Butterfield Bank v Phillip

This has been a hearing on a long outstanding matter, which in the normal way would have been resolved long ago. The Bank brought proceedings against four members of the Phillip family. Judgments were obtained against the first three defendants, but there was a contested summary judgment application against Mr Alfred Phillip, the fourth defendant.

At the hearing of the application for summary judgment on 7 November 2011, I entered judgment for roughly £1.6 million against each of the first three defendants, but I gave judgment against the fourth defendant for the lower sum of £1.1 million because of new allegations that there had been a sale of a property at an undervalue and that the bank certificate was manifestly incorrect. The allegations were new ones, but as I saw it justice required that there be a further hearing to deal with what seemed to be a issue worth about £500,000.

I refer to the judgments I gave on that and subsequent occasions for further information about the background to this case. At that point Mr Jonathan Crystal of counsel represented Mr Phillip.

The order I made on 7 November was the subject of an application for permission to appeal to the Court of Appeal that did not succeed. There was an unhappy failure to agree between counsel about the terms of the order and it was not until 15 June 2012 that the court had to deal with that matter. At that point Mr Phillip, through Mr Crystal, raised some new points suggesting that the bank's certificate upon which calculations had been based was manifestly incorrect. I gave further directions to deal with that setting a time for one day, anticipating that the matter would be resolved within weeks. For whatever reason it was not and here we are in March 2013.

On this occasion Mr Phillip is no longer represented by counsel or solicitors and for that reason he has put forward, through his brother, a helpful but unconventional skeleton argument setting out a number of issues. As Mr Phillip is in effect a litigant-in-person today, I have used his skeleton argument rather than that of Mr Mills for the claimant as the basis of discussion, as I have been concerned to ensure each of the matters raised by Mr Phillip was dealt with. We have gone through this skeleton and I have given Mr Mills an opportunity to respond to what Mr Phillip has said and then on even occasion given Mr Phillip a chance to reply to Mr Mills. But it is important to remember what this hearing is primarily about; it is to consider the matters raised by Mr Crystal on Mr Phillips behalf on the last occasion and the evidence which was to be submitted for this further hearing.

I have further witness statements from Mr Anson(?) of the claimant's solicitors explaining the Bank's position in relation to what Mr Crystal had identified on Mr Phillip's behalf. There are really only two issues. One is whether the claimant can show that the fourth defendant has no real prospect of defending this case on the grounds that the Bank's security was sold by the receivers at an undervalue. The second is whether there is a arguably manifest error in the bank's certificate.

Mr Phillip contends that there are flaws in the bank's certificate arising from arithmetical mistakes in the Particulars of Claim and he points to inaccuracies which he says are in the redemption statement. He says there is a manifest error of some £400,000. However, if one looks at the materials exhibited by Mr Anson, it becomes clear that the Bank did not reach the figures in the certificate from the redemption statement, but has on this occasion produced a new calculation based on the Bank's underlying rates. It is accepted there was an error in the redemption statement, but that no longer arises. There has been no detailed challenge to the evidence of Mr Anson and it follows, therefore, that the error based on the redemption certificate is not material.

There are under the same broad heading contentions by Mr Phillip that the wrong default interest rate has been used because the conditions were not incorporated into the term of the facility or thus into the guarantee, at least I think that is how it is put. This was not a small personal finance transaction; it was a significant loan between a Bank and loans of the family and it seems to me unarguable, having read the evidence, that there has been an absence of incorporation.

The issue of costs and expense extends to an alleged error in default interest, but that does not seem to be material because the default interest was not challenged.

Under the heading of Manifest Error, the next and most substantial matter is costs and expenses of £636,000. I have dealt on a previous occasion with the argument that is repeated in the evidence of Mr Phillip in which he demands access to the underlying materials relating to the expenses. The fact is there was a certificate; there is nothing on the face of it wrong with the certificate. In order to undermine the certificate Mr Phillip would have to show in the words of Lewison J (as he then was) in IMG Capital(?) that there is a manifest error; that is to say one that is obviously or easily demonstrated without extensive investigation. In fact, a very substantial amount of material has been produced by the Bank. Overall, therefore, on the question of whether or not there was a manifest error there is no prospect at all of Mr Phillip being able to succeed with a potential defence which would enable him to resist liability for the, as it were, additional £500,000.

The next question is whether or not there is some real prospect of success for the claim by Mr Phillip that the Bank's security was sold by receivers at an undervalue. Having obtained advice, the receivers decided that this incomplete project should be completed in a different way at substantial extra cost. They obtained professional advice throughout both about that and also about the valuation for the property to be sold.

He refers to what he says are valuations from Connells and from Lamberts. He says that the valuations relied upon by the Bank are at variance with a valuation for Investec Bank of the property only three months earlier, when in March 2009 the property was valued at £6.85 million.

At the heart of that contention is the claim that the property which was sold for £3.825 million was sold at an undervalue. The issue is not simply whether the receivers could have obtained more money; it is whether the receivers broke the duties placed upon them by the law and by the terms of the agreements in this case.

Mr Mills, for the claimants, draws attention to the receivers report submitted to the Bank on 30 June 2009. That contains a summary of marketing and sales advice in sections 4 and 5. One finds figures such as £3.75 million, £3.55 million, £4 million and £3.5 million with a recommended asking price of between £4.250 and £4.350. There are higher figures from Savills, guide price of £4.5 million, in the hope of achieving an offer in excess £4.25 million and so on. It is abundantly clear that the receivers obtained proper professional advice and the figure achieved £3.885 was consistent with the advice obtained.

The question is not whether or not the receivers got a bad deal; the issue is whether or not Mr Phillip has a right to challenge this. In order to succeed Mr Phillip must show that the Bank broke its duty in equity to sell the property at the best price reasonably obtainable. As Mr Mills points out, that involves showing that the Bank sold the charged assets of the borrower or that the receivers sold the charged assets of the borrower as the agents of the Bank, which they did not, and that the sale of the assets was at an undervalue.

There is another problem which goes back to where we started, which is that for more than a year Mr Phillip had access to the advice and assistance of counsel and solicitors and perhaps, if he had needed it, the availability of CFA assistance. That period has gone by, the claim has been put forward in general terms, but Mr Phillip has for whatever reason been unable to produce evidence that the property was sold when it was in December 2010 at an undervalue, let alone undervalue in the region of £500,000.

In those circumstances, it seems to me clear that there is no real prospect of success with any of these claims. Even if a claim had had merit Mr Phillip would have been precluded by the no set-off clause from invoking those matters to prevent judgment being entered and enforced for the underlying claim.

I thank Mr Phillip for his courtesy and for his presentation. This whole matter has clearly been a matter of immense devastation for him and for members of his family. It would appear that they have been victims of movements in the property market, but in my judgment the misfortunes which befall Mr Phillip give rise to no grounds in law for successfully challenging the Bank's claim.

It follows, therefore, that there will be judgment for the entire sum for the bank and I will hear Mr Mills about matters arising from it.