“182. I do not find the bank at fault in the conduct of the restructuring negotiations. They were at arm’s length and commercial. Mr McConville and the claimant required no lessons in commercial negotiation. The bank’s duty of skill and care did not require it to negotiate the restructuring any differently from the way it did so. It was not required by its duty to the claimant to advise him how to resist its attempts to get more money out of him.”
“16. He was then 35 years old and single. He had worked hard to build up his business and he wanted to enjoy this new, albeit borrowed, personal wealth. 17. Over the following months, he made various purchases, not all owned outright. He invested in a mining enterprise in South Africa. He bought land in the south of France and built a luxury villa there. He bought a yacht and sailed it in the Mediterranean. He maintained residences in the north of England and London. He bought a jet, with a mortgage, and some fast cars.”
“We are extremely concerned with aggressive stance that you have adopted with us a business with reference to the letter you have sent today [sic.] We in turn have to take into serious consideration whether or not, in light of your position, it is worthwhile continuing to intensively manage the portfolio, ‘keeping it all together’ and maintain the cash flow necessary to cover base interest, default interest and hedging costs. As I am sure you are aware, both the main loan and hedge instrument are non-recourse to myself personally.”
“Although there seems to be no authority on the point, it cannot be doubted that it is an actionable wrong intentionally to compel a person, by means of a threat of an illegal act, to do some act whereby loss accrues to him: for example, an action will doubtless lie at the suit of a trader who has been compelled to discontinue his business by means of threats of personal violence made against him by the defendant with that intention …”
“That economic duress may constitute a ground for such redress was recognised, albeit obiter, by the Privy Council in Pao On v Lau Yiu Long[1980] AC 614 . The Board in that case referred with approval to two judgments at first instance in the commercial court which recognised that commercial pressure may constitute duress: one by Kerr J in Occidental Worldwide Investment Corporation all v Skibs A/S Avanti[1976] 1 Lloyd’s Rep 293 , the other by Mocatta J in North Ocean Shipping Co Ltd v Hyundai Construction Co Ltd[1979] QB 705 , which traces the development of this branch of the law from its origin in the eighteenth and early nineteenth century cases. It is, however, in my view crucial to the decision of the instant appeal to identify the rationale of this development of the common law. It is not that the party seeking to avoid the contract which he has entered into with another party, or to recover money that he has paid to another party in response to a demand, did not know the nature or the precise terms of the contract at the time when he entered into it or did not understand the purpose for which the payment was demanded. The rationale is that his apparent consent was induced by pressure exercised upon him by that other party which the law does not regard as legitimate, with the consequence that the consent is treated in law as revocable unless abrogated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind. It is a rationale similar to that which underlies the avoidability of contracts entered into and the recovery of money exacted under colour of office, or under undue influence or in consequence of threats of physical duress.”
“270. Was the claimant presented with no practical choice but to submit to the threat by signing up to the ‘consensual’ transfer agreement? No; he retained the choice to resist the threat. Indeed, he did so. He did not sign the pre-prepared transfer agreement presented by Mr Smith at the meeting. He, or his agents Mr McConville and Mr Dyson, decided to continue negotiating. 271. Mr McConville went to London the next day to seek a better outcome than transferring the whole portfolio to the bank. This strategy succeeded, up to a point. The claimant did not decide to litigate, as he could have done. He instructed his solicitors to send a letter before claim, which they did, on 27 July, relying on the bank’s proposed breach of its duties as mortgagee. But instead of litigating, the claimant entered into the disputed agreements. 272. In my judgment, the bank is right to submit that the claimant affirmed those agreements. He took no steps to have them set aside until over five years later. …”
“Medium Term Strategy We have recently completed a significant milestone in our overall strategy with the disposal of twelve sites (c£3.1m pa income) to West Properties. These were properties which were previously secured under an RBS facility. This was a consensual deal and one which was driven by us rather than RBS. It is important to state this fact, as West Properties are generally perceived within the market as the vehicle to which RBS move their distressed assets into [sic.] The assets which have been sold are made up primarily of the portfolio which we have been actively marketing for sale over the last twelve months. The assets which were not included within this original portfolio consisted principally of three Wirral-based assets, their inclusion was necessary given the strong cash flow generated by them which in turn made the overall sale package attractive to West. With the completion of this sale, we have successfully repositioned the business as a whole. We now have the concentration on prime locations, better type and standard of stock, stronger tenants and higher Return on Capital Employed. From a funder’s perspective the ensuing stronger covenant strength and longer term income has greater attraction than previous. …”
“In a relevant contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill.”
