England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Rolls Building, London EC4A 1NL
		18/07/2017

Master Bowles:

1. By my order dated 9th November 2016, as amended by my further order dated 21^st April 2017, I directed the determination of two preliminary issues, arising in third party proceedings between the Defendant, Jagdish Kotak (to whom, as did the parties, I shall refer as Jak), and the Royal Bank of Scotland (RBS). Those issues were as follows.

(1) Was there a 'one signature' bank mandate in place with the Third Party in relation to the partnership between the Claimant and the Defendant (the "partnership") and, if so, what was the scope of any such mandate? In respect of those loan agreements in Annex 1 to the Defendant's Defence and Amended Counterclaim, are the Partnership and/or the Defendant bound by any of those loan agreements by reason of any 'one signature' mandate held to have been in place?

(2) In respect of those loan agreements in Annex 1 to the Defendant's Defence and Amended Counterclaim, was it a precondition for those loans to bind the partnership that they be signed by both partners? Is the Third Party estopped from now alleging that a signature by one partner was sufficient?

2. Further, by an application notice dated 12^th April 2017, the Defendant sought permission to make amendments to his third party claim against RBS. That application came before me on 21^st April 2017 and I directed that it be heard with the preliminary issues. The trial of the preliminary issues and the hearing of the application to amend took place over the 10^th, 11^th and 12^th May 2017 and this is my judgment in respect of those matters.
3. The third party proceedings arise out of partnership proceedings between two brothers, Dinesh Kotak, the Claimant (to whom I shall refer, as did the parties, as Don), and Jak. Those proceedings are listed for trial in November 2017. The third party proceedings, brought by Jak, seek declarations that a large number of loan agreements purportedly entered into between the partnership and NatWest bank, were and are not binding on the partnership.
4. The partnership in question dates back many years and was, for much of the time, a partnership, between Don and Jak, pursuant to which they carried on business together in the textile industry.
5. In, or about, 2000, however, at a time when, as I am told, there was a downturn in the textile industry, the focus of the partnership shifted toward property and, from about that time onward, the focus of the partnership business turned to and became that of property development and of the purchase and letting of commercial property.
6. Somewhat earlier than that date, in, or about, 1996, the partnership moved its banking arrangements from Midland Bank to NatWest and, on 15^th October 1997, the partnership provided the banking mandate upon which RBS places reliance and which is the subject of the first preliminary issue for my determination. RBS is the statutory assignee of the rights of NatWest and, for convenience, I will refer to RBS, rather than NatWest, throughout this judgment.
7. As to that mandate, there was, prior to trial, some concern raised by Jak as to whether the copy of the October 1997 mandate, which is before the court, was complete and/or whether that mandate had remained in force throughout the period during which, as RBS contends, the mandate provided a sufficient authority for loan agreements entered into by the partnership. At trial, however, it was not seriously contended by Mr David Lord QC and Ms Boulter, on behalf of Jak, that the mandate had not remained in force throughout the relevant period, nor that, subject to a point about guidance notes, to which I will later refer, the mandate, as before the court, had formed a part only of a larger document, the missing parts of which might have affected, or impinged upon, the true construction of the mandate. The mandate, itself, as before the court, provides that the signature of one of the two partners constitutes sufficient authority to RBS in respect of any matter falling within its ambit.
8. Between the inception of the banking relationship between the partnership and RBS, and a date in 2002, when Jak, while remaining a partner, ceased to live in the United Kingdom and moved to Spain, the partnership entered into a number of loan transactions with RBS, which are not, in themselves, in issue in the third party proceedings. The first of those borrowings, so far as they are before the court, was a borrowing of £1.45M in June 1997, for the purchase of commercial premises at the Chartwell Drive Industrial Estate, at Wigston, in Leicestershire (Chartwell Drive) and for the construction of new properties on that site. Thereafter and until Jak moved to Spain, there were significant further borrowings and extensions of borrowings, the last of which, prior to Jak's departure, was in December 2002.
9. That last loan agreement, dated 9^th December 2002, as with an earlier loan agreement, dated 13^th July 1999, and, since not all parts of all other loan agreements, in this period, are available, perhaps other such agreements, contained, upon the signature page, a printed statement to the effect that the loan agreement, (more precisely the Advice of Borrowing Terms) 'MUST BE SIGNED BY ALL THE PARTNERS'. The effect of that agreement was to extend the borrowing facilities available to the partnership to some £4.3M, of which £1.657M reflected existing indebtedness, at the time of the agreement, and the balance reflected a continuation of existing facilities, coupled with new facilities, to be used in respect of the continued development of Chartwell Drive and the purchase of land and buildings at St John's Street, in Leicester. As appears later in this judgment, the printed requirement, in respect of the 1999 and 2002 agreements, that they be signed by all the partners, is a matter heavily prayed in aid by Jak, as part of his case that RBS is estopped, in respect of the loan agreements, to which I shall now turn, from denying that the signatures of both himself and Don were required to be on those loan agreements before the partnership was bound.
10. The loan agreements in question are those purportedly entered into by the partnership with RBS during the period in which Jak was in Spain and before his return from Spain in 2010. The agreements are set out in Annex 1 to the particulars of the Defendant's additional claim against the Third Party. They commence in 2004 and continue until March 2010. They chart the gradual increase of the partnership's borrowings during that time. The last substantive agreement, other than an agreement extending the partnership's overdraft facility, is a loan agreement dated 26^th November 2009, under which RBS agreed to advance £11M to the partnership in order to refinance existing indebtedness.
11. The core point taken by Jak, in respect of these agreements (and each of them), other than a number dealing with the extension of the partnership's overdraft facility and which contemplated, in the signature section, a single signature, is that, as he contends, the agreements are, or were, only binding upon the partnership if signed by both partners, as principals. His case, in that regard, is that, although these agreements are all purportedly signed by him, in fact none of them are; his signature having been forged.
12. As to that, Don does not deny that Jak's signature was not always applied by Jak. His contention, which was, to a limited extent, explored in cross examination, by Mr Lord, was that, on occasions, Jak's signature had been applied to loan documents by members of the Kotak family, including Don, himself, but that, when so applied, it had always been at the request of and hence with the authority of Jak. Don's contention was that, from his, Don's perspective, the reason why Jak's signature was purportedly applied to documents, including loan documents was to record and signify that the documentation had been discussed and approved by Jak, even although Jak had not, himself, applied his signature. Don was not able, he said, to identify which loan documents had, actually, been signed by Jak and upon which loan documents a family member, whether Don, or another, had applied Jak's signature.
13. It has been agreed between the parties that, at this trial, I should not resolve the question of forgery, or the question of any actual authority granted by Jak for Don, or others, to sign loan agreements on his behalf and using his purported signature, or the further and related question as to Jak's knowledge of the relevant loan agreements and the loans advanced pursuant to those agreements.
14. Rather, I should decide whether, on the agreed assumption for purposes of this trial, that Jak did not, in fact, sign the relevant loan agreements and that it was only Don, who, in fact, signed those agreements, the partnership is not bound by the loan agreements, because the loan agreements only bound the partnership if actually signed by both partners, as principals, or because RBS is estopped from denying that that was the case, or whether, as contended by RBS, the loan agreements bound the partnership if signed in any way binding upon the partnership.
15. If the answer to that question (the second preliminary issue) is in favour of Jak, then the question of forgery will have to be resolved and there will have to be a determination, in due course as to which, if any, agreements were actually signed by Jak and, thereby bound the partnership. That determination, if required, would take place within the second trial which is currently listed in November 2017.
16. Conversely, if the question is resolved in favour of RBS and if, also, in resolution of the first preliminary issue, the court decides that the scope of the so-called 'one signature' mandate was wide enough to bind the partnership in respect of the loan agreements, simply by reason of Don's acknowledged signature upon those agreements, then the effect, or result, of those conclusions would be that RBS would have established the binding nature of all the relevant loan agreements, the third party claim would be at an end and RBS would need to take no further part in these proceedings, or secure a favourable resolution upon the issue of forgery.
17. If the answer to what has been called the 'two signature' question is resolved in favour of RBS, but the mandate question is resolved in favour of Jak, then, again, irrespective of the question of forgery, the partnership will still be bound by the loan agreements, if and to the extent that RBS can rely upon section 5 of the Partnership Act 1890 (the 1890 Act) and if and to the extent, therefore, that Don, even if acting without the actual authority of Jak, was, when he signed the loan agreements, or any of them, 'carrying on in the usual way business of the kind carried on by the partnership'.
