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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 >> Lloyds Bank Plc & Ors v Cassidy [2002] EWCA Civ 1606 (08 November 2002) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1606.html Cite as: [2002] EWCA Civ 1606

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HHJ BEHRENS
SITTING AS A JUDGE OF THE HIGH COURT
IN THE LEEDS DISTRICT REGISTRY,
MERCANTILE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		8 November 2002

Lord Justice Mance:

1. This is an application for permission to appeal by Mr Michael Cassidy, for which the necessary extension of time was given by Potter LJ on 26^th July 2002. The application relates to an order of HHJ Behrens dated 4^th December 2001 giving effect to a judgment dated 26^th November 2001, by which the judge determined that certain paragraphs (for present purposes specifically paragraphs 14(ii), 18 and 19) in the appellant's amended defence and counterclaim should be struck out. The only reason why HHJ Behrens did not go on to strike out the whole of the appellant's pleading was an outstanding issue regarding the effect of an individual voluntary arrangement (which the appellant was maintaining barred the bank's claim). That issue was determined against the appellant in February 2002, by a further judgment against which no appeal has been lodged. As a result (and since, as will shortly appear, the respondent claimants have no interest in pursuing any claim against the appellant) the whole proceedings have presently been ordered to be stayed.
2. Potter LJ adjourned the present application on 26^th June 2002, with a direction that the appeal be heard immediately thereafter, if permission was given. We have heard full argument, enabling us to determine the application for permission and the appeal if such permission is given.
3. The appellant, Mr Michael Cassidy, was originally second defendant in the proceedings. The named first defendant was his father, Mr Bernard Cassidy, against whom, as I understand it, the proceedings are no longer effective. Although the appellant is the defendant, it is common ground that he has also been the only party interested in the pursuit of the proceedings since around 1993. The claimants (respondents before us) are respectively Lloyds Bank plc and two receivers appointed by the bank in 1991 in respect of the defendants' farming business. They are willing, indeed keen, to write off any claim they may have against the appellant. But the appellant maintains that he has counterclaims exceeding against their claims, and, accordingly, he wishes to pursue this litigation in order to recover the net balance.
4. The proceedings arise from alleged indebtedness of the appellant and his father arising from borrowing in connection with their farming business at Bursea Lodge Farm, Bursea Lane Farm, Sober Hill and Dial House in North Humberside in the period up to 7^th August 1991. Bursea Lodge Farm consisted of about 200 acres (including the farmhouse and appurtenant land totalling 10 acres), which the appellant maintains enjoyed the benefit of an established use certificate for road haulage use, plus Johnson's Field, which was an area of 27 acres with planning permission for the construction of a bungalow, subject to an agricultural restriction. Bursea Lane Farm consisted of about 40 acres, including a farmhouse. Sober Hill consisted of about 77 acres, in relation to which the appellant suggests that there was a realistic prospect of obtaining planning permission for residential development. Dial House consisted of some 80 acres, a small part of which (either 5.76 or 2.7 acres) enjoyed planning permission for industrial use.
5. Personal borrowings had been made from two sources: (1) the Agricultural Mortgage Corporation ("AMC") and (2) the bank. AMC had a first fixed charge over the land at Sober Hill and Dial House and Johnson's Field. The bank had a second charge dated 7^th January 1988 over the same pieces of land and a first charge over the rest of Bursea Lodge Farm and over Bursea Lane Farm. The bank also claimed the benefit of two agricultural charges dated 25^th September 1987. Bursea Lane Farm was sold by the appellant in 1991, and can be ignored for present purposes.
6. A company associated with the Cassidys' farming business, B & M Cassidy & Co. Limited, had also borrowed from the bank, with personal guarantees being given by the appellant and his father. The company was placed in voluntary liquidation in May 1991, and the bank made demands on the guarantees for sums of £86,725.18 (plus interest) (account No. 5006901) and £31,121.92 (plus interest) (account No. 5006902).
7. On 2^nd August 1991 the bank wrote to the appellant and Mr Bernard Cassidy demanding repayment of the personal advance of £280,342.45 (plus interest of £7393.15) (under current account No. 53758-01) and to Mr Bernard Cassidy demanding repayment of a further personal loan advance of £150,000 (plus interest of £3172.56) (under loan account No. 53758-02), giving notice of its intention to exercise the powers and remedies conferred on it as mortgagee of Bursea Lodge Farm. On 7^th August 1991 the bank appointed the second and third claimants as receivers under the mortgage and agricultural charges. Although the witness statement of Wayne Davies filed by the bank in support of the application before HHJ Behrens suggests that the present appellant was liable on loan account 53758-02, this is not consistent with the bank's pleaded case, and the bank's counsel conceded that he could not invite HHJ Behrens to approach the matter on the basis that any such liability existed.
8. The present proceedings were begun by specially endorsed writ dated 1^st May 1992, claiming the outstanding personal loans, and joining the receivers in order that they might claim delivery up of certain farming equipment, allegedly not delivered up to them by the defendants. That aspect of the proceedings was resolved at an early stage. However, the proceedings led to an extensive defence and counterclaim directed by the appellant at both the bank and the receivers. These, he alleges, give him a set off and counterclaim overtopping any liability on his part. Alternatively, if and so far as he cannot set up his complaints against the receivers against the bank, he claims damages against the receivers to cover any unextinguished liability that he may have to the bank. Among the many complaints, I mention at this point two specific complaints, first, that "reasonable proposals" made to the receivers by or through him in September 1991 for the purchase of certain properties for a total of £400,000 were not accepted (paragraphs 14(ii) and 18), and, second, that when properties were eventually sold they were sold at an undervalue (paragraphs 19 and 20).
9. The proceedings have been, clearly, far too long drawn-out. Each side as we understand it points the finger of blame at the other. We were told by Mr Haines, who is newly instructed on behalf of the appellant, that the bank's discovery took place in many successive stages. This appears to be born out by the terms of a letter from Messrs. Drivers, solicitors to the appellant, dated 21^st January 1999 (produced to the bank's solicitors' witness statement before us), which makes clear that in 1997 and 1998 the bank had to produce third and fourth supplemental lists, the last containing some 300 documents after three previous lists had been verified as complete by affidavit. What may, however, be of greater importance is that, although at one point there was an order in 1998 for exchange of experts' reports (which neither side performed), that order was discharged in 1999. On 26^th May 2000 HHJ McGonigal determined against the appellant preliminary issues whether the two agricultural charges were valid permanent charges on which the bank could rely and whether the bank's appointment of the receivers was in breach of an agreement not to appoint receivers provided the appellant sold 5.76 acres of the Dial House land to a Mr Black within a reasonable time. During the course of a case management discussion thereafter, the bank's counsel, Mr Reed, said that "as a result of considering the pleadings as they presently stand" he now took "a preliminary view that the case was suitable for a strike-out application as between the [bank] and the [present appellant]". He was not more specific as to the deficiencies alleged. However he invited the judge to give the appellant a period of time in which to re-amend, and the judge gave 28 days. In these circumstances, HHJ McGonigal decided that it would be better not to give further directions for exchange of experts' reports, since the expert evidence might "turn out to have been a terrible waste of time" if an order striking out even parts of the pleading was made. The appellant made no application to reamend.
10. In the event, it was not until 22^nd June 2001 that the bank applied to strike out the claim or for summary judgment pursuant to CPR 24. The bank's witness statement in support from a Mr Wayne Davies challenged the first complaint in law and fact. As to fact, it raised a point on causation, and asserted that, even if the proposal was made and had been accepted, it would not have discharged the whole receivership debt. As to the second, however, it said that on the appellant's "best case" as to alleged undervalues, the counterclaim could not exceed the claim, that the bank was willing to write off any claim it had against the appellant and that therefore "there is no valid set-off and the entire action can be stayed", or struck out or determined summarily. However, before HHJ Behrens, counsel for the bank, Mr Reed, conceded that the set off and counterclaim would overtop the bank's claim, subject (although the transcript is obscure) to the receivers' argument that parts of the set off and counterclaim could be put on one side as doomed to fail (see transcript 21/1//01 pages 59-60 and 113).
11. Only on 28^th September 2001 did the receivers follow the bank's application with their own application seeking the like relief "or that the court make such order as it sees fit". Their application was supported by a witness statement from their solicitor, Miss Masterson, who took similar points to the bank regarding the first complaint. As to the second complaint, she too relied on the bank's submission that, since the counterclaim did not exceed the claim, the appellant had no "financial interest" in the litigation, which should be stayed. However, she went on in paragraphs 7.7 to 8.2 to say that, even if the bank did not succeed on its case that the bank's claim must of necessity extinguish the appellant's claim, "some consideration must be given to the merits of the Defendant's case"; and that although the bank had "quite naturally, for the purposes of the summary determination, assumed that the Defendant may be able to succeed on every single allegation which it has made, "[w]hen analysing the merit of the Defendant's Counterclaim such an assumption is clearly untenable".
12. Miss Masterson then dealt in detail with two specific aspects of the complaint regarding sales at an undervalue, relating to the sales of the land at Sober Hill and at Dial House. She said this:

