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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Hockin & Anor v The Royal Bank of Scotland & Anor [2016] EWHC 925 (Ch) (25 April 2016) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2016/925.html Cite as: [2016] EWHC 925 (Ch) |
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CHANCERY DIVISION
FINANCIAL LIST
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
DIANE ![]() MICHAEL ![]() ![]() LONWEST ![]() |
Claimants |
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- and - |
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THE ROYAL BANK OF SCOTLAND NATIONAL WESTMINSTER BANK PLC |
Defendants |
____________________
Mark Hapgood QC, Laura John and Adam Sher (instructed by Dentons UKMEA LLP) for the Defendants
Hearing dates: 6 & 7 April 2016
____________________
Crown Copyright ©
Mrs Justice Asplin DBE :
The Applications
"(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;
(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings; or
(c) that there has been a failure to comply with a rule, practice direction or court order."
The Rule is supplemented by PD3A. It is not in dispute that the touchstone for the exercise of case management powers is the overriding objective and that the Court must deal with cases justly and at a proportionate cost. Furthermore, for the purposes of CPR 3.4(2)(a), strike out should not be granted in a developing area of the law unless the court is certain that the claim is bound to fail: Hughes v Colin Richards & Co [2004] EWCA Civ 266; [2004] PNLR 35. Cases which are suitable for strike out include those which raise an unwinnable case or do not raise a valid claim as a matter of law: CPR at paragraph 3.4.2 and Price Meats Ltd v Barclays Bank plc [2000] 2 All ER 346. It is also accepted that if the court considers that the defect in question might be cured by amendment, the claim should not be struck out without first giving the party concerned an opportunity to amend: Soo Kim v Youg [2011] EWHC 1781 (QB). For the purposes of CPR 3.4(2)(b) the term "abuse of the court's process" was explained by the then Lord Chief Justice, Lord Bingham, in Attorney General v Barker [2000] 1 FLR 759 in another context as "using that process for a purpose or in a way significantly different from its ordinary and proper use."
"The method by which issues of fact are tried in our courts is well settled. After normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence... To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases, it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents and other material on which it is based. The simpler the case, the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Wolfe MR said in Swain's case ... that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all."
Strike Out Application
"There were further terms of the 2008 Facility implied by law so as to reflect the parties' intentions (1) that the Bank would act in good faith in its performance of the Terms of the 2008 Facility and, where appropriate, in compliance with its duties as mortgagee and in any case where the Bank had a power or discretion, this would be exercised in good faith and not arbitrarily or capriciously and (2) as set out in paragraph 12 below."
The reference to paragraph 12 was to a contractual duty to exercise due skill and care. At paragraph 16.3.5, the Particulars of Claim then contains an allegation of breach of the terms set out in paragraph 9.3, based upon the facts pleaded at 16.2 to 16.3, although reference was made to paragraph 14 in error. Paragraph 18.4 contains a claim for loss and damage in respect of the breach. In summary, at paragraphs 16.2 and 16.3 the Claimants plead: the alleged facts and matters concerning LWE's treatment by GRG, including allegations (i) as to the undervaluation of LWE's property portfolio by external valuers DTZ acting on behalf of the Bank which is stated to be "incorrect and unreliable"; and (ii) that the Bank's approach forced LWE into insolvency as well as allegations as to the sale of the debenture and the conduct of the administration.
(i) Lack of standing
"a breach of an alleged duty of care said to have been owed by the Banks and two alleged misrepresentations"
and explained thereafter, that the duty of care was a duty to advise in relation to the Swap before LWE was committed and that the misrepresentations were as to future interest rates and that LWE would have the right to terminate the Swap without cost on its third anniversary; and the judge's conclusion at [56]. For the sake of completeness and better understanding, I set out both [55] and [56] as follows:
"[55] The first question is which claims should be assigned. I have held that only one of the proposed claims passes what I may call the vexatiousness test. Should the assignment be limited to that claim?
[56] I have no doubt that if there were entirely distinct claims of which one or more was vexatious and one or more was not, the assignment should exclude any vexatious claim. In this case, however, the proposed claims are closely bound up with each other. This is clearly so in the case of the alleged duty of care to advise and the alleged misrepresentation as to the credit break but it is also true of the alleged misrepresentation as to interest rates. It seems to me that to try to specify in advance precisely what claims the applicants, as claimants could and could not pursue would be a difficult exercise, likely to be productive of argument and expense without corresponding benefit. The draft deed prepared by the applicants refers generally to claims arising out of what they call mis-selling and my view is that I should adopt that provision."
