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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Bryan Court Ltd & Anor v National Westminster Bank Plc [2012] EWHC 2035 (QB) (20 July 2012) URL: http://www.bailii.org/ew/cases/EWHC/QB/2012/2035.html Cite as: [2012] EWHC 2035 (QB)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		20/07/2012

His Honour Judge Richard Seymour Q.C. :

Introduction

1. At the root of this action was an agreement ("the Loan Agreement") in writing signed on behalf of the defendant, National Westminster Bank Plc ("NatWest") on 30 April 2008 and signed on behalf of the first claimant, Bryan Court Ltd. ("the Company"), by the second claimant, Dr. Tareq AlBaho on 5 May 2008. One of the main issues in this action was whether, as was contended on behalf of NatWest, the Loan Agreement was the only operative agreement between itself and the Company, or whether, as was asserted on behalf of the Company, the Loan Agreement was of no effect, the parties having previously agreed terms ("the First Agreement") for a loan of £1,170,000 to be made by NatWest to the Company. It was contended on behalf of the Company that NatWest was in breach of the First Agreement by not advancing sums which it was committed by the First Agreement to lend to the Company to finance building works ("the Works"), and that in consequence the Company had suffered loss. The position adopted on behalf of NatWest was that it was entitled, in reliance on the terms of the Loan Agreement, not to advance the sums which it had not advanced. However, it had in fact advanced sums under the Loan Agreement, it said, and as at 14 September 2010 an amount of £181,733.44 was due to it. As at the same date the Company was overdrawn on its current account numbered 90606949 ("the Current Account") with NatWest in the sum of £5,511.10. In this action NatWest counterclaimed payment by the Company of those sums, or rather the amounts due as at the date of judgment in this action. Dr. AlBaho had entered into a guarantee ("the Guarantee") dated 1 May 2008 of the liabilities of the Company to NatWest, and NatWest sought judgment against him on the Guarantee, in addition to judgment against the Company for the sums due as at the date of judgment.
2. The background to the claims and cross-claims in this action was that the Company was incorporated on 30 April 2002, with company number 4428618, as a company limited by guarantee, with a view to acquiring from the Hon. Christopher Portman ("Viscount Portman") the freehold title to the block of ten flats known as and situate at Bryan Court, 68 Seymour Place, London W1 ("Bryan Court"). In the event the freehold title to Bryan Court was transferred by a transfer ("the Transfer") dated 21 December 2004 in consideration of the payment by the Company of the sum of £400,000. The Transfer included a number of restrictive covenants given by the Company to Viscount Portman for the benefit of the Portman Estate. Those material for present purposes were:-

"13.4.2 not to carry on any trade business profession or occupation whatsoever upon the Property and not to use or permit the same to be used other than as and for 10 high class flats each used as a private single residential unit only.

13.4.3 not to carry out any development as defined by the Town and Country Planning Act 1990 or any Act amending or replacing the same without the consent of the Transferor whose consent is not to be unreasonably withheld or delayed."

3. Dr. AlBaho is, and I think has been since its incorporation, the sole director of the Company. He resides in Flat 3 at Bryan Court. He was a joint lessee, with his mother, of Flat 3 by virtue of a lease for a term of 999 years from 25 March 2005 granted by the Company and dated 16 December 2005. It was suggested during the trial that, possibly, Dr. AlBaho's mother had transferred to her son her interest in the lease in question, but that was not material to any issue in the action.
4. After the transfer to the Company of the freehold interest in Bryan Court it was decided by the lessees to seek to have the building, which seems to have been constructed in the early 1950s, brought up to modern standards and to have a penthouse flat ("the Penthouse") constructed on what had been the roof of Bryan Court. The Works comprised, it appears, the construction of the Penthouse, enlarging the rear balconies to existing flats, the installation of replacement railings and windows, and alterations to the main entrance. Planning permission for the Works was sought from Westminster City Council and was granted on 4 January 2007.
5. By a deed ("the Deed") of modification of restrictive covenant dated 26 November 2008 and made between (1) Viscount Portman, The Portman Estate Nominees (One) Ltd. and The Portman Estate Nominees (Two) Ltd. and (2) the Company it was provided, so far as is presently material, that:-

"2. MODIFICATION

2.1 In consideration of the payment of the sum of Forty thousand pounds (£40,000) paid by the Grantee to the Grantor (receipt of which is hereby acknowledged) the Grantor agrees that the Restrictive Covenants are modified with effect from and including the date of this deed so that paragraph 13.4.2 of Panel 13 to the Transfer shall be amended so that the number "10" is removed therefrom.

2.2 The Grantor and the Grantee confirm that subject to the modification set out above the Restrictive Covenants will otherwise continue in full force and effect.

3. CONSENT

In further consideration of the payment of the sum mentioned in clause 2 the Grantor agrees that pursuant to paragraph 13.4.3 of Panel 13 to the Transfer it hereby confirms its consent to the carrying out of the proposed development to the Property which development is described in the Schedule hereto [that is, the Works]."

6. It will be necessary to come to the circumstances alleged to have given rise to the First Agreement. However, the making and terms of the Loan Agreement were not in dispute. For present purposes the material terms of the Loan Agreement were these:-

"THS AGREEMENT is made between:-

(1) National Westminster Bank Plc (the "Bank"); and

(2) Bryan Court Limited Company Number 04428618 (the "Customer")

to set out the terms and conditions on which the Bank is pleased to make available to the Customer a loan of up to a maximum of £1,130,000.

1. Purpose, Definitions and Interpretation

1.1 The Loan shall be utilised to assist with the Development Costs and to allow interest which accrues in respect of the Loan to be compounded in accordance with the provisions of Clause 4.2 and to pay the administration fee referred to in Clause 5.1(a).

1.2 In this Agreement unless the context otherwise requires:-

"Agreed Plans" means the detailed architect's drawings and building specifications for the Development in form and content acceptable to the Bank.

"Building Contract" means the design and/or construct agreement relating to the Development made between the Customer and the Contractor or any other permitted replacement design and/or construct agreement in a form and substance satisfactory to the Bank.

"Cash Flow Forecast" means a statement incorporating a month by month cash flow forecast prepared by the Customer and addressed to the Bank showing, at the date of its delivery to the Bank (i) the anticipated costs of the Development broken down by purpose, including building costs, licence fees, interest, commission, void costs, professional fees, letting and sale costs and VAT, (ii) the timetable for the Development and the expenditure of such anticipated costs and (iii) income (if any) anticipated during the course of the Development.

"Collateral Warranties" means collateral warranties in favour of the Bank to be executed by the Contractor, each member of the Professional Team and/or any Design Subcontractor in a form and substance satisfactory to the Bank including inter alia the ability to assign at least twice and providing step-in rights in favour of the Bank.

"Consents" means all necessary third party consents and all necessary planning permissions, consents, licences, certificates, authorisations, building warrants, building regulation approvals or relaxations and other approvals and relaxations and agreements which may be required from any local or other competent authority or statutory undertaker or any fire officer in connection with the Property and/or the Development.

"Contractor" means Orchard Concepts Ltd Company Number 03973919

"Cost Overrun" means any expenditure incurred or to be incurred over and above what has been projected in the Cash Flow Forecast.

"Design Subcontractor" means any subcontractor who is responsible for material elements of the design of the whole or any part or parts of the Development.

"Development" means the development of the Property in accordance with the Agreed Plans.

…

"Event of Default" means any of the events described in Clause 12.1.

"Flat 3" means Flat 3, Bryan Court, 68 Seymour Place, London.

"Loan" means up to a maximum of £1,130,000 or (as the context may require) the principal amount owing to the Bank under this Agreement at any relevant time.

"Material Contracts" means the (i) Building Contract, (ii) Collateral Warranties and (iii) Professional Team Appointments.

"Monitoring Surveyor" means Currie and Brown or such other relevant professional as the Bank may appoint from time to time to monitor the progress of the Development.

Monitoring Surveyor's Certificate" means a report prepared by the Monitoring Surveyor and addressed to the Bank, in a form and substance satisfactory to the Bank confirming (i) the value of work in progress at the Development, (ii) the expenditure incurred (for which payment is requested) is in accordance with the Cash Flow Forecast, (iii) the Development is making progress in accordance with the Cash Flow Forecast and the Agreed Plans, (iv) there is no outstanding Cost Overrun and (v) the undrawn portion of the Loan is sufficient to meet the remaining Development Costs.

"Professional Team" means (as relevant) the architect, quantity surveyor, structural and other engineers and cost consultants together with such other professional persons from time to time employed by the Customer or the Contractor in connection with the carrying out of the Development.

"Professional Team Appointments" means the deeds of appointment entered into between the Customer or the Contractor and each of the members of the Professional Team in a form and substance satisfactory to the Bank.

"Property" means Bryan Court, 68 Seymour Place, London or any part of it.

"Repayment Date" means the earlier of (i) 1 January 2009 or (ii) the sale completion date of the 1^st Unit to be sold.

…

"Tranche" means any drawing under this Agreement.

...

2. Preconditions

2.1 The Bank shall not be obliged to provide the Loan or any Tranche thereof unless the following conditions are satisfied on the date on which the first Tranche (and in the case of Clause 2.1(k) any subsequent Tranche) is drawn:-

(a) the Monitoring Surveyor has received the following:-

…

(iii) the Material Contracts, either in the agreed format or duly executed by the relevant parties;

(iv) the Consents;

…

(h) the Bank has received and is satisfied with confirmation from the Customer that (i) all reasonable endeavours shall be utilised to ensure that no Cost Overrun is incurred and (ii) in the event of any Cost Overrun being incurred, the Customer shall pay for such Cost Overrun promptly from its own resources.

(i) the Bank has received and is satisfied with confirmation that the Material Contracts have been executed by the relevant parties.

…

(k) the Bank is satisfied that no Event of Default (or event which may result in an Event of Default) has occurred or may occur as a consequence of the Loan being drawn.

3. Drawdown

3.1 Subject to Clause 3.4, the Loan shall be drawn down in Tranches of such amounts as may be agreed by the Bank following production of a suitable Monitoring Surveyor's Certificate, as and when required by the Customer. Each Tranche drawn will be consolidated with that part of the Loan already drawn.

3.2 …

3.3 If the first Tranche is not drawn down within 3 months from the date this Agreement is signed on behalf of the Bank, the Bank shall not be obliged to provide the Loan.

3.4 If the Loan is not drawn in full by the Repayment Date the undrawn portion of the Loan will cease to be available to the Customer.

4. Interest

4.1 The Customer shall pay to the Bank interest at a rate which is equivalent to 3% per annum above the Bank's Base Rate. As at 29 April 2008 this formula produced a rate of 8% per annum. The Bank's Base Rate may vary from time to time.

…

5. Charges

5.1 The Customer shall pay to the Bank:-

(a) an administration fee of £56,500 either on the date the first Tranche is drawn or 7 days after the date on which this Agreement is signed on behalf of the Customer, whichever is earlier (or such other date as the Bank at its discretion may agree);

…

6. Repayment

6.1 Subject to Clause 6.3, the Customer shall repay the Loan together with interest thereon by no later than the Repayment Date.