"9. LAND AT SOBER HILL

9.1 The Defendant pleads at paragraph 20C of the amended Defence and Counterclaim that the probable sale price of the land at Sober Hill was £218,000. The alleged probable sale price cited by the Defendant is taken from the Dollery Waller valuation previously referred to page 67 to 70 of LJM1. This valuation is based upon alleged hope value for residential development.

9.2 During the course of the Receivership, discussions took place with the local Planning Officers to ascertain whether there was any chance of planning permission being granted for residential use. The Receivers were advised that it was highly unlikely that planning permission would ever be granted for residential development because the land in question was outside the village envelope page 78 LJM1. The Council's own development guidelines militated against any likelihood of planning permission being granted for residential development pages 71 to 77 LJM1.

9.3 Whilst undesirable for any Litigation to become as protracted as this Litigation has, there is one advantage which can be derived from such delay, that being the benefit of hindsight. Having now, some ten years after the event, contacted the Local Planning Authority, I have been advised that there have been no Planning Applications within the last ten years in relation to the land at Sober Hill. The land still falls outside the development limits of the Local Plan and therefore any residential development would not be favourably looked upon. Page 92 LJM1. There is clearly, therefore, little or no hope value for residential development.

10. LAND AT DIAL HOUSE FARM

10.1 Planning permission had been granted for industrial development in relation to 2.7 acres of the land at Dial House Farm. Pages 93 to 94 of LJM1. During the Receivership the land was marketed with the benefit of such planning permission but there was no particular interest in the marketplace for industrial land in that area. There were, in any event, serious problems with access to the site and no definitive agreement could be reached with the Council to secure sufficient access to enable the land to be properly developed for industrial use, despite lengthy correspondence with the Council pages 82 to 116 LJM1. Without reasonable access the land would have far less appeal as development land to any prospective purchaser.

10.2 It must also be borne in mind that the land agent's fees, are agreed on a percentage basis of realisations. If there was any scope for enhancing realisations by selling the land as an industrial site rather than agricultural land, it would have been in the agents commercial interest to secure such a sale. However, due to the isolation of the site there were no prospective purchasers willing to purchase the land for industrial use.

10.3 Again, due to the lapse of time during this Litigation, it is possible to review the Defendant's Claim with the benefit of hindsight. Having caused a recent inspection of the site at Dial House Farm, to be conducted it is noteworthy that the historic planning permission has not been implemented and the land continues to be used for agricultural purposes pages 117 to 118 of LJM1. The further fact that the land at Dial House Farm still has not been developed simply endorses the land agent's view that the location is simply undesirable for use as an industrial site and consequently the alleged breach as pleaded by the Defendant is unsustainable.

10.4 When allowing this claim to continue, the Court must have some regard to the merits of the claim and the Court must be satisfied that the Defendant has at least some prospect of having a financial interest in the Litigation. If the Court is satisfied that there is no real prospect of the Defendant succeeding to a degree where he could achieve a financial interest in the Litigation then it is right and proper that the action should stayed in its entirety."

