Although the trustees, in this case, did not assert any general principle that a trustees’ lien for their own expenses should prevail over the bank’s registered rights as mortgagee, they asserted that their expenses should take priority as a matter of construction of the debenture by express or implied terms.
It was accepted that the trustees had a right of indemnity against the trust assets, but the trustees claimed that clause 17.6.1 of the debenture ensured that any assets which were needed to satisfy the right of indemnity were not trust assets, but belonged to the trustees and therefore would not be affected by the debenture. The judge could not agree with the trustees’ construction of the clause. There was no reference in the debenture to the expenses incurred by the trustees and by clause 12 the trustees covenanted to indemnify the lender and any receiver against all costs, expenses and liabilities.
Further, the court was not satisfied that such a term could be implied:
- A term is to be implied to give effect to the meaning which the document would convey to a reasonable person having all the background knowledge reasonably available.
- It must be necessary to give effect to the presumed intentions of the parties.
- It was not difficult to accept that the parties might have reasonably agreed that the trustees’ lien should rank ahead of the mortgage, but the circumstances were not such to require such a term to be implied.
- This was because it would contradict the terms of the debenture, which provided that at the point of sale, the receivers should apply the proceeds of sale after his own expenses and remuneration towards payment of the secured loan.
- If there were to be protection, it was far from clear that it would be by giving priority to their lien.
- The fact that there was no mention in the debenture for its priority was a significant factor against its implication.
This case provides a useful example of the court’s approach to (1) a claimant’s attempts to construe terms in a debenture which are not obvious and (2) the circumstances when it is possible to imply terms in a debenture.
Dominion Corporate Trustees Ltd v Capmark Bank Europe Plc  EWHC 1605