Unicorn Tower Limited And Others Against Hsbc Bank Plc
| Jurisdiction | Scotland |
| Judge | Lady Wolffe |
| Neutral Citation | [2018] CSOH 30 |
| Date | 03 April 2018 |
| Docket Number | CA25/12 |
| Court | Court of Session |
| Published date | 03 April 2018 |
OUTER HOUSE, COURT OF SESSION
[2018] CSOH 30
CA25/12
OPINION OF LADY WOLFFE
In the cause
UNICORN TOWER LTD AND OTHERS
Pursuers
against
HSBC BANK PLC
Defender
Pursuers: Mitchell QC; John Mair Solicitors
Defenders: O’Brien; Shepherd & Wedderburn LLP
3 April 2018
Background
[1] The pursuers had the ambition to develop a large property in the centre of Glasgow
(“the Property”) in two phases, phase 1 being for 50 apartments and phase 2 being for
commercial space at ground level (“the development”). The indicative cost of phase 1 was
£14 million pounds. There are detailed averments about the arrangements amongst the
pursuers, but it suffices to note that the second pursuer is the parent company of the first
pursuer, which is a single purpose vehicle. The third pursuer, an individual, is a
shareholder and director of the second pursuer and became a guarantor of the obligations of
the first pursuer.
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[2] In early 2007 the defenders agreed to provide finance for the development. There is
no need to narrate the detailed averments about the pre-contractual communications (which
comprise Articles 2 to 8 of condescendence). The import is that the third pursuer had a
pre-existing business relationship with the defenders (in England), that the defenders were
keen to expand its business and to raise its profile in the West of Scotland, and that the
defenders were aware that the funding from the defenders was in substitution for funding
from the Clydesdale Bank.
[3] The documentation entered into among the parties relative to the provision of
financial facilities by the defenders to the first pursuer included the following:
1) A facility letter dated 25 January 2007 agreement (“the Facility Letter”), for a loan
account (“the Facility”) for £7,965,000;
2) A standard security granted by second pursuer over the property in favour of the
defenders (“the Standard Security”);
3) A guarantee granted by the third pursuer in favour of the defenders, dated 14
April 2008 (“the Guarantee”);
4) A security interest agreement, dated 14 April 2008 (“the SIA”); and
5) An interest rate swap agreement (“the IRSA”).
[4] The Facility bore to be repayable on demand and was due for review in 12 months’
time. It was also subject to the defenders’ Terms of Business, but no reference was made to
these in the debate before me. The Facility was continued in January 2008 for a further 12
months (the “2008 Continuation Letter”).
[5] The development did not proceed in the timescale envisioned. (The causes and
consequences of the delay are disputed.) By letter dated 13 February 2009 the defenders
outlined their concerns and stipulated for the provision of further reports and information to
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be provided (“the 2009 Continuation Letter”). Subject to satisfaction with these materials,
the Facility was continued on the same terms as set out in the Facility Letter. It stipulated
for a review of the Facility in two months’ time. The Facility was not further continued in
April 2009. At about this time the third pursuer granted the Guarantee. He also entered into
the SIA and deposited £700,000 with the defenders pursuant to it. By letter dated 8 June
2009, the defenders demanded immediate repayment of the Facility. The pursuers resist that
demand and have raised these proceedings.
The pursuers’ case
The Facility, the Standard Security, Guarantee and the SIA
[6] The pursuers challenge the defenders’ termination of the Facility. They seek
declarator (in conclusion 1) that the defenders were not entitled to terminate the Facility.
They seek damages of £8,000,000 (in conclusion 2) for breach of contract and breach of
undertaking. In support of these conclusions they argue:
1) That there was a collateral agreement (to be inferred rebus et factis) “negotiated”
between “the First Pursuer and the Defender (et separatim, a binding unilateral
promise made by the Defender)” that the Facility “was a fixed term facility and
(absent a breach by the First Pursuer of its terms) would not be terminated until
the completion of the development”.
2) Esto there was no collateral agreement or promise, they argue that the defenders
were personally barred from terminating the Facility; and
3) They also argue that the defenders’ power to demand repayment was subject to
an implied term that it would be exercised in good faith.
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