Ward Hadaway v DB (UK) Bank
| Jurisdiction | England & Wales |
| Judge | Mr Justice Nugee |
| Judgment Date | 11 November 2013 |
| Neutral Citation | [2013] EWHC 4538 (Ch) |
| Date | 11 November 2013 |
| Court | Chancery Division |
| Docket Number | Case No: CH/2013/0330 |
[2013] EWHC 4538 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building
Fetter Lane
London EC4A 1NL
Mr Justice Nugee
Case No: CH/2013/0330
Mr Kinsky (instructed by Rosslyn King LLP) appeared on behalf of the Claimant/Respondent
Mr Lawrence QC (instructed by DAC Beachcroft LLP) appeared on behalf of the Defendant/Appellant
I have before me an appeal from a decision of Deputy Master Lloyd dated 28 May of this year in which he dismissed an application by the Defendants for disclosure of one document known as the Credit Process Guide (or "CPG").
The action is a claim by DB (UK) Ltd, part of the Deutsche Bank Group, against a firm of solicitors who acted for it in relation to three buy-to-let loans to the same borrower, Mrs Brenda Graham, in relation to three residential properties in Leeds. Each loan was made in or about April 2007.
Certain admissions of liability have been made by the Defendant. In particular, the Defence includes a plea in these terms at paragraph 27:
"As to paragraph 34 [which alleges breach of contract and negligence]:
27.1 for the purposes of this action only it is admitted that the Defendant was in breach of contract and negligent in failing to report to the Claimant prior to submitting its Certificate of Title or prior to the Completion date the facts that:
27.1.1 each property purchase was taking place by way of a back-to-back sub-sale involving a price uplift of £55,500;
27.1.2 accordingly, the intermediate vendor was not the registered proprietor of the property…"
That gives a sufficient indication of the nature of the underlying claims.
There are, however, defences that have been pleaded, in particular a defence of causation. In other words, it is said that even if the Defendants had reported to the Claimant at the time what they admit they should have done or what the Claimant manages to prove they should have done, the Claimant would still have made the loans in question.
Mr Patrick Lawrence QC, who appeared for the Defendants, showed me various material which suggested that there have indeed been criticisms of Deutsche Bank's lending during the period of 2006 to 2008, on the basis of which he submitted that this was a genuine live issue or, rather, if there were a trial it would be a genuine live issue. And Mr Cyril Kinsky QC, who appeared for the Claimant, did not suggest otherwise.
The Defendants also plead contributory negligence, but Mr Lawrence's submissions before me were very much focused on the issue of causation.
In the course of pre-action correspondence the Claimant disclosed what was described as "a copy of our client's lending policy". This was a document called the DBM Business Underwriting Guidelines, which set out underwriting guidelines for DB mortgages ("the BUG") and at the very beginning of this document in paragraph 1 (under Introduction and 1.1 General Considerations) it says as follows:
"These Underwriting Guidelines detail the underwriting process of db mortgages (dbm) and has to be read in conjunction with other DB polices especially the DB mortgages Credit Process Guide. The Credit Process Guide is the key credit policy document for this business; in case of any conflicting messages in the Process Guide vs the Underwriting Guidelines, regulations and requirements as of Credit Process Guide apply. dbm risk is responsible to ensure consistency for the underwriting guidelines with the Credit Process Guide in all aspects."
Unsurprisingly, having seen in a disclosed document described as the Claimant's lending policy reference to another document described as the key credit policy document and, indeed, one which in the event of conflict would apply, the Defendants took the view that in order to understand fully the Claimant's lending policies they needed to see that other document. They regarded it as obviously relevant to the issues and in particular to the issue of causation which they had pleaded. They, therefore, asked for it several times in correspondence. The Claimant has consistently refused. It is true to say that it is only one document and one that would not cause it any great time or expense to disclose, but Mr Kinsky has explained to me that it is regarded as a commercially very sensitive document; that it is effectively DBM's blueprint for how to run its business and it does not wish to disclose it unless it is obliged to do so.
