Lloyds Bank Plc v McBains Cooper Consulting Ltd, Court of Appeal - Technology and Construction Court, October 02, 2015, [2015] EWHC 2372 (TCC)

Resolution Date:October 02, 2015
Issuing Organization:Technology and Construction Court
Actores:Lloyds Bank Plc v McBains Cooper Consulting Ltd

Case No: HT-2013-000032

Neutral Citation Number: [2015] EWHC 2372 (TCC)




Royal Courts of Justice

Rolls Building, 7 Rolls Buildings

London EC4A 1NL

Date: 2nd October 2015

Before :


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Between :

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Lord Marks QC and Luke Wygas Esq

(instructed by Clarke Willmott LLP) for the Claimant

Sean Brannigan Esq, QC and Ms. Jennie Gillies

(instructed by Robin Simon LLP) for the Defendant

Hearing dates: 16th-18th June; 22nd-25th June; and 14th July 2015;

Additional written submissions: 15th July 2015; 20th July 2015; 22nd July 2015; 29th July 2015

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JudgmentMr. Justice Edwards-Stuart:


  1. This is a claim by Lloyds Bank pl c (``the Bank'') against its project monitor, McBains Cooper, who was retained to advise it in connection with a loan made by the Bank for the development between 2007 and 2009 of a building in Church Road, Willesden, that was used as a church. There is also a claim by McBains Cooper for repayment of sums paid to the Bank following an adjudication in which an award was made in favour of the Bank.

  2. The borrower was the exotically named Miracles Signs & Wonders Ltd (``the borrower''), a special purpose vehicle formed by a trust, the Miracle Signs & Wonders Ministry Trust (``the Trust''). Its pastor was a Mr. James Chukwu.

  3. The Bank agreed to lend the borrower £2.625 million to assist with the development on the terms of a Facility Letter dated 30 May 2007. Over a year before that the Bank had retained McBains Cooper to act as the project monitor. The role of a project monitor is to check the progress and quality of the works and to approve the applications for drawdown submitted on behalf of the borrower and to make recommendations to the Bank as to the amount that should be paid against the drawdown request. Some witnesses described the project monitor as the Bank's eyes and ears in relation to the project.

  4. Unfortunately it all went wrong. After about 21 months the Bank's facility was virtually exhausted and the development was far from complete. It appeared that neither Mr. and Mrs. Chukwu nor the congregation had sufficient funds to meet the balance of the costs of completing the development, which were thought to be in excess of £700,000. In those circumstances the Bank decided to cut its losses and realise its security in the form of a charge over the development property and two properties owned by Mr. and Mrs. Chukwu.

  5. The Bank claims about £1.4 million, being the total amount of the sums advanced under the facility less the recoveries made from the sale of the various properties over which the bank had a charge. This sum takes into account the sums recovered following the adjudication.

  6. The claim has a somewhat chequered history. Although the Bank realised in mid March 2009 that things had gone badly wrong, the claim form was not issued until July 2013, at a time when the dispute was the subject of an adjudication. Particulars of Claim were not served until 4 April 2014. In those Particulars of Claim an allegation was made for the first time that McBains Cooper had only visited site on two or three occasions instead of at monthly intervals, as the terms of its engagement required.

  7. A remarkable feature of the case is that, until the conclusion of the evidence, each party strenuously asserted that it was not at fault and that what happened was entirely the fault of the other. It seemed to me that it was reasonably clear from the outset that neither party's position was sustainable, but it was not until closing submissions that each side accepted that it had fallen below the standard that was reasonably to be expected of it. It is now quite clear that this loan should never have been made by the Bank in the first place (a decision for which it cannot blame McBains Cooper) and that during the course of the work McBains Cooper gave advice that was unquestionably negligent.

  8. The real issues that have emerged during the trial are ones of reliance and causation: to what extent did the Bank rely on the advice given by McBains Cooper and who is actually responsible for the loss sustained by the Bank?

  9. The Bank was represented by Lord Marks QC and Mr. Luke Wygas, instructed by Clarke Willmott LLP, and McBains Cooper was represented by Mr. Sean Brannigan QC and Ms Jennie Gillies, instructed by Triton Global Ltd (trading as Robin Simon).