13. The appellant was given extensions of time to file his evidence in answer to the bank's (though latterly no doubt also the receivers') application, on 15^th August from 14^th September 2001 to 28^th September 2001, on 7^th September 2001 from 28^th September 2001 to 21^st October 2001 and, finally, by consent, from then until 2^nd November 2001. Still, it is clear that the full ambit of the potential attack on his set off and counterclaim was not known to him until after the receivers' application and Miss Masterson's witness statement of 28^th September 2001. Until then, he was entitled to assume that any hearing would proceed on the basis of his "best case". After Miss Masterson's witness statement, he should have appreciated that the factual basis of his suggested defence and counterclaim was going to be, to some extent at least, examined, with a view to determining whether it was suspect to a point where it could not as a matter of fact over-top any claim.
14. In the event the appellant only filed evidence in response on or about 15^th November 2001. The evidence included letters from three sources put forward as experts in respectively accounting (Mr Sargant described as general manager of Audit (U.K.) Limited), farming (Mr Dodgson, an agricultural consultant) and valuation (Mr Mudd, a chartered surveyor, estate and land agent). Mr Sargant raised points on the calculations of interest and charges on accounts 5375802 and 5006901, which, if justified, would reduce the bank's entitlement as at 31^st March 2001 (leaving out of account, for the reasons I have given, account No. 53758-01) from £577,589.18 to £421,557.16. The judge expressed some scepticism about this reduction, particularly its size, but did not on the approach he took have to decide whether to accept it as fully arguable. I do not think that we can discount it as unarguable on this application.
15. Mr Dodgson supported a figure for losses of crops and repairs to ditches due to defaults by the receivers totalling £115,760. The judge commented adversely on the sparseness of his evidence, but was prepared to proceed on the basis of the figure.
16. Mr Mudd referred in places, in terms of provisional agreement, to a prior report of Messrs. Dollery Waller, surveyors and valuers, dated 19^th October 1992, obtained for the benefit of a finance company, Abbey Finance. Mr Mudd said that he himself had not had time to complete his own report. The bank and receivers resisted the admission of this evidence, but for costs reasons (in view of the appellant's public funding) did not seek an adjournment, and the judge admitted the appellant's evidence with the comment that, when evaluating its weight, he would take into account that the bank and receivers had had no chance to respond to it.
17. The judge struck out the first complaint, as ill-founded in law and (if necessary) also in fact. He struck out much of the second complaint, allowing only limited aspects to go forward by prospective amendment which he indicated that he would allow. He considered that the appellant's maximum set-off and counterclaim could only be £61,750 and £25,000, relating respectively to sales of Sober Hill and Dial House land, plus the £115,760 to which Mr Dodgson's evidence attested. Adding interest at 8% p.a. he assessed the appellant's claim at a maximum of £337,000, which was, as he said, "significantly less" than either amount in which he assessed the bank's claim. It is pointed out, with I think justification, that the judge's approach to interest may well be incorrect. Interest on the bank's claim has been accrued at rates considerably in excess of 8%, starting at over 15% p.a. in August 1991 and only on very brief occasions falling to 8% under any of the accounts. If the appellant has a set-off, that should probably, and certainly arguably, eliminate any interest differential as regards any amounts properly set off.
18. The appellant following the judge's decision supported his application for permission to appeal out of time by producing a very long skeleton of his own making dated 27^th July 2002. The respondents produced long skeletons in reply on 9^th and 8^th October. Presumably, these were exchanged for, or at any rate prepared without sight of, a supplementary skeleton prepared by fresh counsel for the appellant, Mr Haines, dated 7^th October 2002. This has had the merit of considerably clarifying the issues and the basis on which they are now pursued.
19. Echoing in this respect Mrs Agnello, counsel who appeared for the appellant below, Mr Haines submitted that all aspects of the suggested defence and counterclaim are very fact specific. Before looking at them in turn, I look more closely at the factual background which gives rise to them. The material before us suggests that after their appointment by the bank the receivers set about, with the bank's concurrence, seeking to realise assets to cover the bank indebtedness. Prior to their appointment, the receivers had been engaged to advise the bank, and had already taken advice in this connection from Messrs. Weatherall Green & Smith, who they continued to use after they became receivers. The evidence and the material exhibited before the judge (e.g. exhibit MWC1 pages 25-29) show the bank and the receivers communicating about the price for sale of various of the pieces of land in August 1991. Prior to the appointment of receivers, the appellant had already arranged sales of two pieces of the Dial House land (9 acres and 40.63 acres), and these were allowed by the bank to proceed on 24^th September and 9^th December 1991.
20. The appellant's evidence was that, after their appointment, the receivers also informed him that they were appointed to recover the sums, totalling £441,000, demanded by the bank from the appellant and his father personally, and that discussions took place with them in this context regarding a proposed purchase by Mr Black for £150,000 of the 5.76 acres of Dial House land with supposed permission for industrial use, with the appellant and his family paying £250,000 to (in effect) free Bursea Lodge Farm and its land from the bank's charge. This together with the proceeds of the then current harvest, expected to produce some £80,000, would more than satisfy the bank's wish for payment of £441,000. According to the appellant's evidence, AMC had indicated that it would continue to support the Cassidys, and so would allow the bank to receive the £441,000 it wished out of these realisations, and would be satisfied with a continuing charge on the Bursea Lodge Farm land. AMC had not appointed any receivers under its first charge. The appellant's case is that the proposal to realise £480,000 in the above manner was put to the receivers at a meeting in the Holiday Inn, Leeds on 11^th September 1991 attended by the appellant, his solicitor Mr Brown (an insolvency specialist) and Mr Black. Evidence supporting this case was put before HHJ McGonigal in May 2000, in the form of witness statements from Mr Brown and Mr Black. Both of them say that they could not understand why the receivers, a week later, rejected the proposal outright without giving any reason. The existence of this latter evidence was mentioned by Mrs Agnello before HHJ Behrens, but it was not formally put before him.
21. Realisations totalling £536,353 were in fact made by sales:

(1) on 6^th November 1992 in respect of 68 acres at Sober Hill for £93,250,

(2) also on 6^th November 1992 in respect of the remaining 29 or so acres of Dial House land for £35,303,

(3) on 4^th December 1992 in respect of Johnson's Field (lot 3 of Bursea Lodge Farm) for £40,000,

(4) on 14^th May 1993 in respect of 94 acres of Bursea Lodge Farm land (lot 1) for £98,500,

(5) on 8^th October 1993 in respect of a further 96 acres of Bursea Lodge Farm land (lot 2) for £108,300 and

(6) on 30^th June 1995 in respect of Bursea Lodge Farmhouse for £161,000. The delay in selling Bursea Lodge Farmhouse resulted from an adverse claim made by the appellant's mother.

