Standish & Ors v The Royal Bank of Scotland Plc & Anor

A claim should be struck out where, assuming the pleaded facts in the claimant’s favour, it is bound to fail in law. The court may allow a novel claim to proceed where it concerns a genuinely developing area of jurisprudence, but no such discretion arises where no legal foundation is identified.

An implied overarching banking agreement requires particularised conduct and must satisfy the necessity test. Equitable duties arising from mortgage security cannot be extended to ordinary lending conduct unrelated to the exercise of security powers. A shadow director’s fiduciary duties ordinarily concern directions or instructions given to the company’s directors, and the alleged breaches must be connected with the conduct establishing the shadow directorship.

The claimants were shareholders in Bowlplex Ltd. They alleged that RBS, NatWest and associated parties conspired to obtain a disproportionate shareholding during the company’s financial restructuring.

The alleged unlawful means included breach of an implied duty of good faith under an overarching customer agreement, equitable duties said to arise from RBS’s mortgage security, and fiduciary breaches by West Register or its representative as an alleged shadow director.

The defendants applied under CPR 3.4(2)(a) to strike out the claim. The claimants sought to amend their particulars. The central issue was whether the claim, taken at its highest and assuming the pleaded facts, was bound to fail as a matter of law.

1. Disposition. The strike-out application was granted and the claimants’ amendment application was dismissed. The court was satisfied that the claim was bound to fail.
2. On a strike-out application under CPR 3.4(2)(a), the court must be certain that the claim as pleaded cannot succeed. The court may decline to strike out a claim in a genuinely developing area of jurisprudence, but the claimants had identified neither a viable basis under current law nor a relevant developing legal principle.
3. The alleged overarching Customer Agreement was insufficiently particularised. The claimants did not explain how it arose, and the pleaded agreement had no express terms. In any event, the existing facility agreements meant that no additional agreement was necessary to give the parties’ dealings business efficacy. The agreement was therefore an artificial construct and this part of the claim was bound to fail.
4. The alleged implied duties could not be established. General shared assumptions and RBS’s Treating Customers Fairly policy did not provide a sufficient basis for implication. The pleaded contractual powers either were not contractual discretions, did not arise on the facts, or did not concern the type of discretion capable of attracting a good-faith limitation.
5. The equitable duties claim was also bound to fail. Medforth v Blake concerned duties connected with the exercise of mortgage security and receivership. Its reasoning could not be extended to a lender whose alleged conduct was unrelated to exercising or threatening to exercise security powers.
6. Assuming that West Register or Mr Sondhi was a shadow director, the fiduciary duties relied on were limited in scope. Following Vivendi SA v Richards, they ordinarily concerned directions or instructions given to the de jure directors. The alleged breaches related to negotiations and restructuring decisions which the directors and shareholders entered into voluntarily, not to directions or instructions establishing the alleged shadow directorship. The necessary connection was absent.

First instance decision. No earlier appellate decision is stated in the judgment.