Sumitomo Bank Ltd v Banque Bruxelles Lambert SA; Sanwa Bank Ltd; v Same Arab Bank PLC; v Same Queen's Bench Division (Commercial Court) [1997] 1 Lloyd's Rep 487 HEARING-DATES: 25, 26, 27 June, 1, 2, 3, 4, 8, 9, 10, 11, 15, 16, 17, 18, 19 July, 2 October 1996 2 October 1996 CATCHWORDS: Insurance (MIG) -- Non-disclosure -- Duty of care Defendants arranged loan facility with plaintiff banks -- Loans underwritten by insurance company -- Borrowers defaulted on loans -- Insurers avoided policies for non-disclosure -- Whether defendants under duty to plaintiffs to exercise proper and reasonable care to discharge disclosure obligations -- Whether plaintiffs relied on representations made by defendants. HEADNOTE: These proceedings concerned two syndicated bank loans. The first loan known as Corlease for a principal sum of £89.55 m was the subject of a loan agreement dated May 2, 1989 made between Cornlease Ltd as borrower, the Land and Property Trust Co Plc (LPT) the holding company of Corn lease Ltd, the defendant (BBL) as agent and BBL and the plaintiffs, Sumitomo, Sanwa and Arab Bank and Credit du Nord as lenders. The second loan known as Bridgecirc for £92.7m was the subject of a loan agreement dated July 21, 1989 made between Shelfco (No 370) Ltd subsequently Bridgecirc as borrowers, BBL as agent and BBL and Sanwa as lenders. The purpose of each loan was to finance the purchase by the borrower of commercial property in London. In each case the borrower was a special purchase company formed for the purpose of the particular transaction and intended to have no assets or liabilities other than the property and liabilities relating to the transaction. The amount of the loans represented 90 per cent of the valuations of the properties to be purchased. In addition to the normal security for these loans, each loan had the benefit of insurance policies, mortgage indemnity guarantee policies (MIGs) underwritten by Eagle Star Insurance Co Ltd (Eagle Star). In the case of each loan two policies were issued by Eagle Star, one for 0-70 per cent of the valuation of the property and one for 70-90 per cent of the valuation of he property. The MlGs were to protect the banks against loss in the event that the borrowers defaulted on the loans. In July and August, 1990 the borrowers defaulted on the loans, the banks suffered very substantial losses on realization of the normal security and Eagle Star contended that the MIGs were void or voidable for nondisclosure. The plaintiff banks alleged that insofar as Eagle Star's allegations of non-disclosure might prove correct BBL was liable to them to make good those losses on the basis that BBL as the arranger of the loans was responsible to them for performance of the disclosure obligations under the MIGs and failed to discharge them. BBL's responsibility was said to arise on a number of legal bases namely express or implied representations actionable under s 2(1) of the Misrepresentation Act, 1967 and/or in tort and/or as collateral warranties and/or for breach of a general duty of care in carrying out the obligations of disclosure under MIUs and/or for breach of a contractual or fiduciary duty as agent under the Cornlease loan agreement to take reasonable care to see that the conditions precedent to drawdown of the loans under the agreement were met. BBL denied that any of the alleged representations were made by them or if made relied on by the banks and that any duty of care arose. They contended that the terms of the loan agreement were themselves inconsistent with the alleged duty of care, implied terms and fiduciary duties which were also inconsistent with a clear market practice that in the absence of a specific written warranty or assurance to such effect an arranging bank in the position of BBL did not engage its responsibility to participating banks. BBL further alleged that the plaintiff banks themselves owed and were in breach of a duty of care to BBL and a duty of disclosure to Eagle Star and that they were guilty of contributory negligence. The essential issue was whether or not was the duty of disclosure to Eagle Star as underwriters of the MIG policies for the two transactions. A trial of preliminary issues was ordered. -- Held, by QB (Cam Ct) (LANGLEY, J), that (1) insofar as the plaintiff banks contended that a duty of care attached to BBL under the provisions of the loan agreement it would not be accepted; the provisions referred to actual knowledge in a context which precluded writing into them "ought to know" which would be the effect if a duty of care attached; and although such a duty of care could not be spelt out from those provisions alone, the provisions as to BBL's duties, rights and exonerations under the loan agreement did not prevent and were not inconsistent with a general duty of care arising; the fact that BBL owed duties of a limited scope as agent under the loan agreement did not mean that other and wider duties might not have arisen from the relationship of the parties (see p 493, col 2); (2) the banks were not parties to the policy; BBL did not purport to enter into the policy as agent for the banks; the policy was granted by Eagle Star to BBL as agent for the banks which was a reference to BBL's status as agent under the loan agreement and the security documents (see p 495, cols 1 and 2; p 497, col 2); (3) cl 5.3 of the insurance policy imposed the obligation of disclosure which it specified on BBL alone as the insured (see p 495, col 2; p 497, col 2); (4) the effect of that clause was to establish that provided BBL carried out the investigations to which it referred and made the disclosure to which it referred then the duty of disclosure was to be treated as having been fulfilled; no obligations of disclosure were owed by the banks at all either under the policy or at common law; at common law because it was agreed that those obligations were only owed by those who were parties to the policies as insured and under the policy because they were not parties to it and the obligation specified was placed on BBL and BBL only (see p 495, col 2; p 497, col 2); (5) cl 5.3 provided that BBL would assess its lending or credit risk as it would if it were exposed only to 70 per cent of the valuad on (see p 496, cols 1 and 2); (6) disclosure had to be made only of facts, matters or things which would cause it not to make the loan, assuming that it was exposed only to the risk of a shortfall from 70 per cent of the valuations (see p 496, col 2); (7) under the Bridgecirc policies BBL had not only to carry out its standard investigations but also to disclose to Eagle Star any matters which such investigations revealed provided they were such that it would normally disclose them to a proposed participant in the loan; and the underlying purpose of cl 5.3 in this policy was an assumption that as agent BBL would disclose to all potential participants matters material to their judgment in deciding whether or not to participate in the loan on the terms proposed, and so must also disclose such matters to Eagle Star (see p 497, col 2: p 498, col 1); (8) on the facts and the evidence there was no market practice relevant to the performance of the disclosure obligation under the policies (see p 509, col 2; p 511. cols 1 and 2); (9) the relationship between BBL and the plaintiff banks was a classic example of a relationship where a duty of care did arise on BBL to the banks as regards the performance of the disclosure obligations under the MlGs; there was an assumption of responsibility by BBL to the banks to perform that duty; BBL was the arranger of the facility and it assumed as such the obligation to negotiate and agree the MlGs with Eagle Star: it knew the validity of the policies depended on its proper performance of the disclosure obligation; and the duty arose in the context of the specific purpose of the loan transactions (see p 514, cols 1 and 2); (10) BBL owed the plaintiff banks a duty of care in carrying out the disclosure obligations under the policies in relation to both the Cornlease and Bridgecirc transactions (see p 514 col 2); (11) the essence of what was said or represented by BBL prior to the loan agreement was to each bank in each transaction that there would be MlGs, that BBL was to procure them and would do so on the terms notified; that those terms would include the disclosure obligations of cl 5.3 which it was for BBL and BBL alone to discharge and that BBL as a responsible and prudent bank would exercise proper and reasonable care in addressing and discharging those obligations (see p 515 cols. 1 and 2); (12) in giving the notice of drawdown under the Cornlease loan, BBL was undoubtedly acting as agent bank under the loan agreement (see p 515, col 2); (13) the banks were content to rely and did rely on BBL performing what they perceived to be a reasonably straightforward obligation; the fact that they might have assumed that BBL would discharge that obligation did not mean they did not rely on BBL to do so (see 516, col. (14) since the terms of the MIGs imposed no obligations of disclosure on the banks and indeed excluded them there could be no duty on the plaintiff banks to impart information to Eagle Star or BBL in that context; the disclosure obligations were not mutual and the assessment of the credit and property risks was a matter for each individual proposed participant (see 516 cols 1 and 2: p 517, col. (15) the essential basis