Promontoria (Henrico) Ltd v Gurcharn Samra
| Jurisdiction | England & Wales |
| Judge | David Cooke |
| Judgment Date | 03 September 2019 |
| Neutral Citation | [2019] EWHC 2327 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: E30BM206 E30BM207 |
| Date | 03 September 2019 |
[2019] EWHC 2327 (Ch)
HHJ David Cooke
Sitting as a Judge of the High Court
Case No: E30BM206 E30BM207
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BIRMINGHAM
Business List (ChD)
Birmingham Civil Justice Centre
Bull Street, Birmingham B4 6DS
Thomas Samuels (instructed by Walker Morris LLP) for the Claimant
Simon Hill and Tara Sallar (directly instructed) for the Defendant
Hearing dates: 30,31 July, 1 August 2019
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.
HHJ David Cooke
The claimant, which claims to be the successor in title to Clydesdale Bank Plc (“the Bank”, which traded under the name Yorkshire Bank) seeks money judgment for sums of approximately £640,000 alleged to be due pursuant to an overdraft facility letter dated 27 March 2013 (“the 2013 overdraft”) which was the last in a series of facilities granted by the Bank to Mr Samra, together with orders for possession of two commercial properties in Coventry over which Mr Samra had created charges in favour of the Bank to secure those facilities.
Mr Samra's position, as advanced at trial, is firstly to put the claimant to proof of the effectiveness of the assignment from the Bank on which it relies for its title, and secondly if that is established that the relationship between him and the Bank was “unfair” for the purposes of s 140A Consumer Credit Act 1974 and in consequence the court should exercise its powers under s 140B of that Act so as to put him in the position he would have been in if, instead of having facilities repayable on demand under the overdraft facility, he had long term finance ultimately repayable by November 2022 and at lower interest rates, with the effect, he submits, that his total liability would be reduced and the claimant should not yet be entitled to possession of the properties.
Factual background
The following is a general and abbreviated summary of the factual background, to set the scene without at this stage going deeply into those aspects that are controversial. Page references are to the trial bundle. Mr Samra was originally an automotive development engineer. In 1987 he took voluntary redundancy from Rover Cars and set up his own business selling and installing car stereo systems from premises at 118 Arbury Rd Coventry, which he acquired and refurbished with finance from Barclays Bank. In 1990 he moved the business to larger premises at 4 Watling Court, which he bought with finance from Lloyds Bank, retaining Arbury Rd which he let to a commercial tenant on a 15 year lease. In 2003 he effectively merged his business with that of a company called Car Electronics Ltd (“CEL”) in an arrangement structured as a franchise agreement, and moved into that company's premises, renting out Watling Court to another tenant.
In 1998 however he fell into dispute with CEL and looked for other premises to move to. He identified an empty property called Jesson House in Coventry and approached the Bank. He purchased the remaining 67 years of a leasehold interest in Jesson House with the aid of a loan of £100,000 from the Bank, secured by an “all monies” legal charge dated 27 November 1998, which is one of the securities now relied on. He moved his car stereo business into a workshop at Jesson House and set about refurbishing and renting out the remainder of those premises.
In 2000 Mr Samra refinanced his borrowings from Barclays and Lloyds banks by taking further loans from the Bank, secured on the properties at Arbury Rd and Watling Court.
In about 2005 Mr Samra became interested in setting up a business providing a wedding venue and identified a property at Torrington Avenue in Coventry that he considered could be refurbished and converted for the purpose. On 13 February 2006 the Bank gave him a facility letter (“the 2006 Torrington facility”) providing for a loan of £330,000 to purchase a leasehold interest in that property with (then) 53 years remaining. Repayment was to be made in monthly instalments over 15 years of which the first two years were to be on an interest only basis and the remaining 13 years paying interest and capital. He purchased the property using this facility in April 2006, at the same time selling Watling Court and granting an “all monies” charge over Torrington Avenue to the Bank, on which the claimant now relies.
