Barclays Bank Plc v Christie Owen & Davies Ltd (trading as Christie & Co)
| Jurisdiction | England & Wales |
| Judge | Richard Spearman |
| Judgment Date | 30 September 2016 |
| Neutral Citation | [2016] EWHC 2351 (Ch) |
| Docket Number | Claim No: HC-2014-001190 |
| Court | Chancery Division |
| Date | 30 September 2016 |
[2016] EWHC 2351 (Ch)
Richard Spearman Q.C.
(sitting as a Deputy Judge of the Chancery Division)
Claim No: HC-2014-001190
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Nicola Rushton ( instructed by Dentons UKMEA LLP) for the Claimant
Siân Mirchandani ( instructed by Reynolds Porter Chamberlain LLP) for the Defendant
Hearing dates: 13–16, 20–23 June 2016
Richard Spearman Q.C.:
Introduction and nature of the dispute
Among the attractions at Marine Parade in Great Yarmouth are three family entertainment centres ("FECs"): Circus Circus, located at No 21; the Golden Nugget, located at Nos 22–23; and the Flamingo, located at adjacent premises at No 17. For many years prior to 2007, the first two (together "CCGN") were operated by companies owned or controlled by John and Kim Thurston. In that year, the Flamingo came on to the market, and Mr and Mrs Thurston approached the Claimant ("Barclays") for a loan of £1.8m to enable their trading company, Thurston UK Limited ("the Borrower") to buy the Flamingo and to pay for alterations to all three FECs to enable them to be joined together. Barclays loaned the monies, and the acquisition and alterations went ahead. However, the combined business got into financial difficulties. On 8 October 2010, Barclays served a formal demand for repayment of the Borrower's debt, on 12 October 2010 the Borrower was placed in administration, and on 16 March 2011 the FECs were sold for the sum of £1.35m, which left Barclays substantially out of pocket.
Barclays now seeks to recover its losses, or part of them, by proceedings for professional negligence against the Defendant ("Christie"). The claim is based on the provision to Barclays of two valuation reports each dated 27 February 2007. By the first ("the CCGN Report"), Christie placed a value of £2.7m on CCGN; by the second ("the Flamingo Report"), Christie placed a value of £1.5m on the Flamingo. Barclays contends that the true values were about £2.1m and £1m respectively, that these were both negligent over-valuations by Christie, and that it is entitled to recover damages from Christie because it loaned monies to the Borrower in reliance on these valuations which, in the circumstances summarised above, it subsequently failed fully to recover.
Christie denies that it was negligent, and contends that, if that is wrong, Barclays contributed to any losses which it may have sustained because the loan was imprudent.
There are issues as to the correct measure of any loss which Barclays has sustained.
At one stage, it formed part of Christie's case that Barclays failed to mitigate its loss, and a significant part of the opening arguments and the evidence was devoted to that issue. However, that argument was abandoned after the conclusion of the oral evidence.
Ms Rushton appeared for Barclays and Ms Mirchandani appeared for Christie. I am grateful to both of them for their comprehensive written and oral submissions. These were much longer than would otherwise have been the case because, regrettably, there are many issues, some involving only hundreds or even tens of pounds, on which these substantial commercial parties were unable to find a means to compromise. The number of matters which I was asked to resolve inevitably affects the length of this judgment.
The witnesses of fact
The Claimant relied on the witness statements and the oral evidence of:
(1) Philip Watkins, an insolvency practitioner and partner in FRP Advisory ("FRP"), and formerly a partner in Vantis plc ("Vantis"). While at Vantis, in late 2009 he was instructed by Barclays and the Borrower to carry out an independent review of the Borrower and its associated enterprises. Later, while at FRP in 2010, he was appointed as one of the joint administrators of the Borrower and associated companies. Mr Watkins' evidence was mainly directed to the steps taken by the administrators to realise assets, and he was called largely if not entirely to deal with Christie's contentions that Barclays had failed to mitigate its losses (which appeared to rest largely on the notion that Barclays was liable for alleged shortcomings of the administrators in this regard). Its relevance substantially fell away once Christie abandoned that part of its case. However, when questioned (partly by reference to contemporary documents) about the extent to which efforts to realise assets had been hampered by disruptive or deterrent actions which were or appeared to have been instigated by the Thurstons he gave answers which, while making clear that he had no direct knowledge of these matters, left me with the clear impression that the Thurstons had indeed acted in the manner suggested. His witness statement provided the following summary of the principal conclusions contained in the independent review produced by Vantis in 2009:
i. The Borrower and its immediate associated companies were highly geared and unable to service their current debt and therefore Vantis could not recommend any further lending by Barclays.
ii. One company in the group, First Bet Limited, was balance sheet insolvent and under-capitalised following trading losses, and therefore Vantis could not recommend any further lending by Barclays.
iii. In the event that further funding could not be obtained by the group then in view of hire purchase funders, and potentially HMRC, Mr and Mrs Thurston should consider taking immediate steps to file for administration of the Borrower, with consideration also being given to taking the same steps with regard to Circus Leisure Limited, Golden Nugget (Great Yarmouth) Limited and First Bet Limited.
iv. Barclays should consider improving its security by taking a chattel mortgage over the unencumbered arcade equipment at the Great Yarmouth Arcades ("the Arcades").
