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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Rahman & Ors v HSBC Bank Plc & Ors [2012] EWHC 11 (Ch) (17 January 2012) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2012/11.html Cite as: [2012] EWHC 11 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LEEDS DISTRICT REGISTRY

		The Court House Oxford Row Leeds LS1 3BG
		17/01/2012

Judge Behrens:

1. Definitions

1. In this judgment I shall adopt the following definitions:

1. "Mr Rahman": the First Claimant;

2. "Mrs Rahman": the Second Claimant;

3. "LPL": the Third Claimant;

4. "LP(GB)L": the Fourth Claimant;

5. "The Trustees": Mr and Mrs Rahman as Trustees of Dr Rahman's grandchildren's settlement No 1 1992 – the Fifth and Sixth Claimants;

6. "The Parents": the Seventh and Eighth Claimants;

7. "HSBC": the First Defendant;

8. "The Receivers": the Second and Third Defendants;

9. "CIP": Commercial Investment Property;

10. "RIP": Residential Investment Property;

11. "CARM": Credit and Risk Management Report; (This is an internal report prepared by HSBC in respect of each credit application. It contains contemporaneous comments from all concerned with the application including credit control.)

12. "SABU": South Asian Banking Unit; (This was the department of HSBC based in Bradford that was responsible for the Claimants until September 2007.)

13. "LMU": Loan Management Unit; (This is HSBC's restructuring unit for underperforming commercial clients. The unit attempts to restructure facilities to reduce the credit risk. If successful the account is passed back to a Corporate or Commercial Team. If not it is passed to a commercial Recovery Unit for termination and enforcement.)

14. "SPV": Special Purpose Vehicle;

15. "BVI": British Virgin Islands;

16. "CAL": Cransbill Assets Limited.

2. Introduction

2. Mr Rahman is the controlling force behind a group of entities which have been referred to in these proceedings as the Rahman Group. The Rahman Group comprises a loose association of six "cost centres" comprising Mr Rahman, Mr and Mrs Rahman the Trustees, LPL, LP(GB)L and the Parents. From about 1993 the Rahman Group has built up a large portfolio of commercial and residential investment properties.
3. In or about 1998 the Rahman Group commenced a banking relationship with HSBC. HSBC provided secured overdraft facilities and term loans to members of the Rahman Group to enable them to acquire and/or refurbish the properties.
4. On 30 August 2011 HSBC served demands upon Mr and Mrs Rahman and the Trustees for the repayments of various term loan facilities that it alleged had expired between 31 May and 4 August 2011. It alleged that the failure to repay these facilities triggered defaults in relation to those claimants' remaining term loans (under express cross-default clauses). Demand was made in relation to those facilities on 31 August 2011. On 1 September 2011, the Bank appointed the Receivers over the properties provided as security for those facilities.
5. HSBC contend that the demands on 30 August 2011 related to term loans of 5 year duration. The relevant facility letters support that contention. However Mr Rahman contends that by an oral agreement concluded or binding representation made on 28 June 2006 and reiterated on 30 May 2008 HSBC agreed with him to extend all of the facilities under his control to 15 year terms. He also contends that such agreement encapsulated not only existing term loans, but also all present and future facilities, including overdraft facilities.
6. The principal dispute between the parties relates to the appointment of the Receivers. Mr Rahman and the other relevant Claimants contend that the appointment was invalid on three grounds. First they rely on the agreement. Second they rely on the doctrine of promissory estoppel. Third they contend that the appointment of the Receivers was unfair. They rely on the provisions of section 140A and B of the Consumer Credit Act 1974 and invite the Court to exercise its discretionary power in effect to discharge the receivership.
7. HSBC dispute each of the three grounds relied on by Mr Rahman. It denies that there was any oral agreement or representation made on 28 June 2006. Any such agreement would be inconsistent with the facility letters and other contemporaneous documents. It makes a similar denial in respect of the meeting on 30 May 2008. It contends that there was nothing unfair about HSBC's terms or its treatment of Mr Rahman. These were commercial transactions involving large sums of money between experienced businessmen. There is no reason for the Court to interfere.
8. There are a number of subsidiary issues.
9. The most important of these relates to the alleged failure by HSBC to provide funds to LPL to enable it to develop St Anne's School site, Woodhouse Square, Leeds. As pleaded LPL's case is that HSBC agreed to fund the development at the meeting on 28 June 2006. In evidence Mr Rahman went further than this. In any event HSBC denies any agreement to provide funds for the development of St Anne's School.
10. There are four other groups of properties in Leeds where it is alleged that HSBC failed to provide funds. These are 51/55 Clarendon Road, the CAL properties, 40/41 Park Square and 2 Blenheim Terrace. In respect of 51/55 Clarendon Road and the CAL properties HSBC accepts that there was a facility letter in each case but contends that the offer lapsed because there was no acceptance or drawdown within the time specified in the letter. The position with regard to 40/41 Park Square is slightly more complex. On any view the offer in one of the facility letters was accepted in respect of the funds necessary to purchase 40/41 Park Square. Those funds were loaned. Mr Rahman's complaint relates to the balance of the funds referred to in the facility letter. HSBC contends that there was no relevant request to draw down these funds within the drawdown period.
11. Mr Rahman alleges that HSBC agreed to fund the acquisition of 2 Blenheim Terrace as part of an arrangement whereby he would in effect swap 2 Blenheim Terrace for 75 Otley Road which would be sold. He asserts that this swap was agreed by Mr Swift on behalf of HSBC. Mr Swift agrees that there were discussions in relation to a possible swap but denies that there was a concluded contract.
12. Finally there is a dispute about the allocation of the proceeds of sale following what Mr Rahman described as a "fire sale" of St Anne's School and 51/53 Clarendon Road in 2008. Mr Rahman contends that the proceeds should first have been applied to reduce overdrafts and that what happened was in breach of an agreement reached between himself and Mr Kosmirak. Mr Kosmirak denies that there was an agreement as alleged. In any event as the rate of interest on all the facilities was the same it in fact made no difference to the overall position.
13. HSBC have Counterclaimed for the sums due under the various facilities. At one time there was a dispute as to whether interest had been correctly refunded. That dispute was resolved during the course of the hearing. In the circumstances there was no argument at the hearing on the Counterclaim.
14. I should immediately acknowledge with gratitude the very considerable assistance I have received from the legal representatives from both sides. This was a document heavy trial. There were some 29 bundles and it took considerable skill to ensure that the case was conducted and concluded precisely within the time table allotted. I am also particularly grateful to Mr Rahman's advisors for providing me with an electronic pdf copy of every document in the 29 bundles and to Mr Wilson for his extremely detailed and well referenced written arguments.

3. Witnesses

15. Four witnesses were called on behalf of Mr Rahman. The principal witness was, of course, Mr Rahman. He was cross-examined for 2½ days and re-examined for half a day. In addition Mr Rahman called Mr Taher Nawaz, Mr Glen Levison and Mr Matthew Hopkins.
16. Mr Nawaz is a close friend of Mr Rahman and also the accountant advising him. He did not become involved in the matters which are the subject of this dispute until March 2008. Thereafter he assisted Mr Rahman with the correspondence with HSBC and attended some four meetings with the Bank. He was cross-examined briefly over one of those meetings.
17. Mr Levison and Mr Hopkins are both valuers. Both were involved with properties within Mr Rahman's portfolio. The effect of their evidence was that in discussions in 2008/2009 Mr Rahman referred to the fact that his loans with HSBC were 15 year terms. Neither were cross-examined save to establish the dates of conversations.
18. Seven witnesses were called on behalf of HSBC. Mr David Menaghan was a Commercial Manager at SABU and was Mr Rahman's relationship manager from December 2004 until 31 January 2006. His evidence related to this period and was largely uncontroversial. Its relevance lay in setting out the tensions in the relationship between Mr Rahman and HSBC in the early part of 2006. He also dealt with the acquisition of St Anne's School.
19. Three witnesses were called in relation to the events in 2006 and the spring and summer of 2007. This, of course, included the crucial meeting on 28 June 2006. Mr Mike Senior was a Senior Commercial Manager at SABU and took over as Mr Rahman's relationship manager from January 2006 until September 2007. Mr Jason Trigg was Head of the Commercial Team at SABU and Mr Senior's immediate line manager. Given the size and complexity of Mr Rahman's portfolio Mr Trigg was involved in the majority of the meetings and decisions taken. Mr Mark Vines was at the relevant time the Area Director for West Yorkshire. He was brought in by HSBC to attend the meeting on 28 June 2006 and his evidence related to that period.
20. Mr Christopher Kosmirak was employed as a Corporate Manager in the Real Estate Department in Leeds. As such he became Mr Rahman's relationship manager from September 2007 when the relationship was transferred from SABU to Corporate in Leeds until July 2010. His evidence related to the meeting on 30 May 2008 and to a number of the subsidiary issues set out above.
21. Mr Michael Swift was the Deputy Head of Corporate Banking for Yorkshire and the North East. His evidence principally related to the alleged swap agreement in relation to 2 Blenheim Terrace.
22. Stephane Barreau is a Director in LMU and became Mr Rahman's relationship manager when the relationship was transferred to LMU in June 2010. His evidence related to his dealings with Mr Rahman after 2010 and the events which led to the demands and the appointment of the Receivers.

4. Events prior to 2006

4.1 Background

23. Mr Rahman is 58 years of age. He was born in the United Kingdom but educated in India at Delhi University. He returned to the United Kingdom in 1976, and in 1977 got married and moved to Leeds. In around 1981 he acquired his first property, which was a back to back terrace let to students. The property business expanded rapidly. In 1986 he became a Lloyds Name. This caused him financial difficulties and he had to realise his assets. In 1993, however, he reached an agreement with Lloyds which enabled him to proceed to develop his business.
24. Mr Rahman established two limited companies for his sister, namely LPL and LP(GB)L respectively. While Mr Rahman is not a director or shareholder of those companies, he ran the companies and other portfolios on behalf of other members of his family.
25. The basic structure of the business/portfolio was that Mr Rahman controlled family property (i.e. properties owned by the Trustees for their children as beneficiaries, and properties belonging to his sister and his parents) which had appreciated in value. He used the equity in those properties in order to acquire further properties. Over the years he moved from predominantly residential property into high quality commercial property with long blue chip covenants.

4.2 Early dealings with HSBC

26. The relationship between Mr Rahman and HSBC began in 1998 when Mr Rahman was introduced to Richard Bowers the then manager of SABU which was run from Bradford. Between July 1998 and the end of 2004 a number of loans were made to various cost centres. In a CARM dated November 2004 HSBC summarised the position:

Customer	Last PV	Loan	Rentroll
LPL	4,186,000	2,208,000	281,000
LP(GB)L	900,000	400,000	53,000
The Parents	965,000	396,500	60,000
Mr and Mrs Rahman	5,090,000	3,130,000	320,000
The Trustees	2,810,000	1,050,000	171,000
TOTALS	13,951,000	7,184,500	885,000

27. It will be seen that there were loans totalling £7.2 million secured against property valued at £14 million. As Mr Rahman pointed out the rents receivable more than covered any interest payments due under the loans.

4.3 Facility Letters

28. The loans were of differing lengths varying from overdrafts repayable on demand to 15 year term loans. All of the loans were evidenced by facility letters. The facility letter set out the terms of the loan/overdraft facilities being offered. It set out the amount of the loan, (in most cases) the purpose of the loan, the amount or limit of the amount to be lent, the term of the loan, the interest rate, the amount of repayments due and the security required.
29. Each of the facility letters was couched as an offer by HSBC and required acceptance by the borrower (usually within 28 days of the offer). The letter made clear that if the offer was not accepted within this period it would lapse.
30. The facility letters were issued subject to HSBC's General Terms and Conditions. It is not necessary to refer to the terms in detail. Furthermore not all the facility letters were subject to identical terms. Three of the conditions have been the subject of some debate:

1. Under condition 1 a period was fixed for the drawdown of the facility.

The loan shall be drawn in one amount not later than [2 months] after the Acceptance Date.

Three points need to be noted. First this clause plainly had no application to facilities relating to overdrafts. Second the drawdown period was different in different facility letters. Third there are many examples where the drawdown was not "in one amount".

2. Condition 6 is headed "Termination". It sets out a number of events which entitled HSBC to demand repayment of all monies outstanding in respect of the loan. These include a cross-default clause in the following terms:

(c) Any other failure by the Borrower to repay when due and payable or discharge in full any of its indebtedness or liabilities …to [HSBC] …

3. Many of the facility letters contained a renegotiation clause which required the parties to renegotiate the terms of the loan if appropriate notice were served by either party at specified periods during the currency of the loan. If no concluded agreement resulted from the renegotiation such event was to be treated as an event of termination.

31. It is plain that Mr Rahman received and read the General Conditions. Many of the signed copies of the facility letters contain parts of the General Conditions which have been struck out by Mr Rahman before signature. He particularly objected to the renegotiation clause. It was Mr Rahman's evidence that before he struck out the relevant clause he discussed the amendment with the relevant relationship manager – usually Mr Senior. Mr Senior did not accept this.
32. An important distinction has to be made between loans where the monthly repayments comprised only interest with the result that the whole of the capital was repayable at the end of the term ("interest only"), and loans where capital and interest was repayable throughout the term ("capital and interest"). Many of the term loans before 2005 were capital and interest loans with an interest rate of 2% over HSBC base rate.
33. HSBC's procedures required that credit approval be obtained before the issue of any facility letter. In evidence Mr Rahman confirmed that he was aware of this requirement although, on a number of occasions he referred to credit approval as "a mere formality".