In fact, at [32] [48] of his judgment the learned judge had considered each of the three heads of claim in turn in order to determine whether they were viable as opposed to being frivolous or vexatious and as a result, that the court should not direct their assignment. The heads were described respectively as: "Bank's duty to advise"; "Representation as to future rates"; and "Representation as to credit break." He had concluded that only the representation as to credit breaks claim passed his "vexatiousness" test.
" all of the Assignor's rights, title and interest in and to the Rights of Action, and the Benefits together with the rights to prosecute the Rights of Action".
In turn, "Rights of Action" were defined in clause 1.1 of the Deed of Assignment as:
"all claims, counterclaims causes of action, disputes and proceedings (together with any associated orders obtained in connection therewith) whether known or unknown, contemplated or not, and whether actual or contingent, as exist at the date of this Deed or arise in the future and which relate to, are in respect of, result from or are connected with the Breaches or any one or more of the Breaches and, for the avoidance of doubt any rights to claim compensation under the FCA Led Review."
"Breaches" are defined as:
"the actions, omissions and breaches described in clause 2.2"
and clause 2.2 provides:
"The Assignees contend that RBS and or its principal NatWest acted in breach of contract or in actionable misrepresentation and/or breach of duty of care owed to the Assignor by mis-selling to the Assignor a 10 year callable LIBOR swap with NatWest and that such actions, omissions and breaches have caused the Assignor to suffer loss, costs and damage. . ."
Mr Hapgood also highlighted clause 2.1 of the Deed of Assignment which provides:
"The Assignor [LWE] entered into loan agreements with RBS acting as agent for NatWest dated respectively on or around 11 July 2008 and on or around 8 October 2008 and into a swap agreement with RBS on or around 10 July 2008."
"However, we believe that the matters pleaded at 16.2 and 16.3 do also give rise to claims and we anticipate in early course inviting Messrs Marsden & Bloom to agree to assign the rights to also pursue a claim inter alia against your client in respect of the above additional matters in respect of which there can then be an application to amend the Particulars of Claim."
Messrs Mardon and Bloom were the administrators of LWE. A further assignment did not take place.
" the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook [2009] AC 1101, paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision."
Conclusion:
(ii) Bad in Law
"16.1 The Borrower [LWE] may not assign or transfer any of its rights or obligations under this Agreement.
16.2 The Bank may assign all or any part of its rights or benefits under this agreement without the consent of the Borrower "
"21. In my judgment, the judicial observations so far considered represent a clear, consistent and principled approach. It could he dangerous to reformulate the principles, but I would add six comments on the summary given by Lord Simon in the BP Refinery case 180 CLR 266 as extended by Bingham MR in the Philips case [1995] EMLR 472 and exemplified in The APJ Priti [1987] 2 Lloyd's Rep 7. First, in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459, Lord Steyn rightly observed that the implication of a term was "not critically dependent on proof of an actual intention of the parties" when negotiating the contract. If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting. Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term. However, and thirdly, it is questionable whether Lord Simon's first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable. Fourthly, as Lord Hoffmann I think suggested in Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988, para 27, although Lord Simon's requirements are otherwise cumulative, I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied, although I suspect that in practice it would be a rare case where only one of those two requirements would be satisfied. Fifthly, if one approaches the issue by reference to the officious bystander, it is "vital to formulate the question to be posed by [him] with the utmost care", to quote from Lewison, The Interpretation of Contracts 5th ed (2011), p 300, para 6.09. Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of "absolute necessity", not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of putting Lord Simon's second requirement is, as suggested by Lord Sumption JSC in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.
22. Before leaving this issue of general principle, it is appropriate to refer a little further to the Belize Telecom case, where Lord Hoffmann suggested that the process of implying terms into a contract was part of the exercise of the construction, or interpretation, of the contract. In summary, he said at para 21 that "There is only one question: is that what the instrument, read as a whole against the relevant background, would reasonably be understood to mean?" There are two points to be made about that observation.
