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Caricom Cinemas Ltd & Ors v. Republic Bank Limited (Trinidad and Tobago) [2003] UKPC 2 (15 January 2003)

ADVANCE COPY

Privy Council Appeal No. 42 of 2001

(1) Caricom Cinemas Limited

(2) Trinidad Cinemas Limited and

(3) Michael Leschaloupe Appellants

v.

Republic Bank Limited Respondent

FROM

THE COURT OF APPEAL OF TRINIDAD AND TOBAGO

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL,

Delivered the 15th January 2003

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Present at the hearing:-

Lord Hoffmann

Lord Hutton

Lord Walker of Gestingthorpe

Sir Martin Nourse

Sir Andrew Leggatt

[Delivered by Lord Walker of Gestingthorpe]

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The appellants Caricom Cinemas Limited ("Caricom"), Trinidad Cinemas Limited ("TCL") and Mr Michael Leschaloupe were the plaintiffs in three consolidated actions brought against the respondent Republic Bank Limited ("the bank"). First Mr Leschaloupe alone brought a mortgagor's redemption action against the bank (1988 No 4777). Then Caricom and Mr Leschaloupe (in 1989 No 3208) and TCL and Mr Leschaloupe (in 1989 No 3209) claimed further relief in separate proceedings against the bank.

The trial of the consolidated proceedings began on 18 March 1992 before Best J. The trial was very protracted. Oral evidence was completed by 2 June 1992 but counsel's submissions continued, interrupted by many adjournments, until 14 March 1996 when the judge reserved judgment. On 17 October 1997 he gave judgment in favour of the plaintiffs. The bank appealed and on 7 December 2000 the Court of Appeal of Trinidad and Tobago allowed its appeal and dismissed the plaintiffs' cross-appeal.

In reaching this conclusion the Court of Appeal differed from the judge on some issues of fact. Before their Lordships it has been at the forefront of the appellants' case that the Court of Appeal's rejection of the trial judge's findings was unjustified and wrong. In the course of the hearing before their Lordships it became apparent that the differences, so far as related to findings of primary fact, were not as extensive as the parties' printed cases appeared to suggest. But it also became apparent that both the trial judge and the Court of Appeal had (no doubt with the commendable intention of concentrating on the most important issues) given only a sketchy account of the rather complicated sequence of events which gave rise to the consolidated proceedings. It is therefore necessary to set out the facts at some length.

At the beginning of the 1970's Mr Joseph Le Blanc owned a cinema in Trinidad, that is the Ritz cinema at Eastern Main Road, Barataria, held under a lease granted in 1960 for a term of 29 years. He also owned a site at 117 Abercromby Road, Port of Spain, on which he began to build what was to be the Superstar cinema. But he encountered serious difficulties and delays in bringing this project to completion. Mr Le Blanc also owned two cinemas in Barbados but they are not relevant to this case.

At the beginning of the 1970's Mr Le Blanc (who was a solicitor as well as a cinema proprietor) obtained finance from two sources: Barclays Bank DCO (to part of whose business the bank has succeeded) and a private lender called Mr Sooknanan. On 31 July 1970 Mr Le Blanc gave Barclays Bank DCO an all moneys charge over his leasehold interest in the Ritz, and Mr Sooknanan had a charge over the Superstar site for a loan and various further advances made between 1971 and 1976.

In 1977 Mr Le Blanc transferred the Superstar site to TCL, in which he was the controlling shareholder. He also gave guarantees to the bank (then called Barclays Bank of Trinidad and Tobago Ltd) in respect of TCL's indebtedness to the bank, the guarantees having an aggregate limit of $800,000. On 2 November 1978 TCL entered into an all moneys charge of the Superstar in favour of the bank, subject to Mr Sooknanan's prior charge.

At the beginning of the 1980's Mr Le Blanc and TCL were in very serious financial difficulties, mainly no doubt because of the long delay in the completion and opening of the Superstar cinema. In addition Mr Le Blanc had for some years had various health problems, and by the beginning of the 1980's his physical and mental condition was deteriorating.

One remarkable feature of this case is that Mr Leschaloupe, who complains of how he has suffered at the hands of the bank, was a long-serving and highly-regarded employee of the bank. He worked for it (and its predecessor banks) from 1958 until 29 July 1981, latterly in senior management positions. He seems to have been regarded as a suitable person to assist Mr Le Blanc in his financial difficulties, not least because Mr Leschaloupe had from 1974 to 1981 been manager of the bank's finance subsidiary, Republic Finance Corporation Ltd (previously Barclays Finance Corporation Ltd – "Fincor").