4.4 Security

34. HSBC's facilities were secured by way of legal mortgage incorporating HSBC's Mortgage Deed Conditions (1999 Edition). Under condition 11 the Mortgage became enforceable if:

(a) The Debt or any part of it is not paid or discharged when due …

and when any of the above has occurred … and at any time afterwards, the powers of sale and of appointing a receiver conferred by section 101 of the Law of Property Act 1925 shall immediately arise and become exercisable by [HSBC] …

35. In general the securities comprised the assets owned by the particular cost centre to which the facility was granted. During HSBC's closing submissions I was helpfully provided with a Schedule prepared by its solicitors setting out in detail the securities held in respect of each facility where receivers have been appointed. I have included this Schedule as an Appendix to this judgment. It will be seen that many of the properties owned by individual cost centres were security for more than one facility.

4.5 Conversion of loans to 25 Year term/ Acquisition of St Anne's School

36. In or about July 2004 Mr Rahman put a proposal to HSBC with a view to purchasing St Anne's school in Leeds at a cost of £2 million for conversion into 52 flats at an estimated cost of £4 million.
37. In a letter dated 11 November 2004 he repeated the request to Mike Hemingway and John Bell. This led to detailed consideration of the proposal in a CARM dated 16 November 2004. One of the matters considered in the CARM was whether HSBC would restructure existing facilities in a manner which would facilitate the purchase. The proposal was to restructure existing Medium Term Loans (MTLs) to 20 years.
38. Shortly thereafter there was a meeting between Mr Rahman, Mr Hemingway and Mr Bell. According to Mr Rahman it was agreed that at that meeting that all loans would be on 25 year repayment terms and that the restructuring would take effect in January 2005.
39. It is not clear whether that agreement was reached as early as November 2004. It is, however, clear from HSBC's CARM dated 4 January 2005 that a request was made to approve the extension of all existing loans to 25 years but provide an interest only period of 2 years for the £1.9 million loan in respect of the acquisition of St Anne's school.
40. Credit approval was duly obtained both for the purchase of the land at St Anne's school for £1.9 million and for the term loans to be rescheduled.
41. The facility letter for St Anne's School is dated 18^th January 2005. It offers LPL an on demand facility of £1.9 million but makes it clear that the facility is due for review in 12 months. The land at St Anne's School was duly acquired by LPL.
42. New facility letters or letters varying the original term loans were also issued converting the term loans so that they were repayable on capital and interest terms over 25 years.
43. Mr Rahman however complained that the conversion process took too long. Although the first letter is dated 18 January 2005 the process was not completed until 11 November 2005. Mr Rahman was concerned that these delays increased the interest he had to pay. When he gave evidence Mr Menaghan could not now remember the reason for the delay.
44. Mr Rahman also complained about the rate of interest on the loans (in general 2% over HSBC base rate). Mr Rahman considered that that rate was too high. Mr Rahman contends that on 7 September 2005 Mr Menaghan agreed that uniform rates of interest of 1 % over base would be applied to all the facilities. He contends that HSBC failed to honour this agreement and overcharged him interest.
45. There was at one time a dispute as to whether the agreement alleged by Mr Rahman was ever made. In letters dated 14 November 2005, 22 November 2005 and 7 December 2005 Mr Rahman asserted that it was. In a letter dated 16 November 2005 HSBC denied that such an agreement was made. On 7 December 2005 HSBC offered to reduce the rate to 1.75% "as a gesture of good faith". On 30 December 2005 an interest refund of £52,473.29 was made.
46. Mr Rahman was not satisfied with this. The dispute rumbled on until 27 June 2006 (the day before the meeting on 28 June 2006). In a letter dealing with the matters to be discussed at the meeting HSBC offered an interest refund from 7 September 2005 at a rate of 1% over base. That refund was duly applied to the relevant accounts.
47. A further source of irritation to Mr Rahman was that in December 2005 HSBC issued default notices in respect of loan repayments amounting to about £8,000 and failed to honour cheques totalling about £3,000.

4.6 Events in early 2006

January

48. Thus, at the beginning of 2006 relations between Mr Rahman and HSBC were becoming strained. From Mr Rahman's point of view HSBC were not honouring the agreement over interest, it was slow in putting into effect the agreement reached in January 2005, and it was dishonouring his cheques.
49. From HSBC's point of view Mr Rahman was a very valuable customer of HSBC. He had outstanding loans of approximately £10 million; he was paying interest of approximately £200,000 per annum and was seeking to expand his portfolio. According to Mr Senior he was one of the largest customers of SABU.
50. Accordingly HSBC set about repairing the damage and rebuilding the relationship. Mr Trigg met Mr Rahman on 18^th January and wrote a long letter to Mr Rahman on 29^th January 2006. It is not necessary to set out the letter in full. In summary (so far as is relevant to the issues):

1. He referred to Mr Rahman as a valuable customer of HSBC. He wished to continue the relationship but recognised that the service provided by HSBC must mirror his value.

2. He attributed the problems of December 2005 to poor communication (on both sides). He apologised for not giving Mr Rahman the opportunity to rectify any excesses on the overdraft. He offered to refund any fees levied and to write to the payees explaining that cheques were returned due to "Bank error".

3. He referred to a number of facilities including St Anne's School. He noted that Mr Rahman was:

Now considering developing the site yourself. We obtained approval for the landbank loan on the basis that you would either resell the property or develop as part of a joint venture and, again this change of strategy could be interpreted as a lack of planning. We will therefore need to work closely with you to develop a supportable proposal.

4. He then set out a number of key issues that would need to be considered including planning consent, detailed and robust costings, the quality of the proposed builder and an indication of the likely rental income.

5. He pointed out that it was necessary to renew the facility (for the £1.9 million landbank loan) for a further 12 months.

February 2006

51. On 6 February 2006 Mr Rahman wrote to Mr Trigg informing him that in 2005 he had obtained planning approval for 72 flats rather than the approval for 52 that had been obtained in 2004.
52. The application to renew the 12 month facility was the subject of comments by Mr Trigg in a CARM dated 17^th February 2006 which included:

Planning negotiations have become protracted with consent for 72 apartments only agreed in the last few months. SR is now consulting professional advisors/contractors/potential JV partners to decide the most appropriate way forward. Whilst we request 12 month renewal …we will provide interim report by end 5/06 at which time [Mr Rahman]'s intentions should be finalised.

53. The application was approved on 21^st February by Mr Gunton. It is clear from his comments that he had a number of reservations about the facility. Amongst his other observations he noted:

It is appropriate to reiterate Central Credit has no appetite to fund the development of the St Anne's Site …

54. There are a number of factual issues arising. Mr Rahman asserts that Mr Trigg promised him the development funding at or around this time. He asserts that Mr Trigg came to his office. He was shown the plans and they talked about the land. He says that Mr Trigg said that HSBC would fund the development. Mr Rahman also asserts that neither Mr Trigg nor Mr Senior passed on the reservations expressed by Mr Gunton.
55. Mr Trigg denies this. He says that he told Mr Rahman that he had obtained credit approval for the purchase of the land but not for the development. He did tell Mr Rahman that credit did not want to do it and that it would be difficult to get anything agreed. However at that time Mr Rahman was talking about joint venture or sale. He did tell Mr Rahman that he would put a proposal to credit control if he felt it was viable.
56. Mr Trigg also said that he personally was not keen on residential development in Leeds. So much so that he implemented a local policy against such funding.

Alternative Funding

57. From about the end of January 2006 Mr Rahman started to discuss his funding requirements with other banks. He has disclosed documents which show:

1. On 8 February 2006, he on behalf of LPL received draft heads of terms from Bank of Ireland in respect of a loan of £8½ million being £2 million to refinance the facility then held with HSBC and £6.5 million for the development of St Anne's School. This facility was at a margin of 1.6% over base. It was repayable on demand but repayable in any event within 2 years and was subject to a number of other fees.

2. Mr Rahman approached Lloyds TSB in a letter dated 13 February 2006. After initial discussions on 11 April 2006 the Senior Relationship Manager at Lloyds wrote to Mr Rahman with suggestions to enable him to refinance and expand his portfolio. In the letter he suggested a 5 year interest only loan period and that Lloyds should be able to consider an investment facility of £25 - £28 million and £6.5 million to develop St Anne's School. On 10 July 2006, he wrote again confirming that Lloyds were very keen to provide him with banking facilities and that he had received formal credit approval for a package of facilities totalling £30 million. The principal term of the proposed investment loan was that it was interest only for the first 5 years with the loan to be rescheduled over 20 years commencing in year 6.

3. On 22 May 2006, Mr Rahman received outline terms from Bank of Scotland. These included a term loan for £4.2 million to refinance existing term loans and a development loan of £6.5 million in respect of St Anne's School. The term loan was proposed to be on the basis of 5 years interest only and thereafter on a term loan.

4. On 16 June 2006, Mr Rahman received indicative terms from Royal Bank of Scotland. The terms provided for finance of up to £40 million to uplift existing borrowing from HSBC, to provide a £6.5 million development facility for St Anne's School, and to provide a facility for future investment deals. The facility was offered on the basis of a 5 year interest only facility.

58. It can thus be seen that a number of financial institutions were interested in providing Mr Rahman with lending facilities. However none of HSBC's rivals had offered better repayment terms than 5 year interest only.
59. It is common ground that at the meeting on 28 June 2006 Mr Trigg, Mr Senior and Mr Vines were aware that Mr Rahman was being courted by and had received offers of finance from other banks. It is equally common ground that they were keen to continue the relationship if possible.

April 2006

60. On 18 April 2006 Mr Rahman faxed a letter to Mr Senior. In it he referred to the meeting on 18^th January 2006, and pointed out that he was still awaiting decisions. The letter made reference to three properties in Leeds:

1. 25 Park Square. This was a prospective Trust purchase. Mr Rahman asked for permission to exchange contracts in the week commencing 18 April 2006 with completion 4 weeks away. He asked Mr Senior to extend the overdraft on the Trust account by £60,000 to enable exchange to take place.

2. St Anne's School. Mr Rahman complained that the section 106 agreement had not been signed by HSBC. He asked for permission to start demolition (at a cost of £25,000 plus £10,000 preliminaries).

3. 30 Park Square. Mr Rahman stated that the Trust was putting in a tender on 26 April 2006 for this office.

61. Mr Rahman concluded the letter by pointing out that substantial progress had to be made over the next few days and he hoped that HSBC would be able to deliver.
62. Following a meeting on 19 April 2006 between Mr Senior and Mr Rahman, Mr Senior agreed in principle to fund the purchase of 30 Park Square. A letter of comfort confirming this was sent to Mr Rahman's agent thus enabling him to put in a tender for the property.

May 2006

63. A meeting was scheduled between Mr Rahman and Mr Senior for 16 May 2006. It did not take place. However before the meeting Mr Rahman faxed his then current proposals to Mr Senior. In the fax Mr Rahman stated he was proposing to gear up his existing residential portfolio for 2 reasons. First he wished to develop St Anne's School into 72 flats and 65 underground parking spaces at a cost of £6.5 million; secondly he wanted to acquire further investment property – particularly commercial investment. The fax made it clear that Mr Rahman was then looking for a further £30 million from HSBC and made a request for such a facility. The fax referred to agreed current proceeding purchases as including 25, 30 Park Square and 5 South Parade.
64. On 17 May 2006, Mr Rahman sent a further fax to Mr Senior which made reference to St Anne's School:

Pullens have been given the Planning Consent, Ground Report etc and they have come up with a cost of £5.2m. All this has been given to Sanderson Weatherall to incorporate into their [valuation] report. Given the amount of underground car parking I have also asked them to give us their take on a proposed commercial development there. Clearly if neither build program makes a profit the site will be sold..

65. Mr Senior replied the same day. The letter dealt with St Anne's School in the following way:

As previously discussed we would look to support the St Anne's Development which we believe will comply with our lending guidelines but still await the following:-

Professional Valuation

Planning Consent

Ground Report

Costing

Build Program

Prior to obtaining formal credit approval your fax suggests some change of plan, including a Commercial Development or no development at all! Please provide an update on your current position.

66. Whilst it may be said that that this reply does not make any reference to Central Credit's lack of appetite for funding the St Anne's School development, it also lends little support for Mr Rahman's contention that HSBC had already agreed to support the development.
67. The letter also dealt with Mr Rahman's expansion plans:

Your comments in connection with the expansion of the portfolio appear to be entirely in line with our guidelines and again we would wish to support although each transaction will need to be considered in detail and require specific credit approval.

68. As already noted Mr Rahman accepted in evidence that he would need credit approval for all applications.
69. On 26 May 2006, Mr Senior wrote to Mr Rahman confirming that he was processing the application to complete the purchase of 25 Park Square on 31 May 2006. The letter went on to confirm agreement in principle to fund the purchase of 30 Park Square though he commented that the purchase of 5 South Parade fell outside guidelines.
70. On 26 May 2006 two CARMs were prepared in respect of the renewal of various facilities. In the Introduction it was noted that the relationship was at a crossroads and that Mr Rahman had been taken to York Races by a rival – HBOS. Much would depend on the negotiations over the next few weeks.
71. The purchase of 25 Park Square duly completed on 1 June 2006. Credit approval for the facility was obtained on 30 May 2006. The funding was comprised in a facility letter dated 30 May 2006 for £700,000 offered to the Trustees. The facility letter provided for repayment over 15 years on capital and interest terms.

4.7 Events leading up to the meeting of 28 June 2006

Valuation of Mr Rahman's portfolio

72. On 15 June 2006, Sanderson Weatherall provided HSBC and Mr Rahman with a valuation of his portfolio. The portfolio comprised some 39 properties located primarily within the north western fringes of Leeds city centre. According to the valuation the vast majority of the portfolio comprised residential houses, some of which had been converted to provide self contained flats. A small minority were commercial in nature with commercial leases in places.
73. There was some debate as to the extent of the commercial properties. Mr Rahman, in evidence identified some 12 properties out of the list of 39 contained in the valuation which he described as Commercial. I was, however, provided with a schedule taken from the valuation itself which suggested that only 3 properties were commercial, 4 properties had mixed commercial, residential use and the remainder were solely residential.
74. The overall valuation totalled £22.8 million. St Anne's School was valued at £2.75 million but £10 million when converted. There was a separate valuation for St Anne's School. In section 8 of that report and Appendix IV details of proposed costings for the scheme were exhibited totalling £5.2 million. These projections were described as "feasible".

