Ahmad and Others v Bank of Scotland Plc

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Lewison,Lady Justice Gloster
Judgment Date24 Jun 2016
Neutral Citation[2016] EWCA Civ 602
Docket NumberCase No: A3/2014/4199

[2016] EWCA Civ 602





Royal Courts of Justice

Strand, London, WC2A 2LL


Lord Justice Lewison


Lady Justice Gloster

Case No: A3/2014/4199

(1) Amir Ahmad
(2) Shabnum Ahmad
(3) Atif Ahmad
(4) Rozina Ahmad
(5) T/A Zanrose Developments (A Firm)
(6) Zanrose Developments Limited
(7) Zanrose Textiles Limited (In Administrative Receivership)
(1) Bank of Scotland Plc
(2) Pricewaterhousecoopers Llp
(3) Michael John Andrew Jervis
(4) Robert William Birchall
(5) GVA Grimley Limited
(6) Roland Simon Morgan
Rosalind Jane Goode

Michael Hartman (instructed by way of Direct Access) for the Appellants

James Barker (instructed by Walker Morris LLP) for the First Respondent

Fionn Pilbrow (instructed by Gowling WLG (UK) LLP) for the Second, Third and Fourth Respondents

Simon Wilton (instructed by Plexus Law Limited) for the Fifth, Sixth and Seventh Respondents

Hearing dates: 14 th and 15 th June 2016

Approved Judgment

Lord Justice Lewison

Mr Amir Ahmad and Mr Atif Ahmad are brothers. They and their wives traded in partnership under the name Zanrose Developments. Through the medium of the partnership they owned a number of residential properties at 30/40 Bollo Bridge Road in Acton ("the Bollo Properties"). The partnership had borrowing from the Bank of Scotland plc ("the Bank"), which was secured by a charge dated 3 April 2003 over the Bollo Properties. The charge was an "all monies due" charge.


The Ahmads were also shareholders in a number of companies: Zanrose Developments Ltd ("ZDL") and Zanrose Textiles Ltd ("ZTL"). ZDL was a property holding company. It had borrowing from the Bank which was secured by a debenture dated 24 February 2005, and by a legal charge dated 3 March 2005 over a property owned by ZDL at 86 Cleveland Road in Ealing ("Cleveland Road"). ZTL carried on business selling floor carpets and tiles. It had borrowed money from Birmingham Midshires (which was then a part of Halifax Plc) to fund the acquisition of a large warehouse in Perivale known as "Zanrose House". As security for that borrowing ZTL had granted Birmingham Midshires a debenture, and a separate legal charge over Zanrose House, both dated 3 April 2003.


On 1 March 2005 the Ahmads in their personal capacities gave the Bank a joint and several personal guarantee in respect of ZDL's debts ("the Personal Guarantee"). The liability of the Ahmads under the Personal Guarantee was limited to a capital sum of £1,250,000. Clause 14 of the Personal Guarantee provided:

"All payments falling to be made by me/us shall be made to the Bank without any set-off or counterclaim and free from any deduction or withholding for or on account of any taxes."


On 1 May 2007 ZDL and ZTL gave guarantees to the Bank in respect of each other's liabilities ("the Corporate Guarantee").


Following the merger of the Bank and Halifax the Bank became entitled to the benefit of all the secured debts in addition to those which it already had.


On 8 September and 9 September 2008 the Bank made demands for:

i) the sum of £1,455,000 due from the Ahmads on their partnership account;

ii) the sum of £1,456,988.39 due from ZDL; and

iii) the sum of £2,329,865.73 due from ZTL.


The sums identified at (i), (ii) and (iii) above total £5,241,854.12. Under the Personal Guarantee the Ahmads were liable for the corporate borrowing up to the principal sum of £1,250,000, plus interest and costs.


On 9 September 2008 the Bank appointed Messrs Jervis and Birchall ("the PWC receivers") as fixed charge receivers of the Bollo Properties and Cleveland Road. It also appointed them as administrative receivers of the assets and undertaking of ZTL.


On 9 January 2009 the PWC receivers were, for regulatory reasons, replaced by Mr Morgan and Ms Goode ("the Grimley receivers") as fixed charge receivers of the Bollo Properties and Cleveland Road. This was a fresh appointment of receivers.


The PWC receivers (who remained in place as administrative receivers of ZTL) and the Grimley receivers (as fixed charge receivers of the Bollo Properties and Cleveland Road) proceeded to realise the value of the various assets over which they had been appointed. The Bollo Properties, Cleveland Road and Zanrose House were all sold, and an insurance claim vested in ZTL (resulting from a fire that had occurred at Zanrose House in May 2005, and referred to by the parties as the "NIG Claim") was compromised.


