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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Emery & Anor v UCB Corporate Services Ltd [2001] EWCA Civ 675 (30 April 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/675.html Cite as: [2001] EWCA Civ 675

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
(Mr D Oliver QC: Sitting as a Deputy High Court Judge)

		Royal Courts of Justice Strand London WC2 Monday, 30th April 2001

Monday, 30th April 2001

1. LORD JUSTICE PETER GIBSON: The defendant, UCB Corporate Services Ltd ("UCB), appeals from parts of the order made on 6th July 2000 by Mr David Oliver QC, sitting as a Deputy Judge of the High Court. By that order the judge gave his answers to certain preliminary issues which the Master had ordered to be tried in an action brought by the claimants, David Emery and his wife Joy, against UCB. UCB, with the leave of the judge, appeals against the judge's decision on eight of those issues. Mr and Mrs Emery, with the permission of this court, appeal against one other part of the judge's order, although Robert Walker LJ, in giving permission, indicated that he thought that their appeal had little prospect of success.
2. UCB is a lender specialising in the nursing home market. On 26th February 1991 Mr and Mrs Emery applied to UCB for a loan of £250,000 to assist them in the purchase for £300,000 of Hazeley House, 4 Hollow Lane, Hayling Island, Hampshire, together with the nursing home business carried on there. They intended that the home should be run principally by Mrs Emery, who had some experience of nursing care for the elderly. UCB by a facility letter dated 2nd April 1991 offered Mr and Mrs Emery a loan of £250,000 on the security of a first legal charge on Hazeley House. The term of the loan was 25 years, and interest was payable monthly at 3% over the Finance House Association base rate from time to time. The capital was to be repaid at the end of the term out of the proceeds of an endowment policy on the lives of Mr and Mrs Emery.
3. On 30th April 1991 Mr and Mrs Emery accepted the offer. They proceeded to purchase Hazeley House and to execute the legal charge on 8th July 1991. This provided in clause 2(a) that, in the absence of contrary agreement, UCB might at any time demand payment of "the Indebtedness", being all monies and liabilities then or at any time thereafter due, owing or incurred or made by UCB or for which Mr and Mrs Emery might be or become liable to UCB. Clause 2(b) provided that notwithstanding any agreement with Mr and Mrs Emery as to any specified date or dates of payment, UCB was to be entitled to demand payment of the Indebtedness at any time upon the happening of any of certain specified events and that, upon such demand, the whole of the Indebtedness was immediately to be due and payable. Those events included any default by Mr and Mrs Emery in the payment of all or any part of the Indebtedness. By clause 8(a) at any time after UCB had demanded repayment or the Indebtedness should otherwise have become payable, UCB was to have power to appoint receivers. The receivers were to be the agents of Mr and Mrs Emery who alone were to be responsible for the acts or defaults of the receivers. Clause 8(b) conferred specified powers on the receivers, including the power to manage the property charged to UCB.
4. Although a high degree of occupancy was maintained at Hazeley House, from very early on in the term of the loan Mr and Mrs Emery were in arrears in the payment of interest. By a further facility letter dated 14th June 1993 UCB offered, and on 22nd June 1993 Mr and Mrs Emery accepted, the restructuring of the loan. The arrears of interest of a little over £4,000 were added to the principal, the endowment policy was discontinued and Mr and Mrs Emery were to make monthly payments of both capital and income, the amount payable during the first three years being fixed at £2,500 per month. But again they fell into arrears, and in October 1993 UCB and Mr and Mrs Emery agreed that the monthly repayments be increased to £3,000 from 25th November 1993. The repayments which were made were only sporadic, and by 8th March 1994 the arrears were a little over £8,500.
5. Kevin Smith was an Area Recoveries Officer for UCB at its Guildford office and he from time to time dealt with Mr and Mrs Emery. On 3rd March 1994 Mrs Emery suggested to Mr Smith that she be permitted to send £700 to UCB on a weekly basis. They agreed to meet at Hazeley House on 8th March 1994. Even before she secured his agreement to that suggestion, she made a first payment of £700 on 4th March. As the monthly interest charged at that time was about £2,200 per month, £700 per week would represent a payment of an amount over and above current interest. Mrs Emery met Mr Smith on 8th March. Immediately after it Mr Smith wrote a letter dated 8th March 1994 to Mrs Emery in these terms:

"Thank you for your courtesy extended to me at our meeting this morning.

