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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Spencer v Irish Bank Resolution Corporation Ltd & anor [2015] IEHC 395 (19 June 2015) URL: http://www.bailii.org/ie/cases/IEHC/2015/H395.html Cite as: [2015] IEHC 395 |
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Neutral Citation [2015] IEHC 395 THE HIGH COURT COMMERCIAL [2011 No. 8150 P]
[2013 No. 187 COM] BETWEEN JOHN SPENCER PLAINTIFF AND
IRISH BANK RESOLUTION CORPORATION LIMITED (IN SPECIAL LIQUIDATION) FIRST NAMED DEFENDANT AND (BY ORDER)
STAPLEFORD FINANCE LIMITED SECOND NAMED DEFENDANT JUDGMENT of Ms. Justice Costello delivered the 19th day of June, 2015 Introduction 2. The plaintiff also advances a distinct claim for negligent misrepresentation as against the Bank in connection with the representations which he alleges caused him to enter into a loan agreement with the Bank, being the monies he then advanced to the Cashel Rock Partnership so that the Partnership could purchase the Bond from AIAC. He seeks a declaration that discharges him from his obligations arising under the current loan agreement. 3. He also sues for damages for breach of warranty, breach of duty and breach of fiduciary duty. 4. The second named defendant was joined by order of the Court. It purchased the loan, the subject of the proceedings, from the Bank pursuant to s. 12(2) of the Irish Bank Resolution Corporation Act 2013. The second named defendant has counterclaimed seeking judgment against the plaintiff pursuant to the loan agreement. The plaintiff replies that he is entitled to set-off his claim in damages against the Bank in relation to the loan against the entire claim due and owing pursuant to the loan agreement. The plaintiff accepts that if claim to a set-off fails that the second named defendant is entitled to judgment against him in respect of the loan. The Whitgift Shopping Centre 6. The freehold title to the Centre 7. Under the terms of the reversionary head lease, no development could be carried out without the consent of the Whitgift Foundation. In addition, even if the Foundation as landlord authorised developments to the Centre, the Whitgift Foundation and the Royal London would each have to agree to contribute to the costs of any proposed development on a pro rata basis. They were under no obligation to contribute to the costs of any development in excess of 5% of the rental income of the Centre. The purchase of the long leasehold interest in the Whitgift Centre 9. On 29th March, 2005, Howard Holdings made a presentation to the Bank in relation to the Whitgift Centre. The presentation provided a description of the “[s]ignificant opportunities for asset enhancement”. The Bank was interested in joining with Howard Holdings in forming a joint 10. The structure of the proposed purchase and investment was complex. The leasehold interest was to be acquired by AIAC, a subsidiary of the Bank, and was to be 11. The purchase price for the 50% stake in the Whitgift Centre was stg£225 million plus costs of stg£7 million. The source of funding was a debt facility of stg£166 million provided by the Bank and investor equity of stg£66 million. Of this equity, stg£15 million was to come from the JV Partners and stg£51 million was to be raised from the Bank’s client base of high net worth individuals. Pending the raising of the equity, the Bank was to provide AIAC and Howard Holdings with bridging facilities in relation to stg£66 million which would be repaid upon receipt of investor equity. 12. The Bank was to be involved in this project in a number of ways. As a result it had to consider the proposed investment from a number of points of 13. It was essential that a thorough due diligence investigation be carried out as part of the process in deciding whether or not AIAC should purchase the leasehold interest (and whether the Bank should provide finance and invite its clients to invest in the Whitgift Geared Property Fund). The Bank instructed Davies Arnold Cooper solicitors to prepare a report dealing with the title and planning history of the Whitgift Centre. They furnished a report in July, 2005. The Bank also instructed DTZ Debenham Tie Leung (“DTZ”) to prepare a 14. On 31st May, 2005, Howard Holdings hosted an investment presentation in Croydon to a number of client relationship managers from the Bank during which they had the opportunity to 15. Once the Bank had completed the due diligence process to its satisfaction on 29th September, 2005, AIAC entered into a contract to purchase the leasehold interest and the Bank advanced the finance (both bridging and long-term). The Bank and AIAC were now formally in a position to offer bonds in the Whitgift Geared Property Fund to their clients. Planning in relation to the Whitgift Centre and Park Place 17. The owners also applied to develop the site of an existing car park between office blocks B and C on the Wellesley Road of the Whitgift Centre to provide a new medium sized retail unit. This application was referred to as the Phase IV development. It was on the site of the car park that was leased to the Home Office together with 18. In addition, a property company, Minerva plc (“Minerva”) applied for planning permission to develop a The plaintiff’s investment in the Whitgift Geared Property Fund 20. In the spring of 2005 he became aware of an opportunity to invest in a geared property fund offered by Quinlan Private in an asset in Knightsbridge in London (“the Knightsbridge Investment”). On 2nd and 3rd June, 2005, the plaintiff wrote to Ms. Margot Deacy of the Private Client Division of the Bank asking for a loan to enable him to part-finance his proposed investment in the Knightsbridge Investment. On 16th June, 2005, the Bank issued the plaintiff with the letter of offer to enable him to complete this investment. The Knightsbridge Investment was in sterling and the plaintiff wanted to fix the euro cost of the sterling he would require for the investment. The plaintiff agreed a rate and a purchase price for the relevant amount in sterling at that time. 21. Ms. Deacy was aware that the Whitgift Geared Property Fund would shortly be available to market to clients of the Bank. While she arranged for the loan to the plaintiff, she also urged that the plaintiff should consider this option before finally committing himself to the Knightsbridge Investment. 22. On 22nd June, 2005, Ms. Deacy met the plaintiff at his office and discussed a number of matters. They discussed an investment property owned by the plaintiff and three other partners in Nenagh; a property that they owned in Croydon (entirely unrelated to the Whitgift Centre); and the possibility of acquiring a new premises for another solicitor’s practice in either Killaloe/Ballina. In addition there was a general discussion in relation to his pension provision. He indicated that he was interested in gearing up his pension with a 23. Following the meeting of 22nd June, 2005, Ms. Deacy sent the plaintiff a loose-leaf brochure with a compliments slip. This was received by the plaintiff on 23rd June, 2005. In summary this brochure identified 5 asset management opportunities which had a total potential rent increases of stg£2.5 million. It identified 5 possible development opportunities offering a total potential development profit of stg£30 million. It identified a longer shot where AIAC might be able to acquire and develop out an adjoining property with an estimated additional development profit of stg£20 million. The return on equity was:-
24. The plaintiff was interested in involving a friend who resided in Australia in a property investment. On 27th June, 2005, he faxed his friend, Ms. Catharine Scott, a handwritten note urging her to invest with him in the Whitgift Geared Property Fund together with a copy of the first loose-leaf brochure. 25. The next day the plaintiff emailed Ms. Deacy in relation to his pension mortgage in the following terms:-
…The [pension] fund is due to receive €175,000 per annum for at least the next 7 - 8 years and I am aiming for a growth rate in it of 12 - 15% year on year... If it is possible to proceed on this basis I am interested in relying on the Anglo investment in Woodgift (sic), Croydon as recently discussed.” Decision to invest
