Ahmad & Ors v Bank of Scotland & Ors

JUDGE PURLE: The first applications I have to deal with are applications by the defendants for a combination of a strike out and for summary judgment. There are proposed amended Particulars of Claim. Permission to amend is yet to be given, but everyone agreed that I should determine the application by reference to the pleading that the claimants now wish to put forward. There is an application before the court for such an amendment, which is resisted on the grounds that there is no reasonable prospect of success and no real basis for a claim, that is to say on the same grounds as summary judgment and a strike out are sought.

The claimants fall into two groups. First, there are four individual claimants who are the shareholders and directors of the sixth and seventh corporate claimants, Zanrose Developments Limited (“ZDL”) and Zanrose Textiles Limited (“ZTL”). The fifth claimant is Zanrose Developments, a firm which is merely the trading style and therefore an emanation of the first four claimants. Whether or not the joinder of the fifth claimant is mere surplusage given the presence of all the individual partners is not something I need trouble myself with. All relevant parties are unquestionably before the court.

I shall call the first defendant “the Bank”.

The individual claimants had banking facilities with the Bank’s predecessor. They fell into arrears under various loan arrangements they had both through the partnership and through the corporate claimants, for whom they had given guarantees. The corporate claimants had in addition cross-guaranteed each other’s indebtedness. It is alleged by the claimants that a contract was entered into with the Bank in May 2008 which the Bank breached by subsequently appointing Receivers over all of the properties charged to the Bank. Some of the properties (known as the Bollo Bridge properties) were owned by the partnership. In addition, ZDL owned a property known as Cleveland Road, and ZTL owned a property which included a warehouse. The warehouse itself burnt down in late 2005 giving rise to an outstanding insurance claim known for short as the NIG Claim.

In the case of all of the properties owned by the individual claimants and ZDL, LPA Receivers were appointed by the Bank in September 2008, being the third and fourth defendants, both partners of the second defendant, PricewaterhouseCoopers LLP. I shall call them the PWC Receivers. They were also appointed Administrative Receivers of ZTL by the Bank. Subsequently, as a result of a merger of the Bank and its predecessor, there was a perceived conflict and Mr Morgan and Ms Goode, the sixth and seventh defendants, of GVA Grimleys Plc, were appointed LPA Receivers over the partnership properties and Cleveland Road, the PWC Receivers remaining Administrative Receivers of ZTL. I shall call the sixth and seventh defendants the Grimleys Receivers.

It is said that both sets of appointments, of the PWC Receivers in September 2008 and of the Grimleys Receivers in January 2009, were breaches by the Bank of its obligations under the May 2008 agreement.

The May 2008 agreement firstly needs to be considered. The agreement was recorded in writing by the Bank on 27 May 2008, and countersigned by all the partners. I shall take its description from the pleading as now advanced in the draft amended Particulars of Claim. I shall for convenience call this pleading the Particulars of Claim for short.

It is alleged in paragraph 25 of the Particulars of Claim that the 27 May 2008 letter is to be construed having regard to that which went before, namely an earlier meeting of 7 May, which I shall come to, and an offer made orally by telephone by Mr Stacey, who was one of the Bank’s managers, in, it is alleged, mid-May 2008. As pleaded, these are merely aids to construction, though in argument, the emphasis shifted somewhat and it is now said by the claimants that the agreement was either collateral to the May 27 agreement, or included a separate oral agreement, or was partly oral and partly in writing, the written part being the 27 May letter and the oral part being the preceding discussions.

Paragraph 18 alleges firstly a notification by the Bank that the Bollo Bridge properties were then valued at £2.875 million. Mr Stacey is also said to have noted that there was substantial equity amounting to about £1.4 million in the Bollo Bridge properties, though in fact it is worth mentioning that if one looked at the totality of the borrowings (partnership and corporate) across the board, the total amount owed was considerably more than that equity. Paragraphs 19 and 20 continue by alleging that:

“19.

In the first week of May, being on 7 May 2008, the first defendant by its then accounts manager, Mr Michael Stacey and by Mr Mark Dobson, who was Mr Stacey’s senior manager, met with the first claimant and the accountant engaged by all the claimants, Mr Harant Singh.

20.

What was stated at that meeting is relied on as being relevant to the terms to be construed to the subsequent agreements between the parties as set out later herein and which statements were to the following effect:

(1)

the first claimant explained that proposals for refinancing the loans were complete, save as to the seventh claimant, and that the first claimant had recently paid £400,000 from his own account in reduction of the outstanding loans of the seventh claimant.

(2)

Mr Stacey and Mr Dobson said that the first defendant had lost patience with the claimants who had failed to refinance their entire borrowings from the first defendant. And that the first defendant was on the point of appointing Receivers to enforce its powers of sale over all the properties and assets held in the claimants’ businesses.

(3)

Mr Singh responded by explaining that the Bank would be unable to recover either the £2.3 million loan on the fire damaged warehouse or the £1.45 million loan on the Cleveland Road property and the first defendant had nothing to gain by the appointment of Receivers. Mr Singh further stated that the parties should work together rather than appoint Receivers.

(4)

Mr Dobson or Mr Stacey then said words to the effect that they would speak to Head Office and let the first claimant know if the first defendant was going to appoint the said Receivers.”

It is thus not suggested that an agreement was reached at that meeting. There was simply an exchange of views upon which the Bank’s representatives were going to speak to Head Office.

Paragraph 21 continues:

“Further and in or about mid-May 2008, Michael Stacey telephoned the first claimant during which, and to the clear recollection of the first claimant, the following was stated:

(1)

Mr Stacey began by saying ‘I have good news from the Bank’ and

(2)

then said ‘In view of the fact that you cannot refinance the whole debt, the Bank would like the four partners to sell the Bollo Houses and that this money will be used to reduce the Bank debt’.

(3)

Mr Stacey further said: ‘in return the Bank will not appoint any Receivers’.

(4)

Mr Stacey proceeded to ask whether; ‘all of you, [being the 1st to 4th claimants], will agree to sell the Bollo houses’.

(5)

The first claimant replied saying, ‘If we can carry on trading and develop our businesses, I cannot see a problem with all four of us agreeing to sell the Bollo houses’.

