England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
CIRCUIT COMMERCIAL COURT (QBD)

		Leeds Combined Court Centre, The Courthouse, 1 Oxford Row, Leeds, LS1 3BG.
		15/02/2019

HH Judge Klein:

1. This is the judgment following the hearing of two applications; one made, or treated as having been made, by the Claimant, by a notice dated 16 July 2018, for directions, and the second, made by the Defendants, by a notice dated 11 September 2018, principally for the summary disposal of the claim. Although the Defendants' application is the second in time, because the parties agreed that, if that application is dismissed, I ought to give directions and, because the parties broadly agreed those directions as well, it is not necessary for me to deal with the application for directions in this judgment.
2. By the Defendants' application, they sought the following substantive relief; namely, an order that:

i) the Royal Bank of Scotland plc (company number: SC083026) be substituted for the Second Defendant, the Royal Bank of Scotland plc (company number: SC090312); and,

ii) the Claim Form and Particulars of Claim be struck out, pursuant to my order dated 11 October 2017 ("the October order") and/or that summary judgment be granted in their favour under CPR Part 24.

3. The order for the substitution of the Second Defendant is sought because of the arrangements that the Royal Bank of Scotland Group put in place to meet UK ring-fencing legislation, which have had the effect of transferring the Second Defendant's liability to the Claimant, if any, to Adam & Company plc, which has been renamed the Royal Bank of Scotland plc. Mr Doyle, who represented the Claimant on the applications, sensibly indicated that, if the claim has not already been summarily disposed of by the October order, the Claimant would not object to the substitution order sought.
4. Although the Defendants seek an order for the striking out of the Claim Form and the Particulars of Claim "pursuant" to the October order, it has not been disputed that:

i) the issue I have to determine, in practice in that context, is whether or not the Claimant has failed to comply with an unless order in the October order ("the unless order");

ii) if the Claimant has failed to comply with the unless order, the Particulars of Claim have been struck out; and,

iii) if the Claimant has complied with the unless order, the Particulars of Claim have not been struck out and no further remedy under CPR rule 3.4 (or under any equivalent inherent "striking out" jurisdiction) is actively sought by the Defendants. It is in this circumstance, primarily, that the Defendants seek summary judgment (which I shall describe, in this judgment, as "reverse summary judgment").

5. When I consider the procedural history of this case, I will need to consider what is the procedural consequence if the Claimant has failed to comply with the unless order; a not entirely straightforward matter.
6. For present purposes, the Claimant's case can be most usefully discerned from the Amended Particulars of Claim together with the second witness statement of Elliott Hall ("the further information") which, because of the October order, also stands as a statement of case. The Claimant's case is as follows.
7. The Claimant is a company in liquidation which, from late 2002, traded in the entertainment and leisure sector as an owner and occupier of large observation wheels (akin to the London Eye).
8. The Claimant was put into administration on 23 December 2010 and went into liquidation on 6 December 2011. On the same date, Mr Nigel Price and Mr Willian John Kelly were appointed joint liquidators of the Claimant.
9. The Defendants are all members of the Royal Bank of Scotland Group. At the material times, the Claimant was a business banking customer of the Third Defendant and a party to a number of asset finance agreements with the First Defendant.
10. From 2009, the Claimant also had dealings with a division of the Second Defendant known as the Global Restructuring Group ("GRG"). GRG was a unit within the Second Defendant whose ostensible function was to help customers of the Defendants in financial difficulty to restructure their businesses in order to return to a normal banking relationship thereby avoiding or minimising loss for both parties.
11. The managing director of the Claimant was Mr Elliot Hall.
12. Between 2002 or 2003 and 2008 (or possibly 2010),^[1] the Defendants (and specifically the First Defendant) expressly recognised and acknowledged the seasonal fluctuations in the Claimant's revenue stream, and during the early months of the year agreed to accept late payment of instalments due under any asset finance agreement.^[2]
13. In all the circumstances known to the Defendants, including without limitation:

i) the Claimant's reliance on the continuing availability of overdraft facilities to fund its business model;

ii) the seasonal nature of the business and,

iii) the Claimant's excellent financial prospects and business plans;

the contractual arrangements between the Claimant and the Defendants contained implied terms that:

i) the Defendants would not act in bad faith or unconscionably or in a commercially unacceptable way;

ii) (but subject to what I note below) they would not act, or exercise any contractual discretion, capriciously and/or arbitrarily and/or for an improper purpose; and

iii) they would not act in a way that no reasonable lender, acting reasonably, would act.

14. In the further information, the Claimant sets out all the facts and matters on which it relies in support of the implication of the first and third of these terms as follows:

i) The First and Third Defendants were aware of the Claimant's reliance on the continuing availability of overdraft facilities in funding its operations;

ii) They were aware of the seasonal nature of the Claimant's business, and, in particular, the seasonal fluctuations in income necessitating the agreement to accept late payment;

iii) They were aware of the Claimant's expansion of its operation and its excellent financial prospects and plans for the future, in particular by reference to the KPMG Report dated 15 February 2008 commissioned by the Claimant, but were also aware from the outset of the continued seasonal fluctuations in the Claimant's income;^[3]

iv) No term in the First Defendant's Standard Terms and Conditions or in those of the Third Defendant (or, for the avoidance of doubt, of the Second Defendant) excluded any fiduciary or equitable duty arising on the part of the First or Third Defendants;

v) Each of the implied terms was necessary for the proper functioning of the agreements between the parties, in particular given the Claimant's fundamental and continuing need to rely on the agreement relating to late payment (as, in practice, it did);

vi) The fact of the exercise of that agreement on an ongoing basis.^[4]

15. In about mid-2009, the Claimant was placed under the management of GRG despite the fact that it was not in need of restructuring or turnaround. Furthermore, the Defendants did not formally explain to the Claimant that it was being placed under the management of GRG, rather GRG members of staff began influencing the relationship and the Defendants began charging fees for their involvement. In breach of the implied terms:

i) GRG, on behalf of the Defendants, sought on a number of occasions to put the Claimant into default without proper reason. GRG referred to alleged defaults/breaches of covenant in circumstances where the Claimant was not in fact in default or breach of covenant;

ii) GRG imposed extortionate monitoring fees on the business which impacted on the Claimant's cashflow.