![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() 29. Having decided to invest in the Whitgift Geared Property Fund the plaintiff took the necessary steps to enable him to invest in the Fund. The plaintiff proceeded to realise a number of his assets in order that he could fund his own investment. In July to September, 2005 the plaintiff sought to include Ms. Scott in the Whitgift Investment. This posed some technical difficulties as participation in the Fund was confined to Irish residents. She resided in Australia. Ms. Scott granted the plaintiff her Power of Attorney dated 2nd August, 2005, in order to facilitate her participation in the proposed investment. On the advices of Mr. Greg Tynan of the Bank it was suggested that the plaintiff and Ms. Scott invest as a partnership, thereby complying with the residency rules associated with the Fund. The plaintiff and Ms. Scott formed the Cashel Rock Partnership. The plaintiff had a 1% interest in the Partnership and Ms. Scott had a 99% interest in the Partnership, however the plaintiff held this 1% on trust for Ms. Scott so he accepted that she was 100% beneficial owner of the Partnership. 30. The plaintiff had two meetings with representatives from the Bank during September, 2005. On 9th September, 2005, he met with Ms. Deacy and Mr. Tynan and on 29th September, 2005, he met Ms. Deacy. Mr. Tynan was involved in order to deal with the complications imposed by the involvement of Ms. Scott in the investment. Ms. Deacy stated that the plaintiff “really liked both the asset management and the development play associated with the Whitgift Fund”. 31. By letter dated 5th October, 2005, the plaintiff confirmed that he would be investing €1 million in the Whitgift Geared Property Fund in his own name and the Cashel Rock Partnership would invest €1 million. On 12th October, 2005, the plaintiff and Ms. Scott entered into a deed of partnership effective from 1st October, 2005. Ms. Scott was to invest €495,000.00 and the plaintiff €5,000.00 in the Partnership. 32. Between the 12th and the 19th October, 2005, the plaintiff met representatives of the Bank at the Radisson Blu Hotel in Galway. Mr. David Hayes and Ms. Deacy were present. Mr. Hayes made a presentation to the plaintiff in respect of the proposed investment in the Fund. Mr. Hayes had a brochure at the meeting. It is hotly contested whether or not it was the loose-leaf brochure or whether it was the formal funds brochure colloquially referred to as “the Black Book”. In a letter dated 19th October, 2005, the plaintiff expressly acknowledged that he had an opportunity to read “the investment information”. An issue to be decided is whether or not this refers to the Black Book, to the loose-leaf brochure or whether in fact no information was furnished to the plaintiff to read in advance of signing the letter on 19th October, 2005. 33. On 19th October, 2005, the plaintiff completed a number of documents. The first was a personal financial review with Ms. Deacy. In assessing his attitude to risk he was asked to indicate what percentage of his investment he wished to place in low-risk, medium-risk or high-risk. Low-risk indicated the potential investor was prepared to take little or no risk with this portion of his wealth. Medium-risk indicated that the potential investor was prepared to take a moderate level of risk with this portion of his wealth to achieve a return in excess of the types of return produced by low risk investments. An investor who was prepared to accept high-risk was prepared to take significant risk with this portion of his wealth in order to achieve higher returns. The plaintiff indicated that he was prepared to invest 100% of his wealth at high-risk as so defined. Ms. Deacy recommended investment in the Whitgift Geared Fund and the plaintiff acknowledged that the recommendation was based upon the information he had disclosed and that he agreed with the recommendation. This document was signed by Ms. Deacy as sales intermediary and by the plaintiff on 19th October, 2005. 34. Also on 19th October, 2005, the plaintiff and Ms. Deacy signed a letter of that date from the Bank to the plaintiff dealing with his investment objectives referred to as the ‘Reasons Why’ letter. The letter refers to a meeting had over the past few weeks and under the heading “Investment Objectives” stated as follows:-
• Diversification - you wish to develop and expand the types of investments you hold - in your case you would like to have exposure to the UK and other property Markets as you have sufficient property holdings in Ireland. • Growth - You wish to get an improved return on your assets by investing in geared property investment options. You are aware that leveraged investments have additional risks however also have additional potential investment returns. • Security - you wish to invest in a well-managed investment however Capital Guarantees are not required and you could get less back than you invested. • Income - we have advised you that this investment does not provide a regular income and you have sufficient resources to cover your income requirements for the next 7-10 years”.
• You have experience of Geared property investments and you are aware of the additional risk due to the borrowing • You have invested in other types of investments including unitised funds, pensions, shares and life investments. • Your current financial standing allows you to invest in the proposed investment for the term and you are aware of the potential risks to both Capital and returns. • You have had an opportunity to read the investment information and you are satisfied that it meets your investment requirements.” (emphasis added) ![]() ![]() ![]() ![]()
• Based on the information discussed at our meeting and set out above, I recommend the following investment option as suitable to your circumstances: The Whitgift Geared Property Syndicate. The amount to be invested will be €1,000,000 in the name of 37. By letter of loan offer dated 13th October, 2005, the Bank offered to advance the plaintiff the sum of €1 million to part fund his investment in the AIAC Whitgift Geared Property Fund. Security for the loan was to be the assignment of his interest in the Fund. At the meeting with Ms. Deacy on 19th October, 2005, the plaintiff accepted the letter of offer. He expressly waived his right to a 10 day period to consider the commitment to the agreement and he also waived any right which he may have to withdraw from the agreement under s. 30 or s. 50 of the Consumer Credit Act 1995. He confirmed by his signature that he had read the conditions of the letter and the general conditions in the credit agreement and acknowledged that they formed part of the agreement. His acceptance of the facility letter was witnessed by Ms. Deacy on 19th October, 2005. 38. Also on 19th October, 2005, the plaintiff applied to AIAC for an investment bond in the Whitgift Geared Property Fund. As this was a life assurance bond, the Life Assurance (Provision of Information) Regulations 2001 applied. Ms. Deacy signed the Bond as the plaintiff’s financial advisor. It is expressly noted that it was recommended that independent financial advice be taken when purchasing financial products. Both Ms. Deacy and the plaintiff executed the application for the Investment Bond on 19th October, 2005. 39. By deed of assignment made on 13th September, 2005, between the plaintiff and the Bank, the plaintiff assigned his interest in bond number INB/0003006 issued by AIAC to the Bank as security for his liabilities to the Bank. Concluding the investment 41. On 23rd November, 2005, the plaintiff indicated that he and Ms. Scott had now decided that he would invest in one bond in his own name for €1 million and the Cashel Rock Partnership would invest €1 million in a separate bond. Accordingly, on 23rd November, 2005, the plaintiff executed a security assignment in respect of the Bond in the name of the Cashel Rock Partnership in favour of the Bank. The Partnership’s investment was accepted by a receipt dated 30th November, 2005, in respect of bond number INB/0003125. The Policy Documents 43. The Black Book sets out nine asset management opportunities and development opportunities that were set out in the loose-leaf brochure. Importantly it does not monetise the expected return. On the contrary, on p. 20 it states that it is difficult to quantify the return potential from the opportunities. At p. 33 it sets out the risk factors as follows:-
This brochure includes information obtained from external sources, and this information has been reproduced accurately from those sources, but Anglo and AIAC do not accept any responsibility for the accuracy or completeness of such information… Investors should note that a fall in the capital Development Risk The intention to develop portions of the Property will attract further risks. However, any proposals to develop within the existing shopping centre or develop new properties on the site of the Whitgift Centre, will have to satisfy Anglo and AIAC with regard to the feasibility and commerciality of same. AIAC will act in the best interests of the Fund investors when assessing such proposals. As mentioned previously, any capital expenditure on the Whitgift Centre in excess of 10% of gross annual income requires the consent of the Whitgift Foundation and the Royal London Mutual Insurance Society. It is worth noting that both bodies have given their consent to, and funded their share of the cost of, the historic major refurbishments carried out to date. Anglo is satisfied that it is in both parties commercial interest to continue to do so where a clear and compelling case exists.”
