Bank of Scotland v Hussain

Summary judgment is appropriate where a claim or defence has no real prospect of success and there is no compelling reason for trial. The court must avoid a mini-trial, particularly where factual conflicts or complex inferences require disclosure and oral evidence. However, clearly fanciful assertions, or assertions contradicted by all relevant material, may be disposed of summarily.

A commercial bank providing an overdraft on express terms does not thereby assume a fiduciary duty to continue lending or complete a development. Where the facility is repayable on demand and subject to financial covenants, breach of those covenants may entitle the bank to refuse further lending and demand repayment.

Bank of Scotland sought summary judgment to enforce a personal guarantee given by Mr Hussain in respect of the liabilities of Junared Two Limited, a property development company controlled by him. The guarantee was limited to £500,000.

Mr Hussain disputed the guarantee and advanced defences based on an alleged collateral agreement or representation that the bank would provide further finance, an alleged fiduciary duty to lend, and an assertion that he had intended to sign a costs-overrun guarantee rather than a guarantee of J2's liabilities. The central question was whether any defence had a real prospect of success or required determination at trial.

1. Summary judgment was granted. None of the defences had a real prospect of success.

2. The court applied the summary judgment principles in Celador Productions Ltd v Melville [2004] EWHC 2362 (Ch), Doncaster Pharmaceuticals Group Ltd v The Bolton Pharmaceutical 100 Ltd [2006] EWCA Civ 661 and Mentmore International Ltd v Abbey Healthcare (Festival) Ltd [2010] EWCA Civ 761. A mini-trial must be avoided. Nevertheless, the court may reject factual assertions at an early stage where they are clearly without substance or contradicted by all the material on which they rely.

3. The evidence established that Mr Hussain signed the personal guarantee on 15 February 2007. It guaranteed payment or discharge of J2's liabilities to BoS up to £500,000. The absence of an original document and the fax header discrepancy did not create a real issue requiring trial.

4. The alleged collateral warranty and representation that BoS would provide further funds had no real prospect of success. The Facility Letter was unambiguous and the contemporaneous communications showed that BoS was considering further funding, subject to information and approval. In any event, any further facility would have been subject to the same terms, including repayment on demand and the security-cover covenant. J2 was in breach of that covenant, and BoS was entitled to refuse further lending, declare the overdraft due and payable, and cancel undrawn availability.

5. BoS owed no fiduciary duty to Mr Hussain or J2. Applying Bristol & West Building Society v Mothew [1998] Ch 1, the commercial banking relationship did not involve an undertaking by BoS to act for or on behalf of either of them in circumstances giving rise to fiduciary obligations. The evidence also showed that Imagine Homes was placed into administration by its directors, not by BoS.

6. The executed document was a guarantee of J2's liabilities, not a costs-overrun guarantee. Mr Hussain did not allege that he signed by mistake and did not seek rectification.