I have now banked the cheque you supplied me with for £700 to your account.

As I mentioned to you at our meeting your account is causing concern due to the arrears that have built up again over the past 6 months or so and which shortly followed a previous reschedule of your account.

I am therefore arranging with my head office for a firm of accountants by the name of Cape & Dalgleish to visit your business to look at the problems you are currently encountering in terms of your cash flow and possible courses of action thereafter.

As an interim measure, I am prepared to accept payments of £700.00 per week towards the monthly payments and including a small contribution to the arrears. Once I am in receipt of the report I will contact you again regarding payments on your account.

Please ensure these payments are made at the beginning of every week.

In the meantime I look forward to receiving copies of the 1993 accounts and your latest management figures as discussed."

6. The judge was to find that both Mrs Emery and Mr Smith, each of whom gave evidence before him, were honest. But where her recollection of what took place at the meeting conflicted with his, the judge preferred her evidence. He found that Mr Smith did not inform Mrs Emery that the purpose of commissioning a report from accountants was to consider the possibility of appointment of receivers. She was left with the impression that the commissioning of the accountants' report was as much for the benefit of her and her husband as it was for UCB's benefit. The judge said:

"Moreover, the letter of 8th March ... can only properly be construed as suggesting that before any further steps were taken by the bank in relation to the account Mr Smith would be in contact once again."

7. Mr Smith never reverted to Mr and Mrs Emery before UCB, on 28th April 1994, delivered a letter to each of them demanding repayment of £259,520.53, including arrears of £7,977.98. It gave notice that if repayment were not made by close of business on 30th April 1994, it reserved the right to appoint receivers. Repayment was not made then, or at all, and UCB on 3rd May 1994 appointed receivers. The judge found that the decision to appoint receivers and the receivers' attempts to run the nursing home proved disastrous. Hazeley House was sold by UCB as mortgagee on 20th January 1997. The recoveries totalled only £178,634, leaving a substantial sum outstanding for which UCB held no security.
8. On 19th April 1995 Mr and Mrs Emery commenced proceedings against UCB in Portsmouth County Court, claiming declarations that the demand made on 28th April 1994 was invalid, that they were not in default of the demand and that the appointment of the receivers was unlawful, and claiming damages and an account of monies received by the receivers. The re-amended particulars of claim were drafted by leading and junior counsel. They included a claim of promissory estoppel in that it was pleaded that Mr and Mrs Emery acted in reliance on a promise by Mr Smith that UCB would accept weekly payments of £700 until the arrears had been paid off and that UCB would not demand repayment of the loan so long as those payments were made. It was averred that in reliance on that promise Mr and Mr Emery made the agreed payments of £700 per week and (in paragraph 13(2)) that they took no steps to raise funding by refinancing, or otherwise, to pay off the arrears or the entire indebtedness. Those arrears were pleaded on behalf of Mr and Mrs Emery as being approximately £5,000, reduced as at 28th April 1994 to approximately £3,700. UCB by its defence and counterclaim denied the claims of Mr and Mrs Emery and counterclaimed for payment of the outstanding amount owed to UCB.
9. The proceedings were transferred to the Chancery Division on 21st August 1997. On 11th December 1997 Master Bragge ordered the trial of thirteen preliminary issues and gave other directions relating to the trial. At the hearing before the judge Mr and Mrs Emery appeared in person. Those of the thirteen issues which are germane to this appeal and the judge's decisions on them were as follows:

1. What (if anything) was agreed between Mr Smith and Mrs Emery on 8th March 1994?

10. The judge held that there was an arrangement that Mrs Emery would continue to pay £700 per week while UCB considered its position. The judge rejected the submission of Mr and Mrs Emery that the arrangement would continue until the arrears were paid off, but held that it would continue at least until Mr Smith reverted to Mr and Mrs Emery to alter that position.

2. What representations (if any) were made by Mr Smith to Mrs Emery at their meeting on 8th March 1994 and/or by Mr Smith's letter of the same date?

