Bank of India v Riat

JUDGMENT 1. This judgment is in seven parts:Part 1 Introduction §1-5Part 2 The issues §6-10Part 3:   The witnesses §11-17Part 4:   Globepark Development Limited and the search for facilities §18-38Part 5: Misrepresentation §39-54Part 6:  Economic duress §55-71Part 7:  Conclusion §72-73 Part 1. Introduction 2. This case arises out of two limited guarantees signed by Mr Nirpal Singh Riat, the Defendant, as security for facilities provided by the Bank of India (“the Bank”) to Globepark Developments Limited (“the Company”).  The Company was a family run business with Mr Riat and his son Ashwin Riat being the sole directors and shareholders at all material times. Mr Riat was a 98% shareholder in the Company whereas Ashwin Riat held 2%. The business of the Company was property development including renting properties.  3. Mr Riat signed a guarantee on 10 January 2006 (“the first guarantee”) in respect of facilities provided to the Company by the Bank as set out in a facility letter dated 15 December 2005 and which was signed by the parties on 10 January 2006 (“the first facility”) . The first guarantee was limited to £1,237,000 together with interest, costs and expenses as set out therein.  Mr Riat also signed a further guarantee on 2 August 2006 (“the second guarantee”) in respect of facilities provided by the Bank to the Company as set out in a letter dated 7 July 2006 (“the second facility”). The second guarantee was limited to £490,000 together with interest, costs and expenses as set out therein. 4. The Company entered administration on 31 March 2010. The Bank has made formal demands of Mr Riat under the guarantees and which demands he has resisted on various bases since the proceedings commenced on 1 March 2011. Following a summary judgment application before Master Price on 11 October 2011 and an appeal to Mrs Justice Asplin on 12 December 2012 the matters in dispute have now been distilled to two lines of defence, namely that it is asserted by Mr Riat that both guarantees are vitiated by misrepresentation alternatively the first guarantee was vitiated by economic duress. 5. At trial the Bank was represented by Mr Geoffrey Zelin of Counsel and Mr Riat was represented by Mr Stuart Cakebread of Counsel. I am grateful to both Counsel for their very clear written and oral submissions. The trial commenced on 12 May 2014 and submissions concluded on 16 May 2014. Part 2: The Issues6. The first issue is whether the guarantees are rescinded for negligent misrepresentation. The misrepresentation relied upon is that set out in paragraph 10 of the Re-Amended Defence and Counterclaim:“Prior to the First Facility the Claimant represented to the Defendant that the Claimant wished to expand its involvement in the property development sector.” 7. It is then asserted at paragraph 11 of the Re-Amended Defence and Counterclaim that “the said representation was not true insofar as it was a representation as to the then existing intention of the Claimant” and that Mr Riat was induced by this untrue statement to enter into both of the guarantees. 8. The Bank does not admit that the alleged statement was made by any of its employees but if it was said it contends that the statement was true, and even if the statement were untrue it was the genuine and reasonably held belief of Mr Sukhdev Singh, the Bank’s manager at the Wembley branch who is first alleged to have made it, and also of Mr Sushil Kumar.  In any event, says the Bank, any such representation could not reasonably be relied upon but was a mere puff and was not in fact relied upon by Mr Riat who would have entered into the guarantees in any event. 9. The second issue is whether the first guarantee is vitiated for economic duress. It is asserted by Mr Riat that the requirement of a guarantee was not mentioned at all by the Bank’s personnel until the last possible moment and at a point when Mr Riat had “burned his bridges” with Natwest Bank who were the current bankers for the Company and left him with no practical alternative with other financiers. The Bank contends that Mr Riat was informed of the need for a guarantee earlier than he alleges and in any event in good time for him to make a decision. It is contended by Mr Riat that he was the subject of illegitimate pressure for which there was no commercial justification and which left him with no reasonable alternative other than to sign the first guarantee. 10. The Counterclaim advanced by Mr Riat is for a declaration that he is entitled to rescind the guarantees for the reasons set out in the Defence, namely misrepresentation and economic duress, and for consequential relief. Part 3: The witnesses11. I heard the testimony of a number of witnesses called by the Bank. Mr Hemant Kumar is the current Chief Executive of the Bank’s main office in London (“the main office”). His witness statement was limited to setting out the account balances in respect of the Company’s indebtedness. In cross-examination he was asked about more wide-ranging matters including the Bank’s record keeping and preservation of documents.  I then heard the evidence of Mr Sushil Kumar who was the former Bank Manager of the main office and he gave evidence of his direct dealings with Mr Riat including discussions regarding the terms of the facilities and securities required as well as the Bank’s lending procedures and document preservation system. I also heard from Mr Satish Gupta who was the former Chief Executive Officer during the period that is relevant to this dispute who gave evidence of the Bank’s general policy and procedures as well as his direct involvement with Mr Riat.  Finally I heard from Mr Moolchand Dubey who was the former India Desk Officer of the Bank during the relevant period.  12. There was also some brief evidence that was provided by Mr Milan Kapadia of Royds LLP, solicitor for the Bank as well as Sateesh Kumar Vagle, Credit Manager with the Bank, in respect of certain documents that were disclosed during the trial. 13. The Bank’s witnesses who are central to the matters in dispute and who were party to the relevant discussions and events namely Mr Sushil Kumar, Mr Gupta and Mr Dubey are no longer employed by the Bank. In advance of the trial they had been able to consider the documents referred to in their statements. Mr Sushil Kumar appears to have been able to consider documents that were not only not referred to in his witness statement but also were not in the trial bundle. He was thereby able to identify that there were relevant documents missing from the trial bundle which he had seen and the Bank eventually produced those documents.  