In the context of a financially disastrous hotel development, two companies involved in the project have failed to convince the High Court that a bank which held a floating charge over their assets had no right to unilaterally appoint administrators in its attempt to recover loans totalling £32.8 million.
The companies had argued that the administrators’ appointment was invalid and of no effect on the basis that the bank had given binding assurances that it would stay its hand whilst negotiations were in progress with a view to achieving a sensible settlement that would be advantageous to all parties.
It was submitted that the companies had continued to negotiate in good faith in the reasonable expectation that the bank would not seek to enforce its security without giving reasonable notice. The companies argued that they had incurred substantial costs in their attempts to break the impasse and had thus acted to their detriment in reliance on the bank’s statements.
However, in dismissing the companies’ arguments, the Court found that the bank had never made any ‘clear and unequivocal representation’ that it would hold back from enforcing its strict legal rights. Whilst indicating its willingness to negotiate, the bank had given ‘no assurance whatsoever’ that a settlement would be achieved.
The companies had sought to rely on inferences drawn from a combination of phrases used in letters from the bank, the conduct of the parties during the negotiations and words uttered during a meeting. However, the Court noted that the bank had ‘expressly reserved all its rights’ during the negotiations and had never waived its entitlement to require immediate repayment of the loans.