Triodos Bank v Dobbs & Anor

On 22 October 2000 the Receivers called a meeting of the residents of the Televillage. They refused to allow Mr Dobbs and Mr Skinner to attend the meeting. Had they done so, Mr Dobbs and Mr Skinner would have denounced the receivership. Mr Saunders sent the residents a circular letter on the same day. The letter explained that the principles of a contract had been agreed with Countryside, although a contract had yet to be completed. It also explained that the Bank had not taken its decision to appoint receivers lightly; but had made it in the light of the directors of Acorn having been unable to come forward with proposals that met the Bank’s concerns.

On 23 October Mr Dobbs met the Bank of Wales who informed him by letter on the following day that the receivership had precluded that bank from taking the refinancing any further.

The publicity generated by the receivership alerted a number of potential buyers, even before any marketing took place. In addition Countryside made an increased offer to the Receivers on 24 October. The offer now stood at £1.625 million. On the same day the Receivers instructed the sales staff on site to forward details to them of anyone interested in buying a house.

On 25 October Acorn’s solicitors wrote to complain that a spokesman for the Receivers had said that Acorn had debts “other than secured debts to the bank” of £1 million. In fact the articles in the press did not say whether the debts referred to were secured or unsecured. The letter also complained that the Receivers’ press release was misleading in saying that lack of sales of houses had led to cash flow difficulties; and asserted that, on the contrary, it was the Bank that was in breach of its obligation to provide a working facility of £2.6 million. Mr Morrison replied on 26 October to the effect that no member of his staff had disclosed the level of Acorn debt. In a later conversation (on 3 November) with Mr Rothschild, who was employed by the public relations company instructed by the Receivers, Mr Morrison learned that Mr Rothschild had indicated to a journalist that the debts were “a seven figure sum”, but that he did not imply that they were non-bank debts. On 26 October the Receivers were told that Mr Dobbs’ attempts to refinance with the aid of the Bank of Wales had ceased; and they invited him to make an offer for Acorn’s assets.

On 31 October Mr Morrison had a conversation with Mr Saunders. He outlined to Mr Saunders the various options:

Sell to Countryside, in which case the Receivers would require an indemnity;

Market the site, which would cover the Receivers’ position and fulfil their duty to get the best price;

If no better offer than £2.4 million was forthcoming, then there should be a comparison between the Countryside offer and building out.

Mr Saunders confirmed that he was happy that the Receivers should market the site, bearing in mind the possibility of challenge and the duty to get the best price. On the same day the Receivers were told that they had missed that week’s deadline for advertising in the Estates Gazette. However, they were in time for advertising in the Financial Times; and an advertisement appeared on 3 November. Mr Dobbs telephoned the Receivers that day to say that he was pleased to see the FT advertisement because it showed that the Receivers were looking at selling to parties other than Countryside. Edward Symmons also reported on 3 November. Their appraisal placed a value on the site of £2,262,115. This was a residual valuation. They began by estimating the value of the completed units. The gross value of £3.36 million was slightly higher than that placed on the units by Alder King. They then deducted the cost of selling the units, to give a net realisation figure of £3,284,600. From that they deducted the site purchase price and stamp duty; the cost of completing the development (estimated at £235,000) and marketing costs. This gave a developer’s profit of £672,000 or 20 per cent. So far as I can tell, there are no interest or carrying costs built into the calculations; so the valuation may be on the high side.

Details were also sent to some 600 companies on Edward Symmons mailing list. These went out on about 7 November. Although early drafts of the details suggested an asking price of £2.5 million, this was omitted from the final version, which specified no asking price. However, Mr Price of Edward Symmons said in evidence that although there was no asking price on the particulars, any interested buyer would have been told that offers in the region of £2.25 million to £2.5 million would be looked at. Mr Dobbs was among those who received a copy of the particulars.

At the end of October Mr Dobbs had contacted Mr Slatter of Royalstone Ltd, who was interested in buying the development. On 8 November Royalstone made an offer to buy the development. They offered £2.1 million and the discharge of the Bank from its liabilities to Countryside. They revealed that they had agreed terms with the main shareholders of Acorn (i.e. Mr Dobbs and Mr Skinner) to assist them with the purchase. On the same day Mr Dobbs spoke to the Receivers. He repeated his view that the FT advert was good, but said that buyers would need a month or so to consider the position. He asked if the receivers intended putting another advertisement in the press, and was told that that was the only one. Mr Dobbs then complained that “the whole thing was a stitch up” between the Bank and Countryside. He also said that he had funds with which to do a deal with a little bit of bank borrowing. On 8 November Mr Morrison wrote to Mr Dobbs urging him to submit any proposal as soon as possible.

On 9 November 2000 Intobeige Ltd expressed their ability to make an offer of £2.25 million for the site. Mr Rhodes (who gave evidence) was the lead negotiator for Intobeige. He said that he had rung Edward Symmons and had been given an indication of the asking price. He said that if he had not been given some indication of an acceptable price, he would not have pursued the matter any further. The fact that his offer was at the lower end of the bracket that Edward Symmons would have quoted seems to me to support Mr Price’s evidence.

Over the next couple of days further offers were received, but none of them exceeded £2 million.

On 10 November the managing partner of Grant Thornton (South East region) wrote to Mr Dobbs. He said that the journalists had confirmed that they had not obtained quotes from Grant Thornton referring to Acorn’s debt levels. Strictly speaking this was true; but given that Mr Rothschild had indicated that the debt level was a seven figure sum it was misleading. Mr Morrison accepted in evidence that his managing partner had been given incorrect information. Mr Dobbs alleged that the letter was a lie.

On 14 November 2000 the Receivers met Mr Slatter and Mr Dobbs. The meeting lasted some two and a half hours. In the course of the meeting Mr Slatter indicated that he had an agreed source of finds, and that if his offer were accepted he could do a ten day exchange of contracts and a ten day completion. However, he said that the timescale was too short. At this stage one of the unanswered questions was whether the Bank could assign its position under the tripartite agreement to a purchaser. Mr Slatter and Mr Dobbs thought that it could, and said that they had legal advice to that effect. Two days later, Mr Slatter had another conversation with the Receivers. Also on 16 November Edward Symmons analysed the Royalstone offer as being worth in excess of £2.7 million, and reported this to the Receivers.

This information was also given to Mr Saunders. Mr Saunders asked whether the Royalstone offer was a serious one. The Receivers said that as far as they were aware it was; and that they were investigating it.

By 20 November Edward Symmons had reconsidered their advice. They now advised the Receivers that the Countryside deal was the best way forward. They referred to the Royalstone offer and commented that it would be funded with borrowed money; and that a valuation would be unlikely to support it.

Also on 20 November Powys County Council wrote to Edward Symmons. They raised a number of points relating to the infrastructure. First, they said that the surface water drainage was inadequate, and that they would not approve a drainage connection between the existing system and the watercourse. Second, they raised problems over drainage into the hydro-brakes which collected run off. Third, they said that obligations in the land transfer agreement had not been performed; namely: the provision of the telecentre, the private network fibre optic system and the storm water drainage facility. They also claimed that Acorn owed the Council some £33,000.

On 21 November the Receivers reported to the Bank. The position with Countryside was that their offer equated to a sum of about £1.4 million, which would leave the Bank with a shortfall of about £0.7 million before costs. Countryside had also indicated that they would accept £500,000 in full settlement of all claims and cross claims. The Royalstone offer was one that the Receivers had investigated. However, the Receivers commented that, despite requests, Royalstone had not produced evidence of funding. They also pointed out that there was a difference of opinion over the question whether the tripartite agreement could be assigned. Royalstone had also said that they did not intend to obtain a valuation until their offer had been accepted. Of the remaining offers the best one was from Intobeige, at £2.25 million. Acceptance of this offer would leave the Bank with a shortfall of £350,000. The upshot was that the Receivers were not yet in a position to make a firm recommendation. Mr Morrison spoke to Mr Slatter for over half an hour on 23 November. Mr Slatter had independently discovered from Countryside that they would be willing to accept £500,000 in settlement of all their claims. Mr Slatter was “comfortable that he could work with that number”. However, there were still other issues that were concerning him. He also told Mr Morrison that Countrywide were standing by to carry out a valuation, and could do it within two working days. Mr Morrison said that the Receivers were close to another deal. Mr Slatter asked whether it was a better offer. Mr Morrison replied that it was structured differently, in that it was a simple offer for the assets. He suggested that Mr Slatter should reconsider his position and make a simple offer for the assets backed by funding. Mr Morrison said that if it was a better offer the Receivers would consider it. Mr Slatter ended by saying that he needed to work out how much he could give away if he had to pay Countryside £500,000. On the same day he made a revised written offer on behalf of Royalstone of £2.25 million. Since the first offer had been worth, on the Receivers’ calculations, some £2.7 million, this was a significant reduction. Mr Slatter said in his letter that Royalstone had the funding to proceed at that level. He also said that Messrs Dobbs and Skinner intended to seek compensation “for various alleged injustices from various parties related to this project”. The evidence of funding that Mr Slatter produced was a letter from the Bank of Ireland which said:

“I have pleasure in confirming that we would be interested in funding the proposed purchase of Upper House Crickhowell, South Wales.”

That afternoon Mr Morrison rang Mr Joyce of Intobeige and left a message for him enquiring about his funding. Shortly afterwards he was telephoned by Mr Richard Norgan who expressed interest in buying the site. Mr Norgan was aware that a contract had been issued, and said that he was thinking of offering £2.25 million, but that was before he had seen the letter from Powys County Council. Mr Morrison said that he would need to pay a minimum of £2.25 million and that he needed to put an offer in, with evidence of funding, by the following day. Mr Rhodes, on behalf of Intobeige also rang on 23 November. He said that the Bank of Wales would confirm funding, and that the funding was not dependent on a valuation. He said that exchange of contracts would take place as soon as a contract had been issued and reviewed by his solicitor. About an hour later Mr Dobbs rang. In the course of a long conversation he confirmed that Mr Slatter’s deal was £2.25 million for the unencumbered site. He also said that he did not want to give up the right to sue Countryside.

Also on 23 November 2000, against the background of Countryside’s expressed willingness to settle for £500,000, Mr Hawes calculated Countryside’s potential entitlement. This was made up of payments on completed houses, Countryside’s entitlement on sales of remaining plots and certain disputed payments. Mr Hawes calculated that Countryside were entitled to be paid something between £891,000 and £1,197,000, but most probably in the region of £1,125,000. From this the LADs would have to be deducted. Having reworked the figures, taking account of the LADs, he estimated that the net amount due to Countryside would be something between £329,000 and £693,000; most probably £596,000.