18. In this regard, when the preliminary issues were first formulated and set out in my order of 9th November 2016, the preliminary issues included an issue as to whether, even on the assumption that Jak's signature had been forged on the relevant loan agreements without his consent, or knowledge, the partnership was, nonetheless, bound by Don's signature on the agreements, pursuant to section 5 of the 1890 Act. At that stage, however, Annex 1, as then formulated, had conceded, or averred, that the large majority of the loan agreements had been in respect of borrowings advanced for partnership purposes with the obvious consequence, as RBS saw it, that, whatever his actual authority, Don, in signing the agreements in question, was carrying on in the usual way business of the kind carried on by the partnership and was, thus and by virtue of what was termed, by Chadwick LJ, in Bank of Scotland v Henry Butcher & Co [2003] 2 All ER (Comm), the second limb of section 5 of the 1890 Act, acting, with the apparent authority of the partnership. The preliminary issue was expressed to be confined to those loan agreements where the borrowings had, as then pleaded by Jak, been advanced for partnership purposes and did not extend to a number of other of the loan agreements (some ten in number) where it was contended by Jak that the borrowings had not been advanced for partnership purposes, but for other purposes of Don's.
19. Jak's application to amend, if granted, would change the foregoing. His contention, now, in his proposed amendment, is that none of the borrowings advanced by way of the loan agreements (other than those relating to overdraft extensions) were for partnership purposes, albeit that, in respect of those agreements where it had been previously averred that the borrowing had been for partnership purposes, it is now averred that the relevant borrowings were utilised in the purchase of assets which were treated as partnership assets.
20. The consequence of that proposed amendment, if granted, would, of course, have been to render the preliminary issue as to the effect of section 5 of the 1890 Act, entirely redundant. The issue had been limited to those agreements where, as previously conceded, or averred, the lending had admittedly been for partnership purposes. On the new footing, advanced by Jak, there were no such agreements.
21. The proposed amendment, further, puts explicitly in issue, in respect, now, of all the relevant loan agreements, the question, which had previously been restricted to those ten agreements then said by Jak not to have given rise to borrowings for partnership purposes, as to whether, as contended by RBS, Don, in signing those agreements, had been carrying on in the usual way business of the kind carried on by the partnership, such that he had ostensible, or apparent, authority to bind the partnership, pursuant to the second limb of section 5 of the 1890 Act. Although Jak's original particulars of claim in support of his third party claim against RBS had denied the availability, in favour of RBS, of section 5 of the 1890 Act, he had done so by reference to the alleged 'two signature' requirement and Don's lack of actual authority and not by reference to a lack of apparent authority arising under the second limb of the section.
22. Additionally, the proposed amendment sought, further, to apply, to all of the relevant Annex 1 loan agreements, a contention, only previously raised in respect of the ten agreements previously said not to have been for partnership purposes, to the effect that, in entering into the loan agreements, Don was pledging the credit of the partnership for purposes not apparently connected with the partnership's ordinary course of business, such that, by reason of section 7 of the 1890 Act, the partnership was not bound.
23. Jak's proposed amendment is fiercely disputed by RBS. When the application to amend first came on, on 21^st April 2017, objection was raised both as to its being a late amendment, given its proximity to the first trial, and as to its legal merits. In the event, however, given that the amendment did not impact upon the preliminary issue relating to the mandate or upon the 'two signatures' question and given that, as set out above, the necessary effect of the amendment would be, or would have been, to render the section 5 preliminary issue redundant, I took the view that the better course was to proceed with the two issues unaffected by the amendment and deal, at the same time and at the same hearing, with the legal merits of the amendment.
24. As to the last, RBS's position is that the amendments described above, together with other amendments, discussed later in this judgment, have no realistic prospects of success at a trial and so should not be permitted. In that event and, in particular, if the amendments, which seek to broaden the argument under the second limb of section 5 of the 1890 Act and under section 7 of the 1890 Act, so as to embrace all of the relevant Annex 1 loan agreements, are refused and if RBS was also successful on the 'two signatures' issue, then, irrespective of the court's decision on the scope of the mandate, or any ultimate decision as to the forgery, or otherwise, of Jak's signature, Mr Hanke's submission, on behalf of RBS, is that Jak no longer has any answer to RBS's plea that the partnership is bound pursuant to the second limb of section 5 of the 1890 Act, save in respect of the ten agreements, which Jak has always contended were not for partnership purposes.
25. On that footing, the only residual, or subsisting, issue, as between RBS and Jak, would pertain to those ten agreements. In regard to those ten, RBS contends, irrespective of all else, that, of the loan facilities encompassed by those agreements, only three were ever drawn down, that the monies so drawn down totalled no more than £1.1M, that those monies were repaid by the partnership no later than October 2009 and that, in consequence, the grant of any relief to Jak in respect of the ten agreements, or any of them would serve no useful purpose.
26. In similar vein, RBS draws to my attention the fact that, from the RBS perspective, it is only the last substantive loan agreement, that of 26^th November 2009, which is truly in issue; this because that agreement, which purported to advance £11M to the partnership, did so in discharge of all prior indebtedness of the partnership to RBS, such that the partnership's liability to RBS rests solely on that agreement. That liability, I am told, following the sale of the two main assets of the partnership, Chartwell Drive and the partnership's land and buildings at St John's Street, stood, as at 14^th February 2017, at £3,175,442.49.
27. From Don and Jak's perspective, however, matters stand differently. One can readily see that, in the working out of the affairs of the partnership, in the main proceedings, or in any account and enquiries directed in respect of the main proceedings, the question as to whether sums used for the purchase of partnership assets emanated from borrowings of the partnership, or borrowings for which the partnership is liable, or by way of advances from individual partners, could well be material. Equally, if borrowings, although purportedly to the partnership, but, in fact, to one partner, were repaid from partnership funds, then that, too, could well be material. In that context, it does seem to me to be of value, looking at the proceedings as a whole, to consider whether the earlier loan agreements contained in Annex 1 were loans validly made to the partnership and for which the partnership is liable, or whether, for example, because a particular loan agreement required two signatures, but received only one, the borrowings under that agreement cannot be regarded as partnership borrowings at all, but simply the borrowings of the recipient of the loan.
28. In light of the foregoing, the parties agreed that the loan agreements in Annex 1 fell into three categories (A, B and C) and that I should, in dealing with the 'two signature' issue, review a loan of agreement of each type. In the result, I reviewed the loan agreement dated 26^th November 2009 (Category C), the loan agreement dated 18^th November 2008 (Category A) and the loan agreement dated 10^th July 2006 (Category B).
29. The 'two signature' issue is, as I see it and as already explained, the better issue for first determination. If it was, as Mr Lord contends, a precondition of each of the relevant Annex 1 loan agreements that they be signed by both partners, Jak and Don, then, on the footing that I have been asked to assume, that Jak did not sign the agreements, none of those agreements were ever concluded. In that context, even if there was, otherwise, a 'one signature' mandate, or even if Don, in signing, had been 'carrying on in the usual way business of the kind carried on by the partnership', the failure of the two partners to fulfil RBS's own precondition would preclude any of the alleged agreements from arising.
30. The essential starting point in a consideration of the 'two signature' issue is to be found in the fact that, at all times, RBS intended to lend not to two individuals, as such, Don and Jak, but to Don and Jak, acting in partnership. In this regard, Mr Hanke took me in great detail through the terms of the Category A, B and C loan agreements to demonstrate that, in respect of each category of loan, the intended lending had been to the partnership.
31. In his reply to those submissions, Mr Lord did not challenge that analysis and, in consequence, I need not, in this judgment, itemise all the matters identified by Mr Hanke as pointing to that conclusion. It is sufficient to recite that, in the Category A loan agreements, 'the Borrowers' are defined as Jak and Don 'carrying on business .. in partnership'; in the Category B loan agreements the agreement is said to be between (RBS) and Don and Jak 'together carrying on business in partnership'; in the Category C agreements the 'Customer' and recipient of the loan is described as 'The partnership of (Don and Jak)'.
32. Had the intended lending not been to the partnership, then, subject to any argument based upon the mandate, there could be no question of one of two joint borrowers being bound by the terms of a loan agreement that only one had signed, or otherwise accepted.
33. What makes a partnership different and the reason why, in respect of lending to a partnership, the individual partners, in that partnership, may be bound by a loan agreement signed by only one of what may be many partners is that, irrespective of any authority given by a specific mandate, each partner has the authority to bind his fellow partners, acting in that regard both as principal, for himself, and as agent for his fellow partners, in matters falling within his actual or ostensible authority. That authority, both actual and ostensible, derives from the terms of section 5 of the 1890 Act, which, in its turn, replicates, as I understand it, the position which pre-existed the coming into force of the 1890 Act.
34. Given this starting point and given the protection afforded to a lender in the position of RBS by the authority vested in a partner, by reason of his status as a partner (together with any further protection that might be afforded, in this case, by the mandate), the question, here, is whether, notwithstanding that measure of protection, it was RBS's intention, in respect of these loan agreements, that they should only bind the partners to whom the lending was to be extended if both partners signed the agreements as principal. Mr Lord's core submission is that that was RBS's intention.