16. In breach of the agreement relating to late payment and/or of the implied terms, and in breach of a specific authorisation given by the First Defendant's relationship manager, the Defendants relied on a missed payment (that is, a payment due apparently under the 322 and 049 agreements) as an event of default under the relevant asset finance agreement with the First Defendant and made demand for repayment of all the Claimant's facilities in the region of £6.5 million by 30 June 2010. The Defendants knew that the Claimant could not repay this accelerated sum and that, if the Defendants insisted on immediate repayment, the Claimant's business would fail.^[5]
17. By reason of the Defendants' breach of contract, the Claimant has suffered loss and damage.^[6]
18. By paragraph 28 of the Amended Particulars of Claim ("paragraph 28"), the Claimant says:

"The loss and damage suffered by the Claimant is a matter for expert evidence, with permission of the Court. As to quantum:

28.1 By reason of the Bank's breach, and the acceleration of the Claimant's liabilities to the Bank, the Claimant was unable to continue to trade and was ultimately forced into administration as a consequence.

28.2 By reason of the breach, all of the Claimant's business was lost. The business of the Claimant was successful and expanding. According to a report commissioned by the Claimant from KPMG dated 15 February 2008, the Claimant's EBITDA was £5,441,000 for the year 2008/09 and £9,968,000 for the year 2009/10 (as demonstrate the expanding nature of the Company's business). Further, the investment secured by the Claimant in mid-2008 of €10m for 15% of the Claimant's business gave an overall value of the business of €80m based on an EBITDA multiple of 12.

28.3 Based on the above, the Claimant pleads the value of the loss of its business consequent upon the Bank's breach to be £30m, subject to expert evidence.

28.4 The figure of £30m represents a conservative calculation by the Claimant of the valuation of the Claimant's business as a going concern as at the time of the breach on the part of the Bank by reference to the successful and expanding nature of the Claimant's business, the conclusions contained in the KPMG report and the valuation of the business by reference to the investments secured in mid-2008 for a 15% interest in the business."

19. This is a convenient place to make a number of points about the Claimant's case:

i) Although the Claimant describes the "agreement" relating to late payment (which I shall call "the payment holiday agreement" in this judgment) as "the Payment Holiday Term", so, at first sight, suggesting that that "agreement" was a term of the lease purchase agreements between the Claimant and the First Defendant and the facilities provided to the Claimant by the Third Defendant, Mr Casey, who represented the Defendants on the applications, was right to submit that, as pleaded, the payment holiday agreement is contended, by the Claimant, to be a freestanding, contractually binding, agreement between the Claimant and each of the Defendants;

ii) I understood Mr Doyle to accept, during the course of his submissions, broadly, that the implication of any terms in this case depended on the existence of the payment holiday agreement;

iii) Despite the Claimant's concession that it does not rely on any specific term involving or requiring the exercise of a contractual discretion by the Defendants or any of them, bearing in mind that it effectively contends that the Defendants have been in breach of contract by enforcing payment terms, it is not entirely clear to me that the Claimant concedes, as might first appear, that any contractual discretion or right was unqualified in this case;

iv) The quantification of the value of the claim at £30 million might broadly have been (i) a pure guess, (ii) the product of a calculation or (iii) a judgment based on some information. In the second or third case, on the Claimant's statements of case, the KPMG EBITDA calculation and the 2008 investment to which I have just referred ("the 2008 investment") were part and parcel of the calculation or were taken into account in the making of the judgment. Mr Doyle explained to me that the Claimant's quantification of the claim was not a pure guess. Rather, in a slight departure from the Claimant's pleaded case, Mr Doyle apparently accepted, in his submissions, that the quantification of the value of the claim at £30 million was not based on a calculation in which the elements or two of the elements were the KPMG EBITDA calculation and the 2008 investment. Nor were those two matters, I understood him also to accept, taken into account in making a judgment about the value of the claim. Rather those two matters were pleaded, I understood him to say, to support a high value claim. He said this, at paragraph 2.7 of his skeleton argument:

"The alleged loss of £30 million is not a stab in the dark. It is substantiated by reference to both the KPMG report (which demonstrated the expanding nature of the business) and the fact of inward investment secured in mid-2008 for 15% of the business, and warrants the reference to the £30 million alleged loss as "conservative". It is not surprising that, at this stage, the Claimant has not committed to what is likely to be the significant expense of an expert valuation report. It is not difficult to see, however, how such expert evidence may become necessary, especially given the fact that the [Defendants'] present opposition is not mounted by way of saying that the loss of business as a going concern is not capable of characterising the loss consequent upon the contractual breach but, rather, is rooted in objecting to the calculation of the loss alleged";

v) Although Mr Doyle suggested, during the course of his submissions, that it might be argued at trial, on the Claimant's behalf, that the repayment demands were nullities, perhaps picking up on a submission made by Mr Casey at a previous hearing, that is not the Claimant's case as pleaded. Its case is that the repayment demands were effective to accelerate, wrongly, its payment obligations and were capable of amounting to contractual breaches; a case which is inconsistent with the contention that the repayment demands were nullities. (As it happens, Mr Doyle's suggestion in his submissions was not consistent with paragraph 3.8 of his skeleton argument in which he apparently contended that the repayment demands were not nullities. Rather, he apparently contended there that, in this case, the cause of action for the alleged breaches of contract only arose when the Claimant suffered damage and not on breach). It goes without saying, I hope, that any determination of the reverse summary judgment application must be on the basis of the Claimant's case, not some case which might be argued at trial.

