Passing The Buck: The Limit Of Lenders' Duties In Commercial Transactions

In the recent case of Rehman v Santander & BNP Paribas 1, HHJ Klein in the High Court granted summary judgment for Santander (the Lender) and BNP Paribas (the Valuer) thereby dismissing the claims by the Rehmans (the Claimants) alleging negligence, misrepresentation, and breach of fiduciary duty against the Lender, and negligence against the Valuer.

HHJ Klein considered the scope of the duties owed by lenders to customers in commercial transactions.

Background

The claims arose out of the provision of a £2 million loan facility by the Lender to a company that owned two nursing homes (the Company) in 2011. The Claimants were two Directors of the Company but their relative, Mr Shafiq Rehman, represented the Company in its dealings with the Lender.

In order to approve the loan facility, the Lender required a valuation of the Company's assets (being the two nursing homes) and personal guarantees from the Claimants. The Lender instructed the Valuer to value the Company on its behalf. The Valuer provided a valuation report for each nursing home (the Valuations) and a copy was provided by the Lender to Mr Rehman, who in turn provided it to the Claimants. The Valuations stated that they were private and confidential to the Lender and could not be provided to or relied upon by any third parties without the Valuer's prior consent. Following the Valuations, the Claimants and Mr Rehman duly provided "all monies" personal guarantees agreeing to indemnify the Lender in respect of the Company's liabilities limited to £2 million (the Guarantees).

The Company defaulted on the loan facility in 2013 and subsequently went into administration in 2014 and eventually into liquidation in 2016. The Lender did not recover all of its losses from the Company's administrators and therefore demanded repayment of the remainder from the Claimants under the Guarantees. The Claimants refused to honour the Guarantees and made various allegations against the Lender and the Valuer, to which both responded by filing applications for summary judgment on the basis that the Claimants' claims had no real prospect of succeeding. The Lender also counterclaimed for the monies due pursuant to the Guarantees.

Claims against the Lender

The Claimants alleged that:

The Lender breached its duty of care to ensure that the Valuations were undertaken by a competent valuer (the Negligence Claim); By providing the Claimants with a copy of the valuation, the Lender had misrepresented that the...