22. These sales were effected by the bank selling as mortgagee in possession, except in the case of Johnson's Field, which was sold by AMC, which had by now become mortgagee in possession. The appellant's case is that the receivers were however the advisers whose day-by-day advice and conduct of the matter led to these sales, and that they owed him duties of care, in respect of each such sale. In support of this case, the appellant referred to Mr Mudd's letter, in which he in turn referred to Dollery Waller's report dated 19^th October 1992, which valued Bursea Lodge Farm (excluding Johnson's Field) at £520,000. Mr Mudd said that, while his investigations were continuing, in his opinion this valuation was realistic, subject to the omission of the value of the established Heavy Goods Vehicle Operating Centre – in other words the true value might be even more. He compared the £520,000 with actual realisations totalling £367,800 (i.e. items (4), (5) and (6) in the preceding paragraph), giving a "loss" of £152,200. As to Sober Hill, Dollery Waller's report had put a value of £218,000 on this land, but Mr Mudd, after saying again that his own investigations were incomplete, went on that "I can state that as arable land, without any question of hope value, it would have been valued at in the region of £155,000", which, when compared with the realisation of £93,250 shown in item (1) above, gives a difference of £61,750, the figure that the judge accepted. As to Dial House, Mr Mudd confined himself to saying that on his measurements the planning permission extended to a full 5.76 acres, as the appellant was asserting, and that "from documents inspected it appears that negotiations with Humberside Council [for improved access] were progressing satisfactorily", and there "appears to be nothing about the negotiations or the site which would prevent the sale of this land for industrial use". Dollery Waller had put a value of £510,000 on the 27 acres of Dial House land with 5.76 acres having outline planning permission for industrial use.
23. Taking Bursea Lodge Farm, I should say at the outset that I do not think that the appellant can complain, as such, about the judge considering the viability of any claim in respect of this property. It is true that it was not mentioned in Miss Masterson's statement, but the reason for that was no doubt that, although breach of duty was pleaded in respect of this property, the pleading did not go on to quantify any loss, so that it must at that stage have seemed unnecessary for Miss Masterson to address it. Once the appellant sought through Mr Mudd to put a figure on his claim in relation to Bursea Lodge Farm, Miss Anderson, counsel for the receivers, was entitled to ask the judge to consider the viability of the claim.
24. In relation to Bursea Lodge Farm the judge said this:

"78. The only allegation with regard to Bursea Lodge is that it was originally advertised without it being noted that it had an established use certificate for Road Haulage. When the Receivers were reminded of this it was readvertised and it attracted a lower offer. No loss is pleaded under this head and it is not hard to see why. It is not clear what loss could have been suffered as a result of those limited facts."

The judge was wrong about the pleading. The defence included in paragraph 19(g) a further general allegation "failed to market or advertise, adequately or at all, the land and buildings at Bursea Lodge land [sic]", although all that appeared under the head of loss and damage was this: "Probable sale price of the land at Bursea Lodge which enjoyed an Established Use Certificate as a road haulage depot, if properly marketed less that land's actual sale price", without any figures attached. Mr Mudd's report (referring to and endorsing, albeit provisionally, the value of £520,000 for Bursea Lodge Farm land excluding Johnson's Field, and so a potential shortfall in realisations of £152,000) ought to have been taken as raising a sufficient counterclaim for the purposes of resistance to an application for summary judgment on the pleading or otherwise.

