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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Bathija v Lloyds TSB Bank Plc  EWHC 4092 (Ch) (05 December 2014)
Cite as:  EWHC 4092 (Ch)
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7 Rolls Building
London EC4A 1NL
B e f o r e :
| NARESH BATHIJA
|- and -
|LLOYDS TSB BANK PLC
Dan Stacey (instructed by JCP Solicitors) for the Defendant
Hearing dates: 19, - 21, 24 and 25 November 2014
Crown Copyright ©
Judge Behrens :
2 The facts
2.2 The Contract with IATA
- Under Section 220.127.116.11(a) and (b) if full payment is not received by the remittance date, IATA will send a Notice of Irregularity to the agent and demand immediate payment. This type of notice counts as two instances of irregularity.
- Under Section 18.104.22.168(b) if payment is not made on demand the agent will be declared in Default.
- Under Section 22.214.171.124 if there are four instances of irregularity during any 12 consecutive months, Default Action will be taken against the agent.
- Under section 126.96.36.199(d) if non-payment of monies owed to IATA is due to a bona fide bank error or by extraneous factors, the irregularities will be rescinded.
- Under section 188.8.131.52(e) if after default action has been taken it is discovered that the payment was not made because of a bona fide error, IATA will withdraw the Default and irregularities and notify all members.
- Under Section 1.10 where an Agent is declared in default IATA will advise all Members i.e. airlines, that the agent is in default, will discontinue credit, withdraw all Traffic Documents supplied and revoke any authorisation to the agent to issue its own Transportation Orders drawn on Members i.e. book tickets. In addition it will demand an immediate account and remittance of all amounts due by the Agent whether or not the due date for payment has arrived. In addition under section 2.3 the Agency Administrator is required to require the Agent to provide a bank guarantee equivalent to sales at risk.
- Under Section 2.5 the Agent has the right to seek a review of the Agency Administrator's action by the Travel Agency Commissioner. He also has the right to apply for an interlocutory order staying the termination. However before such order is made the Travel Commissioner must require the Agent to provide a bank guarantee and ensure that all amounts that would be due under section 1.10 are settled at the time the order takes effect.
2.4 The overdraft facilities
|Month||Agreed facility||Balance at close
|January 2010||£125,000||£179,424.86 DR|
|February 2010||£185,000||£195,904.54 DR|
|March 2010||£185,000||£176,965.32 DR|
|April 2010||£185,000||£208,225.62 DR|
|May 2010||£185,000||£216,842.69 DR|
|June 2010||£185,000||£216,839.61 DR|
|July 2010||£150,000||£216,514.10 DR|
|August 2010||£150,000||£203,146.36 DR|
|September 2010||£150,000||£191,355.23 DR|
|October 2010||£150,000||£168,880.12 DR|
|November 2010||£150,000||£184,130.13 DR|
|December 2010||£150,000||£175,403.46 DR|
|January 2011||£150,000||£155,073.04 DR|
2.5 The April 2010 payment to IATA
I am writing to apologise for the confusion that led to the above payment being delayed.
When you advised that funds would be coming to pay this item I left instructions with my assistant to keep checking the account.
Unfortunately we checked Account … rather than account … and missed the payment.
Please accept my apologies for this bank error.
2.6 The period to the October payment to IATA
Please note that should [Mr Parker] agree to increase the overdraft Facility he will insist it is not breached at any time. Therefore you must be sure the business can operate within the £185k as he will insist that any items presented that take the account over the £185k will be bounced and that includes the IATA d/d I am afraid.
2.7 The October 2010 payment to IATA
I regret to inform you that due to an error with your account the direct debit was returned unpaid yesterday 19th October 2010.
2.8 Discussions in November 2010
The agreement was that we would help to £185k as a peak with the Facility reducing back to £150k asap pending [Mr Parker] receiving the cash flow forecast.
- Global would be loss making for 12/18 months before returning to profit in 2012. It was unclear how this would be financed.
- Global had no additional capital or access to funding to inject into the Company.
- He was uncertain as to the robustness of the cash flow projections. In particular it did not account for the IATA spike.
- The cash flow forecasts show a number of months where sums in excess of the requested £185,000 would be required. April and May 2011 showed a requirement of £222,491 and £243,032.
- He was very cautious about Global's ability to increase its sales by over 30% particularly with a significant proportion in a new market where they will need to take business from existing suppliers.
2.9 December 2010
2.10 Events to 17 January 2011
2.11 17 January 2011
2.12 18 January 2011
2.13 19 January 2011
Very Urgent. Please process first thing 20/1/11
2.14 IATA default
Should you wish to dispute this default please ask your bank to send us a certificate stating the late CHAPS transfer was a mistake on their part.
I regret to inform you that despite confirming that this payment would be sent by the close of business on Wednesday 19 January it did not leave the bank until this morning.
Please accept my apologies for this as I know you impressed on the bank the urgency of the payment and attended the branch in good time to ensure that payment went through yesterday.
To facilitate the reinstatement of your agency we will require a letter from the bank to confirm the reason why the Direct Debit on 17th January was rejected, if it was a bona fide bank error and their confirmation that your agency account where the DD instruction goes had sufficient finds to make this payment on the 17th.
Please accept my apologies for the delay in refunding the above mentioned account the sum of £14,000 in overpaid interest. The refund is due to the account in the next few days.
Unfortunately the delay contributed to the direct debit in favour of IATA for £164,179.88 due on 17th January being delayed.
