Elite Property Holdings Ltd and Another v Barclays Bank Plc
| Jurisdiction | England & Wales |
| Judge | Lady Justice Asplin,Mr Justice Nugee,Lord Justice Hamblen |
| Judgment Date | 21 February 2019 |
| Neutral Citation | [2019] EWCA Civ 204 |
| Docket Number | Case No: A4/2017/2212 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 February 2019 |
[2019] EWCA Civ 204
Lord Justice Hamblen
Lady Justice Asplin
and
Mr Justice Nugee
Case No: A4/2017/2212
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE MERCANTILE COURT,
QUEEN'S BENCH DIVISION
His Honour Judge Waksman
LM-2016-000083
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr John Brisby QC and Mr Alexander Cook (instructed by Kyriakides & Braier) for the Appellants
Mr Andrew Mitchell QC and Mr Ian Bergson (instructed by Dentons UK and Middle East LLP) for the Respondent
Hearing dates: 29 th–30 th January 2019
Approved Judgment
This is an appeal against the order of HHJ Waksman QC (as he then was) sitting in the London Mercantile Court, dated 21 July 2017, by which he dismissed the Appellants' application to amend their Particulars of Claim and for the avoidance of doubt, ordered that the original claims for damages for conspiracy to injure by unlawful means and/or unlawful interference in the Appellants' trade or business were struck out. The Appellants had sought to amend those claims against the Respondent, Barclays Bank plc (the “Bank”).
The proceedings were commenced on 20 November 2015 and relate to various interest rate hedging products (“IRHPs”) entered into by the Appellants with the Bank. The Appellants' first two claims were for mis-selling of the IRHPs (the “advice claim”) and for breach of duty by the Bank when conducting its review of their sale (the “review claim”). By an order of 20 December 2016 HHJ Bird struck out both the advice and the review claims. He also ordered that if the conspiracy claims were to be pursued, they should be pleaded out fully and properly particularised, in substitution for those claims as they stood and that if the Bank did not consent to the amendments, an application to amend should be filed and served. It is that part of HHJ Bird's order which gave rise to the application for permission to amend which was dismissed by HHJ Waksman QC.
The claims for unlawful interference and conspiracy with a predominant intention to injure are no longer pursued. Accordingly, this appeal is concerned solely with HHJ Waksman QC's decision to refuse permission to amend in relation to the claim for conspiracy to use unlawful means. It is also important to be clear that the appeal is concerned with the form of the draft before the Judge and not a further draft amended pleading which was produced on appeal and was ultimately described by Mr Brisby QC and Mr Cook, on behalf of the appellants, as a “forensic tool”. It was substantially different from the draft in relation to which permission to amend was originally sought and refused. I should add that Mr Brisby and Mr Cook were not instructed in relation to the application and did not appear before the Judge.
Factual Background
I take the essential facts from HHJ Waksman QC's judgment. The First Appellant, Elite Property Holdings Limited (“Elite”) and the Second Appellant, Decolace Properties Limited (“Decolace”) are companies registered in the British Virgin Islands. Both companies had a number of loan agreements with the Bank which were secured over properties in Essex and London, including three care homes for the elderly, owned by Elite and operated by an associated company, Health and Home Limited (“H&H”). H&H also provided a guarantee for the Elite loans and by way of further security for the Bank, a debenture over its assets.
The Bank sold five IRHPs to the Appellants between 2006 and 2010. Three structured collars were entered into between October 2006 and July 2008, two by Elite and one by Decolace, in connection with loan facilities granted by the Bank, totalling about £7.5 million. Having entered into the structured collars, Elite and Decolace subsequently complained that they had been mis-sold. As a result, the collars were terminated in August and September 2010 and the Bank provided facilities to pay the related break costs. At the same time, Elite and Decolace each entered into an interest rate swap with the Bank and on 11 August 2010, they entered into a settlement agreement with the Bank, the details of which are not relevant for these purposes.
In August 2012 the Bank made an agreement with the Financial Services Authority, (the “FSA”) (now the Financial Conduct Authority (the “FCA”)) to conduct a review into its sale of IRHPs and provide appropriate redress where necessary (the “FCA Agreement”). Under the FCA Agreement the Bank was required, amongst other things, to carry out a review of past sales of IRHPs, identify customers who did not meet the “sophisticated customer” criteria, ask them if they wanted a review, carry out the review, and, if a breach of a regulatory requirement had occurred, determine the matter, and, if relevant, provide appropriate redress.
