Nationwide Building Society v Christie & Anor [2013] EWHC 127 (Ch)

[2013] EWHC 127 (Ch)Case No 2BM30379
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue BIRMINGHAM DISTRICT REGISTRY, Birmingham Civil Justice Centre
Bull Street,
Venue Birmingham B4 6DSDate 01/02/2013
Before
HHJ DAVID COOKE
Between
Nationwide Building SocietyClaimantMartin William Christie (1)DefendantsRobert Lester Snell (2)Defendant
Brad Pomfret (instructed by Kuit Steinart Levy LLP) for ClaimantThe Second Defendant appeared in person The First Defendant did not appear and was not represented for in personHearing Hearing date: 11 January 2013
Judgment

HHJ David Cooke:

[1]The claimant seeks summary judgment against the second defendant on its claim against him for just over £5m pursuant to a guarantee in respect of monies lent to the first defendant. It also seeks summary judgment dismissing the second defendant's counterclaim. The principal debts arise on three commercial loan facilities granted to the first defendant pursuant to: i) A facility letter dated 28 June 2006 for £5.6m to purchase a business park at Station Rd Irthlingborough in Northamptonshire, referred to in the documents as the Station Rd property or Nene Park estate ii) A second facility letter dated 25 January 2008 (as subsequently varied) for £800,000 to pay for refurbishment works at Nene Park, and iii) A third facility letter dated 4 July 2007 for £255,000 to purchase a second commercial property at Brooklands Court, Kettering. All the facilities were drawn in full. The amounts outstanding were secured by legal mortgages over the two properties. The first defendant defaulted in payment, and on 28 September 2009 the claimant appointed receivers over the Nene Park property, which was eventually sold by them at auction on 12 May 2011 for £2.5m. Receivers were also appointed over Brooklands Court on 15 June 2010, which they sold on 24 May 2011 for £125,000. The sales left a shortfall of £5,052,708.48 which was claimed, with interest, against the first defendant as principal debtor under all the facility letters. The first defendant did not defend the claim, and the claimant obtained a default judgment against him on 25 November 2011.[2]The claim against the second defendant is based on a deed of guarantee and indemnity dated 4 July 2006, in the claimant's standard printed all monies form, by which he agreed to guarantee the discharge of all present and future liabilities of the first defendant to the claimant, subject to a limit of £5.6m which was of course equal to the principal amount of the first facility. The second defendant has acted in person throughout, filing a defence and counterclaim dated 5 January 2012 raising various matters which I refer to in more detail below by way of defence against liability under the guarantee, together with a counterclaim for £1,497,433 (plus interest) in respect of his losses as an investor in the two properties and other losses to himself and other creditors said to have arisen from negligence and mismanagement of the properties by the claimant, failure to use funds held on deposit by way of security to meet sums due under the facilities, the premature appointment of the receivers and the sale of the Nene Park property at an undervalue. A previous hearing was adjourned because the second defendant filed a witness statement shortly before it raising new grounds of defence. He has not sought to amend the filed defence document, but Mr Pomfret pragmatically accepts that he must address those grounds on this application, since permission to amend would be given if they raise any realistic prospect of success.[3]The test to be applied is whether the matters raised by way of defence and counterclaim have any real prospect of success at a final hearing. Understandably, since Mr Snell acts in person and is a businessman not a lawyer, they are expressed in lay terms and without reference to relevant legal principles. I am grateful to Mr Pomfret for his full analysis of them and his fair consideration of what issues they might raise. It is accepted that any disputed facts must be taken for the purposes of this application as Mr Snell alleges them, unless I were to conclude that his version has no real prospect of being established at trial.[4]It is convenient before turning to the individual points to summarise a little more of the relevant background. i) Mr Snell sets out in his first witness statement (Bundle p44b at para 4 ff) that he, Mr Christie, a Mr Barry Currall and Mr Snell's wife agreed to go into business together trading as "Rushden Property Partnership" in 2006. The Nene Park property was purchased as part of that business in the name of Mr Christie but using funds invested by Mr & Mrs Snell and Mr Currall, together with the borrowings from Nationwide. The application for facilities was made by Mr Christie, who it seems had an existing relationship with Nationwide. It was a term of the first facility that Mr Snell should enter into the deed of guarantee, which he did in the short interval between the issuing of the facility letter and drawdown of funds to complete the purchase of Nene Park. Mr Snell describes his own role as "property manager responsible for the development and management" of Nene Park. I should say that the claim against Mr Snell is not put on the basis that he is liable as a partner for debts incurred by Mr Christie, but only under the deed of guarantee. ii) The three facilities all provided for interest to be payable initially at a margin over LIBOR, but with an option for the borrower to request a quotation for a fixed rate for all or part of the relevant loan which, if accepted by him, would then apply for the period quoted. On 17 October 2008 Mr Christie requested and accepted quotations to fix an interest rate for a period of 2 years 9 months, and interest was thereafter charged at the fixed rate. Mr Snell contends that this amounted to an amendment to the principal debtor's obligations sufficient to discharge