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WFW represents YieldStreet in successful court case against Lakhanis6 October 2020

Watson Farley & Williams (“WFW”) represented YieldStreet Management LLC (“YieldStreet”) in a successful case before the UK Commercial Court concluded on 5 October 2020, which provided helpful clarification on a number of aspects of the law of undue influence.

The case – YS GM Marfin II LLC and Ors v Muhammad Ali Lakhani and Ors [2020] – revolved around a claim brought by a number of companies managed by YieldStreet for the recovery of some US$76.7m owed under various loans to ship-owning corporate borrowers, advanced to finance the acquisition of end-of-life vessels for demolition, personally guaranteed by three members of the Dubai-based Lakhani family. The claimants, as they were entitled, chose not to wait for defences to be filed before applying for summary judgment. One of the guarantors, Tahir Lakhani, did not contest the claim for judgment but his two sons, Ali and Hasan, filed witness statements in which they maintained that their father had ‘instructed’ them to sign their guarantees, and that they had understood neither the nature of the loan transactions nor the risks involved.

Summary judgment was obtained against all three defendants for their liability for the unpaid sums under the personal guarantees of the loan agreements, with the judge (Jacobs J) dismissing the younger Lakhanis’ claim that they had not understood the nature of their guarantees as ‘carrying no conviction at all’ and held that there was no actual undue influence in this case.

The WFW London Dispute Resolution team representing YieldStreet was led by Partner Charles Buss, supported by Associate Kelsey Tollady.

Charles commented: “I’m delighted we were able to obtain summary judgment in our clients’ favour in this case which will be of interest to all commercial lenders who may from time to time seek personal guarantees from family members, explaining, as it does, what precisely is meant by ‘undue influence’ and when a lender may be put on enquiry of the undue influence exerted by one family member over another. UK residential mortgage lenders and their property lawyers are very familiar with applying the Etridge guidelines to satisfy themselves, before taking mortgages over matrimonial homes that secure loans to family businesses, that the other spouse has taken independent legal advice as to the risks. These issues are encountered much less in the international lending context but are ones that should not fall off the radar screen.  We were also able to get summary judgment in the case after a contested hearing in under six months which is testament to the Commercial Court’s commitment to case management even under the constraints of COVID-19″.

Please find here a link to an article by Charles exploring the case and its implications in depth here.


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