Close Brothers Ltd v Esther Louise Ridsdale and Others
| Jurisdiction | England & Wales |
| Judge | Roger Ter Haar Q.C. |
| Judgment Date | 08 November 2012 |
| Neutral Citation | [2012] EWHC 3090 (QB) |
| Docket Number | Claim No.: HQ11X01826 |
| Court | Queen's Bench Division |
| Date | 08 November 2012 |
[2012] EWHC 3090 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr. Roger ter Haar Q.C.
Sitting as a Deputy Judge of the Queen's Bench Division
Claim No.: HQ11X01826
Mr. Max Thorowgood ( instructed by Awb Partnership) for the Claimant
Mr. Gavin Hamilton ( instructed by Lawrenson Solicitors) for the First and Second Defendants
The Third Defendant did not appear and was not represented
Hearing dates: 17, 18, 19 and 23 October 2012
In these proceedings the Claimant ("Close"), a well known merchant bank, seeks to recover on guarantees given by each of the Defendants in respect of sums advanced by Close to St Georges Keep (Southern) Limited ("Southern"), a subsidiary of the Third Defendant.
The Third Defendant has taken no part in these proceedings — accordingly this judgment is solely concerned with what, if any, liability each of the First and Second Defendants has to Close.
The Ridsdales
The First and Second Defendants are wife and husband.
The Third Defendant company is a company set up by Mr. Ridsdale for his personal development projects. It is either wholly owned or majority owned by him. Mrs. Ridsdale was the company secretary.
Mr. Ridsdale is in his early fifties. Early in his career he worked in pubs and restaurants before becoming an insurance broker. He started acting as a developer in the late 1980's. He had a track record of success which impressed Close, as I explain further below. He gave evidence before me. He struck me as intelligent and shrewd. I also formed the view that he was substantially honest, although as I set out below, his witness statement went somewhat further than was accurate.
Mrs. Ridsdale has been married to Mr. Ridsdale for about 9 years and had been together with him for a number of years prior to that. She also was patently honest, and it was clear that in business matters she deferred to his judgment without questioning him as to the details of those matters or being given much information about them. Before giving up work to devote herself to her husband and children as wife and mother, she had worked as a counter clerk in a building society. Nothing in that employment trained her to understand the intricacies of the transactions with which this case is concerned.
Close's Relationship with the Defendants
Close is, as I have said, a well-known merchant bank. It is independent of the High Street banks which found themselves in difficulty in late 2008.
I had the benefit of a witness statement and oral evidence from Mr. Robert Orr, who was until 31 st July 2012 a Director of Close Brothers Property Finance, which is a trading division of Close. He also was an honest witness.
In his witness statement he set out this record of the relationship between the Defendants and Close, which I accept as accurate:
The Claimant's relationship with Mr. Ridsdale began in September 2006 when he approached us in respect of his vehicle, Inntown Properties Limited. At that stage Mr. Ridsdale told us that he was a relatively experienced property developer having 'fallen into' property development in about 1987.
The second project he undertook with the Claimant, through the Third Defendant, concerned land in Cattistock. Mr. Ridsdale approached Mr. Jason Haigh of Close Property Finance Limited and explained his need for a facility of about £2m. The Gross Development Value ("GDV") of the project was valued at £3,200,000.00
Negotiations were successful and the Third Defendant entered into a Loan Facility on 19 September 2006. The loan facility was similar in form and terms to that used in the current proceedings…. in that it was a condition of the facility that the Defendants, Martin and Esther Ridsdale, gave personal guarantees for the indebtedness of their company and that an extension of the terms of the facility was required by the Third Defendant in order to complete the project…
Again in September 2006 the Third Defendant, through Mr. Ridsdale, approached Mr. Haigh in respect of another project, 'Frome'. This time the request was for £396,000.00 …. A facility was offered which was in similar terms to those in the Cattistock project and to those in the current proceedings… Again, it was a condition of the facility that the First and Second Defendants give personal guarantees for approximately 10% of the value of the facility….