I granted permission pursuant to CPR Rule 31.21 for the Bank to rely upon those documents subject to conditions including the filing of witness statements to verify the search carried out and allowing cross-examination on those statements in respect of the customer file. 15. I found the aforementioned witnesses called by the Bank and in particular the three key witnesses namely Mr Sushil Kumar, Mr Gupta and Mr Dubey to be credible, open and trying to do their best to assist the court in their testimony.  16. Mr Riat gave evidence in respect of not only the transactions in question but also the circumstances facing the Company at that time. It was clear that Mr Riat, whilst not intending to mislead anyone in his evidence, found it difficult to accurately recollect important events around the time of his entering the first guarantee without substantial reference to the documents. One example of that, in addition to the others referred to in this judgment, is that in his witness evidence and in the early stages of cross-examination he maintained that the Company had a good relationship with its existing bank, Natwest, in the period around October to December 2005: see paragraphs 8 and 15 of Mr Riat’s witness statement (1/333). It was said that the relationship with Natwest only became difficult when Mr Riat asked for a redemption statement from Natwest and he informed them he would be moving the account to the Bank in early December 2005. The documentary evidence however clearly showed that Natwest had been chasing for management accounts since June 2005 and that the relationship had reached breaking point by 17 November 2005 when the Natwest wrote to the Company with notice of termination of the relationship with effect from 7 December 2005 and requesting that the Company immediately refinance at its earliest convenience and that its credit card be destroyed. It granted a short extension to that deadline until 31 January 2006. Eventually Mr Riat conceded under cross-examination that the relationship with the Natwest was not good, a fact for which he blamed the Company accountants for their slowness in producing accounts, but believed that the relationship might have been capable of being salvaged. 17. The state of the Company’s relationship with the Natwest was important in this case because the first facility provided by the Bank was primarily to refinance indebtedness with the Natwest and it provided important background as to why the Company moved banks at all. The reluctance of Mr Riat to accept that the existing relationship with Natwest was not good and was in fact terminated by Natwest, or even to mention the termination letter in his Defence or witness statement, leads me to exercise particular care in considering whether the other evidence he has provided is supported by the documentation available. Part 4: Globepark Developments Limited and the search for financial facilities18. The Company was incorporated in 1999 and was involved in property development. As part of its business it would buy properties that required work to be done to them and it would rent them or sell them. On 22 March 2004 the Company obtained a series of facilities with Natwest totalling £2.4 million (3/193). The Company owned several properties including a hotel called the Bremic Guest House in Twickenham (“the Bremic”) and four flats in a property called Apsley House (“Apsley”). It is important to note that at the time Mr Riat also held, in his own name, a separate and very substantial property portfolio.  That is a point to which I shall return below. 19. As at December 2005 the position of the Company appeared to be that it had an outstanding loan in respect of the Bremic of approximately £810,000 which it owed to the Natwest and the value of the Bremic at that time was in the order of £1.35 million according to Mr Riat although a valuation by Taylors valued it at £1.05m (3/432ff). Apsley was valued at £460,000 in respect of which £550,000 was outstanding (3/395). 20. The accounts for the Company as at December 2005 showed a current ratio of 0.3. A ratio of less than one suggests a company may have difficulty in paying off its current obligations if they became due at that point. 21. Mr Riat’s first contact with the Bank was in October 2005. Prior to that Mr Riat had been a social acquaintance of Mr Sukhdev Singh who was the manager of the Bank’s Wembley Branch. Mr Riat was invited to Mr Singh’s retirement party which took place on 17 October 2005 and he says that Mr Singh informed him that the Bank was looking for clients like the Company which had a substantial property portfolio to become a client of the Bank.  At the party Mr Sukhdev Singh introduced Mr Riat to two of the Bank’s other officials namely Mr Gupta and Mr Sushil Kumar because they were the relevant personnel at the main office. 22. There were subsequent communications between Mr Kumar and Mr Riat including a letter of 11 November 2005 (3/392).  In this letter Mr Kumar asked for a number of documents to be ready for 15 November 2005. It is common ground there was a meeting between Mr Kumar and Mr Riat on 15 November 2005 and whereas the venue and time are not identified in the letter it appears clear that there were communications prior to this letter being sent agreeing those details. In the letter Mr Kumar requested Mr Riat to have ready at the meeting the following: a formal request from the Company for taking a loan, details of properties in the format set out, the balance sheets of the Company for the previous three years and also, and importantly in this case, an “Assets and Liabilities Statement in enclosed Format of Promoters/Directors.” It is now clear following further disclosure during the trial that this letter was sent by facsimile transmission on 11 November 2005 and it consisted of three pages of which the letter was the covering letter (9/19). Although I have not been shown the original faxed copies received by Mr Riat with transmission details on them the other two pages are more likely than not to have been the “Assets and Liabilities Statement” referred to in the letter. 23. It also appears that prior to the letter being sent on 11 November 2005 Mr Riat had already provided certain details of the Company’s properties and his own personal properties to the Bank. There is a schedule at 3/393 which sets out details for 21 of Mr Riat’s personally owned properties, their current value and the amount that is outstanding in respect of them. There is handwriting on the document, that of Mr Sushil Kumar, setting out various figures but also including the date of 8 November and Mr Sukhdev Singh’s telephone number. The date and circumstances when this document came into the possession of the Bank are unclear but it appears likely it was handed by Mr Riat to Mr Sukhdev Singh who then passed it to Mr Sushil Kumar at some point in time prior to 8 November. Mr Riat was not able to explain why he gave information about his personal properties to Mr Singh. 