Practice - Summary judgment - Entitlement to summary judgment

Senex Holdings Ltd (in liquidation) v National Westminster Bank plc: Queen's Bench Division, Commercial Court (Mr Justice Field): 6 February 2012

In 1999, the claimant, SHL, owned the freehold title of land that was the former site of the Prices Candle Factory (the site). At that time, SHL was owned 100% by RS and from May 2004 was a 100% subsidiary of SCL, whose share capital was owned entirely by RS. SHL applied to the local planning authority for planning and redevelopment permission of the site and in May 1999 entered into a 'section 106 agreement' with the authority under which £1m was to be deposited in an escrow account against certain of its obligations under the agreement.

The agreement was varied by a further agreement dated 22 September 1999 (the September agreement) and replaced by a new agreement concluded in May 2001 under which it was stipulated that the £1m deposit would be held pursuant to the new agreement. Pursuant to the September agreement, £1m was deposited with the defendant bank (the bank) to be held in a joint account in the joint names of SHL and WBC operated under the terms of a joint mandate contained in identical forms executed by SHL and by the authority.

In about October 2004, the bank was told either by RS acting on behalf of SHL or by SHL's solicitors, acting on instructions conveyed by RS on behalf of SHL, that the names of the joint account should be changed with SCL replacing SHL. That change of name was in contemplation of a forthcoming transfer of the site from SHL to SCL which would render SCL an obligated party under the section 106 agreements. In December 2004, the title to the site was transferred from SHL to SCL. In July 2007, SHL's members resolved to place the company into creditors voluntary liquidation.

If the change of name on the joint account was a valid act by the bank, the result was that SHL's rights in the £1m under the account were transferred to SCL. SHL contended that the change of name had not been validly executed by the bank, since there had been no written instructions for the change of name given on behalf of SHL. Accordingly, SHL contended that it was entitled to a declaration that the bank was indebted to it on the account in the sum of £1m. The bank applied for summary judgment against SHL.

It contended that RS demonstrably had the actual authority of SHL to issue the change of name instruction and accordingly the bank had validly changed the name of the account, it being common ground that did not challenge the change of name implemented by the bank. It followed that SHL's claim had no real prospect of success. The application would be granted.

If a bank acted on an instruction given on behalf of a company that did not conform to the applicable mandate, it made legal and commercial sense that it should take the risk that the individual giving the instruction had not had conferred on him by the company authority to give the instruction. Where, however, authority to give the instruction had been conferred by the company, it would make little commercial sense to subject a bank which acted on the instruction to the risk that the individual was acting in breach of duty to third parties. A fortiori where for all practical purposes the company and the individual were effectively but one entity (see [19] of the judgment).

Whilst it was arguable that RS was in breach of duty to SHL's creditors in instructing the bank on behalf of SHL to change the name on the account, it did not mean that RS did not have actual authority quoad the company for the purpose of establishing that the bank was entitled to act on his instruction. RS was indisputably the directing mind and will of SHL.

He was the effective owner, through his ownership of SCL, of the whole of SHL's share capital; he was also a director of SHL when the instruction was first given and remained a director throughout 2005. It followed that as between RS and the company, the bank's customer, RS was authorised to give the instruction he gave, and since the bank had no notice, actual or constructive, of any breach of duty to SHL's creditors and LBW made no complaint of breach of mandate, the bank ought to have been treated as having been entitled to act on RS's instruction, even though the instruction did not conform to the requirements of the mandate (see [18], [21] of the judgment).

There was no real prospect of SHL's claim against the bank succeeding and the bank was entitled to summary judgment against SHL (see [21] of the judgment). London Intercontinental Trust Ltd v Barclays Bank Ltd [1980] 1 Lloyd's Rep 241 considered.

William Edwards (instructed by Charles Russell LLP) for the claimant; Andrew Mitchell QC (instructed by DMH Stallard LLP) for the defendant.