23 June 2006

75. On 23 June 2006, Mr Rahman sent a fax to Mr Senior which he copied to Mr Vines. The fax complains in terms about the level of service provided by HSBC and contains a clear threat to take his business to a rival bank. Amongst his complaints was the rate of interest he was paying, and the failure of HSBC's credit department to approve the deposits for the purchase of 30 Park Square and 5 South Parade until the end of the following week. The letter suggested the cancellation of the meeting proposed for 28 June 2006
76. Mr Senior replied to the letter on 26 June 2006. In the letter he made it clear that he needed to meet to agree terms, obtain an update on Mr Rahman's plans and enlist the support of Mr Vines. He also made the point that credit approval takes a minimum of 2 full days.

26 June 2006

77. On 26 June 2006 Mr Rahman sent a fax to Mr Vines. In it he stated he was proposing to make 6 purchases including 30 Park Square, 5 South Parade and the construction of 72 flats at St Anne's School. The letter included the following:

With certainty finality and closure req'd before the end of the week ending 30-6-06 I am requesting to raise from you nearly £20m in additional funds against a property portfolio of £41 m + producing £2,208,000 p.a before rent reviews o/s.

The £30m of borrowing is sought at 1% over base on an interest only basis for 7 years

I am sorry to say the party is winding down at HSBC. … I will simply take the £30m of business elsewhere because HSBC has lost the appetite for business.

27 June 2006

78. The documents record considerable activity on 27 June 2006. Mr Senior prepared a CARM in relation to the deposits for 30 Park Square and 5 South Parade. The proposal was to increase the overdraft on the trustees account from £80,000 to £360,000. Under the heading "Purpose" there is a comment on the vulnerability of the relationship and the following:

No commitment is given to fund the purchase as indicative repayment cover is outside guidelines and we are unwilling to commit until we agreed the appropriate structure. Discussions with CC In (Rayner) indicated a willingness to discuss interest only x 5 years or part amortisation over 15 years.

79. Comments were added to the CARM by Mr Trigg at about 10.37 p.m. He too recognised that the relationship was difficult and that there was a real possibility of losing Mr Rahman as a client. He referred to a telephone conversation with Mr Heath (in credit) and the prompt support he was given.
80. When he gave evidence Mr Trigg confirmed conversations with both Mr Heath and Mr Rayner. The purpose of the conversations was to try and find a formula which Mr Rahman would be happy with. He confirmed that Mr Rayner had expressed a willingness to consider 5 year interest only loans for CIPs.
81. In the afternoon of 27^th June there was a telephone conversation between Mr Senior and Mr Rahman. Following the conversation Mr Rahman and Mr Senior exchanged correspondence as to what had been agreed. According to Mr Rahman's fax:

1. All borrowings between 7 September 2005 and 27 June 2006 to be at 1% over base rate; future borrowings to be at 1.25% over base until an agreement is reached on hedging interest rates.

2. The trust account facility would be increased by £360,000 to cover the 10% deposit on 30 Park Square and 5 South Parade. The commitment was increased with no commitment to provide completion monies.

3. At the meeting there would be discussion on:

1. Proposed purchases.

2. St Anne's School.

3. Proposed purchases of buildings occupied by Barclays and HSBC being auctioned on 5 and 6 July.

4. Interest only facilities for the next 7 years to 2013 if possible.

82. Mr Senior's letter was shorter. He confirmed the increase in the trust overdraft to facilitate exchange of contracts. The facility letter would be taken to the meeting. He confirmed that there was no commitment to fund the purchase though he anticipated that this would be taken forward at the meeting the following day. He confirmed the reduction in the rate for facilities for the future. He confirmed the rate of 1% over base for the period between 7 September 2005 and 27 June 2006 but qualified this confirmation with the words "subject to a continuing relationship".
83. The qualification provoked a somewhat intemperate response from Mr Rahman which was faxed at 11.45 p.m. He accused HSBC of blackmail and said that if he had received the fax earlier he would have called the meeting off.

5. The Meeting of 28^th June 2006

84. The meeting took place at Mr Rahman's offices. It was attended by Mr Rahman, Mr Trigg, Mr Senior and Mr Vines. It is common ground that it started at about 10.30 after having coffee. There is a dispute as to how long the meeting lasted. On behalf of HSBC Mr Trigg and Mr Senior both said that it lasted about two hours. Mr Rahman said it lasted only about half an hour.

5.1 Documentary Evidence

85. There are conflicts of evidence central to Mr Rahman's case as to what was said and agreed at the meeting. Before discussing the oral evidence it is convenient to look at the contemporaneous documentary evidence in relation to it.

The Agenda

86. The Agenda for the meeting is a 6 page document prepared by Mr Trigg and Mr Senior. Each of the pages consists of bullet points; thus there is one page for the purpose of the meeting and one page for outstanding issues involving Mr Rahman – these include the issues relating to the returned cheques in December and the rate of interest being charged. There is a page dealing with Mr Rahman's plans and a page dealing with actions.
87. In the page dealing with Mr Rahman's plans there is a section headed "Outstanding Deals" which includes - St Anne's School, 5 South Parade/30 Park Square, HSBC University Branch and Barclays (Headrow Branch). Mr Trigg has written comments on his copy of the Agenda. By St Anne's School he has written: "WAYNE'S SUPPORT CAR PARK? OFFICES? £25K DEMOLITION SELL RENT OUT"
88. In the page dealing with Actions there is a section headed "Loan Structures". This has 3 subheadings – RIP, CIP and Overdraft. Beside RIP Mr Trigg has written: "INT ONLY x 15 YEARS". Beside CIP Mr Trigg has written: "PART AMORTISATION x 15 YEARS INTEREST ONLY x 5 YEARS".

Mr Rahman's fax – 29 June 2006

89. On 29 June 2006 Mr Rahman wrote an urgent fax to Mr Senior in relation to 30 Park Square and 5 South Parade. In the letter he asked for a decision within the next 24 hours to confirm whether or not HSBC would support him with the purchase completions of the two properties.
90. The final paragraph of the letter includes:

I would appreciate an answer from you by close of business tomorrow to close this cost centre at 1% over base on a 5 to 7 yr interest only mortgage.

Mr Senior's letter – 29 June 2006

91. On 29 June 2006 Mr Senior sent a letter setting out 9 actions which he asserted were agreed at the meeting. Actions 3 – 5 are relevant:

3) HSBC to obtain credit approval to fund the purchase of 30 Park Square West and 5 South Parade, Leeds. Funding to be provided on a 5 year interest only basis. Existing residential portfolio to be switched to 15 year interest only basis.

4) HSBC to obtain credit approval to switch the £700,000 loan for Park Square West Leeds to 5 year interest only

5) HSBC to obtain indicative terms to fund the St Anne's School development. Full details will be required once a decision has been taken to construct either residential or commercial property.

Mr Rahman's fax in response – 30 June 2006

92. Mr Rahman responded to Mr Senior's letter the following day. In the fax he addressed actions 3 -5 as follows:

3) I await your credit approval to fund 30 Park Square and 5 South Parade through the trust on a 5 yr interest only basis. Although I have given the 10% deposit across to [my] solicitors we have decided not to exchange contracts but to proceed to completion just as soon as the credit approval has been processed.

4) Thank-you for seeking credit approval for switching the £700,000 loan for 25 Park Square West to 5 year interest only.

5) Thank-you for seeking credit approval to fund the development at the St Anne's School site.

Mr Senior's response – 30 June 2006

93. Mr Senior responded briefly the same day. In the letter he expressed a belief that they had agreed a way forward and informed Mr Rahman that he had completed a credit application which would be sent for approval once Mr Vines had added his support.

CARM submitted on 3 July 2006

94. Mr Senior prepared the CARM on 3 July 2006. It is a lengthy document and it is not necessary to set it out in full. He set out the history in some detail including a reference to "a full and frank discussion" at the meeting on 28 June 2006. He described the proposal as "outside the CIP guidelines" and referred to the discussion with credit on 27 June 2006. He referred to the indicative offers from other banks which had been seen by HSBC. He asked for approval for 5 year interest only CIP loans for the purchase of 5 South Parade and 30 Park Square, amend existing CIP loan of £700k to 5 year interest only and to amend existing RIP loans to fully compliant 15 year interest only terms.
95. Mr Trigg added his comments at 2.15 p.m the same day. He also made the point that the loans met RIP guidelines but not CIP guidelines due to proposed interest only terms. After referring to the other offers he made the comment that HSBC's terms appear out of step with the marketplace. His comments included the following:

SR intends to continue growing his portfolio and now recognises that our debt servicing guidelines (15 years capital and interest for CIP) are placing a restriction on his growth aspirations which he would not suffer at another bank.…

SR has asked for 7 year interest only term although candidly advises that other banks have yet to provide credit approved offer letters on these terms. From previous conversations with Central Credit we have assumed we are at the extent of our appetite at 5 years but just in case shall be grateful to receive an indication of appetite for 7 years.

96. Credit approval was granted at 8.07 the following morning and included the following comment:

We acknowledge [HSBC]'s current lack of appetite to entertain interest only CIP lending, but in employing a commercial view here and seeking to support you in your (difficult) negotiations we will approve on the basis of five years interest only.

5.2 Mr Rahman's evidence

15 year interest only CIP loans

97. When he gave evidence about the meeting Mr Rahman confirmed his case that he was offered and accepted 15 year interest only terms on CIP loans. He asserted that he had been offered 5 year interest only loans for CIP loans in March 2006 and had turned the offer down. He accepted that he was offered 15 year interest only loans on RIP loans but said that that did not attract him. He was exiting residential and had lost interest in such loans.
98. He said that Mr Vines offered him 15 year interest only loans on CIP loans and that was what clinched the deal. He said that Mr Senior or Mr Vines told him that he had to take the "off the shelf product" and that he would be given variation/side letters later.
99. My note of his evidence on this critical point reads:

It was put to me – go for the standard product and we will extend the term as we did previously in the November 2004 agreement where all facilities were extended by way of side letters to 25 years. That was a verbal agreement.

30 Park Square and 5 South Parade was by tender; we had to get completion done imminently.

Mark Vines said get the money first. Get it on standard terms. The money was allocated.

The situation was urgent …

He said get the 5 year off the shelf product and we will extend the term.

That is the standard product anyone can buy.

It is easier to get the money if you go for the standard product.

It is easier to get past credit with the standard product.

Time was of the essence.

100. Unsurprisingly Mr Rahman was asked about the contemporaneous documents (set out above) which, on their face, appear to be inconsistent with this evidence. In relation to his fax of 29 June 2006 he said he was told that HSBC would finance the 2 properties. Whilst he understood that credit approval was necessary he was told it was a formality. He explained the reference to a 5/7 year interest only loan by reference to the agreement to go for a standard product.
101. In relation to his fax of 30 June 2006 he was asked why there was no mention of the side letters extending the interest only period to 15 years. He said he had a phone conversation with Mr Senior before he sent the fax. Mr Senior explained that in order to fund the two properties Mr Rahman would need to take an off the shelf package. He would get a side letter in due course.
102. He made two comments about the CARM submitted by Mr Senior on 3 July 2006. First he agreed he did ask for 5 and 7 year interest only terms. This was to discover the extent of HSBC's appetite. He wanted to know how much they were willing to lend; whether they were willing to lend the extra £20 million he was seeking. Second he made the point that this was an internal HSBC document (and thus he implied inaccurate). He repeated he was promised 15 year interest only term loans.

St Anne's School

103. Later in his cross-examination he was asked what was said at the meeting about St Anne's School. My note of his evidence reads:

I said to Mr Vines that HSBC's promise to fund the development is being reneged.

Mr Vines said we will honour our commitment and give you the development money.

I was talking about £5.2 million.

…

We will provide you the funds to develop the site.

There was a quote before him of £5.2 million.

There was a valuation before him.

I said fine.

104. He was asked to explain the references in Mr Senior's letter of 29 June 2006 to indicative terms and the reference to the need for the decision as to the nature of the development. Mr Rahman said that it was his understanding that Mr Vines said he would give him the funding.

5.3 HSBC's oral evidence.

15 year interest only CIP loans

105. In substance the evidence of Mr Vines, Mr Senior and Mr Trigg was consistent with the documentary evidence referred to above. All three witnesses denied in strong terms that there was any offer or agreement to lend money for CIPs on interest only terms for any period longer than 5 years. They all said that they would not have made any commitment without getting approval from credit.
106. Mr Vines' recollection of the meeting was the poorest of the three witnesses. This is hardly surprising. He was the Area Director and did not have the day to day knowledge of the account of either Mr Senior or Mr Trigg. He made the point that it was so far outside his authority level to have committed HSBC to 15 year interest only loans that it would have amounted to gross misconduct. He described the suggestion that he made that offer in order to induce Mr Rahman to stay with HSBC as "absolute rubbish".
107. Both Mr Trigg and Mr Senior made the point that a 5 year interest only CIP loan was not a standard package at the time. It was only offered after the discussions with credit referred to in the CARMs of 27 June 2006 and 3 July 2006. HSBC was trying to put forward a bespoke package for Mr Rahman. By converting him to "interest only" it would increase his borrowing capacity.
108. Mr Trigg made the point that there was no discussion at all about 15 year interest only CIP loans at the meeting. The discussion was about 5 year loans. Mr Rahman asked about 7 year loans. Mr Trigg said he would put the suggestion to credit but that the indication he had received from credit was in respect of 5 year loans.
109. Mr Senior had no recollection of the conversation alleged to have taken place between himself and Mr Rahman on 30 June 2006 when he was alleged to have confirmed that side letters would be sent extending the term to 15 years. He said that anything that had been agreed would have been included in the letter he sent on 29 June 2006.