(6)

Mr Stacey replied explaining the terms of the proposed arrangement, being that the claimants shall:

i.

by the end of June 2008, raise sufficient funds to clear and replace all proper sums due on all accounts and clear all sums outstanding on the mortgage with Birmingham Midshires BS, being the total debt; or

ii themselves, market and sell the Bollo Properties and pay the proceeds of each such sale to the first defendant so as to reduce or extinguish the total debt of all of the claimants.

(7)

Mr Stacey further said, ‘I will send a letter and it is important that you all sign and return it to me before the end of May to avoid us appointing Receivers’.

(8)

Mr Stacey then reminded the first claimant that ‘If you fail to obtain agreement from all of you, the Bank will be entitled to appoint Receivers’.

(9)

The first claimant replied, ‘That is not going to be necessary. I am sure all the partners will sign the letter’.”

A number of points should be noted about that. Whilst Mr Stacey is alleged to have said the Bank would not appoint Receivers in return for the four individual claimants putting the Bollo Bridge properties on the market, there is nothing expressly said about whether the agreement not to appoint Receivers went any further than in relation to the Bollo Bridge properties. The second point is that the arrangement is expressly referred to as a proposed arrangement and does not amount, not even arguably, to an actual agreement or collateral contract. What was contemplated was a further written document which all parties would have to sign. It was made plain that if there was no agreement in the terms of the letter to be sent, then the Bank would be entitled to appoint Receivers. It seems to me that is inconsistent with there being any oral agreement or collateral contract or any other assurance over and above whatever might emerge from the terms of the letter itself, which became the 27 May 2008 letter.

What is pleaded in paragraph 22 is this:

“By the aforesaid conversation, Mr Stacey meant and was understood to mean in the context of the said telephone call [which I have just gone through] and the previous said meeting [that must have been the one with the accountant at which the Bank’s representative said they would speak to Head Office] that the first defendant was offering to continue to service the loans to the sixth and seventh claimants so long as the Bollo properties shall be sold by the first to fourth claimants at full market value for those properties and that the proceeds of such sales would go to reduce all sums then standing as loans to all the claimants and that the loan facilities would continue as before.”

Much of that is in one sense non-contentious. I was somewhat confused by the words “to service” but Mr Hartman for the claimants said that those words would come out. The gist and most important part of the paragraph are the last words: “the loan facilities would continue as before”. Mr Barker for the Bank points out that nothing is said about the time during which the facilities would continue and that the allegation is entirely open ended. More importantly, perhaps, the allegation arises solely out of the previous telephone call following on from the earlier meeting. I have already gone through what was said over the telephone. The offer, if it is right so to describe it, was by the terms of that telephone conversation to be contained in a letter to be written by the Bank to the four individual claimants, which they were all required to sign, and that is all. It seems to me that the gloss sought to be put on it by paragraph 22, if it adds anything at all, does not add anything of significance.

Moreover, I queried with Mr Hartman when he read me this passage (that the loan facilities would continue as before) whether it was his case that the loans ceased to be payable on demand, and it was not. He was merely saying that the Bank agreed not to appoint Receivers, despite the loans being payable on demand.

Paragraph 23 then pleads in relation to the letter of 27 May:

“The first defendant, by letter, expressly confirmed that its authorised officers had confirmed the offer aforesaid expressly set out the terms agreed or to be agreed between the parties and required the first to fourth claimants to acknowledge and agree to the said express terms in writing.”

That is an inaccurate summary of the letter, though it is harmless as far as it goes. There was not a confirmation of the “offer aforesaid”, there was the making of an offer for which it is necessary to go to the terms of the letter itself. There had been no previous terms agreed. There had been a suggestion that terms would have to be agreed along the lines of the letter that was to follow. I shall read the letter of 27 May 2008 in full:

“Re: Zanrose Connection

As discussed recently with Amir, I am pleased to confirm that the Bank has agreed to one final term extension to allow time for the various forms of Bank refinance to take place.

This period will expire at the end of June 2008 and by this time we expect that the debt in the names of Zanrose Textiles Limited, Zanrose Developments Ltd and Zanrose Developments be fully repaid.

This agreed extension is subject to your all agreeing that should the above scheduled repayment not be completed by expiry that you all undertake to place on the market for sale the Bollo Bridge Road properties whose sale proceeds would then be used in debt reduction across the above mentioned legal entities.

Should this agreement not be forthcoming, we will appoint an LPA Receiver for this property to achieve the same outcome of overall debt reduction from the net sale proceeds in the short term.

To indicate your acceptance of these terms, please all sign and return the second copy of this letter by way of your confirming your undertaking that you will act as above should the expiry date be missed.

Kind regards.”

On the face of it, this was a final extension to the end of June. If the debt was not cleared as a result of the “various forms of Bank refinance” referred to in the letter, that final extension would expire and, subject to anything else in the letter, the Bank would have no limitation on its rights. It is clear the letter related in one sense to the entire indebtedness represented by the expression “the Zanrose Connection” i.e., partnership and corporate indebtedness. The four signatories were also the directors of the corporate claimants and were clearly interested more than just in their individual capacities. I do not however see any legitimate basis for adding in to that letter anything based upon what had been said in either the previous meeting or telephone call referred to in the pleading. The letter deals only with what is to happen to the Bollo Bridge properties upon expiry. The Bank to everyone’s knowledge had other rights in relation to other charged assets and the letter is entirely silent as to what is to happen to those assets if the refinancing exercise was not successfully completed by the end of June, the final extension.

It is not necessary to consider what the position might have been had the Bank sought to exercise any of their rights over those assets before the end of June 2008. The letter is silent on the point, though it may perhaps be said that it is implicit that the Bank would not intervene at all in that period. It does not matter because the bank did not exercise its rights until much later, in September 2008. The point that has been mooted is: what if any was the effect upon the Bank’s security rights of its requiring that the partners should undertake to put the Bollo Bridge properties on the market? In my judgment, if a Bank is going to give up or suspend its security rights, which were clearly exercisable in this case so long as the debt was due, then that must be done explicitly, or by necessary implication. Merely surrendering or suspending voluntarily their right to intervene until the end of June and then requiring an undertaking that the claimants should put the properties on the market does not appear to me without more to prevent the Bank from intervening, in suitable circumstances, thereafter, e.g., when the debt is subsequently demanded and not repaid.

