British
and Irish Legal Information Institute
Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> PROMONTORIA (CHESTNUT) LIMITED AGAINST THE FIRM OF BALLANTYNE PROPERTY SERVICES AND OTHERS [2020] ScotCS CSOH_56 (29 May 2020)
URL: http://www.bailii.org/scot/cases/ScotCS/2020/2020_CSOH_56.html
Cite as: [2020] CSOH 56, [2020] ScotCS CSOH_56, 2020 GWD 20-273
[New search] [Printable PDF version] [Help]
Page 1 ⇓
OUTER HOUSE, COURT OF SESSION
[2020] CSOH 56
CA105/19
OPINION OF LORD DOHERTY
in the cause
PROMONTORIA (CHESTNUT) LIMITED
against
THE FIRM OF BALLANTYNE PROPERTY SERVICES
Pursuer
First Defender
and
GILLIAN BALLANTYNE SMITH
Second Defender
and
THOMAS ALAN SMITH
Third Defender
Pursuer: Dunlop QC, Welsh; Addleshaw Goddard LLP
Defenders: Sandison QC, Gardiner; MBM Commercial LLP
29 May 2020
Introduction
[1] The first defender is a partnership and the second and third defenders are the
partners of, and trustees for, the partnership. In this commercial action the pursuer avers
Page 2 ⇓
2
that it is the assignee of the Clydesdale Bank plc (“the Bank”). It seeks to exercise rights
which it avers that the Bank had against the defenders, including the right to repayment of
monies which it avers the Bank advanced to them. The matter came before me for (i) a
debate on the relevancy of the defences; and (ii) a hearing of the pursuer’s motion for
summary decree.
The pleadings
[2] The pursuer concludes for payment by the defenders of (a) £1,180,742.49; and
(b) £905,508.41; with interest on both sums at the rate of 3.75% per year from 11 June 2009
until payment. It avers that by a facility letter dated 16 July 2007 the Bank agreed to make
available to the defenders the banking facilities described in that letter; and that the facilities
were restructured on 29 September 2008, 23 June 2009, 30 July 2010 and 15 July 2011 on the
terms set out in facility letters of those dates. The terms of all of the facility letters are
adopted and repeated brevitatis causa by the pursuer. The pursuer avers (art 5) that the
facility letter of 15 July 2011 provided:
“3.1 All amounts outstanding or in respect of the Facilities are repayable on
demand.”
It also avers:
“7. The Bank sold and assigned to the pursuer its whole right, title and interest in
the Facilities by assignation in favour of the pursuer dated 24th and 27th November
2014 (‘the Assignation’). A certified copy of the Assignation is produced, adopted
and held to be incorporated herein brevitatis causa. The right to be repaid any sums
outstanding in relation to the Facilities now vests in the pursuer... The defenders
were informed about the Assignation effectively. Esto the Assignation was not
effectively intimated on the defenders (which is denied), it is judicially intimated on
them by way of these proceedings...”
The pursuer further avers (art 8) that by letters dated 10 September 2015 (“the demand
letters”) it wrote to each of the defenders demanding repayment of the facilities, and that the
Page 3 ⇓
3
total sum then outstanding was £1,803,954.84. It avers (art 10) that that sum was the
outstanding balance in relation to Business Account No [a] (now known as account no [c])
and Term Loan Account no [b] (now known as account no [d]); that it remains outstanding;
that interest has been running and continues to run on that sum; and that the defenders are
jointly and severally liable to make payment of the outstanding balance to the pursuer, but
that they refuse or delay to make payment. The pursuer also avers that as at 11 June 2019
the sums due on accounts numbers [c] and [d] were respectively the sums first and second
concluded for. The pursuer has incorporated the demand letters brevitatis causa in its
averments.
[3] In the defences the defenders admit that they entered into the various facility letters
with the Bank and that they made use of the facilities. However, they aver that in 2005 the
first defender was formed as a buy to let (“BTL”) property firm. They aver (ans 2) that in
June and July 2007, before the grant of the facility letter of 16 July 2007, the third defender
emphasised to a Bank employee, Adam Heslop, the long-term nature of the first defender’s
business model; and that the third defender “was assured by Mr Heslop that that model
would coincide with the Bank’s wish to be its long term funding partner”. The defenders
aver that the third defender and Mr Heslop met on 16 July 2007 to discuss a draft facility
letter. They further aver:
“The proposed facility had a 5-year duration and the third defender raised this as an
immediate concern. It was inconsistent with his funding strategy and was
considerably shorter than his existing lending terms. The third defender told
Mr Heslop that the term of the loan had to be for 15-20 years. Mr Heslop told the
third defender that the 5 year term was a standard clause and had to remain in the
contract. Mr Heslop told the third defender that the clause would not be enforced at
the end of the 5 year term. He reiterated that the Bank had made a strategic
commitment to BTL lending and wished to be the first defender’s long term funding
partner. Mr Heslop stated to the third defender that the facility would be renewed at
the end of the 5-year term. Mr Heslop said additionally, ‘imagine the public outcry if
Clydesdale Bank ever pulled in its business loans, it will never happen.’ The third
Page 4 ⇓
4
defender said: ‘This is important. Are you sure?’ Mr Heslop repeated ‘It will never
happen.’ The third defender sought further reassurance by asking ‘And you’ll
definitely make me a loan offer at the 5 year point?’ to which Mr Heslop answered
‘Yes’. On a proper construction of those statements by Mr Heslop the Bank thereby
made a legally binding promise to the defenders to extend the facility at the end of
the 5 year term. By letter dated 15th July 2007 the Bank agreed to provide the facility
to the defender. The defenders accepted the facility relying on Mr Heslop’s promise.
All their future property purchases were undertaken in reliance on that promise,
which they understood to be a statement binding the Bank. The underlying promise
upon which all of their future actions proceeded was that they would be no worse
off, at least in terms of duration, through this form of finance arrangement as
opposed to through long-term mortgages. The defenders continued to rely in the
promise (which was not subsequently withdrawn or further qualified) in all of their
dealings with the Bank and, in particular, on each occasion they entered into a
facility agreement. The promise was explicit and unequivocal and, in the
circumstances, was intended by the Bank to have legally binding effect.”
The defenders also aver (ans 3) that the purpose of the facility agreements of 29 September
2008, 23 June 2009, 30 July 2010 and 15 July 2011 was to reflect the drawdown on the 16 July
2007 facility; that when the defenders purchased a property for their BTL portfolio they
drew down on the overdraft to make a purchase; and that the facility agreements in 2008 to
2011 were to convert the sums drawn down on the overdraft to term loans secured against
the purchased properties and to reflect the overdraft which remained available to be drawn
down by the defenders. In answer 4 the defenders aver that the obligations under the
facility letters included the promise made by Mr Heslop. The averments continue:
“Had the Bank not breached the promised terms, the facilities would not have
expired. The third defender was not in default under the original facility upon the
expiry of its initial term. No offer to renew the loan was forthcoming from the Bank,
in breach of its contractual obligation. In those circumstances, the Bank was not
entitled to insist on performance of the Borrower’s counterpart obligations (including
payment). Esto the pursuer now stands in the Bank’s shoes as its assignee (which is
denied), the same pleas may be taken by the defenders against its claim as would
have been open to them in a claim initiated by the Bank. On the foregoing disputed
hypothesis, the pursuer is therefore unable to enforce the payment obligation. Esto
Mr Heslop’s statements do not constitute a legally binding promise (which is
denied), they constituted a representation made on the Bank’s behalf upon which the
defenders have relied to their detriment. But for the statements, the defenders would
have sought and obtained long term mortgage financing from a different lender. The
Page 5 ⇓
5
Bank (and the pursuer as its putative successor in title) is therefore personally barred
from acting in a manner inconsistent with the represented position.”