St Anne's School

110. All three witnesses refuted the suggestion that Mr Vines gave any commitment to fund the St Anne's School development at the meeting. Mr Vines agreed there was a discussion about St Anne's School. His recollection was that Mr Rahman did not have a detailed proposal and did not know if he was going to carry out a commercial or residential development. Until there was a detailed proposal the matter could not be put to credit.
111. Mr Senior and Mr Trigg's evidence was to much the same effect. At no time did HSBC have sufficient details to put forward a proposal. Neither accepted that the details in the valuation were sufficient for HSBC's purposes. Mr Senior gave evidence of a number of other matters which would be needed before a detailed proposal could be submitted. He repeated those matters in his letter of 29 June 2006. Mr Trigg said that HSBC had no appetite for residential development, and that any other form of development would be difficult but that he would be prepared to put forward a proposal if Mr Rahman came forward with a full proposal.

6. Subsequent Events

112. Both sides rely on events that occurred after the meeting on 28 June 2006 in support of their respective contentions as to what happened at the meeting.

6.1 Facility Letters accepted in July 2006

25 Park Square

113. On 30 June 2006, Mr Senior sent the Trustees a letter offering to vary the terms of the 30 May 2006 15 year loan which Mr Rahman had accepted in respect of the purchase of 25 Park Square. The variation offered a 5 year interest only loan to be repaid in full at the end of the term. The variation was accepted by the Trustees on 1^st July 2006.

Overdraft/Old facilities

114. On 3 July 2006, Mr Senior sent the Trustees two facility letters. One was a letter offering to repay the overdraft facility of £80,000; the other was a letter varying the terms of the Trustees' term loan granted in July 2003. In each case the offer was for a term of 15 years interest only. The offers were accepted by the Trustees on 4 July 2006.

30 Park Square/ 5 South Parade

115. There was some misunderstanding as to the amounts of funding that Mr Rahman had requested in relation to these two properties in that he required moneys for refurbishment and for costs. That gave rise to an additional CARM from Mr Trigg dated 13 July 2006 and an additional approval from credit on 14 July 2006.
116. On 13 July 2006, Mr Senior sent the Trustees two facility letters. Both offered 5 year interest only loans to be repaid in full at the end of the term. The facility letter in respect of 30 Park Square offered £1,115,000. The facility letter in respect of 5 South Parade offered £2,756,000. Both facility letters were signed by the Trustees on 14 July 2006. Completion of the purchases took place shortly afterwards.

1 – 3 The Headrow/ 27 Blenheim Terrace

117. 1/3 The Headrow was tenanted to Barclays Bank plc; 27 Blenheim Terrace was tenanted to HSBC. Each of these potential purchases were included in the Agenda at the meeting on 28 June 2006. It is plain they were discussed because Mr Trigg has made notes against each of them. They were not however referred to in Mr Senior's letter of 29 June 2006.
118. In any event Mr Rahman successfully bid for each of them at auctions held at the beginning of July 2006. Funding of the acquisition was the subject of a CARM dated 24 July 2006 prepared by Mr Trigg. In the course of the application Mr Trigg repeated the comment that the funding does not meet CIP guidelines due to the proposed interest only terms. It also included this comment by Mr Trigg:

We believe that 5 years interest only for CIP does not overly expose [HSBC] to refinancing risk given the quality of underlying assets, strength of Leeds commercial market … and appetite of competitor banks. [Mr Rahman] says he will consider capital repayment on expiry should future rental income stream support such.

119. The application was duly approved on 25 July 2006.
120. On 26 July 2006, Mr Senior sent to Mr and Mrs Rahman two facility letters in respect of the above properties. Each offered 5 years interest only loans. £596,200 was offered in respect of 27 Blenheim Terrace, £2,743,650 in respect of 1 – 3 The Headrow. The offers were accepted by Mr and Mrs Rahman on 28 July 2006.

Oral Evidence

121. HSBC naturally rely on these facility letters as being wholly inconsistent with Mr Rahman's case that he was promised 15 year interest only CIP loans. When asked about these documents he said that he was giving HSBC a one month window to provide side letters. He did not sign any 5 year interest only loans after the end of July 2006. He said that it was agreed that he would sign the letters for 5 years and that they would be converted to 15 years. He was told he had to take an off the shelf product and that is what he did.
122. He described Mr Trigg's comments as a figment of his imagination. He never said he would return to capital and interest repayment terms after 5 years.
123. When Mr Senior was asked about the conversion of the old term loans to 15 year interest only terms he said that they were treated by HSBC as RIP loans and thus the conversion was within guidelines and in accordance with what had been discussed at the 28 June 2006 meeting.

6.2 Loans in 2007

124. HSBC made two CIP loans in 2007 which Mr Rahman asserts were made on 15 year interest only terms. He accordingly relies on these loans as evidence of what was agreed at the meeting of 28 June 2006. HSBC do not accept that these two loans were in fact made on 15 year terms. In any event there was no intention on its part to create a 15 year interest only term. In those circumstances neither of the loans affords any guidance as to what was or was not agreed at the meeting of 28 June 2006.

40/41 Park Square

125. It will be necessary to return to this property when considering the subsidiary issues raised by Mr Rahman. For present purposes it is sufficient to look at the documents surrounding the acquisition of these properties.
126. On 12 December 2006 Mr Rahman sent a fax to Mr Senior informing him that he had tendered for the above properties and needed to exchange contracts on or before 21 December 2006. Mr Senior prepared a CARM on 5 January 2007 for a £1.65m loan to assist with the purchase (£1.35 million) and refurbishment (£300,000) of the above properties. The CARM referred to the loan being interest only terms over 5 year period. The proposal was approved by Credit (Gunton) on 8 January 2007. Amongst his comments were the words "Interest only for 5 years"
127. On 17 January 2007 Mr Senior sent a facility letter to Mr and Mrs Rahman offering £1.65 million to assist with the purchase and refurbishment of the above property on 15 year interest only terms. When Mr Senior gave evidence he said that this was a mistake. He referred to the CARM and he also said that the discussions with Mr Rahman were on the basis of 5 year interest only.
128. In any event the terms of the offer were not acceptable. In a fax dated 29 January 2007 Mr Rahman explained that there were 3 clauses in the facility letter which were not acceptable to him and asked whether they could be omitted.
129. On 29 January 2007 Mr Senior sent a fax to Mr Rahman and included a new facility letter which dealt – at least in part – with Mr Rahman's objections. This facility letter however was for a term of 5 years interest only. Mr Rahman did not sign this letter but he did write (in manuscript) "15" above the number "5". On 31 January 2007 HSBC permitted a drawdown of £135,000 in respect of the deposit payable on exchange of contracts.
130. Completion of the purchase was due to take place on 1 March 2007. HSBC's file contains a detailed file note dated 26 February 2007. The file note refers to an ongoing dispute in relation to a fire escape and to Mr Rahman's intention to transfer the property to an SPV domiciled in BVI. Following discussions with Mr Rahman's solicitor it was agreed that the purchase would proceed in the names of Mr and Mrs Rahman and that the transfer would take place a few weeks later.
131. On 27 February 2007, Mr Senior's assistant sent a third version of the facility letter to Mr and Mrs Rahman. This letter offered 15 year interest only terms. Some of the other terms (such as the renegotiation and early termination clauses) were unacceptable to Mr Rahman. He accordingly crossed them out. On 28 February 2007 Mr and Mrs Rahman signed the facility letter and returned it to HSBC. On 1 March 2007 HSBC permitted a further drawdown of £1,406,151 which enabled Mr and Mrs Rahman to complete the purchase.
132. According to Mr Senior the third facility letter contained the same mistake as the first letter. The mistake was not spotted when the letter was returned and drawdown was permitted.

25 Blenheim Terrace

133. On 23 April 2007, Mr Senior submitted a CARM in respect of a new CIP loan of £810,000 to assist with the purchase of the above property. The relevant part reads:

Purchase at auction with benefit of 20 year lease at £29,500 p.a with 5 yearly reviews. Loan to be interest only for a 5 year period as previously agreed for other properties.

134. Comments added by Mr Trigg on the same day include a reference to:

Previous applications have established interest only for 5 years for blue chip CIP covenants as a satisfactory structure given minimal refinancing risk.

135. The application was approved on 24 April 2007 (albeit with some reservations).
136. On 24 April 2007 Mr Senior sent Mr and Mrs Rahman a facility letter in respect of the loan. The letter offered interest only terms over 5 years. Mr Rahman, however, crossed out the word "five" and wrote "fifteen" in manuscript above it. He made a number of other amendments to the terms and conditions. On 25 April 2007 Mr Rahman (but not Mrs Rahman) signed the facility letter and returned it to HSBC. Drawdown of the facility was permitted.
137. According to Mr Senior there was no intention on the part of HSBC to create a 15 year term.

6.3 Correspondence in 2008

138. As already noted Mr Kosmirak took over as Mr Rahman's relationship manager when the account was transferred from SABU to Corporate in Leeds in September 2007. It will be necessary to revert to the early part of the relationship when dealing with some of Mr Rahman's subsidiary claims. For present purposes the correspondence is said to be relevant because of two letters in which Mr Rahman asserted that the loans were on 15 year terms

Background

139. Following meetings and discussions at the beginning of 2008, Mr Kosmirak wrote a letter to Mr and Mrs Rahman on 6 March 2008 expressing concerns about their relationship. Amongst the concerns were allegations that because the interest cover had fallen below 130% there were breaches of the facility letters. The letter contained a list of actions which Mr Kosmirak felt were required to address the concerns. Mr and Mrs Rahman were invited to sign letters of variation to the term loans which acknowledged that the loans were now repayable on demand.
140. It was at this stage that Mr Rahman employed Mr Nawaz to assist him. On 12 March 2008 Mr Nawaz wrote a long letter for Mr Rahman which made a number of complaints that HSBC had reneged on a number of verbal commitments. It is clear from the letter that Mr Rahman did not accept that there were breaches of the facility letters and refused to sign the letters of variation.

Letter 21 April 2008

141. On 21 April 2008, Mr Nawaz wrote another letter for Mr Rahman dealing with the problems that had arisen. Towards the end of the letter Mr Rahman proposes a three point solution to the situation. The first point reads:

The loans be fixed on 15 year terms with interest only as they are at present with any repayments being made out of equity release.

142. Mr Kosmirak replied to this suggestion in a letter dated 8 May 2008:

I will only be able to consider 15 year interest only lending for residential properties which would have to include an agreement on other issues such as loan covenants in line with the above parameters.

143. Earlier in the letter he had made the point that for commercial loans full amortisation over a maximum period of 15 years is required.

Letter 27 May 2008

144. Mr Rahman responded to Mr Kosmirak's letter of 8 May 2008 on 27 May 2008 in a letter written on his behalf by Mr Nawaz. Point 14 of the letter is relevant:

So far as I am aware the existing lending is on 15 year interest only basis. What I am asking for is that as part of the way forward all the loans renewed afresh on this basis. That might mean extending some of the loans by some short periods …

6.4 The meeting with Mr Kosmirak on 30 May 2008

145. It is common ground that there was a meeting on 30 May 2008 to discuss the way forward. It was attended by Mr Rahman, Mr Nawaz and Mr Kosmirak. According to Mr Rahman the meeting lasted about an hour. It is also common ground that during the course of the meeting Mr Rahman asserted that all of the loans were on 15 year interest only terms.
146. There is a difference in recollection as to Mr Kosmirak's response. According to Mr Rahman Mr Kosmirak agreed that barring one loan that had slipped through the net all the other loans were on 15 year interest only terms. Mr Rahman asked Mr Kosmirak to convert the loan that had slipped the net. Mr Kosmirak agreed.
147. Mr Nawaz agreed that Mr Kosmirak confirmed that all of the loans bar one were on 15 year interest only terms. However he accepted in cross-examination that Mr Kosmirak did not agree to convert the outstanding loan to 15 year interest only terms.
148. According to Mr Kosmirak the meeting took between one and two hours. The purpose of the meeting was to structure the way forward. He recalled that Mr Rahman did state that all the loans were on 15 year interest only terms. His response was to the effect that he considered that all the loans were now "on demand" (as a result of the breaches). In any event he did not have the papers to hand and thus could not confirm the statement. He understood the majority of the loans to have been on 15 year interest only terms but he could recall at least one loan of a shorter duration. He did not identify the "shorter" loan.

6.5 Correspondence after the meeting

149. On 31 May 2008, Mr Rahman wrote a 3 page letter to confirm the gist of the discussions the previous day. In paragraph 1 of the letter Mr Rahman set out three items that he wanted to see dealt with. Paragraph 1.1 states:

A deal to reflect 15 year interest only loans. It is noted that other than one loan, which you were unable to recall, all others were rebased to this basis last year so that my request would be to transfer the loan/property that has slipped through on the same basis as for the other loans …

150. Mr Kosmirak did not reply to the letter in detail until 7 July 2008. The relevant part of his letter reads:

I am not able to agree that all loans be moved to a term of 15 years and would restate that where there has been a breach of existing agreed covenants, then as previously advised those facilities remain on-demand. However I would be prepared to keep this under review on an annual basis … Just to add that for facilities on Commercial Investments then I would also be looking to achieve an amortisation profile of 10 – 15 years.

151. In a number of further letters in 2009 and 2010 Mr Rahman repeated the assertion that the loans were 15 year interest only. It is not necessary to refer to these letters in detail because they do not, in my view, advance the issue other than to show that Mr Rahman has been consistent in his allegation since 2008.

