COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEENS BENCH DIVISON
Mr Justice Maddocks
London, WC2A 2LL
B e f o r e :
LORD JUSTICE CARNWATH
SIR ANTHONY EVANS+
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|Royal Bank of Scotland plc
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Mr Mark Cawson QC (instructed by Cobbetts solicitors) for the Respondent
AS APPROVED BY THE COURT
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Lord Justice Waller:
" For the reasons which I have just given, I think that the question is whether the claim has no real prospect of succeeding at trial and that it has to be answered having regard to the overriding objective of dealing with the case justly. But the point which is of crucial importance lies in the answer to the further question that then needs to be asked, which is - what is to be the scope of that inquiry?
 I would approach that further question in this way. The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman, at p 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all."
(i) A lengthy background of relations with the Bank when they willingly loaned him or companies in which he had an interest monies to develop properties, with a successful, by which I mean a profitable outcome;
(ii) A problem with borrowing arranged for one company (Counterfeature Limited) in 1992, but despite a reneging on that borrowing, the Bank allowing an increase in his personal overdraft to enable the development to take place; this lead to TM being put in the hands of RBS's Specialist Lending Services Department (SLS) until a refinancing arrangement could be worked out. The object of any refinancing arrangement was to achieve a situation where he could be returned to "the mainstream banking operation" (see the statement of Miss Hope at paragraph 3);
(iii) As part of the refinancing arrangement the Bank by letter on 10th February 1995 to TM at his company Financial Management Systems Limited (FMS) confirmed that if TM was returned to mainstream banking it would consider lending to enable TM or one of his companies to develop what was called HMR/PMR. The letter said:-
"Further to our meeting I write with regard to the development of Heaton Moor Road through Financial Management Systems Limited.
Whilst I am not in position to provide a formal offer letter agreeing to the future financing of the development, I can confirm that, in principle, the Bank would look to assist subject to normal Bank criteria, at that time, being met."
(iv) Also as part of the refinancing the Bank agreed that TM's current account would be recredited with excess interest or charges raised in reference to "unauthorised" borrowing or unpaid cheques or referrals (the Refund Agreement). [The Bank contend that this agreement was not made in these terms, but accept that for summary judgment purposes it can be assumed.]
(v) The significant terms of the refinancing arrangement were confirmed by a letter signed by the Bank and were as follows:-
"1. The Overdraft Limit is £80,000.
For the purpose of calculating the amount outstanding under the Facility the total of cleared credit balances on account 14306118 in your name will be netted against the total of the cleared debit balances on any such accounts.
2. The Facility will be used for the purposes of your business.
3. (a) The Facility is repayable upon demand in
accordance with normal banking practice.
(b) Without prejudice to its overriding right to call for repayment on demand it is the Bank's present intention that the Facility be available until 31st October 1995 and will be reviewed on that date but may be extended by mutual agreement.
The Bank will always give notification of its intention to place a restriction on your ability to make further drawings on the Facility.
4. Interest will be charged at 21/2% per annum over the Bank's Base Rate, (which is currently 6.75%) subject to a minimum charge of 61/4% per annum. You will be given at least one month's notice of any change in this margin over Base Rate. Interest will be calculated both before and after demand, decree or judgment on a daily basis on the cleared debit balance and will be applied quarterly on the penultimate business day of March, June, September and December.
5. An arrangement fee of £1,000 is payable and will be debited to your account on 3rd March 1995, or shortly thereafter."
(vi) If the Bank had refunded the correct figure in March 1995 under the Refund Agreement, the overdraft figure of £80,000 would have been exceeded, but TM asserts the Bank would have agreed the facility at £90,000, and that would have returned him to normal mainstream banking arrangements.
(vii) If normal mainstream banking arrangements had been in place, TM would have brought the HMR/PMR development back to the Bank and the Bank would (as it had indicated in principle) have provided borrowing to the extent of £500,000 for that development;
(viii) Being unable to bring the HMR/PMR scheme to fruition lead TM and his partner Mr Lamb to dispose of HMR on the best terms available making a profit of only some £8,000, whereas fruition would have entailed profits in the region of £400,000.
(ix) The Bank failed to refund the correct figure until 1998. The Bank then did lend for the PMR project alone, but the delay in refunding caused the delay in that development leading to loss of rents for the period of delay.
(x) Thus TM claims as damages for breach of the obligation to refund, the loss of profits that would have been made on HMR/PMR and/or the losses for the delay on PMR.
"(4) The Defendant would permit the Claimant adequate overdraft facilities on the terms of the overdraft facility letter other than as to limit and in excess of the limit, insofar as the balance of his residual borrowing following first the effecting of the transfers set out in Schedule 4 to him and secondly fulfilment by the Defendant of the Refund Agreement; neither the Claimant nor the Defendant could know the precise level of adequate overdraft, which ahd been estimated by the Claimant as hereinbefore alleged since April 1994 at £80,000, until the transfers were effected and the Defendant had calculated and made the refund;
(5) The Defendant would in principle seek to assist in the future finance of HMR/PMR on normal banking criteria;
(6) The Defendant would deal with the Claimant as in normal banking relation with it, rather than as the subject of specialised lending.