In answer 7 the pursuer’s averments in art 7 are denied. Under a heading “Undisclosed
links in title” the defenders aver that what the pursuer has produced is a redacted copy of
the Assignation, and that the defenders are entitled to disclosure of the whole deed so as to
be satisfied that it is valid and that the pursuer can give them a good discharge; and that the
unredacted copy ought to be the original or a copy certified by a natural person. They aver
that the Assignation is insufficient in itself to establish the validity of the pursuer’s title
because in terms of clause 1.1 the expressions used in the deed are to have the meaning
given to them in the Sale and Purchase Agreement (“the SPA”) dated 27 July 2014 between
National Australia Bank Limited, the Bank, and Promontoria Holding 97 BV, as amended by
a Novation Agreement (“NA”) dated 29 September 2014 between National Australia Bank
Limited, the Bank, Promontoria Holding 97 BV and the pursuer; and because clause 1.2 of
the Assignation incorporates clause 1.2 of the SPA. They aver that the SPA and the NA
ought to have been produced. Under a heading “Non-purification of payment condition”
the defenders aver that it was a condition precedent to transfer of Specified Loan Assets
under the Assignation that the Seller (National Australia Bank Limited) receive the Purchase
Price for the Specified Loan Assets. They aver that the pursuer’s title to sue is predicated
upon the payment of a price which it does not offer to prove was paid, and they call upon
the pursuer to aver and vouch purification of the payment condition. Under a heading
“Ineffective Intimation” the defenders aver:
“Clause 6.2 within the Schedule to the various Facilities permits the Bank to assign
and/or novate any of its rights or obligations under the letters or any other ‘Relevant
Documents’ to certain defined classes of parties. The pursuer is called upon to
explain and vouch which of those defined classes it allegedly falls within. Absent the
clause taking effect, at least in relation to the novation of obligations, the consent of
the other contracting party would be required...”
Page 6 ⇓
6
The defenders go on to refer to two letters to them from the Bank dated 24 and 28 November
2014, the first of which advised that on 28 November 2014 the NAB Group would complete
the sale to the pursuer of the facilities made available to the first defender together with all
related rights and benefits; and the second of which intimated that the NAB Group had sold
all amounts owing to it to the pursuer, and that all of the NAB Group’s rights and benefits
in, to and under the Loan Accounts, Loan Agreements and Loan Assets were being
transferred with effect from 28 November 2014. They aver:
“The pursuer’s purported links in title are: (i) SPA in July 2014 to Promontoria
Holding 97 BV; and (ii) NA in September 2014 to the Pursuer. The purported
intimation correspondence, by contrast, advises the debtor of a direct transfer from
the NAB Group to the pursuer which is said to take effect from 28 November 2014.
Said intimation, being inconsistent with the manner in which title was purportedly
transferred, was accordingly ineffective. The defenders qua common debtors are left
unsure whether, and, if so, how, when and to whom the Bank qua cedent assigned
its rights under the Facilities. The Defenders are therefore unclear as to whether the
pursuer may grant lawfully a discharge of the underlying debt (esto any such debt
exists, which is denied)...”
[4] In answer 12 the defenders also aver that any obligation they may have had to make
payment to the pursuer has been extinguished by the operation of prescription. However,
counsel for the defenders did not seek to support the relevancy of those averments. He
accepted that they ought not to be admitted to probation, and that the defenders’
corresponding plea-in-law 8 should be repelled.
The facility letters
[5] In terms of the facility letters the Bank agreed to make funds available to the
defenders (as “the Borrower”) to be drawn down by them as loans to purchase residential
properties. The principal facility provided in the facility letter of 16 July 2007 was an
overdraft of up to £2 million with an expiry date of 19 June 2012. As loans were drawn
Page 7 ⇓
7
down on the facilities the sum remaining available to be drawn down reduced. By the time
of the facility letter of 15 July 2011 the sum remaining available for drawdown was less
than £200,000. The facility letters contained the following clauses:
“3 Repayment and Cancellation
3.1 All amounts outstanding under or in respect of the Facilities are repayable on
demand. If the Bank makes a demand for any Facility, all facilities will be
immediately cancelled. The Bank may also, at any time, cancel all or any part of any
Facility by notice to the Borrower.
3.2 Subject to clause 3.1, each Facility will be available until the expiry of such
facility specified in clause 1 when it will be cancelled in full unless the Bank has
agreed in writing to extend or renew such Facility, in which case it will, subject to
clause 3.1 and the terms and conditions of any letter renewing such Facility, be
available until the date in such letter when it will be cancelled in full.
...
10.2 From the date of receipt by the bank of all of the items specified in clause 4,
this letter will replace all previous letters, agreements or arrangements between the
Bank and the Borrower in relation to the provision of the Facilities.”
Paragraphs 6.2 and 9 of the Schedule to each letter stated:
“6.2 The Bank may (1) assign any of its rights or benefits and/or (2) transfer by
novation any of its obligations, under this letter or any other Relevant Document to
another bank or financial institution or to a trust, fund or other entity which is
regularly engaged in or established for the purpose of making, purchasing or
investing in loans, securities or other financial assets or to any other person or
persons and/or (3) otherwise deal with its rights, benefits and/or obligations under
this letter or any other Relevant Document, in whole or in part.
...
9 Definitions and interpretation
9.1 Definitions
In this letter, the following words and phrases have the following meanings:
...
(d) ‘Relevant Document’ means (1) this letter (2) each other document under which
any person (including the Borrower) grants security or issues a guarantee, in respect
Page 8 ⇓
8
of the borrower’s obligations under this letter and (3) each letter or agreement
varying, amending, supplementing, restating, substituting or novating this letter or
such document;
...”
Expiry of the facilities
[6] The facilities expired on 19 June 2012 without the Bank offering the defenders a new
facility, but the Bank did not demand repayment of the loans. The defenders made some
repayments on the loans until December 2013, but no repayments were made after that date.
The Assignation
[7] The copy Assignation lodged by the pursuer contains the following certification:
“Certified as a true copy of the original document although due to commercial
sensitivity the schedule to the document (which contains information relating to a
large number of borrower connections) has been redacted so that it includes only all
of the information expressed to relate to the borrower connection identified therein
referencing the name ‘Ballantyne Property Services’ and to exclude all other
information expressed to relate to other borrower connections.
Linklaters LLP [in manuscript]
Name
R J Harbach [signed in manuscript]
Linklaters LLP
ROBERT JAMES HARBACH (Solicitor)
One Silk Street
London
Date 18/09/2018
“
[8] The Assignation was in the following terms:
“ASSIGNATION by:
(1) CLYDESDALE BANK PLC ... (‘Clydesdale’)
in favour of
(2) PROMONTORIA (CHESTNUT) LIMITED ... (the ‘Novated Buyer’ or the ‘Buyer’)
Page 9 ⇓
9
with the consent of
(3) NATIONAL AUSTRALIA BANK LIMITED ... (the ‘Seller’)
THE PARTIES AGREE as follows:
1. Interpretation
1.1 Definitions
Words and expressions used in this Assignation shall (unless otherwise expressly
defined) have the meaning given to them in the Sale and Purchase Agreement and:
‘...