7. Submissions and discussion on main issue

152. Mr Elleray QC invites me to accept Mr Rahman's evidence. He submits that Mr Rahman entered the meeting of 28 June 2006 in a strong negotiating position. Mr Rahman was a valuable customer of the bank with one of the largest portfolios of the SABU branch. The relationship was "at a cross-roads". There were a number of issues between Mr Rahman and HSBC and there was a real risk that the whole portfolio would be lost to one of a number of rival banks who were courting him and offering interest only terms. There were precedents for issuing "side letters" for varying the terms of facilities.
153. He submits that by the time of the meeting the principal matters remaining for discussion were assurances as to funding and the terms of funding for CIP loans. He relies on the position in relation to St Anne's School as instructive in determining where the truth lies. He points out that rival banks had offered funding for the development of St Anne's School, that HSBC had in front of it a valuation and a development appraisal for St Anne's School, and that HSBC had never previously failed to deliver on obtaining credit approval when agreements for funding particular purchases. In those circumstances he submits I should accept that Mr Rahman would have walked out of the meeting if he had not been promised funding for the St Anne's School development.
154. I accept that Mr Rahman was a valuable customer of HSBC that HSBC were anxious not to lose. I also accept that there were issues between Mr Rahman and HSBC, that Mr Rahman had been offered terms by other banks including funds for the development of St Anne's School and that accordingly the relationship was at a cross-roads.
155. However I have no hesitation in preferring the evidence of HSBC's witnesses to Mr Rahman. For the reasons summarised below I find Mr Rahman to be an unreliable witness whose evidence can only be accepted where supported by other independent evidence.

1. My principal reason for rejecting the evidence of Mr Rahman is that it is wholly inconsistent with the contemporaneous documents both from himself and from HSBC. I have set out the relevant parts of the documents earlier in this judgment and I shall not repeat them. In summary the most important documents were:

1. The CARMs. In my view there is no reason not to treat the contents of the CARMs as reliable. They are contemporaneous documents containing the comments of Mr Trigg and Mr Senior as to precisely what they were seeking and setting out arguments in favour of the granting of credit approval. Neither Mr Trigg or Mr Senior had any reason to mislead credit control. The CARMs both before and after the meeting give no indication that 15 year interest only CIP loans were ever even considered. The CARM of 3 July 2006 records the suggestion that Mr Rahman asked for a 7 year interest only CIP loan and that a 5 year interest only loan was the extent of credit's appetite. It is also, in my view, clear from the passages in the CARMs to which I have referred that a 5 year interest only CIP loan was outside the then guidelines. Thus I prefer the views of Mr Trigg and Mr Senior on this point. This finding substantially undermines Mr Rahman's evidence and his explanation for the documents.

2. The correspondence at the time of the meeting. There is no mention of a 15 year interest only term for CIP loans in any of the letters between Mr Rahman and Mr Senior between 26 June and early July 2006. On the contrary on 27 June 2006 Mr Rahman asked for "Interest only facilities for the next 7 years … if possible"; in his fax of 30 June 2006 he awaited credit approval for the loans on 25 and 30 Park Square and 5 South Parade on 5 year interest only terms.

3. The 5 facility letters signed by the Trustees and/or Mr and Mrs Rahman in July 2006. Each of these facility letters granted loans on interest only terms for 5 years only. All were returned signed by Mr Rahman without any reference to the alleged agreement to extend the interest only term to 15 years.

2. In my view Mr Rahman's explanations for the difficulties these documents cause to his case were unconvincing. In the light of the CARMs I am, as I have indicated, quite satisfied that a 5 year interest only CIP was not a standard product offered by HSBC. Thus Mr Rahman's explanation that he was told to go for the standard product and get an extension later simply does not hold water. Mr Rahman has shown himself to be an active correspondent quite ready to complain and set out in writing any disagreement he had with HSBC – even to the extent of accusing Mr Senior of blackmail. In those circumstances the failure to mention the 15 year interest only agreement for CIP loans at the time is, to my mind, quite extraordinary. Even if Mr Rahman was prepared to wait during the month of July why on earth did he not mention the alleged agreement after that?

3. It is, to my mind inherently extremely unlikely that Mr Vines would have offered Mr Rahman 15 year interest only CIP loans. Mr Trigg had discussed the matter with Mr Rayner at credit control the previous day. Mr Rayner had indicated a willingness to discuss interest only over 5 years but no more. None of the rival banks were offering interest only loans for periods longer than 5 years. Mr Rahman had only asked for facilities for the next 7 years if possible. Why on earth, in those circumstances, should Mr Vines offer Mr Rahman terms that were three times longer than had been sanctioned by Mr Rayner or offered by its rivals and more than twice as long as asked for by Mr Rahman?

4. It is to my mind even more unlikely that if such an offer had been made it would not have been mentioned in any of the CARMs following the meeting. It is to be recalled that in the CARM of 3 July 2006 Mr Trigg expressly referred to the request by Mr Rahman for a 7 year interest only term. It is, to my mind, inconceivable that if a 15 year interest only term had been offered at the meeting it would not have been mentioned by Mr Trigg in that CARM. It is difficult to see what possible motive the three relatively senior executives of HSBC would have had for concealing the discussions if they had taken place. As they pointed out they would have been risking their careers if they had done so.

5. To my mind the two loans made in 2007 for 40/41 Park Square and 25 Blenheim Terrace do not assist Mr Rahman's case in determining what was agreed at the meeting of 28 June 2006. The CARM reports plainly show Mr Senior and Mr Trigg's intention to create 5 year interest only loans. Furthermore credit control had only approved loans on those terms. It is not necessary for me to determine whether in fact 5 or 15 year terms were established as a result of the negotiations. If the effect was to create a 15 year interest only CIP loan in either case then such was contrary to HSBC's intention and sheds no light at all on the agreement in June 2006.

6. Equally I derive little assistance from the correspondence in 2008 or from the meeting on 30 May 2008. There are a number of reasons for this:

1. Mr Kosmirak was not, of course, present at the meeting on 28 June 2006. He can have no direct knowledge of what was agreed or offered.

2. In his letters of 8 May 2008 and 7 July 2008, Mr Kosmirak refused to move the CIP loans to 15 year terms. To my mind this is a clear representation that the loans were not then on 15 year terms. In his closing submissions Mr Elleray QC developed an argument that these letters amounted to a representation by Mr Kosmirak that the loans were on 15 year terms. This Alice in Wonderland argument is (if I understood it correctly) based on the fact that Mr Kosmirak considered that the loans had been converted to "on demand" loans as a result of breaches of covenant. On the true construction of the letters, so the argument runs, Mr Kosmirak was simply refusing to convert the loans back to 15 year terms. I do not accept the argument. I think the reasonable reader would simply read the letters at face value. At face value Mr Kosmirak was not prepared to grant 15 year interest only CIP loans. By inference therefore the CIP loans were not 15 year interest only.

3. The letter of 31 May 2008 – described by Mr Wilson as the high water mark in Mr Rahman's case – does not in fact allege that the CIP loans became 15 year interest only following the meeting of 28 June 2006. It says: "all others were rebased to this basis last year" which is not the same.

4. I preferred the evidence of Mr Kosmirak to that of Mr Rahman and Mr Nawaz as to what Mr Kosmirak said at the meeting when the question of the loans was raised.

156. In the result I find as a fact that that there was no agreement at the meeting of 28 June 2006 or any representation by Mr Vines that Mr Rahman would be offered CIP interest only loans for 15 year terms. Indeed I accept the evidence of Mr Trigg that such loans were not even discussed.
157. Equally I am not satisfied that Mr Kosmirak made any agreement or representation either at the meeting of 30 May 2008 or in correspondence to the effect that all of Mr Rahman's loans were on 15 year terms.
158. It follows that, subject to the Consumer Credit Act point which will be considered later in this judgment, the five facilities entered into between May 2006 and August 2006 had all expired in September 2011 when the Receivers were appointed. Equally HSBC was entitled to demand repayment of the other facilities by virtue of the cross default clauses.

8. St Anne's School

159. In dealing with the main issue I have set out relevant events relating to St Anne's School up to 28 June 2006. I shall not lengthen this judgment by repeating them.
160. It will be recalled that although the £1.9 million facility for the acquisition of the land was theoretically repayable on demand it was in practice considered by HSBC every 12 months and was in fact considered in a CARM dated 30 January 2007.
161. The Backgrounds comments in the CARM include:

The purchase of … St Anne's School … has resulted in the pressure on the overdraft. Customer initially obtained residential planning for 52 flats and then this was increased to 72 flats. Customer has also considered commercial development. We have never given any agreement to funding development of any kind …

[Mr Rahman] is currently awaiting the final costing from a number of builders to build the property on a fixed price contract. Depending on the outcome he will either seek development funding (outside HSBC if necessary) or sell the entire site. We are advised he currently has an offer for the site at £3m…

Customer will make a final decision within the next 2 weeks and we will either see sale of the former school or a plan for its development.

162. Mr Trigg added some comments to the CARM on 31 January 2007 which included:

We have given no commitment and indeed have already indicated no appetite for residential apartments in (what we consider to be) the saturated Leeds market. …Despite the attractive gains on paper we believe [Mr Rahman] is coming round to our way of thinking. We are pressing for a decision and expect this in 2007 before handover to Corporate.

163. When he gave evidence Mr Rahman disputed much of this. He said that it was not until January 2007 that he was told that HSBC had no appetite for funding the development. He denied that he was awaiting final costings and said he always regarded it as a viable proposition. He accepted that there was an offer for the site for £2.9 million but said that the prospective purchaser failed to come up with the money.
164. On 19 February 2007, Mr Rahman wrote a long letter to Mr Senior which included a comment on St Anne's School:

To meet your deadline by the end of next month I will give you a definitive answer as to which of the 3 options we have chosen re the St Anne's School site:

i) Residential development with an alternative bank

ii) Office development with an alternative bank or HSBC

iii) Outright sale of the site …

165. A further CARM dated 5 June 2007 contains the following comment:

…Customers have put the St Anne's School for sale at Auction next month. The reserve has been set at £2,250,000 against a PV of £2,750,000 and a recent rejected £3m offer due to unacceptable terms. Sale proceeds would not be received until early July.

166. When he gave evidence Mr Rahman said that he contemplated putting St Anne's School in the auction but withdrew it before the auction.
167. The pleaded allegation in relation to St Anne's School is that a binding commitment to fund the development was made at the meeting on 28 June 2006. In evidence Mr Rahman went considerably further than the pleaded case because he alleged that a commitment to fund the development had been made much earlier.
168. In his closing submissions Mr Elleray QC invited me to prefer the recollection of Mr Rahman. He relied on the interest of competitor banks some of which were willing to fund the development, the strong negotiating position of Mr Rahman and the details that were available to HSBC in the valuation.
169. I have set out in detail why I could not accept Mr Rahman's evidence in relation to the 15 year interest only CIP loans. For very similar reasons I reject his evidence in relation to St Anne's School.

1. The documentary evidence both before and after the meeting of 28 June 2006 is inconsistent with his case.

1. The CARMs around the acquisition of the site make no mention of development funds.

2. Mr Trigg's letter of 29 January sets out a number of matters that need to be considered before there could be a supportable proposal.

3. The CARM of 17 February 2006 makes it clear that there was at that time no viable proposal.

4. Mr Rahman's fax of 17 May 2006 shows he was considering a commercial development as an alternative.

5. Mr Senior's letter of 17 May 2006 specifically refers to the possible change of plan (to commercial development or no development at all) and asks for an update.

6. Mr Senior's letter of 29 June 2006 refers only to "indicative funding" and specifically refers to the necessity to provide full details once a decision has been made to construct either residential or commercial. To my mind this is wholly inconsistent with a binding agreement having been made or offered at the meeting.

7. Mr Rahman's letter of 19 February 2007 makes it clear that by that time he had still not chosen whether to develop as commercial, residential or to sell the site.

2. If an agreement to fund had been made I would have expected it to have been referred to in a CARM. Instead the CARMs consistently assert that no agreement has been made by HSBC to fund the development.

3. It is inherently unlikely that Mr Vines, Mr Senior and Mr Trigg would exceed their authority to the extent necessary to bind HSBC to fund the development. To have done would have amounted to gross misconduct.

4. Mr Rahman's evidence went far beyond his pleaded case. This confirms my view as to the unreliability of his evidence.

170. In the result I reject Mr Rahman's claim that there was an enforceable agreement to fund the development at St Anne's School.

9. 51 & 55 Clarendon Road

171. On 11 August 2006, Mr Senior wrote to LP(GB)L offering a facility of £516,000 for the purpose of assisting with the purchase of and refurbishment of 51 Clarendon Road, Leeds. This was a 15 year interest only RIP loan. In order to accept the offer a copy of the letter had to be signed and returned to arrive no later than 28 days from the 11 August 2006.
172. The General Conditions of the Offer included (in clause 17) a renegotiation clause and in condition 1 a provision that:

The Loan or any drawing of it must be drawn down no later than 6 months after the Acceptance Date and if it is not then this letter shall cease to have effect …

173. The CARM in respect of the loan describes the purpose of the loan:

To provide RIP £516k x 15 years interest only to purchase property from family trust for £400k. This is the full market value. The residuals covers legals stamp duty etc with £100k to convert (Planning held) from commercial to 4 flats.

174. On 17 November 2006 Mr Rahman sent an urgent fax to Mr Senior which included:

[LP(GB)L] is acquiring 51 Clarendon Rd from the Trust – I have your loan offer letter … in the sum of £516.000. [LP(GB)L] is also proposing to acquire from [Mr and Mrs Rahman] 55 Clarendon Road for £400,000 cost and would require £100,000 to convert these offices into 4 flats. Do you wish to offer an additional loan for £500,000 or do you wish to combine the two offer letters into one larger offer of £1,016,000,000. Please advise.

