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Fresh Hope for £1.6 Million Bank Debt Developer

The Court of Appeal has come to the aid of a landowner who is facing a £1.6 million debt claim in respect of a residential development that reached completion just as the property market collapsed. The court breathed new life into the woman’s case after ruling that certain aspects of her defence and counter-claim were arguable.

The woman had borrowed substantial sums from a retail bank in furtherance of a project to build four new homes in the large garden of a house that she had inherited. The development was blighted by the main contractor’s withdrawal from the site mid-way through the building works. The project was completed after further loans were obtained but not before the bottom fell out of the residential property market.

The woman, who was consigned to living in a caravan as a result of the debacle, defended the debt recovery action on the basis that members of the bank’s staff had told her that they would ‘sort the whole thing out’ and had taken over management of the project which they had mishandled. The bank had gone beyond the role of a mere lender and the woman argued that losses that she had suffered as a result of the bank’s breach of duty should be set off in extinguishment of the loans.

At first instance, the woman’s case, as pleaded, was struck out on the basis that it did not disclose any reasonable prospect of success. Judgment was entered in the bank’s favour for more than £1.6 million. However, in allowing her appeal, the court restored parts of her defence and counterclaim in amended form, ruling that they could be properly argued at trial.

The court acknowledged that certain of the woman’s arguments were ‘hopeless’ and that she had no arguable case against the bank in respect of any alleged breach of duty after the contractors had left the site. However, it was arguable that the involvement of the bank’s employees in the project had resulted in delays that prevented a sale of the properties prior to the market collapse.