35. In this regard, although I was helpfully taken, by Mr Hanke, to recent authorities on the construction of contracts, it seems to me, as I observed early in the argument, that the true question, here, is as to the construction of RBS's various offers of loan facilities, as embodied in the relevant loan agreements offered for acceptance. On that footing the question for the court is as to the intent of RBS, as to the relevant mode of acceptance of its offers, that intent being objectively construed from the terms of the offer and the surrounding factual (or, as set out hereafter, legal) matrix.
36. At the forefront of Mr Lord's argument, whether in relation to the Category A, B or C loans, was the fact that, in each case, the agreement, prepared by RBS, contained a signature section, or signature box, which provided for the signature of each partner and which did not, in any case, contain any such words as 'on behalf of the partnership'. It is that formulation, coupled with and reinforced by a number of other and, perhaps, subsidiary factors that, he submitted, raised the conclusion that RBS's offer of finance was, in all cases, predicated upon the requirement that each partner would sign the agreement as a principal.
37. In regard to those further factors, Mr Lord drew my attention to the precondition in each of the relevant loan agreements that RBS would only advance the loan monies when the agreement in question had been signed by 'the Borrowers' (Category A) and by 'the Customer' (Categories B and C). He submitted that the definition of 'Borrowers' and 'Customer', at least in the Category A and Category B agreements, pointed towards a requirement that each of Jak and Don, together constituting, respectively, 'the Borrowers' and 'the Customer', should personally sign the agreements.
38. The Category A agreement, that of 18^th November 2008, defined 'Borrowers' as Jak and Don 'carrying on business .. in partnership' and further provided that the use of the word 'Borrowers' in the agreement should be 'deemed both to refer to all such persons together and to each of them separately'. The Category B agreement, that of 10^th July 2006, defined 'Customer' as Jak and Don, but qualified that definition by a description (also used on the front sheet of the agreement) of their capacity, in respect of the agreement, namely as 'carrying on business in partnership'.
39. Mr Lord also prayed in aid, in respect of the Category A agreements, Guidance Notes which accompanied at least six of those agreements. Those Guidance Notes described the Customer as being Jak and Don and instructed the relevant bank official, these being internal Guidance Notes, to ensure the signature of the Customer. Mr Lord submitted that these notes, albeit internal to RBS, suggested, consistently with his overall submission, that both Jak and Don's signatures were separately required before any agreement was concluded.
40. Mr Lord further submitted that the warning words to be found on all of the relevant loan agreements, namely that these were important documents and that the recipient of the documents should, in the case of the Category A and B agreements, 'sign only if you want to be bound' and, in the case of a Category C document 'take independent legal advice before signing' were consistent with a requirement that each of Jak and Don, as the apparent recipients of the loan documents, had to sign the agreements before they were bound. The point, he submitted, was further emphasised, in the case of the Category B loan agreements, by the fact that the words 'Sign only if you want to be bound by the terms of this Agreement' appear immediately before the signatory section of each agreement.
41. As a final pointer towards his construction of the loan documentation, Mr Lord attached particular weight to the fact that, across all the relevant loan agreements, provision was made that, in the event of a new partner joining the partnership, that partner should enter into a specific agreement with RBS to be bound by the terms of the relevant agreement. His submission was to the effect that the requirement, that a new incoming partner must personally sign such an assent, showed, or tended to show, that RBS required, in all cases, whether at the inception of a particular agreement, or during its currency, all material persons to personally sign the agreement in question.
42. I do not think that the internal Guidance Notes or the warning words (I would say customary warning words) afford any significant guidance in the construction of RBS's various offers. The warning words are standard form words and afford no clue to the intended signatories of the loan agreements. The Guidance Notes are internal and, as such, cannot, as I see it, contribute to an objective evaluation of RBS's offer in respect of the Category A loan agreements, to which they relate.
43. Nor am I persuaded that the fact, that, pursuant to the various agreements, a new incoming partner was required to sign a specific assent to being bound by the agreement in question, carries the significance suggested by Mr Lord. It seems to me that that requirement does nothing more than recognise the fact that the introduction of a new partner gives rise, technically, to a new partnership and that the assent, therefore, of the new partner is required to ensure that he, too, accepts liability for advances made to the previous partnership and carried forward to the new partnership.
44. In regard to the submission that the definitions of, respectively, 'Borrowers', in the Category A agreements and 'Customer', in the Category B agreements import a requirement that each of Don and Jak should sign the agreements personally, I am satisfied that those definitions did not contemplate that either Jak or Don were required to sign, as suggested by Mr Lord and Ms Boulter, in their skeleton argument, in their individual capacities. It is quite plain from the language of the agreements and of the definitions and descriptions of the Borrower/Customer in the agreements that all the loan offers were directed to Jak and Don in their capacity as partners and not as individuals.
45. It seems to me, further, that the fact that the definition of 'Borrowers' in the Category A loan agreements is explicitly stated to refer to each of Don and Jak separately, as well as together, tends to indicate and is, certainly, linguistically consistent with the indication that the signature of one of Jak and Don would constitute the signature of the 'Borrowers' and would suffice.
46. That definition, however, is, as is commonly the case in agreements of this type, expressed to apply 'unless the context otherwise requires'. Does the context, in this case, otherwise require?
47. In the ordinary way, an offer of lending to two persons, in their individual capacities, would require the assent of, or acceptance, by both persons, if both persons were to be bound. In that context, one can readily see that 'Borrowers' should not be given an extended meaning and should mean both actual borrowers.
48. Here, however, the context is partnership and the agency principle between partners arising in partnership. In that context, I can see no reason why the extended meaning of 'Borrowers', to cover both each individual borrower and the two borrowers together, as defined in the Category A loan agreements, should not apply.
49. In regard to the Category B loan agreements, a broadly similar position applies. While Jak and Don are described in these agreements as the 'Customer', Clause 13.3 of each agreement, makes clear that references, in the agreement to the 'Customer' means 'all or any of such persons'. Accordingly, there is nothing in the definition, or description, of the 'Customer' to signify a requirement that each of Jak and Don sign and, given the explicit partnership context of these agreements, nothing, in that context, to inhibit the language of clause 13.3 being given its full effect.
50. There remains the question of substance, raised by Mr Lord, as to the implications to be derived from the fact that each of the relevant Annex 1 loan agreements contained, or included, signature sections which provided for the signature of each partner and which, in no case, contained any language explicitly indicative of the fact that a signatory was signing on behalf of the partnership, or on behalf of the other partner.
51. Mr Lord's submission, arising from the provision of signatory boxes in this form, was that they were indicative of RBS's intention that, notwithstanding any mandate and notwithstanding the actual or ostensible authority that an individual partner might ordinarily have, pursuant to and by reason of section 5 of the 1890 Act, these agreements could only be entered into if, reflective of the form and language of the signature boxes, each partner signed each agreement as principal.
52. In support of this proposition, Mr Lord attached considerable weight to the decision of the Court of Appeal, in Internaut Shipping GmbH v Fercometal SARL [2003] 2 All ER (Comm) 760, and to the passage in Lewison, The Interpretation of Contracts (6^th Edition) Chapter 10, Section 5 (10.05), derived from Universal Steam Navigation Co Ltd v James McKelvie & Co [1923] AC 492 at 505-506, and applied in Internaut.
53. That passage states that where 'a person signs a contract in his own name and without qualification he is prima facie to be deemed to be a person contracting personally, and in order to prevent this liability from attaching, it must be apparent from the other portions of the document that he did not intend to bind himself as principal'.
54. Mr Lord, relying upon this passage and upon Internaut, submitted that, in determining who the parties to a contract are and, in particular, whether a party has signed in his own right, or as agent, one looks to see how the contract has been signed.
55. I do not doubt that to be the case. That, however, is not this case. The question, in this case, is whether there was a contract, or whether, because the signatory sections of the various loan agreements provided for the signature of both partners, the signature of one partner, which, under ordinary principles of partnership law, or pursuant to the relevant mandate, might bind the partnership, was not sufficient to conclude the loan agreements proffered by RBS.
56. As to that, Mr Lord's argument was, as it seems to me, an extrapolation of the position set out in the passage taken from Lewison and, in effect, amounted to this: that since the parties to a contract are determined by the way the contract is signed, the way that the signing provisions in a contract offered for acceptance are, themselves, laid out, determines the mode whereby the contractual offer embodied in the loan documents in question can be accepted. On that footing, Mr Lord submitted that the question for my determination was a short one, that the answer was dictated by the signing provisions and that, because the signing provisions contemplated that the loan agreements be signed by each partner as principal, no other, or alternative, mode of acceptance was available.