On the following day Mr Slatter rang Mr Morrison again. He confirmed that his offer was £2.25 million, leaving the Bank to sort out Countryside. He said that he was not really concerned what the Bank paid Countryside as long as he was given free title. Mr Morrison pointed out that the sale could not go ahead unless Countryside were sorted out, which Mr Slatter said he understood. Mr Slatter also said that Mr Dobbs would agree to £500,000 being paid to Countryside because it would allow the Royalstone deal to go ahead, and Mr Dobbs stood to make some profit. Mr Morrison repeated that he needed to see a letter from the Bank before he could put the proposal to Edward Symmons for their advice. Mr Slatter said that letters would be available either that day or the following Monday. Mr Morrison said that things might develop into a contract race; or the Receivers might seek best and final offers.

On 24 November Mr Morrison wrote to the Bank. He told them about the revised Royalstone offer. He said that they had not yet supplied evidence of funding, and that if they were able to do so the Receivers’ solicitor’s recommendation would be to issue contracts to both Intobeige and Royalstone, and that whoever completed first would be successful. Mr Slatter then sent a fax saying that he was in a final meeting with his financiers and he would ring before 12.12 p.m.

On 27 November, Mr Slatter sent a fax enclosing a letter from Baltic Property Finance expressing a willingness to lend £1 million. Baltic said that they would have to carry out due diligence and make a site inspection. Mr Morrison asked one of his team to call Mr Slatter to find out the Bank of Wales’ position.

On the same day the Receivers received a letter from the Bank of Wales, relating to Mr Lawson (who was one of the backers of Intobeige). The letter said that the Bank of Wales had not yet received a formal proposal for the site, but also said that it seemed to be consistent with other projects Mr Lawson had undertaken. In an off the record telephone conversation, the Bank of Wales confirmed that funding would not be a problem.

On 30 November 2000 Manhattan Loft Corporation made an offer of £2.3 million.

On 1 December Mr Morrison wrote to Mr Slatter. He said:

“Your latest offer of £2.25m was received 23 November 2000 together with letters received from Bank of Ireland and Baltic Property Finance plc. The letter from Bank of Ireland is non committal regarding future funding and appears to be only an expression of interest. Similarly we have not received any direct confirmation from Bank of Wales of their intention to fund your offer and the level of funding that they would provide.

You state that you could exchange and complete within two weeks but the correspondence regarding funding does not appear to substantiate this timetable.

You also state that the agreement of Mr Dobbs and Mr Skinner would be required by Countryside in order for your offer to proceed. We have not received confirmation from these persons that they would provide the agreement required.

I therefore consider it inappropriate to issue a contract to you whilst the above issues remain outstanding.”

Mr Slatter replied on the same day. He said that both the Bank of Wales and the Bank of Ireland had agreed in principle to support Royalstone’s bid. He had valuers standing by to complete a survey for the banks and would instruct them once the Receivers sent out a contract. He was set up to exchange and complete within 14 working days, and that the processing of the loan and the legal work could proceed concurrently. He said that Mr Dobbs and Mr Skinner had agreed to meet Countryside’s requirements subject to a sale being completed to Royalstone, and invited Mr Morrison to confirm that direct with Mr Dobbs. He enclosed a letter from Bank of Wales which said:

“I am writing to confirm that I would be interested in supporting a proposal from the company to provide a maximum of 70% assistance towards the purchase of the above properties on a lower of cost or Bank appointed valuation basis.

I very much look forward to receiving a revised development appraisal from you in order that I can review your requirements in some detail.”

However, Mr Morrison still refused to issue a contract unless Mr Slatter could provide unconditional evidence that funds were immediately available. Edward Symmons in the meantime advised the Receivers to issue a further contract to Manhattan Loft Corporation.

The Receivers commissioned Craigdam Services Ltd to review the proposed settlement with Countryside. They reported on 6 December. They concluded that Acorn’s indebtedness to Countryside was a minimum of £628,826 (and might be considerably greater); and that the Bank’s liability to Countryside would be a minimum of £590,000 (and was likely to be considerably greater). On that basis they recommended the settlement with Countryside at £500,000.

By 6 December there were two contracts out: one to Intobeiege at £2.25 million and one to Manhattan Loft Corporation at £2.3 million. Edward Symmons now advised the Receivers on the question whether the Receivers should themselves build out the development. They concluded that the project was a risky one, and that it would be preferable to conclude a sale to either of the current parties who had contracts; but that if all other options failed a build out should be considered as a last resort.

The frenzy of activity subsided for a few days. On 13 December Mr Rhodes of Intobeige telephoned. There were problems raised by Powys over outstanding works. Mr Rhodes did not believe that he could get a clear title until those issues were sorted out.

On 18 December the Receivers reported to the Bank. Based on offers thus far received, and the proposed settlement with Countryside, they estimated a shortfall for the Bank of £537,000.

On 22 December Acorn (acting by the Receivers), the Bank and Countryside entered into a compromise agreement. The Bank agreed to lend Acorn a further £500,000 plus VAT on part of the sum, which was to be used to settle all Countryside’s claims. There was a mutual release of all claims; Countryside released the Bank from its obligation to exercise its step in rights, and Countryside also agreed to release its debenture and charge over the site. The agreement also contained a confidentiality clause. Clause 9 said:

“Acorn, by its receiver, warrants with [Countryside] that it is not currently negotiating to sell, transfer or otherwise dispose of its interest in the site to Messrs Ashley Dobbs and James Skinner and that it will use its best endeavours in any sale, transfer or other disposal of the site to a third party to procure a warranty that that party is not connected with or will not deal with Messrs Ashley Dobbs and James Skinner in like terms. In the event that Ashley Dobbs and James Skinner are the only or best purchasers of the site Acorn by its receiver will use its best endeavours to procure from Ashley Dobbs and James Skinner a release of all and any claims they have or believe they have against Triodos [and Countryside] and further that Messrs Dobbs and Skinner and any third party controlled by them will not make any statements or claims to the media relating to [Countryside’s] involvement in the Building Contract the September Agreements or the site.”

On 8 January 2001 Countryside’s solicitor rang the Receivers’ solicitor. The attendance note records the latter as saying:

“It may yet be that we will have to do a deal with a party associated with Skinner and Dobbs simply because one of our prospective purchasers may be dropping out … obviously we are under a duty to sell at the best possible price and if in fact there is a genuine interest and a genuine prospect of selling to a company with which they are involved we can’t actually refuse it.”

On 16 January 2001 the solicitors for the Manhattan Loft Corporation wrote to say that their client was “dealing with some fine tuning” relating to the purchase. The “fine tuning” resulted in a reduced offer of £2 million.

Powys County Council now raised concerns over the adequacy of the drainage, and suggested that a balancing pond might be needed. Mr Rhodes of Intobeige learned of this at a meeting. He thought that Intobeige would have to investigate the effect of this. The effect was to cause Intobeige to reduce its offer from £2.25 million to £2.1 million at the beginning of February 2001. Even that offer was not unconditional; and it envisaged completion deferred for up to six months. Edward Symmons recommended the issuing of a contract on the basis of the reduced offer.

On 13 February Mr Norgan, who had previously been in sporadic telephone contact with the Receivers, made a written offer of £2.1 million. There were no conditions attached to it, apart from the investigation of title. He also produced a letter confirming the availability of funding.

There were now two offers of £2.1 million on the table. All other offers received were below that level. Intobeige’s offer was conditional, and Mr Norgan’s was not. On 16 February, the Receivers decided to issue a contract to Mr Norgan. At that stage the purchase was to be taken in the name of a company called Stapleford Estates Ltd. Intobeige’s solicitors were told that there was now a contract race.

Mr Norgan, now acting on behalf of a newly incorporated company called Whitegate Developments Ltd, was the first to exchange contracts on 12 March. The contract was an unconditional contract at a purchase price of £2.1 million. Completion was due on 23 April 2001. Mr Rhodes was very disappointed.

On 13 March (the day after contracts had been exchanged) Mr Slatter telephoned Mr Lovett, one of the Receivers’ colleagues. He asked what was happening about the sale of the property. Mr Lovett said that he could not tell him. Mr Slatter then said that his son had died, and that he had lost interest in the property. He was, however, interested in doing some cabling work, and Mr Lovett agreed to pass this information on.

On 5 April 2001 the Receivers reported to the Bank. They estimated that on the basis of the agreed sale, and taking into account the settlement with Countryside, the Bank’s shortfall would be £724,000.

Acorn owned (and still retains) a 70% shareholding (21,000 shares) in Acorn USA, a Missouri corporation. The other shareholders were Don Russell (10%); Alan Kenyon (10%) and Dreyton Advisory Services Ltd (10%). The shareholders had pre-emption rights under an agreement dated 16 September 1997.

Acorn USA had acquired a 50 acre site in Missouri with the intention of developing a televillage near the city of Nevada. The site had been gifted by the local authority, subject to various conditions as to its development. Mr Dobbs had resigned as a director of Acorn USA in July 1999, in order to devote his time to the Crickhowell project. When the Receivers were appointed in October 2000, Acorn USA’s board consisted of U.S. directors; and there was no direct UK management. The value of the shareholding was stated as £20,000 in Acorn’s balance sheet to the year end 31 March 1998. Taking this figure at face value, the value of the shareholding was relatively small compared to the value of the Crickhowell site.

Acorn had entered into a sale agreement dated 15^th July 1999 with Acorn USA’s CEO, Jason Klumb, for the sale of its 70% holding for $87,570 ($4.17 per share). For some reason, this had not been completed. A further option agreement was entered into on 28 April 2000 but again the option was not taken up.

Acorn USA did not trade but it had installed infrastructure and had partially built two houses on the 50 acre site. This had been undertaken using a secured loan of $170,000 from Tri County Bank. By August 1999, Acorn USA owed its architects $110,000, secured by a lien over the site and was in financial difficulty. Work on site had stopped. Assistance came in the form of outside investors, Terry Hoeper (a builder) and Roger Irvin (an attorney). Both became directors and officers of the company. A line of credit from Metz bank was obtained which they personally guaranteed, although it is uncertain whether all the funds obtained were spent on site. The Tri County loan was repaid and the architects’ fees were largely paid. Mr Hoeper lent tools and equipment and work re-commenced.

By early 2001, the site infrastructure was completed but Acorn USA had amassed debts of around $600,000. No further works were being undertaken. However, the option to acquire a further 530 acres from the local Council for approximately $580,000 was of potential value.

Mr Morrison said that he had been told by Mr Skinner in a meeting on 23 October 2000 that the holding in Acorn USA was “valueless”. Mr Skinner said in evidence that Mr Morrison had misunderstood what he had said. He said that he had told Mr Morrison that the receivership had rendered the US company valueless, because the only ingredient that made the shares valuable was Mr Dobbs, and without him Mr Skinner could not see any great prospect. In substance, therefore, he did tell Mr Morrison that the shares were valueless, whatever the reasons for that might have been.