175. A CARM dated 5 January 2007 summarised the position and on 17 January 2007 Mr Senior wrote to LP(GB)L offering a facility of £500,000 for the purpose of assisting with the purchase of and refurbishment of 55 Clarendon Road, Leeds. This was a 15 year interest only RIP loan. In order to accept the offer a copy of the letter had to be signed and returned to arrive no later than 28 days from the 11 August 2006.
176. The General Conditions contained a renegotiation clause and a clause requiring drawdown within 1 month of the Acceptance Date.
177. Neither offer was accepted within the 28 day period specified in the facility letters.
178. On 16 May 2007 Mr Rahman sent a fax to Mr Trigg and Mr Senior which referred to a meeting on 3 May 2007 where according to Mr Rahman:

It was also agreed that the previous loan offers re …, 51 and 55 Clarendon Road (516k and 500k) would be re-offered as they had expired. Sure they were but for …460k and 400k

179. On 12 June 2007 Mr Senior wrote to Mr Rahman enclosing new facility letters in respect of 51 and 55 Clarendon Road in the reduced sums referred to in Mr Rahman's letter. He explained that the reason for the reduced facility was due to the affordability of the loans following the rise in interest rates since August 2007.
180. When he gave evidence Mr Rahman accused HSBC of breach of contract by putting renegotiation clauses into the original facility letters. He agreed however that he never accepted the revised offers because no money was provided for the development.
181. The final reference to these two properties is contained in a letter from Mr Kosmirak to Mr Rahman on 11 January 2008 following a meeting earlier in the week. The letter covers a number of points and only mentions the two properties in passing:

Turning back to the properties at Clarendon Road then we do have approval for a loan of £200k to support the development of these properties into apartments. You have however indicated that along with the neighbouring properties at 53 and 57 Clarendon Road it would be your preference to sell these and you would undertake to do this within the week …

182. In evidence Mr Rahman said that the decision to sell arose because Mr Kosmirak was putting pressure on him to sell. He had a number of sites that needed development funds and Mr Kosmirak said he could only have development funds for one site. He chose 40/41 Park Square and thus had to sell the Clarendon Road properties.
183. It is Mr Rahman's case that the inclusion of the renegotiation clause was a breach of the underlying agreement to fund the development of these properties. I cannot accept this argument. As Mr Wilson points out there simply was no "underlying agreement" to fund the development. There were offers made in August 2006 and January 2007 but these offers were never accepted. There is no evidence of any other agreement.
184. In any event I do not accept that the renegotiation clause played any part in Mr Rahman's decision not to accept the offers before the Acceptance Date. If that had been the sticking point I have no doubt he would have raised it with either Mr Senior or Mr Trigg. In fact there is no mention of any concern about the renegotiation clause in any of the contemporaneous documents.
185. Accordingly I reject the claim in relation to 51 and 55 Clarendon Road.

10. 40/41 Park Square

186. In section 6.2 I set out the circumstances surrounding the three facility letters which were issued between 17 January 2007 and 27 February 2007. It will be recalled that Mr Rahman objected to the terms in the first two facility letters but that Mr and Mrs Rahman signed and returned the third letter on 28 February 2007. The facility offered to Mr and Mrs Rahman was in the sum of £1,650,000 in respect of the purchase and refurbishment of 40/41 Park Square. The purchase price of 40/41 Park Square was £1,350,000. £300,000 was allowed in respect of the refurbishment costs.
187. Condition 1 of the General Conditions required the Loan to be drawn down in one amount no later than 3 months from the Acceptance Date and provided that if the loan were not drawn down during the Drawdown Period the letter would no longer be effective.
188. On 31 January 2007 HSBC permitted drawdown of £135,000 in respect of the deposit. The purchase of 40/41 Park Square completed on 1 March 2007. The Completion Statement shows that the total purchase price inclusive of costs amounted to £1,406,386 but that the amount due on completion after taking into account the deposit and some £210 provided by Mr Rahman was £1,271,175.25.
189. In fact pursuant to a request from Mr Rahman's solicitors HSBC paid £1,406,151 on 1 March 2007 with the result that there was a surplus in respect of the acquisition costs.
190. On 18 April 2007 Mr Senior wrote to Mr Rahman's solicitor pointing out that there had been an overpayment and requested its return "at your earliest convenience".
191. On 24 April 2007 Mr Rahman's solicitor replied by fax:

In the event we drew a cheque for £134,975.75 on 6^th March for Mr Rahman to pay into his account.

192. There is some confusion as to what happened to the cheque for £134,975.75. In evidence Mr Rahman appeared to accept that it was paid into his account with HSBC. However in his closing submissions Mr Elleray QC made the point that it did not appear in the Bank statements. Subsequent to the hearing Mr Rahman has disclosed additional documents which appear to show that the £134,975.75 was paid into an account with NatWest (03519287) held in the name of Mr Rahman. Included within the documents are paying in slips referring expressly to 40/41 Park Square.
193. I also received additional submissions from Mr Evans of DLA Piper suggesting a somewhat different scenario. However it seems to me more likely that Mr Elleray QC is correct and that the moneys were indeed paid into the account at NatWest.
194. In any event on 2 May 2007 Mr Senior without consulting Mr Rahman effected a transfer of £134,104.73 from Mr Rahman's current account with HSBC to the loan account thereby reducing the outstanding balance on the loan account to £1,407,046.
195. There is no documentary evidence of any objection by Mr Rahman to this transfer. Equally there is no documentary evidence of any request by Mr Rahman or anyone on his behalf for further funds for the redevelopment of 40/41 Park Square until September 2007.
196. In evidence Mr Rahman said he did object to Mr Senior and did make request for funds. Mr Senior refuted this.
197. In any event on 24 September 2007 Mr Kosmirak sent a letter summarising outstanding issues. The summary included:

As agreed there appears little point in transferring these properties to an SPV

The remaining headroom available from the existing £1.65m facility (£1.4m drawn) is to be made available against evidence of invoices paid/work undertaken on 40 park Square following a site visit by HSB Corporate Manager.

198. On 9 October 2007, Mr Rahman commented that £300k credit was being held back since February 2007 inhibiting work in progress.
199. It is accepted by Mr Wilson that Mr Kosmirak could not vary the terms of the existing facility but he contends that as there was no drawdown of the remaining funds within 3 months that part of the facility had lapsed. Mr Elleray QC on the other hand invites me to hold that the requirement to draw down within 3 months is inconsistent with a facility for refurbishment repayable over 15 (or even 5) years .
200. I prefer the arguments of Mr Wilson. I see no inconsistency with a requirement to draw down over 3 months and repayment over 15 years. It has to be born in mind that under the terms of the facility HSBC were not bound to monitor what the payments were in fact spent on. I prefer the evidence of Mr Senior to that of Mr Rahman for reasons already given and am not accordingly satisfied that there was any request for funds in the 3 month period or that there was any objection to the transfer.
201. At one stage I was concerned about the transfer of £134,104.73 made on 2 May 2007. However having considered the arguments in Mr Wilson's closing submissions I am satisfied he is correct that there is no pleaded case in respect of breach of mandate by Mr Senior. In those circumstances I do not have to consider the possible defences to such a claim set out in paragraphs 47.3.1 and 47.3.2 of his closing submissions.

11. CAL Properties

202. CAL is a BVI registered company with the directors and shareholders being HSBC Private Bank (Suisse) SA, Geneva. No trust documents have been provided but according to a CARM dated 5 January 2007 the shares are held in trust for "the Rahman family". Mr Elleray QC however suggested that they were held in trust for the Parents.
203. In any event in January 2007 the Parents owned four residential properties subject to HSBC facilities – 3, 5, 6 and 8 Claremont View – and one unencumbered residential property – 5 Holt Avenue. There was a proposal by Mr Rahman for a 15 year interest only RIP loan of £750,000 to CAL to enable CAL to acquire the five properties from the Parents. According to the CARM the funds raised were to be used in part (£400,000) to repay existing facilities and the balance used to repay Mr Rahman in respect of development costs on the house he was constructing. In the long term CAL was to be used to hold further Rahman properties so as to provide an income in an offshore environment.
204. On 17 January 2007 Mr Senior sent a facility letter to the directors of CAL offering the £750,000 facility. It was a term of the offer that it was open for acceptance for 28 days and thus expired on or about 15 February 2007.
205. On 19 January 2007 Mr Rahman sent a fax acknowledging receipt of the facility letter and making a number of comments on its terms. It was never accepted.
206. Mr Rahman's plans changed. By June 2007 he had decided that 5 Holt Avenue would be funded by LP(GB)L. Thus in June 2007 there is a CARM in respect of a £600,000 interest only 15 year RIP loan in respect of the four Claremont View properties. The application was approved on 11 June 2007.
207. Accordingly on 13 June 2007, Mr Senior sent a facility letter to the directors of CAL offering the £600,000 facility. It was a term of the offer that it was open for acceptance for 56 days and thus expired on or about 10 August 2007. The General Terms and Conditions included a number of conditions which Mr Rahman has crossed out. These include an early termination clause and a renegotiation clause.
208. On 26 September 2007 the Board of CAL resolved to accept and authorise the facility letter. On the same day two signatories on behalf of CAL signed the facility letter agreeing to all of its terms.
209. On 16 October 2007 Mr Kosmirak sent the Directors of CAL a further facility letter in respect of the £600,000 facility. It, too, had to be accepted within 56 days and contained clauses similar to those in the 13 June 2007 letter. This facility was never accepted by CAL.
210. In a letter dated 9 January 2009 from Mr Rahman to Mr Swift, Mr Rahman made it clear that there were a number of items in the draft agreement with which he did not agree. He then identified some 9 terms which required amendment. When he gave evidence Mr Rahman accepted that he never agreed the terms of the facility letter.
211. The proceedings in relation to the CAL properties are brought in the name of the Parents. CAL is not a party to them. Mr Elleray QC alleges that CAL is a nominee company for the parents and relies on an internal file note written by Mr Menaghan on 22 September 2005:

"I understand from Shafik that you have been dealing with his parents' affairs, with a view to transferring their property assets and related lending to a new nominee company – Cransbill Assets Ltd."

212. I have not seen the Trust Deed. The file note is not consistent with the CARM of January 2007 referred to above. I do not accordingly accept that CAL is a nominee company of the Parents.
213. In any event I do not accept that the Parents have any cause of action against HSBC in relation to the CAL properties:

1. The first and third facility letters were never accepted and there was accordingly no contract between HSBC and CAL arising from these.

2. The second facility letter was not accepted within 56 days. Furthermore it does not appear that Mr Rahman ever agreed to the terms offered by HSBC.

3. In paragraph 27 of his closing submissions Mr Elleray QC suggests that, as nominee CAL was acting for disclosed principals - the Parents and accordingly the Parents are entitled to the benefit of the contract and thus can sue on it. I do not accept this analysis. In my view the law of agency has no application to the situation at all. CAL were (or would have been) acting as principals. The fact that the shares in CAL were held on trust does not in my view give the beneficiaries under the trust any right to sue on the contract.

4. In paragraph 30 of his closing submissions Mr Elleray QC suggests that there was an underlying agreement between Mr Rahman and Mr Senior in the terms of Mr Rahman's fax dated 16 November 2006. However that fax simply requests various facilities for CAL. It makes no reference to any agreement in respect of the facilities. Matters plainly moved on after 16 November 2006 and resulted in the offer of 17 January 2007. There was no breach of contract by HSBC.

214. Accordingly I reject the Parents' claims in respect of the CAL properties.

12. 2 Blenheim Terrace

215. In a file note dated 29 June 2007, Mr Senior noted that Mr Rahman told the Bank that the property was for sale at £420,000 and that he was in discussions with the owner.
216. On 15 August 2007, Mr Rahman sent a fax to Mr Herron stating he was committed to purchase the property and asked if HSBC would be willing to fund the purchase.
217. Gary Herron replied on 16 August 2007. The reply included:

"To make 2 Blenheim self supporting you would ideally need to inject £145k which would make interest cover 130%. I have discussed this internally and, if you are able to find £100k stake, whilst this would leave interest cover low, we could look to assist you."

218. On 3 September 2007, Mr Rahman informed the Bank that he had offered to purchase 2 Blenheim Terrace for £430,000 and that Mr and Mrs Rahman would be selling 75 Otley Road for £435,000.
219. There was then an exchange of emails on the same day between Mr Swift and Mr Kosmirak. Mike Swift sent an email to Mr Kosmirak stating :

"customer wishes to acquire 2 Blenheim Terrace and sell 75 Otley Road – impact is that same debt level, same security value but increased rental. Therefore sounds worth doing – …"

220. Mr Kosmirak's reply was more cautious:

"Not quite that simple. I will explain tomorrow... It resolves around what is included re rental income and the resultant %'s. From memory they are 108% interest cover in reality – not ideal."

221. On 24 September 2007 Mr Kosmirak wrote to Mr Rahman setting the issues on the various properties and projects. The letter included an Indicative Term Sheet which was expressly subject to HSBC credit approval.

Loan to be provided for 100% of purchase price – 5 year interest only term - the Bank's agreement being subject to achieving a sale of 75 Otley Road by the end of April 2008".

222. On 11 October 2007 Mr Kosmirak wrote to Mr Rahman a letter which included:

"...the one recommendation I cannot make to my Credit surrounds the finance of 2 Blenheim Terrace as you have indicated. In this regard I will need a minimum of £100,000 contribution from yourself in addition to your agreement to the sale of Otley Road by the end of April 2008. This is what we discussed at our short meeting on Friday.

223. Mr Rahman replied on 24 October 2007 :

"So far as 2 Blenheim Terrace is concerned I am prepared to pay back the £100,000 from the VAT refund from Owlett Hall Farm if that is acceptable to HSBC [to] support the purchase of 2 Blenheim Terrace. This will be in addition to the sale of 75 Otley Road for £435,000."

224. He then wrote again on 31 October 2007:

"So far as 2 Blenheim Terrace it was agreed that I would be paying £100,000 towards the purchase of this property. Please instruct Weatherall to send you the valuation. I will pay £100,000 to [his conveyancing solicitors] with the balance of the purchase price coming from HSBC if that is acceptable to you."

225. There was a meeting between Mr Rahman, Mr Swift and Mr Kosmirak on 19 November 2007 to progress ongoing discussions across the relationship.
226. On 11 January 2008 Mr Kosmirak wrote to Mr Rahman indicating that HSBC could not assist with the purchase.

"I have already sent a fax concerning the purchase of 2 Blenheim Terrace but for the avoidance of doubt, I regret that the bank is unable to assist with this at the present time. Mike Swift and I did mention to you when we all met prior to Christmas, that we were unable to agree any new monies for new property purchases. In addition my earlier letters to you with regards to this were on an indicative basis only and subject to formal credit approval."