25. In respect of Sober Hill, the judge, as I have said, took the figure supported by Mr Mudd, but this was a figure which he gave for it "as arable land, without any question of hope value". Dollery Waller's figure of £218,000 was on the basis that they had been "advised" (by whom being unstated) that "there is a possibility of Planning Permission being obtained for this land", which led them to adopt "a figure to reflect an element of hope value". The judge said, incorrectly, in the course of his judgment (paragraph 65) that the appellant "does not now seek to rely on the Dollery Waller report in support of his claim". That was incorrect because Mrs Agnello specifically invoked the Dollery Waller report in support of the Sober Hill claim (see Transcript 21/11/01 page 65C). Miss Masterson made a number of cogent points on the suggested hope value, which the judge took up in his judgment at paragraphs 74-77. The land was outside the village envelope and the council's development guidelines militated against such a development. The receivers were advised by Weatheralls on 23^rd March 1992, apparently repeating previous advice, that the prospects of obtaining a residential planning permission in the foreseeable future were minimal. No such permission had been obtained in the period up to 2001, and the council had advised the receivers' solicitors in writing on 19^th September 2001 that development outside the development limits of the local plan was "not favourably looked upon". Despite all that, the essential question was whether the market value of the land would have included any speculative uplift for "hope value". Dollery Waller's valuation clearly only involves a limited uplift. In circumstances where there was anyway a potential triable issue as to whether this land was sold at an undervalue, I consider that the judge should have been less willing to shut the appellant out from a full consideration of all aspects of its value.
26. In respect of Johnson's Field, the appellant's pleaded case was that its probable sale price, if properly marketed was £81,000, compared with an actual price obtained of only £40,000. This again came, presumably, from the Dollery Waller report, which in fact gave a value of £81,500. Miss Masterson in her witness statement did not raise any specific points on this claim. Nevertheless she, or more accurately the judge, raised the point that Mr Mudd had not dealt with it (see Transcript for 20/11/01 page 84). In his judgment, the judge made or repeated the point that appellant was not relying on the author of the Dollery Waller report for evidence, and that Mr Mudd did not deal with this issue. In my judgment, that was an unfair point to make. As Mrs Agnello said in her submissions, the appellant had come to court to meet the application then made against him. That included no criticism whatever of the viability of the Johnson's Field claim, although that claim was pleaded and quantified. There was no need for Mr Mudd in those circumstances to deal with Johnson's Field. The judge also made the point that the mortgagees in possession who sold Johnson's Field were AMC and not the bank. That is correct as far as it goes, but it is apparent from the quotation from the receivers' report dated 14^th April 1993, which the judge cited that it was they who took the decision to sell, and that it was only "due to technical difficulties over the title to this land" that it was necessary for AMC to sell as mortgagees in possession. While I would accept that there would appear to be no claim against the bank in these circumstances, there seems to me to be sufficient to support at least a triable issue against the receivers. The matter certainly requires argument.
27. Turning to Dial House, there were issues as to the extent of any planning permission for industrial use and of any (if any) resulting uplift in the value of the land on account of its development potential. In her witness statement in support of the receivers' application to strike out, Miss Masterson said, apparently on instructions from the receivers, that "there was no particular interest in the marketplace for industrial land in this area" and that "there were, in any event, serious problems with access to the site and no definitive agreement could be reached with the Council to secure sufficient access to enable the land to be properly developed for industrial use, despite lengthy correspondence with the Council". She referred to pages 82 to 116 in an exhibit. She prayed in aid the somewhat self-serving argument that, since the land agents were being paid on a percentage of realisations, it would have been in their commercial interests to secure a sale for industrial use, and pointed out that no industrial use had been implemented in the succeeding years since 1991/2. The judge mentioned the plea that Mr Black's offer of £150,000 should have been accepted, and the further plea, based on Dollery Waller report, that the value of the land was £520,000. He appears to have regarded them as inconsistent pleas relating to the same area of land, although in fact (as the evidence showed) Mr Black's offer related to only 5.76 acres (in circumstances where Mr Black was also interested in paying £50,000 for an option to buy a further 10 acres), while Dollery Waller's report related to the whole remaining 27 acres. That said, I would still share the judge's view that it is difficult to relate the level of Mr Black's interest with Dollery Waller's figure. However, it is not clear what the purchase (as distinct from the option) price of the extra 10 acres was to be. (It was in this immediate connection that the judge also said at paragraph 65, incorrectly as I have already mentioned, that the Dollery Waller report was not now relied upon by the appellant.)
28. The judge went on to recite advice given to the receivers by Messrs. Weatheralls in March 1992 to the effect that (i) the area of land with industrial planning permission was only 2.7 acres, that (ii) the writer at Weatheralls remained "wholly unimpressed with the industrial potential of this land", and that (iii) bearing in mind the cost of an access road and the Council's wish to share any development value released by a road, the "the Receivers will be lucky to achieve anything which is substantially higher than agricultural value for the site". The judge said that:

"The present state of the evidence leaves me wholly unconvinced that Michael Cassidy has any realistic prospects of establishing any substantial claim here. Even if the planning permission had related to the whole 5.6 acres [sic] there remained the problems over access, services already referred to. Mr Black's interest had waned and no other interest had materialised or has since materialised".

29. However, the judge did go on to accept a possible limited claim for the difference between the sale price achieved and £60,000, i.e. £25,000. £60,000 is the price that neighbouring owners were apparently prepared to pay to prevent the land possibly falling into the hands of industrial developers. I comment that that itself might be said to show at least a possibility in the mind of neighbours that the land might have industrial value.
30. Should the judge have excluded any possibility of any further claim, in the context of the applications made before him? There was a dispute, which he could not resolve, as to whether the industrial use permission extended to 2.7 or 5.6 acres. It seems to me that the answer to this point could potentially have considerable importance for the value of the land and the potential interest in it. The appellant's witness statement makes a clear case for saying that there was a genuine interest on the part of Mr Black in the land and an offer by him of £150,000 in the summer of 1991, together with a willingness to pay a further £50,000 as (apparently) an option price for the purchase of a further 10 acres. The land was marketed, apparently from July 1992 on at the earliest, on the basis that it enjoyed industrial use permission for only 2.7 acres. If this proves to have been based on a misconception by the receivers or those advising them, there could well be some claim. There were access problems, because of a railway line, but the correspondence, as I read it, shows that the council was primarily interested in enjoying half the development value in order to resolve them. Because so poor a view was taken of the development potential, it was not thought worth trying further to resolve the access problems before selling. The receivers simply sold holding out the prospect that the council would assist by solving them. It is true that subsequently no industrial use was ever made of the land. Nevertheless, it seems to me that there may be a bigger arguable claim than the judge allowed, particularly if the planning permission related in reality to the full 5.6 acres, and that it would be inappropriate to limit it, since it will have to be investigated to some extent anyway. So I think that the judge was also wrong to exclude this claim on the facts. While Dollery Waller's figure does seem improbably high in the light of the other information, I do not think that there should be any formal restriction of the quantum of the suggested set off and counterclaim. There will have to be a full examination of the facts and expert evidence, in order to determine what if any set off and counterclaim is justifiable.
31. In addition to the claim to set off and counterclaim in respect of sales, there was a pleaded case against the receivers of failure or refusal to remove two large agricultural storage buildings from the land at Bursea Lane Farm, pursuant to a liberty alleged to have been agreed on the sale of that farm in late 1992 with a view to their being moved to Bursea Lodge Farm. The plea is that the receivers thereby lost the prospects both of contract fees and the sale of the buildings. No loss was specifically pleaded, although there was a general claim for damages. Mr Mudd in his letter attached significant value to these barns, and said that they would have further increased the value of Bursea Lodge Farm by about £80,000. He added that he had not to date been able to address "the issue of the costs of dismantling and re-erecting this building".
32. Miss Masterson in her witness statement, prepared before seeing Mr Mudd's letter, did not deal with the allegations regarding the barns, for the good reason no doubt that no specific loss has been pleaded. The judge, after mentioning the absence of any pleaded loss, went on to say that (i) the appellant did not deal with this aspect of his claim at all, and had not in particular provided (ii) any evidence that he had any right to remove the buildings, or (iii) any evidence as to the cost of so doing or (iv) any evidence of requests to the receivers to do so. Again, it seems to me that that was unfair at least as regards (i), (ii) and (iv). They were adequately pleaded, and there was no call for the appellant to prove every aspect of his case on a striking out application, which had not addressed that specific aspect, even if it had not done so because no loss was at that stage pleaded. Point (iii) is a fair point (no credit on this score being even pleaded) and one that Mr Mudd acknowledged, but I think that the judge should have been prepared to accept that buildings said to be worth £80,000 in situ would not be likely to cost anything like that to erect. The judge went on to say that the appellant's "experts … now suggest that his losses under this head amount to over £240,000 and possibly as much as £700,000" and "I have to say I regard the claims after this length of time as being so fanciful as to be ignored". Those figures appear to refer to Mr Dodgson's more expansively general figures in his report. I would not discount any possible claim for loss of storage income, even though for nothing like these figures. However, even ignoring Mr Dodgson, it also seems to me that Mr Mudd's valuation raised a case for trial.
33. In the result, I have no real doubt that the appellant raised a sufficient case for saying that he had set-offs and/or counterclaims sufficient to exceed the bank's claim. I can summarise the potential claims as follows:

Bursea Lodge Farm	£150,000
Sober Hill	124,750
Johnson's Field	41,000
Dial House	115,000+	This takes the difference between the level of Mr Black's interest in the 5.76 acres and the ultimate proceeds of £35,000 for all the remaining 27 acres. Dollery Waller's figure of £520,000 would increase the shortfall to £485,000.
Crops and ditches	115,760
Storage barns	80,000+
TOTAL:	626,510

34. This treats the set-offs and counterclaims as available against the bank. As regards Johnson's Field, that appears on any view incorrect. It may well also be incorrect as regards the crops and ditches and storage barns, but we did not hear real argument on this aspect, and nor did the judge. The bank may not be responsible for the receivers (since they may well fall to be regarded as the appellant's own agents under the terms of the relevant charges). But, so long as the overall total of the appellant's claims exceeds the bank's claims, there will still have to be a trial, even if the balance is only recoverable against the receivers not the bank. Further, at least until his reply, counsel for the bank (unlike counsel for the receivers) continued to accept that the matter should be approached on the basis of the appellant's "best case", on which basis counsel for the bank accepted that the appellant had a set-off and counterclaim exceeding the bank's claim.
35. On the figures stated above and bearing in mind also the effect on interest of recognising any set-off (even if only from, say, the commencement of these proceedings, or the date of service of the defence and counterclaim), I have no real doubt that there must be a trial, in order to establish finally and on the basis of proper evidence whether there is any basis for the appellant to recover more than the bank's claim either from the bank or from the receivers. I would therefore grant to the appellant the necessary extension of time and permission to appeal, and would allow the appeal in that regard.
36. It remains to consider the appellant's case that the receivers (or the bank which is allegedly responsible for any misconduct on their part) ought to have accepted the proposals allegedly made on 11^th September 2001, and that this raises a further issue which ought to be tried. The judge regarded this case as manifestly ill-founded in the light of the clear decisions and statements in Cuckmere Brick v. Mutual Finance Ltd. [1971] 1 Ch. 949; China and South Sea Bank v. Tan [1990] 1 AC 536 (PC) and Downsview Nominees v. First City Corp. [1993] AC 295, where it was held that mortgagees and receivers owe no general duty to take reasonable care in the exercise of their powers, and in particular no duty to sell or not to sell at any particular time, although as and when they decide to sell they must take reasonable steps to obtain a fair price. The appellant submits that the law is open to further development; and that the possibility that there may in particular circumstances be a duty to take care in deciding whether or not to sell or to accept proposals is given some encouragement by a reading of Medforth v. Blake [2000] Ch 86 and Palk v. Mortgage Services Funding plc [1993] Ch. 330. The former authority does not in my view assist on this submission; it was dealing with the exercise of a power to manage, and so fell directly within the principle that, if and so far as a mortgagee or receiver does decide to exercise any particular power, he or it must do so with reasonable skill and care. The latter authority is of interest for dicta of Sir Donald Nicholls V-C as he then was, although the decision was actually concerned with the scope of the court's power to order sale under s.91(2) of the Law of Property Act 1925. The Vice-Chancellor said this at pp. 337-8:

"A duty to be fair

The first observation I make on this argument is to emphasise that a mortgage does owe some duties to a mortgagor. As Lord Templeman noted in the China and South Sea Bank case, at p.545, a mortgagee can sit back and do nothing. He is not obliged to take steps to realise his security. But if he does take steps to exercise his rights over his security, common law and equity alike have set bounds to the extent to which he can look after himself and ignore the mortgagor's interests. In the exercise of his rights over his security the mortgagee must act fairly towards the mortgagor. His interest in the property has priority over the interest of the mortgagor, and he is entitled to proceed on that footing. He can protect his own interest, but he is not entitled to conduct himself in a way which unfairly prejudices the mortgagor. If he takes possession he might prefer to do nothing and bide his time, waiting indefinitely for an improvement in the market, with the property empty meanwhile. That he cannot do. He is accountable for his actual receipts from the property. He is also accountable to the mortgagor for what he would have received but for his default. So he must take reasonable care to maximise his return from the property. He must also take reasonable care of the property. Similarly if he sells the property: he cannot sell hastily at a knock-down price sufficient to pay off his debt. The mortgagor also has an interest in the property and is under a personal liability for the shortfall. The mortgagee must keep that in mind. He must exercise reasonable care to sell only at the proper market value. As Lord Moulton said in McHugh v Union Bank of Canada [1913] A.C.299,311:

"It is well settled law that it is the duty of a mortgagee when realising the mortgaged property by sale to behave in conducting such realisation as a reasonable man would behave in the realisation of his own property, so that the mortgagor may receive credit for the fair value of the property sold."