There were very few papers on the US company in the UK files. Soon after the Receivers were appointed, on 30 October 2000, Mr Lovett faxed Grant Thornton’s Kansas City office seeking information on the company. The information and company search that came back was limited. A subsequent site visit showed no activity. The Receivers also obtained information from the internet and entered into a regular dialogue with the directors, primarily Mr Klumb and Mr Russell.

In February 2001, the Receivers were contacted by the company’s US lawyers Blackwell Sanders Peper Martin, and given further background, including the steps that had been taken to sell the 70% shareholding. All offers for the shares had ranged between $0.5 and $4.17 per share. Shortly afterwards, on 2 March 2001, the lawyers put forward an offer on behalf of unnamed investors to buy the shares at $4.17 each but the offer was withdrawn almost immediately.

On 5 March 2001 and 12 March 2001, Mr Lovett held two long conference calls with the directors, shareholders and Mr Dobbs to discuss the affairs of the company and the option to acquire the further 530 acre site. The option had been granted by the Council on condition that at least $250,000 worth of improvements had been made to the 50 acre site by 31 December 1999 and that $581,000 was deposited in an escrow account on or before 6 March 2001. There was an issue over whether the option was still valid but it was agreed at the first meeting that it should be exercised if possible. A notice was sent on 6 March and the funds were placed in an escrow account. These funds were borrowed from Community First Bank with the help (and possibly guarantee) of Messrs Hoeper, Irvin and James Corral. The local authority subsequently disputed the company’s right to exercise the option. Litigation ensued and the company was successful.

At the beginning of January 2002, Terry Hoeper expressed interest in buying Acorn’s 70% stake in Acorn USA but made no formal offer. Shortly thereafter, he and Roger Irvin commenced proceedings in the Vernon County Court against Acorn USA. They claimed $500,000 for money and services invested. They claimed, among other things, that Acorn was in breach of an agreement whereby, in consideration for them investing capital and giving support to the company, Acorn would issue them with stock; that Acorn was in breach of an agreement to pay them $50,000 each and had failed to secure the payments as promised by means of deed of trust. They also claimed a constructive trust over the land. Acorn USA defended the claims and counterclaimed for damages for breach of fiduciary duty and tortious interference with the company’s contractual rights. Most of the factual events behind this dispute occurred before the Receivers’ appointment.

As a result of this dispute and the fact that Messrs Hoeper and Irvin indicated they wished to withdraw their personal guarantees, on 30 April 2002, Metz Bank called in its loans of $450,000 and $50,000 and threatened foreclosure.

Shortly prior to these events, in January 2002, the land option had been exercised, using $650,000 advanced by James Corral, a local businessman who had invested in the original development. Mr Corral operated a development company called JCC Enterprises. Mr Corral’s loan was secured on the original 50 acre site and newly acquired option land by means of a Deed of Trust. Having lent the company significant sums, Mr Corral wanted to take control and buy Acorn’s 70% holding. He had plans to re-organise the plots and sell some off at $22,500 each. He was in discussions with Mr Klumb, the CEO, about these plans and other matters such as payment to Mr Klumb of sums due for director’s fees. Mr Russell felt that Mr Corral’s plans were speculative, given the small population of the city and doubts over whether the land could be used for commercial purposes.

On 4 March 2002, Mr Corral made an offer to purchase the 70% holding for $52,500 ($2.50 per share). He also sought an immediate proxy from the Receivers so that he could exercise control immediately. However, the Receivers could not sell the shares immediately because of the obligation under the pre-emption agreement to offer the shares on the same terms to the existing shareholders. On 18 March 2002, TLT sent letters to the existing shareholders (Don Russell; Dreyton and Alan Kenyon) giving notice that Acorn was willing to sell at the price offered by Mr Corral.

Before the expiry of the 90 day period required by the pre-emption agreement, on 30 May 2002, Mr Corral withdrew his offer. Even before this, on 2 May 2002 Mr Corral sent letter of default to Acorn USA and threatened foreclosure. By this stage, Acorn USA had no funds and no way of servicing its debts. Mr Corral’s change of heart coincided with an agreement reached in May 2002, between him, Messrs. Hoeper and Irvin; Metz Bank and Acorn USA whereby they resolved their respective disputes and claims. This was almost certainly the reason why Mr Corral withdrew his offer to purchase Acorn’s shares. The terms were incorporated in a written agreement dated 31^st May 2002, the principal heads of which provided as follows:

Acorn USA transferred to Corral/JCC, Hoeper and Irvin a 450 acre plot of land lying to the west of Ash Street, leaving Acorn USA with approximately 130 acres. Acorn also agreed to pay them $47,805 in interest payments due under the Metz loans

Hoeper and Irvin and Acorn USA dropped all their respective claims made in the Vernon County Court action;

Corral/JCC released its security over all the land, including that retained by Acorn USA;

Corral/JCC took over the liability to Metz Bank and

Metz Bank released Acorn USA from liability on its various promissory notes and loans.

Although this left Acorn USA free of any liability to Mr Corral and Metz Bank, the land it retained was still encumbered by other secured debts of about $425,000, including a debt of $155,000 to First National Bank.

On 31 May 2002, Don Russell wrote to the Receivers giving notice of acceptance of the offer to sell under the pre-emption agreement for $52,500. This acceptance was confirmed in a letter dated 12 July 2002, in which Mr Russell sought closure of the agreement. The Receivers’ solicitors replied on 17 July 2002 confirming that the Receivers wished to proceed. The funds were received by TLT on or about 2 August 2002 and were held to Mr Russell’s order.

However, at Mr Dobbs’ insistence the Receiver’s gave an undertaking to the Court on 30 July 2002 not to dispose of the shares until trial or further Order. So the sale could not proceed. Although the Receivers were released from their undertaking in December 2002, the Court order was not drawn up until May 2003. On 6 June 2003, Brian Lovett spoke to Mr Russell who explained that he had financed loans for the company which he now considered worthless. The effect of the undertaking had created problems for him and Mr Klumb and he was reluctant to provide any further funds to support the company. As at November 2002, the company had to make monthly interest payments of $5,425 but had no way of servicing this debt. Mr Russell therefore had to pay it himself.

There is no doubt that, by then, Acorn’s shares in Acorn USA were indeed worthless; and Mr Dobbs had prevented the only real possibility of selling them.

Mr Dobbs’ Statement of Case is part narrative, part evidence and part argument. It is not easy to distil from it the allegations that he makes. As far as I can see he makes the following allegations (which I have attempted to put in chronological order):

The Bank misrepresented itself as an ethical Bank, and this misrepresentation induced Acorn to deal with it (paras 9 and 101);

The Bank wrongfully attempted to sell Acorn to Countryside in 1999 (para 14)

The September 1999 financial package was unfair (para 21);

The Bank took over the management of the project, thereby becoming a shadow director or a de facto director of Acorn, and is liable for breach of fiduciary duty in ruining Acorn (para 34);

The Bank was in breach of contract in failing to hand over the liquidated damages to Acorn even after the adjudication (para 49);

The Bank is liable for breach of contract in failing to fund the project to completion (para 41);

The Bank knowingly overstated its demand before appointing receivers (paras 52 and 105);

The Bank wrongfully discouraged investors from investing in Acorn (para 44);

The Bank failed to explore refinancing and other options (para 65);

The Bank conspired with Countryside to put Acorn into receivership (para 103-4);

The Bank appointed the receivers for improper purposes and in breach of UK banking principles (para 58);

The Bank damaged Mr Dobbs’ reputation by issuing false press releases in October 2000 (para 63);

The Bank is in breach of the debt rescheduling agreement by failing to market individual plots for at least one month (para 70);

The Bank is liable for breach of contract in failing to exercise its step in rights under the construction contract (para 78);

The Bank is liable for the Receivers’ conduct in refusing to accept the offer from Royalstone (para 68).

Mr Dobbs also wanted to argue that the Bank is liable for having concluded a settlement with Countryside on disadvantageous terms (para 87). However, this was a new allegation which was raised against the Receivers only days before the trial. The Receivers were not prepared to deal with it, as it would have required expert evidence on the merits of the settlement with Countryside. Nor did Mr Dobbs have expert evidence of his own. I ruled that Mr Dobbs should not be allowed to make this allegation.

Mr Dobbs alleges against the Receivers that:

They disposed of the Crickhowell project at an undervalue, in breach of their duty of care; and

They negligently managed, controlled and wasted Acorn USA.

Mr Dobbs also alleges that the Bank is vicariously liable for these breaches. Mr Dobbs had made a variety of other allegations against the Receivers; but all the allegations apart from those I have set out were struck out by Neuberger J. I refused him permission to raise those arguments again before me.

Misrepresentation. Mr Dobbs says that before dealing with the Bank he acquired some promotional material in which the Bank described itself as an “ethical” bank. He says that this is what induced him to deal with the Bank as opposed to other potential lenders. He was not able to produce a copy of the material on which he relied, but said that he picked it up at the open day that he attended. I am prepared to accept that Mr Dobbs did acquire some promotional literature before he began dealing with the Bank. However, the promotional material that Mr Dobbs produced as dating from about the time that he acquired the promotional material on which he said he relied, did not describe the Bank as “ethical”. Rather it emphasised the Bank’s desire to invest in environmentally and socially responsible projects. I am prepared to accept that the Bank’s description of itself had some influence on Mr Dobbs at the time. Mr Levy suggested that the sole reason why Mr Dobbs dealt with the Bank was because he was in urgent need of finance, and Mr Skinner was able to pull strings within the Bank. Mr Skinner’s connection with the Bank and its responsiveness to the urgency of the situation were undoubtedly very important. But to found a claim in misrepresentation it is not necessary for the representation to be the sole cause, or even the dominant cause of the representee’s action. It is sufficient if it is one of the causes. However, what Mr Dobbs understood about the Bank’s self-description was exactly what Mr Saunders explained about the Bank’s subsequent use of the word “ethical” to describe itself; namely that it proactively supported environmental and socially responsible projects. As Mr Dobbs said in oral evidence:

“the greatest encouragement in going to the bank was the fact that they shared our beliefs in environmental lending, and would mean that whatever nuances in the difference between the two arrangements the relationship was likely to be better because they understood what we were hoping to achieve.”

He also said in oral evidence that the literature that he acquired described the Bank as “ethically environmental”.

In his closing argument Mr Dobbs changed the focus of his complaint. He said that Mr Skinner, many years earlier, had done business with Mercury Provident (a company that the Bank subsequently took over) and that it had been Mercury Provident that had described itself as “ethical”. However, I do not consider that self-descriptions by Mercury Provident can have had any causative effect on Mr Dobbs’ decision to approach the Bank. Moreover, in my judgment even if the Bank had described itself as an “ethical” bank, a statement of that kind is far too vague and subjective to give rise to a claim for misrepresentation, even if the statement was untrue.