11. The judge found no representations made at the meeting, but he said that there was a representation by the letter that UCB would take no action unless and until Mr Smith had first reverted to Mrs Emery to discuss the position further.

3.Did Mr and Mrs Emery or either of them act or fail to act in reliance upon any representations made to them by Mr Smith?

12. The judge said:

"Mrs. Emery, on the other hand, took the point in the witness box that she did nothing, and that she did nothing in reliance upon the expectation that Mr. Smith would revert to her before any further action was taken. I accept that evidence. So the answer to preliminary issue three is in the affirmative, and in the affirmative in two senses: first, that Mr. and Mrs. Emery continued to pay £700 which Mr. Smith had said would be acceptable as an interim measure; and secondly, that they failed to take any steps to seek to protect themselves against the action that was actually taken by the bank, albeit that they were unaware that that action was proposed."

13. 5.In the light of -

(a) any agreement between Mrs Emery and Mr Smith on 8th March 1994, and/or

(b) any representation made to Mrs Emery by Mr Smith; and

(c) the terms of the legal charge

was UCB entitled to demand repayment from Mr and Mr Emery on 28th April 1994?

14. The judge accepted that UCB was contractually entitled to demand repayment, but he referred to Mr Smith's representation by his letter and said:

"In my view, that representation is sufficient to estop the bank from relying upon its strict contractual position unless and until notice is given that that position no longer pertains by Mr. Smith in fulfilment of the representation that he made in his letter. In those circumstances, in my view, in the light of a long line of authority of which the most famous instance is the decision of Denning J. (as he then was) in Central London Property Trust v. High Trees House [1947] 1 KB 130, it is sufficient to raise an estoppel against the bank precluding it from relying upon its contractual rights."

6.Given that UCB demanded repayment on or before the close of business on 30th April 1994, was that demand valid and effective under the legal charge?

15. The judge held that the demand complied with the provisions of the legal charge but that the same estoppel applied and so UCB was not entitled to demand repayment.

7. Was UCB entitled to appoint receivers on 3rd May 1994?

16. The judge held that UCB were was not entitled, pending reversion by Mr Smith to Mr and Mrs Emery, to appoint receivers on 3rd May 1994.

8.Is UCB liable for any acts or defaults of the receivers if

(a) UCB was entitled to appoint receivers, or

(b) UCB was not so entitled?

17. The judge held that if UCB had been entitled to appoint the receivers, it would not have been liable for the acts or defaults of the receivers. But as it was not so entitled, whilst UCB might not itself be directly liable for the particular action taken by the receivers, it was liable for the wrongful appointment of the receivers with all the consequences which might flow from that.

9. Were the receivers entitled to operate and/or manage Mr and Mrs Emery's nursing home business?

18. The judge held that their entitlement so to do was dependent upon the propriety of their appointment and that they were therefore not so entitled.

10.Was UCB and/or the receivers entitled to sell the nursing home business?

19. The judge held that neither UCB nor the receivers were so entitled.

12.What sums remained due and owing from Mr and Mrs Emery on their account with UCB?

20. The judge held that £328,649.12 was owing.

13.Do Mr and Mrs Emery have a valid claim that UCB acted in breach of the terms of the legal charge by reason of

(a) the appointment of the receivers, and/or

(b) the sale of the nursing home business and/or chattels giving rise to a claim against UCB for damages (without any consideration at that stage of what those damages might be, if any)?