Very soon after he left the bank Mr Leschaloupe was engaged by Mr Le Blanc to assist him in his business affairs, and in particular to refinance and complete the construction of the Superstar. Mr Leschaloupe approached the new manager of Fincor, Mr Samaroo. By a letter dated 16 April 1982 Fincor offered to increase its commitment to $2m subject to conditions which included the following:-

"1) Our having sight of a properly legally binding agreement between Mr. Le Blanc and yourself giving effect to the following arrangements:-

a) You to have 51% control of Trinidad Cinemas Ltd.

b) The other cinemas within the Group are to be sold to Trinidad Cinemas Ltd. so as to bring the entire Group of cinemas within your control.

2) Letter of Undertaking from yourself to continue to manage the cinema during the currency of the long term loan and to liquidate the company to clear the loan including any indebtedness to Republic Bank Ltd. should the projections not materialise.

3) Keyman Insurance on the life of yourself for $500,000 assigned to us."

Fincor's offer was withdrawn shortly afterwards but Mr Leschaloupe persuaded the manager of the bank's Salvatori Building branch, Mr Christopher Gunby, to provide finance on the same terms. There is no hint in the contemporary correspondence that anyone at the bank felt any doubt or anxiety about imposing the condition of 51 per cent control, even though this control was to be exercised by someone who had until recently been a senior employee of the bank, and was to be exercised over the business of a customer who was in dire straits, financially, physically and mentally.

On 6 August 1982 Mr Le Blanc assigned his leasehold interest in the Ritz to Caricom (under its then name of Five Islands View Ltd). The recitals to the assignment indicated that just under $300,000 was outstanding under the bank's charge (for which Caricom gave Mr Le Blanc a covenant for indemnity). The consideration for the assignment was stated as just over $703,000 (although it seems questionable whether that sum can have been actually paid). By this time Mr Leschaloupe had, it seems, assumed control of TCL (for which he was the only authorised signatory) and their Lordships were informed that he also acquired a 51 per cent holding of shares in Caricom.

The Superstar was finally completed and opened for business at the end of August 1982. This was achieved without Mr Leschaloupe having formally charged his own resources, but he had at the beginning of May 1982 committed himself to giving the bank a charge over four acres of land which he owned at Ariba, to secure a loan of $300,000 needed for the Superstar. He formally gave this security (as an all moneys charge) on 1 September 1982.

Once open for business the Superstar encountered various teething troubles. It became apparent to Mr Leschaloupe that its viability depended on (among other things) the quality of the films which he could hire, and there were difficulties in obtaining a regular supply of popular films. (It is with hindsight common ground that the cinema industry in Trinidad, and indeed worldwide, was encountering very adverse trading conditions through competition from videos and other forms of entertainment.)

In the months after the opening of the Superstar four guarantees in favour of the bank were entered into, as follows:-

Date	Guarantor	Principal Debtor	Limit
8 November 1982	Leschaloupe	Caricom	$43,000
8 November 1982	Leschaloupe	TCL	$66,000
11 November 1982	Caricom	Le Blanc	$310,000
6 January 1983	Leschaloupe	TCL	$300,000

Early in 1983 there occurred two events which are of central importance to the case: the Le Blancs' action for undue influence against Mr Leschaloupe, and a meeting held on 21 February 1983 to discuss the implications of the Le Blancs' action. This meeting was sometimes referred to in counsel's submissions and in the judgments below as "the crucial meeting".

The precise chronology and pleaded issues in the Le Blancs' action are (like much in this case) not clearly apparent from the record. But it is common ground that Mr Le Blanc had by the autumn of 1982 at latest became mentally incapable and protectors (including his wife, Mrs Maria Le Blanc) were appointed to manage his affairs. They became suspicious (it may be thought, understandably) of Mr Leschaloupe's activities and they acted promptly. Mr Leschaloupe seems to have received a letter before action in the first week of January 1983 and a writ soon afterwards. TCL, Caricom and Mr Peter Sudan (a director of Caricom) were joined as defendants with Mr Leschaloupe. The protectors obtained an interlocutory injunction prohibiting Mr Leschaloupe and the other defendants from disposing of the cinemas.

