PETER PAUL POPEK v NATIONAL WESTMINSTER BANK PLC [2002] EWCA Civ 42

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
LEEDS DISTRICT REGISTRY
(Mr Recorder Stewart QC: sitting as a Deputy High Court Judge)
[2002] EWCA Civ 42Case No A2/2001/1287Venue Royal Courts of Justice, Strand, London WC2, Monday, 21st January 2002
Between
PETER PAUL POPEKClaimant/AppellantNATIONAL WESTMINSTER BANK PLCDefendant/Respondent
Before
Lord Justice DysonLord Justice LongmoreMR RICHARD WALFORD (Acting Pro Bono) appeared on behalf of the Appellant.MR PETER CRANFIELD (Instructed by Dibb Lupton Alsop, Princes Exchange, Princes Square, Leeds, LS1 4 BY)appeared on behalf of the Respondent.Date 21 January 2002
[1]Monday, 21st January 2002 LORD JUSTICE DYSON: This is an adjourned application by the claimant, Mr Popek, for permission to appeal against an order made on the 18th May 2001 by Mr Recorder Stewart QC, sitting as a Deputy High Court Judge in Leeds, whereby he struck out the statement of claim and dismissed the action (under CPR Part 3.4(2)(a)) on the grounds that no reasonable grounds for bringing the claim were disclosed. Although at one time in these proceedings Mr Popek had legal aid and was represented by solicitors and counsel, legal aid had been withdrawn before the case came on for trial on the 16th May 2001 when Mr Popek appeared before the Recorder in person. Today he has been represented pro bono by Mr Richard Walford, who has prepared a skeleton argument and mastered the case with remarkable speed, and has assisted the court greatly with his lucid submissions. Before I come to what occurred on the 16th May, I need to say something about the nature of the claim and some of the procedural history of the litigation.[2]By a writ issued on 8th October 1997 Mr Popek claimed damages for breach of contract and/or negligence and/or breach of fiduciary duty. The statement of claim was served some time in 1998. The following is a summary of the pleaded case. At all material times Mr Popek owned and operated a construction business. In 1988 he approached the defendant bank for financial advice and assistance in connection with the proposed construction of two houses. He met a Mr Danks, the branch manager at the Wibsey Branch, and told Mr Danks that he wanted to be advised as to the most suitable method of financing the development. Mr Danks told Mr Popek that it was the bank's policy not to enter into mortgage agreements in respect of properties that had not yet been built, that he should approach a building society for a limited mortgage loan, that the defendant would be willing to offer to finance any shortfall by granting him an overdraft facility and that, once the houses had been constructed to roof level, the bank would be willing to offer him a mortgage facility to replace the overdraft. Thereafter, Mr Danks arranged a building society mortgage with the Halifax in respect of part of the loan for Mr Popek; and Mr Popek accepted the offer of an overdraft facility initially up to £2,000. It is pleaded that Mr Popek retained the bank to advise him on the most appropriate and cost-effective method of financing the development, and that the bank was under a duty in contract and tort to advise him in respect of the finance of the development and his borrowing requirement with reasonable skill and care. Paragraph 11 pleads:
"Further, in advising the Plaintiff as to the most appropriate method of financing the Development, the Defendant (in the form of Mr Danks) was under a fiduciary duty to act in good faith."