24. At the meeting on 15 November 2005 Mr Sushil Kumar and Mr Riat discussed the Company’s requirements. There was no indication given by Mr Riat that there was any difficulty in the relationship between the Company and the Natwest. Mr Riat described the Company as a valued customer of Natwest.  At some point Mr Sushil Kumar made various notes on the letter of 11 November including the rate of interest of 1.25% and the arrangement fee of 0.75%. There was no note of any requirement for any securities whether personal guarantee or a debenture or charges over the Company’s assets. It appears that on 15 November 2005 Mr Riat signed on behalf of the Company a letter to the Bank setting out information in respect of Company properties including current valuations and outstanding borrowings, the loan to value ratio sought namely 75%, an interest rate of 1.25% and an arrangement fee of 0.5% (3/395).  Mr Riat had negotiated a reduction in the arrangement fee from 0.75% to 0.5%. It was also recorded in Mr Riat’s handwriting that the repayment terms would provide a moratorium on capital repayments for one year, therefore interest only payments in the first year, with the balance repayment in equal quarterly instalments over a further nine years. 25. According to the letter of 15 November 2011 signed by Mr Riat, of the documents and information requested by the Bank in its letter of 11 November 2005 the Bank received (i) the formal request for loan (ii) the information required in respect of the Company’s properties and (iii) the Company’s previous three years balance sheets. However the “Assets & Liabilities Statement in enclosed format of Promoters/Directors” was not provided at that time and Mr Riat was unable to explain why it was not completed and handed over at the meeting on 15 November 2005 together with the other documents. Mr Riat was adamant however that he did not associate such a document with a personal guarantee from himself which he is adamant was never mentioned at any time by the Bank’s representatives until 14 December. 26. Mr Riat received an email on 21 November 2005 from Mr Dubey chasing, amongst other things, the Assets and Liabilities Statement:“Please also ensure submission duly completed account opening form and your statement of assets and liabilities (formats sent to you earlier, copy attached again) along with projected balance sheet and profit and loss account of Globepark for 3 years to enable us to proceed ahead.” 27. In evidence Mr Riat maintains he did not understand why the Bank wanted this Asset and Liabilities Statement and he maintains he never asked the Bank for an explanation as to why it wanted his personal financial information or was unable to say why he provided the information previously to Mr Singh. The Assets and Liabilities Statement was eventually provided by Mr Riat on 14 December 2005 (9/32-33). 28. By way of more general overview it is clear that Mr Riat was, at various times around this period, in touch with other potential lenders. On 13 September 2005 Mr Riat had written to Natwest authorising it to divulge information to Allied Irish Bank regarding “the mortgage debenture  held as security for the bank and the facilities that are secured by this” (see 3/341).  Another example was Bank of Ireland who he wrote to on 14 November 2005 seeking to refinance facilities up to 80% loan to value ratio (see 3/394). Also around 6 January 2006 Mr Riat was in possession of indicative terms from Handelsbanken. It is of note that such indicative terms included an interest rate of 1% above base, an arrangement fee of 0.50% but a loan to value ratio of only 70%. It also had as a condition that there would be a personal guarantee from Mr Riat in respect of the interest part of the loan only (3/5-13). 29. On 17 November 2005 Natwest wrote to the Company stating “Having given due consideration to the recent account conduct and failure to supply Management Accounts to the Bank, per the agreed facility documentation, it is with some regret that I must advise you of the banks decision to withdraw the facility and to request immediate refinance of all outstanding facilities at your earliest convenience and by no later than the 7th December 2005.I would be grateful if you could immediately destroy your company card and return it to us at this address. Natwest Cards have been advised to withdraw the limit immediately and the card may not be used in the future. My understanding from our conversations at the point of the Apsely refinance was that this would be your intention in any event, given the Bank’s refusal to extend further finance against the Hotel.It is obviously disappointing for me to advise you of the necessity to terminate the relationship, but you will appreciate that the overall position has deteriorated to a level that is not helpful for either side and it is therefore best that your on going financing arrangements are carried out elsewhere.” 30. The refinancing of Apsley House had in fact occurred in or around July 2005 and the Natwest were recording that at that time their understanding was that the Company intended to refinance elsewhere in any event. By the time Mr Riat came into contact with the Bank the relationship between the Company and Natwest was in its final stages and Natwest was not suggesting in this letter that the situation could be resolved or that it even wished to discuss resolving it. In evidence Mr Riat said that Owen Lawrence of Natwest had suggested in a conversation that the Company could make a fresh application and if the property valuations were positive facilities might be provided. There is no written evidence to support this. In any event it appears not to have been pursued by the Company as a possible option at any stage. At most it amounted to a suggestion that Natwest might be prepared to do business with the Company in the future. 31. This picture is very different from the one portrayed by Mr Riat in his witness statement. According to Mr Riat the relationship between the Company and the Bank was a good one which was destroyed only by reason of Mr Riat requesting a redemption statement from it and informing it that the Company wished to refinance with the Bank:“On 22 March 2004 NatWest provided Globepark with an open ended facility of £2.4million, a copy of which is at pages 2 – 9 of Exhibit NSR1. I had a good relationship with NatWest and NatWest gave Globepark all the facilities that it needed without asking for any personal guarantee.  