…

8. Security

8.1 The Customer's obligations to the Bank under this Agreement shall be secured by way of:-

(a) all existing security held by the Bank for the Customer's liabilities including:-

(i) a Debenture by the Customer;

(ii) a first Legal Charge over the Property and its associated assets;

(b) security in the Bank's preferred form as follows:-

(i) a Guarantee for £500,000 by Tareq Albaho supported by:-

a first Legal Charge over Flat 3, Bryan Court, 68 Seymour Place, London and its associated assets; and

a Charge of Deposit in respect of all monies held now and in the future with the Bank in account number 140/01/93510950 in the name of Tareq Albaho.

(c) such further security as the Bank may at any time hereafter hold in respect of the Customer's liabilities to the Bank of any kind.

…

13. Miscellaneous

13.1 Without any obligation upon the Bank to do so, the Bank shall be entitled to allow the Customer extended time to pay or grant any other indulgence to the Customer without affecting any of the rights of the Bank in whole or in part."

7. In this judgment I shall use the term "the Loan" in the sense defined in the Loan Agreement.
8. It was common ground that Dr. AlBaho did open an account ("the Dollar Account") numbered 140/01/93510950 with NatWest on 18 September 2007. On 22 April 2008 the sum of US$100,000 was transferred by Dr. AlBaho into the Dollar Account.
9. On 26 September 2007 Ms Karen Povey, a commercial manager employed by NatWest who was, by that time, designated the primary relationship manager in relation to the Company and Dr. AlBaho, caused an account ("the Loan Account") numbered 90769430 and with the name Bryan Court Limited Loan Account, to be opened by NatWest. On 21 December 2007, in circumstances to which I shall return, Ms Povey caused the sum of £28,250, described on the relevant statement of the Loan Account as "Loan Arr Fee", to be debited to the Loan Account.
10. A contract ("the Building Contract") in the Intermediate Form of Building Contract (2005) issued by The Joint Contracts Tribunal Ltd., dated 12 February 2008, was entered into between the Company and Orchard Concepts Ltd. ("Orchard") following some e-mail exchanges on 12 February 2008 between Dr. AlBaho and Ms. Povey. It will be necessary to consider those e-mail exchanges later in this judgment.
11. In the Building Contract the "Date of Possession of the site [that is, Bryan Court]" was stated as 3 March 2008 and the "Date for Completion of the Works" was recorded as "28 working weeks from commencement", which was 15 September 2008. By Articles 3 and 4 of the Building Contract the person named as the "Architect/Contract Administrator" and also as the "Quantity Surveyor" for the purposes of the Building Contract was Blampied and Partners Ltd. ("Blampied").
12. The Contract Sum specified in the Building Contract was £705,000. However, that sum could be altered pursuant to the provisions of Section 5 of the Building Contract, which included:-

"5.1 The term 'Variation' means:

.1 the alteration or modification of the design, quality or quantity of the Works including:

.1 the addition, omission or substitution of any work;

2. the alteration of the kind or standard of any of the materials or goods to be used in the Works;

.3 the removal from the site of any work executed or materials or goods brought thereon by the Contractor for the purposes of the Works other than work, materials or goods which are not in accordance with the Contract;

…

5.2 The value of:

.1 all Variations required by an instruction of the Architect/Contract Administrator or subsequently sanctioned by him in writing;

.2 all work which under these Conditions is to be treated as a Variation;

…

shall be the amount as is agreed by the Employer and the Contractor or, where not agreed, shall, unless otherwise agreed by the Employer and the Contractor, be valued by the Quantity Surveyor (a 'Valuation') in accordance with clauses 5.3 to 5.6 ('the Valuation Rules')."

13. The detailed Valuation Rules in the Building Contract were not material to any issue in this action. However, what was material was the obligation to make what were called "interim payments", stated in the Contract Particulars to be certified monthly. Although the precise calculation of an interim payment was not relevant to any dispute between the parties, these provisions contained in Section 4 of the Building Contract were important:-

"4.6.1 Subject to any agreement between the Parties as to stage payments, the Architect/Contract Administrator shall, on the dates provided for in the Contract Particulars up to the date of practical completion, certify the amount of interim payments to be made by the Employer [that is, the Company] to the Contractor [that is, Orchard], specifying to what the amount relates and the basis on which that amount was calculated.

…

4.8.1 The final date for payment pursuant to an Interim Certificate shall be 14 days from the date of issue of that Interim Certificate."

14. What followed from not making an interim payment within the permitted period of 14 days was dealt with in Section 8 of the Building Contract:-

"8.9.1 If the Employer:

.1 does not pay by the final date for payment the amount properly due to the Contractor in respect of any certificate and/or any VAT properly chargeable on that amount;

…

the Contractor may give to the Employer a notice specifying the default or defaults (the 'specified default or defaults').

…

.3 If a specified default or a specified suspension event continues for 14 days from the receipt of notice under clause 8.9.1 or 8.9.2, the Contractor may on, or within 10 days from the expiry of that 14 day period by a further notice to the Employer terminate the Contractor's employment under this Contract."

15. It was common ground that the preconditions set out in clause 2.1 of the Loan Agreement in relation to the provision to the Monitoring Surveyor of the Collateral Warranties, one part of the Material Contracts to be provided pursuant to clause 2.1(a)(iii), and the Consents, in particular consent from Viscount Portman in the form ultimately embodied in the Deed, to be provided pursuant to clause 2.1(a)(iv), were not complied with at any time material to this action. It was also common ground that, by reason of the non-provision of the Collateral Warranties to NatWest, the terms of clause 2.1(i), were not complied with at any material time. It was contended on behalf of NatWest that the requirements of clause 2.1(h) were also not complied with, but the factual situation in relation to that obligation was less clear and, in the light of the acceptance that there had been a failure to comply with the requirements of clause 2.1(a)(iii) and (iv), and those of clause 2.1(i), nothing turned on whether or not there had also been a failure to comply with the obligations contained in clause 2.1(h). It was not contended that there had been any failure to comply with the requirements of clause 2.1(k).
16. Notwithstanding that it was common ground that there had been failures to comply with the preconditions in clause 2.1(a)(iii) and (iv), and clause 2.1(i), it was also common ground that NatWest had in fact permitted an amount of £85,000 of the Loan to be drawn down on 30 May 2008 and had, on the same day, debited the Loan Account a further amount of £28,250, described in the statement relating to the Loan Account as, "Arrangement Fee".
17. It was submitted on behalf of the claimants by Mr. Adrian Davies that, by permitting, on 30 May 2008, the drawing down of the sum of £85,000 and/or debiting the Loan Account with the balance until then unpaid of the arrangement fee for which clause 5.1(a) provided (which was due "either on the date the first Tranche is drawn or 7 days after the date on which this Agreement is signed on behalf of the Customer") NatWest was thereafter committed to advancing the balance of the Loan on the terms of the Loan Agreement, even if the other bases of claim contended for on behalf of the claimants failed. I shall return to that point, which simply depended upon the construction of the Loan Agreement.
18. Notwithstanding the advance of £85,000 of the Loan, the Company failed to pay interim payments due under the Building Contract because it was not put in funds to do so by NatWest. Orchard, it appeared, followed the procedure set out in the Building Contract for termination, and left Bryan Court on 10 June 2008.
19. Subsequently, in circumstances which were rather unclear, but which were not really significant to the questions which arose in this action, Orchard returned to Bryan Court and substantially completed the Penthouse.
20. The claims made on behalf of the claimants in this action all focused on one or more of the points which I have recorded thus far in this judgment, and which, as facts, were not in dispute.

How the claims of the claimants were put

21. It seemed, from the terms in which it had been drafted, that the Particulars of Claim in this action had not been prepared by someone with legal qualifications. As is common with a statement of case the author of which lacked legal qualifications, the style of the document was narrative and one was left having to do the best one could in order to identify what claims were sought to be pursued, and on what alleged legal foundation. Happily, by the time of the trial the claimants were represented by Mr. Davies, who explained with clarity how each element of the case was put.
22. The First Agreement was said to have been made in one or other of two alternative ways. The first was as a result of a series of exchanges culminating in the debiting to the Loan Account on 21 December 2007 of the sum of £28,250. The second was as a result of the exchanges on 12 February 2008. It was the case of the claimants that, if the First Agreement had been made in one of those ways, it was not superseded by the Loan Agreement because, as pleaded at paragraph 20 of a Reply settled by Mr. Michael Hartman of Counsel, any new term included in the Loan Agreement which was not a term of the alleged First Agreement, and, in particular clause 2.1, "was a said new term made for no consideration and thereby not binding".
23. The first way in which the First Agreement was put in the Particulars of Claim was:-

"10. By 1 September 2007 Paul Crocker was replaced by one Karen Povey as manager at the Ashford offices of the Defendant. Karen Povey imposed a further requirement that the 2^nd Claimant shall advance to the Defendant the sum of US$100,000 as further security for the said funding such sum to be deposited in an account for those purposes.

11. By 11 September 2007, Karen Povey had agreed in telephone conversations and by emails with the 2^nd Claimant, as further evidenced by a letter of the same date to Currie & Brown UK Ltd., that the Defendant shall fund the 1^st Claimant by way of a loan of £1.17 million for the estimated duration of the development, being one year from commencement thereof, which sum was allocated as to development costs of £1,045,000, professional advisers' fees of £80,000 and interest on the loan rolled up in the sum of £45,000.

12. Further and by the said letter of 11 September 2007, the Defendant had instructed Currie & Brown UK Ltd., C&B, to act as 'monitoring surveyors' on behalf of the Defendant over the development and draw down of payments in respect of the works.

13. Further, on 27 September 2007 by email, the 2^nd Claimant notified Karen Povey that the 1^st Claimant was seeking the consent of Portman Estates to a waiver of a restrictive covenant retained by Portman Estates against further development of the said Bryan Court and that the 1^st Claimant intends to sign a contract direct with the contractor and Blampied would be appointed as supervising architects, which same was accepted by the Defendant. By the Defendant's response, Karen Povey notified the 2^nd Claimant that the Defendant would need to complete its formalities.

14. By November 2007, the Claimant had applied for a waiver of the said restrictive covenant, and had obtained a valuation of said Flat 3.

15. Further, the Defendant opened an account dated 18 September 2007 and referred to as the Albaho account being in the name of the 2^nd Claimant, Account No: 140/01/93510950, and for the purpose of the funding agreement allied to which were documentary records associated with that account.

16. Further and/or pursuant to the said funding arrangements and/or affirming the same, on 21 December 2007 the Defendant opened an account for the 1^st Claimant, being the 1^st Claimant's Loan Account Number 90769430, and on the same date withdrew from it the sum of £28,250 as the first instalment of the Defendant's 'loan arrangement fee' for the 2007 [that is, First] Agreement and thereafter charged the Loan Account with interest on the overdrawn account.

17. In the premises and by November or December 2007, either by agreement in writing and/or by oral agreement and/or by performance, the Defendant had agreed the main terms of the funding agreement and/or was thereby bound by contract, and by the aforesaid terms, being the 2007 Agreement."