57. In this regard, late in the argument, Mr Lundie, acting for Don, drew my attention to the decision of the Court of Appeal, in Maple Leaf Macro Facility Master Fund and another v Rouvroy and another [2010] 2 All ER (Comm) 788. In that case, the court had concluded that a funding agreement that made provision for the parties' signatures had bound the parties notwithstanding that one party had not signed the agreement but had evinced its acceptance by email. On appeal it was argued that the absence of one of the parties' signature on the funding agreement meant that no concluded agreement had been reached. That argument failed. In the Court of Appeal, Longmore LJ pointed to the fact that there was nothing within, or outside, the funding agreement such as to show that it was only binding when signed. The most that could be prayed in aid was that the funding document had made provision for the signatures of all parties, but that that did not establish a consensus that the agreement was only binding when signed. The fact that the agreement envisaged a signature and left space for those signatures were not, in his words, at paragraph 16, a 'prescription' that the agreement could only become binding on the appending of the signatures. There was, in short, no prescribed mode of acceptance to be derived from the existence of the signing provisions on the agreement.
58. The decision, in Maple Leaf, is, of course, only a decision as to the effect and meaning of a particular funding agreement and of the offer put forward to the potential accepting parties by that agreement. It does not determine, or purport to determine, as a matter of law, that the production of a loan agreement with particular signing provisions can never give rise to, or evidence, a requirement that acceptance take the particular form denoted by the signing provisions. It does, however, demonstrate that particular signing provisions do not, as a matter of course, result in, or give rise to, the conclusion that the offering party is laying down a particular, or prescribed, mode of acceptance.
59. In this case, the starting point is that there is no legal requirement that a loan agreement can only arise under a signed contract. Nor, on the face of the loan agreements, is there imposed any condition that the loan agreements, as opposed to the advance of the funds provided for by the loan agreements, should only come into being when a signed agreement has been entered into. A signed agreement is a precondition of draw down. It is not a precondition of the existence of the contract of loan itself. The precautionary, or warning words, to the effect that a borrower should not sign unless that borrower wishes to be bound, does no more than signify, as explained, in paragraph 16 of Maple Leaf, that a signed agreement will be the best evidence of the terms agreed.
60. In this context, the court is being asked to go a long way, on only the limited material of the signature boxes, if it is to hold that the existence and form of those signature boxes precluded acceptance of the loan offers other than by the signature of each of the two partners as principals.
61. In particular, as set out in paragraph 51 of this judgment, it would import an intention in RBS that RBS would forego all the protections available to it under section 5 of the 1890 Act and, potentially, under the 1997 mandate in favour of its requirement that each of the two partners individually sign each loan agreement.
62. As earlier set out, RBS's intention, in respect of its loan offers, must be construed objectively and against the relevant factual/ legal matrix.
63. In carrying out that exercise in construction, it seems to me that the court will have regard, substantially, to the same factors as would be relevant in construing a contract. One of those considerations, is that, while the commercial common sense of the matter is important, it is not, as Lord Neuberger pointed out, in Arnold v Britton [2015] AC 1619, to be invoked retrospectively. Rather, the commercial common sense of the matter must be viewed as it would have been perceived at the time of the transaction. Accordingly, if, objectively construed it had been RBS's intention, in proffering the loan documents in the way that it did, that the loan offers could only be accepted by each of Don and Jak signing the loan documents, then the fact that, retrospectively, it has emerged that the effect of that requirement and the fact of non-compliance with that requirement has been that RBS has lost the benefit either of the mandate or of section 5 of the 1890 Act and that the loan agreements are not binding on the partnership, affords no good reason to avoid that construction.
64. I do not think, however, that, objectively construed, RBS's intention was to provide for a mode of acceptance which, in the events that have transpired, or which I am to assume have transpired, would remove the potential protection of the mandate, or of section 5 of the 1890 Act.
65. It seems to me that the existence of the mandate and, more particularly, the fact that the various loan offers were offers to a partnership and hence were susceptible of acceptance by a single partner, in the circumstances provided for by section 5 of the 1890 Act, forms an important part of the factual matrix against which RBS's various loan offers fall to be construed. There can be no doubt but that the protections afforded by section 5 and, potentially, by the mandate would have been known to RBS when making those offers. It seems to me that those possible protections must also be regarded as being known by the potential offerees, the partnership. Mr Lord put the matter bluntly, by saying that the parties must be assumed to know the law. Having considered the helpful distillation of the relevant principles (applying, I think, equally to the construction of an offer as to the construction of a contract) set out in Lewison, Chapter 6 (4.06) pages 203 to 208, I would put the matter, in this way, that, where an offer is made to the partners of a partnership, those partners must be taken to be aware of the general law pertaining to partnerships and, therefore, of the protections available to those trading with partnerships, as provided for by, among other things, section 5 of the 1890 Act.
66. In that context, the question is whether the presentation by RBS of the various loan documents in a form providing for signature by both partners was objectively intended and should objectively be construed as intended to amount to a required mode of acceptance, such that an acceptance in compliance either with the mandate, if applicable, or section 5 of the 1890 Act would be insufficient.
67. In considering that question, regard should also be had, as submitted to me by Mr Hanke, to other provisions of the relevant loan agreements which, so he submitted, pointed to an intention in RBS to protect its position in respect of any internal wrongdoing within the partnership relevant to the agreement in question and to contradict, therefore, any possible intention to forego protections otherwise available.
68. In the loan agreement of 26^th November 2009 (Category C), which incorporated the bank's LIBOR loan terms, those terms provided, by clause 6, confirmations by the 'Customer' (i.e. the partnership) that it had power to carry on the business and that the agreement did not breach its constitution and had been authorised; by clause 9.1.1, an undertaking that the loan would only be used for its stated purpose; and, by clause 13.5, that the inaccurate provision by the Customer of any confirmation given, or information provided, would constitute an event of default such as to entitle RBS to call for immediate repayment.
69. In the loan agreement dated 11^th November 2008 (Category A), clause 9 of the agreement contains a similar, if not more detailed, series of representations and warranties as to the power and authority of the borrowers and the legal validity and binding obligation created by the agreement. Clause 13.1 (b), likewise, provides that any misrepresentation or warranty made in the agreement constitutes an event of default.
70. It is fair to say that the loan agreement dated 14^th July 2006 (Category B), while rendering any inaccurate representation or warranty given by the borrower an event of default, did not contain representations, or warranties of authority in the same way as did the subsequent (Category A and Category C) loan agreements.
71. Be that as it may, I am satisfied that there is nothing in any of the loan agreements, other than the bare signatory provisions relied upon by Mr Lord, to suggest that RBS, when offering these loans was intending to deprive itself of any legal protections that it might have available in the event of some internal default by the partnership, or in the event, as now alleged, of a forgery of one partner's signature by another. Rather the Category A and Category C agreements suggest, very strongly, that RBS was anxious to have in place such specific provisions as it could to prevent the loans becoming unenforceable in any such event.
72. In these circumstances, I am not persuaded that the signatory provisions establish or evince, as it was put by Longmore LJ, in Maple Leaf, a 'prescription' that the loan agreements would only bind when signed by both partners as principals. Looked at against both the specific terms of the Category C and Category A loan agreements and, just as materially, the matrix of background law, within which all these agreements were entered into, I cannot accept that it was RBS's intention, contrary to its own common sense business interests, to deprive itself of the protections afforded by section 5 of the 1890 Act, or, if applicable, the single signature mandate, by the imposition of such a requirement.
73. Rather, it seems to me that the signature provisions were set out as they were in the expectation and wish that both parties would sign, that being the best evidence of the agreement made and of the persons bound by it. In setting out those provisions that way, however, in the context of loan offers made, in all cases, to the partnership, I do not think that, looked at objectively, and in context, RBS was intending to preclude itself, as it would do, if it required the signature of each principal as a condition of its offer, from relying upon an acceptance of the offer in any other way that would bind the partnership, or in precluding itself, in the event of a forgery, from the protections otherwise afforded it either by the statute or by the mandate. Put shortly, the signing provisions were, as I see it, intended as an additional protection to RBS not an alternative one.
74. In the result, I am satisfied, in the terms of the second preliminary issues, that it was not a precondition of the Annex 1 loan agreements that they be signed by both partners.
75. I am also satisfied, in the terms of the second part of the second preliminary question that RBS is not estopped from now alleging that the signature of one party is sufficient to bind the partnership, if one signature would otherwise be effective.
76. Jak sought to found that estoppel upon the contention that RBS had represented to him, prior to his moving to Spain, that it would be insufficient for purposes of further partnership borrowing for a loan agreement to be signed by only one partner. That representation was, further, said to have given rise to a common understanding between Jak and RBS that loan agreements had to be signed by both partners. Jak's pleaded contention, set out, ultimately, in paragraphs 11 to 13 of the proposed amendment was that he had relied upon RBS's representation and upon the common understanding, flowing from that representation, when he went to Spain and that, in the absence of RBS's representation or of that common understanding, he would have ensured that Don was not in a position to enter into further borrowing arrangements without his, Jak's, signed agreement.
