Clifford Gardner v Clydesdale Bank Ltd
| Jurisdiction | England & Wales |
| Judge | David Donaldson |
| Judgment Date | 15 November 2013 |
| Neutral Citation | [2013] EWHC 4356 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No: HC12C00943 |
| Date | 15 November 2013 |
[2013] EWHC 4356 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Rolls Building,
110 Fetter Lane,
London EC4 1NL
David Donaldson QC
(Sitting as a Judge of the High Court)
Claim No: HC12C00943
The Claimant appeared in person (assisted by his McKenzie friend Ms V Clarke).
Mr C Calland appeared on behalf of the Defendant.
Approved Judgment
Friday, 15 November 2013
THE JUDGE:
The claimant, Mr Gardner, is an architect, though, as I understand it, no longer or currently in active practice.
The action concerns the redevelopment of a property at 4–6 Putney High Street over a number of years starting in early 2007, and the funding of that project by the defendants ("the Bank"). On the ground and the basement floor of 4–6 Putney High Street are shop premises which were let out on a commercial lease. Above were three floors of residential property. From 1982 until 1997 Mr Gardner lived in the second of these floors, and also carried out his architectural practice from there. During that time, the freeholder was successively the GLC, the LRB and, finally, Wandsworth Borough Council. Mr Gardner and the occupants of the first and third floors held temporary licences from the freeholder. The flats were not self-contained nor officially habitable. The other licensees were decanted by Wandsworth Borough Council to other proper accommodation between 1992 and 1993, and the freehold was offered to Mr Gardner. However, it took until 1997 before he actually obtained the freehold, and then it was subject to the shop lease. He was then unable to obtain a development loan initially because of the shop, but eventually, in 2001, acquired that lease under a consent order. Further complications led to yet further delay up to the end of 2007. Mr Gardner's plan was to renovate the shop premises and the first two floors of residential accommodation and sell them off, and also to develop the top of the building by adding a penthouse on the roof and joining it with the fourth floor to create a duplex or maisonette unit. He told me that he intended to live in the duplex himself. The plan also involved, perhaps understandably, the installation of a lift.
Mr Gardner has been at pains in his pleadings, witness statement and oral evidence before me to impress repeatedly on the court that he lived in the flat until the works commenced at the beginning of 2007. He told me that he had continued to live there throughout the works, though I had earlier understood the contrary. Whether or not correctly, he obviously regards it as an important plank of his claim. It is right to say, therefore, at the outset that I am quite unable to accept this evidence, and I should explain why.
During the works, there was an issue as to whether Mr Gardner was obliged to pay VAT on the payments to the building contractors. He sought advice from a VAT consultant, Julian Potts of Landmark PT Limited. One possibility which was raised during their discussions related to the zero rate applicable to properties which had been empty for 10 years. In a letter dated 30 November 2009 (from which I have also taken the historical information which I gave earlier), Mr Gardner explained to Mr Potts that this was indeed the case as a matter of fact, writing as follows (bundle H3 page 996):
"I did live in the property from 1982 to 1997, when I acquired the freehold, in order to develop it into three self-contained flats above the shop. I moved in with my partner at 235 Huntingfield Road SW15 5EW that same year, when her house refurbishment was completed. I stripped-out the whole of 4–6, leaving only the site office with kitchenette and wc, at second floor level."
All this would have entitled Mr Gardner to zero rating, but he saw a fly in the ointment so far as the records were concerned. The letter continues:
"Despite being uninhabitable, this allowed me to retain my business postal address (while remaining on the electoral register). This also allowed me to keep my parking permit and credit rating, simply by continuing to pay Council tax for the middle floor (where I had previously lived), but I could not do so any longer, until a flat was created to move back into. In 2008 when building work started at 4–6, I decanted the office too to Huntingfield Road and suspended the Council Tax for 4–6."
His conclusion was that, solely because of these records, his claim for zero rating would not succeed, and he and Mr Potts would have to explore another ground of zero rating.