The terms of subparagraph (4) was implied as a matter of necessity or business efficacy since the adequacy of the overdraft could not be agreed and/or ascertained until the parties had effected the transfer and the Defendant had calculated and made the refund. The term at subparagraph (5) was concluded or evidenced by the letter of 8th February 1995 (paragraph 18 above). The terms at subparagraph (6) above was implied of necessity or of business efficacy, as such was the purpose of the refinancing."
"The principle is that where the defendant has the option of performing a contract in alternative ways, damages for breach by him must be assessed on the assumption that he will perform it in the way most beneficial to himself and not in that most beneficial to the plaintiff." McGregor para 386.
"…..if the contract is broken or wrongly repudiated, the task of the assessor of damages is to estimate as best he can what the plaintiff would have gained in money or money's worth if the defendant had fulfilled his legal obligations and had done no more. Where there is an anticipatory breach by wrongful repudiation, this can at best be an estimate, whatever the date of the hearing. It involves assuming that what has not occurred and never will occur has occurred or will occur, i.e. that the defendant has since the breach performed his legal obligation under the contract, and if the estimate is made before the contract would otherwise have come to and end, that he will continue to perform his legal obligations thereunder until the due date of its termination. But the assumption to be made is that the defendant has performed or will perform his legal obligations under his contract with the plaintiff and nothing more. What these legal obligations are and what is their value to the plaintiff may depend upon the occurrence of events extraneous to the contract itself and, where this is so, the probability of the recurrence is relevant to the estimate. …..
The events extraneous to the contract upon the occurrence of which the legal obligations of the defendant and the plaintiff thereunder are independent may include events which are within the control of the defendant: for instance, his continuing to carry on business even though he has not assumed by his contract a direct legal obligation to the plaintiff to do so. Where this is so, one must not assume that he will cut off his nose to spite his face and so control these events as to reduce his legal obligations to the plaintiff by incurring greater loss in other respects. That would not be the mode of performing the contract which is "the least burthensome to the defendant,""
"A plaintiff in an action for damages for wrongful dismissal can rely only on the fact that the defendant was obliged to carry out the contract sued upon. His prospects in terms of money or money's worth resulting from the carrying out of the contract may be conditioned by the estimated impact of external events on the results of the carrying out. But it has never been held that the plaintiff can claim any sum on the ground that the defendant might after the repudiation date have voluntarily subjected himself to an additional contractual obligation in favour of the plaintiff. That is not the law, nor, with respect, do I think it would be in accordance with the sense of the matter so to hold: an employer whose attitude to the employee has reached the stage that he is prepared to sack him out hand is, so to say the least, an unlikely source of future generosity. I cannot find any support for the contrary propositions in the additional authority to which the Master of the Rolls makes reference."
"And if in Chaplin v Hicks  2KB 786 the defendant himself had been the person who was to judge the beauty contest, he could hardly have argued successfully that, in the circumstances that had happened, he would not have "opted" to give the plaintiff a prize."
And by a note they say:-
"All these cases of defendant's option are, naturally enough, contract cases. But problems raising the same issue can be mentioned in tort, e.g. the defendant's servant negligently injures the plaintiff on her way to a beauty contest judged by the defendant or to an interview with the defendant for a lucrative post."
"The appearance of a cap is actually the result of the plaintiff having to satisfy two separate requirements: first, to prove that he has suffered loss, and secondly, to establish that the loss fell within the scope of the duty he was owed."
The judge held that the loss of the development if caused by the banks failure to make the new loan, fell wholly outside the scope of the duty under the refund agreement which was confined to refunding the money.
"In the light of decided cases, the test appears to be: have the facts in question come to the defendant's knowledge in such circumstances that a reasonable person in the shoes of the defendant would, if he had considered the matter at the time of making the contract, have contemplated that, in the event of a breach by him, such facts were to be taken into account when considering his responsibility for loss suffered by the plaintiff as result of such breach. The answer to that question may vary from case to case, taking into consideration such matters as, for example, the nature of the facts in question and how far they are unusual, and the extent to which such facts are likely to make fulfilment of the contract by the due date more critical, or to render the plaintiff's loss heavier in the event of non-fulfilment."
"However a defendant will still only be liable for damages resulting from special circumstances when those special circumstances have been brought home to him in such a way as to show that he has accepted, or is taken to have accepted, the risk. Not only must the parties contemplate that the damage resulting from the special circumstances may occur. But they must further contemplate that the defendant is taking the risk of being liable for such consequences should they occur."
Lord Justice Carnwath:
Sir Anthony Evans