The absence in the 27 May letter of

Following expiry of the June deadline, on 11 July 2014, a letter was sent by the Bank to the directors of ZTL (the first 4 claimants). This is said to have followed a further meeting with Mr Stacey amongst others of the Bank and the accountant. A number of points were made. The first point related to arrears due from (apparently) ZTL and ZDL totalling £150,000. The letter also considered other ways forward. In relation to the arrears, the Bank said:

“… and would be grateful if you would ensure that this [that is to say clearance of the arrears] is achieved within the course of the next two weeks. If you are unable to comply with this request, the Bank will have to consider its position.”

That might have been met with the riposte that you cannot do that because you promised (as is now said) that you would not intervene and enforce your rights by the appointment of Receivers (which the statement that the Bank would have to consider its position clearly embraced) until we have sold the Bollo Bridge properties. Instead, on 14 July 2008, the reply was not: you cannot consider your position. Instead, the extent and nature of the arrears was queried by reference to supposed overpayments to the Bank at a time when capital repayment instalments were said to have been waived, but which were still paid voluntarily. The argument appeared to be that these payments (though they undoubtedly had the effect of reducing real indebtedness) could be reclaimed by the claimants and set off against arrears. I asked Mr Hartman how that could be so, as the indebtedness reduced by the repayments was admittedly owed and therefore reduced. He conceded there was nothing in the point, and pointed to the deletion in the Particulars of Claim of a claim based on those payments. It is clear, therefore, that there were substantial arrears at this date.

I go back to the pleading. Paragraph 24 of the Particulars of Claim refers to the individual claimants acknowledging their agreement to the “said offer” by countersigning the same letter. That is a misleading plea. The “said offer” is the offer said to have been made over the telephone, which, I have already indicated, is not what is in the letter. What they actually acknowledged their agreement to was what was in the letter.

Paragraph 25 is pleaded thus:

“In the premises, the first to fourth claimants entered into a contact with the first defendant in terms to be construed from the preceding meeting and/or the offer made orally by telephone by Mr Stacey and/or as set out in the letter of 27 May 2008.”

In my judgment, it is not seriously arguable that the first to fourth claimants did anything other than enter into an agreement in the terms of the letter of 27 May 2008. That is what they signed up to and it is from that source that they have to derive such rights as they have.

There is then a pleaded reference to an earlier determination of His Honour Judge Kaye QC in the Chancery Division of the Leeds District Registry, who said this in paragraph 36 of his judgment in relation to the letter of 27 May:

“In my judgment, this meant that the agreement between the Bank and the defendants … impliedly granted them a further “reasonable time” to effect the sale and pay off the Bank. To this extent and on these terms, the Bank did agree to forego enforcing its right against the defendants.”

In the case before Judge Kaye, the defendants did not include ZDL and ZTL, but the four individuals only, who were sued on their guarantees. A number of arguments are raised before me (to which I shall have to come) as to estoppel and abuse of process. In that context, it may be important to isolate the points that were necessary for the decision. It is not at all clear that this particular ruling was necessary for Judge Kaye’s decision because he did not in fact decide whether or not the Bank was in breach of that term. He did not need to because he held that, even if there had been a breach of such a term (and he was clearly assuming there may well have been one), the claimants had not suffered any loss arising out of the appointment of receivers and subsequent forced sale of the Bollo Bridge properties, and could not claim any relief in relation to any wrongdoing alleged to have been suffered by ZDL and ZTL: see paragraphs 41 to 44 of the judgment. I shall have to return to the Leeds proceedings later but I do not consider Judge Kaye’s judgment as being determinative of the issue of precisely what the letter agreement means.

Paragraph 27 of the Particulars of Claim provides:

“Further and alternatively the terms of the said contract constitute a variation or waiver of the first defendant’s rights and powers to enforce recovery of such loans as was provided by the material written agreements of loan with the first defendant and so as to postpone those rights and powers until completion of the sale of the Bollo properties and/or for a reasonable period in which to make such sales and/or thereafter.”

That, as I understand it, is a plea in relation to all of the loans, whether with the partnership, ZDL or ZTL. In my judgment, it is simply not arguable that the letter of 27 May extends to any loans other than the partnership loans relating to Bollo Bridge properties. There is nothing in the letter which indicates anything more extensive and, indeed, the plea is rather contradicted by certain dicta of Judge Kaye in the Leeds judgment, at least as regards the NIG claim (see paragraph 32). On this point, I agree with Judge Kaye, but would extend his reasoning in paragraph 32 to other loans having nothing to do with the Bollo Bridge properties or the partnership.

Paragraph 28 then pleads:

“In the event by the end of June 2008 and in reliance on the contract as set out at paragraphs 22 to 25 above, the claimants had not raised from other sources any funds to clear or replace the debt and thereafter in July 2008 pursuant to contract commenced arrangements for the sale of the Bollo properties by approaching estate agents to engage them in realising the sale value of the said Bollo properties. The first claimant appointed a certain Whitmans Estate Agents to negotiate such sales.”

Just pausing there, all of that, so far as it relates to primary facts as to what the individual defendants did in terms of putting the properties on the market for sale, is true. Whitmans Estate Agents were appointed to negotiate sales. Moreover, they remained in that position after the appointment of Receivers in September 2008, and after January 2009 when there was a change of Receivers.

It seems to me that down to that point it is quite wrong to treat the Bank as having waived its rights under its loan arrangements. The Bank had held off until the end of June. They required the individual claimants to give an undertaking in relation to the Bollo Bridge properties but did not, in my judgment, do anything to waive their rights or vary the contractual arrangements that they had with the various borrowers. Moreover, as I have recorded, Mr Hartman accepted that the loans remained repayable on demand.

The pleading then comes to the events of July 2008 (which I have already touched upon) in paragraph 29:

“Furthermore in July 2008, during a further meeting between the first claimant, the accountant Harant Singh, Mr Stacey and Mr Dobson, there was orally expressed further agreement as to a ‘road map’ forward. Mr Stacey stated and/or represented to the first claimant that the claimants should continue to work on the NIG Claim, continue to obtain planning permission for the Cleveland Road property and to market the Bollo properties. Accordingly, the first claimant thereupon agreed to and acted upon the said representations and immediately ceased to seek alternative funding arrangements.