77. The representation said to have been made by RBS was a representation by conduct and was said to arise from the 'Advice of Borrowing Terms' dated, respectively, 13^th July 1999 and 6^th December 2002, referred to, already, in paragraph 8 of this judgment, and from the statement, in each of those Advices, that the agreement evidenced by those Advices had to be signed by all partners. Reliance was also placed upon the statement, in the December 2002 Advice, that it was a precondition to the use of the loan facilities relating to the purchase of the land and buildings in St John Street that a signed copy of the Advice of Borrowing be returned.
78. RBS, unsurprisingly, took the point, with which I concur, that the fact that, in respect of one, or even two, specific lending transactions, a lender offers to lend upon particular terms, such as the requirement, here, of the signatures of all the partners, does not amount to any assurance, or representation, that that lender will, in respect of future lending, insist upon, or require, the same terms. This is the more the case, as Mr Hanke submitted, where the loan facilities themselves make clear, as do the 1999 and 2002 Advices, that even in respect of the loans currently to be advanced the loan terms may be changed by notice given by the lender.
79. Jak was cross examined as to his understanding of these Advices, both by Mr Hanke and by Mr Lundie. There was a point in his cross examination, by Mr Hanke when he appeared to be telling me that he had been told either by bank officials, or by his lawyers, that all lending agreements with the bank would require both his brother and himself, as partners, to sign. Nothing like that had ever previously been alleged, or pleaded. That that was not the burden of his evidence was, however, made clear when he was cross examined by Mr Lundie. In that cross examination, which was not the subject of any re-examination by Mr Lord, he explained that he had never had any discussion either with the bank or with Don as to the terms of any future lending.
80. Jak was also cross examined as to his expectations while he was living overseas. In that regard, he made it clear that he had not expected that the partnership would engage in any borrowing in his absence and had expected that all expenditure would be financed out of the income and resources of the partnership. He explained that he had complete trust in Don and that that trust and confidence, coupled with his expectation that there would be no and no need for borrowing, meant that he had not contemplated any discussion with the bank to limit Don's possible borrowing, or seen any need to change the banking mandate. He explained to Mr Hanke that even if the 2002 loan agreement had stated, explicitly, that the terms of the existing borrowing were no guarantee of the terms of any future borrowing, he would still have acted as he did.
81. In these circumstances, I am completely satisfied that there was never any representation, or assurance, given by RBS as to the terms, or the signature requirements of any future borrowing, or any corresponding conventional understanding in that regard. I am equally satisfied that Jak placed no reliance upon the Advices of Borrowing, even had they amounted to some form of assurance, or representation. His unequivocal evidence is that those Advices did not impact upon, or affect, the way he conducted his affairs, or his relationship with Don and the partnership. He relied upon Don and, as he said, upon his belief that the partnership was, or would be, financially self supporting.
82. Accordingly, no estoppel has arisen.
83. Turning, therefore, to the first preliminary issue, the so-called 'one signature' mandate, a number of the points, initially raised by Jak, dispersed in the course of the trial.
84. As already stated, in paragraph 6 of this judgment, it is no longer contended that the 1997 mandate was not in force during the relevant period. Nor is it seriously contended that any material part of the operative mandate document is not before the court.
85. RBS was not able to provide a blank template for its partnership banking mandate, as used in 1997. It was able to provide a template for such a mandate, as used in 1998. That document consists of three pages. The first page is a cover sheet, headed Partnership Mandate and stating that it is a legal document and that the guidance notes, over the page, should be read before the 'form' is filled in. It is not completely clear whether the guidance notes are internal desk instructions, or guidance notes for the partners entering into the mandate. Mr Ferguson, RBS's witness, was unable to assist. On balance, I agree with Mr Lord that they are guidance notes for those providing the mandate. As such, I further, agree that they are a legitimate aid to the construction of the mandate. The probability, I think, is that similar guidance notes existed in 1997. The language of the operative part of the 1998 mandate (the third page of the template) is, however, materially different to the 1997 mandate and, in consequence, the notes, themselves, must be treated with care. Mr Lord, however, prayed in aid, as an aid to the construction of the 1997 mandate, the fact that, although it could be argued that the 1998 mandate contained language, defining the extent of the mandate, as wide as, or wider than, that contained in the 1997 mandate, nonetheless the guidance note for partners, where documents (to use a neutral term) were to be signed in the firm name, referred only to the partners signing 'cheques and instructions for payment'. Mr Lord's point was that that guidance was of assistance to me in resolving the real issue, arising as to the mandate, namely the scope of the mandate and, in particular, whether the scope of the mandate extended, beyond the signing of cheques and payment instructions, to the loan agreements in Annex 1, such that the signing of those agreements by Don bound the partnership.
86. The operative part of the 1997 mandate reads as follows:

'You are authorised, until notified to the contrary by any one signatory to the Firm's accounts, to pay cheques or accept other written instructions to make payments by any means (including electronically) from any of the Firm's accounts and for all other purposes on behalf of the Firm if those instructions are signed by:

Any one of the signatories named below in the authorised signatory list

We the signatories below acknowledge (and if appropriate on behalf of all other Partners of the Firm now and in the future) that we are liable together and each separately to you whether for any overdraft caused or increased on any of the Firm's accounts or for any other purpose'.

87. The authorised signatories 'named below' were Jak and Don.
88. It is, I think, common ground that the second part of the mandate (the liability section) (appearing below the reference to any one of the signatories) is intended to identify the liabilities taken on by the partnership pursuant to the mandate and, consequentially, to include any liability arising out of the exercise by a partner of the single signature provisions of the mandate. It follows that one would expect that the liabilities provided for by the liability section would, at the least, correlate with any liabilities which might arise from RBS acting under the authority given to a single signatory by the first part of the mandate (the authority section). If, therefore, on its true construction, the liability section does not reflect the potential liabilities that might arise pursuant to a given construction of the authority section, that would be a powerful indicator that that construction of the authority section was incorrect. The two sections of the mandate must, at least to that extent, dovetail.
89. The main burden of the debate as to the scope both of the authority section and the liability section turns upon the use of the words 'for all other purposes', in the authority section, and the words 'for any other purpose', in the liability section.
90. One preliminary point can be taken out of the way. The copy of the 1997 mandate has, in manuscript, written down its right hand side, the names of the partners and the account number of what has, at all times, been the main partnership account. Mr Lord sought to argue that this manuscript notation had the effect of limiting the scope of the mandate to that particular account.
91. I reject that submission. The language of the mandate is crystal clear and refers, in the authority section, to 'the Firm's accounts' and to 'any of the Firm's accounts. It is manifestly not related solely to that particular account and the manuscript notation, I have no doubt, refers simply to the account, or main account, then in being when the mandate was entered into. Any other construction of the mandate would both be contrary to the language and contrary to any realistic banking practice. It is an obvious commonplace, when a mandate is taken, in respect of a business, where, over time, other current, deposit, or loan, accounts may well arise, that the mandate should look forward to those putative accounts and should not be limited to any initial account.
92. Mr Lord's more substantial submission related, as stated above, to the meaning to be attached to the two phrases 'for all other purposes' and 'for any other purpose'. His submission, in essence, was that, in the authority section, the authority of the single signatory was limited to the everyday operations of the partnership's bank account and was never intended to extend to loans. It was an authority to the bank to honour cheques, or any other payment instructions issued, or signed, by a single signatory. It extended no further. Correspondingly, Mr Lord submitted that, in the liability section, the extent of the acknowledged liability, arising out of the operation of the single signature mandate, was limited to overdrafts, caused, or increased on any of the Firm's accounts by reason of payments made by the bank in accordance with the authority section.
93. In seeking to make good his submission, Mr Lord drew my attention to a passage in The Law of Banking Payments (4^th ed.) at paragraph 7-235. That passage purports to explain the significance of a mandate as specifying the person 'who is held out to the paying bank as authorised to instruct the paying bank to pay'. That, he submitted, was a useful touchstone, in resolving the scope of the authority given to a signatory by a mandate and served to demonstrate that, ordinarily at least, the authority given by a mandate was an authority to make payments.
94. I confess that I did not find this citation of any great assistance. It does not seem to me that the fact that, in a book concerning banking payments, the use of a mandate is described by reference to the making of banking payments, tells me anything of significance either about mandates, generally, or about this particular mandate.
95. By the same token, I am not persuaded that the guidance notes, to which I have made reference in paragraph 85 of this judgment, are of any material assistance in construing the mandate. The portion of the guidance notes, upon which Mr Lord placed some reliance, is not, nor intended to be, an exposition of the full meaning and effect of the mandate. Rather, it simply tells partners who intend to sign cheques and payment instructions (undoubtedly falling within the mandate) using the firm name that they must sign the firm name in the appropriate part of the mandate document. It is not intended to describe the limits of the mandate, nor override the language of the mandate. It is designed, simply, to ensure that where the firm name is to be used by a particular partner, in the exercise of the mandate, the bank has a copy of the firm name, as signed by him, on the mandate document for reference. The reference to cheques and instructions is simply illustrative of documents to which the firm name might be applied in the exercise of the mandate.