20. The procedural history of this claim is unfortunate, to say the least. The claim was begun on 25 April 2016 and the Claim Form, together with the Particulars of Claim, were served on the last day of their validity on 24 August 2016. By September 2016, the Defendants' solicitors were expressing concerns about the content of the Particulars of Claim and, on 18 October 2016, the Defendants served a Request for Further Information on the Claimant. The Claimant did not answer that request. By a consent order, made on 15 December 2016, the Claimant consented to answering the Request for Further Information by 6 January 2017. It did not do so. It provided a response, or a draft response at least, on 25 January 2017, but dissatisfied with that response, the Defendants applied to strike out the Claim Form and the Particulars of Claim in early 2017.
21. On 11 October 2017, I handed down judgment on the Defendants' application. There is an approved transcript of that judgment. During the course of that judgment, I made the following points.
22. Dealing with the deficiencies in the Particulars of Claim in relation to the plea of implied terms, I said this:

"16. In order for the Defendants to properly prepare their case or understand the case they have to meet, particularly if that is to be done in a reasonable and/or proportionate way and otherwise consistently with the overriding objective, I have concluded that as a minimum the Defendants are entitled to know…the following: First, sufficient details by which they can in a reasonable and/or proportionate way identify the agreements into which the Claimant contends further terms should be implied because what, if any, terms are to be implied into an agreement depends in part on the express terms of that agreement. Secondly, the legal and factual basis for the implication of a term which the Claimant contends ought to be implied. There are different bases for the implication of contractual terms and the relevant evidence which the Defendants might wish to adduce may very well depend upon the legal basis for the implication of terms as contended for by the Claimant. This point is particularly important in relation to the Claimant's allegation that there stands to be implied into the relevant agreements a general duty of good faith. In Property Alliance Group Ltd. v. The Royal Bank of Scotland plc [2016] EWHC 3342 (Ch) at [270], [271], [275] and [276], the court indicated, and it was not disputed on this application by Mr Doyle who appeared for the Claimant, that such a term will not be implied into an agreement of the sort under consideration in this case unless it is based on the presumed intention of the parties. Thirdly, sufficient details of the "contractual discretions" on which the Claimant relies, if any, for the purposes of the claim.

17. None of this information is discernible at all…or, if it is discernible at all, it is not discernible, in my view, with sufficient particularity…

18. I need to say a little more about the second point. As Mr Casey said in his skeleton argument, properly in my view:

"The pleaded case for the existence of the alleged implied terms is put no higher than the bank was aware of WTA's reliance on overdraft facilities, that its business was seasonal and that WTA allegedly had excellent business plans and prospects."

19. This is wholly insufficient to establish any mutual intention that the bank would assume a general duty of good faith towards WTA. Indeed, I go further and say that having regard only to the three allegations of fact specifically pleaded in paragraph 18, it is difficult for me to immediately see the factual basis for the alleged implied terms. By way of example, that the Claimant might have had excellent financial prospects and business plans and that the Defendants might have known this does not make it more or less probable that there was implied into the relevant agreement a term that the bank would not act capriciously.

19. It is to be noted, of course, that as pleaded the Claimant relies on "all the circumstances known to the bank" for the factual basis for the alleged implication of the terms as contended for by it. Bearing in mind what I have said in this context about the three allegations of fact, it seems to me that the Defendants are entitled to have particulars of the factual basis for the alleged implication of the terms contended for."

23. In relation to the plea of quantum in the Particulars of Claim, I said this:

"32. I shall say some more in a moment about the Claimant's plea relating to quantum in the particulars of claim. It is enough to note in the present context that…no particulars are given…from which it is possible for the Defendants to calculate prior to the receipt by them of an expert report from the Claimant the value of the claims contended for by the Claimant. I regard this as a serious omission where (1) the claim is valued at such a significant amount and (2) where Mr Hall, who apparently was intimately involved with the Claimant, has already expressed a view, supported by a statement of truth, about the value of the claim which he can only have expressed, it seems to me, on the basis of some information known or otherwise available to him which would, I infer, allow the Claimant to better particularise its plea.

33. As is explained in Halsbury's Laws of England; Volume 29, at paragraph 637, and as is in any event very well known:

"In a particulars of claim a claimant should give particulars of special damage. It need not give particulars of general damage unless the damage is of a kind which is not the necessary and immediate consequence of the defendant's wrongful act. A properly drafted pleading should, where appropriate, give details of the way in which, and the measure according to which, damages are calculated."