(2) Helen Balchin, a senior recoveries manager employed by Barclays, who gave evidence about the recoveries made by Barclays and the manner in which they had been applied by Barclays. This included evidence that, following a review in or around 2012 of the sale of the interest rate hedging product which Barclays required the Borrower to agree to as one of the conditions of the borrowing which forms the subject of the present claim, it was determined that the Borrower was entitled to redress in the total sum of £439,608.72. This sum was not paid directly to the Borrower, but was applied by Barclays to repay part of its indebtedness.
(3) David Sturt, an associate credit director employed by Barclays, who explained the general credit sanction process in Barclays Larger Deals Team ("LDT") in early 2007, and who provided a review of the documents relating to the borrowing which forms the subject of the present claim. Although Mr Sturt worked in the LDT at the time, Mr Sturt had no involvement in the material events, including the credit sanction decision, save that the documents showed that he had reviewed a facility letter which was sent out in February 2007 (although he could not specifically recall doing this some 9 years after the event). The decision itself was taken by Mr Anthony Cox of LDT, who has since left Barclays. In the absence of Mr Cox, Mr Sturt was called to give evidence by Barclays as to what an average credit sanctioner in the LTD in February 2007 with comparable experience to that of Mr Cox ("the Hypothetical Sanctioner") would have done if he had been presented with evidence that the true market value of the Arcades was not £4.2m as advised by Christie but was instead £3.2m (this being Barclays' case at the time Mr Sturt made his witness statement). Mr Sturt's evidence was as follows:
"In my view, had the Hypothetical Sanctioner known the true combined market value of the Great Yarmouth Arcades, he would not have sanctioned the Treasury Loan of £1.9 million. As set out above … the total lending by the Bank to the Company (including the Treasury Loan) was to be £2,703,000. On the basis of a combined security value of £3.2 million (as opposed to £4.2 million) the Bank's total lending would have had a loan to value ratio of approximately 84% (£2,703,000 million divided by £3.2 million x 100). This was 17% more than the 67% loan to value ratio limit set out in Mr Cox's sanction decision. Therefore this would not have been sufficient security for the Bank's total lending to the Company."
(4) Mr Mark Dembicki, a bank manager employed by Barclays, who was its relationship manager with the Borrower from January 2007 until 8 October 2010. He gave a detailed account of the history of his dealings with the Thurstons, based in large part on the contents of contemporary documents which I rehearse below. His witness statement included evidence to exactly the same effect as Mr Sturt's evidence quoted above, as well as the following further evidence (at [186]–[188]):
"The sole purpose of the Treasury Loan was to enable the Company to purchase the Flamingo. The purchase price of the Flamingo was £1.6 million and a further sum of £200,000 was required in order to make the necessary alterations and improvements to combine the Flamingo with the Circus Circus Arcade and the Golden Nugget Arcade.
In these circumstances, it is also highly unlikely that the Bank would have considered and agreed to a loan application for a lesser sum of money or that the Company would have sought a loan for a lesser sum. This is primarily because the Company did not have sufficient funds available to it at that time, and those funds would have needed to be in the region of £559,000, to contribute towards the purchase price of the Flamingo.
If the purchase of the Flamingo was no longer viable, the Bank would not have lent to the Company by way of an equity release in respect of 21–23 Marine...
To continue reading
Request your trial
-
Anne Edith Powell v University Hospitals Sussex NHS Foundation Trust
...January scenario is probably true. This was the approach endorsed by this court in Barclays Bank PLC v Christie Owen & Davies Ltd. [2016] EWHC 2351 (Ch) at [60]: “To consider simply whether to prefer one expert over the other is not the correct approach. The Court should make a judgment as......
-
McGrath vs Department of Justice,Department of Finance
...proceedings of, various types, especially commercial actions (see further Barclays Bank v Christie Owen and Davies (t/a Christie and Co) [2016] EWHC 2351 and Noels v Oxford Hospitals NH Trust [2019] EWHC 936). However, it has to be noted that, although the guidance endorsed and followed in ......
-
Barclays Bank Plc v TBS & v Ltd
...out in the preceding paragraphs was also taken by Mr Richard Spearman QC sitting as a Deputy Judge of the High Court in Barclays Bank v Christie Owen and Davies Ltd [2016] EWHC 2351 (Ch). Was the valuation negligent? 67 In addressing the first issue which arises under the legal approach set......
-
Rawle Hannibal v The BVI Health Services Authority
...WLR 2600 considered; Wilsher v Essex Health Authority [1988] AC 1074 considered; Barclays Bank PLC v Christie Owen & Davies Limited [2016] EWHC 2351 (Ch.) considered; Alsco Pty Ltd v Mircevic [2013] VSCA 229 considered; Williams v The Bermuda Hospitals Board [2016] UKPC 4 distinguished. 3......
-
Negligent Valuation Of Seaside Amusement Arcades Las Vegas Comes To The Rolls Building
...in the Chancery Division, Barclays Bank PLC v. Christie Owen & Davies Limited (trading as Christie Owen & Davies Limited [2016] EWHC 2351 (Ch)), Dentons acted for the bank in its successful claim against a firm of valuers over its negligent valuation of three amusement arcades in Gr......