96. Much more materially, Mr Lord submitted that, in the context of his construction of the mandate, the use of the words 'for all other purposes' in the authority section was designed to extend the ambit of the authority given to the bank to pay beyond that which would automatically flow from the operation of section 5 of the 1890 Act. That section affords a partner actual authority when acting for the purpose of the business of the partnership and ostensible authority when carrying on in the usual way business carried on by the partnership. Mr Lord's contention is that the use of the words 'for all other purposes' was designed to ensure that the bank was authorised by the mandate to honour payments whether or not made for the purpose of the partnership business, or in carrying on in the usual way business carried on by the partnership. In short, under his analysis, the bank would not, in respect of payments made have to have any regard to the purpose of the payment.
97. My problem with this submission is twofold. Firstly, as a matter of language, the words 'for all other purposes'(my emphasis) seem to me to point, clearly, to purposes other than payment, rather than constituting an extension of the authority to pay. Secondly, it seems to me that if the suggested purpose, for which the words have been used is to extend the bank's authority to pay beyond that falling within the authority given to a sole signatory by section 5 of the 1890 Act, they are wholly surplus. The core authority given by the mandate is a general authority to the bank to make all payments and to honour all payment instructions. Its position is already protected by the mandate and, in this context, the words 'for all other purposes' add nothing.
98. The alternative way that Mr Lord seeks to limit the ambit of the mandate is by reference to the eiusdem generis rule and the contra proferentem rule.
99. As to the contra proferentem rule, he submitted that the mandate was a standard form document prepared by the bank and any ambiguity ought, therefore, to be resolved in favour of the partnership and in limitation of the ambit of the mandate. That submission, therefore, turns upon the existence of an ambiguity.
100. In regard to the eiusdem generis rule, Mr Lord drew my attention to the familiar canon of construction, set out by Lord Watson, in Sun Fire Office v Hart (1889) 14 App. Cas. 98 at 103, to the effect that 'where a particular enumeration is followed by such words as 'or other', the latter expression ought, if not enlarged by the context, be limited to matters eiusdem generis with those specially enumerated'. As explained, in Lewison at Chapter 7, Section 13, what this means is that, unless enlarged by context, where 'things described by particular words have some common characteristic which constitutes them a genus, the general words which follow them ought to be limited to things of that genus'.
101. In Mr Lord's analysis, the things described in the particular words of the authorisation section of the mandate are things to do with payment out of the partnership accounts and, therefore, the words 'for all other purposes' must be limited to all other purposes relating to payment from those accounts. By way of example, he drew my attention to the decision of the Royal Court of Jersey, in Izodia Plc v Royal Bank of Scotland International Ltd [2006] JLR 346.
102. In that case the relevant mandate authorised the bank to 'honour comply with and debit to the Company's account … all cheques, warrants, or other orders, or instructions, bills accepted and promissory notes …' A letter was written purportedly instructing the bank to, in effect, add a new signatory to the mandate and that 'signatory' then withdrew some £27M from the Company's account. The court held that the word 'instructions' in the mandate had to be construed eiusdem generis with the preceding and following words and was, therefore, limited to instructions in respect of payments and did not extend to an instruction equivalent to adding a new signatory to the mandate.
103. Mr Hanke's response to Mr Lord's analysis and the application of the eiusdem generis principle was to focus upon the fact that the opening part of the authority section of the mandate already embraced all aspects of payment and, therefore, comprehended a complete genus, leaving no realistic meaning in the words 'for all other purposes'. In his analysis, those words could not mean 'all other purposes relating to payment' because all such purposes were already covered. On that footing, he argued that the use of the words 'for all other purposes' must have been intended to embrace matters other than payment and, therefore, adopting the words of Lord Watson, that the ambit of the words were enlarged by their context.
104. The question then, as he submitted, was to what other purposes the authority given by the single signature mandate extended. His answer was that it extended to, but was also limited to, all matters relating to the ordinary banking relationship between RBS and the partnership and, therefore, gave authority to a sole signatory to enter into a loan agreement, such an agreement forming an obvious part of the ordinary business of banking.
105. Mr Hanke submitted that this was entirely consistent with the meaning that must attach to the words 'for any other purpose' in the liability section of the mandate. Although the use of the word 'purpose' rather than 'liability' was infelicitous, he submitted that the only sensible meaning that could, in context, attach, to the words, given that the section was dealing with the liabilities of the partnership, was that they meant 'for any other purpose giving rise to a liability' and hence were apt to include the liability arising under a loan agreement entered into by a sole signatory under the authorisation section of the mandate.
106. Mr Lundie, in his short submissions on this point and in reliance upon a passage in Chitty on Contracts (31^st Edition) at 12-089, questioned the applicability of the eiusdem generis principle to a commercial transaction, such as a banking mandate. By this route, he reached the same conclusion as Mr Hanke, namely that the ambit of the mandate, both in its authorisation and its liability section, was not, in this case, limited by the application of that principle.
107. I prefer Mr Hanke's and Mr Lundie's submissions to those of Mr Lord.
108. I agree, entirely, that Mr Lord's argument as to the ambit of the authority section of the mandate would render the words 'for all other purposes' otiose and redundant and that that cannot have been the intention of the parties when they entered into the mandate.
109. I agree, also, that, in the context of a banking mandate, the construction of those words, which limits their effect and the authority of the single signatory to all purposes relating to the ordinary banking relationship between RBS and the partnership, is a correct reflection of the intention of the parties. While all parties agreed that, for purposes of this trial, there was no need for me to determine the precise outward limit of the mandate, I have no doubt but that entering into a loan agreement falls squarely within the ambit of an ordinary banking relationship and, hence, within the ambit of the mandate.
110. In regard to the liability section of the mandate, it seems to me that any eiusdem generis argument, applying to that part of the mandate, would, again, render the general words of that section, the words 'for any other purpose' surplus. If they were to be construed as meaning 'any other purpose relating to any overdraft caused or increased on any of the Firm's accounts' they would add nothing to the existing language in the earlier part of the liability section. The liability section already covers all overdrafts caused or increased on the Firm's accounts and the general words would add nothing and mean nothing. To give the words meaning, in the context of a section of the mandate dealing with the partners liabilities, they must, as I see it and as submitted by Mr Hanke, be read as meaning 'for any other purpose giving rise to a liability'. As with the proper construction of the authority section, however, any such liability must, itself, be limited, by context, to matters falling within the ordinary banking relationship, of which the mandate formed a part. As already stated, liability under a loan agreement undoubtedly falls within the ambit of such a relationship.
111. It seems to me that this construction of the mandate has, also, the virtue of commercial common sense and utility in practice. It means that all the ordinary dealings between the bank and the partnership are embraced by both aspects of the mandate and there are not left in place any narrow, or difficult, distinctions between that which is authorised by the exercise of the mandate and that which is not.
112. By way of example, no more, since, as discussed at the trial, the actual exercise of the mandate, post its inception, is not an acceptable aid to the construction of the mandate, it is noteworthy that, as set out earlier in this judgment, the mandate has purported to be used by RBS and Don to enter into formal overdraft agreements. It is, at the least, questionable whether, on Mr Lord's core construction of the mandate, that was an acceptable, or proper, use of the mandate. A formal overdraft agreement does not readily fall within the wording of the liability section, as being an overdraft 'caused or increased on any of the Firm's accounts', nor is it embraced by the construction of the liability section of the mandate advanced by Mr Lord, as set out in paragraph 92 of this judgment and in paragraph 61 of Mr Lord and Ms Boulter's skeleton argument. Yet, a formal overdraft agreement is a quintessential part of an everyday commercial banking relationship and one which should, as it seems to me, fall indisputably within the mandate. RBS's construction has that effect.
113. In the result, I am satisfied that the scope of the 'one signature' mandate is that which is contended for by RBS and by Don. That construction gives rise to and enables a simple and straightforward working relationship to exist between the bank and its customer. I have no doubt that that was what was intended by the inclusion of the general words in the authority and liability sections of the mandate. I see, therefore, no ambiguity and no reason, therefore, to adopt or apply the contra proferentem rule.
114. In respect of the first preliminary issue, there was, at all relevant times, a 'one signature' mandate in place with RBS in relation to the partnership between Don and Jak. The scope of that mandate was sufficient to bind the partnership and Jak to the loan agreements in Annex 1.
115. The effect of my conclusions in respect of the two preliminary issues is that all the Annex 1 loan agreements are, or were, binding on the partnership and upon both partners, irrespective of any question of the forgery of Jak's signature upon those agreements and irrespective of Don's actual authority. The ostensible authority arising from the mandate, was sufficient to bind the partnership.
116. The further effect of the above, as explained in paragraph 16 of this judgment, is that these third party proceedings are brought to an end. The third party claim must be dismissed.