‘Effective Time’ means the Settlement Date immediately following receipt by the
Seller of the Purchase Price for the Specified Loan Assets.
...
‘Novation Agreement’ means the novation agreement dated 29 September 2014
between the Seller, Clydesdale, Promontoria Holding 97 BV and the Novated Buyer
whereby the rights and obligations of Promontoria Holding 97 BV under the Sale
and Purchase Agreement were novated to the Novated Buyer.
...
‘Relevant Documents’ means, in respect of a Specified Loan Asset, each facility, loan
or credit letter or agreement ... collateral warranty ... in each case relating to that
Specified Loan Asset...
...
‘Relevant Borrower Asset Group’ means, in relation to any Specified Loan Asset, the
Borrower Asset Group to which that Specified Loan Asset relates.
‘Relevant Loan Asset’ means a relevant Pool A Loan Asset or a Relevant Pool B Loan
Asset.
...
‘Relevant Pool B Loan Asset’ means a loan asset or debt claim described in Part II of
the Schedule (Relevant Loan Assets) to this Assignation.
‘Sale and Purchase Agreement’ means the Sale and Purchase Agreement dated
27 July 2014 between the Seller, Clydesdale and Promontoria Holding 97 BV as the
initial Buyer, as amended by the Novation Agreement.
Page 10 ⇓
10
‘Settlement Date’ means 28 November 2014 (or such other date as may be agreed by
the parties in writing).
‘Specified Loan Asset’ means:
(a) a Relevant Loan Asset; ...
...
1.2 Construction
Clause 1.2 (Construction) of the Sale and Purchase Agreement shall be incorporated in
this Assignation as if set out in full herein.
...
2. Assignation and Acceptance
2.1 Assignation
Subject to the terms of this Assignation and in consideration for the payment by the
Buyer to the Seller of the Purchase Price for each Relevant Borrower Asset Group,
with effect on and from the Effective Time in relation to each specified Loan Asset
comprised within the Borrower Asset Group:
(a) Clydesdale, with the consent of the Seller, herby assigns absolutely to the Buyer
the following in relation to each such Specified Loan Asset comprised within the
Relevant Borrower Asset Group:
(i) all of its right, title, benefits and interests under, in or to each Relevant
Document...
(ii) Clydesdale’s rights in its capacity as lender (if any) under, to and in connection
with the Relevant Documents, to demand, sue for, recover, receive and give receipts
for all monies payable to it in its capacity as Lender (howsoever and whensoever
arising);
(iii) the right to exercise all rights and powers of Clydesdale in its capacity as Lender
under, to, and in connection with the Relevant Documents...
(iv) all Ancillary Rights and Claims in connection with the Relevant Documents...
...
2.2 Acceptance
The Buyer agrees that with effect on and from the Effective Time:
Page 11 ⇓
11
(a) it accepts the assignation of the rights, title, benefits, interests, powers and
Ancillary Rights and Claims referred to in Clause 2.1(a) (Assignation) above; and
(b) it shall assume, perform and comply with the terms of and the obligations of the
Lender under the Relevant Documents as if originally named as a party in the
Relevant Documents in place of Clydesdale...
3. Notification
On the Settlement Date, the Seller shall notify the Buyer in writing promptly upon
receipt of the purchase price for each Relevant Borrower Asset Group and shall
confirm to the Buyer in such notice that the Effective Time has occurred.
4. Sale and Purchase Agreement
Each of the Seller, Clydesdale and the Buyer hereby agree that this Assignation is a
Transaction Document for the purposes of the Sale and Purchase Agreement. Each
of the Seller, Clydesdale and the Buyer hereby agree that their entry into this
Assignation is without prejudice to the rights and obligations granted and assumed
by them, as appropriate, by virtue of their entry into the Sale and Purchase
Agreement.
....”
The Schedule to the Agreement included details of the lending to the defenders but the
details of loans to other parties were redacted.
The letters of 24 and 28 November 2014
[9] The Bank’s letter of 24 November 2014 advised the defenders that on 28 November
2014 National Australia Bank Limited and the Bank would complete the sale to the pursuer
of the facilities made available to the defenders, and that the Bank would write again on or
shortly after 28 November 2014 confirming completion of the sale. The Bank’s letter of
28 November 2014 informed the defenders that the sale had been completed and that the
Bank’s rights to and under the loan accounts, the loan agreements, facility letters, any other
credit documentation in connection with the loan accounts, and all related security,
mortgages, guarantees, other collateral and other rights in connection with the loan accounts
Page 12 ⇓
12
and loan agreements, had been transferred to the pursuer with effect on and from
28 November 2014. The letter stated that it constituted notice to the defenders of the transfer
to the pursuer, and that from 28 November 2014 all payments, amounts and obligations
owing by the defenders or that may become due or owing were owed to the pursuer; and
that the balance transferred to the pursuer included rights to all outstanding amounts. The
letter also stated that with effect from 28 November 2014 the Bank irrevocably authorised
and instructed the defenders to deal with the pursuer and or its agent in relation to the loan
assets unless they received written instructions from the pursuer and/or its agent to the
contrary.
The demand letters
[10] The defenders admit that the pursuer sent each of them a demand letter dated
10 September 2015 demanding repayment of the loans. The demand letters stated:
“...
1. Background and Interpretation
1.1 The benefit of the Facilities and all supporting security and other documentation
were assigned to Promontoria (Chestnut) Limited on 28 November 2014.
2. Expired facilities
The facilities have expired and are immediately due and repayable.
3. Demand
3.1 Without prejudice to paragraph 2 above, we hereby demand immediate
repayment of the sum of £1,803,954.84 from you being your liabilities to us in terms
of the Facilities...
.... “
Page 13 ⇓
13
Other actions
[11] In May 2017 the defenders raised an action in the Court of Session (A184/17) against
the Bank and the pursuer seeking inter alia payment of damages of £300,000 said to have
been caused inter alia through the Bank’s breach of promise. The averments in the summons
relating to promise were similar to those made by the defenders in the present action, but
they also included the following averments (art 6):
“Mr Smith asked what would happen at the end of the five years. Mr Heslop replied
that, ‘Obviously, we cannot predict what interest rates will be in five years’ time.’ He then
said, ‘But we will make you an offer at as competitive a rate as we can because we want to
keep you as a long-term customer.’”
In articles 22 and 23 of the summons it was averred:
“22. ... [O]n 19 June 2012, the Facilities expired. Clydesdale refused to refinance.
Had it offered to refinance the pursuers would have accepted... refusal to refinance
was a breach of Clydesdale’s promise that it would grant an option to refinance at
the end of the Facilities’ five-year duration...
23. In 2014, Clydesdale assigned its rights under the Facilities to [the pursuer]...”
In art 28 of the summons it was averred that the loss suffered was estimated at £300,000,
which was made up of (a) interest at a rate “above the market rate” which the defenders had
paid since the expiry of the facilities; (b) reasonable legal costs of £75,120.96 contesting
actions raised by the pursuer to obtain repossession of security subjects; (c) loss of profits
which would have been made in the BTL business had the defenders had financing from the
Bank; and (d) loss of interest they would have earned on deposits they would have made
with the Bank.