    The background and summary of the claim

  10. No 226 Church Road, Willesden, London NW10 9NR, used to be a bingo hall. In about the mid 1990s it was purchased by Mr. Chukwu and since then it has been home to an evangelistic church, run by the Trust. Its pastor, Mr. Chukwu, was keen to develop the building to provide function rooms, a bookshop, a nursery, an Internet cafe and self-contained accommodation units which would be available to rent on a weekly basis. The congregation was about one thousand strong.

  11. Mr. Chukwu engaged a Mr. Simon Purdom, a former banker who had become a financial adviser, to assist them in putting together a proposal in order to obtain a loan from a bank for the proposed redevelopment. Mr. Chukwu was presented as an efficient manager of the church who would have no difficulty in running profit making enterprises, such as the provision of a venue for weddings, a nursery and so on.

  12. Although Mr. Purdom seems to have been a persuasive advocate for the Trust, not everyone at the Bank saw the project in the same light. In an e-mail dated 8 November 2005 a Mr. Simon Cook, a Risk Manager in the Bank's Credit Sanctioning department (who was not called as a witness) said that he thought that the project was far too ambitious for such a small organisation with a modest income based entirely upon voluntary giving. In that e-mail he gave detailed reasons as to why he felt unable to support the proposal. This e-mail was sent to Mr. Andrew Mannering and Mr. Richard Hurdle, who were Relationship Directors at the Bank. Mr. Mannering, who took a different attitude to that of Mr. Cook, made it clear that he was ``keen to do something here''.

  13. Mr. Mannering did not give up and sought permission to obtain valuations from Aitchison Rafferty and a review of the project by McBains Cooper. He proposed that Mr. Chukwu should deposit £125,000 with the bank prior to any drawdown.

  14. One feature of the proposed development that proved to be controversial was the development of the third floor of the building. In about April 2006 those advising Mr. and Mrs. Chukwu took the view that the cost of doing this did not justify the likely return (in a report dated 12 June 2006 Mr. Purdom said that it would cost about £500,000 and add very little in terms of value). McBains Cooper were made aware of this decision.

  15. Aitcheson Rafferty was instructed on 3 February 2006 to provide an opinion as to the market value of the site in its undeveloped condition, but with the benefit of the planning consent, and the gross development value (``GDV'') of the completed development. It duly reported on 20 March 2006 with a market value of £1.45 million and a GDV of £3.5 million. This appears to have assumed that all four floors would be developed.

  16. At the same time, also by a letter dated 3 February 2006, Lloyds instructed McBains Cooper to act as its monitoring surveyor in relation to the Works. It provided two initial reports: in August 2006 and April 2007. No complaint is made about these in this action.

  17. On 30 May 2007, without (as I find) any further material input from McBains Cooper, the Bank sent the Facility Letter to the borrower. Thereafter, the borrower entered into a building contract in August 2007 with a contractor, Acre Contractors (``Acre''). In September 2007 the Bank made contact with McBains Cooper asking about the procedure for drawing down money from the facility.

  18. Thereafter, McBains Cooper issued progress reports at regular intervals, starting with Progress Report (``PR'') No 1, on 28 September 2007, and finishing with PR No 18 on 27 April 2009. In PR No 17, issued on 17 March 2009, McBains Cooper stated for the first time that there were not sufficient funds in the facility to complete the development. This caused consternation in the Bank and, in September 2009 the Bank wrote to the borrower demanding repayment of the loan.

  19. The borrower was in no position to repay the loan and so the property was eventually sold. The bank lost about £1,400,000, which it claims from McBains Cooper in this action.

  20. A major allegation by the Bank is that Mr. Symons, McBains Cooper's project monitor did not visit the site nearly as often as he should have done. Indeed, the Bank alleges that he visited the site on only three occasions in 18 months, instead of visiting it prior to issuing each progress report. In fact, the Bank goes a step further and alleges that McBains Cooper was reckless in preparing and submitting its progress reports in these circumstances. This is denied by McBains Cooper. One implication of making this allegation is that, if it succeeds, the Bank may be able to escape from the consequences of its own negligence. At least, that is its case.

    The retainer of McBains Cooper

  21. As I have already stated, this was by a letter dated 3 February 2006. Payment was to be by way of a fee for the initial assessment and thereafter a lump-sum (not specified) payable against each certified amount under the facility. The letter made it clear that the Bank did require McBains Cooper to monitor and certify all project costs. McBains Cooper countersigned the letter (``the Retainer'') on 6 February 2006. The Retainer included the following terms:

    ``1.1 You warrant and undertake to the Bank that you have exercised and will continue to...

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