his obligation as guarantor. iii) It was a condition precedent to drawdown of the first facility that a headlease of the whole of the Nene Park estate be granted to DSR Print Management Ltd ("DSR") at an annual rent of £586,875, and a further term that Nationwide's consent was required to any assignment, variation or surrender of that lease. DSR was a company with which Mr Snell was associated. The intention was no doubt to provide a degree of comfort to Nationwide by adding DSR's covenant for the stated rent. In 2008 Mr Christie sought consent for the assignment of the headlease from DSR to a company called Printhaus, on the basis that Mr Snell intended to sell DSR to a management buy-out team whose finance was dependent on release from the headlease liability and that he (Mr Snell) had offered Printhaus as a replacement, being another company owned or controlled by him. iv) Nationwide had concerns about the value of Printhaus's covenant, but agreed to the assignment on condition that an amount approximately equal to six months interest accruing on the facility (in fact, £225,000) was placed in a deposit account. That account was set up in the name "Nationwide Building Society re: Printhaus", with the sole signatories being Nationwide employees, and money was paid into it by Mrs Snell. It does not appear that there was any document setting out definitively what rights Nationwide had over the funds held, save that it was agreed that any interest be paid direct to Mrs Snell. Nationwide referred to it as a "rent deposit account" and a deposit in respect of Printhaus's obligations under the lease, which now fell on Printhaus as tenant. Mr Snell that Mr Christie have also referred to it in documentation as being a deposit in respect of rent. Quite how this would have worked is not clear, since Printhaus's rent would have been payable to Mr Christie and not Nationwide. I mention it because Mr Snell's contention is that Nationwide should have used the deposit funds to make good Mr Christie's defaults in payment under the loan agreements, and that if it had done so the defaults would have either been cured or reduced to a level that he could have cured from personal funds, so that it would not have been necessary to appoint receivers. Nationwide would only have been able to do this if it was entitled to rely on the deposits as security for Mr Christie's obligations to it (as distinct from Printhaus's obligations to Mr Christie). In the end, Mr Pomfret agreed that I should proceed on the assumption that Nationwide was so entitled, in part because it appears that Nationwide later did exercise such a right, or purported to do so. Nevertheless, Mr Pomfret submits, Nationwide was not obliged to apply the deposit in such a way, which would have eroded the security it was intended to provide. v) After their appointment in respect of Nene Park, the receivers took advice from two well known valuers, King Sturge and Knight Frank. Both recommended marketing the property for a private sale, King Sturge advising an asking price of £2.8-3m and Knight Frank £3.7m. It is not clear from the documents what steps by way of marketing were carried out, but by 13 December 2010 the receivers were writing to Nationwide (p385) saying:
“As you are aware with your agreement we have not undertaken a marketing campaign in respect of the [Nene Park] property but again contacted the parties [who] we are aware had already expressed an interest and set a deadline for offers to be received by close of business on 9 December 2010. ”
It is not clear whether this email means that there had been no marketing campaign at all since October 2009, or only that the receivers had not, a year into the receivership, recently renewed such a campaign but simply chased up those who had expressed an interest in response to their initial marketing. Mr Snell has not alleged that the property should have been, but was not, marketed prior to December 2010. vi) The email went on to record only three offers for the property, £1m and £2.25m from unconnected parties, and £3.5m from Mr Snell which was regarded as unattractive because (a) it required to be fully funded by Nationwide and so would not produce any cash in reduction of Mr Snell's liability under his guarantee and (b) any loan to Mr Snell could not be serviced from the occupational rent roll. By that date, Knight Frank had advised Nationwide that the freehold value of the property was only £2.03m (p353), and accordingly the receivers proposed to accept the offer of £2.25m. vii) That offer, for whatever reason, did not proceed. On 18 February 2011 the receivers wrote again to Nationwide reporting that they had explored selling the property at auction after pre-marketing and a recommendation from King Sturge that the receivers "continue to market the property (Prop Search are already doing this on our behalf) on the basis that it will be offered in the auction held by King Sturge on 14 April 2011 unless of course it is sold prior… King Sturge have recommended setting a reserve on the property of no higher than £2.5m…" viii) Ultimately the property was sold at auction on 12 May 2011, at the reserve price of £2.5m.[5]Mr Snell has raised a number of grounds of defence, and made various factual allegations in support of them in his Defence and two witness statements. Mr Pomfret grouped them under various headings, which I will largely though not entirely follow. It is relevant to note however that Mr Snell has not at any point denied or disputed the amount of the principal indebtedness owed by Mr Christie, or that Mr Christie made default under the facility agreements. Nor has he argued that Nationwide did not have the power under its documents to appoint the receivers when it did, although he puts forward a number of arguments as to why Nationwide was in breach of duty to him by exercising that power. Nor does he make any allegation of breach of duty to him by Nationwide or the receivers in the sale of Brooklands Court.