24. While it may be that a contract can be concluded in English law without either signature of a document by both parties to indicate agreement to its contents or an offer made by one party being accepted by the other party, certainly in the ordinary way a contract is concluded in one of those ways. In the absence of an offer made by one party which is accepted in precisely the terms offered by the other party, there is simply no contract.
25. The position adopted on behalf of NatWest was that the First Agreement had never been concluded because a situation had never been achieved, prior to the signature of the Loan Agreement, in which either both parties signed a document to indicate their agreement to its terms or an offer had been made by one side which the other side had accepted in precisely the terms offered.
26. Although, in his written skeleton argument, Mr. Davies did refer to events earlier in time than 10 December 2007, the kernel of his submissions as to the first way in which it was said that the First Agreement had been made was this:-

"24. On 10^th December 2007, C2 e-mailed Miss Povey saying inter alia that, so far as he knew, the only outstanding issue was the giving of his personal guarantee; Vol. 4, p.397.

25. On the same day, Miss Povey answered, saying what D's additional requirements were; Vol. 4 p.396. They did not include collateral warranties in D's favour from the head contractor or the sub-contractors. See also her e-mail of 16^th January 2008 at vol. 4, p.403, which is to similar effect.

26. On 21^st December 2007, Miss Povey told her superior, Mr. Mike Collins, that she had taken the arrangement fee of £28,250 from C2's account; see vol. 4, pp.10-11, para. 34 and the bank statement at vol. 4 p.400. Her actions appear to have been approved at a higher level; see vol.2, p.137.

27. It is on the face of it difficult to see how D could properly charge the arrangement fee if the facility had not in fact then been agreed, and there was no contract between C1 and D."

27. Mr. Davies's point was, at one level, a powerful one. In order for NatWest to be entitled to charge any fee at all to the Company, there had to be in existence a contract between the Company and NatWest pursuant to which NatWest was entitled to the fee. In the absence of such a contract the charging of a fee was not merely unjustified as a matter of law, but dishonest – in effect stealing, or attempting to steal. One should not readily reach the conclusion that apparently reputable officers of an apparently reputable bank would act dishonestly. Therefore one should conclude that NatWest was in fact entitled to the fee charged, but that meant that there must have been a contract between NatWest and the Company. The only possible contract, on the evidence, was the First Agreement.
28. However, in order to reach a conclusion whether there was in fact a contract it was necessary to consider the evidence. Unhappily the evidence led before me did not justify the conclusion that a contract had been concluded on or before 21 December 2007 between NatWest and the Company.
29. It would be merely tedious to reproduce in this judgment screeds of communications between Dr. AlBaho and Ms Povey simply for the purpose of demonstrating that those parties were negotiating on behalf of the Company and NatWest, respectively, but that no agreement had been reached as to the terms of a loan on or before 21 December 2007. However, it is necessary to refer to some of the exchanges between the parties in order to illustrate the point.
30. It is convenient to begin by noticing the position as at 26 October 2007, when Dr. AlBaho wrote an e-mail to Ms Povey in the following terms:-

"There will be a meeting tomorrow morning among company members to discuss (further) personal guarantees to the bank.

At the moment our budget looks like approaching 1.05m, and that includes projected bank fees and charges of around 75k.

This work also includes all the refurbishments and upgrades to the existing block so that we will be looking at the upper valuation made by DTZ of 1.2m.

If I am correct, you informed me that the terms of the loan will be base +3 with set-up and exit fees of 2.5%. Is this correct?

Given the figures of 1.05m and 1.2m will the bank's terms remain the same?

Is there a scale of personal guarantees that can lead the bank to modify some of its figures? In particular, can we reduce the set-up fee and/or the exit fee?"

31. In an e-mail to Ms Povey sent at 9.41 a.m. on 5 November 2007 Dr. AlBaho informed her that, "Further to our various exchanges last week, I am now writing to let you know that our first choice for main contractor is in fact Orchard Concepts …". Ms Povey responded at 9.58 a.m. the same day:-

"Thanks for the update Tareq.

I'm sure Orchard Concepts will be fine. [What] I need to know now is the amount of the loan required, once received I can progress with formal sanction."

32. Dr. AlBaho provided a figure, up to a point, in an e-mail to Ms Povey sent at 14.03 on 6 December 2007:-

"I now have that final cost figure for you: 940,000.

This include [sic] ALL building costs and fees. But this figure does not include VAT and does not include your banking costs. (Interest, set-up and exit fees etc.)"

33. In an e-mail sent to Ms Povey at 13.16 on 10 December 2007 Dr. AlBaho wrote:-

"I am pushing now to try and ink the documents before Christmas so work can hopefully start as early as possible in the new year. The only outstanding issue now – as far as I know – is the personal guarantee. I remain prepared to give one as you know, but am waiting to hear if any of the other tenants will join me. Although this makes no difference to the bank, you will appreciate it does have some political ramifications among the other tenants.

I hope to get this matter resolved this week."

34. Ms Povey replied nine minutes later by e-mail:-

"Thanks Tareq.

I am waiting for the following ahead of draw down:

All security needs to be signed at solicitors (legal charge over Bryan Court, 2^nd charge over flat 3 and your guarantee).

Initial monitoring report from Currie and Brown.

Signed facility letter, new one in the process of being issued with the revised amount of loan of £1,050,000."

35. I think that it was obvious that, by that e-mail, Ms Povey was making it clear that, in order to commit itself to making a loan, NatWest required a signed facility letter, the execution of the securities identified and a report from Currie and Brown.
36. In fact, as yet not even the amount of the loan was agreed, even in principle. In an e-mail sent to Ms Povey at 8.28 a.m. on 11 December 2007 Dr. AlBaho raised two questions:-

"1. Does the 1.05m facility you are proposing also include all the rolled-over interest?

2. If we need an extra small up-lift (say 50k or so) can we talk about this if it happens? (If it happens it would be near the very end of the project)."

37. The reaction of Ms Povey was to increase the amount of the loan offered to £1,113,290, calculated as explained in her e-mail to Dr. AlBaho sent at 8.51 a.m. on 11 December 2007. That e-mail concluded:-

"Would rather include all eventualities at the outset, this will work better for the IMS and the Bank. As the loan is being drawn in tranches you will only pay interest on funds drawn. Although do not see a problem if a modest increase is required as long as the IMS can back it up."

38. Dr. AlBaho did not feel able instantly to agree to the revised figure. In an e-mail sent at 17.10 on 11 December 2007 he began:-

"I am getting the breakdown of all these figures this evening or tomorrow and will get back to you. In the meantime, regarding the personal guarantees, tenants – me included – are asking about their term and duration.

If we manage to conclude all paperwork soon, then hopefully this will start early in the new year."

39. It was plain from what he wrote that Dr. AlBaho understood perfectly well that, in order for the Company to obtain a loan from NatWest it was necessary for "all paperwork" to be concluded and signed. Although Dr. AlBaho prepared a witness statement for the purposes of the trial, he did not actually attend the trial and his witness statement was admitted pursuant to the provisions of Civil Evidence Act 1995. While, I think, Miss Lisa Lacob, who appeared on behalf of NatWest, would have liked an opportunity to cross-examine Dr. AlBaho, at least in relation to the issues which arose concerning whether there had been a First Agreement, and, if so, when and how it had been concluded, it seemed to me that the position was entirely clear on the documents copies of which were put before me. Dr. AlBaho could, if cross-examined, either have agreed that the picture created by the documents was correct, or been disbelieved.
40. The last e-mail to which it is appropriate to refer in the context of whether the First Agreement was made on or before 21 December 2007 is that sent by Dr. AlBaho to Ms Povey at 10.29 on 21 December 2007:-

"Attached is that spreadsheet with the "provisional" final figures.

You will see we got three construction quotes, and are going with the lowest (which is some 60,000 lower than the next cheapest). This is Orchard Concepts. We have looked into thsi [sic] firm and they are solid and reputable and doing quite a bit of other work in this area; so we are confident they can deliver and honour their contract.

As I explained, there is a question about VAT.

The construction costs of 705,000 are quoted free of VAT and you can see that sum splits into two: the new build of 499,862 and the remedials of 205,138. There is no question that the new build costs are zero rated for VAT. Refurbs to the existing building will however attract the full rate at 17.5%.

Then there is the issue of the design fees and Areen site supervision; contract admin etc. Strictly speaking these are all new-build related expenses and so should – or may not – attract VAT.

All the figures for client costs (excluding finance), include VAT. Again we may be able to claim some of this back.

The figure for 85,000 is my rough estimate for how much we will be paying NatWest in loan fees and interest.

Thus the grand total comes to just over 1.127m.

This includes my rough estimate of the loan set-up + exit fees and interest payments, as well as a VAT contingency of 50,000 in addition to the VAT already included in some of the figures.

Call me as soon as you receive this message and attached file. Please speak over the answering machine and I will pick up. I am a bit busy this morning and so screening my calls."

41. In his witness statement Dr. AlBaho did not say that he had had any conversation with Ms Povey on 21 December 2007. Rather he drew attention, at paragraph 63, to the debiting of the sum of £28,250 to the Loan Account. The implicit suggestion seemed to be that that action somehow concluded an agreement between NatWest and the Company.
42. An e-mail sent by Ms Povey to her immediate superior at NatWest, Mr. Mike Collins, director, commercial banking, Kent, copied to Mr. Steve White, credit operations manager, at 12.07 on 21 December 2007 enabled one to pinpoint when, on 21 December 2007, the debiting took place, and who determined to make the debit. Ms Povey wrote:-

"I have just taken the arrangement fee £28,250 for Bryan Court!!! Yipee. The loan has not been fully sanctioned by Credit as we are pending IMS report/security execution, however fees are not a CREDIT issue and they are happy for me to take the fee with your authority and COM [credit operations manager] sign off. The issue is that if a refund needs to be made (highly unlikely) you cannot correct a transfer that was processed in the previous year.

Please can you confirm via email to Steve White that you are happy for this to take place.

Hope this makes sense, have a great Christmas. See you in the New Year."

43. Mr. Collins replied nineteen minutes later,

"Confirmed!!!

Thanks for all your hard work on this one – have a great Christmas."

44. Mr. White replied to both Mr. Collins and Ms Povey at 12.33 on 21 December 2007:-

"Thanks Mike.

Karen confirmed limit is marked as requested."

45. Ms Povey made a witness statement for the purposes of this action and was also called to be cross-examined. At paragraph 34 of her witness statement she dealt with the debiting of the sum of £28,250 to the Loan Account on 21 December 2007:-

"Also on 21 December 2007, I applied £28,250 of the Bank's initial arrangement fee to the loan account that had been set up on the Bank's systems in order to reflect the amount of work that had been carried out in respect of the matter so far. This represented 50% of the Bank's proposed arrangement fee. At all times it was intended that this fee would be refunded in full should the loan not be approved by Credit. My email to a Director at the Bank seeking approval to deduct the fee clearly stated that the loan was not fully sanctioned, as I was awaiting the report of Currie & Brown and for the security formalities to be completed. The debiting of the fee was not communicated to Dr. AlBaho immediately, however he would of course have become aware of it upon subsequent receipt of the account statement for the Company."

