Midland Bank Ltd (Plaintiff (Respondent) Farmpride Hatcheries Ltd (1st Defendant) Douglas Haig Willey (2nd Defendant (Appellant)

JurisdictionEngland & Wales
JudgeLORD JUSTICE BUCKLEY,LORD JUSTICE SHAW,LORD JUSTICE OLIVER
Judgment Date19 December 1980
Judgment citation (vLex)[1980] EWCA Civ J1219-7
Date19 December 1980
CourtCourt of Appeal (Civil Division)
Docket Number1976 M No. 73

[1980] EWCA Civ J1219-7

In The Supreme Court of Judicature

Court of Appeal

(Civil Division)

On Appeal from The High Court of Justice

Chancery Division

Group A

King's Lynn District Registry

(Mr. Justice Dillon)

Before:

Lord Justice Buckley

Lord Justice Shaw

and

Lord Justice Oliver

1976 M No. 73
Between:
Midland Bank Limited
Plaintiff (Respondent)
and
Farmpride Hatcheries Ltd.
1st Defendant
and
Douglas Haig Willey
2nd Defendant (Appellant)

MR. PETER MOTTERSHEAD Q. C. and MR. AUGUSTUS ULLSTEIN (instructed by Messrs. Webster's, Solicitors, London WIM 5AP). appeared on behalf of the Second Defendant (Appellant).

MR. GEOFFREY JAQUES (instructed by Messrs. Hill & Perks, Solicitors, Norwich) appeared on behalf of the Plaintiff (Respondent).

LORD JUSTICE BUCKLEY
1

I have asked Lord Justice Shaw to deliver the first judgment on this appeal,

LORD JUSTICE SHAW
2

This appeal is brought by the second defendant in the action, Douglas Haig Willey (to whom I shall refer as "Mr. Willey") from the dismissal by Mr. Justice Dillon on 23rd November 1979 of an application by Mr. Willey for an injunction to restrain the plaintiff (whom I shall call "the bank") from enforcing a writ of possession issued on 10th May 1979 The writ related to a property known as West Hall, Munford, in Norfolk. It extended to over fifty acres of land, most of it woodland, scrub or marsh; but it included also West Hall House, a well preserved sixteenth century mansion, together with two cottages and hatcheries and other outbuildings. The freehold of the entire property was at material times vested in Farm pride Hatcheries Limited (the company") the first (and originally the only) defendant. As its name indicates, it was formed to carry on the business of a chicken hatchery. On incorporation its name had been Farm pride Chicks Ltd., and the issued capital was divided between Mr. Willey and his wife and a Mr. Goode ham and his wife. The bank account of the company was with the plaintiff. Mr. Goode ham appears to have been a gentleman of some means, for he was a guarantor of that account. In September 1969 the Goode hams parted with their interest to Mr. and Mrs. Willey who have since been the sole shareholders in the company. At material times they have been and are the only directors. The company acquired the property from a Mr. Benton in February 1970. Before that date Mr. Willey had occupied the mansion and the hatcheries as a tenant of Mr. Benton. The purchase price was £14,825. According to Mr. Willey this figure was substantiallyless than the market value, for it took account of Mr. Willey1s occupation as tenant of the principal buildings. The nature of Mr. Willey1 tenancy is not made clear by the evidence. It may have been a monthly tenancy but its only importance is its possible bearing on the purchase price. He had contemplated the purchase of West Hall some time before and had asked the bank for overdraft facilities amounting to ten or twelve thousand pounds. In the event the purchase was completed with some £6,000 left on mortgage to Mr. Benton but negotiations with the bank continued. Apart from covering the cost of West Hall to the company, it needed overdraft facilities for the purposes of its business.