[12] The pursuer has raised a summary application in Edinburgh Sheriff Court seeking
enforcement of securities granted by the defenders.
Page 14 ⇓
14
Payments made by the defenders in respect of the facilities
[13] As already mentioned, the last payment which the defenders made to the Bank in
respect of the facilities was in December 2013. The defenders have not paid the pursuer any
sum in respect of the facilities.
Counsel for the pursuer’s submissions
[14] Mr Dunlop submitted that the defences were irrelevant and that decree de plano
should be pronounced. Alternatively, he submitted that having regard to the terms of the
defences and the documents before the court summary decree should be pronounced.
Assignation
[15] The defenders’ averments suggesting that the Assignation was defective were
irrelevant et separatim clearly unfounded.
[16] It was clear from the terms of the Assignation without any need for production of the
SPA or the NA that the Bank’s rights against the defenders had been assigned to the
pursuer. The pursuer ought not to be put to its proof that the purchase price had been paid
because it was clear from the documents before the court, in particular from the Bank’s letter
of 28 November 2014 and from the demand letters, that it had been paid. It was also wrong
to suggest that the Bank had not validly exercised the power to assign contained in
paragraph 6.2 of the Schedule to the facility letters. The power was a very wide one. It was
plain that there had been power to grant the Assignation.
[17] Arguments along the same lines as the defenders’ arguments had been advanced in
commercial judge. They had met the same fate in the Inner House (2020 SLT 321). While
Page 15 ⇓
15
that case had concerned different parties and a different assignation, there were no material
differences between the terms of that assignation and the Assignation.
[18] The pursuer’s averments that there had not been effective intimation of the
Assignation to the defenders were clearly unfounded. The letter of 28 November 2014 had
been effective intimation. In any case, there had been judicial intimation of the Assignation
(Carter v McIntosh (1862) 24D 925, Lord Justice-Clerk Inglis at p 934; Promontoria (RAM)
Limited v Moore 2018 SCLR 299, Lord Bannatyne at [44] and [94]).
Promise
[19] The defenders’ averments that Mr Heslop promised to extend the facilities at the end
of the 5-year period were irrelevant. A promise could only be created by clear words. The
words said to have been used by the promisor had to be examined in order to determine
objectively whether there had been an intention to incur a legal obligation (Regus (Maxim)
to have specified the terms upon which an offer of new facilities would be made. What he is
said to have said was not indicative of an intention to bind the Bank to offer to extend the
facilities in 2012.
[20] Moreover, even if, contrary to Mr Dunlop’s submission, Mr Heslop’s statements
could be construed as a promise to renew the facilities on the same terms in 2012, any such
promise did not survive the agreements entered into in the facility letters in 2007 to 2011. In
terms of clause 10.3 of those letters the parties agreed that each letter replaced all previous
letters, agreements or arrangements between the Bank and the Borrower in relation to the
provision of the facilities. If there had been a promise, it had been an arrangement which
Page 16 ⇓
16
had been replaced (cf (in a different context) Grant Estates Limited v Royal Bank of Scotland
Plc [2012] CSOH 133, Lord Hodge at [78], proposition 94).
[21] In any case, even if there had been a binding promise to offer to extend the facilities
in June 2012, and if that promise had not been superseded by the facility letters, the
defenders’ remedy for breach of the promise was damages (cf Royal Bank of Scotland v
Carlyle [2010] CSOH 3, Lord Glennie at [44]). Breach of the promise was not a relevant
ground for resisting repayment of the loans.
Personal bar
[22] The averments of personal bar were irrelevant, for much the same reasons that the
defenders’ averments of promise were irrelevant. The averments did not disclose that
Mr Heslop made a clear representation that the Bank would offer to extend the facilities in
2012. If they did disclose such a representation, at best for the defenders the representation
was only to the effect that there would be an offer that the facilities would be extended on
the same terms for 5 years from 2012. Even if there had been a representation that the
facilities would be extended, that representation would have been an arrangement which
was superseded by clause 10.2 of the facility letters.
Quantum
[23] For the purposes of the present motions the pursuer was content to restrict the
principal sum for which decree should be granted to £1,758,544, with interest thereon from
1 April 2018. In answer 6 of their defences to the summary application the defenders
averred that the sum of £1,758,544 was the balance due under the facilities as at the end of
March 2018. Interest should run on that sum at the contractual default rate of 3 per cent
Page 17 ⇓
17
above the Bank of England base rate per year until payment, failing which at the normal
contractual rate of 1 per cent above that base rate per year until payment.
Counsel for the defenders’ submissions
[24] Mr Sandison submitted that the pursuer’s motions should be refused and a proof
before answer allowed. The motion for decree de plano could not be granted unless the
defenders were bound to fail even if they proved all of their averments (Jamieson v
Jamieson 1952 SC (HL) 44, Lord Normand at p 50, Lord Reid at p 63). The motion for
summary decree could only be granted if the court was satisfied that there is no defence to
is not confined to questions of relevancy, and the court could proceed on the basis of facts
which could be clarified from documents, articles and affidavits, where there are disputed
issues of fact to be resolved the appropriate person to resolve them is the judge who hearing
a proof, not the judge who hears a motion for summary decree.
Assignation
[25] The defenders have a plea of no title to sue. The averments supporting that plea are
in answer 7. There were four matters in relation to which Mr Sandison submitted that the
defenders were entitled to inquiry. First, the copy Assignation that the pursuer had
produced referred to the SPA and the NA. Some terms in the Assignation are said to have
the same meaning as defined terms in the SPA, and clause 1.2 of the Assignation had
incorporated by reference clause 1.2 of the SPA. It was necessary to have sight of those parts
of the SPA and the NA in order to ascertain the effect of the Assignation. Second, the
defenders could not be satisfied from the documents produced that there had been
Page 18 ⇓
18
purification of the suspensive condition that the pursuer paid the purchase price. Third, it
was not clear that the Bank had been entitled to grant the Assignation. The pursuer did not
say which of the powers in paragraph 6.2 of the Schedule to the facility letters the Bank had
exercised. Unless these three matters were clarified the defenders could not be sure that the
pursuer could grant them a good discharge. Fourth, the court should not be satisfied at this
stage that there had been effective intimation of the Assignation, because the terms of the
letters of 24 and 28 November 2014 were inconsistent with the terms of the Assignation.
While there had been judicial intimation of the Assignation, that did not resolve the conflict
between the Assignation and the letters. While some, but not all, of these points had been
argued unsuccessfully in Promontoria (Henrico) Limited v Friel, that case had involved
different parties and a different assignation, and it had been decided after proof, rather than
on the pleadings and the documents alone.
Promise
[26] The defenders’ averments of promise were suitable for inquiry. Mr Heslop’s
undertaking had been clear and specific - that the Bank would offer to renew the facilities, to
extend them - at the end of the initial 5-year term. Renewal meant that the offer would be on
the same terms. What Mr Heslop had said required to be construed against the background
circumstances which he and the third defender had discussed. He knew from the third
defender that the first defender required long-term funding. The third defender told him
that the term of the loan had to be 15-20 years. The promise was that the Bank would offer
to renew so that loan facilities would be offered for at least 15 years. It would be wrong to
try to decide whether there had been a promise, and, if so, what had been promised, without
inquiry into the facts.