30.

On 11 July 2008, by letter, a copy of which with the letter in response are attached hereto, Michael Stacey reaffirmed the said contract and/or its said terms by writing amongst other matters as follows:

‘(5) Regarding Bollo Bridge Road.

(a)

You are to contact Lamberts and advise them that you are happy they re-address the recent valuation to us and then let me know and I will be request this.

(b)

Confirm the contact details of Whitmans and confirm to him that you are happy with his discussing the sale of the houses with us.

(c)

Also confirm to him that you are happy he consults with Grimleys who will look at the matter on behalf of the Bank’.

31.

On 22 July 2008, the first claimant responded to the letter aforesaid by confirming agreement to the points raised by the letter of 11 July 2008.”

During the course of argument, that particular paragraph was said by Mr Hartman no longer to be relied upon. The pleading continues:

“34.

In the further or alternative and in respect of the sales of the Bollo properties, a reasonable period of time to make such sales at full and/or fair market prices shall not be earlier than the time taken by Receivers to effect all such sales (who indeed were thereafter wrongfully appointed) and/or by August or September 2009.”

So, what is said is that the properties should have been sold by (at the earliest) the time the Receivers actually sold them. The Bollo Bridge properties were sold starting in May 2009 taking up to around August 2009, I think, for completion. The pleading goes on:

“35.

Accordingly, and at least until after the expiry of the said reasonable period of time, the first defendant was thereby estopped from enforcing its powers under the said loan agreement to appoint Receivers over the Bollo properties and/or any properties or assets held as security for such loans or mortgage advances as had been granted by the first defendant to the claimants or any of them and/or as was granted by Birmingham Midshires Building Society to the seventh claimant.

36.

Further or alternatively, the first defendant ceased to be so entitled to appoint any Receiver pursuant to the loan agreements and/or any such appointment during the time for performance of the said contract shall so be rendered an invalid appointment.”

Just standing back and looking at those allegations, it is not said that the Bank was unable to demand its loans. It is said that they could not exercise their powers to appoint Receivers. It is also said that any such appointment would be an invalid appointment. I say straightaway that although Mr Hartman in his skeleton advanced an argument to the effect that the loans were not repayable on demand, he did not maintain that argument when asked by me what was meant by the loans continuing on the same terms. The point that the loans ceased to be payable on demand is not pleaded and is in any event, in my judgment, unsustainable.

An agreement affecting the Bank’s rights might, of course, amount to a variation of the original mortgage, but such a variation is not readily to be inferred. It is inherently improbable that a bank would agree to lose its right to appoint a Receiver in the case of a loan remaining payable on demand, especially in these circumstances, where a sale of the Bollo Bridge properties would be nowhere near enough to pay off the entirety of the debt owed by the borrowers, taking into account their liabilities as guarantors.

Neither the 27 May letter nor the 11 July letter said anything about the Bank giving up its rights under the security documents, or varying them. Nor were any unequivocal representations or promises made in those letters sufficient to found an estoppel. Further, even if the agreement was wider than the terms of the 27 May and 11 July letters indicate, which I do not regard as seriously arguable, it would still not operate as a variation of the mortgage conditions. The right to appoint a Receiver on an unsatisfied demand, duly made before the appointment, would still be good enough to justify the appointment as a matter of law.

As to the allegation in paragraph 29 that the claimants ceased to seek alternative funding arrangements in July 2008, it was readily accepted by Mr Hartman, when I asked him, that by that time the proposed new funding arrangements were a dead duck. Indeed, that is evident just from looking at the letter of 11 July 2008. That is recorded expressly by the Bank as having been established at the recent meeting. The position in July, therefore, was that everyone knew that the new funding arrangements were at an end and the Bank was pressing for active involvement in the sale of the properties, having previously pressed for repayment by the end of June. The Bank could be expected to press further for immediate repayment, or to exercise its security rights, at any time.

This was a time (July 2008 onwards) when banks and individuals were getting twitchy in the then prevailing economic conditions. This was shortly before the collapse of Lehman Brothers which (I was told) occurred at the end of September 2008. By then, the Bank had appointed the PWC Receivers across all the properties, and the business of ZTL as well, and in my judgment had incontestably done so lawfully. The fact that there may have been some discussion about further time would not operate so as to take away the power of the Bank to appoint Receivers, even if the approach of Judge Kaye is adopted. It would merely make the exercise by the Bank of that power a breach of some collateral or separate contract, which would sound in damages. On that point, Judge Kaye’s decision becomes important, because he did fully consider, as a necessary part of his decision, the question of damages suffered by the individuals, and found, for reasons which are, on the face of it, incontestably good, that they had suffered no loss.

The pleading goes on to claim various breaches of contract - in particular, the appointments of Receivers and the Receivers’ acceptance thereof. It is said that the appointments of Receivers were invalid but, even if not, their appointments were still breaches of contract.

It is also said that the Receivers themselves (first the PWC Receivers and then the Grimleys Receivers) induced or participated in those breaches, making themselves liable for procuring breaches of contract, interference with contractual relations or the tort of causing injury by unlawful means. I do not think as between the second and the third of those formulations there is now any difference.

Procuring breach of contract has been recognised since OBG v Allan [2008] 1 AC 1 to be a tort of accessory liability. Unlawful means interference (of which interference with contractual relations is an example) is a separate primary tort which has its own parameters.

I do not consider that it is seriously arguable that, even if there were breaches of contract by the Bank in the appointments of Receivers, acceptance of those appointments would amount to the procuring of breaches of contract. The breaches of contract would be the making of the appointments and those were the actions of the Bank, not of the Receivers, and were not induced by the Receivers’ mere acceptances of the appointments.

Complaint is then made about demands which are said in paragraph 41 of the Particulars of Claim to have been made in breach of contract. In my judgment, it cannot be contended that the sums demanded were not then due. They could therefore be demanded, as was conceded before me. There is no pleaded or factual basis for any other conclusion.

There is a further pleaded complaint that the demands failed to credit the balance with proceeds yet to accrue from the sale of the Bollo Bridge properties. That cannot, in my judgment, give rise to any complaint for the very reason that the Bollo Bridge properties had not been sold and there was nothing to credit. It follows that there was nothing, in my judgment, wrongful with the various demands, and the appointments’ validity followed from the terms of the security documents.

