Dragonfly sets bridging precedent with landmark win

B&C can exclusively reveal that while winning its legal proceedings, Dragonfly Property Finance has left a significant mark on financial law.

Earlier this month, Jonathan Samuels informed B&C, that Dragonfly was successful in winning not just an initial claim but a counterclaim, retrieving all legal costs amounting to £80,000.  

The legal dispute was brought by property developer firm Aodhcon which claimed the lender had sold its property at too low a price in breach of duty, after Dragonfly Property Finance had to seize the asset. This was due to a lack of repayment from Aodhcon regarding a £750,000 bridging loan.  

On 6th March the High Court Chancery Division held that there had been no breach of duty by Dragonfly Property Finance.

Jonathan Newman of Brightstone Law LLP, the firm that represented the bridging lender, explained the precedent set by the case.

According to him, the court stated that in the occasion of a realisation, any interest earned on the deposit money by the lender’s solicitor when the mortgage is placed via the standard procedure, should be credited to the borrower.

He continued:  “What the case does is clarifies the lender’s duty to a borrower in the event of a realisation that the lender’s duty is to take reasonable care to get the best achievable price.”

It was stressed that the weight of this lesson lies on the act of the lender applying reasonable care to get the best price and not on the idea of necessarily obtaining that price.  

He said: “This case was scrutinised in rigorous detail and Dragonfly was found clear not to have breached its duty.

“Dragonfly’s statements and actions were also scrutinised by the courts and found to be valid and correct.”

The Senior Partner of the law firm added that claims for sale under-value are unlikely to go to trial. However, they are more likely to occur in an environment where property prices are on the rise.

In light of this trend, he questions whether these will become more common going forward than they have been previously.

The original mortgage charge of £750,000 was placed in 2010 for a term of six months. This was after planning permission was obtained in 2007 on a set of six residential units based on Roman’s Road, London.

Aodhcon sought to renovate and sell the property via a bridge sourced from Dragonfly Property Finance. However, the firm failed to repay the facility inevitably prompting the mortgagee to sell the security.

As a result of the case, total costs paid to Dragonfly are expected to rest at around £250,000.