Commercial Court Refuses To Continue Proprietary Injunctions Against Investors In Collapsed Mortgage Lender MFS

The Commercial Court has refused to continue proprietary injunctions in relation to monies paid out by Market Financial Solutions (MFS) to investors, before the collapse of the UK-based bridging lender: Ocorian Trustee (UK) Ltd & Anor v Chandarana & Ors [2026] EWHC 1635 (Comm).

The decision will be of interest to financial services firms considering misappropriated property and proprietary claims, providing guidance on some key legal questions in these disputes. It will also be of more general interest to those following the fallout from the February 2026 collapse of MFS amid allegations of fraud. 

The judgment arose in the context of claims brought by a special purpose vehicle which had provided capital to MFS for the specific purpose of originating mortgage loans. However, the funds were instead used by MFS to repay investors. The court had granted interim proprietary injunctions against the investors on a without notice basis, but in the present decision refused to continue the injunctions and dismissed the claims against (most of) the investors, on the basis there was no serious issue to be tried. It was not disputed that MFS held the funds on a purpose (or Quistclose) trust for the claimant, but the central question for the court was whether the defendants were bona fide purchasers for value without notice (BFPVWN) so that they could take the monies free of any trust. 

Although the investors had no contractual right to receive the funds (and therefore received the money as a “volunteer” and subject to the constructive trust) they were found to have given “value” after receipt of the funds. This value was derived from the fact that they gave up their rights as a creditor to sue for the debt. Importantly, the investors provided such value before being on notice of the trust, so that they became BFPVWN. The decision demonstrates the powerful shield provided by the BFPVWN defence to an innocent party with no notice of a trust.

We consider the decision in further detail below.

Background

In October 2025, Cronus Finance Limited (Cronus), a special purpose vehicle, agreed to provide loans to MFS, a bridging loan lender and property finance loan servicer. Cronus entered into a series of transaction documents.

In November 2025, payments totalling over £6 million were made from a bank account held in the name of Cronus (the Cronus Account) to the client account of a law firm designated by the transaction documents. Those funds (the Cronus Funds) were to be applied for the purpose of originating mortgage loans and, if that purpose failed, were to be returned to the Cronus Account. The transactions did not proceed and so the law firm therefore held the Cronus Funds subject to a Quistclose trust for Cronus. Instead of returning the funds, in December 2025 the law firm paid them directly into an MFS bank account. This was a breach of trust, and it was not disputed that MFS thereafter held the Cronus Funds on constructive trust for Cronus.

On the same day it received the funds, MFS made payments (the Onward Payments) totalling over £9 million from its bank account to accounts held in the name of 15 individuals and entities (the defendants). The Onward Payments were accompanied by an email from MFS referring to a "year-end reconciliation" and stating that MFS had "decided to return your investment". MFS was subsequently placed into administration. Its joint administrators identified compelling evidence of fraud in respect of MFS's affairs, with a shortfall of approximately £1.3 billion in MFS's bank accounts.

In April 2026, the security agent and assignee of Cronus's rights under the transaction documents and Cronus (the claimants) applied for and obtained interim proprietary injunctions against the defendants on a without notice basis. The claimants contended that they were entitled to trace the Cronus Funds into the Onward Payments and sought to continue the injunctions in order to preserve assets in which they claimed an equitable proprietary interest pending trial. 

Decision

The court refused to continue the injunctions and dismissed the claim against the defendants who contested the applications (save for the third defendant, as explained below).

The court’s power to grant an interim proprietary injunction is provided by CPR 25.1(1)(c). The American Cyanamid test must be satisfied, namely that: (i) there is a serious issue to be tried on the merits; (ii) damages are not an adequate remedy; and (iii) the balance of convenience is in favour of the grant of an injunction.

The central question for the court was whether the claimants could show a serious issue to be tried in the face of the defendants' assertion that they were BFPVWN. As BFPVWN, the defendants could take the monies free of any trust, providing them with a complete defence. The court considered the following key elements to determine this question:

• Characterisation of Onward Payments: The court determined that the Onward Payments were correctly characterised as repayment of debts, but that (in the majority of cases) payment was not contractually due and the defendants had not requested early repayment. This meant each defendant received payment as a “volunteer” (without providing valuable consideration) and so the Quistclose trust continued because the volunteer recipients were not BFPVWN.
• Receipt as a volunteer: The next question for the court was whether the defendants could receive money subject to a trust and subsequently give value (before receiving notice of the trust), so as to become a BFPVWN. The court rejected the claimants’ contention that once money has been received subject to a trust, it does not change its character and remains subject to a trust. It agreed with the defendants that the key date is the date of notice, ie the defendants could become a BFPVWN provided they gave value before having notice of the trust. The defendants relied upon an analogous decision in Gray v Smith [2013] EWHC 4136 (Comm), which concerned notice of an equitable interest in a car.

• Did the defendants give value? The final question for the court was whether the defendants (having received the money as a volunteer) gave value before receiving notice of the trust. The parties agreed that notice was given when the defendants were served with the without notice injunction in April 2026. The defendants argued that by accepting payment (whether the payment was due or not) they gave up the right (as creditors) to sue for the debt, relying upon the Court of Appeal’s decision in Taylor v Blakelock (1886) 32 ChD 560. The court agreed that, although there was no express acceptance (save for one of the defendants who sent an email to MFS), there was an accord and satisfaction in each case because:

  (a) The full amount of payment of principal and interest was made in each case and so the payments left nothing to sue upon;

  (b) None of the defendants protested that MFS had no right to repay early or sent the money back; and

  (c) There was a delay of three and a half months between the payments being made and the defendants being given notice of the trust (by service of the injunction).

Given its conclusions above, the court was not satisfied that the claimants could show a serious issue for trial (save in the case of the third defendant) and therefore did not continue the injunction and dismissed the claim against the other defendants who contested the applications.

The third defendant was related to the director of MFS and the close relationship raised issues that were not present in relation to other defendants. It was a question for trial as to whether the third defendant had notice of the trust prior to service of the injunction, and the court continued the injunction against him.