Francis v Barclays Bank plc

Sale agreement — Defendant selling as mortgagee of property of interest to claimant — Sum payable to defendant on future grant of planning permission — Part 20 defendant advising on variation of agreement — Whether negligent in failing to make enquiries as to prospect of permission being granted for residential development — Claim allowed A company, partly owned by the claimant, was the owner of a site that it had charged to the defendant bank as security for a loan. The claimant’s home was charged as collateral security. The company went into compulsory liquidation, and the defendant appointed the Part 20 defendant, a firm of surveyors, as receiver of the site. It arranged a sale by the defendant, as mortgagee, to a developer. Under the sale agreement, a price of £50,000 was payable on completion. Clawback provisions additionally provided for payment of a “seller’s share” to the defendant in the event that, within 10 years of the agreement date, the developer disposed of the site with the benefit of planning permission, or such a permission was implemented by the developer or any successor in title. The seller’s share was to be calculated by reference to the consideration for the disposal or, in the case of an implemented planning permission, the market value of the property. Following the sale, the receiver, D, resigned. The developer subsequently approached a partner of D with a proposal for variation of the clawback provisions. The defendant instructed D to investigate and report on the offer. It subsequently agreed to a variation limiting any future seller’s share to £80,000, in return for an immediate payment of £35,000. At the time, the site lay outside the area that the local planning authority had allocated for development. However, a draft local plan was subsequently published in which the site was designated for possible residential development. The developer sold the site to another company for £2.2m, and residential planning permission was granted. The defendant received £80,000 as the seller’s share, although, without the variation, this amount would have been around £1m. The claimant brought proceedings against the defendant, alleging a breach of the equitable duty that, as mortgagee of the site, it owed to her as a person interested in the equity of redemption. The defendant in turn sought damages from the receiver for negligent breach of duty in respect of the advice given by D in connection with the clawback provisions. Held: The claim was allowed; the defendant’s Part 20 claim was also allowed. Any reasonably competent and careful surveyor in D’s position would have made enquiries of the local plan department of the planning authority as to the prospect of the site being allocated for residential development. No reasonably competent and careful surveyor in that position could properly have carried out his or her instructions without making appropriate enquiries as to the likelihood of the clawback provisions coming into operation, and the likely benefit to the defendant of their doing so. This had to include a consideration of the prospect of planning permission for residential development of the site being obtained in the near future. Had D made the relevant enquiries, it would have discovered that there was a good chance of planning permission being granted, and it could not possibly have given the defendant the advice that it did. Had it advised the defendant properly, the defendant would not have agreed to the proposed variation, at least unless the developer offered a much higher price. The defendant had been relying upon the receiver’s advice in agreeing to the variation of the clawback provisions, and it had acted reasonably and properly in so relying. The defendant was under a duty to all persons, including the claimant, who had an equity of redemption of the site, to take reasonable steps to preserve and enforce the clawback provisions. As a result of D’s negligence, it had failed to do so. The defendant could not rely upon the fact that it, as opposed to its agent, D, was not negligent as a defence to the claimant’s claim. The claimant was entitled to relief against the defendant, which was in turn entitled to damages from the Part 20 defendant. Gabriel Buttimore (instructed by Healys) appeared for the claimant; John Odgers (instructed by Matthew Arnold & Baldwin, of Watford) appeared for the defendant; David Sears QC (instructed by Berrymans Lace Mawer) appeared for the Part 20 defendant. Sally Dobson, barrister