In addition, for reasons which will appear, I am satisfied that the Bank behaved properly throughout, and was more than ordinarily supportive of Acorn. If the Bank’s description of itself as “ethical” had been a representation sufficient to found a cause of action if it had been untrue, I would have found that it was in fact true.

This allegation fails.

Wrongful sale to Countryside. Mr Dobbs alleges that the bank wrongfully attempted to sell Acorn (or its assets) to Countryside in 1999. There is no evidence to support this assertion. The highest that Mr Dobbs can put his case is that there was a tentative proposal for Countryside to buy out the Bank; in other words for Countryside to take a transfer of the Bank’s securities. There is nothing improper in this. In any event the suggestion never even reached the stage of a written offer. Although the Bank invited Countryside to put any proposals it had in writing, it never did. The allegation that the Bank tried to sell Acorn itself (as opposed to its assets) is legally impossible, quite apart from being completely unfounded in fact.

The only discussions about the sale of Acorn itself to Countryside were those initiated by Mr Dobbs himself, and pursued at various times by Mr Skinner. Indeed, Mr Skinner’s view for a considerable period was that Acorn’s best strategy was a sale of itself to Countryside. The Bank did not participate in those discussions. It is true that in 2000 (not 1999) the Bank did have negotiations with Countryside for the sale of the site to Countryside. But by then the Bank was on the point of enforcing its security; and since Countryside had a second charge on the site, a deal of some sort with Countryside was imperative.

This allegation fails.

The September 1999 arrangements were unfair. The legal significance of this allegation is obscure, in the absence of any claim that the agreements should be set aside. But in any event the allegation fails on the facts. The situation in the run-up to the making of the September 1999 agreements was:

Countryside claimed to be owed more than £750,000 and had threatened to leave the site at the end of June unless they were paid;

Acorn had less than £200,000 left to spend before reaching the limit of its facility;

Two builders had already become insolvent while working on the development, and to lose a third would have made it very difficult for the development to be completed at all;

A change of contractor would have also incurred extra cost, which might have been as much as £500,000;

It was therefore imperative to keep Countryside on site;

Acorn had tried and failed to sell itself to Countryside, and had no alternative source of finance;

Countryside did not trust Acorn, and therefore insisted on having security over the site to secure its payments;

Countryside also required the Bank to guarantee payments to it under the building contract;

Phase I of the development had been completed late and substantially over budget, and the Bank were concerned that the same thing might happen all over again. Since the Bank were to guarantee payment of Countryside under the building contract, it would have been quite unreasonable to expect it to guarantee payments under a cost plus contract. A fixed price contract was an essential goal, and was a benefit to Acorn as well as the Bank;

For the same reasons, it was entirely reasonable, given that the Bank were undertaking a direct liability to Countryside, that changes to the specification should not be made without the Bank’s consent;

Countryside had fallen behind the contractual schedule and, contrary to initial promises, were not completing houses in stages. It was therefore a desirable goal to tie Countryside to completion dates that they said they could achieve;

The Bank took the view that this was already a recovery situation and that it might just get out if all went well.

I accept that Acorn had little choice but to accept the package. But I cannot accept that the Bank can be criticised for entering into it. Mr Skinner emphasised in his oral evidence the importance of the “rescue culture”. The Bank’s willingness to extend further credit to Acorn and to guarantee payment to the building contractor, on the basis of doubtful security, was in truth an attempted rescue. In deciding not to call in the loan in the summer of 1999 the Bank was, in my judgment, living up to its self-description as an ethical bank. It is difficult to conceive of many (if any) other banks exposing themselves to direct liability to a building contractor on the basis of such doubtful security. In addition the Bank, unusually, agreed to postpone part of its secured debt to Countryside.

The reason why Acorn had little choice but to accept the package was largely because it had made no attempt to refinance the project; it had run out of money; and it was in dispute with the third building contractor to attempt the development. Mr Dobbs had no idea how to rescue the project other than by borrowing more money from the Bank; and Mr Skinner was so distant from the day to day running of the project that he took no part in the discussions at all. If Acorn had not entered into the September agreements, the contractor would have left site, and the project would have failed. In addition, Acorn had the benefit of legal advice and the advice of Woodeson Drury.

This allegation fails.

The Bank took over the management of the project thus becoming a shadow director. The goal of this argument is to establish that the Bank owed fiduciary duties to Acorn, over and above its duties as a mortgagee. Mr Dobbs relies on the definition of shadow director in section 741 (2) of the Companies Act 1985, namely:

“a person in accordance with whose directions or instructions the directors of the company are accustomed to act.”

This definition is relevant for the application of statutory duties imposed by the Act and other legislation relating to company directors. It is not directly relevant to the question whether a person owes fiduciary duties to the company in equity. However, I am prepared to assume that if a person would fulfil the statutory definition of shadow director, he is a person on whom equity will impose the fiduciary duties imposed upon a company director. Another concept of relevance is that of a de facto director. He is a person, analogous to a trustee de son tort, whom the law will treat as a director. It has been said that the concepts of shadow director and de facto director are mutually exclusive. But in Re Kaytech International plc [1999] 2 BCLC 351 at 423 Robert Walker LJ said that this was not necessarily so. He said:

“However the two concepts do have at least this much in common, that an individual who was not a de jure director is alleged to have exercised real influence (otherwise than as a professional adviser) in the corporate governance of a company. Sometimes that influence may be concealed and sometimes it may be open. Sometimes it may be something of a mixture, as the facts of the present case show.”

I think also that Robert Walker LJ must be taken to have approved the statement by Jacob J in Secretary of State for Trade and Industry v. Tjolle [1998] 1 BCLC 333 in which he said:

“it may be difficult to postulate any one decisive test. I think what is involved is very much a question of degree. The court takes into account all the relevant factors. Those factors include at least whether or not there was a holding out by the company of the individual as a director, whether the individual used the title, whether the individual had proper information (e.g. management accounts) on which to base decisions, and whether the individual had to make major decisions and so on. Taking all these factors into account, one asks “was this individual part of the corporate governing structure”, answering it as a kind of jury question. In deciding this, one bears very much in mind why one is asking the question. That is why I think the passage I quoted from Millett J is important. There would be no justification for the law making a person liable to misfeasance or disqualification proceedings unless they were truly in a position to exercise the powers and discharge the functions of a director. Otherwise they would be made liable for events over which they had no real control, either in fact or law.”

I was also referred to the decision of Judge Baker QC in Re PTZFM Ltd [1995] 2 BCLC 354. That was a case in which it was alleged that a lender had become a shadow director of the borrower company. Having quoted the statutory definition of “shadow director” the judge said:

“This definition is directed to the case where the nominees are put up but in fact behind them strings are being pulled by some other persons who do not put themselves forward as appointed directors. In this case the involvement of the applicants here was thrust upon them by the insolvency of the company. They were not accustomed to give directions. The actions they took, as I see it, were simply directed to trying to rescue what they could out of the company using their undoubted rights as secured creditors. It was submitted to me that it was a prima facie case of shadow directors, but I am bound to say that that is far from obvious.”

He then concluded:

“I find that there is no prima facie case made out, and it is unlikely that further information will come to light to show that they are shadow directors. The central point, as I see it, is that they were not acting as directors of the company, they were acting in defence of their own interests. This is not a case where the directors of the company, Steven and his colleagues, were accustomed to act in accordance with the directions of others i.e. the applicants here. It is a case here where the creditor made terms for the continuation of credit in the light of threatened default. The directors of the company were quite free to take the offer or leave it.”

I was also referred to the lengthy and illuminating discussion of both shadow directors and de facto directors in the judgment of Chesterman J in Emanuel Management Pty Ltd v. Fosters Brewing Group [2003] QSC 205. The judge drew the same distinction as Judge Baker QC had drawn, namely that a creditor acting to protect its own interests is unlikely to have become either a shadow director or a de facto director.

Mr Dobbs’ first allegation is that the role of the Bank in promoting and negotiating the financial package of September 1999 shows that they took over the project and became shadow directors of Acorn. So far as promoting the package is concerned, that was, in my judgment, an attempt on the part of the Bank to rescue Acorn from its financial difficulties and to keep the development alive, in order to maximise its own chance of recovering its debt in full. Mr Saunders’ report to Mr Blom of 30 July 1999 makes that clear. In order to do that, the Bank was willing to put itself into the firing line. It was not an attempt to take over Acorn itself. The Bank urged Mr Dobbs to get legal advice for Acorn in time for the meeting at which the deal was negotiated; but he did not. He did, however, subsequently obtain legal advice. Mr Skinner said that they were advised not to sign the agreements. However, since Mr Skinner played no part in the negotiations, I regard that evidence with scepticism. But even if it is true, Acorn must have decided not to follow that advice. Mr Dobbs said in evidence that Acorn could have sought alternative sources of finance; so in my judgment Acorn’s decision was not forced upon it. The terms of the agreements were the terms on which the Bank was prepared to continue to allow (and indeed increase) credit to Acorn. Acorn was free to accept or reject those terms.

The package itself required the Bank’s consent to any changes in the specification, but that was understandable in view of the Bank’s own liability to Countryside. The tripartite agreement did not give the Bank the right to initiate changes in the specification, and it did not do so. The tripartite agreement also left marketing the houses in Acorn’s hands, and merely required regular reports to be made to the Bank. Since the only means of repaying the Bank was through the sale of houses, this, too, was a legitimate means of protecting the Bank’s own interests and did not amount to assuming the role of shadow or de facto director.

Mr Dobbs also claimed that the Bank compelled Acorn to appoint Mr Skinner as its Executive Chairman. This allegation was, to some extent, modified in the course of the trial. As it finally emerged, the allegation was that Mr Saunders threatened to call in the loan unless Mr Skinner accepted that role. The allegation was put to Mr Saunders and he denied it. Mr Saunders had said in his letter of 24 November 1999 that Mr Skinner should become more involved in Acorn’s affairs. Mr Skinner said in evidence that he discussed this with Mr Dobbs and by 28 December they had decided that Mr Skinner would assume the role of Executive Chairman, as he said to Mr Saunders in his letter of 28 December. That was the day before the meeting at which Mr Saunders was alleged to have threatened to call in the loan. So the decision had been made by then. Part of Mr Skinner’s cross-examination proceeded as follows:

“Q. I suggest that the view that Mr Saunders made clear was that unless someone took firm control of the project on behalf of Acorn the project was likely to fail and Acorn fail with it.

A. It wasn’t someone, it was me.

Q. Yes.

A. That’s what I said.

Q. You were the only other director available, were you not?

A. Yes, that’s correct.

Q. So do you accept that what Mr Saunders made clear is that unless you took firm control of the project on behalf of Acorn the project was likely to fail and with it Acorn?