21. The judge held that by reason of the appointment of the receivers at a time when UCB was not entitled to make the appointment, UCB was liable for any consequent damage.
22. But the judge proceeded to observe that because Mr Smith could have reverted to Mrs Emery with complete immunity and indicated that UCB was intending to call in the loan, it was difficult to see why Mr and Mrs Emery were worse off than they would have been had Mr Smith complied with what the judge called his "moral and legal obligation".
23. The judge also mentioned one other point. He relied on the evidence of Mr Goldsack, the expert witness for UCB, to find that it would have been impossible (at 28th April 1994) for Mr and Mrs Emery to refinance their borrowing on Hazeley House.
24. The judge, in addition to answering the issues, gave judgment in favour of UCB for £328,649.12.
25. UCB now appeals against the judge's decisions on issues 3, 5, 6, 7, 8(b), 9, 10 and 13. Mr and Mrs Emery appear in person, and each of them has addressed us, if I might say so, with great courtesy and clarity. They appeal against the judge's order giving judgment to UCB in the sum of £328,649.12. They ask instead for an order that UCB should pay them £581,509.07 forthwith. Their appeal depends on the maintenance of the judge's holding on promissory estoppel, and hence that the appointment of the receivers was invalid. I therefore consider UCB's appeal first.
26. Mr Nicholas Stewart QC, who did not appear before the judge and who appears with Mr Mendoza (who did appear before the judge), challenges on behalf of UCB the judge's conclusion that the conditions for a promissory estoppel to arise are present in this case. The judge's judgment contains no statement of the conditions necessary for such an estoppel, and in answering issue 5 the judge expresses himself too economically in stating that Mr Smith's representation was sufficient to raise an estoppel against UCB. The judge, of course, had found in answering issue 3 that there had been reliance by Mr and Mrs Emery on Mr Smith's representation; and no doubt that was intended to be included when the judge was giving his answer on promissory estoppel. But that also omits other material considerations.
27. A promissory estoppel, in my judgment, arises where

(1) there is a clear and unequivocal promise that strict legal rights will not be insisted upon;

(2) the promisee has acted in reliance on the promise; and

(3) it would be inequitable for the promisor to go back on his promise.

28. Some commentators express the second condition in terms of the promisee altering his position to his detriment (see, for example, Snell's Equity 13th Edition (2000) paragraph 39-08), but that is controversial (see, for example, Chitty: Law of Contracts, 28th Edition (1999), paragraph 3-089). However, the fact that the promisee has not altered his position to his detriment is plainly most material in determining whether it would be inequitable for the promisee to be permitted to act inconsistently with his promise.
29. Mr Stewart submits that there was no representation by Mr Smith that UCB would take no action unless and until Mr Smith had first reverted to Mrs Emery to discuss the position further. He says that giving the words of the letter of 8th March 1994 their natural and ordinary meaning, they merely amounted to a statement that, once the accountants' report was received, Mr Smith would be in touch with Mrs Emery again. It could not matter whether it was Mr Smith or someone else in UCB who contacted Mr and Mrs Emery. There was no promise that when UCB did come back it would not come back with a demand for the repayment of the Indebtedness. I see a good deal of force in this submission. But because it was not clearly foreshadowed in the Appellant's Notice or the skeleton argument of UCB, I would be reluctant to decide this appeal on that point, particularly as Mr and Mrs Emery are in person.
30. Mr Stewart submits that Mr and Mrs Emery did not in any practical way rely on the representation found by the judge to have been made and that they did not alter their position to their detriment. It will be recalled that in answering issue 3 the judge first accepted Mrs Emery's evidence that she did nothing in reliance on the expectation that Mr Smith would revert to her. But the judge went on to say that there had been reliance in two respects: the first was the continued payment of £700 per week. But, as Mr Stewart points out, so far as that comprised interest currently due Mr and Mrs Emery were already obliged to pay it, and to the extent that £700 per week exceeded the interest currently due, it reduced the interest arrears, which again Mr and Mrs Emery were already obliged to pay. It is hard to see any alteration by them of their position to their detriment by such payments. The second form of reliance found by the judge was that Mr and Mrs Emery took no steps to seek to protect themselves against the action taken by UCB. That prompts the question: "What steps could they in reality have taken to protect themselves?" The judge found that refinancing would have been impossible.
31. Mrs Emery sought to challenge that finding and took us to some passages from the transcript of her cross-examination of Mr Goldsack. But she was unable to point to anything said by Mr Goldsack which amounted to a withdrawal of his clear conclusion in paragraph 6.8 of his report:

"There is absolutely no doubt in my mind that the Emerys would have been wholly unable to obtain refinancing of the entire loan from UCB or finance to repay their arrears with UCB during the period March 1994 to September 1994."