Liability under the Guarantee

[6]Under this heading I deal with the following arguments by Mr Snell: i) "The second defendant was not provided with sound independent legal advice when entering into the guarantee…" (Defence, para 21). He further alleges in his witness statement that the solicitor advising him was also acting for Mr Christie, and that the claimant knew this and knew of the conflict of interest between his position and that of Mr Christie. ii) "In the alternative the claimant imposed undue influence on the second defendant into entering the guarantee due to the significant standing of the claimant" (Defence, para 22) iii) He only agreed to guarantee payment under the first loan facility, and not the further obligations later incurred by Mr Christie under the second and third facilities (made at various points in his statements).[7]Taking first the question of legal advice, there is no general obligation in law on a bank or similar person taking a guarantee to ensure that the guarantor obtains legal advice, or independent legal advice. Nor, if advice is in fact taken, is the bank in general responsible for any deficiencies in that advice, which are matters between the guarantor and his adviser. This is simply in accordance with the general law relating to formation of contracts; it is for each party to take such advice as he thinks fit, and the other is not responsible if he fails to do so or is badly advised. Mr Snell has not put forward any particular argument as to why Nationwide was under a duty to ensure that he received independent advice in this case.[8]The question of obtaining legal advice in relation to guarantees does frequently arise in the context of guarantees or similar suretyship arrangements by which a wife stands surety for her husband's debts. There have been many cases in which a wife has resisted liability on the basis that her consent to the arrangement was procured by misrepresentation or undue influence on the part of her husband. In Royal Bank of Scotland v Etridge (No 2) [2001] UKHL 44, the House of Lords reviewed and refined the principles set out in earlier similar cases. For present purposes it is sufficient to summarise the effect of that decision to be i) A guarantor may be entitled to set aside the contract of guarantee as against the principal debtor if it was procured by misrepresentation, undue influence or similar legal wrong committed by the principal debtor. ii) The same right will be available against the bank in whose favour the guarantee is given, if the bank is on notice, actual or constructive, of the legal wrong of the principal debtor iii) A bank will be treated as having constructive notice of any such wrong as has in fact been committed if it is put on enquiry by having notice of a relationship between the principal debtor and guarantor which gives rise to a substantial risk that such a wrong has been committed. iv) Such a relationship will exist where the nature of it gives rise to a presumption of undue influence (eg between solicitor and client), but also where the relation between principal debtor is a non-commercial one (such as the emotional relationship between husband and wife) and the suretyship transaction is on its face to the disadvantage of the surety. v) If put on enquiry, one way in which the bank may protect its position is to ensure that the surety is advised by a legal adviser independent of the bank.[9]It is quite clear that, although the principle extends to relationships other than that between husband and wife, Mr Snell could never bring himself within it. He is an experienced businessman and his relationship with Mr Christie was a commercial one for the purpose of their joint investment (with others) in Nene Park and other commercial properties. The arrangement was not on its face to his disadvantage when entered into, in that it secured the finance he and his co-investors had sought for the purpose of an investment business from which he no doubt expected to profit. Further, he has not alleged any misrepresentation or other legal wrong by Mr Christie that led him to enter into the guarantee. He does blame Mr Christie for his later actions which caused or contributed to the commercial failure of their investment, but those matters arose after the guarantee was entered into and could not vitiate it retrospectively.[10]Further still, where the Etridge principle applies, a bank would in any event be protected if the surety is advised by an independent solicitor before entering into the transaction. Mr Snell signed the guarantee in the presence of a solicitor, who witnessed his signature and signed a certificate to the effect that he had advised Mr Snell about his obligations under it. Etridge makes clear that it is sufficient so far as the bank is concerned that the solicitor is independent of the bank; the bank is not required to see that he is not also acting for any other interested party (such as the borrower), nor is it responsible for any deficiencies in the advice given, unless it had actual notice of them. Notice of a potential conflict of interest is thus not sufficient by itself. The certificate given by the solicitor would in any event have protected Nationwide.[11]So far as undue influence is concerned, there are no particular matters alleged to amount to the exercise of undue influence prior to entering into the guarantee, and the mere size of Nationwide as a financial institution is not of itself "undue influence" in relation to customers or others who deal with it, see Lloyds Bank Ltd v Bundy [1975] QB 326.[12]As to the extent of the obligations guaranteed, these are defined in the guarantee as "all monies and liabilities now or in the future due owing or incurred by [Mr Christie] to Nationwide" (p156). It is clear as a matter of construction (and Mr Snell does not say otherwise) that this extends to sums falling due under the second and third facilities, even though they were entered into at later dates. Insofar as Mr Snell is alleging that he was not aware of this, or implying that he was not advised of it by his solicitor, that is a matter between him and the solicitor and cannot affect Nationwide which is entitled to enforce the guarantee in accordance with its terms.