As already indicated, there was much debate before me of the impact of the judgment of Judge Kaye in Leeds. I ought just to summarise what happened in Leeds. There was a guarantee claim against the individuals, who put in a homemade defence and counterclaim, suing the Bank for being a bank and not much else. This is still not a cause of action under English law or any other system of law of which I am aware. It was, however, said, amongst other things, that the Bank was in some way responsible for sales at undervalues of the warehouse, and for the failure properly to prosecute insurance claims relating to the warehouse through the Receivers. A similar undervalue claim was made in relation to the Cleveland Road property.

There were other broad allegations giving rise, it was said, to a loss of £7.3 million being the value of ZTL (although wrongly said to be ZRL) and ZDL: paragraph 24c. Unless I missed something amidst the plethora of abuse hurled at banks generally, nothing was pleaded about the Bollo Bridge properties, perhaps because those were connected with primary liabilities and not guarantee liabilities.

The matter was considered by District Judge Jordan on 4 September 2012 on a summary judgment and strike out application brought by the Bank. He refused the 4 individuals’ application for an adjournment and granted the Bank summary judgment on its guarantee claim, also dismissing the counterclaim. A legal team had not by then been brought on board by the individuals. The District Judge’s order recited both the summary judgment test and the strike out test. The order recorded expressly that the District Judge was satisfied that there were no reasonable grounds for bringing the claim and no realistic prospects of success on the defence or counterclaim, and dismissed the counterclaim. That was then appealed, and the legal team brought on board. Fresh evidence and a fresh pleading were introduced. Judge Kaye, when the matter came to be heard by him, took the view that an adjournment ought to have been granted and he considered fully the merits by reference to the claim then advanced, which in substance was very similar to the claim now being advanced before me. It was in that context that he came to make the observations which I have referred to earlier.

He said this in paragraph 32:

“The terms were confirmed in a letter from the Bank dated 27 May 2008 which was accepted by all the defendants. It is not clear how these terms are said to include resolution of the NIG Claim. The letter contained no reference to this matter but otherwise reflected the terms discussed by telephone and emphasised the Bank was granting a final extension to the end of June. Although the NIG claim had, as with other matters, been the subject of extensive subsequent correspondence, in my judgment, these terms did not extend to the NIG Claim.

33.

The pleaded and argued case is, in substance that the Bank and the defendants thereby entered into a contract by way of compromise of the Bank’s claims whereby in the event of the defendants’ indebtedness not being cleared by the end of June, the defendants had a reasonable time to sell the Bollo Houses. The defendants failed to clear the indebtedness by the end of June and placed the Bollo Houses on the market in July. This contract, they say, the Bank breached by the precipitate appointment of Receivers in September.

34.

This they contend led to a loss of opportunity for the defendants to sell the Bollo Houses, to continue the businesses producing gross profits of about £150,000 pa and rental income, to settle the NIG claim, and losses on the sales of the other properties, in all about £5-7m. The counterclaim simply repeats the defence in its entirety.”

He then set out Mr Barker’s submissions, including a reference to Clause 14 of the personal guarantee which had been set out previously. Clause 14, essentially, was a clause that excluded any right of set off or counterclaim as an answer to the demand for payment. It was in the following terms:

Mr Barker was not suggesting that the matter could not be the subject of a counterclaim, only that the counterclaim was not a reason for withholding judgment from his clients on the claim. He also said there was no merit in the counterclaim. His principal point was that the Bank’s rights were unfettered by the May 27 agreement.

Judge Kaye did not accept Mr Barker’s submissions on the construction and effect of the May 27 agreement. He set out in paragraph 36 (the relevant part of which I have read earlier) his own conclusion, namely that the Bank impliedly granted a further reasonable time to effect the sale of the Bollo Bridge properties and pay off the Bank.

As I have said, that related only to the individual defendants and to the Bollo Bridge properties. It is however a clear finding by Judge Kaye with which unfortunately I do not agree, though it may strictly be unnecessary for me to reach a view on the point. In my judgment, it was not necessary for Judge Kaye’s decision either, as the reason for his decision was that the individuals had not established any loss, even had there been a breach of an agreement for the Bank to give a further reasonable time to effect a sale. Whilst he was inclined to the view that the Bank had not allowed a further reasonable time to effect a sale, he did not need to (and did not in fact) decide the point, because he found there was no loss anyway. Similarly, he did not need to find whether there was a term of the kind alleged, though in fact he expressed a view on the point.

In paragraph 38 of his judgment, he said that the allowance of some 6 to 7 weeks before appointing Receivers seemed to him at first blush somewhat short. He did not ultimately decide the point, however, and the period from the end of June down to the first appointment of Receivers was in fact over 2 months.

Between paragraphs 40 to 44 he considered whether loss was suffered and concluded in 44:

“Accordingly, even if the appointment of Receivers over the Bollo Houses Property was made by the Bank precipitately, i.e. within the margin of a reasonable time for the sale implied by the letter and terms of May 2008, I am not persuaded that it has resulted in either any reasonably arguable claim or any real prospect of success by the defendants that their position would have been any better had time run its full course.”

In reaching that conclusion, he had the benefit of considering the actual marketing history and the valuation evidence of Edward Symmons which justified the sale prices in the light of that marketing history. The total sales prices eventually achieved were £1.928 million, £8,000 more than the valuation. There was no evidence (apart from the bare allegation of the individual defendants) that the sale proceeds would have yielded £2.92 million, the price they put forward.

That, therefore, was on any footing a clear finding justifying the dismissal of the appeal. That also meant that the counterclaim remained dismissed.

The matter then went to the Court of Appeal on an application for permission to appeal. Permission was originally refused by Floyd LJ on paper upon the grounds that there was nothing to suggest that the earlier appointment of Receivers resulted in the sale of the properties at an undervalue. That in essence was the reasoning of Judge Kaye. (Other points were raised both before Judge Kaye and the Court of Appeal but are not relevant to these proceedings.)