(i) wrongfully charged interest that exceeded that which they were contractually entitled;
(ii) wrongfully applied bank charges;
(iii) wrongfully reduced the overdraft facility without discussing it;
(iv) caused cheques to be dishonoured despite there being sufficient funds in the account;
(v) dishonoured standing orders despite their being sufficient funds in the account;
(vi) dishonoured direct debits despite their being sufficient funds in the account;
- The request signed by Mr Bathija on 18 January 2011 was sufficient authority for Lloyds to make the payment without any further attendance by Mr Bathija. Thus his attendance on 19 January 2011 was unnecessary. It was not necessary for Lloyds to wait for his attendance on 19 January 2011 before making the payment.
- It seems likely that Mr Bathija's attendance at Lloyds on 19 January 2011 was at about 3 p.m. That is consistent with the time of 3.15 p.m on the CHAPS Transfer. I accept that at that time it was not possible to guarantee a CHAPS payment would take place on that day.
- It seems likely that sometime after 3.15 p.m Mr O'Neill attempted without success to contact the CHAPS department at Lloyds in an attempt to make the payment that day. He was not successful and directed that it be made first thing on 20 January 2011.
- There is no evidence as to when Mr Parker's authority was obtained. If it was obtained before 3 p.m on 19 January 2011 there is no reason why the payment should not have been made on 19 January 2011. Mr O'Neill was well aware of the urgency and the need to make the payment by 19 January 2011.
- On 20 January 2011 Mr O'Neill wrote a letter of apology in which he acknowledged confirming that the payment would be made by close of business on 19 January 2011 and that Mr Bathija had attended the branch in good time to ensure that payment went through on 19 January 2011.
- In a letter from Lloyds to Mr Bathija dated 5 September 2011 in response to a complaint by Mr Bathija to the Financial Ombudsman Lloyds admitted that the CHAPS payment to IATA was made one day late.
4 Causation and Remoteness
- I prefer to approach what is in reality the same point by reference to the cases on remoteness. Normally a failure to pay money gives rise to no damages other than a possible obligation to pay interest for late payment. It may however be possible for some more extensive liability to be imposed. If that liability is to be imposed it must be by virtue of special circumstances being drawn to the attention of the payer of the money. But simply drawing the attention of the payer of the money to special circumstances, does not necessarily impose a liability on the payer to be responsible for damages flowing from the special circumstances to which attention has been drawn. The editors of McGregor consider this problem in paragraphs 272-274. They draw attention to the fact that there was a time when it was thought that if the special circumstances drawn to the attention of a party were to give rise to a claim in damages there had to be a term of contract dealing with those circumstances. That was shown to be wrong by Lord Upjohn in Czarnikow v Koufos  1AC 350 at 421-422. The matter was however further explored by Robert Goff J as he then was in The Pegase  1 Lloyds Reports 175. In that case Robert Goff J said at page 185:-
"In the light of decided cases, the test appears to be: have the facts in question come to the defendant's knowledge in such circumstances that a reasonable person in the shoes of the defendant would, if he had considered the matter at the time of making the contract, have contemplated that, in the event of a breach by him, such facts were to be taken into account when considering his responsibility for loss suffered by the plaintiff as result of such breach. The answer to that question may vary from case to case, taking into consideration such matters as, for example, the nature of the facts in question and how far they are unusual, and the extent to which such facts are likely to make fulfilment of the contract by the due date more critical, or to render the plaintiff's loss heavier in the event of non-fulfilment."
- In paragraph 274 McGregor summarised the position as follows:
"However a defendant will still only be liable for damages resulting from special circumstances when those special circumstances have been brought home to him in such a way as to show that he has accepted, or is taken to have accepted, the risk. Not only must the parties contemplate that the damage resulting from the special circumstances may occur. But they must further contemplate that the defendant is taking the risk of being liable for such consequences should they occur."
- It is thus an oversimplification to simply pose the question whether a loss if HMR/PMR could not be developed was within the contemplation of the parties when the refund argument was made. If TM was to succeed at the trial he would have to demonstrate that in addition to the special circumstances being drawn to the attention of the Bank, when the Bank agreed to refund, it accepted the risk, that if it did not do so it would be responsible for any loss of profits on HMR/PMR. That might just be an arguable proposition in relation to a failure to refund which had the effect of preventing TM coming back into mainstream banking. It is totally unarguable that the Bank should contemplate that a simple failure to refund would make them responsible for the risk of such losses.
6.1 The claim
- Lloyds was in breach of contract in overcharging interest to the extent of £18,068. A refund of £1,241.17 was in fact made on 11 November 2010. There is a dispute as to whether any further repayments have been made but it has been agreed that this dispute can be referred to the Master if the parties cannot resolve it amicably. Any outstanding balance is to be set off against the sums otherwise due to Lloyds on the account.
- Lloyds was not in breach of contract in failing to honour the direct debit on 17th January 2014.
- Lloyds was in breach of contract in paying the CHAPS Transfer to IATA one day late on 20 January 2014. The measure of damages to be awarded to Global in respect of that breach is nil because the liquidation of Global was not caused by that breach. In so far as it was so caused the loss claimed is too remote as a matter of law to be recoverable. Furthermore Global had no value on 20th January 2014.
6.2 The counterclaim
- Mr Bathija is liable under the terms of the guarantee to the full extent of the sums due by Global after taking into account the set off in respect of interest. There is no agreement as to the precise sum due. In the absence of agreement this dispute can be referred to the Master. In the light of figures in the accounts there will be an order for an interim payment in the sum of £150,000.
- In principle Lloyds may be entitled to possession of the property. However as the property is a dwelling house there may be a defence under the Administration of Justice Act 1970. Furthermore it may be that the application for possession ought to have been brought in the County Court and the Particulars of Claim should have contained more detailed information. I will leave it to the parties on the date when judgment is handed down to make submissions as to the further conduct of the possession claim.
Note 1 It is not possible to give a precise balance as the bank account does not record the order of the payments in and out. [Back]
Note 1 It is not possible to give a precise balance as the bank account does not record the order of the payments in and out. [Back]