To state that the protectors' suspicions may have been understandable is not to imply that their suspicions were well-founded. The undue influence action went to trial in October 1985 (with Mr Gunby appearing as a witness for Mr Leschaloupe) and Collymore J gave judgment in July 1986 wholly exonerating Mr Leschaloupe from the charge of undue influence made against him. Their Lordships approach this appeal on the basis that in his efforts to assist Mr Le Blanc Mr Leschaloupe was acting honourably and that the protracted litigation in which he has been embroiled (both with the Le Blancs and with the bank) has been an undeserved misfortune. But in examining the events of 1983 to 1985 it is necessary to keep firmly in mind the pending litigation between the Le Blancs and Mr Leschaloupe, its uncertain outcome, and the equivocal position of the bank as a major creditor of the estate of Mr Le Blanc (who died during the summer of 1983) and as the recent employer of Mr Leschaloupe.

Mr Leschaloupe promptly informed the bank of the claim made against him. On 11 February 1983 the bank made formal demands under its guarantees on Mr Le Blanc (for a total of $800,000), Mr Leschaloupe (for a total of $409,000) and Caricom (for $310,000). On 16 February it called in indebtedness from its principal debtors other than Mr Leschaloupe: about $2.66m from TCL, about $45,000 from Caricom, and about $310,000 from Mr Le Blanc. Each of the standard-form demand letters referred to the bank's intention, if the demand was not met by 28 February 1983, to sell the mortgaged property by public auction without further reference to the debtor.

That was the background to the crucial meeting on 21 February 1983. It was held at the bank's Salvatori Building branch, where Mr Gunby was manager. (The Salvatori Building branch closed in September 1983 and Mr Gunby moved to the Independence Square branch, where he succeeded Mr Victor Mouttet as manager in 1984.) The persons present at the meeting were Mr Gunby, Mr Leschaloupe and Mr Sudan (who did not give evidence at trial).

In the pleadings in the consolidated actions the appellants pleaded that the mortgagors had "concurred" in the bank's exercising its powers of sale under the mortgages of the two cinemas. The bank specifically denied that the meeting had taken place, and when he gave evidence at trial Mr Gunby did not refer to the meeting in his evidence in chief, but in cross-examination he accepted that it had taken place and that Mr Leschaloupe's account of what was said might be correct. The judge's findings of fact about the meeting were not in any way challenged before their Lordships:-

"I have compared and contrasted the testimony of Messrs. Leschaloupe and Gunby with the contemporary evidence and on a balance of probabilities, I find as a fact that the decision to sell was taken by the Defendant on 21st February, 1983. That there was a meeting was as stated by Mr. Leschaloupe. That the participants were as he had stated. That Mr. Gunby had stated at that meeting that the Defendant Bank would proceed immediately with sale of the properties."

It is convenient to set out at this point, in order to test it against the contemporary documents and the undisputed facts, some further findings of fact made by the judge which were challenged before the Court of Appeal and were at issue before their Lordships:-

"I find as a fact that the Defendant bank delayed implementation of its decision to sell made on 21st February, 1983 by first attempting to make a covert sale of the two cinemas by private treaty to the widow Le Blanc, while simultaneously conveying the impression to Mr. Leschaloupe that it was trying to bring about a statutory sale, and that sales by private treaty were not acceptable to the Defendant Bank. When this clandestine method failed, it totally ignored the suggestion of Mr. Leschaloupe that the best method of sale in the circumstances was private treaty; instead it vacillated and went for the advice of Senior Counsel as to the best method of sale. Only to be advised that it should proceed by private treaty. In the meanwhile, the values of these cinemas were sliding downhill at a fast rate."

At the time of the meeting there had been no direct contact between Mr Le Blanc's protectors and the bank on the subject of the undue influence claim. But on the same day as the meeting, 21 February 1983, solicitors acting for the protectors (Fitzwilliam, Stone, Furness-Smith & Morgan – "Fitzwilliams") wrote informing the bank of the claim, stating that the bank was implicated, and asking for detailed information about the accounts of Mr Le Blanc and his companies. Intermittent correspondence followed between the bank and Fitzwilliams, and then with another firm (Hamel-Smith & Co) whom Mrs Le Blanc (as her late husband's administratrix) instructed during 1984. The judge's findings about the bank's clandestine and improper course of conduct have to be tested against this correspondence and against the matters on which there was unchallenged evidence: the contacts between Mr Leschaloupe and Mr Mouttet (who preceded Mr Gunby as manager of the bank's Independence Square branch) and the advice which the bank sought and obtained as to its selling by private treaty when enforcing a mortgage.

