Butterfield Bank v Phillip

A certificate of indebtedness is not undermined merely because an earlier calculation contained an error. The challenge must show a manifest error that is obvious or easily demonstrated without extensive investigation. A receiver’s sale of charged property is challengeable only where the relevant duty to obtain the best price reasonably obtainable is engaged and the evidence shows an undervalue. A contractual no-set-off clause may also prevent such matters being relied upon to resist judgment on the underlying debt.

The claimant bank sought judgment against the fourth defendant, following earlier judgments against other members of the Phillip family. The remaining issues concerned allegations that secured property had been sold by receivers at an undervalue and that the bank’s certificate contained a manifest error of approximately £500,000.

The defendant also challenged the calculation of default interest, the incorporation of facility conditions and the bank’s costs and expenses. The court considered whether any of these matters gave the defendant a real prospect of successfully defending the additional liability.

1. Summary judgment. The defendant had no real prospect of defending the bank’s claim on the matters raised. Judgment was therefore entered for the bank for the entire sum.
2. Certificate and manifest error. Although an error appeared in an earlier redemption statement, the bank’s certificate was supported by a new calculation based on its underlying rates. The error was therefore immaterial. Applying the formulation attributed to Lewison J in IMG Capital, a manifest error had to be obvious or easily demonstrated without extensive investigation. The evidence did not disclose such an error.
3. Contractual terms and interest. The facility was a significant commercial loan. On the evidence, it was unarguable that the relevant conditions had not been incorporated into the facility and guarantee. The alleged default-interest error was immaterial because the default interest itself had not been challenged.
4. Sale of secured property. The question was not simply whether more money might have been obtained. The defendant had to show a breach of the equitable duty to sell charged assets at the best price reasonably obtainable, together with an undervalue. The receivers had obtained proper professional advice on the development and valuation, and the achieved price was consistent with that advice. The defendant produced no evidence establishing an undervalue.
5. No set-off. Even if the proposed claim had possessed merit, the contractual no-set-off clause would have prevented reliance on it to resist judgment and enforcement of the underlying debt.

The judgment records that permission to appeal against an earlier order made on 7 November 2011 was unsuccessful. The present hearing determined the remaining issues and entered judgment for the bank for the entire sum.