![]() ![]() ![]() ![]() Redevelopment opportunities (subject to planning permission and, where applicable, head leaseholders/freeholders consents). The JV Partners have identified a potentially attractive range of development opportunities, comprising residential, office and mixed use schemes. While these are subject to detailed evaluation and planning consents, Anglo consider that they represent a substantial opportunity to enhance the earnings and overall 45. The policy documents included supplementary provisions for the Whitgift Geared Property Fund which were stated to be supplementary provisions which attached to and formed part of the Bond. Paragraph 3.3 of the Bond provided:-
3.3.1 we have no responsibility to advise you as to the suitability of an investment in the Whitgift Geared Fund for your particular circumstances;… 3.3.4 you will not commence or bring and you hereby irrevocably waive any entitlement to commence or bring any legal or other proceedings against us arising out of or connected with the non performance of the assets forming part of the Whitgift Geared Property Fund or their failure to perform as you may have anticipated or expected”.
2006-2008 49. In 2008 Ms. Scott was concerned about her possible tax liabilities in Australia arising from her investment in the Partnership and so she wrote to the plaintiff on 28th January, 2008, stating that she wished to withdraw all financial and/or other interest from the investment. The plaintiff accepted this letter and effectively released her from any obligations under the Partnership of which she was 100% beneficial owner. This included the obligation of the Partnership to repay the plaintiff the loan he advanced to the Partnership so that it could purchase the Bond in the Whitgift Geared Property Fund. The plaintiff initially maintained that this letter constituted an assignment to him by Ms. Scott of her interest in the Partnership. At the end of the case this claim was abandoned. The plaintiff’s complaints 51. The first time he complained in relation to representations upon which he now sues was when he delivered the Statement of Claim. He did not pursue the many other matters in respect of which he had previously complained to the Bank. Negligent misstatement
(2) That there existed significant potential to increase the rental income by reason of “existing asset management” and “new development” opportunities. (3) That the potential return on investment after 10 years was between 220% and 300%. The written representations upon which the plaintiff relies are those set out in the loose-leaf brochure. The brochure identified 5 asset management opportunities as follows:-
- Forecast net added ![]() ![]() - Timeframe 3-5 years. • Planning exists for 80k sq.ft new space - Forecast net ![]() ![]() - Timeframe 3 years • Early lease renewals - Forecast ![]() ![]() - Timeframe 1-3 years. • Reconfigure M&S and River Island units - Forecast net ![]() ![]() - Timeframe 3-5 years • Increase Mall Income - Forecast net ![]() ![]() - Timeframe 1-3 years”.
25 STOREYS 200, 000 sq ft OFFICES / RESIDENTIAL / HOTEL PROFIT £15m FOCUSHOUSE 15 STOREYS 125, 000 sq ft OFFICES PROFIT £10m WESTERNGATEWAY NEW RESIDENTIAL FIVE STOREYS 110 FLATS 140,000 sq ft PROFIT £12m RESIDENTIAL TOWER 10 STOREYS 175 FLATS 160,000 sq ft PROFIT £15m”.
![]() ![]() The plaintiff’s evidence in relation to the representations 57. In his Statement of Claim of 9th November, 2012, and the Amended Statements of Claim of 2nd May, 2013, and 31st July, 2014, the plaintiff pleaded that he met Mr. Hayes and Ms. Deacy at the Radisson Blu Hotel in Galway in the autumn of 2005. He says it was at this meeting that Mr. Hayes made his oral presentation and furnished him with the loose-leaf brochure. This presentation was what persuaded him to invest in the Whitgift Investment. The date of the meeting is reiterated as being in the autumn of 2005 in the Replies to Notice for Particulars dated 18th January, 2013. 58. On the other hand in his Witness Statement dated 4th June, 2014, for the first time the plaintiff alleged that the meeting occurred during the period the 11th - 15th July, 2005. He was adamant in his evidence to the Court that this was the correct date as his decision to invest in the Whitgift Geared Property Fund was made when he decided not to proceed with the Knightsbridge Investment. He cancelled the sterling he had pre-ordered to enable him to invest in the Knightsbridge Investment on 15th July, 2005. It was clear therefore that his evidence was he decided to invest in the Whitgift Fund on or before the 15th July, 2005, at the latest. 59. During the course of the plaintiff’s cross-examination it became apparent that a number of documents had been omitted from his affidavit of discovery. In particular, four crucial documents came to light at that stage. The first was the compliments slip stamp dated 22nd June, 2005, from Ms. Deacy enclosing a brochure. The compliments slip did not identify the brochure. He had previously discovered a handwritten note written by the plaintiff to Ms. Scott setting out the reasons why she might wish to invest in the Whitgift Geared Property Fund. This is the note referred to at para. 24 above. He now discovered a further copy of this document with a faxed report attached to it which indicated that it had been sent on 27th June, 2005. This note referred to a brochure which it enclosed. The plaintiff also discovered a 60. The plaintiff produced a fourth document as part of this further discovery. This was a second compliments slip from Ms. Deacy which was stamp dated the 15th July, 2005. It read:-
I have also attached a copy mandate for you & Partner to complete
Margot Deacy”. ![]() ![]() ![]() ![]() 62. By the conclusion of his evidence, the plaintiff’s case was that he decided to invest based on a brochure which he received in the post sometime on 15th July, 2005. It was the second such brochure. He spoke with no one in the Bank in relation to the investment as outlined in that brochure, but in the late afternoon of 15th July, 2005, he had made up his mind to invest in the Whitgift Geared Property Fund and to cancel his interest in the Knightsbridge Investment. Most importantly his decision to invest was made some months in advance of the oral presentation of Mr. Hayes upon which he had placed so much emphasis in his earlier testimony. 63. Other aspects of Mr. Spencer’s evidence were unreliable: he initially maintained that the brochure he had faxed to Ms. Scott was the brochure upon which his case was based i.e. the loose-leaf brochure. Following the additional discovery from his office, he had to accept the fact that this was incorrect and that he had sent a different loose-leaf brochure to Ms. Scott. He had also maintained that Ms. Deacy had given him only one brochure and he was now maintaining she had furnished him with two. When asked to explain why the loose-leaf brochure had the words “second 64. However, that is not the end of the matter, Ms. Deacy gave evidence on behalf of the Bank and she accepted in evidence that she enclosed a brochure that related to the Fund with that compliments slip. Her evidence was that this was the prospectus brochure known as the Black Book. As Mr. Gerard Davis, the author of the Black Book, gave evidence to the effect that the Black Book had not been completed until late August, 2005, clearly Ms. Deacy’s evidence that the brochure referred to was the Black Book could not be correct. 65. I accept on the balance of probabilities that Ms. Deacy enclosed a brochure with this compliments slip and on the balance of probabilities that it was not the Black Book. I am left to draw the inference that the loose-leaf brochure was enclosed with the compliments slip and the plaintiff had the brochure when he made his decision to invest in the Whitgift Fund. Therefore the written representations set out in the loose-leaf brochure were made to him prior to his decision to invest in the Fund. On the other hand I do not accept that the plaintiff has established that Mr. Hayes made the oral representation pleaded at para. 6(a) of the Statement of Claim. I dismiss his claim based upon oral representations allegedly made by Mr. Hayes on behalf of the Bank. Did the contents of the loose-leaf brochure amount to misstatements? Planning evidence 67. Mr. Sutton and Mr. Simmonds each considered the five asset management opportunities identified in the loose-leaf brochure. They agreed that in order to relocate the pedestrian access along by Marks & Spencer that planning permission would be required but that this would be easily secured. They noted that planning existed for the 80,000 sq. ft. new space as the Phase IV development. They agreed that the remaining three identified asset management opportunities did not require planning permission. Thus there was agreement that from a planning perspective there was no difficulty with the asset management opportunities set out in the brochure. 68. Mr. Sutton considered the new development opportunities. In relation to the Whitgift Tower he accepted that this was possible in planning terms. He had concerns with the identified opportunities at Focus House, Western Gateway and the Residential Tower based on either their scale or their siting. He accepted that the Western Gateway proposal was achievable from a planning policy perspective. 69. In relation to the Residential Tower proposal he said that the scale of the building was probably not unacceptable but he was concerned that the site was inappropriate as the apartments would be looking over plant equipment on the roof of the Whitgift Centre. He accepted that difficulties might be overcome through design. He was of the opinion that the application for a 15 storey office tower at Focus House was highly optimistic. He accepted that there was a policy for tall buildings on the Wellesley Road but he was not sure if the Focus House site fell within the scope of this policy. On balance he thought it did not. Likewise with regard to the Western Gateway proposal. He agreed that the policies were highly promotional of the kind of development referred to. His problem was with the siting of this proposal as it would block an existing gap in the street scene, it is potentially one storey too high and there could be problems with noise and disturbance. 70. Mr. Sutton considered the planning history of the Park Place development and Bishops Court 1 and Bishops Court 2; he noted that Croydon Council considered that the two schemes (Park Place and either