I had absolutely no intention of having Globepark leave NatWest and I was happy with Globepark’s banking relationship with them.” (Riat, witness statement paragraph 8) “The Claimant’s late request [on 14 December 2005] for a personal guarantee compelled me to agree to it as Globepark had already entered into negotiations with prospective vendors in order to acquire certain properties which were on the market by utilizing the facility provided by the Claimant. It was clearly far too late for me to restart negotiations with NatWest and in any event I had told them I was leaving them at the time I asked them to provide me with the redemption figure as stated above. “(Riat, witness statement paragraph 39) 32. In paragraph 14(3) of the Re-Amended Defence and Counterclaim Mr Riat asserted that it was he who terminated the facility with the Natwest in reliance on terms offered by the Bank. In the Replies to Request for Further Information paragraph 6 a and b Mr Riat asserted that the facility with Natwest terminated on its redemption. 33. In my judgment Mr Riat has presented a picture of the Company’s relationship with Natwest which is not based on reality. Natwest had decided for reasons which were entirely unrelated to the Bank, and Mr Riat’s request for a redemption certificate, that it did not want to continue to provide financial facilities to the Company.  Mr Riat was seeking to refinance with other banks because he wanted to increase the Company’s borrowings to free up further funds, including by increasing the loan to value ratio, and also because the relationship with Natwest had deteriorated over a period such that by the middle of November 2005 Natwest gave notice of termination of the facilities. Whilst it was prepared to extend that deadline by a short period until the end of January 2006, that was a short period of grace with conditions attached. On the evidence before me it is clear that the Company had to refinance its borrowings with Natwest with some other bank and this also explains why Mr Riat was in discussions with a number of institutions including the Bank. 34. Mr Riat was reluctant to provide a personal guarantee. That much is at least clear from his letter dated 14 December 2005 in which he stated to the Bank “Further to our various meetings and negotiations after careful consideration I regret to inform you that I cannot offer the bank any personal guarantees. This was not mentioned at our earlier meetings.” (3/459). At the bottom of that letter, which was faxed to the Bank, is a handwritten note of Mr Kumar stating “Mr Riat agreed the guarantee while talking to CE over phone on 14-12-05”. The reference to CE was a reference to the Chief Executive, Mr Gupta. This handwritten note was signed by Mr Kumar and countersigned by Mr Dubey. 35. On 15 December 2005 following receipt of the requested documentation including the completed Statement of Assets and Liabilities a proposal was submitted to the committee responsible for sanctioning loans within the Bank. The document is headed  “Memorandum for Chief Executive” (3/479). This Memorandum sets out the background and financial position of the Company and states on page 7 “Personal guarantee of Mr Riat: Having regard to the poor net worth of the company, we persuaded Mr Riat to offer his personal guarantee, which he agreed with a lot of reluctance. Mr Riat owns 21 properties with current market value of over £5 m. Netting off the loans there against, he has a net worth of £1.67mn. The guarantee gives us comfort of Mr Riat’s personal commitment to the company’s borrowings.” Again Mr Riat’s reluctance to provide a personal guarantee is clear even on the Bank’s own documentation. 36. The first facility offer was issued on 15 December 2005 and eventually completed on 10 January 2006 and within a very short period thereafter Mr Riat entered into discussions with the Bank about obtaining further refinancing, this time of the Company’s other borrowings namely those with the Bank of Scotland. Terms were agreed after some negotiation. Mr Riat was unhappy with the terms offered for the second facility namely the loan to value ratio had been reduced to 70/30 and the interest rate had increased to 1.5% and he took issue with the Bank as to why the previous terms could not be applied to the second facility: (4/158). As far as he was concerned the Bank had “moved the goalposts”. However not only did Mr Riat go onto cause the Company to accepted those terms and enter the second facility on terms that were worse than those in the first facility but it is also notable that Mr Riat did not take issue with the provision of a personal guarantee in respect of the second facility.  Mr Riat provided the second guarantee as security without any objection. 37. On Mr Riat’s case he had been badly let down by the Bank in respect of the first facility and first guarantee. However he was unable to provide any real explanation as to why he would then within a very short period go back to the Bank to refinance further borrowings of the Company and enter another guarantee. His evidence on this did nothing to support his case. When asked why he proceeded with the Bank he said “A. Apparently the guidelines changed. We just carried on with them. Q. Why? A. No particular reason. We didn’t want to keep on changing lenders. We thought we will not stay with them.” (Day 5 page 24 line 10 to page 25 line 6).  This does not fit at all with Mr Riat’s picture of someone who felt he had been badly treated by the Bank and who felt that the Bank’s personnel had acted with sharp practice and not revealed the need for a guarantee until the last minute. 38. The Company in the years that followed remained a customer of the Bank and found itself in default of its various obligations regarding repayment and banking covenants and on several occasions re-scheduled its loans with the Bank. Part 5: Misrepresentation39. It is common ground between the parties that in order to succeed in setting aside the guarantees it is necessary for Mr Riat to prove that (i) the Bank’s employee made a statement of fact (ii) the statement of fact was untrue (iii) it was reasonable for Mr Riat to rely upon the statement of fact made by the Bank and (iv) Mr Riat in fact relied upon it in entering the guarantees. The Bank asserts, quite apart from its contention that Mr Riat has failed to make out his case on misrepresentation, that Mr Riat affirmed the guarantee subsequent to signing it and must be taken to have waived any right to rescind that might otherwise have existed. 40. Mr Cakebread relies upon Mahon v FBN (UK) Bank Ltd [2011] EWHC 1432 (Ch) 76 -78 in support of the proposition that a representation as to a bank’s interest in particular areas of activity or sectors may amount to a misrepresentation entitling a guarantor to rescind the guarantee. 