There is no reason why Mr Gardner should have misrepresented the position to Mr Potts, not least when his conclusion was apparently that the matter should not even be advanced to the VAT authorities because of the records. Mr Gardner sought vehemently to insist that his account to Mr Potts had been false. His attempts to explain why he should have done this were, I have to say, embarrassing. Whether or not his historical residence in the property is of importance to the real issues in the case, as Mr Gardner plainly and firmly believes, the matter retained significance in making me extremely cautious and concerned about accepting any undisputed and uncorroborated oral evidence of Mr Gardner at face value.
From late 2006 Mr Gardner entered into a number of facility letters with the Bank, and the Bank made a considerable number of payments, the last of which was in early 2012. For the most part, they were paid in respect of construction works, and it is only with these that I will be concerned in this judgment. Initially Mr Gardner retained as a builder Mr Tonek Konopka, who traded as T & G Builders, with whom he entered into a JCT Minor Works Contract. Clause 4.3 of that standard form provided for payment to be made within 14 days (which I understand to be a customary period in the industry) of the issue of an interim valuation certificate by the contract administrator, here the surveyor engaged by Mr Gardner, Mr Roger Farrow.
In March 2009 Mr Gardner terminated his contract with T & G. In its place, he engaged TA Best Limited in the summer of 2009. Again this was done on a JCT contract, but with payment 17 days rather than 14 days after the issue of an interim valuation certificate. The first facility letter dated 27 November 2006 (bundle C1 page 81A) was accepted by Mr Gardner on 6 December 2006. It was subject to an overall limit of £1,620,000, of which £636,762 were construction costs, with preliminary costs of £105,066. It was also subject to a review after 9 months. It was, however, rapidly replaced by a new facility letter dated 8 February 2007, accepted by Mr Gardner the same day. The new limit was now £1,743,780, of which construction costs were £769,180. The facility was now due for review and renegotiation on 31 December 2007, with no obligation on the Bank to continue it. The letter contained the following terms (which had also been included in the 2006 letter) (bundle C1 starting at page 7). Under the rubric "Conditions precedent" (page 8) point 3 reads:
"Funding to be strictly on a Cost to Complete basis with all conditions to each drawdown having been met.
Funding on a Cost to Complete basis means that at all times the Cost to Complete the project (as confirmed by the Quantity Surveyor) is to be lesser the or equal to funds available/undrawn in the facility less the amount of the drawdown request before the Bank.
Should at any time the Cost to Complete exceed Available Funds, a Cost Overrun will be deemed to have occurred, and debt funding will be suspended until the amount of the Cost Overrun has been funded in full by the injection of additional equity.
The borrower's equity must be contributed prior to any Bank funding and must be maintained throughout the term of the facility by topping up with acceptable security or debt reduction."
Then on page 9, under the rubric "Conditions Subsequent to be satisfied by 31 March 2007" item 1 read:
"Completed initial report from Bank's appointed Quantity Surveyor, confirming, amongst other things, that the Development Budget and Program is realistic and achievable. Report to be deemed satisfactory to the Bank in all respects."
Item 5 read:
"All necessary planning regulatory, statutory and building permits to be in place."
Under the rubric "Other Ongoing Conditions", drawdown of the advances was addressed in item 1 as follows:
"Drawdown of development / construction funds to be against certification by the Bank's appointed Quantity Surveyor confirming:-
Total Expenditure to date on the scheme.
Expenditure on the scheme since the date of the most recent drawdown.
The cost to complete the scheme.
The Anticipated Date of Practical Completion of the scheme.
That all sums payable from the contractor to subcontractors, employees and consultant suppliers have been paid."
Item 4, under the same rubric, specified as a further ongoing condition that:
"Cost to Complete to be less than or equal to the Funds Available within the Facility less the amount of the Drawdown Request before the Bank.
In the event the Cost to Complete exceeds the Funds Available within the Facility a Cost Overrun will be deemed to have occurred and no further debt funding will be permitted until the full amount of the Cost Overrun has been funded by additional equity."
Item 5 imposes the yet further ongoing condition that:
"Anticipated Date of Practical Completion to be no later than the Expiry Date of the facility."
The appointed quantity surveyor referred to in the facility letter engaged by the Bank was Cluttons.
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