As to the latter, the particulars of claim and response are notably silent. I am satisfied, therefore,…that the Defendants cannot prepare their own case, or understand the case they have to meet, in a reasonable and/or proportionate way and which, therefore, makes the particulars of claim unreasonably vague or/and insufficiently coherent. It follows, therefore, that I have concluded that the particulars of claim are liable to be struck out on this ground of the application. I will in a moment have to consider whether the striking out of the particulars of claim is a proportionate response to this conclusion…

35. I now turn to consider the second of the three grounds I have identified as being relied on by the Defendants in support of their application. Paragraphs 27 and 28 of the Particulars of Claim read as follows:

"The quantum of the Claimant's claims for breach of contract will therefore will be calculated by reference to the difference between (a) the value of the Claimant in May 2010 and in (b) the value of the Claimant in liquidation, i.e. nil.

The value of the Claimant as at May 2010 will be the subject of expert evidence. The Claimant will also rely on (1) the KPMG report referred to in paragraph 11 above and (2) the fact that approximately £50 million had been invested in the Claimant at that time."

36. In my view, taking paragraph 27 of the Particulars of Claim on its face, the plea as to quantum is that the value of the Claimant's shares was diminished by the matters it complains of.

37. An alternative construction of paragraph 27 of the Particulars of Claim that the value of the Claimant's assets was diminished and reduced to nil by the matters complained of is unlikely to be correct because, as I understand the particulars of claim, the Claimant's did own tangible assets such as large observation wheels which it is improbable became entirely valueless simply by the Claimant being in liquidation; indeed, documents in evidence on this application, for example, relating to the claimant whilst in administration, show that the company retained tangible assets.

38. The Claimant had an opportunity in the response to clarify the nature of its plea of quantum…

40. …it is perhaps notable that the Claimant did not avail itself of the opportunity afforded to it to clarify its case and, in particular, to clarify whether or not its plea as to quantum is referable to the value of its shares. I might perhaps add that in submissions Mr Doyle did not seek to suggest that by paragraph 27 of the particulars of claim the Claimant did not seek to quantify its claim by reference to its share value.

41. I have come to the conclusion that as quantum is pleaded the claim can only give rise to nominal damages. As Dillon LJ explained in Lonrho v. Fayed (No.5) [1994] 1 All ER 188 at p.116E:

"The share price is not an asset of Lonrho at all."

That must be right. In general terms a company does not own shares in itself, so that if the value of those shares diminishes it has not thereby suffered a loss. Mr Doyle did not suggest otherwise; nor did he suggest that the Claimant in this case somehow held shares in itself…

44. Having regard to these matters I have come to the conclusion in the light of the claim as presently pleaded in general that whilst the Claimant's plea on quantum can only give rise to nominal damages, there is no proportionate way of adjudicating on the claim. In such circumstances so long as the Claimant's plea on quantum remains unamended, in my view the particulars of claim are liable, by which I mean susceptible, to being struck out."

24. I added as follows:

"66. The second principal objective of my order ought to be to address the defect in the Claimant's plea of quantum to which I have already referred. In the light of that objective I will strike out paragraphs 27 and 28 of the Particulars of Claim but I will permit the Claimant to amend the particulars of claim, in place of the struck out paragraph 27 and 28: (1) to plead quantum on a basis which on the assumption that the facts necessary to establish that basis for the quantification of the claim are made out is capable of giving rise to damages other than nominal damages and (2) to plead the amount of the claim; and (3) to plead how that amount is calculated…The precise wording of this order can be agreed by counsel.

67. I propose also to order that unless, by 11 January 2018, the Claimant (1) complies with the requirements of the order in relation to the provision of information, in other words answers the questions in the schedule to the order and provides the information sought by those questions; and (2) serves Particulars of Claim amended as to quantum in all the ways I have set out above, then the whole of the Particulars of Claim will be struck out to the extent not already struck out, of course. The effect of such a striking out will be, it seems to me, that CPR rule 3.5 will be engaged and the Defendants will be entitled to obtain judgment with costs by filing a request. If I am right, I do not need to make any specific order in this respect but I will hear further from counsel on this point if necessary."

25. The judgment resulted in the October order, which was settled by counsel and which, so far as is relevant, contained the following recitals:

"AND UPON the handing down of judgment in the Strike Out Application in which the Court observed that the Particulars of Claim were susceptible to being struck out pursuant to CPR 3.4(2)(a), but that the First Claimant should be given one final opportunity to set out its case with sufficient clarity

AND UPON the application dated 10 October 2017 by the First Claimant to amend the Particulars of Claim ("the Amendment Application")

AND UPON the Court refusing to abridge time for service of the Amendment Application or to adjourn the handing down of judgment in the Strike Out Application"

26. By the October order, I made the following orders:

"1. Unless by 4.00 pm on 11 January 2018 the First Claimant provides, in the form of a witness statement verified by a statement of truth signed by a joint liquidator of the First Claimant or a person authorised in writing by the joint liquidators of the First Claimant (which witness statement shall stand as a statement of case), the information sought by and answers to the requests set out in the Schedule annexed to this Order, the Particulars of Claim shall be struck out in their entirety, save to the extent already struck out under paragraph 2 below or otherwise.^[7]

2. Paragraphs 27 and 28 of the Particulars of Claim are struck out.

3. Without prejudice to paragraph 1 above, unless, by 4.00 pm on 11 January 2018, the First Claimant serves amended Particulars of Claim which (i) contain a plea on quantum which is capable of giving rise to an award of damages other than nominal damages (on the assumption that the facts necessary to support such a plea are made out), (ii) pleads the amount claimed by the First Claimant and (iii) pleads the basis on which such amount is calculated, the Particulars of Claim shall be struck out in their entirety, save to the extent already struck out under paragraph 2 above or otherwise."^[8]

27. It is tolerably clear from the judgment, that:

i) I concluded that the Particulars of Claim were seriously defective because they did not spell out (when read with further information which had been provided by that stage) how the Claimant had calculated or otherwise judged the value of its claim to be £30 million, if, of course, that valuation was not a pure guess (in which case, that fact should have been pleaded);

ii) I intended that the Claimant would have one final opportunity to remedy that serious defect; and

iii) if it did not, there would be judgment for the Defendants.