227. Mr Kosmirak wrote again on 16 January 2008:

Our consideration of this proposal has always been on the basis that (1) will need a minimum cash contribution from you personally of £100,000 and (2) the credit approval decision would be made on the basis of the overall position for all your businesses and not on this single transaction

In line with point (2) and after further appraisal by the bank it was made clear to you at our meeting the week of the 19 November, which included Mike Swift, that we could not assist with any new purchase proposals given your present overall position. This view has remained unchanged from this time.

228. Mr Rahman was able to complete the purchase of 2 Blenheim Terrace with assistance from Lloyds TSB, as he confirmed on 23 January 2008:

As I mentioned on the telephone, Lloyds TSB has kindly stepped into your shoes to assist me with the purchase of 2 Blenheim Terrace. I have lodged the Barn at Owlett Hall Farm with them giving them some £2.5m of security to support £½m of loan finance.

229. Mr Rahman complained about the failure to provide funding in the letter of 12 March 2008 which it will be recalled was typed by Mr Nawaz:

The case of 2 Blenheim Terrace which I was to acquire for £425k Mike Swift deputy head of HSBC corporate agreed to the deal whereby I would sell 75 Otley Road and facilities would be offered to me to purchase 2 Blenheim Terrace. I entered into the commitment to buy the property, sold 75 Otley Road for £435k only to find that the bank would not honour its commitment.… This was a simple swap whereby a property of slightly lesser value was being purchased but I was asked to inject £100k. When I did that the deal was still not honoured.

230. In my view the contemporaneous documentation lends no support to the suggestion that there was a concluded agreement to fund the acquisition of 2 Blenheim Terrace. The high water mark would appear to be contained in the letter of 24 September 2007 but the offer in that letter was expressly only indicative and subject to credit approval. There is no CARM in relation to the acquisition and no facility letter.
231. There are a number of inaccuracies in the letter of 12 March 2008. The commitment to purchase 2 Blenheim Terrace was made by 15 August 2007 yet Mr Swift only became involved in September when the relationship was finally transferred to Corporate. When he gave evidence Mr Rahman confirmed that he did not in fact inject the £100k. He said he spent £25,000 in obtaining planning approval for 40/41 Park Square, £25,000 for the air conditioning at 16 Blenheim Terrace and £50,000 on the top floor of 1/3 The Headrow.
232. It is Mr Rahman's case that Mr Swift did indeed agree to fund the acquisition of 2 Blenheim Terrace. When he gave evidence Mr Swift denied this. He made the point that in September 2007 there was the concept of the swap which seemed logical to him but there was never a concluded agreement and in any event he did not have the authority to agree a swap without credit approval.
233. I have already found that Mr Rahman is an unreliable witness. There is no corroboration for his evidence. It is inconsistent with the documents I have set out above. It is, to my mind, improbable that Mr Swift would have agreed a swap. If there had been an agreement I would have expected it to have been contained in some document such as a CARM or a facility letter. I would also expect Mr Rahman to have mentioned it in his letter of 24 October 2007. I prefer the evidence of Mr Swift to that of Mr Rahman.
234. I accordingly reject the claim in respect of 2 Blenheim Terrace.

13. Proceeds of Sale Agreement

235. It is common ground that a number of properties were sold in 2008 and that this was consensual. The properties were: 51-57 Clarendon Road; 1 Kelso Road; the St Anne's school site; 75 Otley Road; 1A Brandon Road; 3 Grimethorpe Place; and 16 Consort Terrace. The issue is whether there was an agreement between Mr Rahman and Mr Kosmirak as to how the proceeds of sale of (1) St Anne's (2) 51 and 53 Clarendon Road and (3) 16 Consort Terrace were to be applied on sale between April and September 2008.
236. 51 and 53 Clarendon Road were sold in April 2008:

1. The net sale proceeds from 51 Clarendon Road of £374,476.87 were paid into the Trustee current account on 15 April 2008, and they were more than sufficient to discharge the £216,733 overdraft on that account.

2. The net sale proceeds from 53 Clarendon Road of £249,476.18 were then paid into the Trustee current account on 22 April 2008 resulting in a substantial credit balance on that account of almost £400,000.

3. The sum of £361,555 was then transferred from the current account to loan account 00975508, leaving a relatively small residual credit balance on the current account, and reducing the loan account to £568,689.40

237. St Anne's School site was sold in July 2008 and HSBC received net proceeds of £1,273,785.62. It applied

1. £63,689 to the overdraft on the current account;

2. £1,210,096 to the £1.9m facility that had been provided to LPL leaving an outstanding balance of £741,404 on that account.

238. Mr Rahman alleges that an agreement was made between him and Mr Kosmirak on 29 February 2008. It is set out in paragraph 68 of his witness statement:

Following further discussions the way forward for securing the remaining funding for 40/41 Park Square, Cransbill Assets, 2 Blenheim and 5 Holt Avenue was agreed at a final meeting on 29 February 2008 and it was to the effect that I would enter into a fire sale and dispose of development properties even if on a loss. At the same time, we agreed that the proceeds of sale should be applied to either pay overdraft borrowings in preference to any loans or that they would be converted to loans as before.

239. Mr Kosmirak accepts that there were discussions as to the sale of properties and the application of the proceeds of sale but denies that there was any concluded agreement.
240. On 15 January 2008 Mr Rahman sent a fax to Mr Kosmirak about the proposed sales:

…it was agreed that you would give me some sort of formula to ensure that sales of properties proceed as planned to generate some cash.

I need to know how sale proceeds will be allocated. Will I be left with enough money to pay selling agents, … Since we are not sure of selling prices we can base it on current valuations. In some instances we may realise more, in others less

241. Mr Kosmirak replied the following day:

You have asked for clarification on the formula to be applied to future property sales. This comes in three parts and in summary for each property being sold we would be looking (1) for you to achieve a minimum sale price of 75% of valuation; (2) to apply 90% of sale proceeds in reduction of bank facilities and (3) to agree in advance with you which facilities and across your various businesses the reductions will apply, i.e. the reductions may not necessarily relate wholly to facilities in the businesses within which the property being sold sits.

242. It will be recalled that Mr Kosmirak wrote letters to Mr and Mrs Rahman on 6 March 2008 setting out HSBC's concerns and proposing a variation in the terms which were not acceptable to Mr and Mrs Rahman. The letter makes a general reference to "meetings in January and February 2008" but makes no specific reference to a meeting on 29 February 2008. When he gave evidence Mr Kosmirak had no recollection of a meeting on 29 February 2008 or of making the agreement alleged by Mr Rahman.
243. The letter of 6 March 2008 makes the following references to the sale proceeds:

The full net sale proceeds of 5 Holt Avenue and 75 Otley Road is to be introduced into your business by 21 March with 90% of these funds being taken in reduction of bank facilities.

Following the sale of [St Anne's School] by [LP(GB)L] a management charge of £500,000 is to be paid to your business with such monies then to be taken in reduction of bank facilities.

244. When he gave evidence Mr Kosmirak said that at that time he thought that St Anne's School would sell at a profit so that it was only the surplus funds that would be used to reduce other facilities. In his closing submissions Mr Elleray QC invited me to reject this evidence in the light of a CARM dated 6 December 2007. That document also refers to the transfer of £500,000 after the sale of St Anne's School. Under the heading "Risk" appears:

St Anne's School (LPL) appears less likely to achieve any profit on sale.

245. Whilst I see the force of this point, I am not able to accept Mr Rahman's evidence that there was an enforceable agreement in relation to the proceeds of sale. The letter of 16 January is too vague to give rise to such an agreement. At best it is an agreement to agree. More likely it is a statement of intent. I have already expressed my view of Mr Rahman's reliability as a witness. The burden of proof on this issue is on Mr Rahman. In my view he has not discharged it.
246. It is, incidentally, difficult to see what overall loss could have arisen as a result of the agreement. All of the loans were at the same rate of interest. The cross default clause in the facility letters renders them all liable to be repaid once there is a breach of any loan to a particular cost centre.

14. The Consumer Credit Act

14.1 The Act

247. Mr Rahman's final contention is that the relationship between the Claimants and the Bank was unfair within section 140A of the Consumer Credit Act 1974.
248. The concept and test of unfair relationships was introduced by sections 19-22 of the Consumer Credit Act 2006. Under ss. 140A of the 1974 Act, as amended by those sections:

(1) the Court may make an order in connection with a credit agreement if it determines that the relationship between the creditor and the debtor arising out of the agreement (or the agreement taken with any related agreement) is unfair to the debtor because of one or more of the following:

(a) any of the terms of the agreement or of any related agreement;

(b) the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement;

(c) any other thing done (or not done) by, or on behalf of, the creditor either before or after the making of the agreement or any related agreement.

(2) In deciding whether to make a determination under the section the court shall have regard to all matters it thinks relevant (including matters relating to the creditor and matters relating to the debtor).

249. Under section 140B the Court is given wide powers in relation to the orders it can make under the section including (under 140B(1)(b))

Require the creditor …to do or not to do (or cease doing) anything specified in the order in connection with the agreement or any related agreement

250. The provision only applies to individual debtors, so is of no assistance to LPL or LP(GB)L. However if the debtor alleges that a relationship is unfair it is for the creditor to prove it is not unfair.

14.2 The allegations

251. In section 15 of his opening submissions, Mr Elleray QC took 3 points in relation to unfairness:

1. The terms of the agreements and the mortgages. By far the most important of these was the cross default clause. However, he also relied upon terms inconsistent with the agreement of 28 June 2006, the requirement that sums due must be paid on 24 hours notice, and the terms of the Mortgages entitling HSBC to appoint Receivers when any part of the debt is not paid when due.

2. The manner of enforcement of its rights under the arrangements under the mortgages. He criticises HSBC for calling in the debts and appointing receivers at the time it did and in the manner it did, relying on the cross default clauses in respect of facilities which had 10 years to run, demanding payment when the interest repayments were being made punctually and there was a dispute between the parties as to the terms of the facilities and the extent of breaches by HSBC.

3. The breaches by HSBC in relation to promises of other funding.

252. I have considerable doubt as to whether the failure to provide other funding can be said to arise out of the agreement so as to fall within section 140A of the Act. However in the light of my finding that there are no breaches of agreements to provide other funding the third point does not arise. It is therefore only necessary to deal with the first two points.
253. Before dealing with them it is necessary to set out the facts relating to enforcement.

14.3 Enforcement

254. The Rahman relationship was first referred to LMU by Chris Kosmirak on around 10 June 2010 and assigned to Mr Barreau. The principal reason why this relationship was referred to LMU was that communications between HSBC and Mr Rahman appeared to have broken down. Mr Rahman was refusing to meet anyone at HSBC, and had intimated a number of complaints and claims for alleged losses.
255. In July 2010 Mr Bowser, a Senior Manager based in Leeds offered to act as an informal mediator between Mr Rahman and the Bank. After an initial meeting between Mr Bowser and Mr Rahman on 4 November 2010, HSBC's approach was noted in Mr Till's comments of 24 November 2010 in a CARM application, where he stated:

…the action plan agreed between Hughes, Bowser, Till and Barreau where it is intended that we will advise Rahman that we are prepared to give consideration to additional funding of £1m to help him complete 41 Park Square subject, of course, to his development appraisal to our satisfaction, credit sanction and normal due diligence. In doing so we recognise that the bank's position would also be improved as we would have a finished building to sell or let that gives us an enhanced security or debt recovery position. We are also prepared to, and Group Legal support that we can, reverse previous loan repayments to re-credit his current account.

"Apart from being commercially expedient for the bank we would hope that Rahman will see that every effort has been made to support him and that we want to move on from previous disagreements and resume a normal relationship with an individual that is held in good regard with the local business community and Wayne.

256. Mr Barreau, Mr Bowser, and Mr Till met Mr Rahman and his accountant, Mr Nawaz at a meeting in Leeds on 28 February 2011. The meeting was not a success. According to Mr Barreau, Mr Rahman made it clear that he was not going to compromise and simply restated many of the points he had made in his correspondence.
257. Following the meeting, on 2 March 2011 Mr Till sent a letter to Mr Rahman. The letter noted that Mr Rahman was not interested in restructuring the facilities whilst his claim for alleged losses had not been dealt with. Mr Till noted that Mr Barreau had said that he could not find any evidence to support Mr Rahman's allegations on HSBC's files but that Mr Nawaz had said that such documents did exist.
258. On 9 May 2011 Mr Barreau wrote to the Trustees to remind them about the prospective expiry, on 31 May 2011, of the loan drawn on 31 May 2006 in respect of 25 Park Square. He invited their proposals for repayment.
259. Mr Rahman replied on 31 May 2011. It included

We are of the firm belief that at our meeting of 28-6-06 it was agreed that all borrowing would be 'interest only for 15 years'. Please confirm that this is the case for all borrowing that was in existence and that it was agreed that all future borrowing would also be for 15 years interest only for all our associated/family cost centres. It was on this agreement and undertaking that we remained HSBC customers.

260. Mr Barreau replied on 2 June 2011

With reference to the agreement reached further to the meeting on 28 June 2006, the conversion of the facilities into 15-year interest agreed only concerned facilities provided to finance residential properties. The duration of the Loan was amended to five years at your request... As indicated in our previous correspondence the Loan expired on 31 May 2011

261. On 5 June 2011, Mr Rahman reasserted his claim in respect of the term of loans. On 14 June 2011, Mr Barreau confirmed the expiry dates of the relevant facilities to Mr Rahman and to the Trustees, further noting that HSBC had spoken to Mark Vines who did not agree with Mr Rahman's assertions.
262. On 5 August 2011, Mr Barreau sent a number of separate letters to the Trustees, and Mr and Mrs Rahman which:

1. stated that the loans which had expired had 5 year terms and that HSBC was not aware of any agreement according to which the maturity of the terms would have been extended;

2. requested that if they were aware of any document showing that the term was longer than 5 years it should be provided by 12 August 2011,

3. invited repayment or extension proposals on the loans by 26 August 2011 (being three weeks from the date of the letter), and requesting that they advise HSBC as soon as possible if they wish to consider this;

4. reserved the right to make formal demand and appoint LPA Receivers with an immediate power of sale if an extension is not agreed; and

5. advised that independent legal advice was taken.