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![]() ![]() ![]() ![]() 71. Mr. Simmonds on behalf of the Bank thought that the development opportunities identified in the loose-leaf brochure were reasonable. There was support for each of the proposals in the relevant planning policies and development plan. He summarised the effect of the policies and the development plan as being highly promotional in terms of promoting new development in central Croydon including both retail development and other town centre uses including offices, housing and a hotel. He noted that the importance of the Whitgift Centre and its potential to expand was expressly mentioned in the London plan. 72. He considered the Park Place development; in his opinion it was 73. DTZ prepared a planning review of the Centre for Howard Holdings dated June, 2005. This Report was included in the DTZ Report on the Whitgift Centre for the Bank and AIAC dated 22nd August, 2005. At para. 5.58 DTZ noted that the offices in the Whitgift Centre were no longer well suited to modern business requirements and that the refurbishment of the office buildings for other uses was likely to be acceptable as redevelopment of the buildings for modern offices was likely to be impracticable. At para. 5.59 they were of the Property 75. They each considered the investment return potential set out in the loose-leaf brochure. The dry investment return was 165% over 10 years. Mr. Francis was of the 76. They both accepted that the asset management opportunities identified in the loose-leaf brochure existed as opportunities It was agreed that the EC Harris Report of 2004 dealing with the condition of the Centre was included in the DTZ Report and it was accepted that the refurbishment costs outlined by EC Harris would probably be covered by service charges and were not therefore likely to be an issue for investors in the Fund. 77. There was considerable disagreement between the 78. Colliers International, Mr. Francis’ firm, marketed the sale of the long leasehold interest in the Whitgift Centre in 2005. Their brochure stated that the particulars in the sales brochure were intended to give a fair overall description of the property. They stated that they currently recorded 71 named major retailers which required either a new store, expansion or relocation in Croydon. They stated that the Centre offered a number of opportunities to improve the asset through active management. They identified 11 such opportunities which included the 5 opportunities identified in the loose-leaf brochure (though expressed in slightly different language). The brochure referred to the offices occupied by the Home Office (blocks A, B, C and E) and the Centre Tower. It noted that the Secretary of State’s lease was due to expire in 2010 and the Centre Tower leases were due to expire between January, 2007 and March, 2015. It stated:-
![]() ![]() 80. In light of these two contemporaneous documents, I turn to consider the evidence led on behalf of the parties on these issues. Mr. Whitfield gave evidence in relation to the asset management opportunities identified in the loose-leaf brochure on behalf of the Bank. He was of the opinion that these opportunities were reasonable and deliverable. Mr. Francis believed that delivery of the identified opportunities would be problematic. He acknowledged the potential to reconfigure the Marks & Spencer store and to relocate the pedestrian access to the north of the Centre but thought it would be difficult to achieve. He accepted there existed an opportunity for early lease renewals but he took issue with the profit forecast. He felt the increase in mall income would be problematic as there would be issues in relation to sight lines and reducing mall widths. 81. I prefer the evidence of Mr. Whitfield in this regard. Many of Mr. Francis’ concerns had been considered and answered in the DTZ Report. Between 8 and 10 RMUs could be sited in the malls without interrupting sight lines and without interrupting pedestrian flows. Similarly, on balance Marks & Spencer was unlikely to withhold co-operation with the proposed reconfiguring of its store and the reconstruction of the entrance to the north of the Centre in 82. The real difficulty is whether or not the monetisation of these opportunities was reasonable. Mr. Francis accepted that if 10 RMUs were added to the malls at the rental and yield identified in the DTZ Report then it was correct to attribute a net of
![]() ![]() ![]() ![]() ![]() ![]() 84. In relation to the development opportunities Mr. Francis pointed out that consent would have to be obtained from both the Whitgift Foundation and Royal London and that they would each have to agree to contribute 25% of the development costs in order for the developments to be delivered. He said to deliver what was articulated in the loose-leaf brochure was exceptionally difficult for all manner of reasons. He referred to the ownership structure, the fact that the Whitgift Foundation and Royal London would have to contribute. He thought the Western Gateway proposal was to be constructed on land not owned by the Whitgift Centre and he referred to the problem of the lease to the Secretary of State. Fundamentally his objection was that he did not know where the figures had come from and he did not know whether they referred to the 50% interest in the Centre or 100% interest in the Centre. 85. Mr. Whitfield’s 86. He was of the opinion that against this background it was not unreasonable for Howard Holdings and the Bank to have identified these opportunities as a means by which additional development 87. As with the asset management opportunities, he was of the opinion that the development opportunities identified were, as opportunities, reasonable and that any reasonable asset manager would have identified and pursued them over time. He pointed out that clearly none were certain and not all would have been successful and indeed may not have been realised in the exact manner contemplated at the point of purchase. He acknowledged that the delivery of each of the opportunities would have required a number of matters to have been addressed (planning, pre letting (if appropriate), superior landlord and freeholders consent and the like) prior to delivery. In addition he said it was highly unlikely that all of the opportunities identified would have been delivered and the timing of the delivery of any was uncertain, albeit it in the context of an investment holding period of up to 9 years. He felt it was likely that one or more of these opportunities would have been delivered. 88. He placed particular emphasis on the fact that in order to achieve the percentages identified in the loose-leaf brochure it was not necessary to complete every one of the opportunities identified in that brochure. It would be necessary to deliver 92% of the cumulative 89. Mr. Whitfield was cross-examined about the need to discuss possible development plans with the Whitgift Foundation as the freeholder whose consent was required in order to carry out any development on the lands and who would be requested to contribute 25% of the costs of any proposed development. He agreed that it would be reasonable to expect that the attitude of the Foundation to the type of developments contemplated would, at the 90. A major point of dispute between Mr. Francis and Mr. Whitfield related to the Park Place development. Mr. Francis considered that the grant of planning permission constituted a major threat to the Whitgift Centre; that it would have a significant impact upon the attitude of existing and potential tenants to the Whitgift Centre and that this in turn would seriously impact on the ability to realise gain from early lease renewals, the third identified asset management opportunity. He accepted that it would be reasonable to assume that if the Park Place development were to be delivered that it was at least five years away given the number of matters that had to be dealt with including CPO procedures and construction time. 91. It was known that there were significant commercial difficulties with the Park Place development. The project had been designed around the Allders store as anchor tenant and the space for the anchor tenant had been specifically designed to meet the needs of Allders. On 30th January, 2005, Allders went into administration and therefore was no longer available to anchor the development. Minerva entered into a joint 92. Mr. Whitfield took the The attitude of the Whitgift Foundation The evidence of Mr. Richard Stapleton 95. On 20th June, 2005, he met with representatives of the Bank and Howard Holdings. The Foundation was questioned about its aspirations for the Whitgift Centre and it was indicated that the Foundation’s prime concern was to ensure that the asset was properly managed and developed and that it was for the Asset Manager of the Centre to come forward with any specific development proposals. In the absence of specific proposals it was impossible to comment further. Mr. Stapleton said that he expressly asked the representatives of Howard Holdings to explain their plans for the Centre and they said they were not prepared to do so. None of the asset management opportunities or development opportunities identified in the loose-leaf brochure were raised at the meeting. Mr. Stapleton’s evidence was that if the Foundation had been shown the loose-leaf brochure they would have said that they would not fund the development opportunities identified in that loose-leaf brochure. He regarded them as speculative. 