[3]It is pleaded at paragraphs 15 and 16 that by opening a bank account with the defendant Mr Popek entered into an agreement with the bank and that there were express terms of that agreement that the bank would(a) offer Mr Popek a mortgage facility to replace the overdraft facility once the two houses had been completed to roof level; and(b) review the overdraft facility at regular intervals so as to advise Mr Popek as to the continuing appropriateness of the overdraft facility for his borrowing needs.[4]The development progressed. The two houses were completed, at least to roof level, in January 1989. During 1989 and 1990 Mr Popek asked the bank to transfer the borrowing from the overdraft account to a mortgage facility, but the bank refused to do so. By October 1991 Mr Popek's borrowings under the overdraft facility had risen to more than £140,000. In October Mr Popek asked Mr Danks for a further £10,000 to complete the development, and requested an increase in the overdraft facility. Mr Danks refused. At his suggestion, Mr Popek attended a seminar organised by the bank on 9th October. Mr Popek spoke to a Mr Nelson, who is a mortgage adviser. Mr Nelson expressed surprise that Mr Popek had been advised to finance the development by means of overdraft and said that in his opinion a structured medium to long-term mortgage facility was a more appropriate borrowing arrangement for Mr Popek. Mr Nelson also advised Mr Popek that he would have no difficulty in obtaining a mortgage from National Westminster Home Loans Ltd ("NWHL"), a subsidiary of the defendant bank. Nevertheless, Mr Danks told Mr Popek that, despite Mr Nelson's advice, he, Mr Danks, would not allow a mortgage application to be approved. On 15th November a mortgage application that had been completed by Mr Popek was refused by the defendant.[5]Paragraph 33 of the statement of claim alleges that the defendant acted in breach of contract and/or negligently and/or in bad faith in that:(a) it failed to replace the overdraft facility with a mortgage upon completion of the houses in January 1989;(b) Mr Danks failed at any time from July 1988 to consider and advise Mr Popek to transfer the overdraft facility into a more appropriate form of borrowing;(c) Mr Danks failed to consider and advise Mr Popek to change the structure of his borrowing despite the advice of Mr Nelson in October 1991, to which I have already referred;(d) the defendant failed to undertake reviews of the overdraft facility at regular intervals so as to advise Mr Popek as to the continuing appropriateness of the overdraft facility for his borrowing needs; and(e) the defendant wrongly purported to charge interest in excess of the interest properly chargeable under the overdraft facility.[6]It is also alleged that the defendant's failure to offer Mr Popek a mortgage facility to replace the overdraft facility and the refusal of the mortgage application were acts of bad faith. The loss alleged to have been suffered arises from(a) the difference between the rate of interest under the overdraft facility and what would have been paid on a mortgage and(b) overcharging on the overdraft account. This is said to have led to the failure of Mr Popek's company which, in turn, caused Mr Popek loss. He entered into an individual voluntary arrangement in April 1992 and was subsequently declared bankrupt in March 1995.[7]The bank served an amended defence in 1998 in which it alleged, inter alia, that the claim disclosed no reasonable cause of action, was scandalous, frivolous and/or vexatious and was an abuse of the process of the court. It also alleged that all causes of action were statute-barred by the Limitation Act 1980. In the reply which was settled by counsel there was no response to the plea of limitation.[8]At a directions hearing on 14th February 2000 it was ordered that an expert in the provision of small business finance be instructed by the parties jointly. Various directions were made in relation to the expert's report. It was expressly ordered that neither party should be at liberty to call expert oral evidence without further order. It seems that the order for the appointment of a joint expert was made pursuant to an application by Mr Popek's solicitor, although this was opposed by the bank's solicitor. The expert instructed was Miss Jane Blyth.[9]Miss Blyth produced her report on 2nd July 2000. Her conclusion was that an overdraft or revolving loan was the only way to fund this development whilst the building work was in progress: see paragraphs 11(c) and (d) and 153. She dealt specifically with the question of Mr Popek's ability to obtain appropriate funding from an alternative institution (at paragraphs 154 to 156) in these terms: 154) The claimant's ability to obtain appropriate funding from an alternative institution. 155) It depends at what amount and time funding is requested. If it was as a new-start-up project, as noted in paragraphs 37-52 and 74-87 it would have been rejected by a competent banker. Similarly, a request to move accounts between banks, with Mr Popek's subsequent track record, would have proved impossible. 156) If it was in connection with the offer by NWHL to consider refinancing some/all of Mr Popek's borrowings in October 1991, then analysis of the account (history of unpaid item), income stream (small and unreliable), track record (optimistic statements which have repeatedly proven to be unreliable) etc, meant the only answer possible was NO."[10]At paragraph 110, Miss Blyth said:
"I am also convinced that there is no evidence to support Mr Popek's contention that Mr Danks influenced, to Mr Popek's detriment, the decision of Nat West Home loans not to provide a remortgage. The facts speak for themselves, the transaction could not be justified."