46. I regret to have to say that that explanation was wholly specious. In her oral evidence Ms Povey agreed that NatWest was not entitled to charge a customer any fee in the absence of a contract pursuant to which the customer had agreed to pay the fee in question. With some reluctance, I think that she accepted that to charge a fee for which there was no contractual entitlement was dishonest. Her explanation as to how this had come to pass in the present case reflected no credit upon her or her superiors who were aware of what she had done at a stage at which it was still possible easily to reverse it. As I understood it, the timing of the debiting of the fee, on 21 December 2007 had nothing to do with how much work Ms Povey, or anyone else at NatWest, had done in connection with the anticipated loan to the Company, but everything to do with bonuses. Ms Povey indicated in her oral evidence that NatWest's internal assessments of her – I think that the word she used was "markings" – were based upon her perceived performance over a calendar year. It seemed that the amount of her bonus for 2007 depended, at least in part, upon how much income she had been able to generate for NatWest in that calendar year. Charging £28,250 to the Company in that year thus enhanced the bonus which she could expect to receive. I had the impression that the bonuses of others also depended upon the amount of the income which Ms Povey was able to generate in the calendar year 2007. It may be that those whose approval of the course upon which Ms Povey had determined of debiting the Loan Account themselves had a direct financial interest in that which they were invited to approve, but that was not the subject of clear evidence. What was clear was that all of those involved must have appreciated that, unless detected (because Dr. AlBaho was not immediately made privy to what had been done) or challenged, NatWest intended to charge interest on a debit which was not properly due, on any view, until a considerable time later. Until recent times the cynical disregard, in their own financial interests, by bank officials of the interests of the customers of the bank would have seemed incredible. It still seems appalling.
47. The second way in which the First Agreement was put in the Particulars of Claim was this:-

"19. On or about 4 February 2008 the 2^nd Claimant informed Ms Povey by email as follows:

' … The contractor has asked if we can sign the contract with him on Thursday. Can we be ready by then? He needs to order materials etc and cannot do so until the contract is signed. And he will need a few weeks to receive orders and start the physical work after signature.

I really want to get this done now.

Regards,

Tareq.

20. On 12 February 2008, in anticipation of reaching agreement in terms of the JCT contract offered by Orchard, the 2^nd Claimant emailed Ms Povey with a request for confirmation that the 1^st Claimant may agree to the said JCT in terms: 'I am supposed to meet the builders [Orchard] this afternoon and sign the contract. Please tell me this is alright!'

21. On 12 February 2008 Ms Povey replied:

'I need the information that Sharon requested to process the security, so there will be nothing at the solicitors as yet, upon receipt of the information this can be taken forward and the ball can start rolling. Don't see any problems now that the issue regarding security has been resolved by us taking a charge over flat 3 to support your guarantee.'

22. In all the circumstances, the Defendant by Ms Povey was under a duty of care in tendering a reply to such request.

23. On 13 February 2008, the 2^nd Claimant wrote by email:

'Hi Karen

Just to confirm that I did sign the contract yesterday with Orchard Concepts. Start date is set for 3^rd March. But some plumbing works needed prior to that are due to be done next week. Obviously people will want to get paid. I am waiting for your papers to sign as well and get all of this done. Regards Tareq.

24. Accordingly, the Claimants were entitled to and did rely upon the aforesaid reply by Karen Povey. Further and alternatively, the said reply evidenced and/or affirmed the said 2007 Agreement which same was to be provided by the Defendants to the Claimants in written form.

25. Further and alternatively, in reliance on the said reply, the 1^st Claimant entered the costly JCT contract with Orchard.

26. Orchard thereafter undertook the said works, commencing in March 2008, C&B, as monitoring surveyors, thereafter purported to evaluate the works of Orchard and certified to the Defendant the value of works completed for purposes of draw downs on the loan facility.

27. In the premises and alternatively, if which is denied the said 2007 Agreement was not completed by 1 January 2008, a contract was thereby formed in terms stated above by 13 February 2008."

48. It was extremely difficult to work out, from the Particulars of Claim, what it was contended were the consequences of the exchanges on, and immediately before, 12 February 2008. It did seem to be asserted that a contract resulted, but also that the answer by Ms Povey to Dr. AlBaho's enquiry, "I am supposed to meet the builders this afternoon and sign the contract. Please tell me that is alright.", amounted to a representation of some sort, and to a breach of some duty of care, presumably not negligently to make statements which were incorrect. Not much light was shed on the nature of the case of the claimants by the terms of paragraphs 18 and 19 of the Reply:-

"18. As to paragraph 21 of the Defence, it is the Claimants' primary case that the said emails of 12 and 13 February 2008 affirmed the 2007 Agreement.

19. Alternatively and secondarily, if, which is denied, it be held at trial that there was no contract binding the Defendant to provide the said loan, the said representations of Ms Povey are to be construed as advice given to the Claimants in circumstances where Ms Povey knew or ought to have known that the Claimants would rely on, and in the event did rely on, that advice for purposes of entering a costly contract with Orchard which otherwise the Claimants would not have entered. In the premises, the Defendant by Ms Povey was under a duty of care in providing such advice."

49. The nature of the case of the claimants acquired a little more focus in the written skeleton argument of Mr. Davies, in which he set out the terms of the critical communications on 12 February 2008, made reference to e-mails on 13 February 2008, which it is appropriate for me to quote, and then sought to draw the strands together:-

"29. At 8.07 a.m., C2 e-mailed Miss Povey, saying:

"I returned last night from France and am keen to get as much done now as fast as possible. I received an e-mail from Sharon Kerton just before I left but had no time to reply. Will do so now. I have not had the chance yet to open my post so if you have sent anything I have not seen it yet but will attend later this morning. I will also be conferring with the solicitors and if you have sent them anything then I will take care of it promptly.

"I am supposed to meet the builders this afternoon and sign the contract. Please tell me that is alright!"

30. Miss Povey answered a few minutes later at 8.13 a.m., saying:

"Hope you had a nice time in France.

"I need the information that Sharon requested to process the security, so there will be nothing at the solicitors as yet, upon receipt of the information this can be taken forward and the ball can start rolling.

Don't see any problems now that the issue regarding the security has been resolved by us taking a charge over flat 3 to support your guarantee."

"Kind regards.

"Speak soon.

"Karen."

31. At 8.22 a.m., C2 again e-mailed Miss Povey, saying:

"Thanks Karen.

"I just need to contact my mother to get the exact post code and address Sharon needs. I just tried calling my mother but she seems to be out. She could not have gone far, so I will get that full address in the next hour or two and email Sharon as soon as I do.

"In the meantime will go ahead and sign today.

"…"

32. Miss Povey's answer at 11.49 a.m. was:

"Can you copy me in to the email as Sharon only works Wednesdays and Fridays. I can then get things moving.

"Kind regards

"Karen."

33. The e-mails at vol 2. p. 140 are also important, and the Court is asked to read them in advance of the trial.

34. Cs contend that D is in breach of contract. They say that by 21^st December 2007 (when D debited one-half the arrangement fee to C1's account) or at any rate by 12^th February 2008, when Miss Povey advised C2 that she did not see any problems with his signing a contract between C1 and Orchard on terms (C2 will say) that D would provide the funding sought if C2 and his mother would provide a charge over Flat 3, Bryan Court, terms had been agreed between C1 and D.

35. Alternatively, by her e-mail of 8.13 a.m., Miss Povey warranted or at least represented to C2 that D would provide funding on the terms set out in the exchange of e-mails on 12^th February 2008. While D denies that it owed a duty of care to C1 in this regard, first, that is irrelevant if Miss Povey gave a collateral warranty, and secondly, it is wrong …"

50. The e-mails of 13 February 2008 which were not cited by Mr. Davies in his written skeleton argument were one from Dr. AlBaho to Ms Povey sent at 12.42, and a reply from Ms Povey sent at 3.12 p.m.
51. Dr. AlBaho's e-mail sent at 12.42 was in these terms:-

"Just to reconfirm that I did sign the contract yesterday with Orchard Concepts. Start date is set for 3^rd March. But some plumbing works needed prior to that are due to be done next week. Obviously people will want to get paid. I am waiting for your papers to sign as well and get all of this done."

52. In her reply Ms Povey wrote:-

"I have sent the application to CREDIT and it is being assessed, response is due on Friday. As soon as I get the OK I'll let you know. Sharon is taking care of the security and I believe is in the process of sending forms etc for signing – I think she will email you direct."

53. In his witness statement Dr. AlBaho dealt with the events of 12 and 13 February 2008 in paragraphs 71 to 73 inclusive. He did not suggest that there had been any relevant contact between himself and anyone acting on behalf of NatWest other than in the e-mails from which I have quoted.
54. Ms Povey dealt with the exchanges on 12 February 2008 at paragraph 44 of her witness statement:-

"I note that the Claimants' solicitors provided hard copies of an exchange of emails to the Bank's solicitors dated 12 February 2008, in which Dr. AlBaho appears to have asked that I confirm he could sign the JCT building contract with Orchard that day. I appear to have responded stating that I was still awaiting information to process the security and that there was therefore nothing with the solicitors yet. I then appear to have said that once this information was received, "the ball can start rolling". The alleged email then states 'Don't see any problems now that the issue regarding the security has been resolved by us taking a charge over flat 3 to support your guarantee …' Although I have not been able to locate these emails on the Bank's system, I recall having numerous conversations with Dr. AlBaho at the relevant time during which I indicated to him that the facilities were not yet in place and therefore the Company would enter into any contract with Orchard at its own risk. I acknowledge I have not kept written records of my telephone conversations with Dr. AlBaho in this regard, but clearly recall stating to him that there was still a 'long way to go' with regard to the security. I note that the alleged email of 12 February 2008 states that I did not 'see any problems' however, if I said this, it clearly would not have been a confirmation on behalf of the Bank that facilities were agreed or in place (Dr. AlBaho clearly appreciating at the time that they were not). Around 12 February 2008, I recall having numerous telephone conversations with Dr. AlBaho and the alleged emails of 12 February 2008 do not therefore provide a full account of my exchanges with him at the time. Dr. AlBaho would have known that while the Bank remained interested in funding the Development, the loan had not yet been approved and no agreement on terms had been reached so that any engagement with any contractors was at the Claimants' own risk. As demonstrated in my email to Dr. AlBaho of 31 January 2008, he was at the relevant time aware that the loan had to be approved by Credit, who could impose further requirements and that the application to them had yet to be submitted to them. I am fully satisfied from my conversations with him that Dr. AlBaho was aware of the contractual position at this time and understood the risks of entering into the contract with Orchard without finance having been in place."