41. I accept in principle that a statement by a bank or other financial institution that it wanted to increase its exposure in a particular business sector may, if untrue, be capable of providing the basis for a claim in misrepresentation. Examples of that might be where the bank’s policy was, contrary to its representation, to reduce lending in that business sector or where in fact the lending was not core business or was limited to particular geographical areas. 42. Mr Riat was adamant that he had been told by Mr Singh and also by Mr Sushil Kumar that the Bank wanted to increase its involvement in the property investment sector. Mr Singh has not given evidence. Mr Kumar did give evidence and maintained that not only did he never make this representation himself but he would not do so because in his view that was information that should remain internal to the Bank and not be disclosed to customers or potential customers. I prefer the evidence of Mr Kumar to that of Mr Riat in that I do not think it likely that Mr Kumar would have made such a statement. Such a representation did not appear to be required by Mr Riat from Mr Kumar and it was certainly not recorded in any correspondence between them. I do however consider that it is likely that Mr Singh, a personal acquaintance of Mr Riat, made such a statement in encouraging Mr Riat to do business with the Bank and to discuss matters further with Mr Kumar. To that extent I accept Mr Riat’s evidence. 43. The Re-Amended Defence and Counterclaim do not state why the representation is said to be untrue. Unhelpfully when pressed by the Bank in a Request for Further Information dated 15 November 2011 to provide full details of all facts and matters relied upon as tending to indicate that the alleged representation was untrue, the response was that this was not a request for further information but a request for evidence. 44. In his witness statement dated 16 December 2013 at paragraph 13 Mr Riat set out his position:Mr Singh specifically told me that Mr Sushil Kumar, Manager of the Claimant was looking for clients like me who had a substantial property portfolio, both personal and business, to become clients of the Claimant. Mr Singh further told me that he had been given clear instructions to source high value Asian business people including people involved in the property development sector in order to expand its involvement in that sector. Mr Singh has said to me that my name was mentioned to him by Mr Kumar as a prospective client and hence I had been invited, along with my wife, for the function at Wembley.  (underlining added) 45. Mr Cakebread readily accepted that the burden of proving the untruthfulness of the statement was on Mr Riat. In order to discharge that burden Mr Cakebread placed his primary reliance upon the policy document disclosed by the Bank and which appears at 3/385, the salient part of which reads: “Real Estate Sector advances may be considered by the Centre subject to various stipulations approved by the Board in its Meeting held on 18/11/1999 for the Real Estate Sector Advances including Hotels, Motels etc and amended thereafter from time to time. Any fresh financing will be done on a very selective basis and preferable to existing customers for purchase of properties for their own use. The Chief Executive will be adopting a very cautious approach while considering any fresh finance to Real Estate Sector and ensure that the following stipulations are adhered to-(a) Not more than 25% of the total advances at a centre should be concentrated in any one sector. However, for the Real Estate Sector advances the ceiling is 15% of the Total Advances of the Centre.” 46. Mr Cakebread’s argument, as I have understood it, is that it can be properly inferred that the Bank did not intend to increase its exposure in the Real Estate Sector:(1)  there is a lower ceiling for Real Estate Sector contained in this internal Bank policy document when compared with other sectors (2) the fact that the policy document and the other documents disclosed do not expressly state that the Bank intended to increase its exposure to the Real Estate Sector(3) the policy document provides a preference for customers who purchase properties for their own use(4) the Banks witnesses namely Mr Gupta and Mr Kumar said in evidence that the Bank wanted to increase the Bank’s exposure in all sectors and this is inconsistent with the representation relied upon(5) in a schedule that Mr Cakebread introduced himself into evidence, based upon figures provided by the Bank, it was clear that overall lending by the Bank’s London main office reduced in the period 30 November 2005  to 31 January 2006.  It was also clear that the amount advanced in the Real Estate sector, whilst actual loans increased over that period, if one included those in the pipeline, there was an increase between 30 November 2005 to 31 December 2005 but a dip between 31 December 2005 to 31 January  2006. 47. I do not accept Mr Cakebread’s submissions.  The policy document referred to merely identified the overall limits to the exposure of the Bank. It is clear that whereas the policy provided a limit of 15% of the total advances for the centre in question in respect of the Real Estate Sector the actual percentage for the Bank’s London main office, including those in the pipeline, rose from 9.9% in November 2005 to 12.8% by the end of January 2006. Therefore in respect of a statement made in October 2005 there was ample headroom whereby the Bank could increase its exposure to the Real Estate Market and still comply with the ceiling imposed by the Bank’s policy document. 48. Furthermore not only do I find that there was headroom that would enable the Bank to increase its exposure to the Real Estate Sector at the relevant time but I find that all of the evidence points to that being exactly what the Bank was aiming to do: (1) in the Schedule which Mr Cakebread himself produced it shows that the total amount of exposure at the main office in the Real Estate Sector rose from £60.436 million as at 30 November 2005 to £68.287 million as at 31 January 2006. When compared with the total amount of actual advances as at that date at the main office that is an increase from 8.05% to 11.42%. (2) in the evidence of Mr Gupta  and Mr Sushil Kumar they informed the court that at that time the Bank was looking to increase its exposure in the Real Estate Sector as it was with all sectors. At one point it was suggested on behalf of Mr Riat that expansion in all sectors was not consistent with saying the Bank wanted to particularly expand in the Real Estate Sector. There is nothing in such a point. The representation allegedly relied upon by Mr Riat was that the Bank wanted to increase its exposure to the Real Estate Sector not that the Bank want to increase its exposure in that sector above other sectors. (3) in the Memorandum for Chief Executive (3/479) it is stated at page 5 thereof that the London branch would see the redemption of IMD linked loans of $105 million in December 2005 and “we have been on the look out for local advances secured by mortgage of properties.” This makes it clear that following redemption of the IMD linked loans that the main office would have an increased ability to lend to local customers where there was security by mortgage of properties and it was actively seeking to do so. (4) Finally, at several points in the evidence Mr Riat was asked why he considered the representation to be false. He appeared to rather fazed by the question:Q.  