[11]At paragraph 112 she said:
"Had Mr Popek initially explained to Mr Nelson the full facts of his case, I am convinced Mr Nelson would have responded, as tactfully as possible, that a remortgage was out of the question with NWHL, as the case failed to meet the bank's basic home loan criteria."
[12]Miss Blyth also dealt with the question of the "accuracy of the interest and other charges" imposed by the bank, and said that although she had not checked them in detail, they seemed fair.[13]At paragraph 161 she said:
"Mr Danks' concerns are recorded in his notes eg 2.11.90. ` I am becoming increasingly concerned not for the bank's money but for Peter's "
. It is my opinion that Mr Danks did as much as he possibly could to help his client, after agreement to lend, in the later stages putting the client's interests above the bank's."[14]Mr Popek's solicitors submitted written questions to Miss Blyth. These were answered in detail on 14th October 2000. Miss Blyth adhered to the views that she had expressed in her report.[15]The Recorder neatly encapsulated her opinion in relation to October 1991 as being that "Mr Danks cannot be criticised for failing to restructure Mr Popek's debt, which is the essence of the allegation made against him certainly in October 1991".[16]There were in fact two single joint experts, because Miss Blyth felt that she did not have the competence or time to report on one aspect of Mr Popek's claim, namely whether the bank had wrongly charged sums by way of interest in excess of the sums properly due. Miss Blyth therefore arranged for Mr Ben Fleet to provide an expert opinion on this aspect of the case. For the reasons and on the basis of the calculations claimed in his report, Mr Fleet came to the view that the bank had not overcharged Mr Popek.[17]In January 2001 Mr Popek applied to Judge Hawksworth QC for permission to adduce expert evidence from two other experts, one dated 4th March 1998 by Simon Pentel of the Association of Mortgage Brokers, and one dated 12th December 2000 by Audit UK Ltd. There was no appeal from his refusal to allow such evidence to be adduced. In his report, Mr Pentel said that Mr Danks should have advised Mr Popek in 1990 to increase the Halifax mortgage or to obtain a similar facility from NWHL. But neither Mr Popek nor his legal advisers had previously sought to rely on Mr Pentel's report of expert evidence in the proceedings. On the contrary, as I have said, it was pursuant to their application that an order had been made for a joint expert to be instructed. The Audit UK report analysed the interest charges in detail and concluded that a total of £2,267 had been overcharged in the sense that what had actually been charged was more than what the bank said it had charged. All but a few pounds related to the period before 8th October 1991, and I have already referred in any event to the report of Mr Ben Fleet.[18]As I have said, the trial came on for hearing on 16th May 2001. It was estimated to last three days. Mr Popek renewed his application for permission to rely on the evidence of the two additional experts. The Recorder refused this application. He said:
"It seemed to me that to allow Mr Popek to start again with new experts' reports, having himself, in the first instance wished to rely upon Miss Blyth, would mean the case having to be adjourned and started all over again. That I was not prepared to contemplate, as Judge Hawksworth was not prepared to contemplate."