Page 19 ⇓
19
[27] Clause 10.2 of the facility letters did not apply to the promise. It was not a general
entire agreement clause. Its scope was limited to “previous letters, agreements or
arrangements”. Prima facie, none of those terms was concerned with an oral unilateral
promise. Facility letters and agreements involved bilateral obligations and so did
arrangements. The application of the ejusdem generis rule was appropriate. Even if the
ejusdem generis rule was not applicable, the court should be slow to hold at this stage that a
reasonable person in the position of the parties at the time the facility letters were entered
into would have understood that clause 10.2 had the effect of superseding the promise; and
in particular, that the parties were agreeing that the promise was an “arrangement” which
was to be superseded.
[28] If it could not be said at this stage that the pursuer was bound to fail to prove a
promise that the bank would offer to renew the facilities so that they would be provided for
at least 15 years, it was wrong to say that the defenders’ only remedy was to seek damages.
The pursuer’s obligation to perform the promise and the defenders’ obligations under the
facility letters were counterpart obligations. The pursuer could not insist upon performance
of the defenders’ obligations under the facilities while refusing to perform its part of the
bargain.
Personal bar
[29] The defenders’ averments of personal bar were also suitable for inquiry. The
pursuer was personally barred from acting in a manner inconsistent with Mr Heslop’s
statements.
Page 20 ⇓
20
Quantum
[30] If the court was not persuaded that any of the points raised by the defenders
provided a defence to the action, then Mr Sandison accepted that £1,758,544 was the sum
due by the defenders as at 31 March 2018.
Decision and reasons
The relevant criteria
[31] The test of the relevancy of a defender’s averments mirrors the test of the relevancy
of a pursuer’s averments. Defences will not be dismissed as irrelevant unless a defender is
bound to fail even he proves all of his averments (Jamieson v Jamieson, supra, Lord Normand
at p 50, Lord Reid at p 63; Henderson v 3052775 Nova Scotia Ltd, supra, Lord Rodger of
Earlsferry (delivering the Opinion of the Appellate Committee) at [16]).
[32] Paragraphs 13 to 19 of Henderson provide authoritative guidance as to the correct
approach to a motion for summary decree. Rule 21.2 applies where the court is satisfied that
there is no defence to the action disclosed in the defences. That may be because the
defender’s averments, taken pro veritate, are legally irrelevant. However, the rule is not
confined to questions of relevancy. The court may look beyond the pleadings and may
consider what in substance the defender is saying. Their Lordships concluded, at
paragraph 19:
“[19] In our view... a judge who is considering a motion for summary decree is
entitled to proceed not merely on what is said in the defences, but on the basis of any
facts which can be clarified, from documents, articles and affidavits, without
trespassing on the role of the proof judge in resolving factual disputes after hearing
the evidence. The judge can grant summary decree if he is satisfied, first, that there
is no issue raised by the defender which can be properly resolved only at proof and,
secondly, that, on the facts which have been clarified in this way, the defender has no
defence to all, or any part, of the action. In other words, before he grants summary
decree, the judge has to be satisfied that, even if the defender succeeds in proving the
Page 21 ⇓
21
substance of his defence as it has been clarified, his case must fail. So, if the judge
can say no more than that the defender is unlikely to succeed at proof, summary
decree will not be appropriate: it is only appropriate where the judge can properly
be satisfied on the available material that the defender is bound to fail and so there is
nothing of relevance to be decided in a proof.”
With these criteria in mind I turn to look at the defences to the pursuer’s claim for
repayment.
Promise
[33] Taking the defenders’ averments pro veritate at this stage, I am not satisfied that they
are bound to fail to establish that Mr Heslop made a promise to make an offer of further
facilities to take effect on the expiry of the existing facilities on 19 June 2012. While it is true
that the defenders do not aver that Mr Heslop stated what the terms of the offer would be, it
seems to be at least possible that a reasonable person in the position of the parties might
have understood him to be committing to renew on the same terms but at the Bank’s market
rates at the time of renewal.
[34] However, I am satisfied that what Mr Heslop is averred to have said, viewed
objectively and in the context of the surrounding circumstances which the defenders aver,
would not have bound the Bank to make an offer of facilities for a period of more than
5 years from 19 June 2012. Nor would it have bound the Bank to make a further offer of
facilities in 2017. It follows that in my opinion the defenders have not pled a relevant case
that Mr Heslop promised that in 2012 the Bank would offer to renew the Facilities for at least
15 years.
[35] I should add that at this stage, prior to evidence being led, I am not convinced that it
would have been right to decide that any promise which was made was an “arrangement”
in terms of clause 10.2 of the facility letters (and was therefore superseded by the first facility
Page 22 ⇓
22
letter or by subsequent facility letters). In my view, the ordinary meaning of the word
“arrangement” is capable of including a promise. I am not persuaded that the ejusdem
generis rule is applicable here. A letter may involve bilateral dealings (eg a facility letter),
but the ordinary meaning of letter has a wider ambit. In my opinion the words “letters,
agreements” do not identify a genus of bilateral transactions. Nevertheless, I would not
have been disposed to discount the possibility that the evidence of the surrounding
circumstances known to the Bank and the defenders at the time that the facility letter of
16 July 2007 was entered into might have caused a reasonable person in the position of the
parties to have understood that “arrangement” in paragraph 10.2 did not include the
promise. I bear in mind that that facility letter was very soon after the promise is said to
have been made, and that Mr Heslop appears to have been the representative of the Bank
who signed that letter (albeit that he did so on behalf of a colleague). If the circumstances
which the defenders aver are all proved, it also seems to me to be possible that the
reasonable person may have concluded that the word “arrangement” had the same meaning
in each of the facility letters.
Mutual obligations
[36] A signal feature of the defenders’ averments is that, rather than averring that they
are entitled to withhold performance of the obligation to make payment, they aver (art 4)
that the pursuer is not entitled to enforce performance of that obligation because the Bank
breached its promise. The plea-in-law dealing with this matter states:
“3. Esto the pursuer has title and interest to sue in terms of the Assignation
(which is denied), its cedent having breached a promise by it to the common debtor
and thereby not being entitled to insist on performance of the common debtor’s
payment obligations, the pursuer is not entitled to decree as concluded for.”
Page 23 ⇓
23
The proposition appears to be that, because of the cedent’s breach of promise, the defenders’
obligation to make repayment of the sums advanced can now never be enforced. That
result, so the argument runs, follows because the obligation to make repayment and the
promise were mutual obligations. Thus, it is said, the pursuer cannot enforce the former
because the Bank failed to perform the latter.
[37] If it were indeed truly the case that on a proper construction of the parties’
obligations the defenders’ obligation to make repayment of the sums loaned to it was
conditional upon the promise being performed, the proposition would be correct
However, it would be a startling outcome, which made no commercial sense, if the
defenders’ contractual obligation to repay loans of the order of £1.8 million could never be
enforced because an offer to extend facilities by 5 years from 2012 was not made. Under the
facility letters the loans were repayable on demand. An offer to extend facilities by 5 years
would also have been on the basis that loans were repayable on demand. It is very difficult
indeed to see why it is that breach of the promise should put the defenders in a stronger
position to resist the demand for repayment than they would have been had the promise
been performed.
