Royal Bank Of Scotland Plc V. William Derek Carlyle
| Jurisdiction | Scotland |
| Judge | Lord Justice Clerk,Lord Bracadale,Lady Dorrian |
| Judgment Date | 12 September 2013 |
| Neutral Citation | [2013] CSIH 75 |
| Court | Court of Session |
| Published date | 12 September 2013 |
| Docket Number | CA31/09 |
| Date | 12 September 2013 |
| SECOND DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Justice Clerk Lady Dorrian Lord Bracadale | [2013] CSIH 75 CA31/09 OPINION OF THE COURT delivered by LORD CARLOWAY, the LORD JUSTICE CLERK in the reclaiming motion by ROYAL BANK OF SCOTLAND PLC, Pursuers and Reclaimers; against WILLIAM DEREK CARLYLE, Defender and Respondent: _______ |
Reclaimers: Duncan QC; Brodies LLP
Respondent: Howlin QC, Wilson; Cartys, Blantyre
12 September 2013
Introduction
[1] The defender was a property developer, specialising in private housing. For some years in advance of the circumstances giving rise to this action, he had carried out certain building projects with the assistance of loan finance from the pursuers. Typically, the defender would buy land upon which to build a new house, arrange for the house to be built, live in it for a limited period and then sell it at a profit.
[2] The pursuers seek repayment of sums of £845,000 and £560,000, together with interest, which they lent to the defender in or about August 2007 for use in the purchase of a plot of land at Gleneagles. The loans were the subject of standard securities over the plot itself, a neighbouring plot and certain lands at Bothwell, which were also being developed by the defender. The pursuers contend that the loans were, and are, governed by two written agreements dated 24 and 25 July 2007.
[3] The defender admits the existence of the two agreements and their nature as relative to the sums advanced (see Answer 2). However, he resists the pursuers' claim on the basis that he is entitled to, and counterclaims for, damages of £1,500,000 in respect of a material breach by the pursuers of a "collateral warranty" (see defender's plea-in-law 2 and counterclaim plea 1) given by the pursuers to the defender. This warranty, which is specifically described as an "assurance" (see also Ans 2, counterclaim Conds 6 and 7), is averred to have been given by the pursuers in advance of the signing of the agreements; notably, but not exclusively, during a telephone conversation between the defender and an employee of the pursuers, namely Helen Hutchison, on 21 June 2007. The import of this assurance, according to the defender, was that the pursuers would, in addition to the sums lent to buy the land, advance to the defender further "funding for the development".
[4] In his counterclaim, the defender makes extensive, detailed averments about his discussions with the pursuers' employees in the months immediately preceding the signing of the agreements. He avers that he repeatedly told the pursuers that he required finance for the whole project, including funding for the building works, for it to be viable as a business venture. He maintains that he entered into the two agreements on the strength of the assurance and that he would not have done so had the assurance not been given.
[5] It is not disputed that the pursuers did not provide any further funding. As a result, the defender avers (counterclaim Cond 8), the development could not proceed. He incurred expense, which is not fully specified in the pleadings, in the form of professional fees and the cost of ground works. More significantly, the defender avers that he lost a profit of some £1.2M, which, he maintains, he would have secured had the development proceeded. It is not clear what has actually happened to the plot. The sellers had reserved a right to re-purchase (buy-back) the land (see infra) in the event that the building was not completed by a date long since passed. However, presumably, the pursuers' securities over the plot (see also infra) remain in place.
[6] By interlocutor dated 19 May 2009, the commercial judge allowed the parties a proof before answer "of their respective averments". This would normally be taken to cover the averments in both the action and the counterclaim and this appears to have been the intention (Opinion ([2010] CSOH 3) para [3]). The defender was ordained to lead at the proof. The proof proceeded in October 2009, after which, on 13 January 2010, the commercial judge issued his principal Opinion and appointed the cause to call "By-Order". Notwithstanding the earlier interlocutor, and for reasons which remained obscure at the Summar Roll hearing, the evidence and submissions at the proof did not cover quantum of damage. At the By-Order hearing on 18 January, the defender was permitted to "adjust" his averments on quantum and the commercial judge continued "consideration of the formulation of any substantive interlocutor".