Guarantee discharged by variation of principal obligations

[13]" It is a well established and strictly applied principle that any variation in the terms of the agreement between the creditor and the debtor which could prejudice the surety will, unless he consents thereto, discharge him from liability unless the contract of suretyship provides to the contrary" (Chitty on Contracts, para44-091). Mr Snell alleges that the variation of the interest on the loan by means of the exercise of the option to fix an interest rate amounted to a change in the terms of the principal obligations which discharged his guarantee. He also alleges that there was an earlier change of interest rate by fixing a "cap and collar", which had the same effect.[14]According to Mr Snell's first witness statement, if the interest rate had remained as originally stated in the agreement, the total interest charge over the period May 2009 would have been some £263,000 less than it actually was. These figures are disputed and seem both to include a large element from before the interest fixture was entered into and to treat capital payments as if they were additional interest; on the claimant's evidence the fixture initially worked in Mr Christie's favour, although after December 2008 when LIBOR reduced considerably, the position reversed resulting in an additional cost by July 2009 of approximately £30,000. Nothing turns on the actual amount however. According to the claimant's evidence the fixture came about because Mr Christie informed Nationwide that he would not be able to meet the first capital repayment which was due under the loan in October 2008. That would have amounted to a default enabling Nationwide to take enforcement action, but it refrained from doing so on condition that Mr Christie exercised the option to fix an interest rate.[15]In relation to the fixing of the interest rate, in my judgment this cannot amount to such a change as would discharge the guarantee. The first and most obvious point is that since the contract between Nationwide and Mr Christie gave Mr Christie the option to fix the interest rate in the manner that he did, his exercise of that option was not a variation in the contract at all, but the performance of it in accordance with its terms. It may have resulted in a change in the amount of Mr Christie's liabilities, but that was a change provided for by the contract as entered into, and not a variation of that contract. The fact that Mr Christie exercised that option at the claimant's insistence makes no difference in my view; Mr Snell has not based his argument on that point, or alleged that Nationwide acted improperly in doing so; his objection is based on the fact that he was not consulted about it.[16]Even if this were not so, the guarantee contains provisions designed to prevent any variation to the principal debtor's obligations having the effect of discharging the guarantor (p157):
“4.1 the Guarantor's liability under this Guarantee and Indemnity shall not be discharged in whole or in part or otherwise be affected in any way by reason of: … (b) Nationwide giving the Borrower (whether alone or with any other person) any new Facility or extending, increasing, renewing, determining of varying any of the Facilities …”
These words are in my judgment amply wide enough to cover any change in the interest rate by subsequent agreement between Mr Christie and Nationwide, to the extent that it entailed any variation of the terms of the facility.[17]Mr Pomfret also relied upon clauses 2.5 and 2.6 of the deed of guarantee, but in the circumstances I do not think they assist him. The first contains an agreement that Mr Snell will be liable as principal debtor if any of the obligations of Mr Christie are or become void, voidable invalid or enforceable and the second contains an indemnity against any failure of Mr Christie to perform any purported obligation or liability which would have been the subject of the guarantee had it been valid and enforceable. Both provisions it seems to me are directed to the situation where liabilities are unenforceable against Mr Christie as principal debtor, which is not the allegation here.[18]The allegation that before the interest rate was fixed an earlier arrangement was put in place to apply a "cap and collar" was made in Mr Snell's witness statement, with no supporting detail. Although it was not expressly denied in the evidence on behalf of the claimant, Mr Pomfret sought to demonstrate by reference to the interest actually charged on the account that no such arrangement had in fact been in operation. It is true that the account records show that the interest charged prior to the fixing in November 2008 was always in accordance with the margin over LIBOR provided by the facility documentation, but it seems to me that this does not necessarily rule out the existence of a "cap and collar" hedging arrangement, since it might be possible either(a) that a cap and collar was fixed but during the relevant period LIBOR did not move outside the limits fixed, or(b) that the arrangement was made by some separate hedging agreement, the effect of which would be that interest would still be payable contractually under the facilities at the rate originally agreed, and any monies payable to or by Mr Christie in respect of the hedging contract might be accounted for separately.[19]Taking the matter at its highest in favour of Mr Snell and assuming that there was some earlier cap and collar arrangement made which at least arguably was not pursuant to the contractual option to fix an interest rate referred to above, in my judgment that can nevertheless not have the effect of discharging his guarantee because: i) to the extent that it was made by way of variation to the terms of the original facility agreement, clause 4.1 of the deed of guarantee referred to above would prevent that variation from discharging the guarantee and, ii) if it was made by way of some separate hedging agreement, Mr Christie's contractual liability to pay interest at the original rate under the loan facility would remain in place so that there would be no variation to that obligation which could discharge the guarantee. Mr Snell did not consider the possibility that there might have been such a separate instrument, and so did not argue that if one had been entered into that would of itself discharge the guarantee; I can see no basis on which it would, and indeed to the extent that Mr Christie incurred a liability to Nationwide pursuant to such an instrument that liability would be caught by the "all monies" terms of the guarantee referred to above.