[38] In Bank of East Asia Ltd v Scottish Enterprise 1997 SLT 1213, at p 1216 F-G,
Lord Jauncey of Tullichettle referred to the well-known statement of general principle which
had been outlined by Lord Justice-Clerk Moncrieff in Turnbull v McLean (1874) 1 R 730:
“At ... p 738 the Lord Justice Clerk said: ‘I understand the law of Scotland, in regard
to mutual contracts, to be quite clear - 1st, that the stipulations on either side are the
counterparts and the consideration given for each other; 2d, that a failure to perform
any material or substantial part of the contract on the part of one will prevent him
from suing the other for performance; 3d, that where one party has refused or failed
to perform his part of the contract in any material respect, the other is entitled either
Page 24 ⇓
24
to insist for implement, claiming damages for the breach, or to rescind the contract
altogether, - except in so far as it has been performed.’”
Lord Jauncey reviewed later authorities and concluded (at p 1217H-K):
“In the light of these cases I turn to consider in a little more detail the three principles
enunciated in Turnbull v McLean. The first one is readily applicable to a case where
the obligation by A to pay the price is the counterpart of the obligation by B to
complete the works or deliver the goods. I do not, however, consider that the
Lord Justice Clerk intended to state that each and every obligation by one party to a
mutual contract was necessarily and invariably the counterpart of each and every
obligation by the other. It must be a matter of circumstances. Thus in a contract to
be performed by both sides in stages, the counter obligation and consideration for
payment of stage one is the completion of the work for that stage conform to
contract. The second principle must, having regard to the first principle, be
construed as referring to performance by the other in relation to the part of the
contract which the one party has failed to perform, rather than to the whole contract,
although in many cases the part will amount to the whole. The third plainly has in
contemplation the material part of a contract which the one party has refused to
perform and which may be the subject of specific implement. So analysed it becomes
apparent that these principles do not produce the result that any claim under a
mutual contract can be set against any other claim thereunder howsoever or
whensoever such claim may arise.”
The second principle is of particular importance in the present case. The defenders have
failed to perform their repayment obligation. It is the counterpart of that obligation which is
relevant, not the totality of the obligations of the Bank/the pursuer arising from the facility
letter and the promise as a whole.
[39] Ex hypothese of the defenders’ averments, I would have no difficulty in accepting that
the facility letter and the promise were part of a package, and that for the purposes of
considering the effect of the mutuality principle the package should be approached in the
same way as if all of the obligations were contained within a single contract, or in two
interdependent contracts. However, that does not mean that the defenders’ obligation to
make repayment was conditional upon the Bank (or its assignee) performing the promise
and each of its obligations under the facilities agreement. It was conditional upon the Bank
performing the obligations which were the counterpart of the repayment obligation. The
Page 25 ⇓
25
most obvious counterpart obligation was the obligation to advance funds in accordance with
the agreement contained in the facility letters. There is no suggestion that the Bank did not
perform that obligation. It is possible that the Bank had further counterpart obligations.
Even if it did, in my opinion the promise was not such an obligation. The promise was that
the Bank would offer to extend the provision of facilities for five years from 19 June 2012.
Under the extended facilities, as under the existing facilities, the loans would have been
subject to the repayment and cancellation term in clause 3.1. In my opinion there is nothing
in the promise which makes it a counterpart of the repayment obligation. The reasonable
person in the position of the parties at the time when the loan obligations were entered into
would not have understood that repayment of the loans was to be conditional upon
Lord President Rodger at pp 640I-641D, 642D-E; Lord Caplan at p 650A-B).
[40] Instead of maintaining that the obligation to make repayment was conditional upon
the promise being performed, the defenders might have averred and argued that they are
entitled to withhold performance of the repayment obligation temporarily because of the
Bank’s breach - either because of mutuality retention or equitable retention. They have not
done that. I am not making a technical pleading point: far from it. There was not a whisper
of any such argument in the defenders’ note of argument or in their oral submissions. That
is not intended as a criticism. I do not think that the defenders would have had a relevant
basis for asserting a right to temporarily withhold performance.
[41] The principle of mutuality retention may apply where contracting parties have
mutual obligations (Gloag, The Law of Contract (2nd ed), pp 625–627; Bank of East Asia Ltd v
Page 26 ⇓
26
Ltd 2018 SC 440). It allows a contracting party to withhold performance temporarily of an
obligation incumbent upon him if and while the other contracting party does not perform a
reciprocal, counterpart obligation. It normally operates where the reciprocal obligations
arise from the same contract - but that need not be the case as long as the obligations are
truly interdependent (Inveresk plc v Tullis Russell Papermakers Ltd, supra). In identifying
counterpart obligations the search is for substantive obligations, as opposed to ancillary or
incidental obligations (Bank of East Asia Ltd v Scottish Enterprise, supra, Lord Jauncey at
pp 1217-1218 ; McNeill v Aberdeen City Council, supra, Lord Drummond Young at [27];
JH & W Lamont of Heathfield Farm v Chattisham Ltd, supra, Lord Drummond Young at [30]
and [34]; Lord Malcolm at [52]-[53]). Generally, the starting point is that all of the
substantive obligations on one side of the contract will be the counterpart of the substantive
obligations on the other (Gloag, The Law of Contract, supra, p 594; Macari v Celtic Football and
Athletic Club Ltd, supra,, Lord President Rodger at p 639; Inveresk plc v Tullis Russell
Papermakers Ltd, supra, Lord Hope of Craighead at [42]; JH & W Lamont of Heathfield Farm v
Chattisham Ltd, supra, per Lord President Carloway at [20], Lord Drummond Young at [34]
and [36]). It follows that a substantive obligation may have more than one counterpart
substantive obligation (or, putting matters another way, that a counterpart may have a
number of components) (Inveresk plc v Tullis Russell Papermakers Ltd, supra, Lord Hope of
Craighead at [45]; Lord Rodger of Earlsferry at [74], [75] and [77]). Exercise of the right to
mutuality retention is subject to the court’s equitable control (Gloag, supra, p 627; McBryde,
The Law of Contract, paragraph 20.77; Gloag and Henderson, The Law of Scotland (14th ed),
paragraph 10-17; McNeill v Aberdeen City Council, supra, Lord Drummond Young at [30];
JH & W Lamont of Heathfield Farm v Chattisham Ltd, supra, Lord President Carloway at [24],
Lord Drummond Young [26], [43] - [46]; cf Lord Malcolm at [58]).
Page 27 ⇓
27
[42] Here, the defenders maintain that they would not have contracted for the facilities
but for the promise - that the promise and the contract were interdependent. I agree that, if
the defenders establish their averments, the facilities and the promise ought to be treated as
a package. The obligation which the pursuer seeks to enforce is the defenders’ obligation to
repay the sums advanced together with the interest contractually due. The Bank’s
obligation to make the advances in accordance with the terms of the facilities (which the
Bank has performed) was clearly a counterpart of the defenders’ obligation to make
repayment. However, for the reasons already outlined, in my opinion the promise was not a
counterpart of the obligation to make repayment of the loans.
