Balaratnam v Santander UK Plc

On an appeal from refusal to strike out or summarily dismiss a claim, the appellate court may intervene where the lower court has erred in principle or reached a decision outside the reasonable ambit of disagreement. Contractual allegations must identify the contractual obligation said to have been breached and plead facts capable of establishing breach, causation and loss. A bare allegation that contractual conduct was unfair or unreasonable is insufficient. A claimant seeking to introduce new tortious or statutory causes of action must plead the alleged duty, breach and resulting loss with adequate precision. Regulatory provisions cannot found a claim where they did not apply to the transaction or were not in force at the relevant time.

Mr Balaratnam claimed damages against Santander in connection with a proposed property-development facility and the bank’s withholding of retention monies, subsequent enforcement of security and appointment of receivers. The original particulars alleged breach of contract, unfair and unreasonable withholding of funds, bad faith in appointing receivers, and breach of MCOB Guidelines.

Master Kay QC refused the bank’s application for strike-out or summary judgment and permitted amended particulars. On appeal, the bank challenged the treatment of each original head of claim and the permission to introduce new contractual, tortious and statutory allegations. The central issues were whether the original claim had any real prospect of success and whether the proposed amendments disclosed an arguable and properly pleaded claim.

1. The appeal was allowed. Each head of claim in the original particulars was bound to fail, and there was no good reason to withhold summary judgment for the bank.
2. The allegation that the bank had no valid basis for withholding retention monies was contradicted by the claimant’s pleaded admission that he had not fulfilled every requirement for release. The evidence also did not support the alleged construction of the facility agreement or establish that the contractual requirements had been satisfied.
3. An allegation that the bank had acted unfairly and unreasonably did not, without more, establish breach of its contractual obligations. The relevant contractual decision-making principles, including the limits identified in Socimer International Bank Limited v Standard Bank London Limited [2008] 1 Lloyd’s Rep 558 and Deutsche Bank (Suisse) SA v Khan [2013] EWHC 482 (Comm), should have been accepted.
4. The receivership allegation disclosed no viable claim. The claimant identified no loss attributable to the appointment or any failure by the receivers. Prior dealings between the receivers and the borrowers did not automatically create a conflict of interest.
5. The MCOB Guidelines did not apply because their scope was limited to dwellings, whereas the secured properties were not the claimant’s dwelling. The pleaded allegation was also manifestly inadequate because it identified neither the applicable provisions nor the conduct said to breach them.
6. Permission to amend should generally be managed through an application supported by draft amendments, so that the court can ensure that any proposed pleading is appropriate. The purported amendments here failed to identify the acts required by any alleged tortious duty and failed to explain how breach caused loss. The alleged duty of care had no arguable evidential foundation; its existence and scope depended on the circumstances, as recognised in Caparo Industries Plc v Dickman [1990] 2 AC 605 (HL).
7. The proposed statutory-duty claims could not succeed. The Financial Services and Markets Act 2000 (regulated activities) order 2001 did not make entry into the facility agreement a regulated activity. The Banking: Conduct of Business Sourcebook was not in force until 1 November 2009 and, in any event, applied only to accepting deposits from banking customers.
8. The master’s approach was wrong in principle and outside the generous ambit of reasonable disagreement. The claim was brought to an end by summary judgment for the bank.

• High Court (Queen’s Bench Division): on 8 February 2019, Mr Justice Walker allowed Santander’s appeal from the order of Master Kay QC dated 2 November 2017 and granted summary judgment for the bank.