Terms of the guarantee unenforceable because they are unreasonable

[20]In his first witness statement Mr Snell says this (p44d):
“ on review of the Claimant's standard form guarantee terms, it is clear that there are onerous and unreasonable terms which are imposed … these are standard terms and the guarantor has no ability to amend, as the claimant adopts a "take it or leave it" approach … it is unreasonable that the liability of the guarantor is not affected or has no impact in spite of negligence by the claimant or any receiver appointed by the claimant ”
[21]Mr Snell does not refer to any legal basis upon which the terms that he alleges to be unreasonable are thereby rendered unenforceable. As a matter of general law, the court does not have a general power to interfere with the terms of contracts entered into and strike down those that it considers to be unreasonable. Mr Pomfret properly reminded me of the provisions of the Unfair Terms in Consumer Contracts Regulations 1999, which provide by regulation 8 that:
“ an unfair term in a contract concluded with a consumer by a seller or supplier shall not be binding on the consumer ”
However it is quite clear in my judgment that Mr Snell could not be considered to have entered into the guarantee in the capacity of "consumer". That term is defined in regulation 3 as meaning:
“any natural person who, in contracts covered by these Regulations, is acting for purposes which are outside his trade, business or profession”
On Mr Snell's own evidence, he and his fellow investors were acting for business purposes when they formed their partnership and invested in the purchase of the Nene Park property, and the obtaining of finance and the giving of a guarantee in support of that finance were clearly part of that business arrangement.[22]It is not necessary therefore to go into the question whether Mr Snell has any prospect of establishing that the clauses he objects to are unreasonable for the reasons that he gives; even if he is right, that does not make them unenforceable at law.

Failure to use the monies held on deposit to prevent or cure default

[23]As indicated above, I approach this issue, which is one of Mr Snell's principal complaints, on the basis that the funds held in the deposit account were held as security on terms which would have entitled Nationwide to draw on them for the discharge of any of Mr Christie's obligations under the facilities. It is Mr Snell's case that had Nationwide done so, either there would have been no default, or any default would have been cured, or the cash flow would have supported the operations at the business park so as to allow it to trade through its difficulties without the appointment of receivers. It is accepted that Nationwide agreed to allow the use of part of the funds to meet payments that were due under the facilities on two occasions, in October 2008 and March 2009.[24]The first such occasion was when the first instalment of capital fell due for payment, and could not be met. It is clear from an e-mail sent to Mr Christie on 9 October 2008 (p260) that this was at Mr Christie's request; that Nationwide agreed to allow release of the funds for this purpose on the basis that it was a one-off concession, that the interest payment due on the same date must be met from the borrower's own resources, and that the amount in the blocked deposit account must be replenished over the next 12 months.[25]Notwithstanding these requirements, a further payment from the deposit account of just over £30,000 was agreed in March 2009, again clearly at Mr Christie's request, in order to meet the capital payment due on that date. This is referred to in an e-mail dated 12 March 2009 (p270). There is no suggestion that, or any other document, that Nationwide agreed to any further such payments. The e-mail concludes "I look forward to receiving your proposals for the restructure to ensure that the facility is placed on a viable financial footing and to avoid any further payment defaults."[26]It is the claimant's evidence that no other requests were made to it for payment to be made out of the blocked deposit account towards payments due under the loan facilities. Mr Snell asserts that there were such requests; he refers to a proposal document submitted by the Rushden Property Partnership in February 2009 which contained the following:
“ Proposal Nationwide is currently holding £225,000 on deposit in an account as a rent guarantee. The Rushden Property Partnership respectfully asks for £120,000 out of this money to cover the cash flow through the bad debt caused by the recent events and pay all outstanding creditors. ”
This however was clearly, as Mr Pomfret submitted, not a request to use the funds on deposit to meet liabilities under the loan agreement, but to release £120,000 to pay general creditors. It is clear that Nationwide was not the only creditor. Mr Snell cannot have thought that the proposal had been agreed or it would not have been necessary to make a further request in March.[27]Mr Snell also alleges that he made repeated requests orally to his contract at Nationwide urging it to use the deposit monies to pay amounts due under the facilities. That is denied, but for the purposes of this application I assume that if the matter went to trial Mr Snell would be able to establish that such requests were made.[28]Mr Pomfret makes two fundamental submissions in response: i) the deposit monies were held as security and Nationwide was not obliged either to release that security to allow them to be used for payment of general creditors or to erode the security by allowing it to be used to meet current payments under the facility agreements ii) even if it had in fact applied all the monies in the deposit account to satisfy payment defaults made by Mr Christie, there would still have been a shortfall of some £11,000 by the date the receivers were appointed. In relation to this latter point, Mr Snell counters that if the amount required was so small, he or his fellow investors would have been able to raise it.[29]The first point seems to me to be a complete answer to any argument that Mr Snell raises in relation to these monies. The deposit account was held as security, and it is the very essence of security that the holder of it controls the property over which he has security. He is certainly not obliged to release it at the debtor's request in order to pay other creditors, or it would be no security at all. Mr Snell and his partners appear to have appreciated this when they made their "respectful request".[30]As the courts have repeatedly held in relation to the exercise of a mortgagee's power of sale (see eg Cuckmere Brick Co Ltd and another v Mutual Finance Ltd [1971] 2 All ER 633) that power is not held on trust for the mortgagor and the mortgagee is entitled to exercise it in his own interests, and at a time of his choosing. As and when he does so, he owes equitable duties to the mortgage or to take reasonable steps to obtain the best price, but that is a different matter. The same applies in my judgment to security over monies held in a deposit account. The holder of the security, in this case Nationwide, may be entitled to draw on the monies at any time and apply them in satisfaction of the secured debts, but he is entitled to take his own decision as to when to do so. He is not obliged to comply with any request that may be made to him by the borrower (let alone by a surety) if he judges it to be in his own interests not to do so.[31]Thus, even if Mr Snell and/or Mr Christie had requested that funds be used from the deposit account to pay amounts falling due under the facility, on the basis that this would allow the borrower to continue to trade and to improve his financial position, Nationwide would not have been obliged to agree. It was entitled to take its own view as to the prospects of success in further trading, and to act on the basis of its own judgment as to where its interests lay. There would be no breach of duty either to Mr Christie or Mr Snell even if Mr Snell were able to satisfy the court at trial that the outcome would have been better, whether for creditors generally or Nationwide in particular, if the funds had been released as he requested.[32]As the second point, I prefer not to base my decision on that, and it is unnecessary to do so. It is true that the account shows that the amount in default at the date upon that of the receivers was greater by £11,000 odd than the amount in the deposit account. But without working through the account, I cannot be confident that if, say, Nationwide had in fact use the deposit account to make good any default as soon as it occurred, the reduction in interest and other charges would not have reduced or eliminated that shortfall, nor is it implausible that Mr Snell and the other investors would have been able to raise enough money privately to pay the balance. But in my judgment even if all this were assumed in Mr Snell's favour, it would not have affected the outcome. The defaults would still have occurred (I can see no basis whatever for suggesting that Nationwide ought to have drawn on its security before a default occurred in order to prevent it occurring) and once they had occurred Nationwide's power to declare the loan in default and appoint a receiver would have arisen and become exerciseable so that it would have been entitled to appoint the receivers when it did in any event.

