Thankyou, I confirm that the bank had guarantees for £380k, In Jan 2010 the retail, high street business suffered major long term road works, x 8 months, destroying businesses. We litigated against the roadwork company and the business insurers.
We were successful in recovery of some of the lost profits, in July 2011. In January 2010 we approached the bank for emergency overdraft facilities. The bank declined, they also declined in April 2010 stating that there was insufficient security available, despite the presence of the government backed EFG enterprise finance guarantee. In December 2010 HMRC commenced recovery proceedings, In November 2011 the bank finally agreed to release £150k of funds using the EFG as security.
By that time the business was insolvent and went into Administration in June 2012, and the business was sold as a going concern.
The claim by the bank that in January 2010 there was insufficient security to make this emergency overdraft, for 8 months, is false. In September 2011 they fully complied with the Bank Lending Code, and the funds were released. There was no justifiable reason not to advance the funds two years earlier. When in 2011 they agreed to lend, the bank took another Guarantee for £150k, on top of the £380k guarantee which they already had. At the time of borrowing we had reduced debt from £380, down to £220k in January 2010. Meaning that they had sufficient security before requiring another guarantee.
The level of risk increased when they refused borrowing, they were very fully aware that the company would suffer severely because of these major roadworks. The bank made no investigation in 2010 about whether we could afford to repay further borrowing, which we could.
The business had also recently won a franchise for a post office, which in 2007 helped the main retail trade to grow, reducing debt month on month.
I agree that no bank is ever under a duty to lend, however they are duty bound to comply with the 2009 Bank Lending Code which offers very substantial amounts of protection to businesses who are facing financial difficulty.
The Code requires them to support a rescue package if they believe one will work. They did give the rescue package, two years too late.
The wording of the Code creates a duty. They are duty bound to attend to the "finance application" with care and skill, and act in a timely manner. If they had acted as indeed they did, in 2011, then in 2010 they would have arrived at the same decision that they arrived at in November 2011. ie they advanced the loan.
Thus the allegation is not one of "they are duty bound to lend" as they are not duty bound.
I have issued proceedings regarding the 2010 application for finance and the bank initially agreed to mediate a settlement, then they realised that the future losses were for several Millions, then they have issued a Strike Out Application, to be heard in the near future.
In their Skeleton Argument they correctly identify the two key issues,
1. Was there a duty of care to attend to the 2010 Application for finance, and
2. Would the bank have advanced the funds in 2010 if they had attended to the application with the same care as they afforded the successful 2011 application when at a time when the business was all but insolvent.
The Lending code is very detailed regarding the standards that the bank are expected to engage, and the FCA confirm that they require all banks to fully comply with every aspect of the code, and to act with due care and skill.
Your comments please.
Is there any case law concerning Guarantees relating to the bank increasing the risk to the customer?
Thankyou, Is there any case law concerning the equitable principles of surety.
The bank compels itself to lend in emergency situations, as prescribed in the Lending Code.
If a bank subscribes to the Code, then they are required to lend in such circumstances. However, If no investigation at the appropriate time is made, then clearly the bank will not lend if it does not wish to.
The breach of the code constitutes negligence in certain circumstances, do you agree?
Thankyou for this. Yes, please do proceed and see what we come up with.
Apologies for the delay in reverting to you.