Carey Group Plc & Ors v AIB Group (UK) Plc & Anor (No 2)

On 11^th March 2011 I handed down judgment on the second defendant’s strike-out application in this matter, in which I concluded that nothing in the Particulars of Claim, either as originally pleaded or as sought to be amended during the hearing, afforded the claimants any prospect of obtaining either the injunctive or declaratory relief sought, so that I proposed to strike-out the Particulars of Claim and the claim itself. I noted however that further evidence had been served after the conclusion of the hearing, and that if any further amendment of the Particulars of Claim were sought to be made on the basis of it, it would have to be dealt with on the merits, after the handing down of my judgment.

The claimants did apply for permission to amend immediately after handing down of the judgment. The application was made without prior notification to the court (albeit on short notice to the defendants). I heard submissions on the application but, since another case had been listed for hearing on the same day, I decided that I would give reasons for my decision on the amendment application in writing, at a later date, so as to minimise the inconvenience which was by then being caused to the litigants in the other case. Nonetheless I informed the parties of my decision that I would refuse to permit the amendment sought, with the result that I ordered that the Particulars of Claim, and the Claim itself, be struck-out with costs. This judgment contains my reasons for refusing permission to amend. I shall adopt the abbreviations and expressions used in the main judgment already handed down. That judgment, and in particular paragraphs 34 to 43, is essential pre-reading. It will be apparent that I concluded that the overdraft facility provided to the second claimant by the Facility Agreement was not a term facility which could not be brought to an end before 31^st July 2011, as had been submitted on the claimants’ behalf. Rather, it could be terminated either by review at any earlier date, or by a demand for repayment of the amount outstanding under that overdraft facility at any time, following which, pursuant to clause 6 of the Facility Agreement, no further utilisation of the overdraft could be made.

The application sought to make three groups of amendments to the Particulars of Claim. The first was to delete paragraph 9.3, which asserts that: “All outstanding monies drawn down under the overdraft are repayable on demand at AIB’s discretion (Clause 6 (ii))”. The second consisted of the insertion of new paragraphs 14A to 14F. The new facts sought to be alleged are as follows:

“14A. During the negotiation of the Facility Agreement, the Claimants were concerned that AIB did not have the ability to provide and maintain the facilities that they had offered. During the course of meetings between Mr Dermot Purcell, the Financial Director of the Claimants, and representatives of AIB prior to 12 October 2010, AIB assured Mr Purcell that AIB was in a position to maintain their obligations to provide ongoing facilities. At this time, Mr Purcell was specifically promised by AIB that the facilities, including the overdraft, would not be called in until after a review on 31^st July 2011.

14B. The Claimants relied upon this oral assurance in executing the Facility Agreement on 21 October 2010. ”

Paragraph 14C asserts a collateral contract that the overdraft would not be reviewed or repayment demanded before 31^st July 2011. Paragraphs 14 D and E assert a claim for rectification of clauses 3 and 6 of the Facility Agreement, so as to remove any right of AIB UK either to review or to call in the overdraft before that date. Finally, paragraph 14F asserts that AIB UK is estopped from asserting any contrary right or entitlement under the Facility Agreement. I take that to be an allegation of promissory estoppel.

Finally, two new sub-paragraphs are added to the prayer for relief in paragraph 46 seeking rectification of the Facility Agreement in the manner which I have described, and a declaration that the overdraft facility cannot be reviewed or called in before 31^st July 2011.

The factual basis relied upon for the making of those amendments is to be found in the first three paragraphs of the fourth witness statement of Dermot Purcell, the finance director of the claimant group, made on 9^th March 2011, one day after the conclusion of the hearing. It is convenient to set those paragraphs out in full:

“1.

I make this statement further to my previous three statements in opposition to the Second Defendant’s (“NAMA’s”) application. I wish to resolve a number of issues which were raised while I was present at yesterday’s hearing.

2.

The first was the suggestion I heard yesterday for the first time that the bank were entitled to review the overdraft facility and demand immediate repayment at any stage. This was not the understanding and agreement reached with the bank when our facilities were renewed. I refer to paragraph 7 of my first witness statement. The reason it took so long to finalise the facility letter before it was finally issued on 12 October 2010 was because of concerns on our part, and on the part of our auditors that the bank did not have the ability to provide and maintain the facilities they had offered. During the course of these meetings with officers of the bank who were dealing with our facilities, I received assurances from the bank that they were in a position to maintain their obligation to provide ongoing facilities in order to ensure that our auditors were able to issue an acceptable form of qualification to our accounts. In this context I was specifically assured by the bank that the facilities, including the (sic) specifically the overdraft, would not be called in until after a review on the 31^st July 2011.

3.

This is the exact opposite to what NAMA were appearing to suggest at yesterday’s hearing. We were in the unprecedented position of a bank in difficulty seeking to convince us to retain our custom. We entered into the facility agreement in reliance on these assurances from the bank and in particular that the overdraft facility would not be reviewed or called in prior to 31July 2011. This has not been disputed by the bank and their internal documentation will evidence that this is and always was the case.”