[19]There is no challenge to this decision.[20]Mr Popek proceeded to open the case. During the opening the Recorder discussed with him the problems presented to his case by the limitation defence and the Blyth report. At the end of Mr Popek's opening Mr Cranfield, counsel appearing for the bank then as now, submitted that the Recorder should strike out the claim on the grounds that it was bound to fail. At the end of the argument on the third day, the Recorder acceded to the bank's application.[21]His reasons in short were as follows. In so far as the statement of claim pleads causes of action that had accrued before 8th October 1991, they are statute-barred. Thus the allegation of failure to give proper advice at any time before 8th October and failure to transfer to a mortgage facility after January 1989 were statute-barred. As regards the allegation that the bank failed to give appropriate advice on or after the meeting of 9th October, the Recorder accepted that this would not be statute-barred, but he held that in the light of Miss Blyth's advice, it was bound to fail. The Recorder did not deal with the allegation of excessive interest charges, but as I have said, it was statute-barred almost in its entirety. Apart from that, there was the evidence of Miss Blyth and Mr Fleet on that issue.[22]I turn to the grounds of appeal that have been advanced by Mr Walford. He relies on Halliday v Shoesmith [1993] 1 WLR 1 as authority for the proposition that, at any rate under the Rules of the Supreme Court (i.e. PRE CPR), an application to strike out should only be entertained at trial in an exceptional case and on receipt of a valid explanation for the lateness of the application. Mr Cranfield submits that the present case was exceptional and there is a valid explanation for the lateness of the application. Mr Popek's claim could only have been struck out in its entirety on the basis that, if (as Mr Popek alleged) the Bank had agreed to provide or had provided advice as to the most appropriate form of facility for the development, the facilities that had actually been offered by the bank and accepted by Mr Popek were in fact the most suitable for his purposes at the relevant times. That was an issue on which the court was bound to find the expert evidence compelling, particularly where the expert had been jointly instructed. Although Miss Blyth produced her report on 2nd July 2000, she did not produce her answers to the questions asked by Mr Popek's solicitors until 14th October, which was only three weeks before the date then fixed for trial. The trial was adjourned on that occasion because no judge was available to hear it. In the meantime, and again at trial in May 2001, Mr Popek sought permission to call additional expert witnesses. So, submits Mr Cranfield, it was only when these applications were refused that the bank was in a position to address the court on the basis that the only evidence before it on the suitability of the facilities offered by the bank was that contained in the report of Miss Blyth.[23]It seems to me that there is considerable force in these submissions. This was a somewhat unusual case. Until the outcome of the application to adduce further expert evidence was known, an application to strike out those parts of the case that were not statute-barred would not have succeeded. But it seems to me, in any event, that where it is clear that the whole or part of a claim is bound to fail, the fact that an application to strike out is made at trial is not necessarily fatal to the application even if the explanation for the lateness of the application is unconvincing. The lateness of the application can be reflected in an appropriate order for costs. The need for the trial judge to contain within limits the expenditure of time and costs is an aspect of the overriding objective under the CPR.[24]I accept the submission of Mr Cranfield in his skeleton argument that the Recorder was entitled to conclude that the hearing of an application by the bank that it had no reasonable case to answer would avoid the need for the calling and cross-examination of witnesses of fact on issues and would shorten the time required for the parties' submissions, and thus lead to a significant saving in time and money.[25]Although the course that was adopted in the present case was unusual, and it will not often be appropriate to strike out part or the whole of the claim at the start of the trial, at any rate in the absence of a good explanation for the lateness of the application, I do not consider that the full rigour of what Beldam LJ said in Halliday v Shoesmith needs to be applied in all cases certainly under the regime of the CPR. If the Recorder was right to hold that Mr Popek's claim was bound to fail, then in my judgment he was entitled to exercise his discretion to accede to the application, late though it was, even if he took the view that the explanation for the lateness was not convincing.[26]I turn, therefore, to consider the substance of the matter and Mr Walford's substantive points.[27]His first point is that the judge was wrong to rely on Miss Blyth's report in striking out the claim whilst depriving Mr Popek of the opportunity of asking Miss Blyth questions. In particular, Mr Walford notes that Miss Blyth relied upon the bank's interview cards to provide the factual basis upon which she reached her conclusions. The judge was aware of the fact that Mr Popek disputed the accuracy of what was allegedly recorded on the interview cards, and Mr Walford submits that in the circumstances the judge should have allowed Mr Popek to ask questions of Miss Blyth; in particular to elicit from her whether her opinion would have differed if it had been based on Mr Popek's version of the facts rather than the bank's.