28. With these conclusions in mind, a number of points may be made about the unless order:

i) The consequence of any failure to comply with the unless order is that the Particulars of Claim will be struck out automatically;

ii) If there was an attempt, as there has been in fact, to comply with the unless order, but if, in fact, which I have to determine on the Defendants' application, that attempt did not meet the three requirements set out in the unless order, there would remain in existence, following the automatic striking out of the Particulars of Claim, the Claim Form and the Amended Particulars of Claim, and the claim would remain in existence because the unless order makes no provision for the consequential dismissal of the claim.

29. I am doubtful that this result creates an insurmountable procedural difficulty if the claim ought to be dismissed summarily because:

i) as I suggested, by CPR rule 3.5, at least on a literal construction, the Defendants could file a request for judgment and costs;

ii) in the light of my October 2017 judgment, it is inevitable that the Amended Particulars of Claim would be liable to be struck out in such circumstances and the claim could be dismissed consequentially and, even if such a remedy was not actively sought by the Defendants, the court could, on its own initiative, make such orders if to so act is consistent with the overriding objective; and,

iii) in this case, in any event, the Defendants have made a summary judgment application which, if successful, would meet any otherwise insurmountable procedural difficulty.

30. As I have indicated, the October order made reference to the Amendment Application. On 10 October 2017, that is the day before I handed down judgment, the Claimant made an application to amend the Particulars of Claim by that statement of case's complete substitution with an amended statement of case. Having refused to abridge time for the service of that application, I heard it on 21 December 2017, when I dismissed it. On 11 January 2018, the Claimant served the Amended Particulars of Claim to which I have referred. On 14 February 2018, the Defendants' solicitors expressed the view that the claim, or at least the Particulars of Claim, had been struck out automatically pursuant to the October order, because there had been a failure to comply with the unless order. There the claim rested procedurally until the present applications were made.
31. I turn then to consider whether the Claimant has failed to comply with the unless order. This has to be judged by reference to paragraph 28.
32. The Claimant contends there that "all of [its] business was lost". What is meant by the Claimant's "business" is unclear. It may be argued, as Mr Casey who appeared for the Defendants did, with some force, that, as it is the loss of that "business" which is being valued, because what is meant by that "business" is unclear, the basis for the £30 million valuation is not pleaded (or set out) in the Amended Particulars of Claim.
33. In any event, I have some doubt that paragraph 28 contains a quantum plea which is capable of giving rise to an award of damages other than nominal damages. Mr Doyle said, in his skeleton argument as follows:

"The pleading in paragraphs 27 and 28 of [the Amended Particulars of Claim] is advanced on a basis fundamentally different to the pleading struck out. What is now alleged…is that (paragraph 28.1) [the Defendants'] breach accelerated [the Claimant's] liabilities and forced [the Claimant] into administration, by reason of which (paragraph 28.2) all of the Claimant's business was lost. It is the loss of that business which prompts the reference (in paragraph 28.3) to expert evidence (i.e. a valuation of the value of the business lost as a going concern)….

[It is not implausible] to say that, given GRG's involvement, [the Defendants] will have some idea…as to the going concern value of the business lost."

If I understood Mr Doyle's submissions correctly, the £30 million valuation represents, broadly, the value, for example to a third party, of the business in excess of the fair market value of the business' assets, if that third party bought the business as a going concern. To put it another way, the £30 million valuation represents, if I have understood Mr Doyle's submissions correctly, what the Claimant says it would have been worth at the relevant time to its owner in excess of the value of its assets had the alleged breaches of contract not occurred. Is this not the contention contained in the Particulars of Claim which I struck out in the October order, but dressed up in different language?

34. In the event, I do not need to answer the question I have just asked, because the Defendants, on their application, do not rely on the first requirement of the unless order, which is the requirement to which an answer to the question goes.
35. The Defendants rely on the third requirement of the unless order; namely, that the Amended Particulars of Claim must plead the basis on which the £30 million valuation is calculated.
36. I have come to the conclusion that the Amended Particulars of Claim do not do so.
37. If the £30 million valuation was a pure guess, the Amended Particulars of Claim should have said so, on the proper construction of the unless order. There was no plea to that effect. As I have said, Mr Doyle rejected the suggestion that the valuation was a pure guess in any event.
38. If the valuation was a product of a calculation, the Amended Particulars of Claim should have set out that calculation, on the proper construction of the unless order. No such calculation is set out in paragraph 28. In particular, considering the position most favourably to the Claimant, it is impossible to discern how one calculates, from KPMG's EBITDA calculation and the 2008 investment, £30 million. If those two matters were elements of a calculation, there must have been further elements to produce the valuation.
39. If the valuation was a judgment, based on an analysis of the two relevant pieces of information in paragraph 28, namely KPMG's EBITDA calculation and the 2008 investment, there must have been some other process of reasoning, which is unpleaded, but which should have been pleaded on the proper construction of the unless order, which resulted in the judgment. If the judgment took into account further (or other) pieces of information, they should have been pleaded but they have not been.
40. In fact, as I have explained, Mr Doyle's submission was effectively that KPMG's EBITDA calculation and the 2008 investment corroborated the £30 million valuation. If that is so, the Amended Particulars of Claim, and paragraph 28 in particular, contains nothing from which how the valuation was arrived at can be discerned.
41. It follows therefore, as I have said, that the unless order has not been complied with and that the Particulars of Claim are struck out.
42. It is possible to understand how it might be suggested that the summary disposal of a claim not on its merits is not a wholly satisfactory outcome where that claim might merit further investigation, but, in this case, the Claimant has had, in practice, almost three years to properly plead its case on quantum. I was just persuaded, in October 2017, to give the Claimant a last opportunity, as the October order indicates, to properly plead that case. It had a further three months to do so in accordance with the October order. In fact, in practice, it has had a further fifteen months to do so, because the Defendants have not requested the entry of a judgment against it. But it has not taken up that opportunity as it has turned out.
43. I turn now to consider the reverse summary judgment application.
44. There is no dispute between the parties about what the parties must respectively do to obtain or resist reverse summary judgment, nor how I should approach the application. It is helpful, nevertheless, to be reminded of relevant uncontroversial principles, which Lewison J summarised in Easyair Ltd. v. Opal Telecom Ltd. [2009] EWHC 339 (Ch) at [15], as follows:

"The correct approach on applications by Defendants is, in my judgment, as follows:

i) The court must consider whether the Claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v. Hillman [2001] 2 All ER 91;

ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED&F Man Liquid Products v. Patel [2003] EWCA Civ 472 at [8];

iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v. Hillman;

iv) This does not mean that the court must take at face value and without analysis everything that a Claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED&F Man Liquid Products v. Patel at [10];

v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v. Hammond (No.5) [2001] EWCA Civ 550;

vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v. Bolton Pharmaceutical Co. 100 Ltd. [2007] FSR 63;

vii) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd. [2007] EWCA Civ 725."

45. It is also helpful to have in mind the further following uncontroversial extract from note 24.2.5 of the 2018 White Book:

"In ED&F Man Liquid Products Ltd. v. Patel…, it was said that under r.24.2 the overall burden of proof rests on the applicant to establish that there are grounds to believe that the respondent has no real prospect of success and that there is no other reason for a trial…

If the applicant for summary judgment adduces credible evidence in support of their application, the respondent becomes subject to an evidential burden of proving some real prospect of success or some other reason for a trial. The standard of proof required of the respondent is not high. It suffices merely to rebut the applicant's statement of belief. The language of r.24.2 ("no real prospect…no other reason…") indicates that, in determining the question, the court must apply a negative test. The respondent's case must carry some degree of conviction: the court is not required to accept without analysis everything said by a party in his statements before the court…In evaluating the prospects of success of a claim or defence judges are not required to abandon their critical faculties...However, the proper disposal of an issue under Pt.24 does not involve the judge in conducting a mini-trial...Therefore, the Court hearing a Pt.24 application should be wary of trying issues of fact on evidence where the facts are apparently credible and are to be set against the facts being advanced by the other side. Choosing between them is the function of the trial judge, not the judge on an interim application, unless there is some inherent improbability in what is being asserted or some extraneous evidence which would contradict it…"

46. With this last extract in mind, I must note that the Claimant has filed no evidence directly in response to the reverse summary judgment application, although, in opposing the application, it is entitled to rely on the Amended Particulars of Claim and the further information,^[9] in particular.
47. The Claimant's case depends on proof of the payment holiday agreement or on the establishment of the pleaded implied terms.
48. The Defendants have adduced credible evidence that the payment holiday agreement did not exist (and, indeed, that there was no agreement giving the Claimant the right to defer payments to the First Defendant in particular). (I shall refer to one email from Mr Hall which, of itself, amounts to such credible evidence.)
49. Mr Hall gives evidence of the payment holiday agreement in the further information but I have concluded that such evidence does not overcome the evidential burden which is on the Claimant to meet the Defendants' credible evidence.
50. Mr Harrison-Ray, the Claimant's Chief Financial Officer, wrote to Matthew McDermott of the First Defendant, on 15 April 2010, as follows:

"We are writing in response to your letters dated 31 March and 12 April following our meeting with you on 7 April.

During our meeting we requested the bank's consideration of a 3 monthly payment holiday, similar to that which was granted at the same time last year, to accommodate seasonally low trading.

You duly responded on 12 April by not only declining the request, but also immediately putting us in default and issuing a formal notice to repay the two agreements in their entirety by 9 May 2010. Upon receipt of this notice we took steps to try and bring the currently due lease payments up to date…

Firstly, we would be grateful if you could explain why a single late payment has triggered a demand for repayment of the entire agreement, particularly when we have an equity partner for Dublin, as you are aware, and therefore we have means in place to clear the finance on one of the wheels."

Mr Harrison-Ray did not suggest that the Claimant had the right to a payment holiday. Indeed, he accepted that payments were overdue.

51. On the same day, Mr Hall emailed Richard Herborn of the First Defendant as follows:

"…To cut a very long story short, the first time ever we are few weeks late with our scheduled payments to [the First Defendant]. We were able to organise enough money to go into the bank to make the payment but RBS have refused to make payment and [the First Defendant] have now called in all three loans. As said above, it is the first time we have ever been late with scheduled payments (other than the agreed 3 months holiday period at the beginning of last year which was agreed in advance) ever since our first finance agreement with yourself and to take in all three loans because of this seems absolutely outrageous. I understand if this is something you don't want to get involved in or can't help, but if you can it would be much appreciated."