A further facility in the total sum of £630,000.00 for the development by the Third Defendant, of 'Stella Maris, Bransmore' was granted by the Claimant on 21 st January 2008. Again the First and Second Defendants signed as personal guarantors….
The summary above shows, I believe, that by the time they came to enter into the agreements with which the Court is concerned in these proceedings the First and Second Defendants were accustomed to dealing with the Claimant and more specifically with the terms of the facility documents as to the requirement for personal guarantees to be given by the directors of the special purpose vehicles undertaking the developments.
As I have said, I accept this as a description of the relationship of the parties before the transaction with which I am concerned, but that acceptance does not extend to accepting the implication in that evidence of full understanding on Mrs. Ridsdale's part of the transactions and the nature and terms of the guarantees given.
Mr. Jason Haigh, who was involved with at least two of the earlier transactions as subordinate to Mr. Orr, left Close and joined a "mezzanine" financier, Shelly Oak. When Mr. Haigh was at Close, he was assisted by Mr. Fergus O'Connell. When Mr. Haigh left Close, Mr. O'Connell worked directly with Mr. Orr.
Mr. O'Connell still works for Close, but did not provide a witness statement and was not called to give evidence.
In January 2009 Mr. Christopher Birch joined Close. In May 2010 he took over responsibility for the accounts held by Mr. Ridsdale's companies with Close.
The Development
Puddletown is a small rural village just under 6 miles from Dorchester in Dorset. It has now been by-passed by the A35. This resulted in withdrawal of business from a garage in the village, Olds Garage.
By the beginning of 2008 planning permission had been obtained to redevelop the garage site. The development project with which I am concerned was for the redevelopment of the garage site and for works to three semi-detached cottages adjacent to the garage site.
The proposed development is shown on a plan dated September 2008 which was placed before me. The site fronts onto a road known as the Moor which runs roughly from South West to North East along the side of the site. Alongside the road, and forming one boundary to the site, is the River Piddle.
Standing on the road and looking in a North Westerly direction, the river would run from right to left in front of the viewer. A bridge crossed the small river. Over the bridge an access road was to be constructed running directly across the site leaving the garage site to the left and an area which had been covered in a hardstanding to the right. This area on the right was described at times as "the brownfield site". The planning authorities wanted it to remain as open, grassed space. Mr. Ridsdale was hopeful that at some point in the future permission would be obtained to develop that space.
At the end of the new access road it was to turn rightwards in front of the first two of three semi-detached cottages. The first two cottages were described in later documents as plots 3 and 4. The access road went in front of these two cottages in order to give access to garages to be built between plots 3 and 4 and the third cottage, plot 5. Plot 5's partner cottage, to the North of the northern boundary of the development, remained outside the scheme at all times.
The three cottages were all Grade II listed. One, plot 3, had already been extended to provide 4 bedrooms. The intention was that the other two would be similarly extended, which would require listed building consent and planning permission. Plot 4 had a sitting tenant. All three were in need of extensive refurbishment.
Returning to the view of a person standing on the road, the area to the left of the site was what had been occupied by the garage premises. Permission was obtained to build 6 houses-two semi-detached and the rest detached. In addition to these there was permission to construct B1 commercial premises on part of the site fronting the road. In a rural location such as this, the demand for such premises was limited if non-existent. Mr. Ridsdale's hope was that eventually a consent for a substitute residential development would be obtained. The garage site came to be referred to as the "newbuild site".
Because of the previous use of the newbuild site, it was known that the site might be contaminated to a greater or lesser extent by leakage of petroleum products. It was also anticipated that specialist foundation works might be necessary. A further problem was environmental sensitivity associated with the River Piddle which was and is the home of a protected species, white-clawed crayfish.
After the owners of the proposed site had obtained planning permission for the development of the scheme, Mr. Ridsdale on behalf of St Georges Keep Ltd had obtained an option to purchase the site. The option was to expire at the end of March 2008. The purchase price of the site was £1,300,000 of which Close agreed to lend £850,000. The balance of £450,000 was to be lent by Shelly Oak.
The development of and agreement to Close's Original Facility
By letter dated 7 th March 2008, Close offered the...
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