The Bank gave an undertaking to the FCA in relation to the review which was at Annex A to the FCA Agreement. Amongst other things, the Bank stated that it would treat its complainants fairly and that it would prioritise any customers who were in financial difficulty. Importantly, it also stated that:
“… except in exceptional circumstances, such as for example where this is necessary to preserve value in the Customer's business, [the Bank] will not foreclose on, or adversely vary, existing lending facilities (without giving prior notice to the Customer and obtaining their prior consent) until [the Bank] has issued a final redress determination…”
Annex A also required the Bank to comply with the terms of a statutory notice issued by the FCA which contained provisions in relation to the role of the “Skilled Person” who was “to provide an independent review of all aspects of the proactive redress exercise and past business review … as well as independent oversight of the application of that approach” (see paragraph 5) and an “independent oversight of the Firm's [Bank's] approach to the undertaking it has given in relation to not foreclosing on Customers or adversely varying their existing lending facilities …” (see paragraph 7). In addition, the Skilled Person was required to “assess and ensure the appropriateness of … the Firm's approach to the undertaking it has given in relation to foreclosure, … and in any case where the firm proposes to rely on exceptional circumstances … the application of that approach, prior to the [Bank] taking any steps to foreclose….” (see paragraph 14). Further, paragraph 15 states that:
“In particular, in any case where the Firm proposes to foreclose on a Customer … the Skilled Person will review the case to confirm that there are exceptional circumstances.”
Returning to the chronology, on 2 November 2012 and again on 30 January 2013 the Bank sent “reservation of rights” letters to Elite in respect of its breach of cashflow to debt ratios, which formed part of the loan facilities. Thereafter, on 7 May 2013, HMRC made a demand on H&H of approximately £700,000 in respect of unpaid Corporation Tax. A winding up petition was issued on 20 May 2013.
In the meantime, on 18 May, H&H and Elite agreed to transfer the care home business to another associated company, Health and Home (Essex) Limited, (“HHE”) and stated that the new operator of the homes would be “unencumbered by the tax liability”. Despite the fact that under the terms of Elite's loan agreements the Bank's consent to the transfer was necessary, it was not sought. The Judge found that the Bank was not informed until 29 May 2013, a conclusion which Mr Brisby QC, on behalf of Elite and Decolace, disputes. At a meeting on 24 June 2013, Mr Stavrinides, who is believed to be the ultimate beneficial owner of both Elite and Decolace and was an authorised signatory for both companies, offered the Bank a replacement debenture from HHE.
In any event, in the light of these matters and earlier defaults, including the breach of cashflow to debt requirements, the Bank decided to evaluate the group's financial position and it commissioned a report from BDO. BDO was appointed pursuant to a joint retainer by the Bank and H&H. In the course of the production of a report, BDO's drafts were considered and commented upon by H&H and attention was drawn to the review being conducted in relation to the IRHPs. It was stated that:
“…Although there are no firm assurances but it could very well be proved that we are entitled to a refund of this amount. Two of the loans totalling £1 million are for financing breakage costs. The overall cost to the group is approximately £2 million.”
In the light of that a further draft was produced and ultimately signed off by Mr Stavrinides on behalf of H&H.
On 24 July 2013, the Bank's Interest Rate Hedging Resolution team wrote to Decolace and to Elite stating that they had determined that both companies met the criteria of “non-sophisticated customer” and, accordingly, they were automatically eligible for redress in relation to the sale of the structured collars. They were invited to take part in an impartial fact-finding process regarding the sales of the products, which was described as important in determining what redress would be offered.
On 2 August 2013, H&H submitted a proposal for a company voluntary arrangement (“CVA”) stating that H&H was unable to pay its debts as they fell due and on 14 August 2013, the Bank wrote to Elite stating, amongst other things:
“On 20 May 2013 a winding up petition was presented…Also, on 2 August 2013, H&H submitted a proposal for a Company voluntary arrangement…The letter also identified, under the heading ‘Breaches’, the sale (the transfer of assets) having been completed without the Bank's prior consent, the winding up petition and the CVA proposal.”
The Bank reserved all of its rights and remedies in relation to the breaches including, but not limited to, issuing...
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