[7] On 10 May 2010 (see explanatory Note of 6 August 2010 ([2010] CSOH 108)), the commercial judge refused to allow the pursuers to amend their own averments on quantum by maintaining that, if there were a collateral warranty, the conditions for any building funding would not have been met by the defender, given the state of his indebtedness and the progress of his other developments, at the time of any prospective draw down. The commercial judge allowed the defender to amend his counterclaim by adding a declaratory conclusion. He then sustained the first plea-in-law to the counterclaim:
"insofar as to Find and Declare ... that the Pursuers are in breach of a collateral warranty in terms of which they bound themselves to make development funding of ... £700,000 ... available to the Defender by way of loan for the purposes of the development of [the plot]".
Despite the terms of the interlocutor of 19 May 2009, the commercial judge allowed the parties another proof; this time (again before answer) on "their respective averments in respect of causation and loss" (presumably quantum of damage). He granted leave to reclaim (appeal) and the pursuers have so reclaimed.
[8] Meantime, on 2 November 2009 at the Sheriff Court in Hamilton, the defender's estates were sequestrated. On 8 February 2011, following extensive procedure in that court, a petition by the defender for recall of his sequestration was refused. The court understands that the delay in the progress of this reclaiming motion has, at least in large part, centred upon the defender's difficulties in securing funding. A Summar Roll hearing was originally set down for 9 March 2011, but discharged in order to ascertain the position of the defender's trustee. Thereafter, the defender made repeated, and ultimately successful, attempts to secure legal aid. A new Summar Roll hearing was appointed in August 2012 to take place in May 2013, but the latter was effectively adjourned until 9 July 2013 to enable the defender to secure legal representation.
The commercial judge's findings in fact and their analysis
[9] The defender's proof commenced with his own testimony; consisting of a relatively concise examination-in-chief (some 40 pages of transcript) and a lengthy cross-examination (170 pp) much of which does not, at least now, appear to be relevant to the issues upon record. The second witness was the defender's accountant, namely Colin Hamilton. Nothing seems to have turned upon his testimony and the commercial judge does not afford it any individual treatment. The third and final witness was Ms Hutchison, who was an assistant director in commercial banking at the pursuers' Motherwell branch. Her testimony was in short compass (23 pp). The pursuers led no evidence. The commercial judge summarised the evidence (para [3]) under three headings, viz: "The defender's evidence"; "Ms Hutchison's evidence"; and "The Bank's internal documents". The last element has no present significance.
[10] The defender testified that he had met with Ms Hutchison (commercial banking) and Ms Young (private banking) in March 2007 concerning his proposal to develop two plots at Gleneagles; the one, which is under consideration here, by himself and the other through the offices of a company, namely Carlyco Limited, which he controlled. A schedule was presented to the pursuers with estimated land purchase prices and anticipated building costs of £700,000 for each house. The existence of a potential buy-back clause (at the original purchase price), which was being insisted upon by the sellers if the houses were not completed by March 2011, was discussed. The defender had stated (para [7]) that, if the pursuers were to provide funds for a deposit on the plots, then the balance of the price for the plots and the build costs "must" be provided as the houses "needed to be built". The defender asked for a "full commitment on the proposal or nothing". The defender had said words to the effect: "do not give me the money for the land unless you give me the money for the build". If the pursuers had proposed any qualifications to that element, the defender would not have proceeded. He would not have looked for alternative funding. Ms Hutchison had confirmed (para [8]) to the defender that the pursuers would "definitely have the appetite for the project", but she needed to refer it to head office (Edinburgh).
[11] The defender had submitted "tenders" (rather than formal missives) to purchase the plots. His tender of £1,350,000 for the plot under consideration here was accepted in April 2007, as was one for the other, Carlyco, plot of £995,000. The total purchase price was therefore £2.345M. A 5% deposit was needed upon conclusion of missives (which did include the buy-back clause). Towards the end of May, the pursuers told the defender that his deposit was "all sorted" (para [12]), but he had repeated the need for the purchase and building funding too, since neither the deposit money nor the purchase money was, on its own, "of use" to him. The defender stated (para [14]) that he had repeated this in a telephone conversation on 5 June, when he was told by Ms Hutchison not to worry, as the pursuers would not give him "the money just for the land". He had replied that he was not going to pay the deposit until the decision on funding the whole project was "through". It appears from the defender's testimony that it was originally...
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