Santander Uk Plc V. Allied Surveyors Scotland Plc
| Jurisdiction | Scotland |
| Judge | Morag Wise, Q.C. |
| Neutral Citation | [2011] CSOH 13 |
| Published date | 25 January 2011 |
| Docket Number | A984/08 |
| Court | Court of Session |
| Date | 25 January 2011 |
| OUTER HOUSE, COURT OF SESSION [2011] CSOH 13 | |
| A984/08 | OPINION OF MORAG WISE, Q.C (Sitting as a Temporary Judge) in the cause SANTANDER UK PLC Pursuers; against ALLIED SURVEYORS SCOTLAND PLC Defenders: ________________ |
Pursuers: L. McNeill, Advocate; Lindsays
Defenders: R.W. Dunlop, Q.C.; Simpson & Marwick
25 January 2011
Introduction
[1] The pursuers are the successors to the rights and claims of Girobank plc ("Girobank"). As such, they are suing the defenders, who carry on the business of chartered surveyors from various addresses in Scotland, for breach of contract. The alleged breach is of an admitted term of the contract between the parties that the defenders would exercise with reasonable care the ordinary skill to be expected of ordinarily competent chartered surveyors in providing a valuation report. The valuation report in question was provided on 10 October 2001. The defenders' second plea-in-law is to the effect that any cause of action available to the pursuers has been extinguished by the short negative prescription. I heard a preliminary proof on that plea. Put shortly, the defenders contend that the concurrence of iniuria and damnum occurred in October 2001 and in any event prior to October 2003. Thus the action was time barred from October 2008. The pursuers' contention is that the concurrence of iniuria and damnum did not take place until 5 August 2005.
Agreed Evidence
[2] A detailed Joint Minute, No. 26 of process, was lodged at the commencement of the preliminary proof. There was a large measure of agreement between the parties as to the relevant facts. A number of productions relevant to the issue in dispute were also agreed. In light of the extent of the agreement on the evidence, I was advised by Mr McNeill that he did not intend to lead any oral evidence on behalf of the pursuers and he closed his case, that case comprising the Joint Minute and the productions referred to therein. Accordingly, the evidence upon which the pursuer later relied can be summarised in the following passages from the Joint Minute.
"2. On 2 October 2001 Girobank instructed the defenders to provide for Girobank plc (hereinafter "Girobank") a report and valuation of the leasehold interest of Fishlike Ltd (hereinafter "Fishlike") in the property at the Esplanade, Sea Beach, Aberdeen, from which Fishlike operated a licensed "Harry Ramsdens" restaurant (hereinafter "the property").
3. Fishlike's leasehold interest in the property was in terms of lease between Fishlike as tenant and Rossnow Leisure (Aberdeen) Limited as landlord dated 8 and 15 May 1998 (7/6 of process).
4. Valuations of the property were requested by Girobank on various valuation bases, as set out in page 2 of the report provided by the defenders, no. 6/1 of process.
5. The defenders accepted Girobank's instructions, and responded with a valuation report dated 10 October 2001 which forms no. 6/1 of process.
6. In 6/1 of process, the defenders valued the Estimated Realisation Price (Business Closed) of Fishlike's said leasehold interest in the property at £300,000.
7. The true valuation of the Estimated Realisation Price (Business Closed) of Fishlike's said leasehold interest in the property as at both October 2001 and October 2002 was £75,000.
8. Girobank offered Fishlike a term loan of £225,000, secured over the property, and Fishlike accepted that offer on 29 October 2001. Offer of loan and acceptance thereof form 6/11 of process. After accepting the offer Fishlike immediately drew down the full loan amount of £225,000 which had been released by Girobank to Fishlike by at latest 6 November 2001.
9. Girobank also offered Fishlike an overdraft facility of £75,000 which offer was again accepted by Fishlike on 29 October 2001. Offer of overdraft and acceptance thereof form 7/3 of process.
10. In accordance with the terms and conditions of said term loan, Fishlike (1) granted a standard security over Fishlike's leasehold interest in the property (7/7 of process); (2) granted the personal bond (6/2 of process) referred to in the standard security; and (3) procured an unsecured personal guarantee provided by its Director William Miller (6/3 of process).
11. On 16 October 2002, without any further valuation of the property having been obtained by them, Girobank offered to increase the term loan provided to Fishlike to the sum of £300,000. That offer was accepted by Fishlike on 17 October 2002, and the full amount of £300,000 was drawn down and released by 22 October 2002 that same day. Offer of loan and acceptance thereof form 6/6 of process.