I have given two examples where the law imposes a duty on a mortgagee when he is exercising his powers: if he lets the property he must obtain a proper market rent, and if he sells he must obtain a proper market price. I confess I have difficulty in seeing why a mortgagee's duties in and about the exercise of his powers of letting and sale should be regarded as narrowly confined to these two duties. In addition to the mortgaged property, a mortgagee normally has a right of recourse against the borrower personally. He may also have the benefit of a guarantee from a third party. There is no problem when the borrower or guarantor can raise the necessary money, or the security available is adequate and readily realisable. Then the borrower should arrange to pay off his debt in full. The difficulty arises when that is not possible. Then the borrower is in the mortgagee's hands. Whether in that situation a mortgagee is at liberty to exercise his rights of leasing and sale in a way that in all likelihood will substantially increase the burden on the borrower or guarantor beyond what otherwise would be the case is not a question I need decide on this appeal, for a reason I shall mention later. That he can act in such a cavalier fashion is not a proposition I find attractive. That is a question which may call for careful examination on another occasion. For present purposes it is sufficient to note that, quite apart from section 91(2), there is a legal framework which imposes some constraints of fairness on a mortgagee who is exercising his remedies over his security."

37. The evidence before HHJ Behrens relating to the proposals made by Mr Black (to buy 5.76 acres of Dial House for £150,000) and by the appellant (to buy out the bank's charge over Bursea Lodge Farm for £250,000) consisted primarily of the appellant's statement dated 14^th November 2001, although I have pointed out that Mrs Agnello mentioned to the judge the existence of previous witness statements from Mr Brown and Mr Black filed in relation to the issue before HHJ McGonigal, which contained their supporting accounts. The appellant in his statement made these points: (i) the proposal, if accepted, would have ended the receivership and have led to the control of the farm and its assets returning to the appellant; (ii) AMC had agreed that they had more than enough security and remained willing (despite AMC's first charge) for the proceeds of sale of the 5.76 acres at Dial House to go to the bank (under the bank's second charge); (iii) the receivers had informed the appellant that they were appointed to recover the sums demanded on 2^nd August 1991, that is in round terms £288,000 from the appellant and his father and a further £153,000 from Mr Bernard Cassidy alone; and this was confirmed orally at the meeting on 11^th September 1991; in other words, the bank had chosen not to require the receivers to recover any sum that may have been due under the guarantee of the debts of B & M Cassidy & Co. Limited; (iv) in order to back his own offer of £250,000 for Bursea Lodge Farm and its land, the appellant had obtained an offer of finance from a Manchester mortgage company of up to 60% of its valuation, that he could not advance his negotiations with them until he knew what the receivers would accept, and he was and is confident that he could have raised further monies if necessary; (v) a week after its making, the proposal was simply rejected, without any explanation or attempt to negotiate, in circumstances which left the appellant, Mr Brown and Mr Black all unable to understand why it had not been accepted.
38. Even if the present claim is not allowed to proceed, the history of Mr Black's interest is likely to be of relevance to the issue of market value of the Dial House land. That itself is a background factor, though certainly not the most important factor, when considering whether the appellant should be allowed to maintain the present claim.
39. The pleaded case is in terms which are so broad and vague as to be unlikely to attract any court. The appellant asserts:

"a duty to accept all reasonable proposals for the repayment of the receivership debt and/or sale of the assets by or to the [appellant] and his associates".

Before the judge, Mrs Agnello recognised, realistically, that this was untenable. She supported the following re-formulation:

"a duty to act as a reasonable receiver, to consider and accept offers put to him to end the receivership and/or dispose of assets that as reasonable receiver ought to accept"

40. In the appellant's skeleton dated 27^th February 2002 and in the supplementary skeleton prepared by Mr Haines dated 7^th October 2002, emphasis is laid on the particular facts of this case as justifying the possible implication of a duty of care in relation to the proposal. Among the facts mentioned, additional to those already covered above, were that (vi) the receivers' specialist advisers were advising that a sale should take place as soon as possible (the view being taken that agricultural land was going to fall in value) and (vii) there was a substantial risk that failure to accept the proposal would increase the losses sustained by the bank and the appellant, part of such increase being attributable to the continuing costs of the receivership itself. During the course of the hearing before us, Mr Haines applied for permission to re-amend to the following effect:

"18.A. At all material times the Claimants knew

(i) That the offer would result in the mortgage debt being repaid

(ii) That there would be no loss to the 1^st Claimant if the offer was accepted

(iii) That the offer of Mr Black of £150,000 for a further option for 10 acres should be accepted

(iv) That there was likely to be a substantial shortfall between the amount of the debt and the proceeds of sale of the land in respect of which the receiver which the receiver had been appointed if the receivership continued

(v) That there was a real risk of financial harm to the Defendant in that (a) there was a declining market in agricultural property in the area of the land concerned and/or nationally (b) that the above shortfall would increase (c) that the receivership fees would increase to the detriment of the Defendant (d) the result was that the Defendant was likely to go bankrupt.

B. That in those circumstances there was a duty of care and/or a duty to act fairly in relation to the offer on the First Claimant to accept the same and a similar duty on the Second and Third Claimants to advise the Bank to accept the offer."