A.

I think that’s what I am saying, is it not?”

In my judgment this does not amount to a threat by Mr Saunders to call in the loan unless Mr Skinner took on the role of Executive Chairman. But even if it does, I would not have regarded it as amounting to more than legitimate commercial pressure from a banker the security of whose loan was beginning to be in doubt. It certainly does not suggest that the Bank itself wished to act as a director of Acorn. Quite the contrary.

Mr Dobbs relies on an extract from a letter that the Dutch National Bank wrote to the Bank in August 2001, following a routine audit. The extract (in translation) reads:

“You told us that you have concluded there were two big cases which had not gone well. Now they are being thoroughly analysed with the aim of learning from these cases. In Bristol your organisation perhaps became too closely involved in the management of Acorn Televillages.”

Mr Blom explained that the word “management” in Dutch does not imply that you are steering an enterprise; but that you are doing the little things that a manager should do. In the present case, the Bank’s self-criticism was that Mr Hawes was too helpful to Acorn in preparing cash flows; when what was needed was a proper assessment of the loan. This extract does not, in my judgment, support Mr Dobbs’ allegation.

Mr Dobbs also relied on instances where the Bank refused to sanction the drawdown of funds for certain purposes. But as Mr Saunders made clear in his letter of 8 November 1999, the Bank was simply concerned with the question of the release of funds. It remained Acorn’s responsibility to decide how best to use them. It must also be borne in mind that the Bank had its own direct contractual liability to Countryside. The protection by the Bank of its own interests is consistent with its not having become a director of Acorn. Mr Dobbs’ argument consistently overlooks the fact that the Bank had its own interests to protect, both as funder of the project; and also as guarantor of payments to Countryside under the building contract. In addition it overlooks the fact that it was on Acorn’s instructions that the Bank withheld the disputed LADs from Countryside. In addition Mr Saunders repeatedly urged Acorn to get on with marketing.

Mr Dobbs also relied on the Bank’s alleged denial of funds with which to pay conveyancing fees. However, the only instance was that in May 2000, just before Acorn’s facility was reinstated. The position was that Gabb & Co wanted to deduct fees from the proceeds of sale of plot 32 even though those fees related to a different plot; and hence were not covered by the agreement. The Bank nevertheless agreed. But Gabb & Co deducted a greater amount than that which had been agreed; so the Bank protested. I cannot see any ground on which the Bank can fairly be criticised for that; or that the Bank’s protest gives any support to the allegation that it acted as a shadow director of Acorn. Mr Dobbs was at pains to say that there could be no conceivable criticism of the quality of the conveyancing services provided by Gabb & Co. Mr Saunders agreed that no such criticism was made. But that is not the point. The point is that the Bank had agreed with Gabb & Co that a certain amount of money would be remitted to the Bank out of the proceeds of sale of one particular plot; and Gabb & Co remitted less than they had promised.

In addition, there were many initiatives that Acorn took on its own. It was Acorn, through Mr Skinner, who proposed persuading Countryside to change the site management and who actually persuaded Countryside to do so. The Bank may have agreed to the suggestion, but they did not impose it on Acorn. It was Mr Dobbs and Mr Skinner, without the intervention of the Bank, who attempted to sell Acorn to Countryside. It was Mr Dobbs and Mr Skinner who decided to commission Mr Russell’s report. It was Mr Dobbs and Mr Skinner who decided to refer the dispute with Countryside to adjudication. It was Mr Dobbs and Mr Skinner who decided to make the claim against the Bank for damages caused by economic duress.

There is no example of an occasion on which the Bank claimed to be a director of Acorn; or on which Acorn held out the Bank as having been a director. There is no example of a board meeting of Acorn in which the Bank participated. The Bank was not, in my judgment, part of the corporate structure of Acorn.

In my judgment the allegation that the Bank became a shadow director or a de facto director of Acorn fails.

The Bank failed to hand over the LADs to Acorn. Until the outcome of the adjudication, the Bank behaved entirely properly in placing the LADs in a separate account, and not releasing them to Acorn. There were two reasons for this. First, the sums were in dispute and, in addition, Countryside had a claim against Acorn for loss and expense. The Bank had no means of deciding the rights or wrongs of the dispute or Countryside’s claims. Second, and more important, Mr Skinner had himself agreed with Countryside that the LADs would be kept in a separate account until the dispute between Acorn and Countryside had been resolved; and had given the Bank instructions to that effect. So the Bank was doing no more than complying with its customer’s instructions. Mr Dobbs’ complaints that the Bank should have handed over the LADs to Acorn before the adjudication are entirely misconceived. The position after the adjudication is a little different. On the face of it, the adjudicator had decided that Acorn had been entitled to deduct the LADs, and that Countryside had no claim. But an adjudication is only a provisional decision. Countryside might have challenged the decision at the end of the contract. Moreover, in economic terms the Bank did credit Acorn with the LADs. First, it accepted Mr Skinner’s suggestion that the amount of the LADs should be set off against the development loan for the purposes of calculating interest. So Acorn was not being charged any interest on the LADs. In effect, therefore, the Bank had agreed not to release the money for other profitable lending at no cost to Acorn. Second, the LADs were disregarded in decisions to extend Acorn’s credit, so that Acorn’s overall ability to borrow from the Bank was greater than it would have been if the LADs had been released to it. Moreover, by the time that the adjudicator reached his decision, Acorn had no agreed facility and the Bank had already called in the loan. There can, therefore, be no question of the Bank having broken any contract with Acorn in not releasing the LADs.

Mr Dobbs seemed at one stage to be arguing that the Bank’s failure to “hand over” the LADs meant that Acorn had less cash in hand than it would otherwise have done. This seems to me to be a misconception. The effect of crediting the LADs to Acorn would not have put cash into Acorn’s hands; it would merely have reduced the extent of Acorn’s borrowing. I think, in the end, Mr Dobbs recognised this. But he said that the Bank’s refusal to credit the LADs to Acorn made it impossible to refinance. There are a number of flaws in this argument. First, until the adjudicator had adjudicated, the Bank was complying with its customer’s instructions in keeping the LADs on a separate account. Second, after the adjudicator had pronounced, there was no extant facility. Third, there is no evidence that the fact that the LADs were kept in a separate account had any effect on other potential lenders. Fourth, I could not see why the existence of two accounts, one in credit and one in debit, would have presented any more of an obstacle to refinancing than one consolidated account in debit (though with a smaller debit balance).

This allegation fails.

The Bank failed to fund the project to completion. The argument under this head depends on implying a term into the September 1999 tripartite agreement. Mr Dobbs says that at the date of that agreement it was contemplated that the project would be completed and the houses sold by January 2000. This led to the agreement that the facility would continue until the end of February 2000, one month after the expected sale of the final house. The purpose of the loan was to enable Acorn to complete the project and sell the houses. LADs would be payable if there was any delay in completion. The very fact of the LADs shows that delays were expected. The Bank’s undertaking to exercise its step in rights shows that it expected to build out the project. Performance of the obligations under the building contract was not under Acorn’s direct control. From this platform Mr Dobbs argues that it was an implied term of the tripartite agreement that, if the expected dates were not met, the Bank would continue to fund the project until the building was complete and the houses sold. This argument is hopeless. It is predicated on the assumption that things would have gone wrong, otherwise the facility would not have needed to be extended. No banker in his right mind would agree to an open ended commitment to fund a project that had gone wrong. The term is not necessary to give business efficacy to the agreement, because it would always have been open to Acorn to refinance from an alternative lending source. The term is not so obvious that it goes without saying. On the contrary it would have been an extraordinary term for the Bank to have agreed. If the officious bystander had asked the parties what would happen if the expected dates were not met, I have no doubt that they would have replied that they would review the position at the end of the facility and take stock of the changed situation. In addition the implied term would contradict an express term, namely that loan was repayable on demand and that the facility would expire at the end of February 2000. And the step in rights were rights that the Bank undertook to exercise if it terminated the finance agreement and appointed a receiver. So the exercise of the step in rights predicated that the Bank had terminated the facility and called in the loan (otherwise there would have been no occasion to appoint receivers).

In fact, the Bank did continue to offer facilities to Acorn after the expiry of the facility provided for by the September agreements. Its offer in February 2000 was not accepted by Acorn, despite Mr Hawes’ urging. In his Statement of Case, under the headline “[Bank] deliberately starves [Acorn] of funds”, Mr Dobbs complains that Mr Saunders refused to allow Acorn to draw further on the account in April 2000. This complaint is breathtaking, given that since February 2000 Acorn had been refusing to countersign the letter offering it a facility; and in consequence there was no authorised facility in place. The Bank offered a further facility in May 2000; despite the fact that Acorn was claiming that the Bank had been guilty of economic duress and was liable in damages of over £1 million; and despite the fact that Acorn had threatened to sue Mr Saunders personally for libel. In my judgment the Bank behaved with exemplary forbearance in the face of Acorn’s accusations. It is astonishing that Mr Dobbs and Mr Skinner appear to believe that the Bank should have continued to fund the project in the face of their accusations. The Bank more than lived up to its claim to be an “ethical” bank.

This allegation fails.

The Bank knowingly overstated its demand before appointing receivers. The first demand was made before the result of the adjudication. It included the withheld LADs in the calculation of Acorn’s indebtedness. The second demand was made after the result of the adjudication. It also included the withheld LADs in the calculation of Acorn’s indebtedness. I can see the argument that the second demand ought to have reduced the amount of the indebtedness by the amount of the withheld LADs. Even that argument is not straightforward, because of the provisional nature of an adjudication. In addition, since the Bank had not consolidated the LADs account and the development loan account, the amount owing on the development loan account was correctly stated in the demand. Maybe the Bank should have consolidated the two. But what I do not accept is that the Bank knowingly overstated its demand. Had the LADs been excluded from the demand, Acorn’s debt to the Bank would still have been in the region of £2 million; and it was still facing a substantial claim from Countryside. In addition there is no evidence that the alleged overstatement in the second demand of the amount due had any effect, either on Acorn or Mr Dobbs. The first demand was the demand that was legally effective; and as at the date of that demand, the amount of the debt was correctly stated.

Even if I had accepted the factual allegation, an overstatement of the amount due would not have invalidated the demand: Bunbury Foods Pty Ltd v. National Bank of Australasia Ltd (1984) 51 ALR 609, followed in Bank of Boroda v. Panessar [1987] Ch. 335 at 346-7.

This allegation fails.

The Bank wrongfully discouraged investors from investing in Acorn. This allegation relates to Regime. Regime’s letter to the Bank of 10 October 2000 says in terms that it decided to pull out because further investigation had led it to believe that two plots were unsaleable and that the returns were not good enough. This gives no support to Mr Dobbs’ allegation. Mr Dobbs did not call any witness from Regime to support his allegation. There was a meeting between Regime and the Bank before the letter was written. Mr Saunders said in evidence that at the time of the meeting he and Mr Hawes “were hopeful that they would look seriously at investing in Acorn, and I think we tried to encourage them to do so.” I accept his evidence.