23. First, the notion that a term will he implied if a reasonable reader of the contract, knowing all its provisions and the surrounding circumstances, would understand it to be implied is quite acceptable, provided that (i) the reasonable reader is treated as reading the contract at the time it was made and (ii) he would consider the term to be so obvious as to go without saying or to be necessary for business efficacy. (The difference between what the reasonable reader would understand and what the parties, acting reasonably, would agree, appears to me to be a notional distinction without a practical difference.) The first proviso emphasises that the question whether a term is implied is to be judged at the date the contract is made. The second proviso is important because otherwise Lord Hoffmann's formulation may be interpreted as suggesting that reasonableness is a sufficient ground for implying a term. (For the same reason, it would he wrong to treat Lord Steyn's statement in Equitable Life Assurance Society v Hyman [2002] 1 AC 408, 459 that a term will be implied if it is "essential to give effect to the reasonable expectations of the parties" as diluting the test of necessity. That is clear from what Lord Steyn said earlier on the same page, namely that "The legal test for the implication of ... a term is strict necessity", which he described as a "stringent test".)"
"Both on the authorities and as a matter of principle, it seems to me that where a contract gives responsibility to one party for making an assessment or exercising a judgment on a matter which materially affects the other party's interests and about which there is ample scope for reasonable differences of view, the decision is properly regarded as a discretion which his subject to the implied constraints that it must be taken in good faith, for proper purposes and not in an arbitrary, capricious or irrational manner. Those limits apply in circumstances where the decision is final and binding on the other party in the sense that a court will not substitute its own judgment for that of the party who makes the decision. There is therefore also a discretion in the second sense distinguished earlier. The concern as Rix LJ observed in Socimer at para 66, is that the decisionmaker's power should not be abused. The implication is justified as a matter of construction to give effect to the presumed intention of the parties "
" in each case the discretion did not involve a simple decision whether or not to exercise an absolute contractual right. The discretion involved making an assessment or choosing from a range of options, taking into account the interests of both parties. In any contract under which one party is permitted to exercise such a discretion, there is an implied term "
He concluded at [91] that the discretion in relation to the service failure points was very different from those considered in the authorities. He went on:
" The discretion conferred by clause 5.8 simply permits the Trust to decide whether or not to exercise an absolute contractual right.
[92] There is no justification for implying into clause 5.8 a term that the Trust will not act in an arbitrary, irrational or capricious manner. If the Trust awards more than the correct number of service failure points or deducts more than the correct amount from any monthly payment, then that is a breach of the express provision of clause 5.8. There is no need for any implied term to regulate the operation of clause 5.8."
Miss John submits that in the same way in this case, clause 16.2 contains a simple contractual right which the Bank can choose whether to exercise.
"The fact that Kestrel had that contractual choice does not justify subjecting it to some kind of good faith obligation."
Conclusion:
(iii) Abuse of Process
"This fact is relevant to the consequential losses claimed under the causes of action that are fully pleaded in the Particulars of Claim. The Claimants reserve their right to add to the causes of action following disclosure."
He also relies upon part of the Claimants' solicitor's letter of 5 November 2015 which is as follows:
"The position is that the matters pleaded in paragraphs 16.2.3, 16.2.6, 16.3.1-16.3.3, 16.3.4 are not pleaded as the basis for a breach of the implied term pleaded at paragraph 9.3. No pleaded claims are presently pleaded out of the matters at 16.2 and 16.3 the Claimants alleged that the events and matters pleaded at paragraphs 16.2 and 16.3 resulted from and were consequential on the mis-selling of the swap."
" the key question must always be whether or not, at the time of issuing a Writ, the claimant was in a position properly to identify the essence of the tort or breach of contract complained of and if given appropriate time to marshal what it knew, to formulate Particulars of Claim. If the Claimant was not in a position to do so, then the claimant could have no present intention of prosecuting proceedings, since it had no known basis for doing so. Whilst therefore the absence of present intention to prosecute proceedings is not enough to constitute an abuse of process, without the additional absence of known valid grounds for a claim, the latter carries with it, as a matter of necessity, the former. If a claimant cannot do that which is necessary to prosecute the claim by setting out the basis of it, even in a rudimentary way, a claimant has no business to issue a Claim Form at all "in the hope that something may turn up." The effect of issuing a Writ or Claim Form in such circumstances, is so the plaintiff/claimant hopes, to stop the limitation period running and thus deprive the defendant of a potential limitation defence."
"It is wrong in principle for parties to half plead a case in the hope or anticipation that that will create sufficient of an issue to give rise to disclosure obligations; "
Conclusion:
Amendment Application