117. In light of that it necessarily follows that, subject to any retrospective amendments, so as to reflect in the pleadings the issues determined in this trial; for example the amendments to paragraphs 11 to 13 of the amended particulars of the third party claim, which set out Jak's pleading in respect of estoppel; the application to amend must be dismissed.
118. In case, however, this matter goes further and in view of the fact that I had the benefit of full argument in respect of the amendments, I will, albeit in a somewhat abbreviated form set out my principal conclusions in respect of the key amendments which were proposed.
119. There were three principal aspects of the amendments.
120. Firstly, as set out in paragraphs 18 to 21 of this judgment, they were designed to widen, to all the Annex 1 loan agreements, the averment that, in entering into those agreements, Don had not been carrying on in the usual way business carried on by the partnership, such that those agreements were not entered into with the ostensible, or apparent authority of the partnership pursuant to the second limb of section 5 of the 1890 Act.
121. Secondly, as set out in paragraph 22 of this judgment, the amendments sought to contend, again in respect of all the Annex 1 loan agreements, that, in entering into the loan agreements, Don was pledging the credit of the partnership for purposes not apparently connected with the partnership's ordinary course of business, such that, subject to actual authority, or, as it transpires, the authority derived from the mandate, the partnership would not be bound.
122. Thirdly, the amendments sought to contend, in respect of certain of the loan agreements, namely those expressed to be entered into to re-finance pre-existing loans from RBS, or liabilities, or existing indebtedness to RBS, that, if it were the case (as I hold it is not) that the loan agreements that were purported to be re-financed by those agreements were in fact void, unenforceable, or otherwise not binding upon the partnership, then, whether by reason of express term, pre-condition, implied term, or total failure of consideration, those subsequent re-financing agreements would, likewise, be ineffective or otherwise unenforceable against the partnership.
123. The question to be resolved in respect of each of these categories of amendment, if permission to amend was to be given, was, or would have been, whether the amendments, as pleaded, had realistic prospects of success. There was some suggestion, by Mr Lord, that a somewhat different test applied, namely that permission should be granted unless the claim raised by the amendment had no prospect of success. In so far as there is a sensible distinction between the one test and the other, I am satisfied that the right test is that, arising under CPR 24 and set out above.
124. In regard to the first category of amendments, those relating to the second limb of section 5 of the 1890 Act, the question for consideration, arising in respect of each of the Annex 1 loan agreements, other than the ten, or so, where it has always been alleged that the agreements were not entered into for partnership purposes, is, or would be, whether there is any realistic prospect, upon the facts, as pleaded by Jak, in his amended particulars, that a court at trial would hold that Don's conduct, in entering into each of the relevant Annex 1 loan agreements did not amount to 'carrying on in the usual way business of the kind carried on by the partnership'.
125. If there is no such prospect, it is not contended, or pleaded, pursuant to the proviso, which qualifies the second limb of section 5 of the 1890 Act, that RBS, in its dealings with Don, knew that he had no authority to enter into the loans in question and that, for that reason, Don lacked the ostensible authority to enter into the loan agreements which would otherwise flow from the fact that his conduct fell within the second limb of section 5 of the 1890 Act.
126. It is not and cannot be disputed that the kind of business carried on by the partnership, from 2000 and, therefore, in all the years relevant to this enquiry, has been, as variously described in the pleadings and by Jak, both in his evidence before me and in his witness statement, as the purchase, development and letting of commercial property with the aim of selling the properties in the medium to long term. The live question, therefore, in respect of the viability of this category of proposed amendments is whether Don's conduct in entering into the relevant loan agreement could realistically be said to be conduct other than the carrying on of that kind of business in the usual way.
127. In this regard, it is clear from the authorities that, in determining whether an act of a partner constitutes the carrying on of a particular business in the usual way, the court is not to examine the way in which the particular partnership in question carried on its business, but whether the conduct in question was usual to the type, or kind, of business carried on by the partnership. Thus, in the example given by Dyson LJ (as he then was), in JJ Coughlan Ltd v Ruparelia [2004] PNLR 4 at paragraph 25, a solicitor who sold double glazing would, palpably, not be carrying on business of the type, or kind, usual to a solicitor.
128. It is clear, also, from Ruparelia at paragraph 30, that, even where, looked at a relatively high level of generality, the act of a partner may be regarded as usual to the kind of business carried on by the partnership, that act may, nonetheless, be regarded, when examined in detail, as one which 'viewed fairly and properly' is not one which can properly be described as usual to the kind of business carried on by the partnership in question. In regard to most acts, so examined, however, it was the view of Dyson LJ that the transaction in question would fall obviously on one side of the line or another, although a few would not be plain. In such a case, Dyson LJ cautioned against the court finding too readily that a given act was not usual to the kind of business carried on.
129. In viewing the act, or action, in question and in determining whether that act was carried on in the usual way of a business of the relevant kind, the question to be answered is not whether the act in question was an act carried out in the usual way of a business of the relevant kind but whether, as Mr Hanke put it, in argument, the act would appear to be such an act when viewed through the eyes of a rational, competent reasonable counterparty to the transaction in issue and, therefore, in this case, through the eyes of a reasonably prudent and competent lender (see United Bank of Kuwait Ltd .v Hammoud [1988] 1WLR 1051 and Hirst v Etherington [1999] Lloyds Rep PN 938).
130. The amendments relevant to the foregoing are those set out at paragraphs 7(4)(c) to (f), 7(5)(d) and 7(6) of the amended particulars of the third party claim.
131. The starting point (Mr Hanke would say, the finishing point, as well) is that all the relevant Annex 1 loans (that is the loans other than those where it has always been pleaded that they were not for partnership purposes) were loan transactions entered into by a partnership which was in the business of property purchase, letting and redevelopment. His submission is that it is an everyday commonplace of such a business that they operate, to a significant extent, on borrowed money and that, accordingly, it is implausible and unrealistic to suggest that, at the high level of generality explained above, Don's acts of borrowing were not usual to the kind of business carried on by the partnership. I would accept that submission.
132. In so doing, I do not overlook the fact that there is old authority that, save in respect of what has been termed a trading partnership, the borrowing of money by a partnership is not to be treated as something falling within the usual way of carrying on business. I agree, wholeheartedly, however, with the editors of Lindley and Banks on Partnership (19^th Edition), at 12-47, that those authorities are deserving of particular critical consideration in the modern business climate. In my view, where, as the editors, point out, a significant number, if not the majority, of businesses, are financed, in whole or part, on borrowed money, it is archaic and outdated to suggest that the borrowing of money is not something that arises in the carrying on of many, if not most, businesses in the usual way.
133. As set out in paragraph 131, this is particularly the case in respect of property businesses, where borrowed money is almost always fundamental to the business operation. So much so that, notwithstanding the nineteenth century authorities, it is, in my view, utterly unrealistic to argue that the borrowing of money is not integral to the usual way in which a property business is run.
134. It remains to consider whether the matters raised by Jak, in respect of the relevant loan agreements entered into by Don evidence the kind of special features that might warrant the court, in determining, in respect of any particular loan agreement, that that agreement was not one which could be regarded, looked at through the eyes of a reasonable and competent lender, as one which was not usual to a property business of the kind carried on by the partnership.
135. In my view, having considered all of the matters raised in the relevant paragraphs of the amendments, there is nothing alleged, whether taken individually, or cumulatively, which raises a realistic prospect that, at a trial, the court would hold that there was anything within, or in respect of, any of the individual loan transactions (other than what I might call the excluded ten) which would lead a reasonable and competent lender to think that that these were not transactions entered into by a property business acting in the usual way of such a business.
136. In view of my overall decision that the third party claim must be dismissed and, correspondingly, that the application to amend, save in so far as it contains retrospective amendments relating to this trial, must also be dismissed, I will not, in this judgment, enter into the more detailed analysis that might have been required were the third party claim to continue.
137. It is sufficient to mention the following matters.
138. Firstly, in respect of the matters pleaded at paragraphs 7(4)(c) to (e)(iv) of the amendment, none of those matters bears at all upon the usual way in which a property business would carry on its business. In regard to (e)(v), I have already indicated that, in my view, the old authorities, relating to so called non-trading partnerships have no realistic application in modern business conditions and, specifically, in respect of a property business of the type carried on by the partnership.
139. Secondly, in respect of paragraph 7(4)(f) of the amendment, which seeks to raise and to rely upon a number of particular matters, said to take the transactions to which those matters related so far outside the norm of the kind of borrowing transaction which might be expected to be entered into by a property business acting in the usual way of such a business as to disqualify those agreements from being regarded in that way, I have no doubt at all that any departures that there may have been from what might be called strict compliance with some form of lending protocol do not go nearly far enough to warrant a court in concluding that the transactions in question, seen through the eyes of a prudent lender, were not transactions within the ambit of a property business carrying on its business in the usual way. I add that a number of the matters raised go to the conduct of RBS rather than Don. I cannot see that those matters are, or can be, material.