[28]The detailed facts relied on by Miss Blyth in arriving at her conclusion at paragraph 156, to which I have already referred, are set out at paragraphs 101-110 of her report. Mr Walford told us on instructions in the course of argument that some of these facts, particularly those going to Mr Popek's financial and business competence, are disputed. But the difficulty facing Mr Popek is that he never raised these points at any time before 16th May. It seems to me that if he wished to challenge the conclusion at paragraph 156 of the report on the basis that it had no proper grounding in fact, his solicitors should have addressed this point in their written questions. But although they submitted a significant number of written questions to Miss Blyth, none of them was directed to this issue. That was the time when Mr Popek, through his legal advisers, should have explored with Miss Blyth the question of whether her conclusion would have been different on the basis of his version of the facts. As was explained by Lord Woolf CJ in P v Mid Kent Area Health Care National Health Service Trust [2001] EWCA CIV 1703 , paragraph 28, the cross-examination of a single joint expert is not the norm. Lord Woolf said this:
"The starting point is: unless there is reason for not having a single expert, there should be only a single expert. If there is no reason which justifies more evidence than that from a single expert on any particular topic, then again in the normal way the report prepared by the single expert should be the evidence in the case on the issues covered by that expert's report. In the normal way, therefore, there should be no need for that report to be amplified or tested by cross-examination. If it needs amplification, or if it should be subject to cross-examination, the court has a discretion to allow that to happen. The court may permit that to happen either prior to the hearing or at the hearing. But the assumption should be that the single joint expert's report is the evidence. Any amplification or any cross-examination should be restricted as far as possible."
[29]It is obviously sensible that if a single joint expert is (unusually) to be subject to cross-examination, then he or she should know in advance what topics are to be covered, and where fresh material is to be adduced for his or her consideration, and that this should be done in advance of the hearing. It would have been most unsatisfactory if Miss Blyth had been required to consider a challenge to paragraph 156 on the basis of a new set of facts of which she had had no prior notice. In my judgment the Recorder was entitled to decide this application on the basis of Miss Blyth's report. He was not in error in depriving Mr Popek of the opportunity of putting his version of the facts to Miss Blyth by way of cross-examination.[30]Mr Walford's next point is that the Recorder should not have held that the limitation defence was bound to succeed. He submits that the Recorder should have had regard to the decision of this court in Brocklesby v Armitage [2001] 1 All ER 172, 180-181, and held that a case of deliberate concealment within the meaning of section 32 of the Limitation Act 1980 might have succeeded. The facts alleged to have been concealed are these:
"That there would earlier have been no problem in obtaining a mortgage from Nat West Home Loans, that the claimant should encounter no problems in obtaining a mortgage (implicitly) from other lenders, and that a remortgage would allow him to pay off the Halifax debt and much or all of the overdraft facility."
[31]Mr Walford submits that these concealed facts were revealed by the defence on 9th October 1991 so that time only began to run on that date, and accordingly all the pleaded causes of action were within the relevant limitation periods. I have very grave doubts as to whether any of these so-called facts are facts of the requisite quality to come within section 32 of the 1980 Act. But whether that is so or not, the section 32 point was not pleaded. It is essential that a claimant who wishes to answer a plea of limitation by relying on section 32 should plead his case giving full particulars, so that the defendant knows exactly what case he has to meet. Mr Walford submits that an application to strike out is normally refused if a pleading can be cured by amendment. That is undoubtedly true, but no amendment was put forward by Mr Popek before the Recorder, and he did not seek an adjournment to enable him to do so. He is not to be criticised for this since he was a litigant in person, but that remains the position. If there had been a full trial on 16th May, there is no reason to suppose that the section 32 plea would have been raised by Mr Popek. The limitation defence would therefore have succeeded at the end of the trial. In my judgment the Recorder was right not to take the possibility of a section 32 plea into account in deciding this application.[32]Mr Walford's final substantive point is that the allegations of breach of fiduciary duty in relation to the period after the 7th October 1991 should not have been struck out, that they were not time barred, nor were they doomed to fail in the light of the Blyth report. He relies on a passage in the judgment of Millett LJ in Bristol & West Building Society v Mothew [1998] Ch 1 page 18, where after an authoritative survey of the law of fiduciary duties, Millett LJ said this:
"(In this survey I have left out of account the situation where the fiduciary deals with his principal. In such a case he must prove affirmatively that the transaction is fair and that in the course of the negotiations he made full disclosure of all facts material to the transaction. Even inadvertent failure to disclose will entitle the principal to rescind the transaction."
