Pickenham Romford Ltd v Deville

Summary judgment may be given where the defence has no real prospect of success and the evidence permits the issue to be determined without a trial. An alteration to an instrument avoids it only if it was deliberate, material, unauthorised and not made by a stranger, subject to the applicable law.

Subrogation requires a proper legal or equitable basis. A debt discharged by a refinancing loan is not revived merely because the lender applies the money in an agreed way, or because other companies later reduce a residual debt. Released security cannot be asserted as continuing security in priority to the refinancing lender.

Pickenham Romford Ltd, acting by its administrators, sought declarations concerning the priority of Bank of Scotland plc’s security over development land and an order vacating unilateral notices registered by Alan Charles Deville.

Mr Deville alleged that the Bank of Scotland debenture was invalid, that he had contractual or equitable rights of subrogation to securities formerly held by Lloyds TSB plc, and that Bank of Scotland had breached an agreement to fund servicing payments. The court determined the issues on the claimant’s summary judgment application.

1. Summary judgment. The claimant established its entitlement to the declarations and related relief. The documentary evidence showed that the defence had no real prospect of success and that the issues could safely be determined without a trial.
2. Validity of the Bank of Scotland debenture. The alleged handwritten insertion of title EGL 555694 did not invalidate the debenture. Applying the principles discussed in Pigot’s Case (1614) 11 Co Rep 26B and Raiffeisen Zentralbank Osterreich AG v Crossseas Shipping Ltd [2000] 1 WLR 1135, an avoiding alteration must be deliberate, material, unauthorised and, at least arguably, made by a party rather than a stranger. The insertion was not material or potentially prejudicial to PRL. The debenture already required PRL to create the necessary security and authorised Bank of Scotland to execute documents on PRL’s behalf.
3. Contractual subrogation. The Lloyds letters were proposals for repayment and release of security, not an agreement conferring continuing or subrogated rights. They were in any event superseded by the later refinancing documentation. Lloyds released the relevant securities, and the refinancing documentation was inconsistent with any continuing right in Mr Deville or the other companies.
4. Servicing agreement. The facility documentation and cash-flow appraisal did not establish any open-ended agreement requiring Bank of Scotland to service the residual Lloyds debt. There was consequently no breach capable of affecting the release of Lloyds’ security or conferring priority rights on Mr Deville.
5. Equitable subrogation. The Romford Loan was extinguished by the Bank of Scotland refinancing. Payments later made by SBIL and SBDL reduced a residual bridging debt and did not entitle them, or Mr Deville, to the discharged Lloyds security. Clause 12(d) of the Lloyds OGSA also prevented the relevant companies from claiming the benefit of Lloyds’ security until the liabilities were discharged. Lloyds’ agreement to postpone enforcement to Bank of Scotland further postponed its rights as a whole.
6. The declarations and order vacating the unilateral notices were granted.

First-instance decision. No prior appellate decision is stated in the judgment.