32. The judge plainly had material on which to make the finding that refinancing was impossible.
33. Mrs Emery also said that refinancing was not an issue raised among the preliminary issues. True it is that there was no specific issue raising this point. But it has to be borne in mind that the Master, when giving directions on 11th December 1997 for the trial of preliminary issues, ordered that there be liberty to the parties to adduce expert evidence at the trial of preliminary issues to relate to issue 3 and paragraph 13(2) of the re-amended particulars of claim. That order was made at a time when Mr and Mrs Emery were represented by counsel, who had the opportunity of addressing the Master on it. It is therefore plain that it was expressly contemplated by the parties that at the trial of the preliminary issue evidence would be given by or for Mr and Mrs Emery on the steps which they might have taken to raise funding by refinancing or otherwise. We are told that in fact an expert's report was obtained for Mr and Mrs Emery but they chose not to rely on that evidence and their expert was not called.
34. Mr and Mrs Emery now say that they might have repaid the loan or the arrears, which Mrs Emery has told us were only £2,500. That is inconsistent with paragraph 13(2) of the re-amended particulars of claim settled by counsel. We asked Mrs Emery how they were going to repay the arrears; and she said that they might have gone to the bank to obtain the monies. But Mr Goldsack's evidence is that that would not have achieved anything. In my judgment it is plain that there was no evidence before the judge that there was any real possibility of Mr and Mrs Emery repaying the arrears, still less was there any possibility of them repaying the indebtedness as a whole owed to UCB. It is hard, again, to see that in reality Mr and Mrs Emery altered their position to their detriment by this second form of reliance.
35. Mr Stewart takes a further point based on the judge's acceptance that Mr Smith could have honoured his representation by simply contacting Mr and Mrs Emery before UCB made its demand for repayment of the indebtedness and to inform them that UCB had decided to call in the loan. Although at one point Mr and Mrs Emery appeared to wish to challenge the judge's view on this, it is supported by the plain language of the letter of 8th March 1994. Mr Smith could, therefore, have honoured his promise, which the judge found to have been made, by a telephone call at any time before the demand was made. If that call had been made shortly before the demand, such a call would have left Mr and Mrs Emery with no time to take any practical steps to meet the demand even if such steps had been available to them, which they were not. That reduces the representation to a mere formality shorn of practical significance.
36. I do not doubt that Mr and Mrs Emery genuinely feel aggrieved at UCB's conduct in not honouring what they regard as a clear promise to them not to take action without Mr Smith reverting to them once the accountant's report was received. But having regard to all the circumstances, I am left in no doubt that this is not a case for the operation of the doctrine of promissory estoppel. It is not inequitable for UCB to go back on Mr Smith's representation. UCB cannot be held to be estopped from exercising its contractual rights in demanding repayment. Putting it the other way round, I regard it as plainly unfair that a failure to warn Mr and Mrs Emery of what UCB was about to do, when such warning would not have made any actual difference to their position, should leave UCB exposed to a claim for substantial damages.
37. In the light of this conclusion, it is unnecessary to deal with a further criticism made by Mr Stewart of the judge's decision under issue 8(b). The judge did not deal with the argument, which Mr Mendoza had advanced to the judge and which was based on the remarks of Walton J in Bank of Baroda v Panassar [1987] Ch 335, at pages 353-4, that an invalid appointment of a receiver intended to be the agent of the mortgagor does not make the mortgagee/appointor liable for the acts of the receiver as the mortgagee's agent. The judge does not explain how he reached the conclusion that UCB was liable to Mr and Mrs Emery for all the consequences of what he held to have been an invalid appointment. As it is not necessary to deal with this point, I will say no more than that the judge's conclusion on that point seems to me open to question.
38. I would therefore allow UCB's appeal, set aside the judge's decision on issues 5, 6, 7, 8(b), 9, 10 and 13 and in lieu substitute the following answers:

Issue 5Yes

Issue 6Yes

Issue 7 Yes

Issue 8(a)No

Issue 9Yes

Issue 10Yes

Issue 13No.

39. That brings me finally to Mr and Mrs Emery's appeal against the monetary judgment against them. But the premise of that appeal is that the judge was right in his finding of promissory estoppel and the invalidity of the appointment of the receivers. Because of my earlier conclusion, that premise is falsified, as they themselves concede. On that basis their appeal must be dismissed.
40. LORD JUSTICE BUXTON: I also would allow UCB's appeal on the terms described by my Lord: from which, as he has said, the conclusion that he has indicated follows in respect of Mr and Mrs Emery's appeal. I would venture to add only one matter by way of footnote.
41. Question 8(b) asked the judge this:

"Is the defendant liable for any acts or defaults of the receivers if the defendant was not entitled to appoint the receivers?"