41. The judge took the straightforward view that there was "nothing in the judgment of Scott LJ [in Medforth v. Blake] to disagree with the proposition that a mortgagee can choose when to exercise his power of sale" and that the duty as pleaded and Mrs Agnello's alternative formulation were both "inconsistent with the well-established proposition that a mortgagee in possession and/or a receiver are not obliged to exercise the power of sale". On that basis he struck the claim out. For my part, it seems to me that there may be some scope for further examination of the borderline between the supposed area of freedom, which exists when a mortgagee or receiver decides not to sell, and the area of duty, which exists in relation to the exercise of the power to sell. Once a mortgagee or receiver has decided to sell, he or she cannot, presumably, avoid liability if he or she fails to accept or follow up an obviously favourable proposal. It cannot be an answer to any claim to say that a decision was taken not to sell pursuant to that particular proposal. The question then becomes, what is meant by deciding to exercise the power to sell or deciding, per contra, to manage the property for a period before selling. On the facts of the present case, it is not presently clear to me to what extent it could be said that the bank or the receivers had consciously decided to postpone sale. So far as the limited documentation presently before us shows, they were at all times interested in realising the value of as much of the land as soon as possible. It certainly seems that they were being advised to do so.
42. Apart from the considerations mentioned in the previous paragraph, I consider that the facts set out in paragraphs 37 and 40 above could, if established, arguably involve a duty on the bank or the receivers. Whether a mortgagee (or receiver) is, in law or equity, at liberty to exercise his rights in a way that in all likelihood will substantially increase the burden on a borrower or guarantor beyond what otherwise would be the case is, as Sir Donald Nicholls V-C said, a question that may need careful examination. I do not think that it is appropriate to undertake such examination in the present context, on the basis of hypothetical or assumed facts. A more concrete understanding of the precise course of events, including the receivers' side of the story, is desirable. I do not think that it is necessarily a fatal flaw that Mr Haines' suggested reformulation seeks to derive a duty of care from examination of the particular facts of the case. On the contrary, the tendency in recent authority has been to underline the importance of examining the particular facts, before deciding whether or not any duty of care arguably exists.
43. The judge also considered that the appellant's claim was in any event bound to fail on the facts, which he considered, as he said, "briefly". He acknowledged that the bank had demanded some £445,000, going on: "but, of course, AMC had priority over the Bank". That, however, overlooks the appellant's case that AMC (which had not appointed any receiver or gone into possession at that stage) had agreed not to stand on its priority.
44. The judge went on to comment that the appellant "does not disclose where he would have raised the £250,000 or provide any evidence that it was available. Having regard to his financial position at the time it would seem to be of some relevance". Again, it seems to me that the appellant's position and the evidence he filed must be viewed in the light of the way in which the application to strike out was presented against him. Mr Wayne Davies, the bank's solicitor, said that his clients could not produce direct evidence of the meeting of 11^th September 1991, not having been present, but went on: "However, there is no case pleaded on causation; it is not alleged that the [appellant] and Mr Black proposal [sic] had it been accepted would have proceeded to exchange and completion". Mr Davies went on to make the points that the bank also had claims on the guarantees of B & M Cassidy & Co. Limited and that AMC had priority. These are covered by Mr Cassidy's evidence that the receivers were only required to look for £441,000 and that AMC was at that stage prepared to allow the bank priority in respect of the proceeds of Dial House. Miss Masterson's statement mirrored these points, saying:

"Paragraph 18

The Defendant seeks to allege that a joint offer made by himself and Mr John Black, in the sum of £400,000 when added to the estimated harvest proceeds would have been sufficient to discharge the then balance of the receivership debt and attendant costs. In addition, there is no case pleaded on causation insofar as no evidence has been adduced that, had Black's proposal been accepted, the offer would have proceeded to exchange and completion. Of more importance, as is evidenced by paragraphs 24 to 27 of Wayne Davies's Witness Statement, the allegation is, causally irrelevant because the debt to the Bank would, in any event, not have been discharged in full."

In these circumstances, it seems to me that the appellant's evidence, which was clearly to the effect that the proposal would, if accepted, have led to the termination of the receivership, was sufficient to require trial. He did also disclose that he had already obtained an offer of finance up to 60% of £300,000 (i.e. £180,000) from a Manchester mortgage company.

45. The judge then examined passages in receivers' reports dated 13^th August 1991, 21^st October 1991 and 27^th January 1992, which discounted any industrial use value for the Dial House land and contained an account of a "verbal offer of £400,000 from Mr Black", which the judge commented was "quite different from what [the appellant] now alleges". He concluded that "those facts do not come within a measurable distance of establishing an arguable case that the Receivers were in breach of duty and/or that any loss was thereby caused to either [the appellant] or the Bank". The receivers' reports appear simply to have been put before the judge, and not to have been exhibited to any of Mr Davies', Miss Masterson's or the appellant's statements; no expert evidence was adduced from the bank's or the receivers' side before HHJ Behrens. I do not consider that the judge was entitled to derive firm or final conclusions of fact from documents of this nature, when those conclusions were contrary to the evidence of the appellant in his statement. For completeness, I would add that the judge did not draw attention to a passage in another report of 13^th August 1991, by the valuers, Messrs. Weatheralls, which did mention Mr Black's interest in purchasing the 5.76 acres for £150,000.
46. I can understand the bank's and the receivers' contention that the appellant's claim with regard to the proposal of 11^th September 1991 will fail. Clearly it faces a number of difficult hurdles, of law and it may well also be of fact. But I do not think that either the facts or the law are so clear that the appellant can be shut out from a trial on this issue. As I have pointed out, the facts are in any event also likely to have to be explored in the context of the issue, which has anyway to go to trial, regarding the value of the Dial House land. For all these reasons, in my opinion the judge came to a wrong conclusion in respect of the proposal also. I would grant the appellant the necessary permission to appeal, and I would allow the appeal accordingly.
47. As to the application to reamend in the terms put forward by Mr Haines, set out above, the bank suggested that any such reamendment would cause it grave prejudice, because of the lapse of time, the extra costs involved (irrecoverable because of the appellant's financial position) and the difficulty of having to re-proof bank officers or former officers, after so many years. Miss Anderson also submitted that the "similar duty" alleged in relation to the receivers was untenable. For my part, I cannot see any basis for the bank's objection so far as concerns clauses (i) to (iv) inclusive. Nor can I see any such risk in relation to points (a), (b) and (c) in clause (v). All these are on the face of them matters which the bank and receivers ought to be able to address from their contemporary records and by expert evidence. Point (d) in clause (v) goes outside that field, and could involve a more wide-ranging enquiry into the appellant's financial condition and support. I cannot see either that whether or not the appellant was likely to go bankrupt could be the test of the existence of any duty. The "real risk of financial harm" pleaded in clause (v) in the form of increased liability if the receivership continued would seem all that could be required. So, at this stage, I would refuse permission to include point (d), while not precluding any future application when the matter could be more fully argued. Subject to the exclusion of point (d) in clause (v), I would therefore grant the appellant permission to reamend his defence and counterclaim to insert a plea in the terms put forward by Mr Haines, and set out above. Paragraph 14(ii) will however require consequential reamendment, which I would invite counsel for the appellant to produce, after seeing this judgment in draft and before it is formally handed down.
48. The application for permission to appeal and the appeal pursuant thereto will be allowed accordingly

Lady Justice Hale:

49. I agree.
ORDER: The application for permission to appeal and the appeal pursuant to it will be allowed; order as per minute. (Order does not form part of the approved judgment)