3

In August 1969, Mr. Willey appears to have lost patience with the cautious attitude of Mr. Christian, who was the manager of the local branch of the bank at The ford. He asked to pursue the negotiations on behalf of the company with an official of the bank at higher than branch level. As a result the matter was taken up by Mr. Prank Timbers who was the manager of the Norwich branch of the bank. The company was accorded additional facilities, but needed yet further accommodation to enable it to operate as an expanding business. On 23rd June 1971, Mr. Timbers called at West Hall, where he saw Mr. and Mrs. Willey. The position and affairs of the company were discussed in detail. Mr. Timbers compiled a note of the discussion which was accepted before Mr. Justice Dillon as an accurate account of what he was told about the company and its business affairs. It was a critical interview of such importance that the more material part of that note should be quoted. It reads: "He" (that is, Mr. Willey) "told us that apart from one car which was subject to a smallamount of H. P., every other piece of equipment and machinery was paid for, including the very large machines in use in the hatchery. In order to minimise profits for tax he has ploughed a considerable amount of the company's profits into renovating and redecorating West Hall, which appears to be in a very good condition whilst the various outbuildings are all in useful order. His daughter is very interested in show jumping and they have 3 horses and 2 ponies in addition to one horse box. Mr. Willey told us that he is the British Hydroplane Champion and this was evidenced by numerous cups on the mantel piece. We also inspected the two cottages which will shortly become vacant and which he hopes to sell for at least £2,000 each, and also the cold store which at the moment is on a ten day offer of £2,000. The proceeds from these sales will be injected into the company. We discussed fully the situation regarding Mr. Goode ham's guarantee and Mr. Willey asked whether we would be prepared to raise the outstanding mortgage of about £4,500 from his solicitors, at the same time increase the company's limit to £10,000 to enable us to have the deeds as security. He had in the back of his mind, should the opportunity come to enlarge the hatchery, the bank would possibly look sympathetically at his request. The March 1970 Balance Sheet and Accounts should shortly be ready and he is to discuss the possible release of the mortgage with his solicitor. Once we have received the accounts and Mr. Willey's go ahead we can submit an application, but of course we made no promises at this stage. As mentioned in the surveyors' report what land is suitable for cultivation is now in use as either meadow for show jumping or is being cropped".

4

Almost the only matter which was not mentioned was Mr.Willey's status in relation to West Hall House, where he and his family were living. Mr. Timbers did not think to ask about it and neither Mr. Willey nor his wife vouchsafed any information in that regard. The matter was not insignificant for at a much later stage in the history Mr. Willey asserted a claim to be a licensee of the company under the terms of a service agreement which appointed him to be the managing director of the company for twenty years from 6th March 1968. By clause 9(iv) of that agreement the company undertook to "allow Mr. Willey and his family the sole and exclusive use and occupation for the same period of the residential premises and the buildings presently occupied therewith and known as West Hall aforesaid, free of rent rates and all other outgoings including the cost of telephone, electricity and heating".

5

A curious and unexplained feature of this agreement is that it bears date "the seventh day of March 1968" although the company did not acquire the West Hall property until two years later. However no point arising out of this discrepancy appears to have been taken before the learned judge and it is unnecessary to dwell upon its possible implications. What is manifest and incontrovertible is that a licence conferring a right of occupation on Mr. Willey free of rent for another seventeen years from 1971, must have had the effect of reducing the market value of West Hall House and the other buildings mentioned, in a radical degree; and is beyond question that the house and the buildings represented, in terms of value, the major part of the entire property. It would have been obvious to a schoolboy, let alone a man of business as Mr. Willey undoubtedly was, that if the property were to be offered as a security for an advance the lender would regard the licence as reducing the value of that security in a very greatmeasure, indeed almost to the point of extinction.

6

At the interview on 23rd June 1971, when Mr. and Mrs. Willey were looking for a substantial loan or overdraft from the bank, their silence on the topic of the licence cannot, in my assessment of the situation, be ascribed to oversight or inadvertence. Collateral and irrelevant matters were described by Mr. Willey with profuse particularity; but not a word about the licence. It is impossible to escape the conclusion that Mr. Willey intended to conceal the existence of the licence. In this design he was assisted by Mr. Timbers' omission to make any enquiry as to the occupancy of the Willey family.

7

Mr. Timbers asserted, both on affidavit and when he gave evidence before the learned judge, that he had not been told anything about a tenancy of West Hall House and that the first he heard of the service agreement and the twenty year licence it purported to confer was when he saw Mr. Willey's affidavit sworn in the present action. He declared that if he had been told at the time of the negotiations of the existence of a tenancy he would have "stopped then on the spot or at least have immediately enquired what the tenancy was all about". Mr. Justice Dillon accepted Mr. Timbers' recollection in this regard.

8

On the day following the interview of 23rd June 1971, Mr. Timbers made the following entry in his office records: "Mr. Willey telephoned stating that his solicitors were prepared to release the deeds of West Hall on the payment of £4,340 we told him we would prepare an application and he asked that this should be at a figure of £12,000 and he offered for the first two years reduction of £2,000. We asked again for the March 1970 accounts and he said he would expedite these".

9

After further negotiation the company executed the mortgage which gave rise to these proceedings. It was granted ly way of demise to secure payment of all moneys at any time owed by the company to the...

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