On 2 March 1983 Mr Gunby wrote to Fitzwilliams saying that the bank had already shown extraordinary forbearance and could not reasonably be expected to wait until the final determination of the undue influence proceedings, which might well be in five or six years' time. After some further exchanges the correspondence seems to have lapsed, possibly because of Mr Le Blanc's death and the need for his widow to obtain a grant of representation. It resumed with a letter dated 3 November 1983 to Mrs Le Blanc from the bank's solicitors, Sellier & Co, formally demanding a total of about $3.5m in respect of a loan to the deceased, Caricom's overdraft and TCL's bridging loan and overdrafts. Fitzwilliams replied on 29 November stating that Mrs Le Blanc had a grant and was actively seeking a purchaser for the Superstar. The bank would be asked "to consider a mortgagee's sale by private treaty".

No reply to that letter seems to be extant. Mr Gunby's evidence was that he knew that the bank had power to sell by private treaty, but that its policy was to sell by public auction after advertising the auction in the newspapers, on the basis that that course was less likely to lead to litigation. What is common ground is that in November 1983 Mr Gunby agreed to defer any auction sale for three months in order to give Mrs Le Blanc an opportunity to find a purchaser, or to raise funds to pay off or reduce the indebtedness to the bank.

On or about 19 January 1984 Mr Leschaloupe called at the bank's Independence Square branch to see Mr Gunby, and saw Mr Mouttet instead. Mr Leschaloupe's evidence of this meeting, as recorded by the judge in his notes, was as follows:-

"I enquired about the sale as usual from Mr. Mouttet and in order to give me an answer he opened a company file. I was present when he opened the file he had it on the desk. He read the file and he commented words to the effect that the Bank cannot go ahead and sell those properties. I exclaimed something like 'what?' and he was reading from the file indicated that the Bank had agreed with the Solicitor for Le Blanc not to proceed with the sale for a specified period. I believe he told me that the period expired at the end of March or April 1984. I don't specifically remember who those Solicitors were. At the end of January 1984 I wrote to Mr. Mouttet confirming."

The letter which Mr Leschaloupe referred to was written by him on 30 January 1984. It is notable for what it does not say: that is, there is no trace of any sense of outrage or betrayal at the discovery that the bank had been in negotiation with Mrs Le Blanc and had agreed to hold its hand for three months. The letter was a calm, business-like letter acknowledging the difficulties facing the two cinema businesses, exacerbated by the undue influence proceedings. Mr Leschaloupe stated that the attempt to service the mortgages and break even was a losing battle. He wrote:-

"I am fully satisfied if the properties were sold now that all creditors and mortgagees would be repaid in full but if this decision were to be delayed for any length of time the accumulated interest would eventually exceed the value of the properties."

On 23 March 1984 Sellier & Co wrote to Fitzwilliams referring to the absence of any further communication from them. They stated that they were taking steps to effect a sale of the properties. On 14 May 1984 an advertisement appeared in The Guardian newspaper for the sale by auction on 21 May 1984 of the Ritz cinema. Shortly before the advertisement appeared Mr Leschaloupe had received copies of some of the correspondence between Fitzwilliams and Sellier & Co, which had been exhibited to an affidavit in the undue influence proceedings. As a result Mr Leschaloupe spoke to Mr Mouttet again, and was told that the period of grace granted to Mrs Le Blanc had expired, and that the bank was proceeding with the sale.

Mr Leschaloupe's evidence was that he did not see this (or later) advertisements of auction sales, but Mrs Le Blanc seems to have seen the advertisement which appeared on 14 May 1984, because on 18 May Hamel-Smith & Co wrote on her behalf to Sellier & Co stating that she was seeking a loan to purchase the Ritz, and asking for an extension of two weeks. This seems to be the only documented occasion on which Mrs Le Blanc's solicitors referred unequivocally to Mrs Le Blanc herself making a purchase (rather than taking a transfer of the bank's security, as they did in letters of 12 July and 6 September 1984); and the reference to a purchase was in the context of a pending sale by auction.

The auctioneer, Mr Leo Cowie, gave evidence. After refreshing his memory from his records he said that the Ritz had been put up for sale on 21 May 1984, 6 June 1984, 5 July 1984 and 1 February 1985. The Superstar was put up for sale on 25 June 1984, 12 December 1984 and 1 February 1985. Some but not all of the sale advertisements are included in the record. Mr Cowie's unchallenged evidence was that no bid was received for either cinema at any of these sales.

