ICD”). Torre participated in the B1 loans. Shortly after Torre’s participation, the borrower, Dunedin Property Industrial Fund (Holdings) Limited (“Dunedin”) started to experience financial difficulties and so approached one of its B2 lenders to discuss the financing structure. A Royal Bank of Scotland (“RBS”) entity was the B2 lender and also had multiple other roles including: (i) B1 agent;; (ii) B2 agent;; and (iii) equity participant under the loan notes at the bottom of the financing structure.

As part of its discussions, Dunedin provided RBS with a draft business plan and cashflow statements. The cashflow statements indicated that Dunedin would not be able to meet its interest covenant and pay interest on the relevant due dates. Consent for the interest to be “rolled up” was not obtained from all lenders so Dunedin was forced to give notice to the lenders of a possible event of default (“EoD”) on the basis of insufficient funds to pay interest due under the junior facilities. Dunedin subsequently went into administration. In the resulting winding up, Torre as B1 lender did not receive any funds and so sought to recover its losses from RBS on the basis that RBS had breached its duty as agent and on the basis of negligent misstatement by RBS...