The realisations from the Bollo Properties were sufficient to discharge the direct borrowing of the Ahmads on the partnership account, but the sale of the assets of ZDL and ZTL did not raise enough to discharge all of the corporate borrowing. By letters dated 12 March 2012 the Bank demanded from the Ahmads payment of the sum of £906,323.01, which was alleged to be due from them under the Personal Guarantee.


The Ahmads failed to make payment and the Bank issued proceedings against them. Those proceedings were issued out of the Chancery Division of the Leeds District Registry ("the Leeds Action"). The Ahmads originally filed a Defence and Counterclaim but DJ Jordan took the view that the defence disclosed no real prospect of successfully defending the claim and that the counterclaim had no real prospect of success. By his order of 4 September 2012 he gave judgment for the Bank and dismissed the counterclaim. An appeal came before HH Judge Kaye QC. By that time Mr Hartman (who then as now represented the Ahmads) had drafted an amended Defence and Counterclaim and the appeal was heard on the basis that the allegations contained in that document would, if an amendment were to be permitted, form the basis of the Ahmads' defence to the claim and their counterclaim against the Bank. The Ahmads' application for permission to amend the Defence and Counterclaim was referred to in the judge's eventual order as "the Second Application".


The main defence for present purposes (and the foundation of the counterclaim) was an allegation that the Ahmads and the Bank had reached an agreement, the terms of which were contained in a letter from the Bank (and countersigned by the Ahmads) dated 27 May 2008. The effect of the agreement was said to be that:

i) Unless the total debts owed by the Zanrose businesses to the Bank were extinguished by 1 July 2008 there were to be two alternatives:

ii) The first was that upon the Ahmads immediately placing the Bollo properties on the market for sale and paying all proceeds of sale to the Bank in diminution of the debts owed by the Zanrose businesses, the Bank would waive its rights to appoint any receivers in respect of the Zanrose businesses or the partnership;

iii) The second was that failing the placing of the Bollo Properties on the market for sale, the Bank would be entitled to appoint receivers over the Zanrose businesses and to use all proceeds of sale in reduction or extinguishment of the overall debt.


The draft pleading went on to assert that the Ahmads had placed the Bollo Properties on the market; and that the appointment of receivers on 9 September 2008 was a breach of that agreement. The pleading then asserted that the Ahmads lost the opportunity to control and realise or retain the fair market value of the assets of the Zanrose businesses, and that the Bollo Properties, Cleveland Road and Zanrose House would each have realised more than they in fact did. The Ahmads counterclaimed damages for that loss. Neither ZDL nor ZTL was a party to the action (or was proposed as a party to the counterclaim).


There was lively argument before HH Judge Kaye about the meaning of the alleged agreement. However, what is critical for present purposes, is what he said in his judgment at [43] and [44]:

"[43] Any loss caused to the companies by the precipitate appointment of receivers is, of course a matter for the companies, not the defendants, who are solely defending the claim based on the Personal Guarantee.

[44] Accordingly, even if the appointment of receivers over the Bollo [Properties] was made by the Bank precipitately, i.e. within the margin of a reasonable time for the sale implied by the letter and terms of May 2008, I am not persuaded that it has resulted in any reasonably arguable claim or any real prospect of success by the defendants that their position would have been any better had time run its full course."


In consequence he dismissed the application to amend; and also dismissed the appeal against DJ Jordan's order. The Ahmads applied to the Court of Appeal for permission to appeal. Following a refusal on the papers, the renewed application was dismissed by Arden LJ. The effect of that dismissal is that HH Judge Kaye's order stands. That in turn means that DJ Jordan's order dismissing the counterclaim also stands. However, in the course of her extempore judgment (at a hearing at which the Bank was not represented) Arden LJ said at [35]:

"When the judge reached the conclusion that there was no answer to the guarantees and gave judgment, then, in my judgment, it followed that he was right to refuse permission to bring in the cross-claims by way of counterclaim. The right course would be for those claims to be made the subject of a fresh claim by the guarantors as against the Bank."


Not surprisingly, the Ahmads (now joined by ZDL and ZTL) have done just that; and they have also sued the PWC receivers and the Grimley receivers for good measure. The issue on this appeal is whether, on the basis of the pleaded case, the Ahmads ZDL and ZTL have a case that is fit for trial, or whether it should be summarily dismissed. HH Judge Purle QC considered that it should be summarily dismissed. His decision is at [2014] EWHC 4611 (Ch). This appeal against his decision is...

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    • Queen's Bench Division
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    ...must be looked at broadly, and he will not be adjudged to be in default unless he is plainly on the wrong side of the line.” 64 In Ahmad v Bank of Scotland [2016] EWCA Civ 602, the Court of Appeal adopted the following summary of the legal principles agreed by counsel at [38] (with emphasi......

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