Nicholson v HSBC Bank Plc & Anor

Whether a secured bank acted in bad faith in appointing a receiver is assessed by reference to the bank’s interests and the information available when the decision was made. Later expert evidence assembled for trial does not establish what the bank knew at the relevant time. An overdraft repayable on demand allows only the time needed for the mechanics of payment, not time to raise the money. A case-management decision concerning evidence does not, without more, establish an unfair trial, particularly where the evidence would not materially affect the decisive issue. Permission to appeal should be refused where the proposed grounds have no realistic prospect of success.

The claimant, a pig farmer, owed substantial sums to HSBC, which was secured, and to BOCM Pauls Limited, which was unsecured. In February 1988 HSBC demanded repayment of the overdraft and appointed a receiver. After a trial before His Honour Judge McGonigal, the claimant sought permission to appeal. He alleged that HSBC had acted in bad faith to protect BOCM, breached confidence and contract, and denied him a fair trial through an evidential case-management ruling. The central question was whether any of those grounds had a realistic prospect of success.

1. Disposition. Lord Justice Rix gave the leading judgment and Lord Justice Aldous agreed. The application for permission to appeal was refused with costs because none of the proposed grounds had a realistic prospect of success.
2. Bad faith. The trial judge had heard the relevant witnesses, believed them, and accepted the bank’s evidence that it acted in its own interests rather than as a cover for BOCM’s interests. The judge had also given detailed reasons based on the financial position, the lack of available further credit, and the bank’s loss of confidence in the claimant’s ability to recover. The Court of Appeal could not realistically interfere with that conclusion.
3. In assessing the bad-faith allegation, the relevant material was what the parties had available when the receivership decision was made. Expert valuation evidence assembled more than a decade later for the trial did not materially establish the bank’s state of mind at the relevant time. The refusal to permit further expert evidence at the case-management stage was an exercise of discretion, and the claimant had not appealed that decision.
4. Confidence. Any complaint about information supplied by BOCM to HSBC was overtaken when, shortly afterwards, the claimant authorised both major creditors to communicate and share information fully in an attempt to resolve the financial crisis.
5. Contract. The overdraft was repayable on demand. That term required payment when demanded, subject only to time for the mechanics of making payment. It did not provide time to raise the money. The appointment of the receiver later on the same day therefore disclosed no realistic contractual ground of appeal.
6. Human rights. The claimant had received a fair trial. The evidential ruling was discretionary, and valuation evidence did not materially bear on the decisive question of good faith. The human-rights grounds accordingly also had no realistic prospect of success.

1. Court of Appeal (Civil Division): Permission to appeal was refused with costs under [2001] EWCA Civ 748.
2. High Court of Justice, Queen’s Bench Division, Mercantile Court: His Honour Judge McGonigal rejected the claimant’s allegation that HSBC had acted in bad faith and decided the evidential and related issues against him.