Mr Hall's email makes clear too that payment to the First Defendant was overdue and he sought to distinguish the circumstances the Claimant was then facing from an earlier (2009) occasion when payment was late but when a payment holiday agreement had been reached. Not only, therefore, did Mr Hall not suggest, in his email, that the payment holiday agreement existed, to the contrary he indicated that there had been an ad hoc payment holiday agreement for the earlier period only.

52. Mr Doyle tried to establish that Mr Hall's email was somehow patently ambiguous, but it is not. He also suggested that there might be some evidence at trial which might justify an alternative construction of the email, but he was not able to point to anything to support that suggestion, so I cannot conclude that such evidence is reasonably expected to be available at trial.
53. Absent any further evidence which supports a different construction of Mr Harrison-Ray's letter and Mr Hall's email, which were wholly contemporaneous with the demand breach complained of, and there is no such evidence and, as I have indicated, there is nothing to support a contention that there might be any, there is no prospect that a court would find that the payment holiday agreement existed.
54. I have already set out the facts and matters on which the Claimant relies for the implication of the pleaded terms. Mr Casey was right to contend that, in the light of the October order, and the decision of the Claimant not to file any evidence in response to the reverse summary judgment application, it would be reasonable to conclude that there is before the court all the necessary evidence to properly determine whether the terms contended for by the Claimant were implied into the 322 and 049 agreements. It is also right that I expressed the view, in my October 2017 judgment, that the first three matters on which the Claimant relies for the implication of terms, cannot give rise to the contended for implied terms. The fifth and sixth matters depend, wholly or in part, on the existence, at least, of the payment holiday agreement. In the light of the conclusions I have already reached, to the extent that those matters do rely on the payment holiday agreement, they cannot assist in the establishment of the implied terms. By the fifth matter, the Claimant also suggests that the implication of the contended for implied terms was somehow generally necessary for the proper functioning of the 322 and 049 agreements. I have considered those agreements with care and it is fanciful to suppose that this suggestion is right (particularly because those agreements operated apparently perfectly well absent the payment holiday agreement). I cannot see how the fourth matter, the point that the 322 and 049 agreements did not exclude fiduciary or equitable duties, goes to whether or not the contended for terms might be implied.
55. However, I would prefer to rest any dismissal of the Claimant's claim, to the extent it is dependent on the alleged implied terms, on stronger ground than a conclusion that the implication of those terms into the 322 and 049 agreements is fanciful.
56. The view I expressed in my October 2017 judgment was based on the first instance decision in Property Alliance Group Ltd. v. Royal Bank of Scotland plc. Since my October 2017 judgment, that case has been the subject of an appeal to the Court of Appeal, whose decision is reported at [2018] 1 WLR 3529.
57. The power in issue in that case was the following:

"The lender [i.e. RBS] may, at any time, require the valuer [i.e. Lambert Smith Hampton or such other valuer or surveyor as RBS might appoint] to prepare a valuation of each property. The borrower [i.e. PAG] shall be liable to bear the cost of that valuation once in every 12-month period from the date of this agreement or where a default is continuing."

58. The Court of Appeal, which comprised the Master of the Rolls, Longmore and Newey LJJ, set out clearly, at paragraphs 161 to 169 of their decision, the circumstances in which what may be broadly described as good faith obligations would be likely to affect the exercise of contractual discretions. The Court of Appeal said, in particular, at paragraphs 168 to 169:

"The judge took a different view. It seemed to her that RBS had "an absolute right to call for the valuation and accordingly, that the Socimer line of authorities and the necessary implication of terms in order to control the otherwise unfettered exercise of a discretion/assessment or formulation of opinion [do] not arise" (paragraph 278 of the judgment). Echoing the judge's conclusion, Mr Handyside argued that clause 21.5.1 of the 2011 facility did not involve any discretion, assessment or choosing from a range of options and that there was therefore no scope for any implied term to arise. Mr Handyside stressed that clause 21.5.1 had been inserted for the benefit of RBS and maintained that it was not obliged to take account of PAG's interests when deciding whether to invoke the provision.

In our view, however, the power conferred by clause 21.5.1 of the 2011 facility was not wholly unfettered. We agree with Mr Handyside that the provision will have been inserted for the benefit of RBS, and there is, of course, no question of RBS having owed fiduciary duties. In the circumstances, it seems to us that RBS must have been free to act in its own interests and that it was under no duty to attempt to balance its interests against those of PAG. It can, however, be inferred that the parties intended the power granted by clause 21.5.1 to be exercised in pursuit of legitimate commercial aims rather than, say, to vex PAG maliciously. It appears to us, accordingly, that RBS could not commission a valuation under clause 21.5.1 for a purpose unrelated to its legitimate commercial interests or if doing so could not rationally be thought to advance them."

To this extent therefore the Court of Appeal did not adopt the approach of the first instance judge.