During this period of unsuccessful attempts to sell by auction, Mr Leschaloupe (as governing director of TCL) wrote to Mr Gunby on 8 October 1984 expressing his serious concern at the mounting arrears of interest in TCL's borrowings, and at the failure of the auction sales. He told Mr Gunby that TCL had obtained planning permission to convert the Superstar building for commercial use, and that he had been advised that it might be sold through private negotiations for a sum in the region of $6m. He asked the bank to authorise a sale by private treaty as a matter of urgency.

Mr Gunby's evidence was that as a result of this letter he decided to take the opinion of senior counsel as to the prudence of proceeding with an attempt to sell by private treaty; and that in the course of December 1984 the bank was advised by senior counsel that it would be a prudent and proper course. The bank then seems to have waited to see whether the auction sale on 1 February 1985 would be any more successful than the earlier sales. When it was not, the bank wrote on 20 February 1985 to three well known estate agents in Port of Spain (Mr Raymond, Mr Ferreira and Mr Querino) asking them if they would accept instructions to try to obtain sales by private treaty. The letters indicated prices in excess of $4m for the Superstar and in excess of $700,000 for the Ritz. Mr Raymond gave evidence at the trial, and his evidence was that after he was instructed he was in constant contact with Mr Leschaloupe and kept him fully informed of progress (or rather lack of progress).

So far as appears from the record, contact between Mrs Le Blanc's solicitors and the bank's solicitors went into abeyance after September 1984. But on 9 July 1985 Sellier & Co wrote to Hamel-Smith & Co, apparently out of the blue, offering to assign to Mrs Le Blanc for $700,000 its mortgage over the Ritz. It was not an offer to sell the cinema to her at that price, even though Mr Gunby in cross-examination seems to have agreed that it was. Hamel-Smith & Co's response was to ask for time until after the conclusion of the undue influence action. This exchange is significant only as marking the end of what Mr Guthrie QC (in seeking to uphold the judge's findings set out in paragraph 21 above) characterised as negotiations for sale by private treaty carried on by the bank of which Mr Leschaloupe was left in ignorance, except for the limited information which he got from Mr Mouttet in January 1984).

The rest of the sorry story can be summarised quite briefly. The economic climate continued to worsen both for cinemas and for speculative redevelopments, so that the two properties could not command a good price either as cinemas or as redevelopment projects (for which planning permission had been granted). Eventually the Superstar was sold for $3m on 29 September 1987, for use as a hall for religious meetings. The Ritz was sold for $300,000 on 31 March 1988, when the lease was very near to expiry (but the freehold reversion was apparently available for acquisition by the purchasers). Larger bids for the Ritz had been made and had been rejected (on professional advice) as inadequate. But it was no part of the appellants' case that the prices which the two cinemas fetched were, at the time of the eventual sales, undervalued. The complaint was that the bank should have sold much sooner, and that had it done so, it would have achieved much higher prices.

At first instance Best J made the important findings of fact set out in paragraphs 20 and 21 above. He concluded that there had been an improper exercise (not however amounting to fraud) of the bank's power of sale. In consequence he made declarations that Mr Leschaloupe was discharged from liability under his guarantees of 8 November 1982 and 6 January 1983 and that his land at Ariba was discharged from the mortgage of 1 September 1982. He ordered an assessment of damages and consequential loss suffered by TCL and Caricom.

The main judgment in the Court of Appeal was delivered by Sharma JA, with whom Hamel-Smith JA and Nelson JA agreed. Sharma JA quoted the judge's findings about the meeting on 21 February 1983. He said that thus far, the judge's reasoning was impeccable, but that the judge had failed to consider the subsequent conduct of Mr Leschaloupe. For the next four years Mr Leschaloupe had never made any complaint about the bank's failure to carry out an agreement for immediate sale. (In fact the first letter from Mr Leschaloupe which could be called a complaint was a letter dated 3 April 1987 sent to Mr Gunby, when it was known that Mr Gunby was leaving the bank and emigrating; this letter was expressly written for the purpose of putting things on the record, but it did not refer to an agreement for immediate sale made in February 1983.)

In referring to Mr Leschaloupe's omission to complain about an agreement for immediate sale Sharma JA seems to have misunderstood the appellants' case. Mr Guthrie readily accepted that it was no part of his case that there was on 21 February 1983 an agreement, in the sense of an enforceable contract, for immediate sale. What happened was a decision to sell taken by the bank (in the person of Mr Gunby) and concurred in by Mr Leschaloupe. Mr Guthrie also accepted that the bank was not a trustee of its power of sale and that even after making a decision to sell a mortgagee would normally be at liberty to change his mind, and to act in his own interests in doing so. Mr Guthrie recognised that he could succeed only by showing that this was not a normal case, and that Mr Gunby, by his clandestine negotiations with Mrs Le Blanc, tainted the bank's exercise of its power of sale in such a way as to make it improper.