55. That passage from the witness statement of Ms Povey struck me as very odd. The use of the word "alleged" to describe the various e-mails, and expressions like, "I appear to have responded stating that …" seem calculated to suggest that the e-mails were not genuine or, if in part genuine, had been tampered with since original production. However, in her oral evidence Ms Povey accepted that all of the e-mails were genuine. When asked why she had expressed herself as she had in paragraph 44, using the word "alleged" and expressions like, "I appear to have responded stating that …", she suggested that it was because at the time she wrote the witness statement she had not actually seen the relevant e-mails, because they no longer existed on the NatWest system. That was a straight forward lie, for the paragraph itself began by reciting that hard copies of the e-mails had been provided, and Ms Povey quoted from parts of them in the paragraph. I was very unimpressed by Ms Povey as a witness. It seemed to me that she took a flexible view of the truth, and was minded, in this instance, and in relation to what she said at paragraph 34 of her witness statement, to put forward evidence which she knew to be false in order to seek to exculpate her of possible blame for misconduct or dishonesty. I reached the conclusion that I could not accept her evidence on any disputed issue. Happily, the only significant disputed issues to which the evidence of Ms Povey was relevant were the matters dealt with in her paragraphs 34 and 44. For the most part relevant exchanges were in writing and copies of the relevant documents were adduced in evidence.
56. The fact that I disbelieved the evidence of Ms Povey that she "had numerous conversations with Dr. AlBaho at the relevant time during which I indicated to him that the facilities were not yet in place and therefore the Company would enter into any contract with Orchard at its own risk", did not have the consequence that I was persuaded that a contract was concluded in the exchanges which I have cited, or that Ms Povey warranted, or represented, to the Company that NatWest would make a loan to fund the Works, or that Ms Povey owed the Company a duty of care not to mislead it into thinking that NatWest would make a loan for that purpose. It was clear, as it seemed to me, from the terms of Dr. AlBaho's own e-mail sent at 8.07 a.m. on 12 February 2008 that he was expecting that NatWest would have sent, or might have sent, documents either to him or to the solicitors acting on behalf of the Company. In the context the relevant documents could only have related to the proposed loan, and that suggested that Dr. AlBaho understood perfectly well that documents would need to have been produced and signed before a loan could be made. Exactly that point had been made by Ms Povey in her e-mail to Dr. AlBaho sent at 1.25 p.m. on 10 December 2007. In his e-mail of 13 February 2008 Dr. AlBaho confirmed that he understood that, "I am waiting for your papers to sign as well and get all of this done." Thus, against that background, I think that it is obvious that the question at the end of the e-mail sent at 8.07 a.m. on 12 February 2008, "Please tell me that is alright", was not, as implicitly the submissions of Mr. Davies would have it, "Please confirm that NatWest will advance a loan to fund the Works.", but rather was seeking an assurance that the risk involved in signing the Building Contract in advance of a formal offer of loan being made was considered by Ms Povey to be slight. Her answer, "Don't see any problems now that the issue regarding the security has been resolved by us taking a charge over flat 3 to support your guarantee", was actually a response specifically to the question as to the level of risk, it was slight – Ms Povey did not see any problems. It cannot seriously be suggested that her answer, interpreted in that way, was negligent, for in due course the Loan Agreement was signed. If one regarded what she said, as I have construed it, as a warranty, it was not untrue, and, equally, if it was a representation, it was not untrue. I have to say that it seems to me that to interpret the exchange as giving rise to a warranty is to place upon it a burden which it will not bear, but it does not matter. Again, the alleged representation encounters the difficulty that, if it were to give rise to some liability, it had to be a representation as to existing fact, and it was far from obvious that what was said amounted to a representation of existing fact. The closest one could get, perhaps, was a representation as to the then current intention of NatWest.
57. In the result, for the reasons which I have given I am satisfied that there never was a First Agreement and that no liability on the part of NatWest arose as a result of the exchanges on 12 and 13 February 2008.
58. For completeness I should record that, on the assumption that I found that there had been the First Agreement, Mr. Davies, amplifying the plea of Mr. Hartman in the Reply, contended at paragraph 37 of his written skeleton argument, that:-

"Miss Povey's letter of 30^th April 2008 suggests that the only variation made to the parties' previous agreement was a slight increase in D's fee and the rate of interest applicable. Such variations are exclusively for D's benefit and cannot amount to consideration moving from D to C1 so as to support a variation of any contract concluded before 5^th May 2008."

59. As I have not been persuaded that there had been a First Agreement, it is not necessary to consider that submission. However, a conventional analysis of a formal written agreement being made after an oral agreement would be that consideration was provided by each party agreeing to forgo its rights and obligations under the agreement first made, in consideration of the acceptance by the other of the rights and obligations in the later agreement. Each case depends upon its own facts, but it is usually the case, and was so in the present case, if there had been a First Agreement, that the formal written agreement is considerably more detailed that the preceding oral agreement. Thus the point for which Mr. Davies contended, although conceivably sound in theory, in practice is unlikely to be encountered.
60. The letter dated 30 April 2008 from Ms Povey to Dr. AlBaho to which Mr. Davies made reference was in these terms:-

"I am pleased to enclose the Bank's Agreement in respect of the loan to assist with the development at Bryan Court.

You will note that the Bank's fee and interest rate has been increased slightly to that initially discussed – this reflects the current proposition and the present economic climate, both of which have changed significantly since the deal first came to the table.

I should be grateful if you would sign the Bank Copy where indicated prior to returning it in the envelope presented."

61. Ms Povey did not deal with that letter, or her thinking at the time she wrote it, in her witness statement. However, it appears that in fact she anticipated some resistance from Dr. AlBaho to the increase in fees and interest rates, for, having received an e-mail from Dr. AlBaho in which he raised no points on these matters, she forwarded that e-mail to Mr. David Kiernan of NatWest, with this observation, "Have copied you in to Tareq email, has agreed to fees!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! YIPEE, no questions asked". One wonders why Ms Povey was so delighted.
62. The ultimate point taken as justifying the claims of the Company in this action was that by making an advance of £85,000 out of the Loan on 30 May 2008 NatWest became committed to advancing, on the terms of the Loan Agreement, the balance, because it was no longer able to rely upon the preconditions stated in clause 2.1 of the Loan Agreement, other than clause 2.1(k), upon which it did not seek to rely. The point was, I think, just about pleaded in the Particulars of Claim, but did not have attached to it the prominence which it achieved at the trial. The material pleas in the Particulars of Claim were these:-

"44. Further, on 30 May 2008, in accordance with and pursuant to the terms of the agreement, the Defendant released £85,000 to the 1^st Claimant's current account.

45. Thereafter, in breach of contract, the Defendant failed to allow or permit draw down of further payments by the 1^st Claimant against certified work or any draw down payments from the 1^st Claimant's account for purposes of the said development and pursuant to the 2007 Agreement and/or the Written Agreement."

63. However, it did appear that it was understood on the NatWest side that the critical question in the circumstances was whether NatWest was entitled, in reliance on the provisions of clause 2.1 of the Loan Agreement, not to make further advances, for the Defence and Counterclaim included these pleas:-

"46. As to paragraph 44:

(1) As at 30 May 2008, the Defendant was not contractually bound to permit the Defendant to drawdown any part of the loan under the Loan Agreement because all of the conditions set out in clause 2.1 of the Loan Agreement had not been met.

(2) Notwithstanding that it was under no obligation to do so, the Defendant permitted the First Claimant to drawn [sic] down £85,000 on 30 May 2008. Prior to permitting that limited drawdown, by an e-mail of 20 May 2008 from Karen Povey to the Second Claimant, the Defendant informed the Claimants that "… NO further draw downs will be sanctioned until collateral warranties are executed and lodged."

(3) It is denied (if it be alleged) that the Defendant thereby waived its right to the conditions set out in clause 2.1 of the Loan Agreement being met prior to any further drawdown. The Defendant relies, insofar as necessary, on the e-mail referred to in (2) above and clause 13.1 of the Loan Agreement.

47. As to paragraphs 45 to 47:

(1) It is denied that in declining to permit the First Claimant to further drawn [sic] down the loan provided for by the Loan Agreement the Defendant was in breach of contract. The First Claimant was not entitled to drawn [sic] down because all the conditions set out in clause 2.1 of the Loan Agreement had not been met."

64. At paragraph 34 of the Reply and Defence to Counterclaim it was alleged that NatWest had waived its rights to require performance of every condition of the Loan Agreement which had not been performed by the Company, other than the obligation to provide warranties. At paragraph 16(1) of the Rejoinder and Reply and Defence to Counterclaim it was pleaded that:-

"It is denied that the Defendant waived its rights under clause 2.1 of the Loan Agreement. If and insofar as necessary, the Defendant relies on clause 13.1 of the Loan Agreement."

65. The e-mail dated 20 May 2008 pleaded at paragraph 46(2) of the Defence and Counterclaim was accepted as having been sent on that day by Ms Povey to Dr. AlBaho at 12.20 p.m. It was in these terms:-

"I have received confirmation that the sum of £85k can be drawn from loan initially to cover the most pressing invoices, this is subject to the following conditions 1. You must sign the remaining paperwork at Portman Square urgently and upon receipt that this has been actioned I can arrange to have the legal documents lodged with the Banks Security Centre. Portman Square should return the documents directly to me so that I can action this.

Also Orchards bond does not seem to include the Bank??? Currie and Brown are investigating this.

I must also make you aware that NO further draw downs will be sanctioned until collateral warranties are executed and lodged.

Trust this meets with your approval."

66. It looks as if, when she started to draft the e-mail, Ms Povey anticipated that there might be a number of conditions which she would wish to impose on the agreement of NatWest to the making of a payment of £85,000, for the number "1" appeared after the words "following conditions". However, there was only the one condition. The matter next mentioned in the e-mail, Orchard's bond, was not expressed to be the subject of any condition. What was relied upon on behalf of NatWest as preventing a waiver by the making of the payment of £85,000 was not expressed as something requiring agreement on the part of the Company, but a simple statement of NatWest's intentions, "NO further draw downs will be sanctioned until collateral warranties are executed and lodged."
67. In my judgment clause 13.1 of the Loan Agreement was on no assistance on the issue whether or not, by agreeing to the drawing down of £85,000 of the Loan, NatWest had waived any entitlement it might otherwise have had to contend that it was not obliged to provide the balance of the Loan. Clause 13.1, amongst other things, provided that NatWest could grant an indulgence to the Company, "without affecting any rights of the Bank in whole or in part." That form of words begged, rather than answered, the question what were the rights of NatWest in the circumstances. I accept the submission of Mr. Davies that, on proper construction of clause 2.1, NatWest was not obliged to provide the Loan or any tranche thereof unless and until the various preconditions set out in that sub-clause were met, but that, if NatWest, not being obliged to advance any part of the Loan, in fact did so, thereafter it was only entitled not to advance a particular tranche if the condition in clause 2.1(k) was met. Given the terms of clause 2.1(k) that was not, as Miss Lacob contended that it was, an uncommercial result. There were no fewer than 14 different events defined in clause 12.1 of the Loan Agreement as an "Event of Default" and they appeared to provide a comprehensive array of situations in which the risks to NatWest had altered since the making of the Loan Agreement. Moreover, it is plain from the opening words of clause 2.1 itself, "The Bank shall not be obliged to provide the Loan or any Tranche thereof", that NatWest had not determined in advance that it would not provide the Loan or any tranche thereof if the preconditions, or some one or more of them, had not been satisfied on the date on which the first tranche was drawn; it merely retained the option not to do so. Thus it was plainly contemplated that, in particular circumstances, NatWest might elect not to rely on failure to satisfy some precondition as justifying making no advance at all. That was in fact the present case.
68. In the result, I am satisfied that the claim of the Company succeeds on the ground that, by the terms of the Loan Agreement itself, in the events which happened, NatWest became bound, subject to the terms of the Loan Agreement, to advance the total amount of the Loan.