[33]But even if the bank was a fiduciary, this principle has no application to the present case. There is no allegation that the original transaction should be rescinded because it was unfair or because in the course of negotiations that led up to it there was insufficient disclosure of all the facts material to the transaction. There was nothing to put the bank on notice in the pleadings that it had to prove that the transaction was fair. In truth, the complaints here are about the way in which the bank performed the contract, and the particulars relied on in support of the case on breach of fiduciary duty are the same as those relied on in support of the claim for breach of contract and negligence. The high water mark of the post 7th October 1991 case is the allegation of paragraph 33.8 that Mr Danks' role in ensuring that the mortgage application was refused by NWHL was an act of bad faith. But as Mr Cranfield points out, on the basis of Miss Blyth's report that allegation was bound to fail: see paragraphs 110, 112 and 156. Since, for the reasons that I have already given, the Recorder was entitled to proceed on the basis of that report, the post 7th October 1991 allegations in their various formulations were bound to fail.[34]For all these reasons, I have come to the conclusion there is no real prospect that the Recorder's decision would be reversed on appeal and I would refuse permission to appeal. It is obvious that Mr Popek feels very strongly that his financial misfortunes have been caused by the bank. The banking ombudsman rejected his complaints, and I regret to say that for the reasons I have attempted to explain in my view the case that has been pleaded on his behalf against the bank has no real chance of success.

LORD JUSTICE LONGMORE: I agree with my Lord, for the reasons that he has given, that this application should be dismissed. I only add this. Sir Martin Nourse, in giving his reasons on 31st July 2001 for adjourning this application for permission to appeal so that the defendant could be represented, asked whether it would not have been open to Mr Popek to put questions at trial to the expert, Miss Blyth, to test her conclusions. He answered his own question by saying that even if there was no expert contrary to that given by Miss Blyth, it would still have been open to Mr Popek to ask questions of Miss Blyth at trial. The effect of the Recorder's order was, of course, that no such questions were asked because there was no trial.

[36]This observation of Sir Martin's was in accordance with the note in the Civil Procedure Rules (currently at page 674 attached to Part 35.7) to the effect that both parties would have the opportunity to cross-examine the single expert albeit with a degree of restraint. Since Sir Martin adjourned this application, however, this court, on 5th November, has made it clear in P v Mid Kent Health Care National Health Service Trust , reported in the Times for 19th November 2001, that this note in the Civil Procedure Rules is not to be regarded as of general application. Part 35.6 of the CPR provides that a party may put written questions to a single joint expert, but only once and only for the purpose of clarification of the report, unless the court gives specific permission for questions to be put for another purpose. My Lord has already set out the relevant paragraph from Lord Woolf's judgment in that case, and I need not repeat it.[37]In this case it was Mr Popek's advisers who themselves asked for a single joint expert on the relevant part of this case. Written questions were in fact asked and answered after the report was made. There was thus, on the authority of P v Mid Kent Health Care NHS Trust , no place for further questions at the trial, and the learned Recorder was, in my judgment, right not to contemplate that possibility but to accept the report on its own terms. Unfortunately for Mr Popek, it was fatal to his case.[38]For my own part, I am most grateful to Mr Walford for his pro bono assistance to Mr Popek in this court, but I am satisfied it would be no kindness to Mr Popek to grant him permission to appeal since any appeal would be bound to fail.

Order

Appeal dismissed with costs.

Cited in 1 later judgment