Failure to obtain the best price on the sale of Nene Park

[33]Mr Snell's case is that Nene Park was sold at a gross undervalue. He relies on valuations obtained at various stages before the receivers were appointed, and also on a desktop valuation is said to have been obtained by HSBC bank in August 2010, i.e. after the receivers were appointed. He says that by setting a reserve price of £2.5 million at the auction Nationwide signalled that it was prepared to accept a figure as low as that, with the result that buyers would not offer more. There would be obvious difficulties in establishing this case at trial, given the fact that the receivers obtained professional advice from at least two reputable firms and ultimately sold the property at public auction at which any interested party could have bid more than the reserve price if necessary to win. Mr Snell makes some criticism of the process of marketing the property, but only in the most general terms. In his second witness statement at paragraphs 42 and 43 he alleges that "marketing activity of the LPA receiver was poor and this is clear due to the fact that the initial bidders were again introduced to the claimant's LPA receivers from me" and further that the eventual purchaser was also someone with whom he already had contact.[34]Mr Pomfret's primary submission is that the property was sold by the receivers and not by Nationwide, and the receivers act as agents of Mr Christie as mortgagor. He submits that there is no credible case that the receiver did not take proper steps to realise the best price, but even if that case were made out, responsibility would fall on the receiver and not on Nationwide.[35]I accept that latter submission. Section 109(2) of the Law of Property Act 1925 provides that:
“ A receiver appointed under the powers conferred by this Act … shall be deemed to be the agent of the mortgagor; and the mortgagor shall be solely responsible for the receiver's acts or default unless the mortgage deed otherwise provides. ”
The legal charge under which the receivers were appointed in this case makes no contrary provision; indeed clause 9.2 (p94) essentially repeats the provisions of the Act. Thus, if it were established that the receiver had not taken proper steps to achieve the best price of the property, he might be liable to Mr Christie for breach of his fiduciary duty as agent of Mr Christie. Potentially, he might also be in breach of duties owed in equity to Mr Snell as surety, but any claim by either Mr Christie or Mr Snell would be against the receiver and not against Nationwide. It could not give him a defence to Nationwide's claim.[36]A mortgagee may become liable for the acts or default of a receiver if he "directs or interferes with" the exercise by the receiver of his powers; see American Express International Banking Corp v Hurley [1985] 3 All ER 564 at p 571. But Mr Snell has made no such allegation; his submissions simply treat Nationwide and the receiver as if there were one party and as if Nationwide is responsible for everything that the receivers have done; see for instance p 44o which contains a section headed "Sale of Nene Park by the Claimant at an undervalue", immediately followed by "on 12 May 2011 the Receivers sold Nene Park for £2.5 million at auction. The reserve price on the listing was set at £2.5 million, which demonstrates that the claimant [was] prepared to accept a value of £2.5 million at auction for Nene Park."[37]In fairness to Mr Snell, although it is not the function of the court to put forward a case on behalf of a party that he has not made himself, I have read for myself the correspondence in the bundle between the receivers and Nationwide in relation to the auction sale in order to see whether any of the allegations he has made, given the most generous construction in the light of those documents, could be held to be a credible allegation that Nationwide had given directions to the receivers or interfered with the sale by, for example, insisting that the property be sold in a particular way or with a lower reserve price than might otherwise have been the case. It seems to me that it could not. The general tenor of all those communications is that the receivers put forward their own proposals as to the method of sale and the reserve price based on the advice they have received, and seek confirmation that Nationwide approves their proceeding with the course of action that they propose. The fact that such approval was sought and given does not change the proposals of the receivers into instructions or directions given by Nationwide, nor does it amount to "interference" by Nationwide.[38]I conclude therefore that even if Mr Snell were able to establish that the receivers had acted in breach of duty in the conduct of the sale (I emphasise again that I make no finding that they had done so and indeed on the evidence as presently before me it seems unlikely to be the case) there is no real prospect of his succeeding in laying responsibility for that at the door of Nationwide.[39]For completeness I should say that Mr Snell also alleges in his witness statements that Nene Park was mismanaged by the receivers after their appointment with the result that tenants left, thus increasing losses to Nationwide (and so his own liability) both because rental income was not maximised and because the value of the reversion was reduced. If he is right, this too would at best give him a claim against the receivers but not against Nationwide.