12. Throughout the period from 6 November 2001 until and including 22 July 2005, Fishlike paid the monthly instalments due by them on the sad term loan in the correct amounts on the due dates. The total interest element in the monthly instalments so paid was £58,486.69.
13. 6/5 and 6/7 are what they bear to be, namely statements showing the outstanding balance from time to time on Fishlike's term loan for (respectively) the periods (i) 6 November 2001 to 24 October 2002; and (ii) 22 October 2002 to 22 July 2005.
14, 6/8 and 6/9 are what they bear to be, namely statements showing credit balances at close of business on 30 April 2004 of respectively £14,100.91 and £7,832.96 on Fishlike's current accounts numbers 165 8093 and 146 7514 with Girobank.
15. 7/4 is what it bears to be, namely a document setting out Girobank's lending policies including as to the exercise of devolved powers within Girobank as in force at the time of Girobank advancing funds to Fishlike as aforesaid.
16. 7/8 - 7/16 are what they bear to be, being accounts, balance sheets and similar documents prepared by the auditors of Fishlike for the dates and accounting periods shown on same.
17. Each of the documents referred to hereinbefore is what it bears to be, and may be treated as evidence in the cause without necessity of a witness speaking thereto.
18. Fishlike ceased trading at the property and the winding up of Fishlike commenced on 5 August 2005.
19. At no time prior to 5 August 2005 had Girobank sought to sell its rights under the term loan, Mr Miller's personal guarantee and the standard security."
Evidence for the Defenders
[3] In addition to relying on certain aspects of the Joint Minute, evidence was adduced in the defenders' case from two witnesses, David McLintock and Hendry Stewart. Mr McLintock is a 55 year old retired banker from Glasgow. He now works as a consultant in the banking sector. He has been a Member of the Chartered Institute of Bankers in Scotland since about 1980. He worked for some 33 years as a banker with Bank of Scotland (subsequently HBOS) retiring in December 2008. During those years, he worked as a relationship manager, a credit controller and was a member of a Scotland wide corporate credit panel. He was chairman of the relevant credit panel in Glasgow and had extensive experience of resolving bad debt problems on behalf of the bank. He was also in charge of the lending control section of the bank in Glasgow. He had very significant experience of assessing credit valuations from a banking perspective. He was used to advising on lending criteria. I accepted that he was well qualified to express an expert view as a banker on the value of the rights held by Girobank in 2001 following the granting of a secured loan over the Aberdeen property. To this end, Mr McLintock had produced a report, No. 7/17 of process in which he expressed views on the matter. He spoke to that report. In essence, Mr McLintock expressed an independent view on the value of the bundle of rights acquired by Girobank in October 2001 in return for lending £225,000 to Fishlike. Those rights included 1) a standard security over Fishlike's interest in the property, 2) a personal bond or covenant by Fishlike and 3) a personal guarantee from Mr Miller the sole director of Fishlike.
[4] In his report and in evidence, Mr McLintock explained that the process of lending assessment has become increasingly sophisticated in recent years with lenders using computer generated models and credit scoring. However, two factors continue to be fundamental in the process. These factors are known as Viability and Safety. It is the analysis of Viability and Safety that enables the lender to calculate the strength of a business and determine the amount of debt they are willing to provide. In order to ascertain the value of Girobank's rights, a hypothetical transfer of those rights to another financial institute was postulated. The hypothetical acquirer would look at each of the three relevant rights and test them against the requirements of Viability and Safety. So far as the value of the security over the lease was concerned, Mr McLintock confirmed that he would rely upon the view of a chartered surveyor. As it had been agreed in this case that the true valuation of Fishlike's leasehold interest in the property at October 2001 was £75,000, he would rely on that. Then he would consider the viability of the business to generate profit. He would look for profits at the level of twice the interest charged. Where the ratio of profits to interest fell below 1.25:1 he would characterise the business as high risk. In that event the lender would fall back on the safety of the asset cover, in this case the value of the property over which security was being offered. Mr McLintock confirmed that if the viability of a company became problematic then the safety aspect became crucial to the lender. In essence the Estimated Realisation Price (Business Closed) would be the sum the lender would be likely to receive if the business ceased trading. It was apparent from the accounts of Fishlike that a lender would not provide any facilities without evidence of improved financial performance and adequate security being given. The accounts of the company to 31 October 1998 (No. 7/9 of process) indicated that at that time, Fishlike had been in a situation of...
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