So what makes you say that what Mr Singh told you about the bank’s wish to expand its business in the property sector was untrue?  Why have you alleged that? A.  Sorry, I didn’t say it is untrue.  That is my statement, that the bank wanted to expand their business in the property sector. I refer to the transcript at Day 4 page 111 line 7 to page 112 line 12. 49. It is correct to say that the policy document contained a preference for those who were existing customers to purchase properties for their own use however that preference does not render untrue the statement relied upon. The Bank might still have wished to increase its exposure to the Real Estate Sector whilst having a preference for existing customers who wanted to buy their own homes and I find that it did so intend. 50. In my judgment the statement which is likely to have been made only by Mr Singh was not untrue. It represented the clear understanding of the desire by the Bank or at least the Bank’s main office to increase its exposure to the Real Estate Sector. 51. Even if I had found that the representation was untrue I would not have found that it was negligent to have made such a statement. No particulars of negligence are set out in the Re-Amended Defence and Counterclaim.  Mr Cakebread seeks to rely upon the Bank’s policy document to make out a case in negligence on the basis that the policy document was not followed. That does not follow.  First there was no evidence that Mr Singh should have been familiar with the policy document. Secondly, Mr Singh’s understanding was likely to be the same as Mr Kumar’s understanding namely that the Bank’s intention was to increase exposure in the Real Estate Sector as with all other sectors and this view was shared by the then Chief Executive Mr Gupta who was responsible for sanctioning such lending. Mr Riat’s  case in demonstrating that the statement, if untrue, was made negligently did not begin to get off the ground. 52. It is not necessary for me to consider reliance but in my judgment such a representation is more than a mere puff and is capable in principle of being relied upon. However in my opinion this is not a representation which the Company or Mr Riat actually relied upon. It was clear that Mr Singh was about to retire and it was also clear to Mr Riat that the personnel dealing with such loans was not Mr Singh but Mr Kumar and Mr Gupta. The fact that, as I have found, Mr Kumar did not make such a statement and Mr Riat did not ask Mr Kumar to confirm what he had been told by Mr Singh leads me conclude that the statement was not relied upon. Mr Riat and the Company were focussed on the key terms namely the loan to value ratio and the interest rate for the loan in question. 53. Likewise I do not need to consider the issue of causation.  However, lest I be wrong, if the representation had been untrue and had been relied upon to any extent in my judgment I find that the Company would have entered the facility agreements in any event and Mr Riat would have entered the guarantees in any event. The key points of interest for Mr Riat were, as I shall expand upon below, the interest rate available and the loan to value ratio. Any particular intention by the Bank to expand in the Real Estate Sector was, on the evidence before me, of no importance to the Company or Mr Riat. 54. The defence based upon misrepresentation fails. Mr Riat has failed to discharge the burden of proving that the representation was false and in any event that it was said negligently. I also find that the statement, that was probably made only by Mr Singh, was not relied upon by Mr Riat given Mr Singh’s role in the Bank. I also conclude that the Company would have entered the facility agreements and Mr Riat would have entered both guarantees in any event. Part 6: Economic Duress55. There was no dispute as to the relevant principles in respect of economic duress.  It is well settled that duress is not a tort and is only actionable in the sense that a party who has been a victim of duress can commence proceedings to set the agreement aside: The Universe Sentinel [1982] 2 All ER 67 at 76g-h. 56. One of the defining features of economic duress is that it involves illegitimate pressure meaning that it is without any commercial or similar justification. Illegitimate pressure must be distinguished from the rough and tumble of normal commercial bargaining and will depend upon a consideration of all of the circumstances in any given case. 57. In Carillion Construction Ltd v Felix (UK) Ltd  [2001] B.L.R. 1; 74 Con. L.R. 144, Dyson, J cited the passage from his own judgment in DSND Subsea Ltd (formerly DSND Oceantech Ltd) v Petroleum Geo Services ASA [2000] B.L.R. 530 at §113: “The ingredients of actionable duress are that there must be pressure, (a) whose practical effect is that there is compulsion on, or a lack of practical choice for, the victim, (b) which is illegitimate, and (c) which is a significant cause inducing the claimant to enter into the contract: see Universal Tankships of Monrovia v ITWF [1983] AC 336,400B-E, and The Evia Luck [1992] 2 AC 152, 165G. In determining whether there has been illegitimate pressure, the court takes into account a range of factors. These include whether there has been an actual or threatened breach of contract; whether the person allegedly exerting the pressure has acted in good or bad faith; whether the victim had any realistic practical alternative but to submit to the pressure; whether the victim protested at the time; and whether he affirmed and sought to rely on the contract. These are all relevant factors. Illegitimate pressure must be distinguished from the rough and tumble of the pressures of normal commercial bargaining.” 