The defendants opposed permission to amend, mainly on the ground that the claimants had no real (as opposed to fanciful) prospect of succeeding in the new case thereby sought to be advanced at trial. It was common ground that permission for an amendment may be refused if, treating the matter in the same way that the court would address an application for summary judgment by the opposing party, it can be seen without the necessity for a trial that the claim sought to be advanced has no real prospect of success. For that purpose, the court does not test an assertion of fact by reference to probability, which is a matter for trial. “The criterion which the judge has to apply under CPR 24 is not one of probability; it is absence of reality.” see per Lord Hobhouse in Three Rivers District Council v. Bank of England (No 3) [2001] 2 All ER 513. For that purpose, it is “open to the court to reject … evidence if it were inherently implausible or if it were contradicted, or were not supported, by contemporaneous documentation.” See per Arden LJ in Collier v. P&M J Wright Ltd [2008] 1 WLR 643 at 653C to D.

The background to this new evidence from Mr Purcell may be summarised as follows. In the letter before claim addressed to AIB UK dated 11^th February 2011, under the heading “The Facility with AIB” the claimants’ solicitors stated without qualification that the terms of the Facility were set out in the Facility Agreement and that, in relation to the overdraft, AIB’s right to review was as set out in clause 3. It asserted that “all outstanding monies drawn under the overdraft are repayable on demand at AIB’s discretion”, by reference to clause 6. Precisely the same assertions were made in paragraph 9 of the Particulars of Claim, dated 14^th February 2011, signed by leading and junior counsel and supported by a statement of truth. Similarly in the witness statement in support of the claimants’ application for interim injunctions made by Patrick Joseph Carey, a director and shareholder of the claimants, he stated in paragraph 16 that the terms of the overdraft facility were as I have just described.

On the following day Mr Purcell made his first witness statement in which, at paragraph 7, he described the negotiation of the Facility Agreement in the following terms:

“7.

AIB quickly agreed to a renewal of facilities and a draft facility letter was issued in July. This was, however not finalised by the bank until 12 October. A meeting was held in mid November and at that meeting we were assured that the bank believed that NAMA would not be involved with our banking arrangements. At the meeting, the AIB executives confirmed that they had made representations to NAMA to exclude Carey Group from those loans eligible for transfer and that they had received a list of loans due for transfer and the Carey Group loans were not among those selected. We felt reassured and believed that our existing facilities were secure until July 31^st 2011.”

That witness statement was made after the hearing before Peter Smith J on 14^th February at which the transcript shows that the following exchange occurred between the judge and leading counsel for the claimants:

“The Judge: Your clients do not say they have been made any promise beyond the contractual documents, do they?

Mr Page: No, they are not saying that, …”

I was told by Mr Page on instructions that Mr Purcell did not attend that hearing, but it was not suggested that there was no senior representative of the claimants present, nor that the answer given to the judge’s question was other than upon, or in accordance with, counsel’s instructions.

The first defendant’s Defence, served on 1^st March 2011, contained the following response to the allegation in the Particulars of Claim that the Facility Agreement could not be assigned to an entity unable to provide an overdraft facility, at paragraph 12.1(v):

“Further, as regards the Overdraft Facility, this is terminable by the First Defendant, or its assignee/transferee, in its absolute discretion at any time without any advance notice. In the circumstances, if the First Defendant were to transfer its rights and obligations under the facility Letter, the transferee would have the right to terminate the Overdraft Facility without notice, which it could exercise on assignment. In that context, there is no reason why, as a matter of construction, clause 12.4 requires the transferee to have the ability to operate the Overdraft Facility.”

Thus the claimants were, before preparation of their response to the strike-out application, placed on the clearest notice that AIB UK’s understanding of the bargain relating to the overdraft facility was that it was terminable upon notice at any time, rather than only on or after 31^st July 2011.

The claimants’ response both in counsel’s skeleton argument and oral submissions at the hearing of the strike-out application on 8^th March was only that the Facility Agreement conferred a fixed term overdraft facility purely as a matter of construction. Despite serving two further witness statements after receipt of AIB UK’s Defence, on 4^th and 7^th March respectively, Mr Purcell said nothing to challenge what had until then been common ground between the claimants and AIB UK, namely that the whole of the bargain with reference to the overdraft facility was to be found contained in the terms of the Facility Agreement. That remained the basis of the presentation of the claimants’ case until the day after the hearing of the strike-out application, when Mr Purcell’s fourth witness statement was served.