96. He said that on several occasions during the meeting both Howard Holdings and the Bank asked precisely what the Foundation’s position would be on development proposals but that that in the absence of specific proposals it was impossible to comment further. He said it was made clear that any proposal would have to be considered on it merits and that the Foundation did not have any significant funds to invest in the Centre. 97. Under cross-examination he agreed that in 2005 the Foundation was open to the idea of redevelopment of the Centre. He agreed that the attitude of the Foundation was one of openness to consideration of improvement in redevelopment opportunities, subject to detailed plans being submitted for consideration and risk assessment and with no guarantee that the Foundation would necessarily follow through with the proposed plan. He agreed that as no specific proposals had been discussed they were neither in nor were they out. Banking evidence 99. Dr. Thomas Walford gave evidence on behalf of the plaintiff. He criticised many aspects of the Bank’s involvement in the investment and its dealings with the plaintiff. However, many of these are not relevant to the case advanced by the plaintiff. Mr. Conor O’Malley gave evidence on behalf of the Bank. He and Dr. Walford agreed that the Bank’s professional advisors (DAC and DTZ) were high quality and appropriate to the proposed investment. They agreed that it was reasonable for the Bank to rely upon the Reports of DAC, DTZ and EC Harris. Dr. Walford did not accept that it was reasonable for the Bank to rely upon advice from Howard Holdings as he did not accept that they had the appropriate expertise. They agreed that the DTZ Report accurately described the 100. Dr. Walford identified the primary relationship between the Bank and the plaintiff as being created on 19th October, 2005, when he formally completed a personal financial review and signed the investments objective letter and application for the Bond. He said it was difficulty to categorise the relationship between the plaintiff and the Bank as normally the relationship would be governed by an investment agreement and there was none in this case. He said it was not a straight forward advisory relationship. He was of the opinion that the Bank owed the plaintiff common law duties of care. He was not of the opinion that there was a fiduciary relationship between the Bank and the plaintiff. 101. He accepted that the plaintiff understood the nature of a geared investment and that the plaintiff acknowledged in writing the risks he was undertaking a number of times. He acknowledged that the plaintiff understood that it was an illiquid, geared investment; that it was a 100% investment in one asset in which he could lose all his money if the property dropped by 26%. 102. Dr. Walford was highly critical of the adequacy of the disclosure by the Bank to the plaintiff of what he regarded as material information. He said he was stunned to hear that at the meeting between Howard Holdings, the Bank and the Whitgift Foundation, that Howard Holdings were resistant to talking about any development proposals they had in mind. He was 103. Dr. Walford was particularly critical of the references to the Whitgift Foundation in both the loose-leaf brochure and the Black Book. It was his opinion that these were misleading to a significant degree and they failed properly to disclose matters which ought to have been disclosed to potential investors. He criticised the statement that stg£2.5 billion would be spent in Croydon over the next 5 to 6 years by major UK developers including Minerva. This was a reference to the Park Place development. However, the Bank elected to omit all reference to the Park Place development from its literature because it believed that Minerva would be unable to deliver the proposed development. Dr. Walford was of the opinion that it was highly questionable that the Bank had met its duty not to mislead a client as to any perceived advantages or disadvantages of a contemplated transaction by failing to disclose the refurbishment costs estimated by EC Harris in 2004. However, this was based on a false premise as in fact the property experts, Mr. Francis and Mr. Whitfield, considered that this would not be an expense to the Fund as the costs would be recovered from the tenants pursuant to their full repairing lease obligations. 104. Dr. Walford was critical of representing the future spend of stg£2.5 billion in Croydon as a positive factor. He described it as grossly misleading. He said that the competition of other new shopping centres in the Croydon Town Centre would change the overall balance and represented a major risk to the future 105. Dr. Walford said he could see no basis for the 220% claim and he was therefore of the opinion that the Bank had breached its CCIBSCI obligations in not having considered this matter in more detail. 106. Mr. O’Malley gave evidence on behalf of the Bank. In his opinion it was reasonable for the Bank to rely upon Howard Holdings in relation to the possible development opportunities and asset management opportunities identified in both the loose-leaf brochure and in the Black Book. He said it was reasonable to rely upon their property expertise in 2005 as they were their joint 107. Mr. O’Malley said that the plaintiff could not be described simply as an advisory client. The Bank was not giving general advice on a whole array of products in the market. It was offering this particular investment. To the extent that it was giving advice in that context, he was of the opinion that the Bank had satisfied the obligations it owed to the plaintiff. 108. Mr. O’Malley agreed that where there were actual forecasts stated in the loose-leaf brochure, that it was reasonable to assume that the amounts involved had been the subject of calculation and he confirmed that he himself had not seen any detailed calculations. 109. In relation to the meeting between the representatives of Howard Holdings, the Bank and the Whitgift Foundation, Mr. O’Malley was of the
The plaintiff’s evidence in relation to the representations
A. That is my understanding of it, yes.” 6
A. Yes. The figure of 220% including my investment would have been satisfactory to me. 471 Q. Well, the figure of 165 would too, if I’m right about the maths A. Yes. Yes it would. 472 Q. So if I’m right about that, if that’s what the return means, in fact you were being offered a figure higher than the figure you would have been happy to invest in. A. If you are right about that, that is true. But my case is all about the realism of the figures.” 7 112. The plaintiff gave evidence that he was particularly interested in the development angle of the Whitgift Investment. This was confirmed by Ms. Deacy in evidence on behalf of the Bank. The Knightsbridge Investment likewise involved development opportunities, though they were not spelt out to the same degree as in the loose-leaf brochure. In the handwritten fax to Ms. Scott of 27th June, 2005, the plaintiff made no reference to the development opportunities and the submission was entirely based upon the potential return. 113. The plaintiff accepted that, on the assumption that he had been provided with the loose-leaf brochure in or around July, 2005, further documentation was to come. He accepted that as an experienced solicitor the loose-leaf brochure was not the sort of document that was going to be a legally binding document surrounding the conclusion of an agreement. He stated:-
114. In relation to the loose-leaf brochure he said that he took opportunities to be plans and that he took it that “the investment couldn’t fail”. On the other hand he accepted that it was a high-risk investment and that he understood the nature of geared investment. When writing to Mr. Bohan in or around March, 2006, after he had read and considered the Black Book, he informed Mr. Bohan that the assumptions underlying the investment were based on the Black Book and that the investment was expected to make a return of 300% in the following 7-9 years. This figure was a Howard Holdings forecast taken from the loose-leaf brochure and not from the Black Book. He was thus relying on both documents despite his acknowledgement of differences between them. It is also noteworthy that he was referring to the projected return of 300%. He had referred to this when he first invited Ms. Scott to join with him in the investment in June, 2005. It was not a forecast ever made by the Bank, though it was included as a Howard Holdings forecast in the loose-leaf brochure. Legal submissions on behalf of the plaintiff
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![]() ![]() 117. The plaintiff argues that the representations in the loose-leaf brochure and to a lesser extent in the Black Book were either inaccurate or made without any reasonable basis. He challenged the accuracy and the reasonableness of the representations on a number of grounds:
(i) Relevant planning guidelines and the location and scale of the proposed developments; (ii) The attitude of Croydon Council to the proposed development of the Whitgift Centre based on the (iii) By reason of the grant of planning permission and anticipated development of the Park Place Shopping Centre by Minerva. (b) Two of the identified opportunities were mutually exclusive. The development of the Whitgift Tower as offices/residential/hotel was located on the same site where the Phase IV development had been granted planning permission. He complained that it was misleading to identify these as separate opportunities without making it clear that they were alternatives. (c) In relation to the Phase IV planning permission, it was in respect of land which was subject to a lease to the Home Office which would not expire until December, 2010. The fact that the project could not proceed immediately was not made clear. Furthermore, it was said that in October, 2005 the Secretary of State subsequently refused to surrender the car park which cast further doubts on the reality of the development opportunity. (d) He complained that the figures attributed to each of the specified opportunities in the loose-leaf brochure implied that they have been subject to reasonable calculation. In fact the Bank itself carried out no calculations. It based its figures upon figures produced to it by Howard Holdings without the supporting underlying calculations. He says that it was unreasonable to accept these figures without any supporting calculation; it was unreasonable for the Bank not to carry out its own calculations and it was irrational simply to discount the Howard Holdings figures by arbitrary percentages. (e) The loose-leaf brochure identified as a positive factor the fact that stg£2.5 billion was to be spent in Croydon over the next 5 to 7 years by major developers including, inter alia, Minerva. It was said it was misleading to include Minerva as part of this proposed spend as this was a reference to the Park Place development which the Bank had concluded would not be developed. The Bank did not disclose the fact that planning permission had been granted to Minerva to carry out the Park Place development (which on the plaintiff’s case potentially could have had a (f) The loose-leaf brochure confirmed that the Whitgift Foundation was the owner of the freehold title to the property and must consent to any expenditure on the Centre greater than stg£1 million. The brochure stated:- “We have met with the WF, who confirmed that they will support and fund plans which will maximise the ![]() ![]() The plaintiff alleges that this was incorrect and misleading as the Whitgift Foundation had not confirmed that they would support and fund any such plans. (g) The plaintiff complains that the failure to refer to the grant of planning permission to Minerva for the Park Place development and the possible impact of that proposed development on the Whitgift Centre was a matter which ought to have been disclosed as a risk factor in the proposed investment in the Whitgift Geared Property Fund. (h) The representation that the potential return on investment of 220%-300% after 10 years was in all the circumstances grossly misleading. ![]() ![]()
119. In relation to the alleged misstatement regarding the rate of investor return, the plaintiff’s case is that the Bank was under a duty to ensure that there was a reasonable basis in fact for the statements made concerning the potential return on the investment. He says that on the basis of the evidence there was no basis in fact for the additional projected returns over and above the dry investment case of 165%. In this regard he relies upon the evidence of Mr. Francis. 120. The plaintiff also pleads that the Bank owed him a duty of care and that this was breached resulting in him sustaining loss and damage. The plaintiff argued that the Bank breached the duty of care it owed to the plaintiff in a number of ways:-
“Also, there is a risk that the Whitgift Foundation might not support the full redevelopment plans for the asset, although we feel this risk is mitigated by the historic actions of the Foundation who have provided their share of funding on all phases to date. Furthermore, it is a precondition that we meet with the foundation prior to exchange to discuss this fully.” (b) At the meeting with the Whitgift Foundation the representatives of the Bank did not discuss the proposals developed by Howard Holdings in any detail with the representatives of the Whitgift Foundation. Thus, they lost the opportunity to inform themselves of the attitude of the Whitgift Foundation to the development of the Centre generally and to the ideas Howard Holdings had in mind for the Centre in particular. (c) Howard Holdings did not share certain information with the Bank and the Bank failed in its duty of care to investors including the plaintiff in relying upon Howard Holdings in the circumstances. It is said that Howard Holdings were notified after the meeting of 27th May, 2005, that the previous year the Foundation had refused their consent to a development on foot of the Phase IV planning permission. Secondly, Howard Holdings did not share its calculations in respect of the asset management opportunities and new development opportunities which the Bank circulated to, amongst others, the plaintiff, as part of its marketing campaign. The plaintiff relies upon the same arguments in relation to his claim for damages for negligent misrepresentation in relation to the loan agreements. He says that he was induced by these misrepresentations to enter into the loan agreement in 2005. He advanced the loan to the Cashel Rock Partnership and the Cashel Rock Partnership purchased the Bond from AIAC with the ultimate proceeds of the loan. When he renewed the loan in 2009 he had little choice in the matter and this agreement also was induced by the original misrepresentations. It was originally pleaded that the oral and written representations the subject of the claim became implied terms or conditions or warranties of the loan agreement. These arguments were not pursued during the trial and the plaintiff abandoned these pleas. Submissions of the Bank
(2) That the representation was made by a person who is so placed, that others may be reasonably expected to rely upon his skill or judgement or ability to make careful enquiry, or to give reliable advice or information. (3) That such representation is made by such a person who intends or knows, or ought to know that the person to whom it is made, will place reliance on it and will be induced thereby to act upon it. (4) The maker of the representation was guilty of negligence in consequence of which the representation was false, untrue, inaccurate or misleading. (5) That the person to whom the representation was made does in fact rely on the statement and is in fact induced thereby to act on the faith and truth of it. (6) That in consequence of so acting, the person to whom it was made has suffered damage or loss. ![]() ![]()
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![]() ![]() 123. More fundamentally, the Bank argues that the plaintiff clearly accepted that he was prepared to invest in the Whitgift Geared Property Fund on the basis of the return of his original investment and a profit of 120%. He stated:-
125. In the light of this evidence, the Bank relies on a further passage from Cartwright at para. 3-52 as follows:-
127. The Bank argues that the actual representations comprised in the loose-leaf brochure did not constitute misstatements. In relation to the asset management opportunities it was submitted that there was no real dispute that these were genuine and that it was reasonable to expect that they could achieve a good return from the opportunities. It was noted that in order to reach the percentages set out in the loose-leaf brochure, it was only necessary that some of the opportunities identified were realised. In relation to the Phase IV development, it was submitted that it was a genuinely 128. The Bank pointed out that in relation to the new developments identified, there were no planning difficulties in relation to the Residential Tower or the Whitgift Tower. It was submitted that they were all good options which had been put forward at a time when there was strong support for buildings of this nature in Croydon from the officials and from the 129. In relation to the attitude of the Whitgift Foundation, the Bank argued that a reasoned decision had been made that it was inappropriate to give details of Howard Holdings’ plans to the representatives of the Foundation at their meetings. The position of the Whitgift Foundation was that in principal they were supportive of any 130. The plaintiff placed considerable emphasis on the internal processes of the Bank in relation to both the Credit Committee approval and Product Committee approval. Questions raised by the representatives in relation to the reality of the development opportunities were not answered. The Credit Committee approval, it was said, required that the attitude of the Whitgift Foundation be ascertained. The Bank argues that even if there were internal failures in following on these two points they are not relevant in any claim in negligence alleged against the Bank which gives rise to a claim in damages for the plaintiff. 131. In relation to the fact that two opportunities were identified in the loose-leaf brochure which were mutually exclusive as they occupied the same site (the Phase IV planning permission and the Whitgift Tower new development opportunity) did not in reality make any difference to the overall picture presented by the loose-leaf brochure. 132. The Bank argued that it was reasonable for it to rely upon the figures produced by Howard Holdings and which were reproduced in the loose-leaf brochure. It said that Howard Holdings were the experts and their joint 133. Insofar as the plaintiff was seeking damages for misrepresentation this related to the loan agreement entered into by the plaintiff with the Bank on 19th October, 2005. It was pointed out that this was not a case within Part 134. Even if it could be established that the representations formed part of the loan contract, the plaintiff has suffered no damage thereby giving no rise to a claim in damages. The Bank argues that the mere fact of entering into a loan contract as opposed to the manner in which a person invests the monies that are loaned to him cannot give rise to damage. In Galoo Ltd. & Ors
