Mint Bridging Limited v Earthrise Developments Limited & Ors.

An express anti-set-off clause in a commercial lending agreement may exclude a borrower’s right to set off cross-claims, provided the clause satisfies the reasonableness test in section 11 of the Unfair Contract Terms Act 1977. A clause excluding set-off may be reasonable where the borrower remains free to pursue its cross-claim separately after redeeming the lender’s security. A later facility may supersede an earlier facility and terminate accrued rights and remedies where the parties intended it to replace the earlier agreement without reserving those rights. A conclusive-evidence clause concerning the amount due does not give the lender an unfettered discretion or permit it to override the contractual machinery.

Mint Bridging Limited provided development finance to Earthrise Developments Limited, secured by mortgages and personal guarantees given by Mr Palmer, Mr Cox and Mrs Palmer. The first facility was replaced by a second facility, which financed completion of the development. After the property and other security were realised, Mint claimed the remaining certified indebtedness.

The defendants alleged that Mint had breached the first facility by delaying or withholding advances and sought to set off resulting losses. Mint relied on the second facility’s anti-set-off provision, its supersession of the first facility, and conclusive-evidence clauses concerning the amount due. The central issues were whether Mint had breached the first facility, whether any breach caused the alleged losses, whether set-off was contractually excluded, whether the first facility had been superseded, and whether the certified amount could be challenged.

1. Claim succeeded. Mint was entitled to judgment for £625,225.97, being the amount certified under the second facility and guarantees.
2. The first facility did not require Mint to release construction funds in advance pending a quantity surveyor’s approval. The conditions precedent concerning a professional valuation related to valuation of the property and reports recommended by the valuer. The detailed facility terms left no room to imply an additional condition precedent based on trade custom.
3. A collateral contractual condition was nevertheless formed during the pre-completion discussions: release of the relevant funds was subject to a favourable recommendation from Mint’s quantity surveyor. The evidence did not establish that Mint required the defendants to appoint a main contractor.
4. The defendants failed to establish any material breach by Mint. In any event, they failed to prove causation. Even if a breach had been shown, it was not established that the project would have been completed within the first facility’s 11-month term.
5. The anti-set-off clause in paragraph 9.1 of the second facility letter excluded the company’s cross-claim as a defence. Applying sections 3(2)(a) and 11(1) of the Unfair Contract Terms Act 1977, the clause was fair and reasonable. It served sound commercial purposes while leaving the defendants free to pursue damages separately.
6. The second facility superseded and replaced the first facility in its entirety. By entering into it without reserving rights under the first facility, the parties relinquished those rights and remedies.
7. The conclusive-evidence provisions were clear and applied to the identification and quantification of the indebtedness. No manifest error was shown. They did not confer an overall discretion on Mint or permit it to override the contractual machinery. The possible existence of an implied duty to act honestly was academic on the pleaded case.

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