for the claim by the plaintiffs was for a breach of duty of care in the discharge of BBL's obligations under cl 5.3 of the policies; to that claim BBL was entitled to allege that the plaintiff banks contributed to their own loss by their negligence (see 517, col. (16) the preliminary issues would be answered accordingly (see p 517, col. CASES-REF-TO: Bankers Trust International Ltd v PT Dharmala, [1996] CCL 518; Caparo Industries Plc v Dickman, (HL) [1990] 2 AC 605; General Accident Fire & Life Assurance Corporation v Midland Bank Ltd, (CA) (1940) 67 Ll L Rep 218; [1940] 2 KB 388; Gran Gelato Ltd v Richcliff (Group) Ltd, [1992] Ch 560; Henderson v Merrett Syndicates Ltd, [1994] 2 Lloyd's Rep 468; [1995] 2 AC 145; Highlands Insurance Co v Continental Insurance Co, [1987] 1 Lloyd's Rep 109; Holt v Payne Skillington and De Groot Collis, (CA) Dec 18, 1995, unreported; Lancaster City Council v Unique Group Ltd, Dec 15, 1995, unreported. INTRODUCTION: This was a trial of preliminary issues raised in the proceedings between the plaintiffs, the Sumitomo Bank Ltd, Sanwa Bank Ltd and Arab Bank Plc and the defendants Banque Bruxelles Lambert SAin which the plaintiffs claimed that as the defendants were the arrangers of the loans on which the borrowers defaulted, they were responsible for the performance of the disclosure obligations under the mortgage indemnity guarantee policies and had failed to discharge them. COUNSEL: Mr Gavin Kealey, QC and Mr D Edwards for the plaintiff banks; Mr P Scott, QC and Mr Railton for the defendants. PANEL: Langley J JUDGMENTBY-1: LANGLEY J JUDGMENT-1: LANGLEY J: Introduction These proceedings concern two syndicated bank loans. The first loan, known as Cornlease, was the subject of a loan agreement dated May 2, 1989 made between Cornlease Ltd as borrower, the Land and Property Trust Co Plc ("LPT"), which was the holding company of Cornlease Ltd, the defendant ("BBL") as "agent" and BBL and the plaintiff banks and Credit do Nord as lenders. I shall refer to the plaintiff banks as Somitomo, Sanwa and Arab Bank. Credit do Nord are not parties to the proceedings. The second loan, known as Bridgecirc, was the subject of a loan agreement dated July 21. 1989 made between Shelfco (No 370) Ltd (subsequently Bridgecirc) as borrower, BBL as "agent" and BBL and Sanwa as lenders. The purpose of each loan was to finance the purchase by the borrower of commercial property in London. In each case the borrower was "a special purpose company" that is a company formed for the purpose of the particular transaction and intended to have no assets or liabilities other than the property and liabilities relating to it. The Cornlease loan was for a principal sum, of £89.55m and the Bridgecirc loan for a principal sum of £92.7m. The participations of the banks in these loans were as follows: (1) Cornlease Sanwa £35m. Arab Bank $20m. Somitomo £20m. BBL £9.550m. Credit do Nord £5m. (2) Bridgecirc: BBL £47.7m. Sanwa £45m. The amount of the loans represented 90 per cent of the valuation of the properties to be purchased. The valuation of the Cornlease properties was prepared by Lewis & Tucker and dated Apr 12,1989. The valuation of the Bridgecirc properties was prepared by John D Wood and dated June 20, 1989. In addition to what I shall call normal security for these loans each loan had the benefit of insurance policies underwritten by Eagle Star Insurance Co Ltd ("Eagle Star") which covered the entire amounts lent by the banks. These policies have been and I will refer to them as mortgage indemnity guarantee policies or "MIGs". In the case of each loan, two policies were issued by Eagle Star, one for 0-70 per cent of the valuation of the property and one for 70-90 per cent of that valuation. The reason for two policies was that it was normal at the time for banks to lend only up to 70 per cent of the valuation of the property. In simple terms the MIJGs were to protect the banks against loss in the event that the borrower defaulted on the loans and to indemnify the banks for the amount of the difference between the sums due to the banks and such sums as might be recovered on realization of the normal security for the loan. Thus the policies expressly envisaged that the total loan made by the banks would be for 90 per cent of the valuation of the properties. A gain in simple terms, what has given rise to these proceedings is that in July and August, 1990 the borrowers did default on the loans, the banks suffered very substantial losses on realization of the normal security, and Eagle Star, when called upon to indemnify the banks under the policies contended that the MIGs were void or voidable for non-disclosure. BBL claimed declaratory relief against Eagle Star in other proceedings which were compromised with Eagle Star in January, 1993 by payments made by Eagle Star of some £27.7m. for Cornlease and some £22.7m for Bridgecirc. Those proceedings continued against other parties ultimately as far as the House of Lords. Despite this settlement the plaintiff banks. and of course BBL itself also, have sustained very substantial losses on the loans. The losses of the plaintiff banks are said to total some £80m. It is the plaintiff banks' case that insofar as Eagle Star's allegations of nondisclosure may be proved correct, BBL is liable to them to make good those losses on the basis that BBL as the arranger of the loans was responsible to them for performance of the disclosure obligations under the MIGs and failed to discharge them. BBL's responsibility is said to arise on one or more of a number of legal bases namely express or implied representations actionable under s 2(1) of the Misrepresentation Act, 1967 and/or in tort and/ or as collateral warranties and/or for breach of a general duty of care in carrying out the obligations of disclosure under the MIGs and/or for breach of a contractual or fiduciary duty as agent under the Cornlease loan agreement to take reasonable care to see that the conditions precedent to drawdown of the loans under the agreement were met. BBL, again in summary, say none of the alleged representations were in fact made by them, or if made relied upon by the banks, and no duty of care arises. They contend that the terms of the loan agreements are themselves inconsistent with the alleged duty of care, implied terms and fiduciary duties which are also inconsistent with "a clear market practice that in the absence of a specific written warranty or assurance to such effect an arranging bank in the position of BBL does not engage its responsibility to participating banks." BBL also alleges that the plaintiff banks themselves owed and were in breach of a duty of care to BBL and a duty of disclosure to Eagle Star and that they were guilty of contributory negligence. The essential issue is, therefore, whether or not BBL is liable to the plaintiff banks for a failure to discharge the duty of disclosure to Eagle Star as underwriters of the MIG policies for the two transactions. Whether or not BBL in fact failed to discharge that duty does not arise on this hearing because during the course of the proceedings various orders have been made for the trial of preliminary issues and it is only those issues which I have to determine. I have attached as Appendix A to this judgment the issues as set out in the orders made by the Court in each action. Where necessary I have inserted the allegations in the pleadings which the orders referred to only by cross-reference. Essentially the issues can be grouped into four categories: (1) Issues relating to pre-contractual representations and duties. (2) Issues relating to representations and duties concerning drawdown of the loans. (3) Duties owed by the plaintiff banks to BBL and Eagle Star. (4) Contributory negligence. I have also attached as Appendix B to this judgment a list of the more important players, parties and persons involved in the events and the trial of the preliminary issues indicating whether or not those persons gave oral evidence at the hearing or their evidence was given by way of a Civil Evidence Act notice. As to the latter in each case the notice was founded on the fact that the person in question was resident overseas. By way of a general comment on those who gave evidence, I found them all to be impressive and truthful. As to the expert witnesses, in each case I found them both impressive and professional and that their evidence was given. as of course it should be, with the intention of assisting the Court with their honestly held expert opinion. Where therefore I refer to the evidence in this judgment I accepted it as truthful and accurate save where otherwise expressly indicated. While the circumstances of the three plaintiff banks concerned in the Cornlease transaction and their claims are substantially similar they are not identical. Sumitomo, for example, alone relies on a pre-contractual oral representation said to have been made by BBL. Sanwa and Arab Bank rely on a representation which Sumitomo does not because of the different terms of their communications with BBL. Sanwa alone is concerned with the Bridgecirc transaction and makes no claims referable to the circumstances in which the drawdown of the loan was made on that transaction whereas in Cornlease all three banks do make claims in respect of the drawdown. The representations which are relied on are alleged to have been made in the documentation supplied to the banks by