G1 PROPERTIES LIMITED AGAINST THE ROYAL BANK OF SCOTLAND PLC

Factual and Procedural Background

The Plaintiff is a limited liability company operating in the "buy to let" property market since about 2001. The Defendant, a banking institution, provided loans to the Plaintiff for property purchases, initially through separate loan agreements. The Defendant later proposed a more flexible loan facility known as the "Hunting Licence," allowing the Plaintiff to borrow up to £750,000 without individual loan agreements, subject to providing acceptable property surveys.

The Hunting Licence was signed on 23 March 2007 with a term initially expiring on 1 September 2007, later extended to 1 September 2010. The Plaintiff alleges that the Defendant made the loan facility available before the Licence was signed.

Following the extension, the relationship deteriorated, with the Defendant reducing the credit limit in 2008 and declaring the Hunting Licence expired in September 2010. The Plaintiff attempted to negotiate converting its borrowing into term loans, but the Defendant refused and exercised security rights, appointing a receiver in March 2012. The receivership ended in March 2015.

The Plaintiff commenced this action in March 2017, alleging that the Defendant promised on three occasions to provide a new term loan upon expiry of the Hunting Licence, offering the option to sell properties to repay borrowings or convert the borrowing into a twenty-year term loan.

Legal Issues Presented

1. Whether the Defendant made a binding promise to the Plaintiff to provide a new term loan upon expiry of the Hunting Licence.
2. The contractual effect, if any, of the document titled "The Indicative Heads of Terms."
3. The nature of the Hunting Licence facility and its classification as an overdraft or term loan.
4. The relevance and sufficiency of the Plaintiff’s pleadings regarding the promise and related representations.
5. Whether there was an implied contractual obligation on the Defendant to communicate reasons for breach of the Hunting Licence and to offer a new loan.
6. The relevancy of the Plaintiff’s claims regarding the loan secured over a specific property and the implied terms concerning the Defendant’s conduct.
7. The procedural question of whether the Defendant’s "not known and not admitted" pleadings should be treated as admissions.

Arguments of the Parties

Plaintiff's Arguments

• The Defendant promised that upon expiry of the Hunting Licence, the Plaintiff could convert borrowings into a term loan or sell properties to repay debts.
• The document titled "The Indicative Heads of Terms" supports the Plaintiff’s case and provides content to the term "term loan" used in representations.
• The promise was a unilateral undertaking enforceable without action by the Plaintiff beyond notification of their choice.
• The Defendant breached an implied term to communicate reasons for breach and to offer a new loan.
• The Defendant wrongfully refused to release security over a property, impeding the Plaintiff’s ability to repay and clear defaults.
• The Defendant’s failure to admit certain pleadings should be treated as admissions under relevant case law.

Defendant's Arguments

• The "Indicative Heads of Terms" document, by its title, lacks contractual effect and is irrelevant.
• The Hunting Licence was not an overdraft but a short-term loan, not repayable on demand, and the Plaintiff’s description is inaccurate but immaterial.
• The Plaintiff’s pleadings lack specificity and are irrelevant in parts, particularly concerning the promise and representations.
• The oral representations were not binding promises but at best speculative and do not create enforceable obligations.
• The Plaintiff failed to properly plead the source and effect of quotations relied upon, undermining the case.
• The Defendant was entitled to plead "not known and not admitted" where former employees’ statements were involved, and such pleadings should not be treated as admissions.
• The Plaintiff’s claim of implied terms regarding the loan secured on the property is irrelevant without proper averments of the security terms.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully examined the nature and effect of the "Indicative Heads of Terms," concluding that the label "indicative" suggested non-finality but did not render the document devoid of contractual effect at this stage. The court acknowledged the possibility that the parties considered themselves bound by its terms, especially as the Hunting Licence appeared to be based on it.

Regarding the characterization of the Hunting Licence, the court found it immaterial whether it was an overdraft or term loan since the Defendant did not enforce repayment until expiry, undermining the Defendant's argument about repayment on demand.

The court scrutinized the Plaintiff’s pleadings on the oral representations, noting significant deficiencies and contradictions. The Plaintiff failed to clearly specify when or how it exercised the alleged option to convert borrowings into term loans, and did not adequately link the term "term loan" in the representations to the Heads of Terms.

The court found that the Plaintiff’s pleadings did not sufficiently establish the objective and reasonable meaning of the representations or their contractual effect, rendering the case based on the promise irrelevant.

Similarly, the representations by other Defendant representatives were deemed repetitions and no more relevant than the initial one.

The court rejected the Plaintiff’s claims of implied obligations to communicate and to offer a new loan, finding no basis in the Hunting Licence or pleadings to support these claims.

Regarding the loan secured on the specified property, the court found the Plaintiff’s pleadings insufficient to establish the terms of the security or justify the implication of terms preventing the Defendant from withholding release of security, making these claims irrelevant.

On procedural matters, the court analyzed the Defendant’s use of "not known and not admitted" responses, concluding that the Defendant was entitled to such pleadings where it lacked knowledge, particularly given that relevant former employees were no longer available. Consequently, the court declined to treat these as admissions.

The court also held that the Defendant’s bare denial of loss pleadings was a relevant defence, limiting the Defendant’s ability to introduce alternative evidence but not amounting to an admission.

In light of these findings, the court dismissed the Plaintiff’s case.

Holding and Implications

The Plaintiff’s action is dismissed.

The direct effect of this decision is that the Plaintiff’s claims based on alleged promises, representations, and implied terms fail on the pleadings and lack sufficient specification to proceed. The court did not establish any new legal precedent but applied established principles concerning contractual interpretation, pleadings, and procedural fairness in admissions. The dismissal leaves open the possibility of proof if the Plaintiff can rectify pleading deficiencies, but the current pleadings are inadequate.