Damages for breach of the Loan Agreement

69. The damages claimed in this action were pleaded at paragraph 54 of the Particulars of Claim in this way:-

"By reason of the aforesaid breaches of contract or any of them and/or by reason of negligent misstatement, the Defendant has caused the 1^st Claimant and/or the 2^nd Claimant to suffer substantial loss and damage.

PARTICULARS OF LOSS AND DAMAGE

a. Had the Defendant provided the funding timeously and in compliance with the terms of the 2007 agreement and/or the written agreement, then by October 2008, the 1^st Claimant would have had the opportunity to have sold the penthouse, for a sum of £1.7m.

b. Further and alternatively, from about May 2008, the Claimants were entitled to and did enquire as to and sought alternative funding for completion of the development.

c. At the said date and thereafter during 2008 it proved very difficult for the Claimants to raise funds from banks or other lenders on reasonable terms. In that substantial sums were due and outstanding from the 1^st Claimant to creditors, and/or in that such sums represented losses to the 1^st Claimant, the 1^st Claimant resolved to sell the development project to recover the value of such equity as remained in the said development.

d. By and on 16 October 2008, the 1^st Claimant entered a contract for sale for the development to BC Penthouse Ltd., BCPL, a Gibraltar based company, as buyer of the proposed development. The main terms of that contract were to the effect that

i. The sale price was £1.1m to be paid by BCPL to the 1^st Claimant,

ii. BCPL shall pay to the 1^st Claimant an initial payment of £200k as part payment upon exchange of contracts.

iii. BCPL shall make all payment for works within 7 days of receipt of completion certificates rendered by supervising architects, such sums to be deducted from the further sums due on the sale,

iv. The 1^st Claimant to be liable for all project costs exceeding £1.1million.

e. By reason of delay and subsequent projected increases in project costs, on 19 January 2009 the 1^st Claimant agreed to a variation of the said contract of sale to BCPL such that the 1^st Claimant agreed to pay £125,000 and agreed to transfer the freehold title of Bryan Court to BCPL and introduce ground rents into all the leases to allow BCPL to collect the total sum of £4,000 per annum in respect of the ground rents in return for BCPL accepting liability for completing all outstanding works.

f. Further, the sale of the freehold included a small strip of land to the side of Bryan Court on which the 1^st Claimant had originally planned to seek planning permission to build a maisonette or town house. The potential loss to the 1^st Claimant is estimated to be £300,000.

g. Subject to the Claimants obtaining expert reports relating to the market in such penthouse flats at June 2008, as a result of the failure by the Defendant to provide funding after May 2008, the development suffered damage or loss of opportunity damages, expressed as approximate sums, as particularised below:

h. In its final furnished state

£

Potential Sale Price on completion 1,700,000

Less all budgeted costs amounting to (1,170,000)

Yielding a likely gross profit amounting to £530,000

which sum was lost to the 1^st Claimant

and,

i. The loss suffered in mitigating the damage so caused by selling the project to BCPL and amounting to

Payment 125,000

Freehold 160,000

Lost Development Opportunity 300,000

Yielding a further likely loss of £585,000

which was lost to the 1^st Claimant

j. Further, the total anticipated or opportunity loss on the building programme is calculated to be the sum of lost likely profit of £530,000, added to which is the actual operational loss of £585,000, amounting in total to a loss of £1,115,000.

k. In reduction of those losses, the 1^st Claimant has received from the Defendant the benefit of sum of £85,000 which sum shall be credited to the Defendant and set off against the loss to the 1^st Claimant.

l. Further and alternatively, by reason of the said breaches of contract by the Defendant, the Defendant wrongfully caused the 2^nd Claimant to lose the said sum of $100,000 less $10,608.68 refunded to the 1^st Claimant by the Defendant, amounting to a net loss of $89,391.32."

70. The claim made by Dr. AlBaho in his personal capacity appeared to be without any foundation. It was not alleged that NatWest was in breach of any obligation owed to him personally, rather than owed to the Company. Moreover, it appeared from paragraph 94 of Dr. AlBaho's witness statement that what had in fact happened in relation to the money in the Dollar Account was that NatWest had agreed that Dr. AlBaho could draw funds from it in order to pay costs incurred in connection with the Works, on the understanding that the sums so drawn would be replaced when the Loan was made. In an e-mail to Dr. AlBaho sent at 10.56 a.m. on 22 April 2008 Ms Povey wrote:-

"With regards to the initial invoice that I believe needs paying – the bank are happy for you to use your US$ ahead of the Banks security being in place. I will then replace the balance when the loan is drawn. I will arrange to transfer the funds to Bryan Court Limited so that you can issue cheques."

71. Thus it appeared that it was the Company which had had the benefit of the funds drawn from the Dollar Account, not NatWest, in any event.
72. BC Penthouse Ltd. ("BCP") appeared to be a company incorporated in Gibraltar with the company registration number 101402. There were produced in evidence at the trial copies of two contracts in writing made between the Company and BCP. The first ("the Penthouse Contract") was dated 16 October 2008 and seemed to have been a fairly straightforward agreement for the sale of the Penthouse. The Penthouse Contract took the form of an agreement running to two pages, which in turn incorporated "Contract Conditions" ("the Conditions") set out on succeeding pages.
73. For present purposes the material terms of the Penthouse Contract, other than the Conditions, were:-

"THE PROPERTY

1.1 The property is the Penthouse Flat, to be numbered 11 Bryan Court, on the roof of the building known as Bryan Court 68 Seymour Place, London W1H 2NE shown edged red on the plan annexed hereto and which is to be built in accordance with the specifications and upon the terms and conditions contained in the building contract made between the Seller and Orchard Concepts Ltd. of 9 Harmsworth Street, Kennington London E17 3TL ("the Building Contract").

1.2 The tenure is Leasehold in accordance with the terms and conditions of the draft lease annexed hereto ("the Lease").

1.3 The Property is to be registered at the Land Registry with absolute title.

SALE PRICE

The sale price is £1,100,000 (one million one hundred thousand pounds), which is to be payable at the following stages:-

2.1.1 Initial deposit of £200,000.00 on exchange of contracts

2.1.2 Payments against certificates rendered by the Supervising Architects ("Blampied & Partners Ltd.") within 7 days of receipt.

2.1.3 Final payment of remaining balance of sale price (if any) to be paid on the Completion Date.

COMPLETION DATE

The completion date shall be in accordance with clause 9.

…

CONTRACT

The Seller will sell and the Buyer will buy and the Buyer will accept the Lease of the Property for the Sale Price.

This Contract continues on the pages that follow [on which were set out the Conditions]."

74. The Conditions included:-

"4. The Seller warrants that it will complete the construction of the Property in accordance with Section 2 of the Building Contract and in accordance with the terms of the relevant planning permission and building regulation consent.

…

9. The Seller will complete the construction of the Property so it is ready for occupation and following this completion will then take place either:

9.1 on the completion date specified on the front page of this Contract or if no date is stated;

9.1.1 14 days from the date of the notice requiring completion served by the Seller's conveyancer on the Buyer's conveyancer.

…

19. The Seller shall as soon as practicable after exchange of this Contract procure the carrying out and completion of the Building Contract:

a. With all reasonable speed and diligence;

b. In a proper and workmanlike manner;

c. Using good quality materials;

d. In accordance with all Requisite Consents and Statutory Requirements; where relevant to adoptable standards;

And to that end will enter into such appointments in respect of the Professional team as the Buyer considers necessary."

75. The Penthouse Contract related solely to the Penthouse. It made no provision whatever for the undertaking of such of the Works as did not relate to the Penthouse. In theory, at any rate, it might have been possible to contend, if the facts were said to justify it, that in order to mitigate the dilemma in which the Company had been placed by the refusal of NatWest to advance the balance of the Loan in excess of £85,000, the Company had been obliged to sell the Penthouse to BCP for a sum less than its value. However, that was not how the claims of the Company were formulated. There was a logic in how the claim for loss of profit on the sale of the Penthouse was put, but that logic involved the Penthouse Contract being financially neutral and simply providing the funds to enable the Penthouse to be completed.
76. The second agreement ("the Payment Agreement") in writing made between the Company and BCP was dated 19 January 2009. It seemed to me to be a very strange agreement, and one the effect of which was very difficult to assess. Beneath the details of the names and addresses of the parties, and in advance of the recitals, there were definitions, which included:-

"1. 'Bryan Court' means the building situated at and known as Bryan Court, 68 Seymour Place, London W1H 2NE.

2. 'The Contract' means the contract dated 16^th October 2008 made between the parties to this agreement for the sale of the proposed penthouse flat at Bryan Court.

3. 'The Penthouse' means the penthouse flat referred to in the Contract.

4. 'Building Contract' means the agreement dated 12^th February 2008 together with the supplemental agreement dated 16^th October 2008, and any variations thereto as at the date hereof, made between the Seller and Orchard Concepts Limited.

5. 'the Freehold' means the freehold of Bryan Court which is registered at HM Land Registry under title number NGL847065.

6. 'the Leases' means all those leases of flats granted to members of the Seller at Bryan Court for a term of 999 years from 25^th March 2005 at an annual rent of a peppercorn.

7. 'the Payment' means the sum of £125,000 (one hundred and twenty five thousand pounds).

8. 'the Shortfall' means the costs of all the works specified in the Building Contract which the Seller has contracted with the Buyer to pay under the Building Contract over and above the tendered sum.

9. 'the Claim' means all and singular each and every cause of action in law or equity that has accrued to the Seller at the date hereof including but not limited to its right to prosecute a claim for breach of trust or other cause of action whatsoever against the Royal Bank of Scotland NatWest or any successor company and the right to all damages awarded and the benefit of any other relief or remedy obtained by the prosecution of such claim."

77. The recitals to the Payment Agreement were:-

"1. The Seller and the Buyer have entered into the Contract and the Seller has agreed to build and sell a lease of the Penthouse to the Buyer for a term of 999 years from 25^th March 2005 at a price of £1,100,000.

2. Delays in completion of the Building Contract have resulted in the Shortfall.

3. The Seller is the registered proprietor of the Freehold and has the benefit of the Claim.

4. The Seller has obtained the agreement of all its members to a variation of the Leases by the provision of an annual ground rent of £350 (three hundred and fifty pounds) for the remainder of the term in substitution for the peppercorn currently payable thereunder; this amount to be reviewed every 5 years according to variations under the Retail Price Index.

5. The parties to this agreement have agreed terms between them for sale by the Seller to the Buyer of the Freehold and the assignment of the Claim."