BBL when first soliciting their participation in the loans and then by the supply to them of a copy of the draft proposed Eagle Star policy. The representations in respect of the drawdown alleged by the banks in Cornlease are said to have been made in the notices of drawdown given to them by BBL following completion of the loan agreement. I propose first to set out and consider the material terms of the loan agreements and MIGs and then to give a chronological account of the material events which resulted in those agreements being concluded, together where necessary with my findings of fact upon those events. The Cornlease loan facility The agreement is dated May 2, 1989. It was made between Cornlease Ltd, LPT, the plaintiff banks. BBL and Credit du Nord as lenders, and BBL -- . . . in its capacity as Agent under the Security Documents ("the Agent"). The recitals recorded that: (B) The Agent has arranged a loan facility of £89,550,000 to be made available to the Borrower by the Banks upon the terms of this Agreement; (D) the Agent is willing to act as Agent for the Banks on the terms of this Agreement. By cl 1 the "Security Documents" were defined to mean: This Agreement, the Debenture, the Head Lease Mortgage. the Rental Income Assignment, the Key Man Policies Assignment. the Shares Charge and the Interest Rate Cap Agreement Assignment and all other documents supplemental to, collateral with or derived from any of them, jointly and severally. The "Eagle Star Indemnity" was defined as two mortgage indemnity guarantee policies of insurance in favour of the banks covering in the aggregate the amount equal to the advance. Thus, as is agreed, the MIGs were not "Security Documents". By cl 2(A) the banks agreed to grant the borrower a loan facility of up to £89,550,000 subject to the conditions of the agreement. By cl 2(C) the obligations of the banks were agreed to be several; each bank agreed to advance the amount of its participation in the loan and any failure of one bank to perform its obligations under the agreement was not to affect the obligations of the borrower towards any other bank nor was the agent or any other bank to be liable for the failure of such bank to perform its obligations. Clause 5 of the agreement was headed "Conditions Precedent". It provided: (A) Second Schedule: The obligations of the Banks are conditional upon receipt of confirmation in writing by the Agent that all of the conditions precedent listed in the Second Schedule have been fulfilled. Further Conditions: The Advance requested by the Borrower shall not be made if: (2) Any Event of Default has (to the knowledge of the Agent) occurred or will (to the knowledge of the Agent) occur as a result of making the Advance; or (3) Any of the representations set out in clause 14 is untrue (to the knowledge of the Agent) on the proposed date for the advance, or would (to the knowledge of the Agent) be untrue if repeated on that date by reference to the circumstances then existing. By cl 6(A) the advance was to be made available at the request of the borrower if (but only if) the agent received a notice of drawdown in the form set out in the agreement. By cl 14(A) each of the borrower and LPT represented and warranted to and for the benefit of the other parties to the security documents that: (14) Eagle Star Indemnity: the Eagle Star Indemnity is or will be, prior to the making of the Advance, in full force and effect, constitutes the legal, valid and binding obligations of Eagle Star Insurance Company Limited and is not void or voidable; (15) Defaults under Eagle Star Indemnity; there has been no breach of any of the terms of the Eagle Star Indemnity and no person has disputed, repudiated or disclaimed any liability thereunder or indicated that it does not consider itself bound by or does not intend to comply with any provisions of the same. By cl 19(A) it was provided that: Events of Default: if at any time and for any reason, whether within or beyond the control of any party to the Security Documents any of the following events occurs: (2) Breach of Warranty: any representation, warranty or statement by the Borrower or LPT in any of the Security Documents or in any document delivered thereunder is not complied with or is or proves to have been incorrect in any material respect when made or if it had been made on any later date by reference to the circumstances then existing, would have been incorrect in any material respect on that later date; or (12) Security Documents: any of the Security Documents or the . . . Eagle Star Indemnity . . . is not (or is properly claimed by the person granting it not to be) in full force and effect . . . then the agent could (inter alia) exercise any of its rights under the security documents. Clause 20 of the agreement was entitled "The Agent and the Banks". So far as material it provided as follows: (A) Appointment of Agent Each Bank appoints the Agent to act as its agent for the purpose of the Security Documents and authorises it to take such action and exercise such rights, powers and discretions as are specifically delegated to it by the Security Documents and such other action, rights, powers and discretions as are reasonably incidental but the Agent may not begin any legal action or proceeding in the name of a Bank without its consent. The relationship between the Agent and the Banks is of agent and principal only and the Agent shall not be a trustee for any Bank, nor an agent or trustee for the Borrower or LPT, under or in relation to the Security Documents. (B) Agent's Duties: the Agent shall: (3) have only those duties, obligations and responsibilities expressly specified in the Security Documents. (C) Agent's Rights: The Agent may: (5) assume that no Event of Default has occurred unless an officer of the Agent, while active on the account of the Borrower, acquires actual knowledge to the contrary. (D) Exoneration ofAgent: Neither the Agent nor any of its personnel or agents shall be: (1) responsible for adequacy, accuracy or completeness of any representation, warranty, statement or information in the Security Documents or any notice or other document delivered under the Security Documents; (3) obliged to enquire as to the occurrence or continuation of an Event or Default; or (4) liable for anything done or not done by it or any of them under or in connection with the Security Documents save in the case of its or their own negligence or wilful misconduct; (F) Non-Reliance on Agent: Each Bank confirms that it has itself been, and will at all times continue to be, solely responsible for making its own independent investigation and appraisal of the Properties, the business, operations, financial condition, creditworthiness, status and affairs of the Borrower, LPT, Eagle Star Insurance Company Limited, the counter-party to the Interest Rate Cap Agreement or any other party giving security, guarantees or indemnities in respect of the Borrower's obligations under this Agreement and has not relied, and will not at any time rely, on the Agent: (1) to provide it with any information relating to the business, operations, financial condition, creditworthiness, status or affairs of the Borrower, whether coming into its possession before or after the making of the Advance . . . (2) to check or enquire into the adequacy, accuracy or completeness of any information provided by the Borrower under or in connection with the Security Documents . (3) to assess or keep under review the business, operations, financial condition, creditworthiness, status or affairs of the Borrower. (H) Indemnity to Agent: To the extent that the Borrower does not do so when obliged to do so or is not obliged to do so, each Bank shall on demand indemnify the Agent in the proportion borne by the amount of the Advance outstanding to it to the Advance at the relevant time. against any cost, expense or liability sustained or incurred by the Agent in complying with any instructions . . . or otherwise sustained or incurred by it in connection with the Security Documents or its duties. obligations and responsibilities under the Security Documents except: (2) to the extent that they are sustained or incurred as a result of the negligence or wilful misconduct of the Agent or any of its personnel or agents. The conditions precedent in the Second Schedule to the agreement stated that: The obligations of the Banks and of the Agent under the Security Documents are conditional upon the receipt by the Agent in form and substance satisfactory to it, prior to receipt by it of the first notice of drawdown, of: (12) evidence satisfactory to the Agent that Eagle Star Insurance Company Limited has issued two mortgage indemnity guarantee policies of insurance . . . in favour of the banks covering in the aggregate an amount equal to the Advance. The other matters referred to in the Schedule are what may be described as various formal documents such as the corporate documents of the borrower and specimen signatures, engrossments of each of the security documents, a report on title and the valuation. The Bridgecirc loan facility The agreement is dated July 21, 1989. It was made between Shelfco as borrower, BBL "in its capacity as Agent under the Security Documents" ("agent"), and BBL and Sanwa as lenders. Apart from differences which reflected the particular transaction, the agreement was in substantially the same terms as the Corn lease agreement. That