58. The party asserting duress carries the burden of proving causation, and must prove that the duress was a “significant cause” inducing that party to enter into the agreement: DSDN Subsea Ltd v Petroleum Geo Services ASA [2000] BLR 530 following Dimskal Shipping Co SA v International Transport Workers Federation [1992] 1 AC 152 at 165G. 59. Mr Riat’s case on economic duress in respect of the first guarantee is as follows. The Bank’s representatives did not mention the requirement of him providing a personal guarantee in respect of the first facility until 14 December 2005 by which time the relationship with Natwest was terminated, it was too late for the Company to seek out alternative lenders who would not require a personal guarantee and in any event the Company was under pressure to complete on the purchase of two properties namely 63A St Stephens and 723 Bath Road. 60. Much of the trial was taken up with examination concerning whether there was any mention of a personal guarantee by the Bank’s representatives at the party on 17 October 2005 or at the meeting on 15 November 2005.  Mr Kumar gave evidence that he mentioned a personal guarantee would be required at the party on 17 October in his discussions with Mr Riat. Mr Riat is adamant that no such discussion took place on 17 October at what was a social event, albeit it was also a networking event, with many other people present. Although the evidence is finely balanced in my judgment there was at least some reference by Mr Kumar to a personal guarantee at the party and also on some date subsequent to it but prior to the meeting on 15 November. The letter of 11 November referred to the need for a Statement of Assets and Liabilities from Mr Riat and enclosed the form for him to complete. It is unlikely that this would have been sent to Mr Riat without at least some explanation as to why it was required. I prefer Mr Kumar’s evidence in this regard. 61. In any event I find that there was a discussion about the personal guarantee on 15 November 2005 because Mr Kumar was well aware that there was one document that he had requested be provided to him and which had not in fact been provided, the Statement of Assets and Liabilities. Mr Kumar was an experienced manager at the Bank. The requirement of a personal guarantee was standard practice under the Bank’s policies unless there was a good reason to waive the requirement.  Mr Riat maintained in his evidence that because Mr Kumar did not make a note at the time that there was a requirement for a personal guarantee this was evidence that there was no such mention of a guarantee. He contrasted this with the situation in respect of the second guarantee when Mr Kumar did make a handwritten note of the requirement for a guarantee. On the balance of probabilities I find that Mr Kumar did in fact state at the meeting on 15 November that Mr Riat would need to provide a personal guarantee.  The absence of a note of this being mentioned by Mr Kumar at this meeting was indicative that Mr Kumar did not consider at that time that it would be such an issue for Mr Riat. Clearly by the time the second guarantee came to be discussed in 2006 the Bank was aware that Mr Riat had been reluctant to provide the first guarantee, hence it was more cautious and kept a better note of the discussions. 62. I am also satisfied that Mr Riat, irrespective of Mr Kumar mentioning the personal guarantee, knew the implications of being sent a Statement of Assets and Liabilities form not only on 11 November 2005 but also again on 21 November 2005 and that it was to provide evidence that he could provide a worthwhile personal guarantee to support the Company’s application:(1) Mr Riat was reasonably punctual in returning the other documents that had been requested by the Bank. His delay in returning the Statement of Assets and Liabilities after two requests were made was, in my judgment, because of his reluctance to enter into a personal guarantee. For him to be reluctant to return the forms he had to be aware of the reason why the Bank wanted detailed information about his personal properties including current valuation and indebtedness; (2) Mr Riat is an intelligent man. He was an experienced businessman and a qualified structural engineer. He accepted in evidence that he knew that a personal guarantee meant that the properties in his personal name would be at risk but said he did not know the full implications of a guarantee. If he was unclear as to why he had been asked for the information about his personal assets and liabilities he could have inquired of the Bank why it was necessary but he made no such enquiry. The reason he made no inquiry is that he knew very well that the Bank wanted a personal guarantee. 63. In his letter of 14 December Mr Riat said “Further to our various meetings and negotiations, after careful consideration I regret to inform you that I cannot offer the bank any personal guarantees. This was not mentioned at our earlier meetings”. In my judgment this at least supports the recollection of Mr Kumar that at the meeting on 15 November 2005 the need for a personal guarantee was discussed. The decision not to provide a guarantee relayed by Mr Riat in the letter of 14 December was based upon “various meetings and negotiations” and contrasts those with “our earlier meetings.” 64. Furthermore when Mr Gupta spoke to Mr Riat on the telephone on 14 December and explained that a personal guarantee was essential otherwise the Bank would not proceed with the loan there was no strong protest from Mr Riat. True it is he was very reluctant to provide a personal guarantee and relayed that to Mr Gupta but on any showing this was a short telephone call during which he agreed to provide the personal guarantee. According to Mr Gupta the call lasted a few minutes and according to Mr Riat it lasted about 15 minutes. On either version the personal guarantee did not feature as a major issue again and there was no letter of complaint even after Mr Riat obtained independent legal advice which certified that legal advice had been given prior to signing the first guarantee and that the solicitor was satisfied that Mr Riat has provided the guarantee of his own free will and without pressure. 65. I also take into account that in August 2006 Mr Riat signed another personal guarantee to secure the second facility for the Company. There was no suggestion of any protest or any reluctance in respect of entering that guarantee. Mr Riat maintained that he felt he had no option but to enter the second guarantee because the Company had already entered the first facility. That is not true as he could have maintained the facility with the existing lender. There was no proper explanation as to why the second guarantee should have been objected to any less than the first guarantee. In my judgment the reason there was no opposition to the second guarantee was because Mr Riat simply accepted it was the Bank’s standard procedure. The Company however had the option to go elsewhere for its re-financing or remaining where it was.  66. I reject the defence of economic duress in this case for the following reasons:(1) Mr Riat was informed by Mr Kumar of the need for a personal guarantee by the time of the meeting on 15 November 2005 at the latest and most likely prior to that date. This was almost two