140. Thirdly, as to paragraph 7(5)(d) of the amendment, the fact, that loan monies advanced in respect of a particular property transaction exceeded the purchase price of the property relevant to that transaction, is no indication that the transaction was not a usual transaction for a property business carrying on a business, which, as with this one, carried on works of redevelopment.
141. Fourthly, in regard to paragraph 7(6) of the amendment, the un-particularised allegation that RBS was aware that the transactions entered into by Don were not transactions being carried on by Don, or the partnership, carrying on in the usual way business of the kind carried on by the partnership (an allegation, effectively, that RBS joined in a fraud on the partnership) is not pursued.
142. As to the other aspects of paragraph 7(6), paragraph 7(6)(a) incorporates paragraphs 7(4)(c) to (f) and 7(5) of the amended particulars of claim. Those matters have already been dealt with. As to the new matters raised, there is nothing, other than in paragraph 7(6)(iii), which relates to a number of the excluded ten agreements, which realistically suggests, from the perspective of a competent lender, that the loan agreements entered into by Don were anything other than agreements of the kind to be expected to be entered into by a property business of the kind carried on by the partnership.
143. In this regard, I do not think that the fact, that there may have been other agreements (namely some or all of the excluded ten) which might have not been viewed by a prudent lender as being agreements of the kind to be expected to be entered into in the usual way by a property business of the kind carried on by the partnership, has the effect that other agreements which were, to all appearances, agreements of the kind that it would be expected that a property business of the kind carried on by the partnership would enter into, should not be viewed as such.
144. Nor do I think that the fact, alleged by Jak, that RBS took no steps to verify Jak's signature, is anything to the point. From the perspective of the bank, these were all standard form loan agreements, entered into by a long standing customer and ostensibly signed by both partners. There is nothing in that, whether viewed from the perspective of the bank, or otherwise, to entitle a court to regard these agreements as anything other than what they were, namely loan agreements entered into in the usual way of a business of the kind carried on by the partnership.
145. In the result, I have no doubt but that these amendments, were they to have been made, would have had no realistic prospects of success and, for that reason, had the occasion arisen, I would have refused permission to amend. To adopt the language of Dyson LJ in Ruparelia, there is no doubt, in this case, which side of the line the relevant loan agreements fall. They were agreements usual to the kind of business carried on by a business of the type carried on by the partnership and, as such binding on the partnership.
146. Turning to the second category of amendments, as set out in paragraph 8 of the amended particulars of claim and relating to section 7 of the 1890 Act, the question, here, which, in view of the foregoing, I can deal with in relatively short order, is whether there is a realistic prospect that it can be established at a trial that Don, in entering into the relevant loan agreements, again, those other than the excluded ten, was pledging the credit of the partnership for purposes 'apparently not connected with the firm's ordinary course of business'.
147. The matters relied upon by Jak are the same matters as are relied upon in support of the contention that the loan agreements in question were not loan agreements entered into in the usual way of the kind of business carried on by the partnership.
148. Nothing in those matters obviates the fact that the business of the partnership was a property business, that the borrowings in question were borrowings apparently, for and connected with that business, and that such borrowings were usual to that kind of business. In those circumstances, I cannot see any basis upon which it can be said that the borrowings entered into by Don were apparently not connected with the partnership's course of business. The opposite is true and, in consequence I would have refused this category of amendment.
149. The final tranche of amendments are those set out in paragraphs 14 to 17 of the amended particulars of claim. Those amendments raise the contention that those five of the loan agreements which are expressed to be entered into by the partnership to re-finance the partnership's existing indebtedness contain either a pre-condition, or an express term, or an implied term, such that, in the event that there was no pre-existing indebtedness the agreement in question would not come into being, or would not bind the partnership, or would not otherwise be enforceable. In two instances they raise the further contention that the agreements are unenforceable by reason of a total failure of consideration.
150. The underlying postulate upon the basis of which these amendments are advanced is that the loan agreements which antedate the loan agreements said to contain the suggested pre-condition, express term, or implied term are all, themselves, unenforceable and, hence, give rise to no indebtedness to RBS, while, yet, the agreement, or agreements, said to contain these terms, or this pre-condition would, otherwise than for the existence of these terms, or this pre-condition, be binding upon the partnership. In respect of the two agreements where a total failure of consideration is additionally alleged, the corresponding postulate must be that the agreements prior to those agreements are ineffective to create any indebtedness to RBS, but that, but for the relevant total failure of consideration arising from that fact and/or the existence of the relevant pre-condition, or express, or implied term, those agreements would bind the partnership.
151. It is apparent from my conclusions at this trial that the circumstances postulated by this aspect of the amendments have not arisen. Given, moreover, that it is not in contest but that the borrowings in respect of Chartwell Drive and the Land and Buildings at St John Street, were authorised borrowings of the partnership and that it is, at least in part, those borrowings that the five loan agreements relevant to this aspect of the amendments purported to re-finance, it seems to me that, even if my findings are successfully appealed, the circumstances relevant to these amendments will, nonetheless, never arise. For this reason, I see no need to explore the merits of this aspect of the matter in even the detail that I have given to the section 5 and section 7 amendments.
152. Rather, I will indicate my views by reference, only, to the November 2009 loan agreement. If the matter should go further and should the need arise to consider the earlier agreements, that can take place on another occasion.
153. I do not think that it was either an express term, or a pre-condition of the 2009 agreement, or an implied term of that agreement, that there be existing indebtedness to RBS. Clause 1.1 of the agreement, which is the only part of the agreement which expressly refers to existing indebtedness, or the like, is a clause which sets out the purpose of the loan. It does not state that the loan agreement is conditional upon the existence of the indebtedness referred to in the clause.
154. Instead, the structure of the agreement, when read with the LIBOR terms, which form part of the agreement, is that it contains an undertaking by the partnership (the Customer), at clause 9.1.1 of the LIBOR terms, that the loan will only be used for the specified purpose; namely to repay existing indebtedness. If that be not the case and if, therefore, the confirmation provided by the undertaking, as to the purpose of the loan, is inaccurate, then, by clause 13.5 of the LIBOR terms, that inaccurate confirmation constitutes an event of default and, consequentially, clause 10.1 of the agreement entitles RBS to call for the immediate repayment of the loan.
155. That structure is, in my view, wholly antithetical to the existence either of an express, or an implied term, or condition, to the effect that the agreement is conditional upon, or effective and enforceable only, if there is existing indebtedness. The agreement and the LIBOR terms, forming part of the agreement, makes specific and express provision for the situation which arises, or which would arise, in the event that the relevant loan was not used for its specified purpose, whether that purpose was the refinancing of existing indebtedness, or anything else. The effect of the agreement and the way it is structured is not that no agreement arises, in that event, but that provision is made, under and pursuant to the agreement for the recovery of the loan. Given that express provision, it is trite law that no conflicting implied term can arise.
156. The final matter raised, in respect of this aspect of the amendment, is the allegation of total failure of consideration.
157. The foundation of this submission is to be found in the fact that the 2009 loan agreement and the November 2008 loan agreement, which is the other agreement in respect of which total failure of consideration is alleged, were each agreements under which no new money was advanced, but where the partnership's liability to RBS was relocated from earlier agreements to the relevant new agreement. In that scenario and in the postulated context that, at the time of each relevant agreement, there was no indebtedness owed to RBS, the argument advanced by Mr Lord is that the consideration for, in the case of the 2009 agreement, the £11M loan, namely the repayment, or discharge, of the partnership's existing indebtedness, had wholly failed.
158. In the course of argument, on this point, it seemed to me that the argument wandered somewhat between a submission that there was no consideration given by RBS and, therefore, no contract and the pleaded contention that the consideration to be given by RBS, namely the refinancing, or discharge, of existing indebtedness, was a consideration, there being no such indebtedness to be discharged, or refinanced, that had wholly failed.
159. It seems to me that the better analysis is the latter not the former. The consideration, under each relevant agreement, is that RBS, in consideration of the partnership's promise to repay the monies advanced under the agreement, would treat the partnership's pre-existing indebtedness as discharged. On that footing, the fact, that there was, had it been the case, no existing indebtedness, would not have affected the formation of the contract. In that circumstance, however, there being no indebtedness to be discharged, there would, very arguably, be a total failure of consideration, the effect of which, might be to entitle the partnership to advance a restitutionary claim to the recovery of all monies paid, or to be repaid, under the loan agreement in question.
160. Given the above analysis, had the situation arisen, I would have been prepared to accept the possibility that such a claim might be made and would have afforded Jak time to consider and, if he could, plead out the basis, not currently made clear, upon which such a claim might render the relevant loan agreement unenforceable. In the event, however, the situation does not arise.
161. For all the reasons discussed herein, I will dismiss the third party claim and, subject to retrospective amendments in relation to the matters in issue in this trial, I will dismiss the application to amend.