Lloyds Bank Plc & Ors v Cassidy

A mortgagee or receiver is not required to accept a proposal merely because it may reduce the borrower’s burden. Any alleged duty must be assessed objectively against the parties’ true liabilities, including guaranteed and secured indebtedness, and cannot require the mortgagee to disregard its own interests. An outline proposal with a substantial shortfall, uncertain finance and necessary third-party cooperation is not an obviously favourable offer. A receiver acting in good faith may sell secured property when it chooses and need not fund further cultivation or improvements before sale. A procedural irregularity in giving the judge material unavailable to one party warrants appellate intervention only if it caused prejudice or injustice.

Michael Cassidy applied for permission to appeal against an order made by His Honour Judge Langan in the Leeds District Registry (Mercantile Court) on 19 March 2004. The judge dismissed the counterclaim except for damages of £9,147.90 concerning the 1992 harvest and gave directions concerning the judgment debt.

Following an earlier appeal against strike-out, the case proceeded to a lengthy trial. The proposed appeal challenged the rejection of claims concerning the Black offer, the failure to sow for the 1993 harvest, the assessment of damages and alleged procedural irregularities, including unequal access to transcripts. The central issues were whether the bank or receivers had breached duties owed to the mortgagor and whether any procedural irregularity caused prejudice.

Clarke LJ gave the first judgment. Chadwick LJ and Auld LJ agreed. The application for permission to appeal was refused.

1. The court did not need to decide whether the asserted duties to accept an obviously favourable proposal or to avoid substantially increasing the borrower’s burden existed in law. The claims failed because there was no breach even assuming that the duties were arguable. The discussion in Palk v Mortgage Services Funding PLC [1993] Chancery 330 concerned a dictum and did not require a different result.
2. The alleged breach had to be assessed objectively against the true position. The relevant liabilities included the guaranteed company indebtedness and amounted to approximately £589,000. The bank would have had to release or postpone security over property belonging to the applicant’s father, while the proposal still involved a substantial shortfall. It was an outline proposal without specific financing arrangements and was not an obviously favourable offer. Fairness to the applicant did not require the bank to disregard its own interests.
3. The claim also failed on causation. Whether the applicable standard was the balance of probabilities or loss of a chance, the applicant had not shown completion, or a real or significant chance of completion, of the necessary financing by himself and Mr Black and the required cooperation of the Agricultural Mortgage Corporation. The Court of Appeal found no realistic basis for interfering with the trial judge’s credibility findings.
4. Applying Silven Properties Limited v Royal Bank of Scotland Plc, a receiver acting in good faith was entitled to sell secured property without waiting for increased value or funding further improvements. That principle extended to the decision not to sow for the 1993 harvest. The receivers’ decisions were not open to review and the claim failed.
5. Under the Partnership Act 1890, the applicant’s reliance on section 33(1) did not displace the trustee in bankruptcy’s entitlement under section 42(1) to the other half of the damages. The award therefore was not to be doubled.
6. Providing the judge with transcripts when one party did not have them was a procedural irregularity. Save in exceptional circumstances, material provided to the judge should also be provided to the other parties. The irregularity caused no prejudice or injustice because the transcripts were later supplied and the proposed appeal had no arguable merit. The applicant was ordered to pay the respondents’ costs, subject to the legal-aid certificate and detailed assessment.

1. Court of Appeal (Civil Division): On 1 December 2004, permission to appeal was refused unanimously. The applicant was ordered to pay the respondents’ costs, subject to the stated qualifications.
2. Leeds District Registry (Mercantile Court): On 19 March 2004, His Honour Judge Langan dismissed the counterclaim save for damages of £9,147.90 relating to the 1992 harvest and gave directions concerning the judgment debt.
3. Earlier Court of Appeal proceedings: On 8 November 2002, this court allowed an appeal against the strike-out of the claim, after which the issues proceeded to trial.