Lloyds TSB Bank plc v Hayward

Where a trial judge’s factual conclusion depends centrally on the date and significance of a contemporary document, the judge must confront that issue and make the best finding available on the evidence. Treating the evidence as inconclusive, without resolving a central issue, may fundamentally undermine the judgment. The Court of Appeal should ordinarily not make its own findings of fact. A retrial is appropriate unless the evidence is exceptionally clear or another ground disposes of the appeal. A later variation of loan arrangements which introduces a materially adverse requirement for a guarantor requires the guarantor’s written consent where the parties have so agreed. Waiver, estoppel and affirmation require an evidential foundation.

The Bank obtained judgment in the High Court, Chancery Division, for £704,855.54 on three guarantees given by Mr Hayward for the indebtedness of a football club. Mr Hayward appealed.

The central issue was whether a requirement for replacement guarantees, introduced in a letter sent after a lengthy meeting on 23 September 1994, had instead been agreed at that meeting. The trial judge accepted the Bank’s witnesses and treated the undated Thomas note as inconclusive. He therefore found no subsequent variation of the loan arrangements and entered judgment for the Bank, subject to credits for the Gardiner cash deposit and £40,000. The appeal concerned the adequacy of that factual reasoning and, alternatively, whether the assumed variation discharged Mr Hayward from liability.

1. Appeal allowed. The order of Rimer J was set aside and the action was remitted to the High Court for a retrial before another judge.
2. The trial judge had to decide when the undated Thomas note was prepared. Its date was central, not peripheral, because, if made after the 23 September meeting, it could corroborate Mr Hayward’s account and cast doubt on the recollections of the Bank’s witnesses. The judge’s failure to make the best finding reasonably available on that issue fundamentally flawed the finding that the replacement-guarantee requirement had been agreed at the meeting.
3. The Court of Appeal is not ordinarily a fact-finding tribunal. It should assume that function only in exceptional circumstances, such as where the evidence is so clear that a retrial would waste time and money. This case did not meet that threshold. The effect of the Thomas note on the credibility of the Bank’s witnesses had to be assessed at first instance.
4. The Bank’s late concession concerning credit for the Gardiner cash deposit did not, by itself, justify a retrial. The trial judge was alive to its possible effect on the witnesses’ reliability, even though he did not expressly state how he used it.
5. If the replacement-guarantee requirement had first been introduced by the Gardiner side-letter, it varied the loan arrangements made at the meeting, required Mr Hayward’s written consent under the Hayward side-letter, and was plainly to his detriment. Mr Gardiner had counter-signed the letter both personally and as Chairman of the Club. The arguments based on waiver, estoppel and affirmation had no evidential basis: the Bank had not sought the required written consent, no representation abandoning the requirement was shown, and there was no evidence of reliance or unequivocal election.
6. The Court declined to determine the alternative argument that breach of the Hayward side-letter would have entitled Mr Hayward only to nominal damages rather than discharge from the guarantees.
7. The costs of the trial were reserved to the retrial judge. The Bank was ordered to pay the costs of enforcement and the appeal, with a payment on account of approximately £35,000 after set-off.

• High Court, Chancery Division: Rimer J entered judgment for Lloyds TSB Bank plc on 22 January 2002 in the sum of £704,855.54, subject to credits for the Gardiner cash deposit and £40,000.
• Court of Appeal (Civil Division): Permission to appeal was granted by Aldous LJ on 17 May 2002. The appeal was allowed, the order set aside, and the action remitted for retrial before another High Court judge.
• House of Lords: Permission to appeal was refused.