263. Mr Rahman replied in letters sent on 7, 8 and 9 August 2011. He made no proposals in respect of repayment or the extension of the expired facilities.
264. On 19 August 2011, Mr Barreau sent further short letters to the Trustees, Mr and Mrs Rahman requiring proposals on repayment or extensions by 26 August 2011 and reserving the right to appoint LPA Receivers
265. On 19 August 2011, Mrs Rahman sent a letter to HSBC stating that Mr Rahman was on holiday until the week commencing 5 September 2011 and that he would reply to Mr Barreau's letter on his return. Mr Barreau replied on 25 August pointing out that proposals were required by 26 August 2011 and that Mr Rahman being on holiday did not have any effect on HSBC's position.
266. On 30 August 2011, Mr Rahman's solicitors faxed a letter to HSBC. The solicitors requested until 19 September 2011 to respond to the letters of 5 and 25 August 2011. The letter noted that the fee earner was on leave until 1 September 2011 due to the Eid holiday. Counsel had been instructed on behalf of Mr Rahman.
267. On the same day HSBC issued demands to the Trustees and to Mr and Mrs Rahman in respect of the 5 year interest only facilities that had expired. These were delivered on 31 August 2011.
268. On 31 August 2011, HSBC sent letters in respect of the remaining facilities under the cross-default provisions.
269. On 1 September 2011, HSBC appointed the Receivers.

14.4 The authorities

270. I was referred to two authorities on section 140A – D – Paragon v McEwan Peters [2011] EWHC 2491 (Comm) and Harrison v Black Horse [2011] EWCA Civ 1128.
271. The facts in Paragon bear some similarity to the present case in that the creditor Paragon had lent over £6 million on properties which were to be let on residential mortgages. In paragraph 54 and 55 of the judgment David Steel J rejected a claim that the creditor's enforcement of its rights was unfair. He gave a number of reasons including:

1. The fact that the mortgages were payable on demand is not unfair. Such terms are common place in the industry.

2. There was no suggestion that demand was prompted by an improper motive or was the consequence of an arbitrary decision.

3. At the time of the demand there were substantial arrears of interest.

272. The overall business was in terminal trouble. On a falling market disposals of properties were being used to fund outgoings. In those circumstances the demand could not remotely be categorised as "unfair".
273. Harrison was a very different case. The issue was whether non-disclosure of commission on the sale of a PPI product rendered the relationship between lender and borrower unfair.
274. In paragraph 58 of the judgment Tomlinson LJ rejected the argument. It is plain that he regarded the commission as being "quite startling" and that there would be many who would regard it as unacceptable conduct on the part of the lending institution. Yet he rejected the claim. He did not think that the size of the undisclosed commission rendered the relationship unfair. In addition he made the point that the regulatory authority did not after consultation require disclosure of the commission. In those circumstances it would be odd if there was a finding of unfairness under section 140A of the Act.

14.5 Discussion

The terms of the agreements.

275. This was commercial lending involving very substantial sums of money. There is no suggestion that Mr Rahman had the weaker bargaining position. He was quite willing to take his business elsewhere and threatened to do so on a number of occasions. Indeed much of his case was predicated on the submission that he was in a strong bargaining position.
276. At no stage did he complain about the terms that are now suggested to be unfair whereas he did complain about a number of other terms. As Mr Wilson pointed out he plainly read the terms and conditions with some care.
277. In the light of my findings none of the terms were inconsistent with what was discussed at the meeting of 28 June 2006. I agree with David Steel J that the repayment of overdraft facilities on demand cannot remotely be considered to be unfair. It is commonplace in the industry and in the nature of an overdraft. The 5 year facility was not repayable on demand. It was repayable after 5 years. There is nothing unfair about that. A term entitling a mortgagee to appoint an LPA receiver on breach is also standard in the industry and cannot in my view be regarded as unfair.
278. Equally I do not regard the cross default clause as being unfair. It is not clear whether such a clause is standard but at least one of the other banks offering terms to Mr Rahman would have included such a clause. It has to be remembered that there were multiple facilities offered to various costs centres all of which were supported by multiple securities. In such a case there are sound commercial reasons for the cross default clause. Suppose property A is security for a 15 year term and a 5 year term. At the end of the 5 year term no repayment is made and Property A is sold realising more than enough to satisfy the sums due under the 5 year term. In the absence of a cross default clause there is, to put it no higher, doubt as to whether the mortgagee can retain the surplus as security for sums due in respect of the 15 year term. No such problems arise if there is a cross default clause.
279. To my mind it is not unfair that a cost centre should be able to maintain its 15 year interest only RIP loans for the full 15 years only so long as it honours the terms of its 5 year interest only CIP loans and repays them when they fall due.

The manner of enforcement

280. I have set out the history of enforcement in some detail so as to demonstrate that this is not a case where HSBC have arbitrarily decided to serve a demand for immediate repayment and then appointed Receivers. On the contrary through Mr Barreau HSBC have since February 2011 adopted a patient attitude and have tried to find a solution to the dispute.
281. Mr Barreau attended a meeting in February in the hope of reaching some form of accommodation. Mr Barreau wrote a number of letters between May 2011 and August 2011 pointing out the expiry of the 5 year terms, inviting proposals for repayment, and inviting Mr Rahman to provide documentary evidence of his allegations.
282. Mr Rahman steadfastly refused to address the issues raised in Mr Barreau's letters. Instead he has repeatedly advanced what I have held to be totally unfounded claims against HSBC. He did not produce a single contemporaneous document to support his allegations. He refused to advance any proposals despite being given ample opportunity to do so between May and the end of August 2011.
283. In my view HSBC's decision to enforce its securities at the end of August cannot remotely be described as unfair. It is true that Mr Rahman always paid the interest due under the facility letters. However I agree with Mr Wilson that this does not assist him. The obligation on the Trustees, and Mr and Mrs Rahman was to repay the capital after 5 years. If they could avoid enforcement by simply paying the interest after this time they would be able to convert a 5 year term to a term of indefinite length.
284. I also agree with Mr Wilson that when the whole of the correspondence is looked at it was not unfair of HSBC to refuse to accede to the requests in Mrs Rahman's letter of 19 August 2011 and the solicitors' letter of 30 August 2011. In my view Mr Rahman had been given more than sufficient time to make proposals since May 2011 and had declined to do so. He could and should have consulted lawyers long before the end of August 2011. Although Eid fell on 31 August 2011, Mrs Rahman did not mention this in her letter of 19 August 2011. The only reference to Eid was in respect of the fee earner of the solicitors instructed by Mr Rahman.
285. In all the circumstances I reject the application for an order under section 140A of the Act.

15. Conclusion

286. In the result I conclude:

1. That the five facilities in respect of CIP loans to the Trustees and Mr and Mrs Rahman in the spring and summer of 2006 were for terms of 5 years and had expired by August 2011.

2. There was no agreement or representation either on 28 June 2006 or 30 May 2008 that these loans were for terms of 15 years. Accordingly HSBC were entitled to enforce the loans by the appointment of Receivers on 1 September 2011.

3. The application under section 140A Consumer Credit Act is refused.

4. All of Mr Rahman's subsidiary claims fail.

5. It follows that the action is dismissed.

6. HSBC is entitled to succeed on its Counterclaim. The precise sums due should be provided on the handing down of the judgment.

Appendix

Table of Securities

No	Borrower	Date Issued	Amount	Term	Date Amended	Date Demanded	Security Properties	Page Number of Schedule
1	Trustees	30/05/2006	£700,000	5	30/06/2006	30/08/2011	1 Kelso Road 15 Hanover Square 18 Hanover Square 6 Claremont Grove 51 Clarendon Road 53 Clarendon Road 3 Grimthorpe Place 1a Brandon Road 5 Claremont Avenue 25 Park Square West	E2/753
		13/07/2006	£2,756,000	5	N/A	30/08/2011	No schedule
		13/07/2006	£1,115,000	5	N/A	30/08/2011	1 Kelso Road, 15 Hanover Square 18 Hanover Square 6 Claremont Grove 51 Clarendon Road 53 Clarendon Road 3 Grimthorpe Place 1a Brandon Road 5 Claremont Avenue 25 Park Square West 3 Claremont Grove 5 South Parade 30 Park Place	E2/828
2	Mr & Mrs Rahman	26/07/2006	£2,743,650	5	N/A	30/08/2011	16 Consort Terrace 17 Hanover Square 177 Hyde Park Road 23 Cardigan Road 26 Blenheim Terrace 28 Blenheim Terrace 29 Blenheim Terrace 30 Blenheim Terrace 55 Clarendon Road 39 Clarendon Road 44 Dennistead Crescent 75 Otley Road 2 Ash Crescent 1-3 The Headrow	E2/863
		26/07/2006	£596,200	5	N/A	30/08/2011	16 Consort Terrace 17 Hanover Square 177 Hyde Park Road 23 Cardigan Road 26 Blenheim Terrace 28 Blenheim Terrace 29 Blenheim Terrace 30 Blenheim Terrace 55 Clarendon Road 39 Clarendon Road 44 Dennistead Crescent 75 Otley Road 2 Ash Crescent 1-3 The Headrow	E2/876
3	Mr & Mrs S Rahman	24/04/2007	£810,000	5	N/A	31/08/2008	16 Consort Terrace 26 Blenheim Terrace 25 Blenheim Terrace 30 Blenheim Terrace 29 Blenheim Terrace 27 Blenheim Terrace 28 Blenheim Terrace 23 Cardigan Road 17 Hanover Square 1-3 The Headrow 44 Denistead Crescent 177 Hyde Park Road 39 Clarendon Road 55 Clarendon Road 75 Otley Road 2 Ash Crescent	E3/1032
		09/11/2005	£3,460,000	25	20/07/2006	31/08/2008	16 Consort Terrace 26 Blenheim Terrace 30 Blenheim Terrace 29 Blenheim Terrace 28 Blenheim Terrace 23 Cardigan Road 17 Hanover Square 44 Denistead Crescent 177 Hyde Park Road 39 Clarendon Road 55 Clarendon Road 75 Otley Road 2 Ash Crescent Life policy no 9B5Y31M	E2/691
		29/01/2007	£1,650,000	15	N/A	31/08/2008	16 Consort Terrace 26 Blenheim Terrace 30 Blenheim Terrace 29 Blenheim Terrace 27 Blenheim Terrace 28 Blenheim Terrace 23 Cardigan Road 17 Hanover Square 44 Denistead Crescent 177 Hyde Park Road 39 Clarendon Road 55 Clarendon Road 75 Otley Road 2 Ash Crescent 40/41 Park Square	E3/958
4	Mr Shafik Rahman	24/04/2007	£810,000	5	N/A	31/08/2011	16 Consort Terrace 26 Blenheim Terrace 25 Blenheim Terrace 30 Blenheim Terrace 29 Blenheim Terrace 27 Blenheim Terrace 28 Blenheim Terrace 23 Cardigan Road 17 Hanover Square 1-3 The Headrow 44 Denistead Crescent 177 Hyde Park Road 39 Clarendon Road 55 Clarendon Road 75 Otley Road 2 Ash Crescent	E3/1032
		09/11/2005	£3,460,000	25	20/07/2006	31/08/2011	16 Consort Terrace 26 Blenheim Terrace 25 Blenheim Terrace 30 Blenheim Terrace 29 Blenheim Terrace 27 Blenheim Terrace 28 Blenheim Terrace 23 Cardigan Road 17 Hanover Square 1-3 The Headrow 44 Denistead Crescent 177 Hyde Park Road 39 Clarendon Road 55 Clarendon Road 75 Otley Road 2 Ash Crescent	E2/691
		29/01/2007	£1,650,000	15	N/A	31/08/2011	16 Consort Terrace 26 Blenheim Terrace 25 Blenheim Terrace 30 Blenheim Terrace 29 Blenheim Terrace 27 Blenheim Terrace 28 Blenheim Terrace 23 Cardigan Road 17 Hanover Square 1-3 The Headrow 44 Denistead Crescent 177 Hyde Park Road 39 Clarendon Road 55 Clarendon Road 75 Otley Road 2 Ash Crescent	E3/958
		10/11/2005	£349,000	23 years 10 months	20/07/2006	31/08/2011	16 Consort Terrace 17 Hanover Square 177 Hyde Park Road 23 Cardigan Road 26 Blenheim Terrace 30 Blenheim Terrace 29 Blenheim Terrace 29 Blenheim Terrace 55 Clarendon Road 39 Clarendon Road 44 Denistead Crescent 75 Otley Road 2 Ash Crescent Life policy Salma Rahman no 9B5Y31M	E2/708
5	Trustees	23/07/2003	£1,016,000	15	03/07/2006	31/08/2011	1 Kelso Road 15 Hanover Square 18 Hanover Square 5 Claremont Avenue 3 Claremont Grove 6 Claremont Grove 51 Clarendon Road 53 Clarendon Road 1A Brandon Road 3 Grimthorpe Place and critical illness for both S & S Rahman	E1/353
		24/06/2004	£75,000	15	30/06/2006	31/08/2011	1 Kelso Road 15 Hanover Square 18 Hanover Square 5 Claremont Avenue 3 Claremont Grove 6 Claremont Grove 51 Clarendon Road 53 Clarendon Road 1A Brandon Road 3 Grimthorpe Place and critical illness for both S & S Rahman	E2/499
		03/07/2006	£80,000	15	N/A	31/08/2011	1 Kelso Road 15 Hanover Square 18 Hanover Square 5 Claremont Avenue 3 Claremont Grove 6 Claremont Grove 51 Clarendon Road 53 Clarendon Road 1A Brandon Road 3 Grimthorpe Place and critical illness for both S & S Rahman 25 Park Square West	E2/814