Failure to communicate/negotiate/comply with requests of Mr Snell; frustration

[40]Mr Snell makes a series of allegations that may be summarised as being that Nationwide did not, either before or after the appointment of the receivers, sufficiently communicate with him as to its intentions, negotiate a solution with him that would have avoided the need to appoint receivers or accept his proposals for alternative courses of action. In part this relates to the failure to agree to release monies from the deposit account or accept his proposal to lend him money so that he could acquire Nene Park for £3.8m, with which I have dealt separately. But he makes these points more generally, characterising Nationwide's actions as a breach of duty of care to him, a conflict of interest on account of its close relationship with Mr Christie, withholding information from him (eg as to the change in interest rates) in wrongful reliance on the Data Protection Act and client confidentiality, refusing to discuss the facility with solicitors instructed by Mr Snell, acting in secrecy or in collusion with Mr Christie, engaging in a premeditated attempt to ensure that the investors were excluded from the property, appointing receivers "prematurely" and acting unreasonably, unprofessionally and in breach of business ethics. This he says has "frustrated" the guarantee. This is no doubt not a complete collection of the ways in which the allegation is put at various points of the Defence, witness statements and skeleton argument, but however it is put, it cannot amount to anything which establishes a claim against Nationwide with a real prospect of success.[41]At bottom, all of these allegations are in one way or another the same, ie that Nationwide did not act in Mr Snell's interest or take courses of action Mr Snell thought advisable, and that insofar as Nationwide dealt with Mr Christie, they did not consult him as well. But Nationwide's principal contractual relationship was with its customer Mr Christie, and there is nothing in the facility documentation, the guarantee or the general law that would require Nationwide to inform Mr Snell as surety, let alone consult him about, the way in which the facilities were conducted. Nationwide owed duties of confidence to its customer in relation to his financial and other information. It would be a matter between Mr Snell and Mr Christie to provide any information Mr Snell wished to have, and discuss any actions that Mr Christie proposed to take. In relation to Nationwide's security and exercise of its contractual rights under the facility documents, it was under no obligation to consult Mr Snell, let alone do as he wished. It was not, as mentioned above, a trustee of its rights in favour of Mr Christie, still less Mr Snell as surety, and was entitled to act on its own assessment of its own interests in any instance in which Mr Snell put forward an option he felt would be more beneficial to him, or even if he felt it would be more beneficial to Nationwide.[42]The courts have not recognised any general duty on a creditor to safeguard the economic interests of a surety, either in the tort of negligence or by way of implied term in the suretyship contract; see Chitty on Contracts para 44-110. There is nothing in the relationship between Nationwide and Mr Snell, which was entirely an commercial one entered into in circumstances in which Mr Snell was an experienced businessman in a business partnership with the principal debtor and well understood the implications of a personal guarantee, that raises any real prospect that a court would find it just to impose such a duty in this case-see for instance the rejection of similar arguments in a comparable situation in Barclays Bank Ltd v Quincecare [1992] 4 All ER 363. Nor is there any evidence before me that comes near to making good any suggestion of lack of good faith, improper purpose or anything similar on Nationwide's behalf in its dealings either with Mr Christie or Mr Snell.[43]The alleged failures are not therefore breaches of any duty owed to Mr Snell either under the contract of guarantee or otherwise, and do not either release him from his obligations under it or give rise to any counterclaim against Nationwide. This, as Mr Pomfret submits, is plainly not a case of "frustration" of the contract of guarantee in the legal sense, since nothing has occurred which makes it legally or commercially impossible for Mr Snell to perform his obligations under it.