Mr Dobbs relied on the fact that an internal note revealed that Regime was on a list of persons who might be interested in acquiring the development from the Receivers. Given that Regime had once shown interest, this is not in the least surprising. In fact Regime showed no further interest, even during the Receivers’ marketing campaign.

This allegation fails.

The Bank failed to explore refinancing and other options. Although this allegation features as a headline in Mr Dobbs’ Statement of Case, no details are given of what he says the Bank should have done. In his final address Mr Dobbs said that the Bank ought to have contacted the Bank of Wales when the latter was interested in refinancing the project. However, the fundamental misconception is the assumption that it was the Bank’s job, rather than Acorn’s, to explore the refinancing of the project. Moreover, there was nothing to stop Mr Dobbs from asking the Bank of Wales to contact the Bank, rather than expecting the Bank itself to take the initiative. He did not do so. In addition, as the narrative makes clear, the Bank had, for practical purposes, itself refinanced the project several times.

This allegation fails.

The Bank conspired with Countryside to put Acorn into receivership. In his Statement of Case Mr Dobbs alleges that there is “a triable even if inherently implausible or scarcely credible prospect that there was a conspiracy to defraud [Acorn] of the value of its assets made between [Mr Saunders] at the Bank, [Alan Cherry] and [Richard Cherry] at Countryside.” The existence of a triable allegation may be enough to stave off summary judgment; but the trial is the time to decide whether the “inherently implausible and scarcely credible” allegation is actually true.

It cannot properly be suggested that the Bank acted unlawfully in appointing receivers after Acorn had failed to repay the loan following the demand. So the conspiracy must be what is called a “lawful means” conspiracy. It is an essential ingredient of such a conspiracy that the conspirators’ predominant purpose is to injure the victim. The distinction here is between the object of injuring the victim, on the one hand; and the object of protecting the conspirators’ own legitimate interests on the other. The former, but not the latter, is an actionable conspiracy.

Why, then, did the Bank appoint receivers? Mr Dobbs suggests that Mr Saunders took the decision to appoint receivers because he wanted to protect himself and the Bank against claims by Acorn that the Acorn account had been mishandled. He says that Mr Saunders wanted to protect his own reputation, and the only way of doing that was to kill off Acorn. He says that the Bank was already “cosying up” to Countryside; and they agreed that Acorn would be put into receivership so that Countryside could acquire the development on the cheap. Mr Dobbs points to Mr Hawes’ letter of 6 September 2000 in which he said that it would be desirable “to prevent any attempt by the directors to raise a phoenix from the ashes”.

These allegations are fantasy. It is necessary to recap on some of the salient facts. The Bank went into the project in April 1996 on the basis of a loan of £950,000 which would reduce to £200,000 at the end of Phase I. In April 1998, when Acorn’s liabilities had increased to £550,000, instead of calling in its loan the Bank increased Acorn’s borrowing limit to £2.195 million. By September 1999 when Acorn had again run out of money, the Bank did not call in its loan. Instead it increased Acorn’s borrowing limit to £2.6 million and undertook a direct contractual liability to Countryside; and agreed to postpone part of its secured loan to Countryside. In February 2000, when the facility expired, and the Bank thought that it was facing a shortfall, it did not call in its loan; but offered to extend the facility. When that was declined, it urged Acorn to accept. Even after Acorn had threatened the Bank with claims for damages, and threatened to sue Mr Saunders for libel, the Bank still renewed the facility. When the renewed facility expired at the end of May 2000 the Bank still did not call in its loan. It was only when the Bank was dragged into the adjudication to face a claim for £1 million damages for economic duress that it called in the loan. Even though the Bank had called in the loan in early August 2000, Acorn had no concrete proposals for repayment by 20 October when the Receivers were finally appointed. There were some vague and last minute suggestions that the Bank of Wales might refinance; but Acorn did not make strenuous efforts to pursue them. Indeed Mr Skinner played no part at all in attempting to refinance, leaving it all to Mr Dobbs.

Why did the Bank appoint receivers? The answer is clear. The Bank appointed receivers because Acorn had not repaid the loan; and Mr Saunders took the view that the appointment of receivers would minimise the Bank’s loss. Mr Bierman, who reported to Mr Saunders, thought that Acorn was unable to service its debt and unable to complete the project. It was his judgment that Acorn’s liabilities exceeded its assets. That was a reasonable judgment. I cannot place any weight on Mr Hawes’ cryptic comment in his letter of 6 September (which Mr Dobbs did not ask him to explain). In my judgment the Bank did all that could reasonably have been expected of it to support the project.

So far as Countryside were concerned, it is true that there were discussions between the Bank and Countryside about Countryside buying the site from the Bank. Since Countryside had a charge on the land, which would have to be cleared off before any sale could take place, it was obvious that the Bank would have to talk to Countryside and do a deal with them. Otherwise any sale would be paralysed. In fact there was no agreement between the Bank and Countryside for the sale of the site, because Countryside would not come up with an acceptable offer. The decision to appoint the Receivers was that of the Bank alone. It was not a decision taken in concert with Countryside. Ultimately the settlement with Countryside was a simple cash settlement of Countryside’s claims, made after taking advice. The terms of the settlement included a release by Acorn of its claims against Countryside. But that is an essential term of any settlement. Mr Dobbs also relied on clause 9 of the compromise agreement which, he said, was an attempt to stifle his claims against Countryside. What he overlooks, however, is that clause 9 only comes into effect if he and/or Mr Skinner acquired the site. Even then the Receivers only undertook an obligation to use best endeavours to procure a release of claims by Mr Dobbs and Mr Skinner.

Moreover, Acorn had already made its claim for damages for economic duress against the Bank; and although the Bank objected to the forum in which it was brought, it did not stifle that claim. Even when Acorn (by its receivers), the Bank and Countryside entered into the compromise agreement on 22 December 2000, the Bank did not procure a release of Acorn’s claims against it. Nor did the Bank object to the late joinder of Acorn as a claimant in this action. In the result Mr Dobbs presented his and Acorn’s claims against the Bank during the course of an eleven day trial. So no claims against the Bank have been stifled.

This allegation fails.

The Bank appointed the receivers for improper purposes and in breach of UK banking principles. The allegation of the appointment of the Receivers for improper purposes adds nothing to the allegation of conspiracy, and fails for the same reasons. However, Mr Dobbs has another allegation under this head. He complains that the Bank appointed the Receivers without any prior consultation with the directors of Acorn and without conducting an independent business review. He says that had such a review been conducted, Acorn would have been found to have been profitable. He also complains that the Bank made no attempt to refinance Acorn.

It is true that Mr Dobbs and Mr Skinner were not given advance notice of the receivership. Nor did the Bank conduct an independent business review of Acorn’s affairs. Was this a breach of “UK banking principles”?

The principles on which Mr Dobbs relies are set out in a publication issued by the British Bankers Association entitled “Banks and Businesses Working Together”. The principles include the following:

“Where a customer does get into difficulties and acts early, its bankers will work to ensure that there is sufficient time to take the advice and have the discussions identified in the key principles. In most cases, that should enable both bank and customer to negotiate the terms of the bank’s support and to return to successful operations. However, if the customer refuses to seek or to act upon advice or to have meaningful discussions, the bank may hasten moves to instigate recovery proceedings, which may include enforcement of security.”

“Sometimes the existing legal entity and management structures running the business cannot be saved but a restructuring through a receivership, or a sale to a new owner, or a change of management can save the underlying business and maintain employment and community benefit.”

“We will alert you when we have concerns about your business and/or our relationship with you.”

“If you are unable to solve the underlying problems we may ask for additional financial information and/or seek an independent review of your business.”

“Where we have requested an independent review of your business to help you solve the underlying problems, we will seek to discuss the information provided with you (and should you request, your advisers) before taking any action.”

It is clear from the last two principles that those banks who subscribe to these principles do not promise to call for an independent review of the customer’s business. The principles make it clear that it is up to the bank in question to decide. So no complaint can legitimately be levelled against the Bank for not calling for a review of Acorn’s business. In fact, because of the way in which the Bank had monitored the project; and because, at that time, the project was Acorn’s only business activity, the Bank already knew a lot about Acorn’s business. The question of discussion with the customer before taking action arises only if a business review is requested by the bank. Since the Bank did not ask for a business review, this principle does not apply either. There were many requests by the Bank, starting in early August, for Acorn’s proposals to repay the loan. There was silence until mid-September when Mr Dobbs asked for the renewal of the facility. There had previously been prolonged and increasingly combative discussion between the Bank and Acorn about the state of the business. Moreover, I am quite sure that it was never intended that the form of co-operation between bank and customer envisaged by the principles would apply in circumstances where the customer had accused the bank of economic duress and had made a claim for £1 million in damages against it.

It would, perhaps, have been courteous of the Bank to have told Acorn in advance that they were about to appoint receivers, but I do not think that they were in breach of any principle of UK banking in not doing so.

I should also say that even if I had been of a different view, a breach of UK banking principles would not, in my judgment, have given rise to any legal liability on the part of the Bank. In addition, I am quite unpersuaded that an independent review of Acorn’s finances would have found it to be capable of finishing the project, selling the houses and remaining solvent.

This allegation fails.

The Bank damaged Mr Dobbs’ reputation by issuing false press releases in October 2000. This allegation is, in effect a claim for libel. The limitation period for such a claim is one year from the date on which the cause of action accrued. Mr Dobbs’ claim, even if well-founded is statute barred. Although the court has power to extend time under section 32A of the Limitation Act 1980, Mr Dobbs has never asked for an extension of time.

Be that as it may, the only statements that Mr Dobbs has identified are the statements that Acorn had cashflow problems and “had run up debts of over £1 million”. Both those statements were true.

This allegation fails.

The Bank is in breach of the rescheduling agreement by failing to market individual plots for at least one month. The Receivers were appointed on 20 October 2000. The sales staff on site were retained until at least 18 December 2000. Brochures were available for interested buyers, and Acorn’s website remained up and running. Offers for individual plots were passed on to the Receivers. This amounts to reasonable endeavours by the Bank to market the plots.

This allegation fails.

The Bank is liable for breach of contract in failing to exercise its step in rights under the construction contract. The step in rights that the Bank had promised to enforce were those contained in clause 2.2.5 of the deed of variation signed in September 1999. Those step in rights entitled the Bank to take the place of the Employer for the purpose of giving instructions to the contractor under the building contract. However, clause 2.2.5.3 made it clear that the Bank was to incur no greater liability to Countryside by exercising its step in rights than it already had under the terms of its guarantee. It is important to realise that the step in rights only extended to the building contract, and not to work outside the scope of the building contract.