The matter came on again on a renewed oral application for permission before Arden LJ, coupled with an application to admit further evidence as to sales at an undervalue. Arden LJ started with Clause 14 of the guarantee, which I have already set out. As I have said, this clause was referred to by Judge Kaye, but only when identifying the points made by Mr Barker. It did not form part of Judge Kaye’s decision. Arden LJ, undoubtedly correctly, considered (in paragraph 9) that Clause 14 made it unarguable that cross claims in damages (which she noted were, as formulated, substantial) could be set up as an answer to the judgment under the guarantees. She eventually concluded, in paragraph 34, that the judge’s order was such that she could not give permission to appeal against it. She further held that she did not need to go into the cross claims, which were the reason why an application had been taken out to admit further evidence. In paragraphs 35 and 36 she said this:

“35.

When the judge reached the conclusion that there was no answer to the guarantees and gave judgment, then in my judgment it followed that he was right to refuse permission to bring in the cross claims by way of counterclaim. The right course would be for those claims to be made the subject of a fresh claim by the guarantors as against the Bank.

36.

So, in those circumstances, I propose to dismiss the application and I also, for the reasons given, dismiss the application to adduce fresh evidence which is dated 22 November 2013.”

The result, therefore, was that permission to appeal was refused. It must be remembered that the hearing before Arden LJ was not itself an appeal, but the oral renewal of an unsuccessful application for permission to appeal. In accordance with the usual practice discouraging respondents from attending such hearings, the Bank did not appear and were not represented. That is significant for this reason. Mr Barker argued for the Bank, in my judgment correctly, that the proceedings before the District Judge and Judge Kaye, by dealing with the substantive merits of the counterclaim and dismissing it, gave rise to a cause of action or issue estoppel precluding the individuals from bringing any claim in relation to the Bollo Bridge properties based upon the wrongful appointment of Receivers, or sales at an undervalue. This does appear to follow from the principles set out in Arnold v National Westminster Bank plc [1991] 2 AC 93.

Mr Hartman challenged this conclusion because these were not, he said, final decisions, but interlocutory. I agree that the District Judge’s decision was interlocutory in the sense that it was a decision made on an interlocutory application but that decision (and the dismissal of the appeal) finally disposed of the case, and that is in my judgment sufficient for estoppel purposes. Mr Hartman emphasised at length in his skeleton argument (which I accept) that it is necessary for estoppel purposes to identify precisely what issues were necessary for the decision, and that it is only those issues which can give rise to an issue estoppel in the strict sense. Nonetheless, once those issues are identified, the estoppel bites.

The basis of the decision of the District Judge was that there was nothing in the counterclaim on the merits, which he dismissed. That gave rise to a cause of action estoppel on the counterclaim as then formulated. The District Judge did not refer at all to Clause 14. The basis of the decision of Judge Kaye was also on the merits, essentially for the reasons set out in paragraph 44 of his judgment, that even if the appointment of Receivers was made precipitately there was no reasonably arguable claim of loss or any real possibility of success that the defendants’ position would have been any different. That was the issue that was actually decided and which therefore produced an issue estoppel. Arden LJ, in refusing permission on a different basis, could not be taken to have deprived the Bank of any estoppel it then had at a hearing at which they were not present, not represented and not expected to be present or to be represented.

It may well be that Arden LJ intended the individuals to be able to bring a separate claim, but she simply overlooked the impact of estoppel and the significance of the counterclaim having previously been dealt with, and dismissed, on the merits. The appellants to the appeal were the individuals (though there is some confusion on the face of the appeal documents, which describes the Bank as the appellants and the individuals as the respondents). The individuals were not refused permission by Judge Kaye to introduce a counterclaim when there had not previously been a counterclaim. What they were seeking to do was to amend and thereby resuscitate the counterclaim which had been dismissed by the District Judge. The dismissal of that counterclaim, on the face of it, precluded them from bringing it again, because it had been dealt with finally, giving rise to a cause of action estoppel.

Of course, the counterclaim as it stood before the District Judge was very different in content from that raised before Judge Kaye, though it included allegations concerning the conduct of the Receivers. Judge Kaye did however consider the reformulated counterclaim very carefully and decided for the reasons he gave that there was nothing in it, even on the assumption that there was a precipitate appointment. Accordingly, on that ground I find that the individual claimants are estopped from arguing that they had suffered any loss from the alleged precipitate appointment because that point has been decided against them.

It is said that that is a very unfair result because Arden LJ was intending to preserve the claims. As I have said, she may have thought that was the effect of her order but in my judgment, it was not, and it would not be fair on the Bank to give her order that effect as she was merely deciding whether to grant permission to appeal at a hearing at which the Bank were (properly) neither present nor represented.

It is possible that it might be argued that the unfairness to the individual claimants is such that this should be one of those exceptional cases where issue estoppel (or cause of action estoppel, if the exception goes that far), should not apply. The exception is recognised in the Arnold case, which I have already mentioned, though its precise boundaries are uncertain. In my judgment, to recognise such an exception in this case would not be fair on the Bank. Judge Kaye determined the counterclaim of the individuals on the merits, on the evidence then before the court. If it is now to be held that the individuals are free to start again, then the claimants before me, including the individual claimants, have a completely free run at the case all over again with whatever new evidence they can muster. That puts them in a better position than had they been given permission to appeal, because any fresh evidence would have needed the Court of Appeal’s permission, which is not given as a matter of course.

It is not clear to me precisely why Arden LJ dismissed the application to adduce fresh evidence. Mr Hartman’s recollection is that there was no separate judgment relating to the exclusion of evidence, but that the exclusion of the new evidence followed from her ruling that the appropriate course was to bring separate proceedings. If that is so, then it is correct that Mr Hartman’s clients may have suffered an injustice that I am unable to put right. I do not however think it would be right to extend the exception to issue estoppel recognised in Arnold so as to allow the facts to be reopened at large on what may be very different evidence. The proper course, if that was the unintended consequence of Arden LJ’s judgment, is for Mr Hartman’s clients to apply, if they are not too late, to the Court of Appeal, under CPR 52.17, which gives the Court of Appeal a limited ability to allow applications to reopen an appeal (including an application for permission to appeal) in exceptional circumstances, where it is necessary to attain the ends of justice. Assuming the hurdle of meeting these criteria can be overcome, that in my judgment would be the more appropriate course. If the hurdle cannot be overcome, the appropriate course is to give effect to the estoppel on the loss issue decided by Judge Kaye against the individuals.