78. For present purposes the material substantive provisions of the Payment Agreement seem to have been these:-

"1. In pursuance of this agreement the Seller agrees:

1.1 on the date of this agreement:

1.1.1 to pay to the Buyer the Payment

1.1.2 to transfer to the Buyer without charge or the payment of any premium and with full title guarantee the Freehold

….

1.3 to procure within 6 months hereof the execution by each of its members of a deed of variation of the Leases with the Buyer on the terms referred to above.

…

2. In consideration of the above the Buyer agrees:

2.1 to accept the Payment in full and final settlement of any claims which the Buyer may have against the Seller in respect of the Shortfall and to use the Payment for the purposes only of meeting all expenditure relating to and arising out from the Building Contract and the completion of the same; the Payment to be held by the Seller's Solicitors as stakeholders for the Buyer pending completion of the Contract, following which the Payment will be released forthwith to the Buyer, or in default of completion the Payment will otherwise be forfeit to the Seller."

79. It was wholly unclear from the terms of the Payment Agreement that entering into it had anything to do with the dilemma arising out of the refusal of NatWest to provide the balance of the Loan to the Company. Per contra, it seemed that the making of the Payment Agreement was consequent upon there being an increase in the sums payable under the Building Contract, such increase occurring at some point after the date of the Penthouse Contract. What it was that prompted that increase did not emerge clearly in evidence. At paragraph 152 of his witness statement Dr. AlBaho appeared to suggest that it was the delay caused to the undertaking of the Works by reason of the non-availability of funding from NatWest, but that was difficult to understand, when Orchard had left site on 10 June 2008 by reason of non-payment, yet the Penthouse Contract treated the Building Contract as still in place. One would have thought that the cost implications, if any, of the delay would have been known by the date of the Penthouse Contract, as that contemplated the completion of the Penthouse in accordance with the provisions of the Building Contract.
80. A further mystery is why an increase in the sums payable under the Building Contract, to which the Company and Orchard were parties, but BCP was not, should prompt the Company to pay a sum to BCP. What one might have expected, if any agreement at all were appropriate, was the Company promising to BCP to pay to Orchard whatever sums were necessary in order to procure completion of the Penthouse. The obligation of BCP in clause 2.1 of the Payment Agreement to use the sum of £125,000 to be paid under that agreement, "for the purpose only of meeting all expenditure relating to or arising from the Building Contract" seemed to make no sense.
81. Again, it was difficult to understand the motivation for the transfer by the Company to BCP without payment of the freehold interest in Bryan Court. If BCP provided some benefit to the Company of some sort, well and good, but in fact the freehold interest just seems to have been given away. That it was transferred was noted by Mr. Mark Shaw, the expert valuer instructed on behalf of NatWest for the purposes of this action, at paragraph 9.1 of his report:-

"The Freehold interest in Bryan Court is held under Title No. NGL847065 in the name of BC Penthouse Ltd. (incorporated in Gibraltar) of Gibro House 4 Giro's Passage, Gibraltar. The price stated to have been paid on 29 November 2010 was £125,000."

82. Whilst that paragraph noted that which was otherwise not established by evidence adduced at the trial, namely that the freehold interest in Bryan Court had been transferred to BCP, the information provided was difficult to reconcile with the Payment Agreement. The Payment Agreement in terms provided that the transfer was free of payment, not for £125,000, which was expressed in the Payment Agreement to be payable by the Company, not to the Company. The alleged date of transfer was also puzzling.
83. No evidence was put before me to suggest that any of the tenants of Bryan Court had actually agreed to vary his or her lease to pay a ground rent other than a peppercorn.
84. Apart from the alleged loss of profit on sale of the Penthouse, all of the claims of the Company in this action depended upon the Payment Agreement having been rendered necessary as a result of the breach which I have found on the part of NatWest in failing to advance the balance of the Loan, and the Payment Agreement having had the effect for which the Particulars of Claim contended. I have already indicated that there was in fact no evidence to link whatever prompted the making of the Payment Agreement with the non-provision of funds by NatWest. I have also commented that the purpose and effect of the Payment Agreement were very difficult to understand. Without some further explanation, which was not offered in the evidence, I do not accept that it was necessary for the Company to agree to pay BCP £125,000 and to transfer the freehold interest in Bryan Court to BCP. No worthwhile consideration emanating from BCP could be discerned in the Payment Agreement. Given the apparent terms of the registration of the transfer of the freehold interest in Bryan Court at HM Land Registry, there has to be some doubt as to whether the apparent terms of the Payment Agreement were ever implemented, at least in full.
85. By the end of the trial the focus of attention in relation to the alleged loss of profit on the sale of the Penthouse had become what was its value as at October 2008 and how much would have been needed to have been spent in order to complete the Works, but for the interruption caused by the decision of NatWest to refuse further funding.
86. The Company instructed Mr. Andrew McKenzie as an expert valuer to give evidence on its behalf. Mr. McKenzie produced a brief report, but did not attend the trial. In his report Mr. McKenzie identified six properties sold in 2007 or 2008 which he considered should be taken into account in reaching a conclusion on the value of the Penthouse in October 2008. He analysed each of the properties which he mentioned in order to produce a rate per square foot of gross internal area. The range of rates was between £886 and £1,422. He concluded that the value of the Penthouse in October 2008 had been £1,500,000. Mr. McKenzie noted his understanding that the gross internal area of the Penthouse was 1,593 square feet. By calculation the rate per square foot which he adopted for the Penthouse in reaching his valuation was £941.62.
87. Mr. Shaw did attend the trial. He agreed with Mr. McKenzie that, in relation to the valuation of penthouse flats in Central London, at least, the appropriate method of valuation was to apply an appropriate rate per square foot to the gross internal area. Mr. Shaw told me that he had actually measured the gross internal area of the Penthouse as completed, and it came to 1,538 square feet. Mr. Davies accepted that figure as correct, in the absence of any indication as to how Mr. McKenzie had reached his figure of 1,593. Mr. Shaw listed 22 properties in his report as properties the sale of which in 2007 or 2008 he had taken into account in calculating his valuation of the Penthouse in October 2008. He adjusted each rate per square foot as analysed to bring it to a common base as at October 2008. With those adjustments the range was £735 to £1,210. The property Mr. McKenzie had analysed as producing a rate per square foot of £1,422 Mr. Shaw analysed as producing a rate per square foot of £1,222. When he came to give evidence Mr. Shaw produced a marked up version of his table of comparable properties identifying eight which he contended were particularly helpful. These eight included both the lowest and the highest of the rates per square foot which Mr. Shaw had calculated. The eight were all, like the Penthouse, two bedroom flats. With one exception the other 14 flats Mr. Shaw mentioned in his report were three bedroom flats. Mr. Shaw calculated an average value per square foot from the two bedroom flats he mentioned at £947. However, Mr. Shaw then devalued the appropriate rate per square foot to be applied in calculating the value of the Penthouse as at October 2008 to £825. His explanation in his report prepared for the purposes of this action as to why he thought that appropriate was:-

"15.7 In terms of location, this is reasonable and the property is well situated for transport connections. However Seymour Place is not the most prestigious residential location in Marylebone and I have taken this into account. The refurbished entrance and staircase of the common parts presents well and the internal staircase from the third floor entrance to the fourth floor is also generally well finished. The overall size of the flat is good.

15.8 The flat does however have some significant deficiencies, the most important of which is a lack of access to a lift. At the luxury end of the market, one would normally expect a block of flats to have a lift serving each floor. Where there is a penthouse flat, the lift will often open directly into the flat, secured by a key from within the lift car. The lack of this feature detrimentally affects value.

15.9 Many blocks of comparable flats also benefit from 24 hour porterage which adds to security and enhances the general running of the building. This was a feature of Bryan Court prior to the Claimant owning the freehold interest, at which point the porters [sic] flat was refurbished and sold.

15.10 Another factor which needs to be taken into account, is the size of the terracing around the flat which at points is only 2 ft. deep. A spacious terrace is often seen as a pre-requisite for a penthouse flat.

15.11 The quality of some of the finishes within the flat is disappointing, particularly the floor covering and the dressing room and second bedroom fitted units. The lack of attention to detail in some areas is also disappointing. The use of steel-frame doors to separate the kitchen may not suit everyone's taste.

15.12 To take account of the deficiencies with the subject property compared with the market as a whole, I make an allowance of between 10% and 15% and on this basis I arrive at a rounded range of £800 to £850 per sq ft. This mid-point of this range is £825 which I believe fairly reflects the value of the subject property at the valuation date.

15.13 I would add that I have considered the concept of a 'new build premium'. It is recognised that there is often a premium that is paid in the market for newly constructed properties which have never been occupied before and this is typically found in large scale residential schemes rather than one off roof-top extensions. Given however the type of block and property this is and the taking account of the deficiencies already described, I do not consider that an allowance for 'a new-build premium' is warranted here."

88. I notice that, as a matter of arithmetic, 90% of £947 is in fact £852.30, while 85% of £947 is £804.95. The average of these two figures is £828.63. The effect of Mr. Shaw's rounding of figures appeared, therefore, to be to reduce his valuation.
89. Mr. Shaw was asked in cross-examination about the effect of lack of a lift in a penthouse flat. He said that there was no percentage which would generally be applied to take account of the lack of a lift. Essentially a valuer had to take account, using his or her judgment, of all the pluses and all the minuses in reaching a valuation. I am sure that that is right. However, from his helpful analysis of each of the properties the sale of which he took into account in reaching his valuation of the Penthouse in October 2008, it does appear that in nine of the twenty-two instances there was no lift. In only six instances was there terracing, although in seven cases there was a balcony, or more than one. However, that meant that in nine of the properties which Mr. Shaw considered there was neither a terrace nor a balcony. Given these features of the properties which Mr. Shaw considered, it seemed surprising that his valuation of the Penthouse at £825 per square foot in October 2008 meant that only two of the properties which he considered were less valuable per square foot, and one other more or less of equivalent value, at £826 per square foot. However, the latter was not one of the properties the sale of which Mr. Shaw told me was particularly helpful. In his oral evidence Mr. Shaw emphasised as the principal deficiencies of the Penthouse, as compared with other penthouse flats potentially on the market, the lack of the lift, the very small terrace and the fact that the floor covering in the Penthouse was laminated wood, not solid.
90. In reaching his valuation Mr. McKenzie seemed to base himself simply on placing the Penthouse in a range of rates per square foot. However, Mr. Shaw did two things. He first assessed the average rate per square foot for the gross internal areas of each of the two bedroom flats sales of which he took into account, and then he devalued the average. On reflection I have some difficulty in understanding the logic of that approach. In the nature of the exercise it was likely to reduce the rate per square foot adopted, as it seemed to me. The process of calculating an average rate per square foot must take into account, in the circumstances of the present case, the fact that some flats considered by Mr. Shaw lacked lifts, that others lacked terraces, and the general attributes and deficiencies of each. If all of the flats Mr. Shaw considered had had lifts and terraces, for example, I can see that some adjustment was necessary to be made in valuing a flat which lacked a lift and had a poor terrace, but that was not this case. There was no logical reason why Mr. Shaw should not have based his conclusions on flats which lacked lifts and those which lacked outside space, whether balcony or terrace, and making an adjustment for the poor quality of the flooring in the Penthouse. In Mr. Shaw's list of properties which he considered there were six which fell into this category, some with three bedrooms and some with two. The average rate per square foot, as adjusted by Mr. Shaw, was £868. Or he could simply have placed the Penthouse at a particular point in the range demonstrated by the other properties which he considered. The average rate per square foot, as adjusted by Mr. Shaw, of the eight properties sale of which he indicated in his oral evidence was particularly helpful was £1,017.13. The average of those two averages is £942.57.
91. At section 17 of his expert report Mr. Shaw gave other information which seemed to me to be relevant to the valuation of the Penthouse as at October 2008. The Penthouse was, as at the date of the trial, for sale. It was being offered at a price of £1,695,000, the asking price having been reduced from an earlier £1,795,000. An asking price is only an asking price, and not reliable evidence in itself of value. However, the fact that the asking price of £1,695,000 had been reduced at least indicated a desire to achieve a sale and suggested that some interest was expected at the level currently advertised. Mr. Shaw stated at paragraph 17.3 of his report that the average price of a flat in the City of Westminster had increased by 18.6% in the period October 2008 to the latest date for which information was available, December 2011. On that basis, if the current asking price of the Penthouse is realistic, that would indicate that the rate per square foot as at October 2008 would have been £929.34. I do not overlook that at paragraph 17.3 of his report Mr. Shaw commented that:-