At the date of the receivership the following works remained to be done:

Remedial works to the foul drainage on Phase I;

Installation of the fibre optic cable network which was a requirement of the land transfer;

Completion of the Telecentre, which was also a requirement of the land transfer;

Some snagging to individual houses;

Completion of the wearing course to estate roads, but Countryside had been instructed by Woodeson Drury not to complete this work until after the resolution of the drainage problem.

There is no doubt that the remedial works to the foul drainage on the Phase I site; the installation of the fibre optic network and the completion of the Telecentre were all outside the scope of the building contract with Countryside. So the Bank’s promise to exercise its step in rights did not extend to them. Thus it follows that the Bank had no contractual obligation to build out the whole of the development. In addition the way in which the step in rights were drafted made it clear that they did not impose on the Bank any financial liability greater than that which it had already. Thus the Bank could not be required to advance any further monies for the completion of the development.

On the face of it, however, the Bank had an obligation to exercise its step in rights as regards the snagging and the completion of the wearing course of the roads. Mr Levy argued that:

The Bank’s promise to exercise its step in rights was a promise given for the benefit of Countryside alone. Consequently Countryside was entitled to release the Bank from its obligation; and did so by virtue of the compromise agreement of 22 December 2000;

By joining in the compromise agreement, Acorn acquiesced in the Bank’s belief that it had been released from its obligation; and is now estopped from asserting its continued existence;

Alternatively, by releasing Countryside from its obligations under the building contract, the Bank put it out of its power to enforce the step in rights; and by joining in the compromise agreement containing that release, Acorn must be taken to have waived its right to require the Bank to exercise its step in rights.

The Bank’s undertaking to exercise its step in rights was not expressly confined to Countryside alone. Moreover the undertaking was contained in both the deed of variation and in the debt rescheduling agreement. It is not, to my mind, self-evident that Acorn could have derived no benefit from the undertaking. On the contrary, if the works comprised in the building contract were all undertaken, it might well have been considered at the date of the contract that, at least in theory, a greater price could be obtained for the development site. I am not persuaded that the undertaking was one that Countryside alone could release. I have already noted that although both Acorn and the Bank entered into the compromise agreement, they did not mutually release claims against each other.

The compromise agreement contained a mutual release by Countryside and the Bank of their obligations towards each other under the building contract. I do not consider that the mere fact that Countryside released the Bank from its obligation to Countryside to exercise the step in rights would, by itself, have estopped Acorn from enforcing the Bank’s obligation to Acorn to enforce those rights. However, I regard the Bank’s release of Countryside as more significant. Once the Bank had released Countryside from its obligations under the building contract, there were no step in rights left for the Bank to enforce. By joining in that compromise Acorn at the very least acquiesced in that situation. In my judgment it would be unconscionable for Acorn to assert that the Bank’s obligation to enforce its step in rights survived the compromise. That covers the period from 22 December 2000 onwards. What of the period between 20 October and 22 December? During that period the Bank had not exercised its step in rights, contrary to the promise that it gave. Acorn did not release accrued claims against the Bank. In order for an estoppel to arise as regards accrued claims, it would, in my judgment, be necessary to find a clear and unequivocal representation by Acorn that it would not rely on its strict legal rights. In my judgment the compromise agreement does not amount to such a representation. In principle, therefore, I conclude that the Bank was in breach of its undertaking to exercise its step in rights by failing to exercise them between 20 October 2000 and 22 December 2000.

However, it is necessary to consider how the Bank could have enforced its step in rights, had it decided to do so. The step in rights were simply rights to give instructions to Countryside. But by the date of the receivership Countryside had not been paid for many months. The last payment they received was in November 1999, and they had been working unpaid for about six months after that. The prospect of Countryside willingly completing the development without being paid for their past work is remote. Countryside would have been able to terminate the contract on the ground of non-payment. Had they done so the Bank’s step in rights would have vanished. The step in rights, and the promise to exercise them, would not have compelled the Bank to take legal action against Countryside, even assuming that there was any effective legal action that the Bank could have taken. In my judgment it is highly unlikely that the Bank could have persuaded Countryside to carry on working without negotiating a settlement of Countryside’s claims in a larger sum than the £500,000 eventually agreed. In addition it would have been of no practical benefit to have carried out the work relating to the wearing course of the estate roads, unless the drainage problems had been sorted out first. And the drainage problems were not within the scope of the Bank’s undertaking. Completion of snagging would have made little difference. Moreover, the period of breach was a very limited one and Acorn released (or must be taken to have released) the Bank from future performance of its obligation on 22 December 2000.

Strictly speaking the question of damages for breach of the Bank’s obligations is not before me. But there is no suggestion that there is further relevant evidence on the question of quantum. It may, therefore, be helpful if I indicate that, had I been assessing damages, I would not have awarded Acorn more than nominal damages. Nominal damages are conventionally fixed at £2.

This allegation succeeds to the extent that the Bank is liable for having failed to exercise its step in rights between 20 October and 22 December 2000. But on the evidence I have heard, I would not have awarded Acorn more than £2 nominal damages.

The Bank is liable for the Receivers’ conduct in refusing to accept the offer from Royalstone. Mr Dobbs’ allegation is that the Receivers deliberately decided to cut Royalstone out of any possible sale, because of Mr Dobbs’ association with Royalstone. He says that the Receivers were determined that he should have no more to do with the project. This allegation is contradicted by all the documents. In fact:

In addition, although Mr Rhodes’ witness statement said that he had been told that Mr Dobbs was “persona non grata”, he accepted in cross-examination that he was told no such thing.

Mr Dobbs also relied on clause 9 of the compromise agreement as showing that the Bank wanted to cut him out of any deal. However, clause 9 expressly recognised that he and/or Mr Skinner might be the only or the best purchaser of the site; and the Receivers’ solicitors had already made it clear to Countryside in correspondence that their legal duties did not allow them to refuse to treat with Mr Dobbs.

Mr Dobbs also argued that the first Royalstone offer (which had a financial value of £2.7 million) remained open for acceptance even after the second offer of £2.25 million. Not only would that have been at variance with basic principles of the law of contract, it is also contradicted by what Mr Dobbs and Mr Slatter both told the Receivers. Had both offers been concurrently open for acceptance, it is astonishing that neither Mr Dobbs nor Mr Slatter ever told the Receivers that that was so. Moreover, it seems to me to have been commercially most improbable for Royalstone to have had two concurrent offers open for acceptance: one at £2.7 million and one at £2.25 million. It is also clear that even if Mr Dobbs’ analysis of the position is correct, Mr Morrison thought at the time that the second Royalstone offer had superseded and replaced the first one. It cannot seriously be suggested that he was negligent in taking that view.

This allegation fails.

Sale at an undervalue. Mr Dobbs’ main complaints were these. First, he said that the Receivers were negligent in deciding to sell the development as a whole. They should have built it out and sold the houses individually. Second, he said that the asking price was too low. It is no surprise, he said, that offers were all around the £2 million mark, because that is what the Receivers (or their agents) suggested they were looking for. Implicit in this complaint is the suggestion that if the asking price had been, say £3.5 million, buyers would have been found. Third, he said, the development had not been widely enough advertised.

I deal first with the complaint that the Receivers did not build out the development and sell the individual houses. The first point to make about this is that the Receivers had no obligation to do so. A receiver, like a mortgagee, is entitled to sell the property as it is. He is under no obligation to improve it. Second, a build out would have required the injection of more lending by the Bank, which the Bank were unwilling to do. Third, it seems to me that it would have been highly unlikely that Countryside would have continued to work without being paid; and a build out would either have required a more generous settlement with Countryside or the engagement of a fourth building contractor. Fourth, a build out and the subsequent marketing of the individual houses would have taken time, during which interest would have been continuing to accrue on the loan. It is uncertain even now when the last of the houses was in fact sold (probably in December 2003); and whether the farm buildings have yet been sold. Fifth, the costs of a build out, in the light of the stance taken by Powys County Council, were uncertain. Sixth, individual buyers are less willing to buy from Receivers (from whom they can expect no “after-sales service”) than from a properly constituted developer. Mr Dobbs suggested that Edward Symmons could have procured the issue or transfer of NHBC certificates, but there was no evidence about that; and Mr Price thought that it would have been difficult to have done so. I conclude that the Receivers were entitled both as a matter of law, and on the facts, to decide not to build out the development.

Mr Dobbs put in his own “report” on value, although he is not an expert valuer. Neither the Bank nor the Receivers objected to the admission of this evidence. Mr Dobbs’ “report” proceeded on the basis that the Receivers should have sold the houses individually and not en bloc. The value he ascribed to the development was the aggregate of the values of the individual houses (plus the farm buildings) adjusted for inflation and the rising housing market. However, in practical terms the Receivers could not have sold the units individually without building out the development. This was the view of Mr Stupples, the Receivers’ expert, and I accept it. It was also Mr Skinner’s view in June 2000 that unless all the works were completed marketing the individual units would be “a waste of money.” Since I have concluded that the Receivers were entitled to decide not to build out the development, it follows that the basis on which Mr Dobbs “values” the development is inappropriate. The correct way of valuing the development is on the basis of a sale en bloc to a developer who would complete the build out and then sell the completed units.

I turn next to Mr Dobbs’ complaint that the asking price was too low. Although it was not clear from his Statement of Case whether he alleged that the asking price was too low even on the basis of a sale en bloc, his opening address made it clear that he did make that complaint in the alternative to his complaint that the Receivers should have sold the houses individually.

Both the Receivers and Edward Symmons had firmly in mind their duty to obtain the best price. This is not, therefore, a case of misapprehension of the legal position. It is also a case in which the property was sold for less than the debt owing to the Bank, and the shortfall was more than the Bank could have hoped to recover from Mr Dobbs under his personal guarantee. This is not, therefore, a case where mortgaged property has been sold for just enough to cover the debt, leaving no surplus for the mortgagor. Cases like that justifiably raise suspicions that the mortgagor has been less than fair to the mortgagee.