I am not saying for one moment that the Court of Appeal would wish to reopen the appeal. That would be a matter entirely for the Court of Appeal and not for me. The difficulties involved in invoking CPR 52.17 are well known. The advantage of this course, as I see it, is that the Court of Appeal would approach the matter, mindful of the fact that they were dealing with an appeal from Judge Kaye and not dealing with the matter afresh, as I would be doing if I allowed this claim to proceed. The Court of Appeal would, therefore, have to consider whether or not, on the evidence before Judge Kaye, there was an arguable counterclaim, and whether it was appropriate, if Arden LJ has not already decided the point on grounds other than those appearing from the judgment I have referred to, to allow the individual claimants to adduce the further evidence that was then sought to be put forward.

In my judgment, that would be a fairer course for the Bank and is a course which is open to the individual claimants. They would, of course, have to persuade the Court of Appeal that there was anything in their claim and that they had, in fact, suffered an injustice. I am bound to say that having looked at all the evidence, it seems to me that Judge Kaye was clearly correct to reach the conclusion that he did, namely that there was no arguable case of loss. He looked at the marketing history and the evidence from Edward Symmons and found that there was no sale at an under value. It seems to me that he was bound to reach that conclusion on that evidence, and that he was right to do so.

The evidence that is now put forward (of a Mr Hope) is a desktop valuation starting with an earlier high valuation before the market had started to deteriorate, adjusting that valuation in line with fluctuating market conditions thereafter. Mr Hope did not consider the marketing history, which, in my judgment, is much more relevant than a desktop statistical exercise as now relied upon.

I am not, of course, conducting the trial but a similar point was considered recently by Mr John Baldwin QC sitting as a deputy high court judge in Ludsin Overseas Limited v Maggs 30 [2014] EWHC 3566 (Ch). The issue in that case was whether or not the court should have set aside a statutory demand. A statutory demand can be set aside when it appears that the creditor holds some security in respect of the debt and the court is satisfied that the value of the security equals or exceeds the full amount of the debt. That is an application that can be made summarily on evidence, or the court can, in an appropriate case, give directions and, if there is a real issue, may order cross-examination to resolve that issue.

The only issue before the court in Ludsin was the value of the security. The Deputy Registrar below had set aside the statutory demand on the basis that the creditor had the benefit of a security which was of greater value than the debt. Further evidence was admitted on the appeal and the deputy high court judge said this at paragraph 23:

“It seems to me that the best indication of the value of an asset at any particular time is what someone will pay for it after reasonable attempts have been made to sell it. There is now before the court direct evidence of that. The fact that no-one has been prepared to offer £2 million for Bellmans despite 6 months’ marketing by a well-known and reputable agent is, in my judgment, highly persuasive if not conclusive evidence that Bellmans is not currently worth £2.9 million, the price which it would have to achieve if Ludsin’s debt were to be fully secured. That evidence in my view is far more persuasive than the opinion of Mr Green given in February of this year.

24.

In these circumstances, I grant permission to adduce the fresh evidence and conclude that the interests of justice demand that the appeal proceed by way of rehearing. The evidence on that rehearing satisfies me that the statutory demand should not have been set aside and I allow the appeal.”

That is a very clear and common sense approach which applies just as much to this sort of case as it does to the setting aside of a statutory demand. Accordingly, the several months’ marketing that occurred after July 2008, in the hands of the agents initially appointed by the individual claimants, whom the Receivers continued to engage, is easily the best evidence of what these properties were worth.

Complaint is made that the individual Bollo Bridge properties should have been tenanted. What appears to have happened is that there were some tenants from whom rents were collected until the leases came to an end and the properties were vacated. The sales were with vacant possession and no new tenants were sought so as to allow the properties to be offered with vacant possession. That is a perfectly proper approach to family homes which were being marketed to ordinary domestic purchasers and not simply of interest only to professional buyers or dealers.

Accordingly, it seems to me that there is nothing in the complaints about the Bollo Bridge properties and that Judge Kaye was clearly right in his conclusions as to loss. For that reason also, there is nothing in this complaint against the Bank.

This conclusion has a knock-on effect against the Grimleys Receivers, and, to the extent that complaint is made of their failure to realise the full value of the Bollo Bridge properties, the PWC Receivers. They, of course, do not strictly have the benefit of any estoppel, as they were not parties to the proceedings before Judge Kaye. The Grimleys Receivers did however sell the properties in question, allegedly at an undervalue, and the PWC Receivers were appointed before them. The Grimleys Receivers contend that for the same claim to be made against them would expose the judgment of Judge Kaye to collateral attack improperly so as to amount to an abuse of process, there being no new evidence entirely changing some material aspect of the case. The submission is adopted by the PWC Receivers, if need be. I was referred in this connection to Taylor Walton v Laing [2007] EWCA Civ 1146, especially at paragraph [25], and Johnson v Gore Wood [2002] 2 AC 1, at page 31. There is much force in that argument and I would be inclined to accept it. However, irrespective of that, no loss has on the evidence been suffered anyway. It accordingly seems to me that, however one views this aspect of the case, the Grimleys Receivers are not liable. Nor are the PWC Receivers.

I have already expressed the view, departing in this respect from the approach of Judge Kaye, that there was no fetter on the Bank’s right to appoint a Receiver after the end of June 2008. Even if there was, I do not accept that an appointment in September, more than 2 months after the expiry of the final extension, was too soon.

It is necessary in this context to consider not just the Bollo Bridge properties but the other assets under charge. Receivers were appointed over all the assets. Judge Kaye did not find that any of those other assets were affected by the 27 May 2008 letter, and expressly rejected the argument that the NIG claim was included within the arrangement. In that respect, I agree with him and do not consider that the arrangement (whatever its effect) ever extended, as I have already said, to anything other than the Bollo Bridge properties. That was an arrangement not on the part of the Bank to do nothing but an undertaking on the part of the claimants to do something. It did not purport to (nor did it, in my judgment) affect the power of the Bank to intervene, at least after the end of June 2008, at a time of its choosing.