That submission faces formidable difficulties as a matter of law. Since a mortgagee is not a trustee of his power of sale, there are obvious conceptual difficulties about an allegation that a mortgagee has failed in bad faith to exercise his power of sale. However their Lordships do not find it necessary to go further into that point since they consider that the submission faces even more formidable difficulties on the facts.

Sharma JA quoted the judge's findings about the bank's clandestine negotiations with Mrs Le Blanc and commented:-

"In my respectful opinion, the learned trial judge fell into error when he held that the appellant was trying to sell by private treaty to Le Blanc's widow. The evidence shows, clearly that, the negotiations which were taking place, were attempts to discharge the companies' liabilities without a sale by the appellant. It was NOT negotiations for a sale."

In their Lordships' view Sharma JA's conclusion is a rather abbreviated summary of what appears to have been a series of disconnected episodes, rather than a single continuing process of negotiation. Nevertheless it is in their Lordships' view essentially correct, and consistent with the contemporary documentary evidence referred to in paras 23 to 32 above. That documentary evidence does not support the trial judge's conclusion of a clandestine negotiation for a sale by private treaty to Mrs Le Blanc. The only express reference to a sale by private treaty (to some unspecified purchaser whom Mrs Le Blanc hoped to find) was in Hamel-Smith & Co's letter of 29 November 1983, which led to the bank granting a three-month period of grace but did not lead to anything else. Mrs Le Blanc's wish to purchase herself, as expressed in Hamel-Smith & Co's letter of 18 May 1984, was made almost on the eve of, and no doubt in the context of, a proposed sale by auction. Every other reference in the correspondence to a proposed transaction between the bank and Mrs Le Blanc was either neutral (referring simply to raising funds) or was concerned with Mrs Le Blanc taking transfers of the existing mortgages, which would not have required any exercise of the bank's powers of sale.

Mr Guthrie made some other powerful criticisms of the judgment of Sharma JA. He pointed out that (contrary to Sharma JA's supposition) there was evidence before the judge as to the amounts owed by the various debtors in 1983, and the values of the properties in 1983 (although the valuation of the Ritz as at August 1982 seems to have been a retrospective exercise). Mr Guthrie challenged the Court of Appeal's conclusion that Mr Gunby appeared to be an honest witness and pointed to several passages in the judge's notes from which it appears (although with less clarity than it might have appeared from a verbatim transcript) that Mr Gunby was prevaricating or shifting from his earlier evidence.

There is some force in these and similar points made on behalf of the appellants. Nevertheless if they were to succeed in this appeal they had to establish (as a necessary but not a sufficient condition of obtaining equitable relief, for the reasons mentioned in para 37 above) that the Court of Appeal was wrong to reject the judge's findings of a clandestine plot entered into by the bank. In their Lordships' view the appellants have failed to establish that.

When the Le Blancs launched the undue influence action at the beginning of 1983 the bank was faced with a very difficult situation. That is so even if (as may be thought) the difficulties were very much of the bank's own making (as it was the bank that had insisted on Mr Leschaloupe having 51 per cent control of the companies). Mr Le Blanc (and later his widow) was, it seems, entitled to the remaining 49 per cent of the two companies. If the action had succeeded Mrs Le Blanc would have been entitled to 100 per cent. In addition, Mr Le Blanc and his estate were still personally liable under the all moneys charge given in 1970 and the guarantees given in 1977. In the circumstances it would have been extraordinary if there had not been a dialogue between the bank and the Le Blancs, and the latter could not sensibly be described (as they were in the appellants' pleadings) as strangers to the mortgage transactions.

In these circumstances it would have been much better for the bank to have acknowledged its dilemma and discussed it frankly with both sides to the undue influence dispute. It is obvious (at least with hindsight) that all parties had a common interest in the early sale of the two cinemas. Unfortunately bankers often prefer secrecy (dignifying it as confidentiality) and Mr Gunby seems to have been no exception. Mr Daly SC for the bank candidly acknowledged that Mr Gunby may have been anxious about his own position and influenced by a desire to cover his own back. The bank does not emerge with credit from the story. But the evidence did not establish that it acted in bad faith, or something close to bad faith, and the trial judge was wrong in concluding that it had.

For these reasons their Lordships dismiss the appeal with costs.