months before Mr Riat signed the guarantee on 10 January 2006 giving him enough time to continue discussions with other banks;(2) Mr Riat knew when he had been asked to complete a Statement of Assets and Liabilities in the letter of 11 November 2005 in respect of his own finances that this was to demonstrate that he could provide a personal guarantee and he knew that the Bank wanted a personal guarantee. I reject any suggestion by Riat that he did not know that this was the reason for the Bank’s request;(3) the Company had the ability to obtain re-financing elsewhere. In his evidence Mr Riat gave evidence as to how he was being approached by other institutions even up to one week prior to completion with the Bank. In the letter of 14 December 2005 Mr Riat does not suggest that he has no other option but stated “If you decide to go ahead please call me at the earliest.” In early January Mr Riat has received indicative terms from Handelsbanken. He did not pursue those  terms because he preferred the terms offered by the Bank even with a personal guarantee;(4) Mr Riat received independent legal advice from John Ryan a partner in Bennett & Ryan who provided a certificate to the Bank in respect of Mr Riat signing the first guarantee “I am of the opinion that he appeared to me to understand my advice and executed the Security Documents on his free will without any undue influence/duress and that he has understood the contents of the Security Documents being entered into by him voluntarily knowing that in the default by the borrower as defined in the Letter he is personally liable for all indebtedness to the bank and the properties maybe sold.” There was no letter of protest at the time the first guarantee was signed. Given the provision of legal advice it is properly to be inferred that, if there was duress, Mr Riat would either not have proceeded with the transaction on behalf of the Company or there would have been a letter setting out the position. 67. In my judgment Mr Riat was not placed under any significant pressure by the Bank let alone illegitimate pressure. The requirement of a personal guarantee is not unusual in the context of corporate lending. The need for a personal guarantee had been brought to Mr Riat’s attention by 15 November 2005 at the latest and most likely at an earlier date. The evidence shows that he had other options for refinancing with other institutions and had sufficient time to obtain independent legal advice before signing the guarantee, which opportunity he availed himself of. 68. The overwhelming evidence in this case is that the most important motivation for Mr Riat choosing the Bank for refinancing was that it was prepared to provide a 75/25 loan to value ratio on the Bremic Hotel which would enable some further funds to be released to enable the purchase of other property. Mr Riat accepted that the loan to value ratio on offer was very attractive as was the interest rate.  I note in particular Mr Riat’s evidence on Day 4 page 65 line 21 to page 67 line 2. 69. One of the factors relied upon by Mr Riat in suggesting he was under great pressure was that the Company needed to complete the purchase of two other properties from the monies that would be made available through the refinance with the Bank. One was 63A St Stephens and the other was 723 Bath Road. The property at 63A St Stephens did not complete until March 2006. The property at 723 Bath Road completed in August 2006. I am not at all satisfied on the evidence before me that the Company or Mr Riat were under any significant pressure in respect of completion on these two properties. I have not been shown any communications or documents to show vendor’s exerting any pressure on Mr Riat let alone any pressure of which the Bank was made aware. The Bank was certainly not responsible for any such pressure that did exist. 70. Furthermore I find that even if the Bank had not mentioned the need for a personal guarantee until 14 December that could not be described as illegitimate pressure which could give rise to economic duress. On 14 December the Bank was still in the course of negotiating with Mr Riat. The Bank was not obliged to advance any monies and Mr Riat was not obliged to accept any loan from the Bank. The full terms of the loan had yet to be determined. Mr Riat relies upon the Memorandum at 3/485 in which it is stated by the bank’s personnel that “Having regard to the poor net worth of the company, we persuaded Mr Riat to offer his personal guarantee.” The Memorandum also referred to the Dun and Bradstreet Report that identified the Company as a “higher than average risk”. Mr Riat’s reliance upon this part of the Memorandum to show a volte face by the Bank is misplaced because a personal guarantee was standard practice for the Bank in any event. Furthermore in such circumstances even if the need for a personal guarantee had not been mentioned until 14 December the Bank was fully entitled, apart from anything else, on the basis of the financial information available to insist upon such a guarantee given the risk identified in respect of the Company. Such a request could not be said to be illegitimate or to be without commercial justification. There was no concluded agreement and the Bank was free to walk away from the negotiations as was Mr Riat also free to walk away. 71. Finally, in my judgment Mr Riat has delayed far too long in seeking to set aside the first guarantee for economic duress. The guarantee was entered into on 10 January 2005 and the claim to set it aside was first raised in the draft Amended Defence and Counterclaim served on 18 July 2011. During that time the loans to the Company have been rescheduled through negotiations between the Bank and the Company acting by its director Mr Riat whilst Mr Riat would at all times have been aware that the first guarantee existed and was relied upon by the Bank. In my judgment whilst the period of time in which a victim of economic duress must apply to set aside an agreement will vary depending on the circumstances, in the present case there was no proper excuse for the delay and Mr Riat would, had I found that there had been economic duress, be taken to have lost that right to have it set aside by reason of delay. Part 7: Conclusion72. For the reasons set out herein I find for the Bank on the claim. The counterclaim is dismissed. 73. There will be judgment for the Bank for the amounts due under the first and second guarantees. In the absence of agreement between the parties I will hear further submissions in respect of the terms of the order, the precise amount of the judgment including accrued interest as well all issues of costs and any consequential or further orders that are sought. I ask that Counsel liaise to agree the draft order in so far as possible.