It is not in the abstract wholly implausible that a bank might orally promise a customer to keep an overdraft facility then under negotiation open for a fixed term. It is at least very improbable that the parties would then conclude a detailed written agreement providing for an overdraft reviewable and repayable on demand without something in writing, such as a side letter, if the promise of a term overdraft still formed part of their bargain. But for the court to treat as otherwise than inherently implausible an assertion made for the first time after the conclusion of the recent hearing that the real bargain between the claimants and AIB UK with regard to the overdraft facility had been made purely orally, and both outwith and inconsistent with the terms of the Facility Agreement, it might be thought that some evidence would be necessary to explain why the claimants had, on this critical aspect of the matter, been pursuing a different and inconsistent positive case, to the effect that their understanding was that the whole bargain in relation to the overdraft facility was to be found in the Facility Agreement, and that it provided for repayment on demand. An explanation would be necessary if for no other reason than because the requirement to withdraw that admission in paragraph 9.3 of the Particulars of Claim would itself require a satisfactory explanation.

All that Mr Purcell offers by way of explanation in his fourth witness statement is the explanation that the first time when he personally heard that AIB UK claimed to be entitled to review the overdraft facility and demand immediate repayment at any stage, was during the hearing on 8^th March. Since it was the claimants themselves which first made that assertion, and since its implications had been spelt out in minute detail in AIB UK’s defence served on 1^st March, that evidence comes nowhere near affording a credible or sufficient explanation for the claimants’ volte face.

The proposed amendments and Mr Purcell’s fourth witness statement offer no explanation of how it was that, at a board meeting of the second claimant held on 20^th October 2010, the directors resolved to accept the facilities, including the overdraft facility, offered in the form of the Facility Letter from AIB UK dated 12^th October 2010, in a form which unmistakably provided for review and repayment, at the bank’s discretion, prior to 31^st July 2011, the minute of which, signed by Mr Purcell, forms part of a schedule to the Facility Agreement in its final form, or why he personally signed the Facility Agreement as a director for the second claimant under a warning in heavy type recommending that the second claimant consult a solicitor or other legal adviser before accepting the letter.

Finally, the claimants offer no support for their new case by reference to any contemporaneous documentation, suggesting only that disclosure of documents by AIB UK is likely to confirm the oral promise now alleged.

There may well be instances where glaring inconsistencies between a new case and the case previously advanced and verified by evidence and statements of truth may be satisfactorily explained, so as to give rise to a conclusion that the new case has a real prospect of success. But the court is not obliged to treat the mere assertion of such a new case in a witness statement as other than fanciful if the only explanation provided for its inconsistency with the case advanced to date is, on its face, inherently incredible, or manifestly inadequate. In the present case, Mr Purcell’s explanation suffers from both those defects.

Mr Page sought to address those difficulties by submitting that these proceedings had come on very quickly, that they were still at an early stage, and that mistakes of the kind now said to be constituted by the way in which the case was originally presented were typical of the rough and tumble of fast moving developments arising out of an emergency. My review of the development of this litigation suggests that it has throughout been addressed with intense concentration and attention to detail on the part of the claimants and their advisers. On any view, the claimants have had the whole of the period since 14^th February, when the point was specifically raised by Peter Smith J during the first hearing, to consider whether the Facility Agreement constituted the true and complete bargain between the parties in relation to the overdraft facility.

Mr Page also submitted that the new case gained credibility because it had yet to be denied by AIB UK. In my judgment it is sufficiently denied by paragraph 12 of AIB UK’s Defence, as quoted above, verified by a statement of truth. Regardless of what may have been said during negotiations, AIB UK’s case is and has always been that the bargain in relation to the overdraft was that it was both reviewable and terminable at any time.

Even if, contrary to my view, the fourth witness statement of Mr Purcell and the factual averments in the proposed amendments were to be taken at face value, the claimants would still face grave obstacles in relying upon them for the legal consequences asserted. In relation to rectification, no factual basis is provided for the bare assertion that the Facility Agreement was signed by the claimants while mistaken as to its contents. All that is said is that the claimants relied upon the oral assurance alleged to have been given to Mr Purcell when executing the Facility Agreement.

As for collateral contract, the Facility Agreement contains, at paragraph 18 of Schedule 9 a provision prohibiting variation, supplement, extension, deletion or replacement otherwise than in writing and signed by the authorised representative(s) of the Bank. Although in different language, I consider that a provision in those terms is designed to serve substantially the same purpose as an entire agreement clause, as analysed by Lightman J in Inntrepreneur Pub Co v. East Crown Ltd [2000] 2 Lloyd’s Rep 611 at paragraph 7, approved by the Court of Appeal in AXA Sun Life v Campbell Martin Ltd. [2011] EWCA Civ 133.

Finally, as for estoppel, the assurance relied upon is alleged to have been given before the parties made the Facility Agreement. In Chitty on Contracts (30^th ed.) at paragraph 3-088 it is stated that a promissory estoppel depends upon detrimental reliance upon a promise made about existing, rather than future or putative, legal relations. The natural inference to be drawn from the making of a contract inconsistent with the promise which is neither capable of rectification nor supplemented by a collateral agreement is that the parties do not thereafter treat the earlier promise as continuing to form any part of their legal relations.

Nonetheless, it is primarily because I consider that the case now advanced is, in the circumstances which I have described, inherently implausible, that I declined to grant permission to amend.