![]() ![]() 136. Furthermore, the Bank says that in respect of contracts not covered by the Act of 1980, the old rule set out in Seddon Conclusions 137. The plaintiff has not established on the balance of probabilities that any oral representation was made to him to the effect that the Whitgift Centre was projected to increase its rental income by stg£2 million year on year. Furthermore he has adduced no expert evidence in relation to this alleged representation. Therefore this part of his claim cannot succeed. This leaves two remaining alleged misstatements:-
• Based upon the foregoing further representation in writing to the effect that the potential return on investment after 10 years was between 220% and 300%. ![]() ![]() 139. I am satisfied that the asset management opportunities identified in the brochure existed and on the balance of probabilities that they were reasonable and realisable. In addition to the evidence of Mr. Whitfield in this regard, it is important to note that these asset management opportunities were identified both by Colliers International and DTZ. All expert witnesses have agreed that it was reasonable for the Bank to rely upon the DTZ Report. While it may well be possible to dispute the details of any one identified opportunity, they were presented in the brochure as top 5 asset management opportunities. They were not presented as definite plans and it would be unreasonable to treat them as such as did the plaintiff. It was not unreasonable for the Bank to state that there existed asset management opportunities which had the potential significantly to increase the 140. The new development opportunities were high level concept ideas and not definite plans. This is abundantly clear from both the scant information and the round figures attributed to the identified opportunities. Both planning experts agreed (as did the property experts) that the planning environment in Croydon in 2005 was generally 141. In conclusion, I do not believe that the identified asset management opportunities and new development opportunities were unreasonable and accordingly the representation that they existed as opportunities did not amount to a misstatement in and of itself. Therefore I hold that the second alleged misstatement upon which the plaintiff bases his case falls. 142. The brochure set out projected returns in respect of each of the identified opportunities. No witness had been provided with any contemporaneous calculations by the Bank in relation to these figures. It was to be inferred that the figures were produced by Howard Holdings. The basis for the calculations in 2005 was never fully explained. Mr. O’Malley on behalf of the Bank explained that at this remove it was not possible to reproduce the exercise. However, he was of the opinion that the figures appeared to be reasonable. 143. There was evidence in relation to the calculation of the projected return in respect of one asset management opportunity. DTZ had estimated the annual return for 8-10 RMUs in the malls of the Centre. Mr. Francis, on behalf of the plaintiff accepted that if this figure was employed that the figure in the loose-leaf brochure for increase in mall income attributable to RMUs of an added 144. Furthermore, as Mr. Whitfield pointed out, not all of the identified new development opportunities had to be carried out in order to achieve the 25% increase in the 145. However, the matter does not end there. There were three further matters disputed in evidence by the parties:- (1) There are two mutually exclusive opportunities identified in the loose-leaf brochure. They are exclusive because they each relate to the same site within the Whitgift Centre and thus it would not have been possible to complete both the Phase IV development (the second of the asset management opportunities) and the Whitgift Tower (the first of the new development opportunities). While it is clear from the coloured 146. (2) In one other important respect the loose-leaf brochure was seriously misleading. Under the heading Risks and Sensitivities, the brochure identified the Whitgift Foundation as the owner of the freehold title to the property whose consent must be obtained for any expenditure in excess of stg£1 million. It stated:-
![]() ![]() 148. In the light of this evidence, the statement in the brochure is misleading in my opinion. They did not confirm that they “will” support and “fund” plans which will maximise the 149. The approval of the Whitgift Foundation of the plans of the Whitgift Centre was absolutely fundamental to any of the new development opportunities. Simply put, none of them could be achieved without the consent of the Foundation and none of them could be realised without the pro rata funding commitment from both the Whitgift Foundation and Royal London. The Bank was fully aware of the
150. (3)There was considerable debate in relation to the Park Place development. No reference was made to this in the loose-leaf brochure. It is not disputed that there can be a misstatement by omission. The failure to refer to Park Place in the loose-leaf brochure could amount to a misstatement if, in turn, the plaintiff had established that the grant of planning permission in respect of Park Place in 2005 undermined the identified asset management opportunities and development opportunities and the projected returns to such an extent that it was false or reckless to continue to present the opportunities as realistic and achievable. I do not believe that the evidence comes close to establishing this fact. There was clearly considerable doubt as to the commercial 151. It is true that in identifying the intended future spend in Croydon during the next 5-7 years that the spend by Minerva which was to be in respect of Park Place was inconsistent with the 152. Finally, insofar as the plaintiff advances a case that the Bank represented that the potential return on the investment after 10 years was up to 300%, this must be rejected. It is abundantly clear that this was a figure calculated by Howard Holdings. The Bank clearly presented its case as being a maximum of 220% made up of 165% on a dry case basis, 30% for asset management and 25% for the new development opportunities. 153. What then are the legal implications of the two misleading or inaccurate statements I have accepted existed in the loose-leaf brochure? The plaintiff stated that the tort of negligent misstatement does not require the plaintiff to demonstrate that the statement at issue induced him to enter into the contract before a relief can be granted. The question then is, did the Bank breach the duty of care that it owed to the plaintiff? The claim is based upon the alleged failure of the Bank to fulfil a duty of care in making the representations in the loose-leaf brochure. It is not based simply on the falsity of the statements. A representation may be false without having been made negligently. Furthermore it is essential to have regard to the scope of the duty of care in the particular case. The scope of the duty of care is defined by the purpose for which the statement was made. In Caparo Industries plc
![]() ![]() 154. In argument the Bank pointed out that not every statement made that is untrue will found a claim in negligent misstatement, which is correct. The Bank referred to the case of Raiffeisen Zentralbank Osterreich AG
![]() ![]() 156. Further, the plaintiff’s complaints relate to the reasonableness or otherwise of opportunities identified and whether it was reasonable to project a return on investor’s equity of 220%. It is clear that it would never have been possible to implement both the Phase IV development and the Whitgift Tower development. The Bank did not represent in the loose-leaf brochure that all of the identified opportunities would be carried out. The asset management opportunities are identified as the top 5 asset management opportunities. This implies that there are others and indeed others were set out in the Black Book. It attributes a possible increase in the 157. It is said that it was misleading to present the Phase IV development as a current opportunity when the Secretary of State was in occupation of the land pursuant to a lease that was to run to 2010. The previous managers of the Centre were negotiating with the Secretary of State in June and July, 2005 when the loose-leaf brochure was circulated and when the Black Book was being drafted. They believed that an agreement might be reached to surrender the lease in whole or in part. Therefore neither the loose-leaf brochure nor the Black Book were incorrect at the time that they were written. In October, 2005, the Secretary of State refused the offer on the basis that the terms were too onerous. This was not notified to potential investors and the documents remained uncorrected. In the autumn of 2005 there was the prospect of negotiating further with the Secretary of State or waiting for the lease to expire in due course. In any event the existence of the planning permission was 158. The Bank’s representations regarding the Whitgift Foundation’s attitude to proposed opportunities are the most problematic. The impression created in the loose-leaf brochure was not corrected in the Black Book. Ultimately however the Bank stated that the consent of the Whitgift Foundation was necessary to enable the developments to proceed and that no consent could be guaranteed. Mr. Stapleton gave evidence that in his opinion the Foundation would not have supported or invested in any of the developments outlined in the loose-leaf brochure or the Black Book. While I accept this evidence I am aware of its limitations. His role is to advise the Foundation. He acknowledged that each proposal would be considered on the merits when presented to the Foundation for its approval. The proposals would be in far greater detail that what is set out in the brochures. I cannot conclude that the Bank was intending to submit unrealistic or unrealisable proposals or that the Foundation would not consider them in a bona fide fashion. I therefore hold that the statements in the loose-leaf brochure and, to the extent that they are relevant, in the Black Book, concerning the attitude of the Whitgift Foundation to the proposed asset management opportunities and the new development opportunities, do not constitute negligent misstatements. 