The Receivers proceeded on the basis of the advice they obtained from Edward Symmons. As I have said, Edward Symmons began by considering the gross value of the completed houses and the farm buildings. Their aggregate value was the highest of all the valuations that had been produced, although it is possible to speculate that if Countrywide had valued all the units, their valuation might have been about 10 per cent higher. But the Countrywide valuation was made on the assumption that the development had been completed, which was not in fact the case. Moreover, there are reasons for supposing that the Countrywide valuation might have been on the high side. I refer in particular to the discrepancy between the Countrywide valuation of plot 7 as compared with the price that Mr Dobbs was willing to accept for it, and to the comparison between the Countrywide valuation and the eventual sale prices of plots some two years later. Mr Dobbs said that the Countrywide valuation should be increased to take account of the rise in house prices since 1999. He produced statistics from the Land Registry which, he said, showed that the rise in house prices in Crickhowell had been some 70 per cent. However, this suggestion is not borne out by the figures available for actual sales; even if one of them (plot 11) may be suspect. Moreover, Mr Dobbs’ statistics cover a period of rising house prices after the date of Edward Symmons’ appraisal. In addition, the sample size on which Mr Dobbs’ statistics were based is too small for the extrapolations to be reliable. It is also the case that (as both Mr Dobbs and Mr Skinner said) the very fact of the receivership may well have had a depressing effect on value. Mr Dobbs also relied on Mr Rhodes’ answer in cross-examination that the development “at its best … may well have been worth £4 million finished and done correctly it may well have been worth it.” But Mr Rhodes was clear that he would not have paid anything approaching that sum. I am not able to place weight on Mr Rhodes’ tentative and conditional opinion. I do not consider that the gross value that Edward Symmons ascribed to the development was unreasonable or negligent.

Having decided on the gross value of the development, Edward Symmons then made certain deductions. The deductions that Edward Symmons made for the cost of sales have not been challenged. Nor have the deductions that they made for the cost of completing the development. Mr Dobbs did suggest that the amount of developer’s profit (20 per cent) was too high. Mr Rhodes, whose offer was £2.2 million (later reduced to £2.1 million), said that he was looking for a profit “in excess of £500,000”; which would have been in the region of 20 per cent. Alder King had advised in July 2000 that developers’ profit might be as much as 25 per cent. The figure of 20 per cent was also supported by Mr Stupples, the Receivers’ expert; and in the absence of any expert (or indeed other) evidence to the contrary, I accept that it was a proper deduction, particularly bearing in mind that Edward Symmons’ appraisal allowed nothing for financing or carrying costs, which would have to have come out of the developer’s profit. Edward Symmons’ bottom line valuation was £2.2 million. Bearing in mind the nature of the site, I consider that it was a realistic one.

The starting point therefore is, in my judgment, that Edward Symmons pitched the informal asking price at about the right level. Their view was supported by Mr Stupples, who said that he had prepared a residual valuation. However, his report did not set out his detailed calculations as it should have done. So I attach little weight to his overall opinion of value. But I consider that Edward Symmons’ advice is borne out by the range of offers that the Receivers obtained (not all of which I have described in the narrative). They may be tabulated as follows:

As Mr Price of Edward Symmons said, and I accept, the more prospective purchasers investigated the development, the more they were put off by the difficulties. At least four bidders revised their bids downwards.

Lastly there is the question of advertising. Even before the Receivers advertised the development they had received expressions of interest generated by the widespread publicity occasioned by the receivership itself. Had it been paid for, publicity on that scale would have cost a lot of money. The Receivers advertised in the Financial Times. Edward Symmons sent out 600 sets of particulars to a targeted mailing list. Mr Price thought that the response to that marketing campaign was good. Mr Rhodes was one of those who had learned of the development without seeing the advertisement in the Financial Times or Edward Symmons’ particulars. It is true that the development was not advertised in the Estates Gazette (as it might have been), and that Mr Price described the marketing campaign as “limited”; but in my judgment the Receivers were entitled to take the view that the response to the advertisement and the mailshot, coupled with the publicity surrounding the receivership, was enough to expose the development to the market.

I add that I think that it is highly significant that the Royalstone bid, with which Mr Dobbs himself was associated, was reduced from about £2.7 million to £2.25 million. Mr Dobbs pointed out that the Bank of Wales had been interested in funding the Royalstone bid (as it had been in funding Mr Dobbs’ own attempts at refinancing). If Mr Dobbs had really thought that the property was being sold at an undervalue on the scale that he now alleges, it is inexplicable that he did not either increase the Royalstone bid or make one of his own; and, in either case, take more active steps to secure funding from the Bank of Wales. The cost of a valuation would have been a relatively modest outlay if the potential prize had been as great as Mr Dobbs now suggests.

I have already dealt with the allegation that the Receivers should have accepted the Royalstone bid.

This allegation fails.

Acorn USA. The starting point is that the shareholding had been valued in Acorn’s accounts at £20,000 and on the day following the Receivers’ appointment Mr Skinner, in Mr Dobbs’ presence, had said that they were worthless. Mr Klumb, who had an option to acquire the shares for $87,500, declined to exercise his option. As a local politician, he might have been expected to know the worth of the company. Attempts by Acorn USA’s lawyers to sell the shares failed. The best evidence of what the shares were worth was what Mr Corral was prepared to pay: $52,500; a price that was matched by Mr Russell.

Why did the Receivers not sell at that price? Because Mr Dobbs stopped them. By the time the Receivers were free to sell, the purchasers had withdrawn and the shares were valueless.

Mr Dobbs argued that the Receivers should have taken more interest in Acorn USA. But it was not until his final address that he was able to say what he meant by that. It turned out that he meant that the Receivers should, as majority shareholders, have instructed the board of Acorn USA to acquire the land over which Acorn USA had an option, and should have actively sought finance for funding the option on more favourable terms than Acorn USA in fact obtained. In the alternative, the Receivers should have sold the shares earlier.

The Receivers were not the board. Nor were they entitled to give directions to the board. In theory they could have called a meeting of the company, and voted in a new board, but Mr Dobbs’ suggestion did not go as far as that. Moreover, all the Receivers’ activities (or lack of them) as regards Acorn USA take as their starting point the modest valuation of the shareholding in Acorn’s accounts, and Mr Skinner’s statement that the shares were worthless. Moreover a sale of the shares would have been difficult because of the pre-existing share sale agreements with Mr Klumb, and the existence of complex litigation relating to the land.

This allegation fails.

In view of my findings on the underlying issues, this question does not arise. However, for the sake of completeness I should say something about it. The starting point is that the Receivers were the agents of the company; not the agents of the Bank. However, the Receivers clearly owed duties to the Bank as the appointing secured creditor. It is not unexpected that the Receivers kept the Bank informed about what they were doing; and reported to them either formally or informally from time to time.

However, I am satisfied that the Receivers were well aware of their position as agents of Acorn and well aware of their duty to obtain the best price for Acorn’s assets. It was the Receivers’ decision, on the advice of Edward Symmons, to reject the Countryside offer. It was the Receivers’ decision where and how to advertise the property for sale. It was the Receivers’ decision not to issue a contract to Royalstone. It was the Receivers’ decision to issue contracts to Intobeige and Whitegate and to put them into a contract race. I am quite satisfied that the Receivers did not act on the Bank’s instructions. They remained the agents of Acorn. If it had mattered, I would have held that the Bank is not vicariously liable for the acts or omissions of the Receivers.

I cannot leave this case without making some more general remarks about those involved in the events I have described.

Mr Dobbs is clearly a man of vision. No one doubts that in terms of its conception and design, the Crickhowell development was innovative and fully deserved its award from the Royal Town Planning Institute. I do not question that it is an acclaimed development in terms of its design and concept. However, I do not think that Mr Dobbs had the financial management skills to bring this complex development to a successful financial conclusion. He sees things entirely from his own perspective. Any error by others is perceived as dishonesty; and any communication not copied to him as conspiracy. His attacks on the integrity of Mr Saunders, Mr Bierman, Mr Blom and Mr Morrison were, in my judgment, quite unjustified.

Mr Skinner, once he took control of Acorn, considerably increased the heat. He adopted a very confrontational approach both with Countryside and with the Bank. That kind of approach is a high risk strategy. It was not calculated to win hearts and minds. Unfortunately it had the effect of driving the Bank away.

Mr Saunders was able to give as good as he got. He had a robust management style, and was clearly at times exasperated with Acorn, and more particularly with Mr Dobbs. But I entirely acquit him of any dishonesty. As I have said the attack on his integrity was quite unjustified. I also reject the suggestion that he bullied or humiliated Mr Dobbs. He was doing his best to bring home to Mr Dobbs the gravity of Acorn’s financial situation, which Mr Dobbs found difficult to accept. Mr Dobbs was reliant on more money being advanced by the Bank and on promises of increased house prices, even when houses failed to sell within the projected timescales. I do not find it surprising that a banker asked for more than promises.

The Bank behaved with sympathy and forbearance towards Acorn. When it entered into the September 1999 agreements it did more to help Acorn than Acorn had a right to expect. Mr Dobbs himself recognised that at the time. That it offered to extend Acorn’s facilities in the face of Acorn’s accusations is remarkable. It acknowledged that it had got too close to its customer and had become more involved with its customer’s business than was wise. But that arose out of a genuine desire to see the project through to completion; and a genuine desire to help Acorn. In my judgment it is fully entitled to describe itself as an ethical bank.

The Receivers acted professionally throughout. They were faced with a difficult situation, and they acted in the best interests, not only of the appointing bank, but also of Acorn itself. Mr Dobbs’ attack on Mr Morrison’s integrity was as unjustified as his attacks on others.

Finally, I remind myself that I am not hearing a claim against Countryside. Countryside has had no opportunity to defend itself against the allegations made against it. I pass no judgment on where the rights and wrongs of the allegations against Countryside lie.

All Mr Dobbs’ allegations fail, save that Acorn is entitled to damages for the Bank’s failure to exercise its step in rights between 20 October 2002 and 22 December 2002. It is agreed that Mr Dobbs is entitled to rely on any defence that Acorn can rely on. However, unless the damages awarded to Acorn would exceed the extent of the shortfall to the Bank (minus £50,000) the existence of the cross-claim gives Mr Dobbs no defence to his liability on the guarantee. I have indicated that, had I been assessing damages, I would not have awarded more than £2. I cannot conceive of a court awarding damages to Acorn in a sum approaching the £650,000 or so necessary to have any impact on Mr Dobbs’ personal liability. At the date when proceedings were begun, Mr Dobbs’ liability stood at £50,369.71 (taking interest into account). I think that it follows that the Bank is entitled to judgment for £50,369.71 on the guarantee plus interest from the date of the proceedings; that I should dismiss Mr Dobbs’ counterclaim and his claim against the Receivers; and that I should also dismiss Acorn’s claims (apart from the claim based on the Bank’s failure to exercise its step in rights). As to that claim, I will give Acorn permission to proceed to an inquiry into damages, but I hope, in view of my indication, that that permission will not be taken up.

When the Receivers gave an undertaking not to sell the shares in Acorn USA on 30 July 2002, Mr Dobbs gave a cross-undertaking in damages. I have decided that the Receivers’ proposed sale would not have been a breach of duty. It follows that Mr Dobbs is liable on his cross-undertaking. I must therefore give the Receivers permission to proceed to an inquiry into damages, although I hope that they do not take up that permission either.