“Those cases together establish or reaffirm that a mortgagee’s duty to the mortgagor or to a surety depend partly on the express terms on which the transaction was agreed and partly on duties (some general and some particular) which equity imposes for the protection of the mortgagor and the surety. The mortgagee’s duty is not a duty imposed under the tort of negligence, nor are contractual duties to be implied. The general duty (owed both to subsequent encumbrancers and to the mortgagor) is for the mortgagee to use his powers only for proper purposes, and to act in good faith: see the Downsview case, at p.317. The specific duties arise if the mortgagee exercises his express or statutory powers: see the Downsview case, at p.315. If he exercises his power to take possession, he becomes liable to account on a strict basis (which is why mortgagees and debenture holders operate by appointing receivers whenever they can). If he exercises his power of sale, he must take reasonable care to obtain a proper price. …”
“148. If parties enter into a transaction which is a mortgage, then the law imposes certain obligations on the mortgagee, and confers certain rights on the mortgagor, which go back to the intervention of equity in the early development of mortgages. Although a mortgage is a contractual transaction, the imposition of such duties has nothing to do with the implication of terms in a contract under the general law of contracts: see Yorkshire Bank Plc v Hall[1999] 1 WLR 1713 , 1728D. Whether these duties are imposed on a given party depends only on whether, on the true analysis of the transaction, it is or is not a mortgage. 149. Other consequences may follow if the transaction is a mortgage, for example obligations to register the security if it has been created by a company, failing which it may be void against a liquidator or other creditors. 150. It is therefore important to draw a clear distinction between a transaction which is a mortgage, on the one hand, and one which, however similar it may be to a mortgage in economic or commercial effect, is not a mortgage as a matter of true legal analysis.”
“154. That passage suggests that she was proceeding on the basis of the implication of a term into the contract, but by analogy with the terms imposed by law in relation to a different type of transaction, to which this agreement had economic similarities. It seems to me, with respect to her, that she was led by that similarity into drawing, and applying, an analogy with mortgage law, while overlooking, on the one hand, the need to justify the implication on the basis of conventional contract law and, on the other hand, the fact that, in relation to a mortgage, the duties by reference to which she drew the analogy do not derive, and cannot be derived, from such a process of implication, but are imposed as a matter of general law, which does not apply in the present case because the transaction is not a mortgage. 155. It seems to me that the duties to which a mortgagee is subject are no guide at all on the question whether it is legitimate to imply into the contract a term under which Standard would be subject to such a duty such as the judge found.”
“Cuckmere Brick Co Ltd v Mutual Finance Ltd[1971] Ch 949 is Court of Appeal authority for the proposition that, if the mortgagee decides to sell, he must take reasonable care to obtain a proper price but is no authority for any wider proposition. A receiver exercising his power of sale also owes the same specific duties as the mortgagee. But that apart, the general duty of a receiver and manager appointed by a debenture holder, as defined by Jenkins LJ in In re B. Johnson & Co (Builders) Ltd[1955] Ch 634 , 661, leaves no room for the imposition of a general duty to use reasonable care in dealing with the assets of the company. The duties imposed by equity on a mortgagee and on a receiver and manager would be quite unnecessary if there existed a general duty in negligence to take reasonable care in the exercise of powers and to take reasonable care in dealing with the assets of the mortgagor company.”
“169. In our view, however, the power conferred by clause 21.5.1 of the 2011 facility was not wholly unfettered. We agree with Mr Handyside that the provision will have been inserted for the benefit of RBS, and there is, of course, no question of RBS having owed fiduciary duties. In the circumstances, it seems to us that RBS must have been free to act in its own interests and that it was under no duty to attempt to balance its interests against those of PAG. It can, however, be inferred that the parties intended the power granted by clause 21.5.1 to be exercised in pursuit of legitimate commercial aims rather than, say, to vex PAG maliciously. It appears to us, accordingly, that RBS could not commission a valuation under clause 21.5.1 for a purpose unrelated to its legitimate commercial interests or if doing so could not rationally be thought to advance them.”
“191. As for the second duty relied on, by the same reasoning I reject the submission that the obtaining of the revaluation received in January 2009, the charging of the default interest rate or the manner in which the negotiations were conducted, were acts done in order to vex the claimant maliciously. All the bank's actions were rationally connected to its commercial interests. I reject the claim for breach of the second duty by the same reasoning as in the case of the first duty.”