159. If I am incorrect in that conclusion and the loose-leaf brochure is a document upon which the plaintiff was intended to and was entitled to rely, I must then consider the implications of the further documentation furnished to the plaintiff by the Bank. The plaintiff accepts that by 5th December, 2005, at the latest he had received the Black Book and all the contractual documents referred to above. In fact, on the balance of probabilities I believe that he received the Black Book at the meeting in the autumn of 2005 in the Radisson Blu Hotel in Galway with Mr. Hayes and Ms. Deacy. The Black Book had been prepared as the prospectus for the investment and to be given to intending investors. The plaintiff’s ‘Reasons Why’ letter which he signed on 19th October, 2005, expressly recorded that he had an opportunity to read the investment information and that he was satisfied that it met his investment requirements. I believe that this was a reference to the Black Book which was furnished to him the previous week. The plaintiff accepted in evidence that he read the Black Book; he absorbed it and pondered it. He is and was an experienced solicitor and experienced investor in property. He accepted that the language of the Black Book was guarded and he noted the absence of any figures in the Black Book. He acknowledged in relation to the Black Book:-
162. In the light of this evidence I conclude that the plaintiff in fact did not rely upon the statements in the loose-leaf brochure or, to put it more correctly, purported to rely upon them when he had no entitlement to do so. Certainly, as concerns his case based on the figures in the loose-leaf brochure, these were corrected and were corrected to the knowledge of the plaintiff in the Black Book. He had absorbed it and pondered it and noted that the Bank was not standing over the figures and that the development opportunities were difficult to quantify. In my opinion this amounted on the part of the Bank to a correction of any misrepresentation that occurred in the loose-leaf brochure. As Cartwright stated at para. 3-11:-
![]() ![]() 164. The plaintiff’s case is based on the proposition that had the misstatements, in respect of which he now complains, not been made and had the true position been made clear to him, he would not have invested in the Whitgift Geared Property Fund. It is clear that he was investing in the Fund on the basis that he expected to make a significant return on his investment. To that end he was prepared to accept a high-risk geared investment. It is clear from his faxed note to Ms. Scott in June, 2005 that, not unreasonably, his focus was on the ultimate return. He made no reference to her of the development opportunities as such. He was concerned with the ultimate estimated return on equity for investors. When he was contemplating investing in the Knightsbridge Investment, he likewise was focused on the ultimate potential return. The Knightsbridge Investment brochure did not contain any particular figures or particular plans for development. Undoubtedly he was interested in the development opportunities, as his actions post investment indicate but it was with a 165. The plaintiff gave evidence that he would have invested in the Whitgift Fund if it gave a return of 220%. As referred to above, his understanding was that this meant 220% including his own investment of €1 million. It was common case that a return of 165% (as set out in the loose-leaf brochure) meant the return of an investor’s investment plus 165%. It was reasonable for the Bank to make this statement. This meant that the Bank made a reasonable representation to the plaintiff that he would get a return which was greater than that upon which, on his own evidence, he would have been prepared to invest in the Fund. It follows therefore that he has not established that he would not have invested in the Fund had he known the true figures (as he alleges) in relation to the projected returns for the asset management opportunities or the new development opportunities. 166. In submissions on behalf of the plaintiff it was argued that the plaintiff had informed Ms. Deacy on behalf of the Bank that he had been aiming for a growth rate of 12-15% year on year and that the Whitgift Geared Property Fund could only have satisfied this requirement if it achieved a return of between 220% and 300%. This argument is based upon the email to Ms. Deacy of 28th June, 2005, quoted at para. 25 above. I do not accept that this is the basis upon which the plaintiff entered into the investment at all. In the email he stated he was aiming for a growth rate of 12-15% year on year in the context of paying €175,000.00 per annum into a pension fund for at least the next 7 to 8 years. This is fundamentally different to a once-off investment such as purchasing a bond in the Whitgift Geared Property Fund. There was no reference at all to this growth rate requirement in any of his meetings in September or October, 2005 with the Bank. It was not referred to in his ‘Reasons Why’ letter. Furthermore, it was not what was promised by the Knightsbridge Investment even though he was prepared to proceed with that investment until he elected to invest in the Whitgift Geared Property Fund. He decided to invest in the Fund without any information or representation that this investment with identified return on equity of between 165 - 220% by the Bank would equate to 12-15% over 10 years. The plaintiff has not advanced the case that he was wrongly advised to invest in the Fund on the basis that it would not afford him a 12-15% per annum increase over 10 years. There was no expert evidence led in relation to this alleged representation at all. Therefore, any case which he now seeks to advance at the close of the hearing in that regard cannot be entertained and must be rejected. 167. It follows from all of these reasons that the plaintiff’s case in negligent misstatement is rejected. Negligent Misrepresentation 168. As the case in negligent misrepresentation was based on the same alleged misstatements of fact, this case also must fail. Furthermore, it must be rejected on the basis of the arguments advanced by the Bank to the effect that these statements in the loose-leaf brochure could never have been intended to form part of the loan contract. In addition, the Bank is correct in its argument that simply by entering into a loan, the plaintiff has suffered no damage thereby. The fact that he used the proceeds of the loan to advance a loan to the Cashel Rock Partnership and the Cashel Rock Partnership, in turn, purchased a bond in the Whitgift Geared Property Fund and that the Partnership lost money due to the loss of Other Reliefs 169. The plaintiff was not seeking to pursue rescission of the loan agreements. The other claims of the plaintiff based on an alleged fiduciary duty owed by the Bank to the plaintiff or the alleged breach of warranty or an assignment of the Partnership interest of Ms. Scott have either not been established or were not pursued by the plaintiff at the end of the case, as I have already discussed. Counterclaim of the second named defendant 171. In addition, the plaintiff argued that he was entitled to set-off any award of damages which he might receive in respect of his claims against the Bank against any sums due and owing under either of the loan agreements which had been assigned to the second named defendant. There were 172. The second named defendant sought judgment on foot of the second facility letter dated 15th April, 2009. The plaintiff accepted that as of 31st August, 2014, the sum due and owing in respect of that facility was €1,087,071.19. The Defence to this Counterclaim advanced by the plaintiff was that he was discharged from any obligation in connection with the loan agreement consequent on the Bank’s breach of condition of the loan agreement. In the event that the second named defendant is entitled to judgment against the plaintiff, the plaintiff argued that he was entitled to set-off any damages awarded against the Bank on foot of this claim in these proceedings against the sums allegedly due and owing pursuant to the facility letters to the second named defendant. The plaintiff accepted that the Bank had transferred all rights, title, interest, benefits, liabilities and duties and obligations which the Bank held under the loan facilities to the second named defendant by a deed of transfer dated 23rd May, 2014. In 1 Day 4, p. 86. 2 Day 4, p. 94. 3 Day 12, p. 47. 4 Day 12, p. 50. 5 Day 13, p. 54. 6 Day 2, p. 37. 7 Day 3, pp. 92-93. 8 Day 2, p. 114. 9 Day 2, p. 132. 10 Day 2, p. 136. 11 Day 3, p. 92. 12 Day 2, p. 132. 13 Day 2, p. 136. |