Misrepresentation

[44]Mr Snell's defence and counterclaim pleads that he had a number of discussions in 2009 with Mr Stephen Postlethwaite, in the course of which representations were made to him: i) That funds would be released from the deposit account "to repay and redeem the outstanding arrears subject to final confirmation by one other authorised person from the claimant. This was to be a mere formality and therefore in principle this had been agreed. Due to the representations and agreement in principle [Mr Snell] continued to run the [Nene Park] property as normal…" (Defence, para 39), and ii) In a conversation in or about April 2009 Mr Snell asked whether Nationwide were considering receivership and "Mr Postlethwaite advised that this was not a course of action which the claimant would look to pursue" (Defence para 41). This is amplified in his later witness statement (p44k para 45) "I recall explicitly the conversation I had with Mr Postlethwaite who firmly and clearly advised me that: 'Although it [receivership] is in our arsenal we have no intentions of doing so' ". In reliance on this Mr Snell says that he continued to manage Nene Park and "invested" a further £48,000 to meet an instalment payment due to Nationwide in June 2009.[45]Although Nationwide does not accept that these statements were made, it is common ground that for present purposes I must assume that they were. Both alleged representations were made after the loan facilities and guarantee were entered into, and there can therefore be no claim for damages or rescission on the basis that those contracts were procured by the representations. Insofar as Mr Snell has any claim arising from them it must be that what was said in these statements gave rise to an obligation on Nationwide to act as they are said to have promised, either because they gave rise to some new contract between him and Nationwide, or they gave rise to some estoppel or waiver of Nationwide's rights. They are not the sort of statements that may give rise to liability in the tort of negligence, which requires a special relationship between the parties (typically that between an adviser and his client) which is not present between a creditor and surety. Mr Snell does not suggest (and could not realistically do so) that they amounted to variations of his contract of guarantee.[46]Any of the conceivable causes of action would require, as a minimum, that a statement had been made amounting to a clear commitment on Nationwide's part, on which Mr Snell was intended to rely, and that he did in fact do so to his detriment (amounting to consideration, if a contract is relied on). Further, if damages are to be recovered, some loss must be shown to have flowed from the breach of commitment.[47]I accept Mr Pomfret's submissions that the allegations Mr Snell makes, taken at their highest, cannot establish any such claim. The first statement was expressly conditional on approval of another person and there is no allegation that such approval was given. No commitment therefore arises. Although Mr Snell says he was told that approval was a formality, this can have been no more than Mr Postlethwaite's impression. It could not realistically be suggested that such approval was not necessary, or that Mr Postlethwaite was committing the other person to give it, since any of those would have been contrary to what he actually said.[48]Mr Pomfret points out that Mr Snell is not specific about when this was said, and could have been referring to the two occasions when Nationwide did in fact agree to release funds. The statement alleged relates to payment of "outstanding" arrears, ie those outstanding at the date, whenever it was, that the statement was made. He does not allege any general commitment to release funds as and when required in the future to meet payments falling due. Thus, whenever the statement was made, there must have already been a default, and release of funds to pay the amount outstanding would neither have waived that default nor prevented the occurrence of any future default. Nationwide would always have been in the position that it was entitled to appoint the receivers as it did, and any losses arising from that appointment would have been suffered in any event.[49]The second statement can only have been, at its highest, a statement of Nationwide's intention as at the time it was made in April 2009. The receivers were not appointed until September of that year, after further default had occurred and no doubt further development of the trading position of the estate and its prospects as perceived by Nationwide. A statement that receivership is "in our arsenal" cannot possibly be construed as a waiver of the right to appoint receivers at any time in the future and irrespective of what may happen, which is in effect what Mr Snell contends for. It could never therefore have been a commitment not to make the appointment in September.[50]Having reached the conclusions above, I do not need to address whether Mr Snell could have established the necessary detrimental reliance or consideration, but for completeness I should record that Mr Pomfret also submitted that his having continued to manage the park could not amount to detrimental reliance. I would have agreed with that, since he was doing no more than to continue in the business role he had agreed with his partners and made no allegation, for example, that he had foregone an opportunity to do something else. It would however have been arguable that paying the further £48,000 was capable of amounting to such reliance, since even though he would have been liable under the guarantee if it had not been paid, it changed his financial position to part with the cash.

Conclusion

[51]Despite the length at which they are put forward, and the variety of ways they are expressed, none of the arguments advanced by Mr Snell gives rise to any real prospect that he would succeed at trial either in showing any defence to his liability in principle under the guarantee, or any counterclaim against Nationwide which could be set against his liability. There will be summary judgment accordingly for Nationwide on the claim and counterclaim.