59. I was not taken by either party to the payment and related terms on which the Defendants' repayment and related demands were or were said to be based. In such circumstances, I should be slow to conclude that they did not involve the exercise of a contractual discretion and, in any event, I should be slow to conclude that their operation was not subject to implied terms.
60. The stronger ground which does justify the dismissal of the Claimant's claim, both to the extent it is dependent on the alleged implied terms and to the extent that it is dependent on the payment holiday agreement, does exist.
61. As I have explained, as I read the Claimant's Amended Particulars of Claim, it is its case that the source of the allegedly wrongful acceleration of its liabilities and the total loss of its business was the repayment breach. In other words, it is that breach which was the effective cause of the loss it claims. That breach occurred more than six years before the claim was begun. The consequences are clear. First, the Claimant's cause of action in respect of that breach accrued more than six years before the claim was begun. (If any support for that is needed, it is only necessary to refer to Chitty on Contracts (33^rd edition), at paragraph 28-032.) Secondly, the claim, to the extent it is based on that breach, is statute-barred, so that the Claimant has no real prospect of succeeding on it.
62. If I have misread the Amended Particulars of Claim, and the Claimant claims that GRG's alleged conduct has caused it the loss set out in its quantum plea in the Amended Particulars of Claim, then the Claimant's position is not improved. It is to be remembered that the Claimant makes two complaints against GRG; namely, that:

i) GRG claimed falsely that the Claimant had breached its contractual obligations. However, the further information makes clear that those claims were made only to the Claimant. It is fanciful to suppose that such claims, if false, could have had any impact on the Claimant's business because, on the Claimant's case, it knew of the falsity of those claims;

ii) GRG charged "extortionate monitoring fees". The Defendants, in the exhibit to Mr Clayton's 4^th witness statement, show credibly that those fees, which the further information contends were monthly sums of £4,671.49 and £3,592.24 in relation to the 322 and 049 agreement, were all levied before 25 April 2010, except for a single fee of £4,671.49, in relation to the 049 agreement, which was levied on 15 May 2010. The Claimant adduces no evidence to contradict these facts. It is, as Mr Clayton contended in paragraph 52 of his 4^th witness statement, frankly fanciful to suppose that the effective cause of the Claimant's inability to trade (the damage which the Claimant alleges was done to it by the Defendants) was the single May 2010 fee when, on the Claimant's own case, its business was so valuable in 2009/10. As to the other fees in issue, because, on the Claimant's case, they were wrongly levied more than six years before the claim was begun, any claim for any loss caused by them is statute-barred.

63. In the circumstances, I have concluded that the Claimant has no real prospect of succeeding on the claim. No compelling reason was advanced why the case should be disposed of at trial and I cannot think of any compelling reason. It follows therefore that, to the extent that the claim has not already been summarily disposed of, the claim is dismissed.

Note 1   The position is not entirely clear, but nothing turns on this.    [Back]

Note 2   It is not clear, from this contention, whether the Claimant’s case is merely that the Defendants, in particular the First Defendant, did no more than accept late payments or that the Defendants, in particular the First Defendant, were bound somehow, to, and did, accept late payments. The parties have proceeded on the basis that the Claimant’s case is the latter. The further information on this contention is as follows. Broadly, it is said, that (i) the agreement was that the Claimant would be entitled to notify the First Defendant of its intention to make late payment of any monthly instalment due under any finance agreement with the First Defendant as required by the Claimant by reason of the seasonal fluctuation in the Claimant’s income or the Claimant moving a wheel from one location to another so as to be out of commission or on account of the Claimant having some alternative need or use for the working capital that would otherwise be used in meeting the relevant monthly instalment and (ii) the agreement was made at the time of the Claimant first entering into facilities with the Third Defendant and the First Defendant in mid-2003 at a meeting at 122 Scala House, Nuneaton.    [Back]

Note 3   These first three matters are already pleaded in the Amended Particulars of Claim.     [Back]

Note 4   The Claimant contends, in the further information, that it does not rely on “any specific term involving or requiring the exercise of a contractual discretion by the Defendants or any of them”. It also identifies the agreements which it contends contain the implied terms as, in particular, a lease purchase agreement between it and the First Defendant described as the 322 agreement and a lease purchase agreement between the same parties described as the 049 agreement.    [Back]

Note 5   It was not disputed by the Claimant (indeed, as I understood Mr Doyle’s submissions, it was accepted) that the “breach” complained of here occurred by 15 April 2010 (and, in any event, more than 6 years before the claim was begun). That concession is hardly surprising. All the contemporaneous evidence to which I was taken supports that fact and Richard Clayton, in his 4th witness statement, made in support of the Defendants’ application, said, for example, as follows: “On 8 April 2010, [the Third Defendant] issued a demand for the repayment of the outstanding balance on the Overdraft Facility by close of business on 7 May 2010. In a letter sent on 12 April 2010, [the First Defendant] refused [the Claimant’s] request, made at the meeting on 7 April 2010, for a 3 month repayment holiday under the 322 and 049 agreements and demanded repayment of the outstanding balance of £6,783,367.54 by no later than 9 May 2010. If the balance was not cleared by that date, [the First Defendant] would seek to terminate its agreement with [the Claimant] and begin enforcing its security. An internal bank email on 13 April 2010 confirms the letters were sent on 12 April 2010. There is no doubt, from the terms of Mr Hall's letter of complaint…on 15 April 2010, that they were received.”    [Back]

Note 6   The only breach of contract, which, on my reading of its statements of case, the Claimant has pleaded, which it claims has caused it the loss it seeks to recover in the claim, is the alleged wrongful April 2010 conduct of which the repayment demand or demands to which I have referred were part and parcel, which led, in turn, to the alleged wrongful acceleration of its liabilities. I shall call this claimed breach, in this judgment, “the demand breach”.    [Back]

Note 7   This is the further information.    [Back]

Note 8   This third paragraph is “the unless order”.    [Back]

Note 9   The Claimant did not seek to rely on any other witness statement already filed in the claim.     [Back]