National Westminster bank Plc v Rabobank Nederland

JurisdictionEngland & Wales
JudgeMR JUSTICE COLMAN,Mr Justice Colman,MR JUSTICE SIMON
Judgment Date11 May 2007
Neutral Citation[2006] EWHC 2959 (Comm),[2007] EWHC 3163 (Comm),[2007] EWHC 1742 (Comm),[2006] EWHC 2108 (Comm),[2006] EWHC 2332 (Comm),[2007] EWHC 1056 (Comm)
Docket NumberCase No: 2004 FOLIO NO. 68,2004-68
CourtQueen's Bench Division (Commercial Court)
Date11 May 2007
Between
National Westminster Bank Plc
Claimant
and
Rabobank Nederland
Defendant

[2006] EWHC 2108 (Comm)

Before:

Mr Justice Colman

Case No: 2004 FOLIO NO. 68

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Mr Nicholas Stadlen QC and Mr Antony Zacaroli (instructed by Travers Smith) for the Claimants

Mr Anthony Temple QC and Mr Jeffrey Chapman (instructed by Morgan Lewis) for the Defendants

PAPER APPLICATION

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

MR JUSTICE COLMAN Mr Justice Colman

The Hon

1

This application by Rabobank is advanced in somewhat unusual circumstances. In substance it asks for permission to rely on the allegations advanced in a document called Misrepresentation Statement of Case ("MSC") by way of substitution for, and partial amendment of, Rabobank's Amended Defence and Counterclaim, together with ancillary directions as to supplemental witness statements and expert evidence.

2

The MSC arises from a problematic pleading history in these proceedings the details of which do not for the most part matter and which can be outlined as follows.

3

Rabobank's counterclaim against National Westminster Bank ("NWB") arises out of the participation of both banks in certain financing facilities under which both advanced credit facilities to Yorkshire Food Group ("YFG"). Certain of the officers and directors of YFG were private customers of NWB to whom or to whose nominees NWB had also extended credit facilities for purposes which, it is alleged, gave rise or would inevitably give rise to breaches of the officers' and directors' duties to YFG. Given that those private credit facilities were in part secured on shares in YFG, and given further that the security of credit facilities extended by NWB and Rabobank to YFG were dependent upon the financial viability of YFG and the maintenance of its operation in business as a profitable and independent going concern, it is alleged by Rabobank that in deciding what further financial commitments it ought to take on in order to keep YFG going, when it had encountered severe financial difficulties, it was material that it should be given by NWB a full picture of its commercial relationship with the officers and directors who were its private customers. As the financial condition of YFG deteriorated still further in 1996 – 1997 NWB resolved to disengage from its financial backing of YFG. This it did by persuading Rabobank to cause an associated company to buy out YFG's outstanding indebtedness to NWB at a discount, leaving Rabobank and its associated company as aggregate creditors of YFG in a substantially increased amount which was likely to increase still further unless YFG were liquidated.

4

The essence of Rabobank's case is that, in persuading Rabobank to continue to keep YFG afloat in 1996 and to procure the buyout of YFG's indebtedness to NWB, the latter deliberately failed to disclose information very material to Rabobank's decision-taking on these matters, with the effect that the information about YFG and its officers and directors that was disclosed was rendered so highly misleading as to amount to half-truth misrepresentations. Rabobank also relied on one particular free-standing misrepresentation as fraudulently made (the Van der Schrieck Misrepresentation).

5

The case in fraud developed to include the half-truth misrepresentations by an Amended Defence and Counterclaim ("ADC") in June 200The trial was then fixed for October 2006.

6

The manner in which the fraud claim had been pleaded was not satisfactory. Requests for further information as to the misrepresentation claim were unproductive and the matter came before me on 3 March 200It was at once apparent that the ADC was insufficiently explicit as a claim for fraudulent misrepresentation and in as much as it included claims for breach of fiduciary duty, negligent misstatement under Section 2(1) of the Misrepresentation Act 1967 and negligence at Common Law and relied heavily on pleas by cross-reference to other parts of itself, it presented a veritable bramble thicket of allegations which were extremely hard to understand. Consequently, I directed that Rabobank should serve a free-standing statement of its case on misrepresentation. This was to be done before the exchange of factual witness statements and was scheduled to cater for there being adequate time for witnesses to be able to deal with the case against them. I indicated that the statement should cover fraud and what appeared to be a case in equitable negligence ( Nocton v. Ashburton).

