Judge removed from HSBC loan dispute for Hot Yoga Studio

(Bloomberg) — Two real estate developers have won a bid to get a British judge to recuse themselves from hearing their case against HSBC Holdings Plc after they argued that a bank loan for a hot yoga studio owned by the judge raised “the perception of possible bias .”

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The judgment in the case on 20 January also detailed publicly for the first time how the wider case has dragged down HSBC chief executive Noel Quinn, with Magee and Tony Ryan – the pair behind the former AIM-listed Mar City Plc – claiming “long and close personal relationship’ with Quinn.

The Ryans have been battling Mar City’s lender and administrators in court since 2021 over its collapse. The bank provided funding, including a £10 million ($12.4 million) personal loan, before the developer ran into financial difficulties and entered administration in 2016.

The Ryans are seeking permission to file a lawsuit over Mar City’s failure. They lost a ruling in June 2022 when Judge Nigel Gerald found their claims lacked “any evidence” and an attempt to “smear” HSBC’s name, according to the ruling.

But on Friday the Ryans won a bid for Gerald to step down and their application for permission was reheard after arguing that his business associations with HSBC – the bank is a lender to a hot yoga studio Gerald and his wife own in Brixton – should have been disclosed.

The studio received around £125,000 in pandemic loans from HSBC and the Ryan family sought an injunction against him not disclosing the relationship, according to the ruling. Gerald, for his part, said it “didn’t even cross my mind” that the relationship, which he called “essentially transactional,” should be disclosed. He said there had never been any dealings with HSBC or personal guarantees from him or his wife.

But a senior judge who heard the Ryans in the matter said a fair observer could perceive a “real possibility of bias” against the Ryans and in favor of HSBC. He said Gerald had not properly considered Ryan’s personal relationship with Quinn and other managers “and the trust they have in them”.

An observer “will be concerned about this aspect of the case,” the judge said as he ordered the hearing to be heard again by another judge. He said there was no finding of actual bias. The judiciary’s press office said separately that it would not comment on Gerald.

A spokesman for the Ryan family declined to comment.

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The court decision also described evidence given by the Ryans, who said Quinn’s daughter worked for Mar City and was involved “in making contact with Mr Quinn to help arrange the additional funding provided by HSBC ” in 2015.

Quinn, who grew up in Birmingham and whose first job was working on a construction site, led HSBC’s UK merchant banking operations until 2011 before being promoted to lead similar operations in Asia. He was promoted to interim CEO of HSBC in 2019 before being appointed to the permanent job in March 2020.

A spokesman for HSBC and Quinn declined to comment.

Mar City listed on London’s AIM, which focuses on smaller companies, in 2013 and saw its market capitalization rise to £187m before being delisted following concerns about a cash flow crisis and “significant” related party debt . In 2015, HSBC provided a £10 million personal loan to Ryan to help pay off the debt. But in the end, say Ryan, HSBC’s corporate recovery teams forced the firm into administration.

HSBC claims it has repeatedly tried to help Mar City restructure, according to the ruling.

“HSBC has supported MCPLC in its efforts to restructure and fend off attempts by MCPLC’s other creditors to wind it up,” the bank’s lawyers said in a 2022 document detailed in the decision. “As a creditor, HSBC was ultimately entitled to exercise its rights as a lender and creditor and seek to recover debts owed to it.”

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