is not surprising as both were drafted by Simmons & Simmons. The one difference of some significance is that there were no equivalents of cl 14(A) (14) or (15) of the Cornlease agreement. The reason for that, which is apparent from an annotated draft of the agreement, was that Nabarro Nathan son who were the solicitors for the borrower on the Bridgecirc loan, considered it inappropriate for Bridgecirc to warrant the validity of the Eagle Star indemnity to which it was not a party. Otherwise, questions of construction of the agreements involve the same considerations and outcome and propose therefore to address them by reference only to the Cornlease agreement. Construction of the loan agreements As Recital (B) makes clear it was BBL who had arranged the facility. Clause 20 governed the relationship between BBL as agent and "the banks". BBL was appointed agent by the agreement and expressly so "for the purpose of the Security Documents". BBL's task was one of the future management of the loans pursuant to those documents. They did not include the MIGs. I do not find that surprising as the MIGs were not agreements with which the borrower or LPT were concerned. The emphasis on the security documents arid the future management of the loans is apparent from cl 20(B)(3) which limits the agent's duties to those expressly specified in the security documents, cl 20(D) which addresses the agent's "exoneration" in terms of the security documents, and cl 20(H) which provides for an indemnity to the agent from the banks in connection with costs or liabilities sustained by the 'agent in connection with the security documents. The exoneration and indemnity are themselves subject to an exception where the agent is negligent. Clause 20(B)(3), read in the context of the entire agreement has in my view a clear purpose, namely to provide that the agent's specific "duties obligations and responsibilities" as agent are and are only as spelt out in the security documents. The clause looks to the future role of the agent, not to the past relationship of the parties. I cannot read the clause as an exclusion of liability for anything not falling within that description let alone for conduct which ante-dated the agreement and the appointment of BBL as agent or which is not referable to the security documents, if that conduct would otherwise give rise to liability. Nor can I read it as in some way defining the total extent of BBL's role or duties in the entire transaction or as a "code" applicable other than to BBL's specific role as agent under the loan agreements, which was to administer the loans in accordance with those agreements. In short the clause was in my judgment simply specifying the tasks which the agent was to perform as agent. Moreover, even for such tasks, I cannot construe the clause as excluding liability for the negligent execution of them. The clause itself does not address the quality of the performance of the duties to which it refers and I cannot read the word "duties" as in any way referring to a duty of care if one would otherwise arise. The extent to which the agent acting as such is exonerated from liability has to be found, if at all, in cl 20(D) which itself recognizes that in some circumstances a liability for negligence may arise. On the other hand, it must be remembered that the loan agreement was itself a security document and in examining the scope of any alleged duty of care in respect of tasks carried out as agent under the loan agreement it is therefore necessary to pay close attention to the precise obligations of BBL under that agreement. Thus, there is no dispute that in giving notice of drawdown under the loan agreement, BBL was acting as agent bank. Clause 20(F) does refer (and alone refers) to events prior to the agreement as well as matters that may occur in the future. Essentially it imposes upon each of the banks the obligation to make its own assessment of the financial soundness of the borrower, LPT and Eagle Star and of the value of the properties. It is not in dispute that each of the banks was responsible for its own assessment of what may be called the credit risk of the transaction. But the clause says nothing about the Eagle Star indemnity. By cl 5(A) the obligations of the banks to advance the loan were conditional on BBL as agent confirming to them in writing that the conditions precedent in the Second Schedule were fulfilled. No claim is made on the basis that BBL were at fault in giving that confirmation, which they did. That does not surprise me as I read the list of conditions precedent in the Second Schedule as effectively mechanical matters of ensuring that documentation, including the MIGs, was apparently in order and no more than that. Hence, Mr Fraser consulted Simmons & Simmons about their fulfilment which Simmons & Simmons confirmed. The provisions in cl 5(B) that the advance should not be made if an event of default had occurred or the borrower's representation that the MIGs were in full force and effect and valid and binding obligations on Eagle Star was untrue were expressly predicated on the agent having knowledge that that was so. There is no dispute that if BBL had in fact had that knowledge at the time the borrower requested the advance to be made then it was under a duty to the banks to reject the request for the advance. Insofar as the banks contend that a duty of care attached to BBL in relation to these provisions I cannot accept that. In my judgment the provisions refer to actual knowledge in a context which precludes writing into them "ought to know" which would be the effect if a duty of care attached. I therefore do not think that such a duty of care can be spelt out from these provisions alone. On the other hand I also do not think that the provisions as to BBL's duties, rights and exonerations under the loan agreements in any way preclude a general duty of care arising, if that is otherwise appropriate, for the reasons which I have stated. The fact that BBL owes duties of a limited scope as agent under the loan agreements does not mean that other and wider duties may not have arisen from the relationship of the parties. In other words, and contrary to Mr Scott's submission, I see nothing in the provisions of the loan agreement which is itself inconsistent with such a duty. In particular the loan agreements were not addressing the insured's disclosure obligations under the MIGs which in practical terms were part of the package completed on May 2 and July 21 and thus either had or had not been performed on those dates, when BBL first assumed the role of agent bank. THE POLICIES Cornlease (1) THE 0 to 70 per cent. The policy was dated May 2, 1989. It appears that in fact it was signed at a later date but on May 2, 1989 Eagle Star wrote to Mr Markovits confirming that they were holding covered under the terms of their mortgage guarantee policy and that the wording of that policy had been agreed between Barlow Lyde & Gilbert and Simmons & Simmons and that 50 per cent of the premium due for the policy had been paid. The policy itself provided for the premium of £696,500 to be paid in two .instaIments and the second instalment was payable on its anniversary, namely May 2, 1990. The front page of the policy stated that it was "in favour of" BBL. The policy was signed by Eagle Star and by BBL in its own name and not "as agent". The recitals recorded that: (A) by a Loan Agreement . . . dated 2nd May 1989 between (1) Cornlease (2) LPT (3) the Banks and (4) BBL . . . as Agent for the Banks ("the Insured") . . . the said Banks agreed to grant a loan facility of up to £89,550,000 in principal amount to the Borrower secured (inter alia) by the Security Documents as defined below granted in favour of the Insured as Agent for the said Banks and to be further insured by this policy in favour of the Insured as Agent for the said Banks. (B) the Borrower has requested Eagle Star to provide this Policy which Eagle Star had agreed to do in consideration of the payment of the Premium. The policy records that it was agreed "between the Company (ie Eagle Star) and the Insured". The insured was defined in the agreement as BBL as: Agent under the Loan Agreement or any other Security Document. The "security documents" were defined to have the same meaning as in the loan agreement and thus the policy itself was excluded from that definition. The "outstanding debt" was defined to be, in effect, all sums payable or owing by or from the borrower or LPT to the "Insured and/or the Banks". The material terms of the policy were as follows: Clause 2. In consideration of and subject to payment of the Premium by the Insured (on behalf of the Banks) to the Company and to the other terms and conditions hereof, this Policy is granted to the Insured as agent for the benefit of the Banks. Clause 3 . . . if any of the following events occurs: (a) the Property is sold following an Event of Default and pursuant to a power of sale contained in the Security Documents . . . then, if the proceeds of sale arising pursuant to the sale . . . are less than the Outstanding Debt . . . the Company will pay the amount of the deficit to or to the order of the Insured within 30 days of receipt of a statement from the Insured or by or on behalf of the Banks stating which of the above events has occurred and stating the amount of the deficit. Clause 5.3 Disclosure. The Insured's duty of disclosure