42. For the reasons indicated by my Lord, that question does not arise in this appeal. However, learned judge did think that it arose, because of the finding he made as to the entitlement to appoint the receivers. He dealt with it in these terms:

"... given the conclusion to which I have come, that the defendant was not entitled to appoint the receivers, whilst they may not themselves directly be liable for particular actions taken by the receivers they are, in my view, liable for the wrongful appointment of the receivers with all the consequences that may follow from that."

43. In the particulars of claim that were settled on behalf of Mr and Mrs Emery by leading counsel two bases were adduced as to why such liability might arise. The first was in paragraph 27 of the claim, where it was argued that the Bank might be either a joint tortfeasor with, or the principal of, the receiver when he committed the various acts of trespass and reversion which are alleged in paragraph 25 of the points of claim. The second basis was in paragraph 28, which alleged that the Bank was under an implied contractual or tortious duty to take care in the appointment of receivers under the legal charge. That duty, it was said, had been broken because in circumstances when they knew or ought to have known that they had no power to appoint the receivers, they in fact did so.
44. Granted that this was a live issue before the judge and an issue upon which he was minded to grant permission to appeal, as indeed he did, in my view he should have dealt in a good deal more detail than he did with the basis for the conclusion that he reached. As my Lord has pointed out, he did not address the argument based on the authority that was put him by Mr Mendoza, nor does he explain at all what the conceptual or legal basis is for his conclusion.
45. Insofar as I can deduce it from the very brief statement that the judge gives, it would seem that in saying that the bank was liable for all the consequences of the wrongful appointment of receivers he was attracted to the argument adduced in paragraph 28 of the points of claim. I have to say two things about that. First of all, that is a striking conclusion, and one that in my view by no means necessarily follows from the actual act of negligence that was alleged, which was simply negligence in appointing the receivers. I am very far from thinking that the judge reached the correct conclusion on that point. Secondly, however, I go into this matter for reasons that I have already indicated, that where there is a difficult point of law which the trial judge realises is to be or may be ventilated before this court, and more particularly where one of the parties is unrepresented, then it really is incumbent upon him to assist this court and the parties by setting out the reasons for his conclusions. That the judge did not do. Had this been a live issue on this appeal, his failure to expound the argument in any detail whatsoever would have caused some considerable difficulty in dealing with an appeal from his judgment. However, in the event, that matter did not arise.
46. LORD JUSTICE JONATHAN PARKER: I also agree that this appeal must be allowed.
47. In my judgment the case based on promissory estoppel arising out of the letter of 8th March 1994 must fail for the reasons which my Lord, Peter Gibson LJ, has given. Moreover, although, in the event, the point does not arise for decision on this appeal, like my Lords, I find myself unable to discern from the judge's judgment the basis for his further conclusion in answer to preliminary issue 8(b), namely that the bank is liable for all the consequences of the "wrongful appointment" of the receivers. The expression "wrongful appointment" suggests that the judge was of the view that an effective appointment of receivers had been made, not that the attempt to appoint receivers was invalid. But if the appointment was effective under the terms of the legal charge, then prima facie the bank would not be liable for the acts or defaults of the receivers (see clause 8(a) of the legal charge); and if it was ineffective, then it is hard to see what consequences may have flowed from it. It may be that the judge had in mind some contractual basis for a claim against the bank on the footing that there was a binding agreement by the bank not to appointment receivers until Mr Smith had reverted to Mr and Mrs Emery. Possibly he may have had some tortious cause of action in mind, for example a claim in negligence. But this is, as it seems to me, speculation since the judge did not give any reasons for his conclusion.
48. It suffices for me to say that in the circumstances it must, as my Lord has said, be an open question whether the judge's conclusion in answer to preliminary issue 8(b) was correct.
Order: Appeal allowed with costs, subject to detailed assessment. Respondents claim dismissed. Permission to appeal to the House of Lords refused. (Order does not form part of approved judgment)