Starling v Lloyds TSB Bank Plc
| Jurisdiction | England & Wales |
| Judgment Date | 29 October 1999 |
| Date | 29 October 1999 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal
Before Lord Justice Peter Gibson, Lord Justice Mance and Mr Justice Moore Bick.
Mortgage - borrower's request that property be let - alleged duty of good faith by lender
A claim that a lender had breached an equitable duty of good faith owed to a borrower to consider properly any request by the borrower to grant a lease to a property over which he had secured a mortgage which failed to show dishonesty or improper motive and which made the alleged duty unworkable in practice should be struck out.
The Court of Appeal so stated in a reserved judgment when allowing an appeal by Lloyds TSB Bank plc against a decision of Mr Justice Rix on October 6, 1998 to allow the appeal of Mr John Starling against an order of Master Eyre to strike out his claim for negligence and breach of duty owed by Lloyds TSB Bank plc relating to banking services as disclosing no reasonable cause of action.
Mr Mark Hapgood,QC and Mr Derrick Dale for the bank; Mr Mark Phillips, QC and Mr Jonathan Crystal for Mr Starling.
LORD JUSTICE PETER GIBSON said that the appeal raised a short point which, if the mortgagor was right in his submissions, would have considerable significance for lenders and borrowers on the security of real property.
The point raised was whether, in a case where the statutory power afforded to a mortgagor in possession to grant such leases as specified in section 99 of the Law of Property Act 1925 had been modified, a duty was owed by the mortgagee to the mortgagor to consider properly any request by the mortgagor to let the mortgaged property.
Mr Phillips said the duty was one arising out of a duty of good faith owed by a mortgagee to a mortgagor when doing any positive act and in particular when exercising the right to withhold consent to a letting by a mortgagor.
The duty of good faith was an equitable duty arising out of the relationship of mortgagor and mortgagee.
If there was a duty of good faith, that duty involved an obligation on the mortgagee to consider any request made to it by the mortgagor to give consent to letting the mortgaged property, relying onImperial Group Pensions Trust Ltd v Imperial Tobacco LtdWLR ((1991) 1 WLR 589) to support the proposition that a blanket refusal to consider giving consent was a breach of that duty. His Lordship noted that the circumstances in the Imperial case were far removed from the present.
The duty arose out of an employment...
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