leading up to the issue of this Policy shall be treated as having been fulfilled if: (a) the Insured has carried out all such investigations and has made all such enquiries in relation to the Borrower and the Property as it would carry out or make if proposing to enter into the Loan Agreement without the benefit of this Policy or insurance providing cover of the type or to the extent of that provided by this Policy . . .but assuming: (i) the existence of all the rights and obligations . . . provided for in the Security Documents between the Borrower, LPT, the Banks and the Insured; and (ii) a policy of insured issued by a reputable insurer in favour of the Insured and the Banks providing that in the event of.. .the proceeds of sale being less than the amounts due to the Insured and the Banks from the Borrower such insurer would pay to the Insured and the Banks an amount equal to such shortfall up to a limit of 20% of the amount originally advanced: and is not as a result of such enquiries and investigation aware of any fact, matter or thing, other than any such which it has disclosed to the Company, which would cause it not to enter into the Loan Agreement in such circumstances. Clause 6. All payments to be made by the Company hereunder shall be made in Steding and to such account of the Insured as the Insured may notify to the Company. I should add to the foregoing that there are a number of other provisions in the policy which not only refer to "the Insured" in terms which strongly suggest that only one party was referred to, and that party was BBL, but which also, by the use of language such as "the Insured and the Banks" or the "Insured or any of the Banks" contrast the insured with the banks. In the first category I have in mind such cll. as 3.3; 3.5; 5.5 and 7.3. In the second category I have in mind cll 4.2(b); 5.2 and 5.4. The draftsman seems therefore to have had in mind a distinction between the insured and the banks and to have used the distinction where appropriate to the wording. It should also be noted that one sub-clause, cl 5.8(b) is expressed in terms of an agreement by the insured and the banks not without Eagle Star's consent to prejudice Eagle Star's liabilities by agreeing to an alteration of the security documents and the like. However I do not think such a provision with that purpose can of itself be used to suggest that the banks were or must have been parties to the policies. Rather it would reflect the role of BBL as agent under the security documents. (2) THE 70 to 90 per cent. This policy was also dated May 2, 1989. A similar letter holding covered dated May 2, was written in respect of this policy as for the 0 to 70 per cent policy save that it recorded that the premium had been paid in full. The premium was £1,761,150 reflecting the perceived greater risk of the first 20 per cent being exposed to a claim. In all substantial respects this policy was in the same terms as the 0 to 70 per cent policy. Construction of the policies A number of issues arise on the construction of these policies and in particular of cl 5.3, the disclosure clause. These issues are: (1) whether or not the plaintiff banks were parties to the policy; (2) whether or not cl 5.3 imposes the express obligations contained in it on BBL alone as the insured or also on the plaintiff banks; (3) whether or not the common law duty of disclosure was otherwise excluded in so far as owed by BBL or the plaintiff banks; and (4) what were the obligations of disclosure imposed by cl 5.3 and, in particular, how easy or difficult were they to fulfil. I will address these issues in turn. (1) Were the banks parties to the policy? In my judgment they plainly were not. BBL did not purport to enter into the policy as agent for the banks. Rather the policy was granted by Eagle Star to BBL as agent for the banks, which was a reference to BBL's status as agent under the loan agreement and the security documents, as the definition of "the Insured" makes clear. It is a well known concept that policies of insurance may be granted to one party as insured but for the benefit of others so that in the event a claim has to be made the insured may recover for the interests of those others and hold any recovery on trust for them. The words used in cl 2 were not "the Insured as agent for the Banks" but "as agent for the benefit of the Banks". Moreover, as I have said, the draftsman appears to have had well in mind a contrast between "the Insured" and the banks. That is also apparent from cl 5.3 itself. The contrast with the loan agreements themselves is also apparent. In those agreements the banks were plainly named as parties to them. It was BBL's submission that properly construed the policies were composite policies in effect insuring each bank for its own participation in the loan and thus giving rise to separate obligations of disclosure which, if breached, would affect only "the policy" of that bank leaving "the policies" of the other banks unaffected. I was referred in this connection to General Accident Fire & Life Assurance Corporation v Midland Bank Ltd, (1940) 67 Ll L Rep 218 at p 236; [1940] 2 KB 388 at p 405 per Sir Wilfred Greene, MR. I find that, however, an impossible construction. In my judgment the banks were not parties to the policies and the disclosure obligation was placed on BBL alone: see (2) below. (2) On whom was the express obligation of disclosure imposed? In my judgment cl 5.3 imposes the obligation of disclosure which it specifies upon BBL alone as the insured. Within its own terms cl 5.3 contrasts "the Insured" with "the Insured and the Banks". The use of the word "it" in sub-cl (a) is a reference to a single party. Where the draftsman meant "banks" he said "Banks" and where he referred to "the Insured" he meant BBL. (3) Was the common law duty of disclosure excluded? The effect of the clause, in my judgment, was to establish that provided BBL carried out the investigations to which it referred and made the disclosure to which it referred then, as the clause stated, the duty of disclosure was to be "treated as having been fulfilled". That, as it seems to me, must mean that the parties were themselves defining the extent of disclosure which was required. Indeed, by the conclusion of the hearing, neither party was contending to the contrary. Moreover I find it no surprise at all that parties such as these, with the benefit of skilled legal advice, should seek to define and limit the common law duty disclosure nor do I find it in any way surprising that Eagle Star would content themselves with a duty expressed in the terms it was to be carried out only by BBL. It should be noted that the clause says nothing about misrepresentation and Eagle Star would retain its full rights in law if a misrepresentation was in fact made to it which it relied upon in granting the policy. The consequence was and is that no obligations of disclosure were owed by the banks at all, either under the policy or at common law. At common law because it is agreed that those obligations are only owed by those who are parties to the policy as insureds, and under the policy because they were not parties to it and the obligation specified was placed on BBL and BBL alone. (4) What were the obligations of disclosure and how easy were they to fulfil? While any lawyer would acknowledge that the law of disclosure is itself a matter of some complexity and the discharge of a duty of disclosure a matter of some uncertainty the underlying purpose of the draftsman of cl 5.3 seems to me to have been clear. Granted that at the time the practice of banks was to lend up to no more than 70 per cent of the valuation of the property which was to be the security for the loan and granted that this was in the heady days when property values were perceived to move in only an upwards direction, purchasers and developers were keen to secure loans of up to 90 per cent of valuation and to find a mechanism to induce banks to make them. MIGs provided the mechanism. If a reputable insurer was prepared to take the risk the banks would not otherwise take of the property security proving inadequate for a shortfall between 70 and 90 per cent of valuation then the banks could be induced to increase the limit of their loans. Thus, in such circumstances, one can understand a disclosure obligation which required an insured to assess a risk "as if uninsured" but only as he normally would, namely as a good risk if he was proposing to lend only 70 per cent of the valuation but not the 90 per cent in fact contemplated. The insurer will or should understand that he is to bear the increased risk which the banks would not otherwise do. That is what the commercial context suggests to me was to be expected. And that, in my judgment, is the substance of what cl 5.3 in fact provided and achieved. In shorthand it provides that BBL will assess its lending or credit risk as it would if it were exposed only to 70 per cent of the valuation. That is apparent from the requirement in the 0 to 70 per cent policy that BBL would carry out the investigations and enquiries it would make as if the policy did not exist and thus there was an uninsured risk for up to 70 per cent of the valuation but on the assumption that the 70 to 90 per cent policy did exist and thus that the first part of the risk was insured. It is true that this reasoning cannot be applied elegantly to the 70 to 90 per cent