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England and Wales High Court (Queen's Bench Division) Decisions
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Cite as:  EWHC 1199 (QB)
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QUEEN'S BENCH DIVISION
ON APPEAL FROM THE ORDER OF
MASTER LESLIE DATED 3 OCTOBER 2012
Strand, London, WC2A 2LL
B e f o r e :
| NATIONAL WESTMINSTER BANK
|- and -
James Barnard (instructed by Isadore Goldman) for the Respondent/Claimant
Hearing dates: 17 and 18 April 2013
Crown Copyright ©
SIR RAYMOND JACK :
"'provided the Defendant with no support or assistance, in particular the support and advice of a business manager, which the Claimant had offered as part of the services it misrepresented to the Defendant that it would provide in order to induce her to enter into the Loan Agreement."
and lastly that the bank commenced the proceedings without giving Miss Frankham opportunity to sell the houses.
"The claimant owed a duty to act with reasonable skill, care and diligence in carrying out its duties as the defendant's banker in addition to its duties under the loan agreements. Full details of negligence will be provided on disclosure and in witness statements."
This does not purport to add anything to the ordinary limited duties of a lending banker. As to the last sentence, it is the duty of a litigant to give in the statement of case the best particulars of negligence that can be given. They may be added to after disclosure. It should never be the position that they have to be dug out from a witness statement.
"The court is therefore left with two alternatives: strike out this defence, let the claimant enter judgment, and then what happens? I do not think that that would be in the interests of justice … . I think that what is alleged by Miss Frankham, if correct, may amount to a valid counterclaim against the bank and, arising out of the same relationship as it does, and a good argument, for a set off. …. What I think should be done is that Miss Frankham should be given one last chance to put her case in order, to have it coherently and consistently pleaded, after proper and rigorous examination of the legal principles involved, which I think has been absent from her case to date, and I cite to that extent the defence and counterclaim".
The master thus recognized the possibility that Miss Frankham might plead an agreement under which the bank undertook duties beyond that of a mere lender, and he no doubt had in mind the allegations made by Miss Frankham as to what the bank had actually done. He ordered that a draft amended defence and counterclaim was to be served by 13 April 2012, and that there should be a further case management conference on 2 May. He awarded costs against Miss Frankham in the sum of £2,000.
"Your client needs to support her application for permission to amend with evidence, in order to demonstrate that the proposed amendments have some prospect of success. See: White Book Para 17.3.4".
Paragraph 5. In June 2005 Mr Muckley of the bank discussed the funding of the development with Miss Frankham at a meeting. He knew her and that she was inexperienced.
Paragraph 6. To induce her to enter into a loan contract Mr Muckley represented that he was experienced in property development of the kind in question, that he would personally assist her and facilitate her banking needs to take the project to completion, and that "he would give her all other necessary support and advice throughout the project."
Paragraph 7. Further, as evidenced by a letter of 15 June 2005 Mr Muckley assumed responsibility for providing financial and management assistance and advice in relation to the development, and instructed her to obtain quotations from two builders whom he recommended.
Paragraph 8. In reliance on Mr Muckley's representations and promises of assistance Miss Frankham entered a loan agreement with the bank on 10 October 2005 for finance up to £675,000. This was refinanced on various occasions resulting in a loan agreement of 22 November 2007.
Paragraph 9. Contrary to his representations Mr Muckley gave no assistance but Mr Gyngell was appointed Miss Frankham's bank manager, and he purported to manage the project on her behalf as set out in paragraph 11.
Paragraph 10 pleaded the contract with My Home dated 21 December 2005 and that it provided for a fixed price to be payable in instalments upon completion of specified stages of the work.
Paragraph 11. From January to late March 2006 the bank by Mr Gyngell undertook responsibility for the financial and project management and administration of the development. In particular:
(a) The bank nominated Gleeds as the monitoring surveyor to report progress to enable Miss Frankham to draw down funds. Notwithstanding the limited role of a surveyor Mr Gyngell instructed Gleeds to advise whether sums were due to My Home under the contract without consulting Miss Frankham or obtaining Miss Frankham's authority;
(b) The bank made payments to my Home without Miss Frankham's consent or letting her satisfy herself that the money was due;
(c) Mr Gyngell attended site meetings with My Home and gave instructions without Miss Frankham's consent. Specifically Mr Gyngell instructed My Home;(i) to build the fourth house in the wrong place contrary to the planning consent, despite Miss Frankham's objection;(ii) to commence plastering before the exteriors were complete and watertight.
(d) Mr Gyngell advised Miss Frankham to pay My Home £5,000 for substandard bricks which she wished to reject.
(e) Mr Gyngell acted as if he was the owner and developer of the land as evidenced by his conduct pleaded and by his repeated statements to Miss Frankham that he "owned" the development.
Paragraph 12. The loan agreements were subject to terms implied by law and/or a duty on the bank's part, that:
(a) the bank would only act on Miss Frankham's instructions in relation to the transaction of business on her account;
(b) the bank would exercise all reasonable care in the conduct of Miss Frankham's banking affairs.