[43] Even if, contrary to my view, for the purposes of mutuality retention the promise
ought to be treated as a counterpart of the defenders’ obligation to make repayment, in my
opinion that would not have availed the defenders. They are not withholding repayment in
order to seek performance of the promise. The promise was made by the Bank, not by the
pursuer. It was never a possibility for the pursuer to extend the Bank’s facilities with the
defenders. On the defender’s account, the Bank breached the promise on 19 June 2012, long
before the Assignation. In any case, the promise was to offer to extend the facilities for
5 years from 19 June 2012. On any view, it cannot now be performed by the Bank or by the
pursuer. Had the facilities been extended the further 5 year period would have ended in
June 2017 (if not before). Ex hypothese of the pursuer’s averments, the promise has already
been breached. It cannot now be performed, and the defenders cannot withhold
performance of the repayment obligation in order to compel performance of the promise.
Accordingly, even if the promise had been a counterpart obligation of the right to
repayment, the defenders would not have had a good basis for temporarily withholding
performance until the promise was implemented (see eg Macari v Celtic Football and Athletic
Page 28 ⇓
28
Club Ltd, supra, Lord Caplan at p 650D-E; McNeill v Aberdeen City Council, supra,
Lord Drummond Young at [29]; JH & W Lamont of Heathfield Farm v Chattisham Ltd, supra,
Lord President Carloway at [18] and [21]).
[44] On the other hand, the defenders might have sought mutuality retention in security
of the damages claim for breach of the promise (Gloag, The Law of Contract, supra, pp 626-7;
Inveresk plc v Tullis Russell Papermakers Ltd, supra, Lord Hope of Craighead at [30]-[33];
Lord Rodger of Earlsferry at [73]-[76]; JH & W Lamont of Heathfield Farm v Chattisham Ltd,
supra, Lord Drummond Young at [25], [27], [44]-[47]). Had they done so I think it very likely
that the court would have concluded that it was not equitable in the whole circumstances to
allow mutuality retention. The outcome of the damages claim is uncertain. The sum
claimed is a small fraction of the repayment liability. The heads of loss are inspecific. It
does not appear that the damages action has been prosecuted with any vigour. Its
resolution may be years away. The defenders have made no repayments towards the debit
standing on their accounts since December 2013. If the damages action is ultimately
successful, there is no suggestion that the defenders would have difficulty enforcing an
award of damages. If that was thought to be an issue the defenders could seek diligence on
the dependence of that action. In the whole circumstances in my opinion it would not have
been fair and just to allow retention in security of the damages claim (cf McNeill v Aberdeen
City Council, supra, Lord Drummond Young at [30]; JH & W Lamont of Heathfield Farm v
Chattisham Ltd, supra, Lord Drummond Young at [24], [43]-[46]).
[45] The option of seeking equitable retention (Inveresk plc v Tullis Russell Papermakers Ltd,
supra, Lord Hope of Craighead at [32]; Lord Rodger of Earlsferry at [77] - [112]; JH & W
Lamont of Heathfield Farm v Chattisham Ltd, supra, Lord Malcolm at [55] - [59]) was open to the
defenders even though the promise was not a counterpart of the defenders’ repayment
Page 29 ⇓
29
obligation. However, once again it is not hard to see why the defenders do not ask the court
to exercise its power to permit equitable retention. In my opinion it is clear that it would not
have been fair and just for the equitable power to have been exercised in the defenders’
favour in the whole circumstances.
Personal bar
[46] In my opinion the defenders’ averments of personal bar are irrelevant. Even if it is
established that Mr Heslop said what the defenders aver he said, the representation was that
there would be an offer to renew the facilities on the same terms other than as to interest
rates and charges. It was not a representation that, no matter what the circumstances, a
demand for repayment would not be made before 2017. The pursuer was not personally
barred from demanding repayment in 2015; nor is it personally barred from enforcing its
right to repayment now.
The Assignation
[47] Mr Sandison did not argue that the defenders’ averments that the certification of the
copy Assignation was ineffective are relevant. In my opinion they are irrelevant.
Certification does not require to be by a natural person (Promontoria (Henrico) Limited v
Mr Harbach.
[48] I turn then to the four points which Mr Sandison did raise. I find it convenient to
deal with his first point after I have dealt with his second, third and fourth points.
[49] The second point is that the defenders cannot be satisfied from the documents
produced that there was purification of the condition of the Assignation that the pursuer
Page 30 ⇓
30
paid the purchase price. The defenders do not aver that the pursuer did not pay that price.
Nevertheless, they call upon the pursuer to aver, and vouch, satisfaction of the payment
condition.
[50] In my opinion it is clear from Bank’s letter to the defenders of 28 November 2014
that, as anticipated in the letter of 24 November 2014, the sale completed on 28 November
2014. In addition, in my view confirmation that the sale price was paid may reasonably be
inferred from the terms of the demand letters of 10 September 2015. The defenders’
averment in their action for damages that in 2014 the Bank assigned its rights under the
facilities to the pursuer is further confirmation of the defenders’ awareness that the
transaction had completed. For the purposes of the summary decree motion I am satisfied
from these materials that the second point is not a good defence.
[51] The third point is that the defenders say it is not clear to them that the Bank was
entitled to grant the Assignation, because the pursuer has not said which of the powers in
paragraph 6.2 of the Schedule to the facility letters the Bank exercised. Once again, the
defenders do not aver that the Bank was not entitled to grant the Assignation. All that they
do is (i) call upon the pursuer to explain and vouch which of the powers the Bank exercised;
and (ii) aver that “Absent the clause taking effect, and at least in relation to the novation of
obligations, the consent of the other contracting party would be required”.
[52] In my opinion there is no substance in this point. It is not a relevant defence to the
pursuer’s claim for repayment.
[53] Clause 6.2 (1) is in very wide terms. It confirms that the Bank may assign its rights
and benefits under the facility letters. Clause 6.2 (1) echoes the common law position, viz
that a creditor is entitled to assign the claims which it has against a debtor as well as any
accessory rights. At common law, the consent of the debtor to an assignation of such claims
Page 31 ⇓
31
and rights is not required (see McBryde, The Law of Contract in Scotland (3rd ed),
paragraph 12-02; R G Anderson, Assignation (2008), paragraph 1-03). Nevertheless,
clause 6.2 (1) provides the defenders’ consent to assignation. In my opinion it is clear that
the Bank was entitled to assign the claims which it had against the defenders.
[54] I turn to clause 6.2 (2). The common law position is that a debtor cannot transfer his
obligations to a third party unless his creditor consents (R G Anderson, Assignation,
paragraph 1-04). If such consent is obtained, that enables novation of the obligations. The
debtor’s obligations to his creditor are extinguished in exchange for him undertaking the
same obligations to a new creditor. Here, in terms of clause 6.2 (2) the defenders agreed that
the Bank could transfer by novation any of its obligations under the facilities letters or other
Relevant Documents to a financial entity of the type described. They consented to such
novation. It is not suggested that the pursuer is not a financial entity falling within the
description in clause 6.2 (2). In my opinion it follows that the Bank was entitled to novate its
obligations under the facilities letters and the Relevant Documents to the pursuer. It would
appear to have done so in terms of clauses 2.1(b), 2.1(c) and 2.2 of the Assignation.