policies. Frankly, I suspect the drafting went a bit awry. On the face of cl 5.3 in that policy it provides that the relevant investigations and enquiries are to be carried out as if the 70 to 90 per cent policy did not exist but then provides that the insured is to assume that such a policy does exist. That is a nonsense. The explanation is I think easy to find. The words used are exactly the same as those to be found in the 0 to 70 per cent policy. But the effect is different in the first part of the clause. I have no doubt that the intention was to refer there to the 0 to 70 per centpolicy not "this policy" thus achieving the same result as in that policy itself. Otherwise the clause is silent on whether the 0 to 70 per cent policy plays any part in the matter at all. Granted, however, the glaring inconsistency in the clause as drafted and what I am sure was the intention, in my judgment it is both right and appropriate to give the clause the same meaning as I have found it has in the 0 to 70 per cent policy. This construction has the beneficial and, I think, intended effect of making clear what is required of the insured and that it is the same for both policies. Namely no more and no less than to carry out the investigations and enquiries BBL would normally carry out if the loan were to be for 70 per cent of the valuation. Banks involved in commercial property lending would do that, if not every day of the week, at least with considerable frequency and could be expected to have established procedures for doing so, as indeed did the banks involved in this case. Thus, do what you normally do in such circumstances, disclose anything revealed which would cause you not to make a loan in those circumstances and the obligation of disclosure is to be treated as having been fulfilled. Put that way, I would not expect that to be seen to be a difficult or onerous task. Any bank such as BBL would understand that it knew exactly what was required of it and was not being asked for anything out of the ordinary course of its business practice. The criterion for what was material to be disclosed was also itself not an onerous one. Disclosure had to be made only of facts, matters, or things which would cause it not to make the loan, assuming it was exposed only to the risk of a shortfall from 70 per cent of the valuations. Eagle Star, of course, allege that BBL failed to discharge that obligation. I am not concerned with whether it did so or not. I am concerned with whether, if it did, the plaintiff banks can recover from BBL for the losses they can prove to have suffered by reason of Eagle Star taking that stance. Bridgecirc The Bridgecirc policies were dated July 21,1989. Again it seems the policies were signed at a later date, but on July 21, Eagle Star wrote to Mr Markovits to confirm that they were holding covered under the terms of their mortgage guarantee policy and that the policy wording would be as agreed with Barlow Lyde & Gilbert. The policies were, as with Cornlease, split into a policy covering 0-70 per cent of the valuation and 70-90 per centof the valuation. While the basic structure of the policies was similar to the Cornlease policies, there were differences. It is only the material differences to which I refer below. The 0-70 per cent policy The front page of the policy stated that it was "in favour of" BBL "as Agent for the Banks herein mentioned". The premium was £396,550 paid at the date of the policy and an additional amount of £396,550 payable in four equal instalments on Oct 21, 1989 and Jan 21, April and July, 1990. The recitals referred to the loan agreement dated July 21, 1989 and that the borrower had requested Eagle Star ("the company") to provide "this indemnity". The "insured" was defined as BBL -- . . . in its capacity as agent for the Banks under the Loan Agreement Security Documents (except where expressly provided otherwise). The "security documents" were again defined in terms which it is agreed excluded the policy itself from the definition. The banks were defined as BBL and Sanwa. The policy recorded that it was agreed between Eagle Star and the "insured". It was signed by BBL in its own name and not as agent. Clause 2, as with the Cornlease policies, stated that the indemnity was granted "to the Insured as agent for the benefit of the banks". While cl 3 provided an indemnity for any deficit between the outstanding amount due under the loan agreement and the proceeds of sale of the property, that provision was subject to a proviso that, in effect, no indemnity was payable for such part of that deficit as was attributable to the valuation itself not being full or accurate or to -- . . . the negligence of any professional adviser of the Insured or any of the Banks. Mr Harland described this as "an assumption of valuation clause" and that seems to me to be a good short-hand description of it. In effect the risk of the valuation being inaccurate or negligently prepared was to be taken by the insured and not, as in Cornlease, by Eagle Star. The terms of the disclosure clause, cl 5.3, were also different. They provided that: In fulfilment of its duty of disclosure (and so that its duty shall be deemed to be fulfilled): (a) the Insured confirms that it has carried out before the date of this Indemnity (both in its capacity as an agent and as an original lender) such investigations and made such enquiries in relation to the Borrower and the Property in accordance with the standard property lending criteria observed by it (i) in carrying out credit analysis and document negotiation in relation to secured property lending transactions and (ii) when proposing to enter into loan and security documentation similar to the Security Documents, in each case, without the benefit of an indemnity or an insurance policy providing cover of the type or to the extent of that provided by this Indemnity and it is not, as a result of such investigations and enquiries, aware of any fact or circumstances which it would, in accordance with its usual procedures as an agent, disclose to a member or prospective member of a syndicate of banks of which it was agent in relation to the Security Documents and which it has not disclosed to the Company. The 70-90 per cent policy This was in the same terms as the 0-07 per cent policy save that the premium was £1.442 m, which was recorded to have been paid at the date of the policy. Turning then, to the same issues as those I have considered in relation to the Cornlease policies: (1) I see nothing to suggest any different conclusion. The banks were not parties to the policies. (2) The same applies. In my judgment the terms of cl 5.3 plainly impose the disclosure obligation on BBL and BBL alone. The "standard property lending criteria observed by it" must refer to a single entity and the materiality test is disclosure as an agent bank to prospective participants in a syndicated loan, which, while not impossible to apply to participants themselves, would at the least be a strange use of language if it was intended to do so. Again, the thrust of the structure of the policy is to point up the distinction between BBL as insured and the participant banks (itself and Sanwa) who are to benefit from the policy. (3) For the same reasons as I have given for the Cornlease policies, I am satisfied that the common law duty of disclosure was excluded in the sense that it was deemed to be fulfilled if the terms of cl 5.3 were complied with. (4) Clause 5.3 in the Bridgecirc policies differs from cl 5.3 of the Cornlease policies in two respects. First the wording does not entitle BBL to assume the existence of the 70-90 per cent policy in assessing its obligation of disclosure. In each policy it has to act as if that policy or its equivalent did not exist, and there is no express provision entitling it to assume that the other policy did exist. Whether that was the intention or not I need not determine. It may well be (and I suspect it was the case: see Mrs Andrews' paper in May, 1990 below) that in any event Eagle Star were well aware of BBL's standard property lending criteria and so could not complain that those criteria would normally limit loans to 70 per cent of valuation. The criterion for making disclosure was that BBL must carry out its standard investigations and enquiries. The test of materiality was whether those investigations made BBL aware of any fact or circumstance which would in accordance with its usual procedures as an agent be disclosed to a prospective member of a syndicate. Thus BBL had not only in fact to carry out its standard investigations but also to disclose to Eagle Star any matters which such investigations revealed provided they were such that it would normally disclose them to a proposed participant in the loan. As to the first obligation, cl 5.3 in terms records that BBL has to discharge that obligation prior to the date of the policy. BBL signed the policy. It must therefore have been confident that it had complied with this obligation and knew what was required of it. Nor do I find that surprising. Again, all it had to do was to follow its standard lending criteria. The second obligation assumes at the least a commercial obligation on BBL as agent for a syndicated loan to disclose certain matters to proposed participants in the loan. The extent of such an obligation and indeed whether it is a legal duty or not has been the subject of some debate