"I have not carried out a current day market valuation but my view is that this is higher than in October 2008 but significantly lower than the current asking price."

92. In reaching a conclusion as to the appropriate rate per square foot to adopt for the purposes of valuing the Penthouse as at October 2008 I think that it would be wrong to ignore the opinion of Mr. McKenzie. He adopted the same approach as Mr. Shaw in seeking to calculate a value based on gross internal area multiplied by a rate per square foot. He, unlike Mr. Shaw, did not calculate an average to which he then applied a discounting element, an approach which I have difficulty in understanding. What he did do was to come up with a rate per square foot which was very similar to the average rate per square foot for a two bedroom flat at which Mr. Shaw arrived. That average takes into account, to an extent, in the manner which I have explained, two of those features of the Penthouse which Mr. Shaw regarded as especially negative, the lack of a lift and the poor quality of the terrace. For that reason, and because of the relative position in which it placed the Penthouse in the range of rates per square foot analysed and adjusted by Mr. Shaw, I conclude that Mr. Shaw's assessment of £825 per square foot is too low. Doing the best I can, I find that the appropriate rate per square foot is £925.
93. In the result I find that the value of the Penthouse in October 2008 was £1,422,650. No doubt in the world of valuation that figure would have been rounded, either down to £1,420,000 or up to £1,425,000, but I do not consider that it is appropriate to round it, given the way in which I have reached the figure.
94. Mr. Shaw enlisted the help of Mr. Andrew Moulsdale, a chartered building surveyor, in calculating the likely cost of completion of the Works after the interruption when Orchard left site. I am sure that Mr. Moulsdale approached his allotted task conscientiously. However, I do not think that what he was asked to do was of any assistance. What I have to consider is what profit, if any, the Company would have made out of the completion of the Works but for the refusal of NatWest to continuing funding. If that decision had not been made, the execution of the Works would not have ceased as at 10 June 2008, and later been re-commenced, they would have continued until practical completion of the Works in about mid-September 2008. The best indication of what the actual costs would have been in those circumstances was, I think, the original anticipated cost of the Works, including funding costs payable to NatWest, as adjusted to take account of increases in the sums payable under the Building Contract as a result of decisions taken prior to the date Orchard left the site.
95. It is convenient to take the original anticipated costs of the Works, including the financing costs, as the amount of the Loan, since the Loan was intended not merely to meet the costs of the Works, but also the financing costs. From a breakdown of that sum set forth in a NatWest internal document in relation to the Loan, under the rubric "Resub – 12 Feb 2008", attached to the witness statement of Ms Povey, it seems that it included, in respect of the anticipated cost of the Works, "Contingency 2.45% £22,308" ("the Contingency"). The breakdown in fact showed figures which totalled £1,127,358, so the Loan included an additional element which was available, but not necessary to be spent, of £2,642. The Contingency and that amount totalled £24,950 ("the Additional Funds").
96. On or about 1 August 2008, at a time when Orchard had ceased the execution of the Works, but when it was still anticipated that the Works might shortly be resumed, Blampied produced a document entitled "Bryan Court, 68, Seymour Place, London W1 Schedule of Anticipated Instructions, and Summary of Anticipated Final Project Costs"("the Estimate"). The Estimate recorded a "Total Anticipated Project Cost", exclusive of funding costs, of £1,107,265. However, what is of interest for present purposes are the elements included in "Variations as above £155,157", for the other items included in the total of £1,107,265 were also included, as I understand it, in the calculation of the Loan. In the Estimate a number of items were noted as "Instructed", by which I think that it was intended to convey that instructions for the work in question had been issued pursuant to the relevant provisions of the Building Contract, and therefore they had to be paid for. The focus of attention is thus upon those items included in "Variations as above £155,157", but in respect of which no instructions had been issued. There were in fact eight of these. From the relevant descriptions it can be seen immediately that four, amounting in total to £66,600, were envisaged as consequential upon the cessation of the funding by NatWest and/or the abandonment of the execution of the Works on 10 June 2008. They were:-

"21 Delay and re-mobilisation costs – anticipated three months @ £10,000.00 £30,000.00

22 Additional design/administration costs £7,500.00

23 Interest on late payments £15,000.00

24 Cost escalation £705,000.00 x 2% £14,100.00"

97. The other four anticipated "Variations" were:-

"16 Form two back to back cupboards under entrance steps for electrical intake, and water booster equipment £1,500.00

17 SICA render to 3 No additional pavement vaults – (now 4 No total) £2,400.00

18 Re-wire 9 No flats to comply with current standards utilising existing conduit £27,000.00

19 Design, supply, and installation of lighting fittings to communal areas and penthouse. By specialist SKL Ltd.

£25,000.00"

98. Only in relation to one of these four elements was any evidence led at the trial, and that was the suggestion that nine flats needed to be re-wired. In an e-mail dated 1 August 2008 to Mr. Gabriel Knapick of Currie & Brown UK Ltd., to which e-mail was attached the Estimate, Mr. Patrick Frost of Blampied commented as follows:-

"Regarding the electrics within the existing flats, these have to be tested, and if they fail to meet the required standards, they will have to be re-wired. To date, one flat has been tested and passed. Until such time as all the flats are tested, the number of flats requiring re wiring cannot be established. Therefore of the nine remaining that have not been tested, I have allowed £3,000.00 per flat for re wiring, which is a budget figure provided by the M&E consultants."

99. As I understand it, all of the flats were constructed at the same time, and one would imagine that the condition of the electrical wiring in each flat would be similar. Consequently it seems that there is a good prospect that re-wiring was not in fact necessary. If that were so, of the "Variations as above £155,157", only £61,557 (£155,157 minus £66,600 and minus £27,000) would actually have been incurred by way of increases if the execution of the Works had gone smoothly and payments of amounts of the Loan had been made when necessary. If one deducted the Additional Funds from that figure of £61,557 the arithmetical result is £36,607. It is probably also appropriate to take into account that only that part of the £25,000 for light fittings which related to the Penthouse needed to be spent, as the common parts of Bryan Court would have had lighting already.
100. Doing the best I can I find that, had NatWest not effectively stopped the execution of the Works by declining funding, the cost of completing the Works, including the financing costs, would have been as was pleaded in the Particulars of Claim, £1,170,000, calculated as the amount of the Loan plus the figure of £36,607, rounded to £40,000.
101. In the result I find that the profit which the Company would have made out of the execution of the Works, but for the problems resulting from the breach of the Loan Agreement on the part of NatWest, is £252,650, calculated as a gross selling price of £1,422,650 less costs of £1,170,000.

The Counterclaims

102. On behalf of NatWest the sums counterclaimed were set up, so far as necessary, as a defence of set-off. What was alleged at paragraph 58 of the Defence and Counterclaim was:-

"If (which is denied), the Defendant is liable to the First Claimant, the Defendant seeks to set-off in extinction alternatively reduction of such liability the sums counterclaimed below."

103. At the end of the trial, in the light of the appreciation of the implications of the debiting to the Loan Account of the sum of £28,250 on 21 December 2007, considerably in advance of the conclusion of the Loan Agreement, and thereafter charging interest upon that sum from that date, compounded from time to time, the amounts claimed on behalf of NatWest in this action were adjusted. In the recalculation the total arrangement fee of £56,500 was treated as having been debited on 30 May 2008. Moreover, it was disclosed in the third witness statement of Mr. Stephen Munro, a corporate manager employed by NatWest who dealt with the calculations, that, in an earlier version of the calculations relied upon, NatWest had chosen to include what was called a "case fee" of 2% of the sum claimed, which Mr. Munro said at paragraph 8 of his third witness statement, was, "a 2% management charge taken to reflect the cost to the Bank in dealing with the recovery of indebtedness on such accounts after demand [for repayment] has been made." It looked to me as if that was in fact yet another element of charge to which NatWest sought to help itself in disregard of any contractual obligation on the part of the customer, for Mr. Munro thought it appropriate not to seek to justify the "case fee", but rather to produce calculations which included it and calculations which did not. The second was the correct approach. On that approach the sums due at the end of the trial were £188,994.28 on the Loan Account and £5,652.03 on the Current Account.
104. Mr. Davies accepted that the sum of £85,000, together with interest thereon assessed in accordance with the terms of the Loan Agreement, was due to NatWest from the Company and should be allowed in reduction of any damages which the Company established it was entitled to. However, he contended that the Company was not liable in respect of the arrangement fee, because NatWest had been in breach of the Loan Agreement in failing to provide the balance of the Loan over £85,000. I do not accept that submission. Pursuant to clause 5.1 of the Loan Agreement NatWest was entitled to charge the administration fee on the date the first tranche was drawn down or seven days after the date of the Loan Agreement. Both those dates had passed before NatWest was in breach of the Loan Agreement, so the sum was due. While NatWest had, as I have found, breached the terms of the Loan Agreement, consideration for the payment of £56,500 had not totally failed. The Company was bound to pay that sum if NatWest had performed its obligations under the Loan Agreement. The compensation which I have assessed is intended to put the Company in the position in which it would have been had NatWest not been in breach of the terms of the Loan Agreement, which position included paying the administration fee.
105. Consequently NatWest is entitled to set off against the damages which I have found of £252,650, the sums due to it, totalling £194,646.31.

Conclusion

106. In the result there will be judgment for the Company in the sum of £58,003.69.
107. For the sake of good order, the claims of Dr. AlBaho in his personal capacity are dismissed.
108. The sums counterclaimed by NatWest being less than the sum found to be due to the Company, the counterclaims of NatWest are dismissed.