7

On 3 April 2006 Rabobank served a schedule – the Misrepresentation Schedule —which was intended to clarify all aspects of Rabobank's misrepresentation case in fraud but did not cover negligence. It was considered at a hearing before Tomlinson J. on 16 June 2006. He considered it to be "unworkable" and said that it could not be used at the trial but gave Rabobank a last chance to identify its case on misrepresentation in explicit form, but without pre-judging whether Rabobank would be given permission to amend its existing pleading by reference to the contents of the further document.

8

In the course of the 16 June 2006 hearing Tomlinson J. was invited to strike out certain parts of the ADC as disclosing no cause of action or as bound to fail. He did indeed strike out paragraph 51 which alleged that NWB owed Rabobank a duty of care when disclosing to Rabobank information relevant to the achievement of what the pleading described as Common Goals. This was not a Hedley Byrne duty of care to avoid making misstatements by way of advice or information. Also struck out were allegations of breach of that duty, including all the particulars of such breaches of duty in paragraph 52. At sub-paragraph 13 of the Particulars of breach of duty struck out with regard to breach of that duty of care there appear the words:

"The facts and matters alleged at paragraphs 53, 54 and 55.6 below will be relied on as particulars of breach of fiduciary duty and negligence."

9

Quite obviously the function of this sub-paragraph was to deploy the facts and matters pleaded in paragraphs 53, 54 and 55.6 as facts in addition to those particularised at (1) to (12) of paragraph 52 upon which the allegations of breach of fiduciary duty and breach of duty of care were based. When Tomlinson J. ordered that allegation of breach of duty of care be struck out, the consequence was therefore that there ceased to be any allegation of negligence to which paragraph 52(13) could apply. Since it had never performed the function of a free-standing allegation of negligence in addition to that under paragraph 51 which had been struck out, it had been rendered otiose as regards a breach of duty of care claim by Tomlinson J's order. There was no other allegation of a duty of care or the breach of it in the ADC.

10

The new document – Rabobank's MSC – emerged on 3 July 2006. It was divided into three sections A, B and C. Section A was intended to present the case on fraudulent misrepresentation, Section B on section 2(1) negligent misrepresentation and Section C on negligent misstatement at Common Law under Hedley Byrne v. Heller.

11

There can be no doubt that Section C introduced a cause of action not hitherto pleaded in the ADC in which, as I have held, there was no surviving claim for breach of duty of care.

12

It was not the only new allegation in the MSC. Misrepresentations 7, 8 and 9 were entirely new. They were deployed as part of the fraudulent misrepresentation claim and as part of the basis for the claim for negligent misrepresentation under section 2(1).

13

At the Pre-trial Review, the hearing of which took place on 7 July 2006, I directed that Rabobank's application for permission to rely on the MSC, whether as a re-formulation of its existing case or by way of amendment, should be determined by written submissions and without a hearing. Pursuant to this direction NWB relied on a witness statement from Mr King, its solicitor, explaining the problems of trial preparation that would be likely to arise should the new allegations be relied upon by Rabobank. The written submissions were complete by 26 July 2006.

14

In determining whether at this point of time permission should be given to Rabobank to rely on its MSC it is necessary to bear in mind that only two months remain before the start of the trial and that for most of those concerned in trial preparation a significant part of that period will be taken upon by holidays.

15

Secondly, of the four key NWB factual witnesses, Messrs Hamilton, Catton and Havelock no longer work for NWB and their availability for interview access by NWB's solicitors is extremely limited and of subsidiary priority to their current workload with different employers. In this connection, Mr Catton alone is alleged to have been involved in each of the three misrepresentations not relied upon until the MSC, namely those numbered 7, 8 and 9. Mr Havelock's position in the management stream at NWB would make him at least a potential witness with regard to the system of administrative control and information transmission between the representee employees and management at NWB. Investigation of this field may be of importance not only with regard to the fraud claim but also the section 2(1) negligent misrepresentation claim.

16

Thirdly, NWB would wish to rely on the evidence of its UK Banking Expert, Mr Paul Thompson, who is likely to be able to give evidence directly pertinent to the section 2(1) claim and, if permitted to be pursued, the Hedley Byrne negligent misstatement claim. Self-evidently he cannot complete that evidence unless and until he has had...

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