during the hearing. It is easy therefore to say that it is all very difficult and uncertain. But I think that is a considerable exaggeration and I do not think it would have been (or was: see below) perceived to be so at the time by BBL. The underlying purpose of the provision is to my mind again clear, namely an assumption that as agent BBL would disclose to potential participants matters material to their judgment in deciding whether or not to participate in the loan on the terms (apart from insurance) proposed, and so must also disclose such matters to Eagle Star. Any bank must know the importance of making proper disclosure to insurers and, acting in its own interests as much as, if not more than, those of others, should keep insurers informed of matters which may be material in that sense. If in doubt, err on the side of caution is sound advice and not difficult to follow. I do not therefore think that the disclosure obligations in the Bridgecirc policies were ones which would have been perceived to have been difficult or problematic to comply with. Again, essentially, they come to no more than do as you would normally do. The facts Mr Fraser joined BBL in their corporate finance department in August, 1987. He was known to Mr Markovits, who put a loan proposal to him in October, 1987 which, in December, BBL declined. At the end of 1987 Sanwa were considering a proposal involving a MIG underwritten by Eagle Star. The evidence is that while mortgage guarantees were known in the domestic mortgage market at the time their use in commercial property lending was not common and was only beginning to develop. Arab Bank was involved in MlG-supported commercial property loans at least by April, 1988 and had an established relationship with Mr Markovits and Eagle Star. The first completed loan which has some significance to the events with which I am specifically concerned is one which has been referred to as the Hill of Rubislaw (Realex) loan which related to property in Aberdeen. In the event Arab Bank was the agent bank for this loan and BBL a participant in it. BBL had hoped to act as agent bank but only obtained limited authority from Brussels to participate in the loan. Eagle Star underwrote a MIG in respect of this loan dated Dec 12, 1988. It was for the top 20 per cent only and it is apparent from its terms that Eagle Star appreciated that the banks were in fact lending more than they would normally do by reference to the valuation of the property and it must, I think, have been apparent to Eagle Star that the MIG was at least a material factor in the banks' agreement to advance more. The terms of the MIG, however, said nothing at all about the duty of disclosure, which would therefore have applied without qualification. Mr Darby said that where Arab Bank were the policy holder they would get together all the information on the transaction and would meet with the insurer to go through it and see if there was anything else the insurer wanted. During the early months of 1989 Mr Markovits continued to put loan proposals to Mr Fraser of BBL. What became the Cornlease transaction was first raised by him in a letter to Mr Fraser dated Feb 21, 1989. The next day Mr Fraser submitted a memorandum to BBL's London credit committee in which he recommended that BBL should establish a £100m MIG-backed property lending portfolio envisaging that it would be Sun Alliance which would provide insurance up to 90 per cent of an independent valuation. This recommendation was approved in London and on Mar 1, 1989 approved by Brussels on terms that the portfolio was either £50 m or £100 m -- . . . to be syndicated down to £50 m on a non-recourse base composed of property transactions in which BBL would grant loan advances covered entirely by an insurance policy issued by an insurance company at our convenience. Mr Fraser agreed that it was understood that what was proposed involved the transfer of the ultimate credit risk to the insurers. He also made clear that the proposal was for BBL to underwrite "a complete package" meaning the entire sum to be lent. The last paragraph of the memorandum said: We do believe however that we could offer participation to other banks where participants could have a put on BBL in event of a default (this would protect our insurance scheme from UK competitors). Mr Fraser was reluctant to agree with Mr Kealey that this meant that BBL was to be responsible to participants for the policy performing (which I think it plainly did) but in any event said the credit committee in Brussels declined that as totally unacceptable which was reflected in the reference to "non-recourse" in the terms of their approval. By Mar 21, at the latest BBL had approved both Sun Alliance and Eagle Star as providers of such insurance. Mr Markovits also knew Mr Digby-Rogers ofSumitomo. He wrote to him, following a telephone conversation, on Mar 31, 1989 about the Cornlease property. The letter referred to the discussion between them about the commercial aspect of the transaction and enclosed details of the property and LPT's balance sheets. In the discussions Mr Markovits had said there would be 100 per centinsurance backing for the transaction. Mr Digby-Rogers had hoped Sumitomo would be the arranging bank for the proposal but he learnt almost at once from Mr Markovits that that was not to be and BBL and Mr Fraser had won the mandate but would be looking to syndicate the loan. There was a telephone conversation between Mr Digby-Rogers and Mr Fraser on Mar 31, Mr Digby-Rogers' recollection is that Mr Fraser was looking for a joint underwriting and that they discussed the insurance indemnity, with Mr Digby-Rogers explaining that Sumitomo had done one previous MIG deal and explaining the principles behind it. This was a reference to the Hill of Rubislaw (Britoil) transaction mentioned below. Mr Digby-Rogers did not take to Mr Fraser feeling that Mr Fraser thought he knew all this already and would proceed on his own terms. After this conversation Mr Digby-Rogers decided that Mr Leatherdale should handle the matter, telling him that he should ensure that the wording of the proposed MIG was acceptable. Mr Digby-Rogers sent a fax to Mr Fraser on the same day (Mar 31). It read as follows: Dear Stephen, Following our telephone call this morning Iwould just like to confirm to you that I believe the outline structure proposed for this financing is well within our property lending risks parameters. As such and having looked at the outline details provided, this financing is definitely one which the Bank would like to support as a co-underwriter on a 50:50 basis. This statement is, as I am sure you appreciate, made subject to a detailed analysis of the structure, credit approval and documentation. That is perhaps some demonstration of both the enthusiasm and competition there was for loans of this type. On Apr 3, 1989 BBL issued a detailed offer letter for Corn lease which was accepted by the borrower on the same day. The offer was of a loan of a maximum of 90 per cent of valuation -- . . . subject to appropriate insurance cover acceptable to the Bank. The letter stipulated that such cover should be for a value of up to 90 per cent of valuation with the borrower responsible for the premium for the 70 to 90 per cent element of the cover. The margin was stated to be 0.67 per cent pa above LIBOR and the front end fee 0.70 per cent flat. Two side letters from BBL addressed to the borrower but in fact sent c/o Mr Markovits, also dated Apr 3, stated that while official documentation would refer to a margin of 0.67 per cent pa over LIBOR the margin was in fact to be 1.375 per cent pa which BBL was to receive separately. This margin was said to be in respect of the "second tranche" of insurance premium and for agency fees due to BBL. Mr Fraser said the intention was that Mr Markovits would be responsible for the premium and would keep any surplus for himself. A further letter on the same date from Mr Fraser to Mr Markovits "confirmed" that the net margin and fee to BBL was to be 0.8 per centpa margin and a fee of 0.25 per cent and that Mr Markovits was to "disburse" the differential between those rates and the actual receipts from the borrower. In the event, and after negotiating different rewards for the plaintiff banks, there were substantial rewards for Mr Markovits personally from the transaction and the fees to be received by BBL greatly exceeded those to be received by the plaintiff banks and Credit du Nord despite the fact that BBL were advancing less than the other banks with the exception of Credit du Nord. Thus Sumitomo was to receive a front end fee of £60,000 whereas BBL's front end fee was some £103,000. Mr Malin calculated that the overall return on assets to BBL on the Cornlease loan was between four and five times the return to the banks. While I see nothing to criticise in that it can hardly be said by BBL that it was not or was not to be rewarded for the role it played both as the arranger of the syndication and subsequently as agent bank under the loan agreement. It was also on Apr 3 that Eagle Star issued a policy in respect of another loan agreement known as Hill of Rubislaw (Britoil) which related to another property in Aberdeen. This policy was drafted by Allen & Overy on behalf of Sumitomo and Sumitomo was the agent bank for the loan and the insured under the policy as trustee for the benefit of the participant