Uren v First National Home Finance Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 10 November 2005 |
| Neutral Citation | [2005] EWHC 2529 (Ch) |
| Docket Number | Case No: CH/2005/PTA/01118 |
| Court | Chancery Division |
| Date | 10 November 2005 |
[2005] EWHC 2529 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Mann
Case No: CH/2005/PTA/01118
MR. D. MATTHIAS (instructed by Messrs. Follett Stock) for the Claimant/Respondent.
MR. W. HIBBERT (instructed by Eversheds LLP) for the Defendant/Appellant.
Hearing date: 8 th November 2005
This is an appeal from District Judge Mitchell sitting in the Truro District Registry. By a decision dated 10 th February 2005 (resulting in a sealed order dated 19 th February 2005), the District Judge declined to strike out the claim in this matter, and declined to give the defendant summary judgment, the defendant having claimed summary judgment on the basis that the claim had no reasonable prospects of success. This appeal is brought with the permission of Blackburne J.
Facts
Mr Uren is one of many intending purchasers in a development of flats in Tenerife known as Santa Barbara. The development was being carried out at the end of the 1980s and into the 1990s. It was carried out by a company called Arrish Limited, a Manx company. Mr Uren agreed to acquire two flats, and he paid £50,000 (in various instalments) to Arrish as part payment of the purchase price. A company in the same group as the defendant lent monies to Arrish for the purposes of the development, and there were many other purchasers. In July 1990 the lending bank appointed receivers. By way of enforcement of the security, there was a Spanish judicial auction. Because of the nature of this application, I am invited to assume that the facts relied upon in the particulars of claim and further information provided by Mr Uren are true. Those assumed facts include a short description of the relevant auction process. Apparently there are three stages, each designed to obtain the best price reasonably practical in the circumstances. The first auction is at a reserve price equivalent to the lender's principal sum; the second is at a reserve of 25% of the original price; and the third is apparently an auction with no reserve at which the property is simply sold to the highest bidder. This procedure was invoked and it went as far as the third auction. At the third auction the development property was purchased by another Manx company called Pitchcott Limited ("Pitchcott"), a company owned and controlled by the First National group of which the defendant is part.
The intending purchasers formed an action group, and contributed various sums to that group. Mr Uren himself contributed £75,000 being the amount of the balance of the purchase price due on his flat. Over £1.5m was raised. The purpose of the action group was to procure that the development got finished. The defendant is alleged to have encouraged the purchasers' association in this endeavour and to have indicated that it would make funding available to enable the purchasers to complete the development. Until that completion happened Mr Uren (and, I assume, the other purchasers) had no interest in the development itself. All they had done was provide money which, to a greater or lesser extent, had been used to acquire and carry out the development. In 1992 this action group came to an arrangement with the First National Group, using its fighting fund of £1.54m. This money (or rather the bulk of it) was made available to a new company (incorporated in England) known as Santa Barbara Limited, which was intended to be a vehicle for completing the development. That company purchased the shares in Pitchcott at a price of £100, and the development site remained in Pitchcott's ownership. A debt of some £3.6m was owed by Pitchcott to the First National company concerned (presumably money advanced to enable Pitchcott to buy the development from Arrish), and Santa Barbara Limited discharged this debt using about £1m of its own resources (that is to say the fighting fund) and a sum of £2.5m borrowed from a bank in the First National Group, in respect of which that lender took a first charge on the development site, a guarantee from Santa Barbara Limited and a debenture from the latter company to secure the liability under the guarantee. There was therefore a refinancing exercise. Santa Barbara Limited also obtained, through Pitchcott, a further £2.5m development facility from the defendant to enable the development to be completed, that sum to be drawn down in stages. Monies beyond that were lent from time to time over the following years.