Mutual exchange of disclosure lists took place on I believe 8 February 2013, but consistently with its stance the Claimant refused to include the CPG and it was not listed in the disclosure list. I am not, of course, concerned with the commercial considerations which have led the Claimant to take the view that it does not wish to disclose a document, I am only concerned with the legal question as to whether it should have disclosed it and should now do so.
Before the Deputy Master the evidence for the Defendants was contained in a witness statement of Mr Phillip James Murrin, a member of DAC Beachcroft LLP, the solicitors for the Defendants. Among other things, he referred to a number of references in the BUG to the CPG, not only the one which I have already read out in paragraph 1 referring to it as the key policy document, but a number of other references in the body of the BUG which it is not necessary for me to refer to one by one.
The evidence for the Claimant is contained in a witness statement of Helen Mary Thirkettle, a solicitor of Rosslyn King LLP, the Claimant's solicitors. She referred to the CPG and she said it was a high level business modelling document, and she said this at paragraph 5:
"The CPG was designed to cover the credit process for the Claimant's business in the UK and provide a guideline for the management of credit risk. The document deals with high level policies. This document was not intended to be used on a day to day basis by the underwriters who were handling loan applications on behalf of the Claimant and although there is a section at the start of the Business Underwriting Guide ("BUG") which refers to it in broad terms, it is only separately referenced in a limited number of sections of the BUG. Philip Murrin in his Witness Statement makes reference to these, to which I respond to below. The purpose of the CPG was to establish a high level framework for lending at the time the Claimant was being established in the market place. I have spoken to both Paul Graham, director of the Claimant who wrote the policy and was involved in the setting up of the Claimant's business, and a number of underwriters who were involved in the underwriting of residential mortgage loans at the time of the lending in this particular case and it has been made clear to me that the loans which are the subject of this litigation matter were underwritten using the underwriting guides and policy criteria already provided to the Defendant as part of Pre-Action and standard disclosure in this case and not the CPG. The purpose of the CPG was to establish a framework for the Claimant's lending and obtain funding for its subsequent lending. I believe that all of the allegations of contributory negligence and causation can be properly dealt with by reference to the BUG and product guides already disclosed."
She then dealt in turn with each of the references to the CPG in the BUG which had been picked up in Mr Murrin's witness statement and explained why she did not regard them as relevant to the issues in the case. I take as possibly the best example of what she says, paragraph 7.2. There she refers to paragraph 15.1 of Mr Murrin's statement which reference paragraph 1.3 of the BUG. At this point it is convenient to read paragraph 1.3 of the BUG which provides as follows (under the heading, General Underwriting Principles):
"These Underwriting Guidelines have been written to outline and explain dbm's underwriting criteria. All applications should be processed in line with this policy. However, it is acknowledged that there will be mortgage applications that do not comply, but are still viewed as 'good business'. Authority to approve such cases lies with dbm underwriters, where full referral details and written confirmation of acceptance must be retained on file. For further details refer to sections 4 and 5 of the [CPG]."
Going back to Ms Thirkettle's witness statement, she says:
"I can see that this reference relates to scenarios where manual underwriting may be appropriate if the borrower's application is not automated. The loans that are the subject of this dispute were automated loans, as described in paragraph 7.5(a) below, and not manually underwritten and therefore this section is not relevant to the pleaded issues in this case. The reference at paragraph 1.3 above is not relevant to these loans and therefore cannot be relevant to the issue of causation or contributory negligence in this case. The CPG is not being relied on by the Claimant, nor does it adversely affect the Claimant's case or the Defendant's case or support the Defendant's case."
The Deputy Master in his decision dealt with each of the references to the CPG which Mr Murrin had picked up from the BUG, dealt in each case with what Ms Thirkettle said about those, and concluded as follows:
"22. Then Ms Thurkettle says:
'I can see this section deals with personal lending authority lending levels (mandates). There is no pleaded allegation of contributory negligence in relation [to] mandate levels pleaded in this case.'
Then she goes on...
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