I have referred to the letter of 11 July 2008 in which the Bank was pressing for the payment of arrears from ZTL and ZDL. That was met by an argument which formerly formed the subject matter of a claim in this case but which is now to be removed from the Particulars of Claim because Mr Hartman accepts that this aspect of the claim is unsustainable. It said that the claimants voluntarily paid too much at a time when the Bank had expressed a willingness to accept interest payments only. If that is so, that was the claimants’ choice and did not give them a cause of action against the Bank, for the reasons I have already explained. Accordingly, there were arrears which, at least as regards those two companies, the Bank had asked to be cleared within 14 days and which were not repaid but challenged on grounds which are now accepted as bad. It seems to me that, faced with that attitude, the Bank was entitled to intervene sooner rather than later, and that the debtors’ attitude to their obligations generally was a matter which could legitimately inform the Bank’s approach to how much longer they ought reasonably to allow their debtors to deal with other repayment obligations. The same people were in charge of the marketing of the Bollo Bridge properties, and no sale had in fact been achieved of any of the Bollo Bridge properties by September 2008. Experience shows that if a sale is not achieved within the first few weeks of a property going onto the market, there is often a very real risk that the properties will remain on the market for a lengthy period of time. It seems to me that to wait until September was, in the circumstances of this case, a reasonable period of time to allow, the more so in the context of the deteriorating economy that we all remember. That is not necessary for my decision but is an additional ground for it. In those circumstances, it seems to me that all of the claims are really quite hopeless.

There are also trespass claims against the Receivers based upon their invalid appointments. I can deal with those shortly because I have not found any invalid appointments. I have found that all the appointments were valid. Accordingly, there can be no claim for trespass against any of the Receivers.

So far as the Grimleys Receivers are concerned, they are in an even better position than the PWC Receivers because they were not appointed until January 2009. That is over three months since the previous appointments and six months since the expiry of the June deadline. On any footing, that would be a reasonable time, I would have thought.

It is also said that the Receivers had in some way committed one of the economic torts I have touched upon.

The first is procuring breach of contract. I have already expressed the conclusion that this claim is misconceived even if the Receivers were appointed unlawfully because the breaches of contract (on this hypothesis) occurred in the making of the appointments. Acceptance of the appointments was not a breach of any contract, nor did acceptance induce any breach.

There is also no serious evidence that any of the Receivers knew that their appointments were in breach of contract. Some concerns were expressed to the Receivers by a third party (but not developed or explained) in the autumn of 2008 and onwards. There had also been an earlier formal challenge by the claimants to the Bank (but not to the Receivers) but this was suitably rebutted, and there is no sustainable suggestion that the Receivers knew of any invalidity in their appointments. It is common ground that knowledge of the breach (which includes recklessness) and not just of the existence of a contract is a necessary ingredient of the tort of procuring breach of contract.

Evidence was put before me of the legal advice that the Receivers received, which, assuming that the powers of appointment had arisen, confirmed that they were validly appointed. They had no reason to believe that the powers of appointment had not arisen in the light of the undisputed indebtedness which the Bank relies upon, and which remained undischarged.

As regards interference with the business of the claimants by unlawful means, that is a very narrow tort, whose boundaries were explored and explained by the House of Lords in the OBG case. The main point for present purposes is that liability is dependent upon an intention to cause harm, which need not be the primary intention but must at least be one of the intentions that the Receivers had. The Receivers were appointed by the Bank to realise the Receivership assets at the best prices reasonably obtainable, and the Receivers must have had that intention. Realising the assets at the best prices reasonably obtainable is inconsistent with an intention to cause harm.

The unlawfulness of the means is another difficulty that the claimants face, especially on my findings that there was no unlawful appointment. Normally, this tort is established by conduct aimed at a third party which has a knock-on effect upon the claimant. This however is not a three party unlawful means case; it is a two party case. There is conduct aimed at the claimants which it is said has, in fact, caused loss to the claimants, namely the wrongful appointment of and taking of office by the Receivers. Were that right, the Receivers would be guilty of trespass and would be liable to pay damages based on the measure of damages available in trespass cases. As Patten J, as he then was, at first instance in Silven Properties Ltd and Others v Royal Bank of Scotland plc and Others [2002] EWHC 1976 (Ch) [2003] BPIR 171 observed at paragraph [110], that does not entitle an aggrieved claimant to loss of profits.

In this case, the real complaint is that, had the claimants been allowed more time by the Bank, they could have traded profitably out of their difficulties. With the exception of the Bollo Bridge properties, the complaint is not that the properties were sold at an undervalue. There is no longer any allegation of sale at an undervalue in relation to the warehouse property or Cleveland Road.

There appears to be an allegation that the NIG claim was settled for too little. That was settled for £1.55 million in May 2009. It was settled following recent advice on quantum from leading and junior counsel. The settlement was reached at a mediation at which leading counsel and solicitors were present. It is said that leading counsel was not consulted on the actual settlement at the mediation. Be that as it may, there is no doubt that the settlement reached was in line with leading counsel’s advice as to the prospects of success and the likely quantum. Counsel had advised that there was at best a 50 per cent chance of success of recovering, at most, £5 million plus costs. So, taking costs, as was done by Mr Pilbrow, at £0.5 million, for argument’s sake, the claim was, at best, worth on the 50 per cent basis, £2.75 million. However, the NIG claim equally stood a 50 per cent chance of going down for £0.5 million worth of costs, indicating a broad range of outcomes (between £2.75 million and -£0.5 million) of £3.25 million. £1.55 million was on that basis a good deal and I do not consider it is possible for the claimants successfully to argue otherwise.

A conventional claim is brought against the PWC Receivers for breach of duty as Receivers in failing to obtain the best price reasonably obtainable for the NIG claim. That claim for the reasons just given is doomed to fail on the facts.

Both sets of receivers are also sued for breaches of duty in failing to realise the Bollo Bridge properties at the best price reasonably obtainable. I have already held that this claim (which is a claim by the individual claimants) is also doomed to fail on the facts. It has been determined by Judge Kaye. Moreover, his conclusion on the loss point was clearly right, and is unaffected by later evidence.

There is no allegation except as to future loss of profit relating to Cleveland Road or the warehouse property. No sustainable claim is made against anyone in this connection.

The claims against both sets of Receivers, in all their forms, must therefore fail.

It follows from these observations that the claim as a whole is hopeless. The claim will therefore be struck out and the action dismissed against all defendants.