The particulars of claim do not strictly distinguish which company in the First National group entered into which part of the relevant transactions. It implicitly proceeds on the assumption that they should all be treated as one for these purposes. No point on that was taken by the defendant in the appeal before me, and I shall proceed on the same basis. The particulars of claim complain that as time went on the defendant exercised an improper control over the development by failing to comply with the drawdown provisions under the agreed facilities, so that unnecessary and improper difficulties were caused to the carrying out of the development. It is alleged that not only were these activities a breach of contract; they were in bad faith and it seems to be said that the defendant planned to take over the development. There was obviously a degree of acrimony, with demands submitted by the defendant and refused by Santa Barbara Limited, culminating in a demand for the outstanding sum of £6.69m on 14 th March 1996 and the appointment of receivers to Pitchcott and Santa Barbara Limited the next day (15 th March 1996).
At this point history began to repeat itself. There was another judicial auction, and again the property was bought by a company controlled by (in essence being part of) the First National Group, namely Agosta 96. The purchase price was, apparently, rather less than the sums due and outstanding to the defendant bank. In a press release issued on the same day that the receivers were appointed, the defendant had said that it proposed to safeguard the interests of the purchasers of the flats, and it appears that in the next two years there were some negotiations with intending purchasers of the development (outside the defendant's group) which had built in a degree of preservation of the purchaser's rights (if that is what they had) to their apartments. However, for reasons that do not currently appear, those deals were not done. Instead, there was apparently a deal with another company, experienced in timeshare operations, known as LSI. That deal (it is assumed for present purposes) had two elements. The first was a sale at £7m. That would be enough to repay the outstanding indebtedness. The second is said to arise on a collateral contract (not apparently documented, but which I am invited to assume for present purposes to exist) to the effect that LSI would introduce business to the defendant worth about £1m a year for the following 3 to 5 years. This arrangement seems to me to be rather vague, but, bearing in mind the nature of the application before me, and the stance of the parties, I am to assume that there was such an arrangement.
The Claim
The claim form was issued on 28 th May 2004. That becomes important in the context of a limitation defence. The claim is based in "unjust enrichment". The particulars or claim sets out the story to which I have referred, and makes an express allegation that an officer of the defendant bank "unlawfully outside the terms of the facility letter….so abused the defendant bank's powers to control the draw down procedure in respect of the Development Facility as to cause repeated crises in the development works….". That allegation is repeated in paragraph 12 in respect of a later period, referring to a "strategy of unlawfully abusing its powers to control the draw down procedure". The "strategy" is said to have "culminated" in a letter indicating that the bank intended to exercise its powers to call in the loan, which it duly did. Paragraph 14 alleges that the construction work had been "substantially completed by Santa Barbara Limited/Pitchcott with the aid of considerable financial input from the purchasers….". Paragraph 15 alleges that:
"The bank's conduct and the conduct of its lawyers was completely unmeritorious and flagrantly in bad faith. Without doubt, in hindsight, the bank had set its mind to take over the resort, come what may, and had set its lawyers about that task."
There is then a pleading of the receivership. Paragraph 18 reads:
"In the premises, the defendant bank having taken control of the development site unlawfully and in bad faith, was arranging to dispose of the site (through Agosta 96 to LSI) and to enrich itself significantly through loan business that LSI guaranteed to introduce as part of the deal. The purchasers were to be left without any protection by the deal."
Paragraph 20 alleges that the claimant (along with the other purchasers) had lost his apartments and all the money that he had already paid, whereas the defendant bank not only had recovered what was owing by Santa Barbara Limited/Pitchcott through the sale of the development site to LSI (through Agosta 96), but was also going to derive the other substantial profits referred to. Paragraph 21 pleads:
"The defendant bank has accordingly been enriched at the expense of inter alia the claimant in such circumstances that the law in accordance with the principles of restitution would consider to be unjust".
And paragraph 22 reads:
"The claimant is entitled as against the defendant bank to the restitution of what he has lost by reason of the defendant bank unjustly enriching itself at his expense—namely, his investment in the development (£150,000) and the capital appreciation...
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