Paragraph 13. In breach of those terms and duty:
(a) The bank drew down funds and paid them to My Home without the consent of Miss Frankham save for the initial £65,000;
(b) The bank wrongly debited Miss Frankham's account with £2,350, £5,000 and £5,000 on 12 January, 24 February and 27 March 2006 respectively;
(c) The bank dishonoured cheques drawn in favour of material suppliers due to an alleged lack of funds caused by the incorrect debits;
Paragraph 14. By reason of the facts set out in paragraphs 6 and 11 the bank through Mr Muckley and Mr Gyngell assumed responsibility for the financial planning, management and administration of the development and the contract with My Home, and thereby owed a duty to exercise reasonable care and skill in the planning, management and administration of the project as would be expected of a prudent and experienced property developer.
Paragraph 15. Negligently and in breach of that duty of care the bank:
(a) failed to advise Miss Frankham on the contract with My Home, in particular on the payment schedule;
(b) failed to take proper steps to ensure My Home had completed work properly before making payments;
(c), (d) and (e) as 11(c)(i),(ii) and (d) above;
(f) failed to advise Miss Frankham when My Home left and failed to obtain a replacement contractor.
Paragraph 16. In late March My Home left with the work incomplete and not commensurate with the payments made, and the fourth house in the wrong place. The bank refused to permit further drawdowns so a new contractor could complete the work.
Paragraph 17. Building therefore stopped while Miss Frankham tried to resolve matters.
Paragraph 18. From late April 2006 Miss Frankham tried to find finance elsewhere and by her solicitor informed the bank of her intention to bring a claim against the bank in respect of its handling of the development and her banking and financial affairs.
Paragraph 19. At a meeting at Miss Frankham's home on 17 July 2006 Mr Andrews of the bank told her that if she gave up the idea of going to another lender the bank would "sort the whole thing out" – quotation marks in the original. Miss Frankham understood, and was intended by Mr Andrews to understand, that:
(a) the bank would continue to provide support and finance for the development and would continue to manage the development;
(b) the bank would not withdraw funding or seek repayment until all the houses were sold and Miss Frankham's claim against the bank resolved.
Paragraphs 19 and 20. There were further loan agreements.
Paragraph 22 and 23. On their true construction the loan agreements provided for repayment only on the final sale of the houses.
Paragraphs 24 and 25. No houses have sold and nothing is due to the bank.
Paragraph 26. Alternatively by reason of Mr Andrew's representation acted on by Miss Frankham in taking up further loans the bank is estopped from demanding payment.
Paragraph 27 admitted the bank's letters of demand, paragraph 28 put in issue the amount due, and paragraph 30 denied that interest was yet payable.
Paragraph 31 pleaded the set off of the counterclaim.
Paragraph 32 of the counterclaim repeated paragraphs 2 to 27of the defence.
Paragraph 33. The bank had wrongly debited Miss Frankham with £200,470 paid to My Home without her consent, and with sums totalling £12,350 referred to in paragraph 13(b).
Paragraph 34. By reason of the negligence and breach of duty pleaded in paragraph 15:
(a) Miss Frankham suffered loss in the amounts paid to My Home;
(b) If My Home's performance had been properly monitored remedial action could have taken place before My Home left, and a new contractor appointed to complete in October 2006 or shortly after. Miss Frankham has thereby lost the profit to be made on the sale of the houses in 2007.
(c) Miss Frankham would not have had to apply for amended planning permission in respect of the fourth house and to give up part of her other land to get consent. She suffered delay and the costs of the fresh permission.
(d) She would not have paid £500 for substandard bricks.
(e) With proper support and advice from the bank a replacement contractor would have been engaged enabling the development to have been completed by 2007, and Miss Frankham lost the profit to be made on a sale at that time.
Paragraph 35 is really a repeat of paragraph 14.
Paragraph 36. Negligently and in breach of the duty pleaded in paragraph 35 the bank.
(a) failed to give proper advice when My Home left and to obtain a new contractor – as paragraph 15(f);
(b) wrongly advised Miss Frankham at the meeting on 17 July 2006 that she and her partner should complete the development theMisselves despite their inexperience;
(c) failed to ensure funds were in place to enable the development to proceed smoothly despite further loan agreements being in place.
Paragraph 37. Miss Frankham therefore had to complete the development in a piecemeal fashion and so the development was not completed by mid 2007 and the houses could not be sold or let.
Paragraph 38 pleaded as loss caused 'by reason of the matters aforesaid':
(a) Payments made to My Home including sub-standard bricks £205,470. Wrongful debits £12,350;
(c) Diminution in the value of the retained land, to be assessed.
(d) "Loss of profit on the sale of the units to be assessed but estimated to be in the region of £1.2 million based on the increase in costs and interest of approximately £700,000 and a diminution in market value estimated to be £500,000 (£125,000 per unit)."
"Looking forwards I have agreement in principle for a new loan to meet the estimated completion costs of the four houses based on our conversation last week and the numbers you supplied. Again a loan agreement will be drafted and forwarded to you shortly.
"As I mentioned in my previous email I do not feel that either of us will be best served by me taking on the role of informal project manager and monitoring the site. Given past difficulties and the complexity of self-build some professional involvement is essential. I will therefore be appointing a new monitoring surveyor to work for the Bank who will review the costings to complete the work and authorise future drawdowns as the work progresses.
I hope that this first step forwards will provide proof that I do wish to work with you to complete the four houses bearing in mind that it is only two working days since we met".
The letter gives some insight into what was happening, and it raises questions as to the past.
The Master's decision
"Accordingly, in considering whether to permit an amendment I am entitled and bound to consider whether the amendment is supported by any evidence, and that the relevant test is whether the amendment has a real prospect of success".