Mulvenna v Royal Bank of Scotland Plc

A court considering summary judgment must not resolve disputed evidence or conduct a mini-trial. It may dismiss a claim only where, taking the claimant’s case at its highest, there is no real prospect of success.

Contract damages are assessed on the basis that the defendant performs its legal obligations, but does nothing more. A claimant cannot recover for the loss of a discretionary commercial benefit, such as further lending, which the defendant was not contractually bound to provide. Exceptional loss following a failure to pay money requires more than notice of special circumstances. The defendant must have accepted responsibility for the risk of that loss.

The claimant alleged that the bank breached a refinancing arrangement by failing promptly to refund excess interest and charges to his current account. He claimed that the delay prevented him from returning to mainstream banking and from obtaining finance for two property developments, causing lost profits and rental loss.

District Judge Needham refused the bank’s application for summary dismissal on 18 July 2002. HH Judge Maddocks allowed the bank’s appeal on 19 December 2002 and dismissed the action. The claimant appealed after permission was granted on renewal. The central issues were whether the alleged loss was caused by the breach and whether it was too remote.

1. Appeal dismissed unanimously. Waller LJ, with whom Carnwath LJ and Sir Anthony Evans agreed, held that the disputed damages claim had no real prospect of success.

2. The proper summary-judgment inquiry was whether the claim was fit for trial, not which account of disputed facts should be preferred. Although extensive material may exceptionally be examined, a claimant’s evidence should not be rejected unless it can clearly and easily be shown to be incapable of belief. The court therefore assumed the claimant could prove his factual case and asked whether it could nevertheless yield the claimed damages. This followed the approach in Three Rivers DC v Bank of England [2001] 2 All ER (HL) 513.

3. The proposed implied terms could not assist the claimant. No implication could oblige the bank to vary the expressly agreed overdraft limit or to treat him as a mainstream customer despite non-compliance with the facility. The letter concerning future development finance imposed, at most, an obligation to consider lending in principle on normal banking criteria.

4. On causation, the claimed development profits depended upon the bank voluntarily extending the overdraft facility and making further development finance available. Under the rule applied from Lavarack v Woods of Colchester Ltd [1967] 1 QB 278, damages assume performance of contractual obligations and nothing more. The bank was entitled to have damages assessed on the basis of the facility it made, rather than a facility which it might have been persuaded to make. It was not contractually bound to increase the limit, even if a correct refund would have left only a relatively small excess.

5. Independently, the loss was too remote. Notice of the claimant’s proposed developments did not establish that, when agreeing to refund charges, the bank accepted the risk of liability for all lost development profits if payment was delayed. That result was wholly unarguable on the alleged facts. Waller LJ would hear argument on whether the strike-out should be confined to damages or extend to the whole action. Costs were to be dealt with on paper.

• Court of Appeal (Civil Division): The claimant’s appeal was dismissed. Jonathan Parker LJ had refused permission on paper, but Rix LJ granted permission on renewal.
• HH Judge Maddocks: On 19 December 2002, allowed the bank’s appeal from the District Judge and dismissed the action.
• District Judge Needham: On 18 July 2002, refused the bank’s application for summary dismissal, directed that the case proceed to trial, and refused permission to appeal.