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James Michael Shanley v Clydesdale Bank plc

Posted on 27/12/2019 · Posted in Expert Witness, Financial Litigation, Lending

Background to Case

Mr. & Mrs. Shanley had been customers of Clydesdale for many years. Mr. Shanley was an entrepreneur who had made a lot of money and the family lived in a large house (‘Frogston‘) in an upmarket area of Edinburgh. In early 2008, the Shanleys emigrated to Australia and let Frogston. By the Autumn of 2008, however, life in Australia was not working out so moving back to the UK was being planned. Partly because their existing property was let for another six months or so and partly because Mr. Shanley had seen a house for sale (‘Ettrick’), that he thought he could buy at a deep discount of c.£1,000,000, he made an offer on it of £2,650,000 which was accepted subject to missives (contract). The Shanleys approached the bank for assistance and eventually an open-ended bridging loan of £1,650,000 was agreed albeit the bank cautioned the Shanleys as to the fragile state of the property market. With the worsening economic environment, the Shanleys did not sell Frogston until five years later in 2013.

The Litigation

Mr. Shanley decided to sue the bank for mis-selling him a bridging loan, claiming damages for interest and fees and consequential losses of £5,000,000 because being tied into the loan meant he could not invest in various business ventures from which he would have made large profits. Mr. Shanley dispensed with around 8 legal teams over a number of years until the Court got fed up and threw out his case in 2018 because he kept missing court deadlines for the production of documents, telling him to start again. He appealed and the case was reinstated with a due date of April/May 2019.

Everyone hears only what he understands.”
Johann Wolfgang von Goethe

The Expert Report

In summary, this was critical of the bank regarding a poor facility letter and for not following Mortgage Conduct of Business Rules but that the open-ended bridging loan was nevertheless an appropriate product and that Mr. Shanley understood the risks involved. The Shanleys had also instructed their own banking expert.

In the Opinion of Lady Woolfe

63. “…….In my view, at the material time the pursuer understood and accepted the risks inherent in open-ended bridging. He did so, because he did not foresee the twin risks which came to pass: namely, the purchasers’ total failure to meet their obligations under the missives (and the inability to recoup that from their assets), and the inability to sell Frogston thereafter due to the decline in the property market.

64. It follows that the pursuer’s case fails. The defender is entitled to absolvitor. I shall grant a decree in those terms. I reserve any question of expenses.

Scottish Legal Terminology

A civil action in court is known as a proof rather than a trial. Counsel are referred to as advocates rather than barristers. The bringer of an action is a pursuer rather than a Claimant/Plaintiff and the other party is referred to as a Defender rather than a defendant. The judge’s verdict is known as an opinion rather than a judgement. The Outer House of the Court of Session is the equivalent of the High Court. (The Inner House is the equivalent of the Court of Appeal.)

Link: James Michael Shanley v Clydesdale Bank Plc [2019] CSOH 75

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