The wedding business did not however proceed after Mr Samra withdrew his application for planning permission for it, and he instead sought to refurbish Torrington Avenue and let it as office space. In 2007 he received a demand for £30,000 for dilapidations at the CEL premises, which he was unable to pay without further finance, and so he approached the Bank to extend his facilities.
On 8 November 2007 Mr Samra signed a facility letter with the Bank (“the 2007 facility letter”) providing for facilities of up to £575,000 available by way of eight possible options, expressed to be secured on the Bank's existing charges over Jesson House, Torrington Avenue and Arbury Rd together with a charge over a new 15 year term life insurance policy issued by Aegon to Mr Samra on his own life, which was put in place through the agency of Mr Ronald Cameron, an employee of the Bank. The letter provided that whatever options were taken up, all the facilities had to be repaid in full by a “Final Maturity Date” five years after the first utilisation.
The following day Mr Samra drew down funds under the 2007 facility letter using two of the available options:
i) A “Variable Range Rate Loan” of £350,000, which was coupled with a “cap and collar” hedging instrument effectively limiting the interest rate payable to specified minimum and maximum levels, and
ii) A “Variable Rate Loan” of £210,000 on which interest was to be charged at a margin of 1.7% over base rate, without any hedging.
Both options provided for payment of interest only over the five year term, at the end of which (ie on 9 November 2012) the capital became repayable in full. It is Mr Samra's case however that by virtue of his discussions with various individuals on behalf of the Bank at this time there was an understanding, referred to in his pleadings as “the Common Intention”, that at the end of this five year period the Bank would provide him with further facilities by which he could make payments of interest and capital so as to discharge the loan over a further ten years ending in November 2022. The foundation of his case is that the relationship between himself and the Bank became unfair when the Bank did not give effect to that understanding. I will refer later in more detail to the factual allegations and matters Mr Samra relies on, but for the moment continue with the broad outline of the facts.
In 2008 there was a rent review in relation to Jesson House as a result of which Mr Samra faced a substantial liability for backdated increased rent, which again he could not pay without further finance, which he sought from the Bank. On 5 September 2008 he signed a further facility letter (“the 2008 facility”) which was in broadly similar terms to the 2007 facility letter save that it provided for an increased total amount of £610,000 available in only two options, being those already utilised, and a Final Maturity Date of the fourth anniversary of first utilisation. In practice it seems no change was made to his hedged loan or the supporting hedging instrument, which was treated as continuing under the terms of the 2008 facility, and the increased total was made available under the unhedged Variable Rate loan. The Bank also treated these facilities as repayable in November 2012, the date applicable under the 2007 letter, although that was slightly more than four years after the 2008 letter.
In April 2011 the Bank commissioned valuations of the properties it held as security, which showed that the loan to value ratio (LTV) was now 79%, in breach of a covenant in the 2008 facility to maintain LTV below 55%. On 6 April 2011 the Bank wrote noting the breach of covenant and offering two options;
i) Repayments continue as interest only with an increase in margin from 1.7% to 4.25%, or
ii) Switch to repayment of interest and capital from May 2011 with an increased margin of 3.7%
Mr Samra disputed these valuations and there was evidently considerable discussion with the Bank, some of which took place by email although not all of that correspondence has been made available in these proceedings. It is clear however that he negotiated a better outcome than either of the options offered, as a letter of 5 May 2011 records a verbal agreement that the loans would remain on the existing terms (ie interest only repayments) with an increased margin of only 2.5%.
In May 2012 the Bank notified Mr Samra that following a “strategic review” it was proposed to transfer its commercial property loan portfolio to its parent company, National Australia Bank Ltd (“NAB”). An email from the relationship manager on 4 September 2012 confirmed that NAB would be managing the loan from then on (without apparently any formal transfer) and that as a result of NAB's strategy of “exiting the property book through repayment and natural run off” it was “key that you start planning for this now as maturing loans are unlikely to be renewed so you will need to start making arrangements for your loan facilities that are currently due to expire on 9 th November 2012”.
Mr Samra had kept up the interest payments due but did not make any repayment of capital and on 9 November 2012 the outstanding capital balance of £610,000 was debited to his personal bank account, causing it to be overdrawn. On 12 November 2012 the...
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