[55] It is at least moot whether the promise was an obligation under the facilities letters or
other Relevant Documents. If it was, then it would have been one of the obligations which
were novated in terms of 2.1(b), 2.1(c) and 2.2 of the Assignation. If, on the other hand, it
was not such an obligation but was a collateral obligation (a view to which I incline), it
would not have been novated (because it would not have been conveyed in terms of the
Assignation, and because it would not have been an obligation which the defenders had
agreed (in terms of clause 6.2 (2) of the schedule to the facilities letters) could be novated).
Nonetheless, even on the latter scenario the defenders would still have been able rely on the
Page 32 ⇓
32
promise as a defence to a repayment action by the pursuer if it was a defence which they
could have taken against the Bank prior to the Assignation: assignatus utitur jure auctoris.
[56] In my opinion it is important to keep in view that the obligation which the defenders
aver that the Bank did not perform was the promise to offer to extend the facilities. For the
reasons already given, the promise is not a relevant defence to the pursuer’s claim for
repayment.
[57] The fourth point is that the defenders say the court should not be satisfied that there
was effective intimation of the Assignation. I disagree. I am satisfied that there has been
effective intimation.
Johnston, 1977 SC 191; Fieldoak Limited v Dounis & Others, 26 January 2016, Unreported,
with [64] and [93]), 2020 SLT 321, Lord President Carloway at [22] and [50]) or by the
assignee. In my opinion the Bank’s letter of 28 November 2014 to the defenders was
effective intimation of the Assignation. It communicated inter alia that the debts which the
defenders owed to the Bank had been transferred to the pursuer. It made it very clear that
from that date the debts were owed to the pursuer and not to the Bank. In my opinion that
satisfied the requirements for effective intimation (Libertas-Komerz GmbH v Johnston, supra,
the Court delivered by Lord Clarke at [14]). Had it been necessary for the pursuer to found
upon the demand letters of 10 September 2015 as being effective intimation, I would have
been satisfied that they were. Like the Bank’s letter, they made clear what had been
transferred by the Bank to the pursuer, and that the pursuer was asserting a right to
repayment. In any case, even if, contrary to my opinion, neither the Bank’s letter nor the
Page 33 ⇓
33
demand letters constituted effective intimation, there has been judicial intimation of the
Assignation (Carter v McIntosh, supra).
[59] It follows that, for the purposes of the summary decree motion, I am satisfied that the
defenders’ averments that intimation was not effective are not a good defence to the action.
[60] That brings me back to the defenders’ first point, the gravamen of which is that
without sight of the SPA and the NA neither the court nor the defenders can be satisfied that
the Assignation did indeed assign inter alia the right to repayment which the pursuer now
seeks to enforce.
[61] In my opinion this point has substance. If the correct approach to the construction of
the Assignation had been (i) to give those of its terms which are defined within the body of
the deed their defined meaning; and (ii) to construe all of the Assignation’s terms - those
defined within the deed and those not so defined - according to the ordinary canons of
interpretation, I would have had no difficulty in concluding that the Bank’s right to
repayment had been assigned to the pursuer. However, the difficulty is that the Assignation
may in fact provide that a different approach is required. Two factors may point to that
being the case.
[62] First, in terms of clause 1.1 unless words and expressions used in the Assignation are
expressly defined therein, they are to have the meaning given to them in the SPA (as
amended by the NA). In other words, the SPA (as amended) provides a further lexicon of
defined terms. Access to that lexicon is necessary in order to construe the Assignation.
[63] Second, clause 1.2 of the SPA is incorporated in the Assignation. It would appear
that it makes provision relating to the construction of the Assignation. Once again, neither
the court nor the defenders are in a position to know what that provision is.
Page 34 ⇓
34
[64] I accept, of course, that the pursuer is not obliged to produce documents which are
unnecessary to prove that the right which it is seeking to enforce has indeed been assigned
redact documents as long as the redactions are not material to proof of the right upon which
The redaction of the schedule to the Assignation to remove details relating to other
borrowers is an example of legitimate redaction in respect of which the defenders can have
no complaint. However, in my opinion the SPA’s lexicon of defined terms and clause 1.2 of
the SPA ought both to be produced, as should any amendment (if any) of those provisions
effected by the NA. The defenders have a legitimate complaint that that material has not
been made available.
[65] I am conscious that a very similar point appears to have been argued without success
by the defender in Promontoria (Henrico) Limited v Friel. In that case the terms of the
assignation (see 2019 SLT 153, [47]-[51]) were similar to (but not identical to) the terms of the
Assignation. However, in that case it appears that although the fact that the SPA had not
been produced was mentioned en passant before the commercial judge, the present argument
was not developed before him. Rather, the thrust of the argument which he had to consider
seems to have been a complaint about redaction of the schedule to the assignation (2019
SLT 153 at [69], [87] and [97]). On the other hand, in the Inner House the present point does
seem to have been advanced (2020 SLT 321 at [28]). The court was critical of the fact that this
and other challenges to the assignation had not been focussed by the defender in his
pleadings or otherwise clearly raised by him in advance of the proof ([47]). It opined that
the commercial judge ought to have determined that such challenges were not open to the
Page 35 ⇓
35
defender, given the state of his pleadings and his position at the preliminary and procedural
hearings ([37], p 328L). The court stated:
“[49] In the interests of clarity and efficiency in a commercial case, a party is entitled
to produce only such parts of a document as are necessary to prove the case averred.
If only part is produced, there may be a risk that the other party can present certain
arguments based on the absence of the whole document. Whether such arguments
will succeed must depend on the particular circumstances of the case. In
determining the matter the court may have regard to the fact that the other party has
not chosen to recover, or to produce, the missing parts of the document in order to
substantiate his argument. In this case, there was no requirement for the pursuers to
produce the sale and purchase agreement in the absence of any real indication that it
might have a bearing on the central issue of whether the assignation covered the
Glen TV debt and the defender’s guarantee.”
The court went on to hold ([50]) that on the evidence the commercial judge was entitled to
find that the assignation was adequately proved. In the circumstances that was a wholly
unsurprising conclusion. The present argument had not been raised before or during the
proof, and it was focussed only in submissions during the reclaiming motion.
[66] Here, by contrast, the point has been raised timeously in the defences. As yet, there
has been no proof. The defenders have given the pursuer fair notice that they are putting it
to its proof as to the material terms of the Assignation. In my opinion they are entitled to do
that. It cannot be said without sight of the defined terms in the SPA and clause 1.2 of that
document that those provisions have no real bearing on the issue of whether the Assignation
conveyed the defenders’ debts to the pursuer.
[67] Nonetheless, it would be surprising if, once the SPA’s defined terms and clause 1.2
are available, the conclusion was that the Assignation did not convey the defenders’ debts to
the pursuer. That outcome must be a possibility; but it is not what would be expected. In
my opinion that is a material consideration when it comes to determining appropriate
further procedure.
Page 36 ⇓
36
Conclusions
[68] Had I been satisfied that the Assignation conveyed the defenders’ debts to the
pursuer I would have granted the motion for summary decree. It is the absence of the two
parts of the SPA already mentioned which prevents me from reaching a conclusion on that
critical issue. In my opinion none of the other points raised by the defenders provides a
good defence to the motion for summary decree.
Disposal
[69] In the whole circumstances I shall continue both motions to a hearing to be
afterwards fixed. I shall order the pursuer to produce certified copies of (i) that part of the
SPA containing defined words and phrases; (ii) clause 1.2 of the SPA; and (iii) any part of
the NA which amended the provisions described in (i) or (ii).