banks. BBL was not involved nor were the other plaintiff banks. The transaction had been introduced to Sumitomo by Mr Markovits, and it was to this transaction that Mr Digby-Rogers had been referring in his conversation with Mr Fraser on Mar 31. The limit of the indemnity under the policy was £3.325 m being 20 per cent of the amount of the loan. The disclosure clause in this policy provided that: [Eagle Star] has received a copy of the present executed Finance Documents and agrees that its liability under this Policy shall not be affected by any non-disclosure or misrepresentation or negligence whatsoever in relation to any information, statement or other matters which may have been provided to [Eagle Star] in connection with this Policy by the Borrower, the Insured, any Bank or any other person. Neither the Insured nor any Bank is under any duty of disclosure in relation to this Policy and the Premium has been fixed on that basis. Thus this policy contained what I will call a "blanket exclusion" of the duty of disclosure and exclusions of liability for misrepresentation and negligence in addition. As Mr Wood of Allen & Overy said in evidence he was very surprised to achieve such terms. He had negotiated them on behalf of Sumitomo with Simmons & Simmons who were instructed by Eagle Star. Following acceptance of the BBL Cornlease offer letter, on Apr 5, 1989 Mr Fraser sent Mr Digby-Rogers a fax about Cornlease enclosing the offer letter dated Apr 3, 1989. It is this letter on which Sumitomo relies in support of certain of the representations it alleges. The fax referred to Eagle Star's agreement to accept a portion of the premium up-front and the balance at the end of year 1, recorded that Simmons & Simmons had been instructed, that Sumitomo would be seeking independent advice from Allen & Overy and sought an early confirmation that Sumitomo would be joining on a 50:50 basis. The offer letter, as stated, referred to the security as including: . . . Insurance to be provided by an insurer acceptable to the Bank for a value of up to 90% of the valuation. Mr Digby-Rogers said that, although he could not now remember it, he was sure that he would have expected BBL to be responsible for obtaining the MIG and to hear from BBL if there was any problem with it as BBL should have known how important it was to the transaction. Mr Leatherdale said the same. He said BBL was a well known and respectable bank upon which he felt Sumitomo could rely. On Apr 5 Mr Markovits wrote to Eagle Star to inform them that BBL had approved the Cornlease transaction, that the loan amount was to be 90 per cent of the valuation, that BBL had "underwritten" the transaction and it was likely that Sumitomo would be participating "on a joint underwriting basis" for half the loan. The letter also stated that: The wording of the policies is to be that agreed for Sumitomo recently . . . and that two policies were required. The reference to the wording was to the wording for the Hill of Rubislaw (Britoil) transaction with the blanket exclusion. Mr Digby-Rogers spoke to Mr Bauernfreund of Lewis & Tucker about the property on Apr 6. He raised the question of why a valuation of about £100 m should be considered when the property was sold at about £75 m. Mr Bauernfreund's note of this conversation records, however, that Mr Digby-Rogers had himself done a "back of the envelope" exercise which had produced a result very similar to Mr Bauernfreund's preliminary valuation. Mr Bauernfreund was at this time awaiting instructions to prepare a formal valuation. On Apr 7 Mr Fraser wrote a memorandum seeking the approval of BBL's credit committee to the Cornlease loan. He described the "security" as including -- . . . BBL covered by insurance policy for 100% of our loan. The policy covers our interest and costs in the event of default (same basis as agreed for Leegate). The loan was then envisaged to be for about £90 m. The reference to Leegate was to a previous completed transaction but one where the policy wording made no reference at all to the duty of disclosure. The memorandum also said that in order to comply with BBL's internal approval -- . . . we will have to have some fairly clear indications from other Banks that we can either put together a club deal or that we can sell down rapidly . . . and suggested a syndication of about £70 m. The proposal was approved on about Apr 11, 1989. On Apr 7 Mrs Andrews of BBL sent to Arab Bank for the attention of Mr Darby and Mr Parker a note about the Cornlease transactions. It is this note and its enclosures on which Arab Bank relies in support of some of the representations which it alleges. The note referred to a telephone conversation that day and attached what were described as "brief details" of the transaction. It said: Eagle Star is writing the policy to cover 100% of our advance assuming an acceptable valuation report (Lewis & Tucker) . . . Our structure avoids recourse to LPT balance sheet and provides full recourse on a good corporate credit (Eagle Star). The deal is fully underwritten by BBL. We propose to retain a minimum 20-25m. Simmons & Simmons have been instructed on documentation . . . We hope this is enough information for you to indicate on a prompt basis your interest . . . The "brief details" included a reference to -- . . . Insurance to be provided by Eagle Star for 100% of the debt. Borrower to be responsible for the premium. Although the letter referred to the deal being "fully underwritten" by BBL, ML Fraser said it was in fact understood between BBL, Mr Markovits and the borrower that BBL required to arrange participation and/or sell-downs so as to keep within its lending limits. On Apr 7, Mr Digby-Rogers of Sumitomo spoke to someone (who noted the conversation) on behalf of Mr Markovits saying that the "credit paper" was finished but Mr Noda would not allow it to be released until there was (inter alia) agreement on the payment of Allen & Overy's fees and -- . . . the whole thing dependent on satisfaction with Eagle Star policy. On Apr 10, Mr Varley of Arab Bank prepared a credit recommendation for the transaction for a sum of £25 m. Its terms were plainly derived from Mrs Andrews' note of Apr 7, as one would expect. The accompanying narrative referred to BBL arranging the loan "on a club basis" and stated: In view of the level of insurance cover on this loan, the risk can be viewed ultimately as an insurance risk rather than a property risk, hence the low pricing of 70 basis points over Libor. Reference was made to a possible sub-participation of £10 m to Arab Bank (Switzerland) and selling down to other banks in London. A sheet headed "Risk Analysis & Mitigants" stated: We are lending (90%) against a valuation of £100m, whilst the true cost is £75m. Although this ratio is high in relation to our property lending criteria, we regard it as acceptable because our payback is covered by the insurance companies, eliminating any capital losses. Also on Apr 10, Mr Leatherdale of Sumitomo prepared what was known as a "Keishi" which was a preliminary application to Tokyo for approval of the transaction. The Keishi was also approved by Mr Kubo, Mr Noda and Mr Ade. It referred to the "Exceptional Level of Security for Loan" and to "the risk is unusually low" because the security of the lender would be both a fixed first charge and "Eagle Star Insurance Policy for the whole loan". A further reference to the Eagle Star policy recorded that: For the full amount of the loan, in a form acceptable to Sumitomo (using the same principles as have already been applied in respect of the policy used for the Hill of Rubislaw (Britoil) Nominees loan in Aberdeen). It was thus Sumitomo's belief at the time that the duty of disclosure would be subject to a blanket exclusion. The Keishi also set out at length an analysis of the property, LPT and other financial considerations. On Apr 10, Markovits provided Mr Fraser with a copy of the terms of Hill of Rubislaw (Britoil) policy. On Apr 11, BBL wrote to Mr Watkins of Sanwa a letter about the Cornlease transaction. The letter and its enclosure were in the same terms as the letter of Apr 7,nt to Arab Bank, and are also relied on by Sanwa in support of some of the representations it alleges. On the same day Sanwa, by Mr Kobayashi and Mr Ozawa, prepared a "Ringi" seeking approval from Tokyo to a proposed participation of £70 m in the loan based on BBL's letter and its enclosure. The Ringi included statements (in translation from Japanese) that: The purchase price of the property is £75m. The banks will hardly not offer 100% above the actual purchase price but, with the Eagle Star guarantee, financing up to £90m will be possible. This difference will enable borrower to pay guarantee (insurance) charge, cap purchase cost, and will make the borrowing at a low margin possible. Reasons for taking up: this case is Eagle Star's risk: the property itself can be regarded as a reasonably good one . . . For Eagle Star risk for 2-5 years profitability is good. On Apr 12, Arab Bank in Amman telexed Arab Bank, London approving in principle a £25 m participation in the loan. The telex asked for (inter alia) a copy of the insurance policy in order for final approval to be provided. On the same day Sanwa, Tokyo responded to the Ringi from London asking for an explanation of the terms of the Eagle Star guarantee and why the valuation (£100 m) differed from purchase price (£75 m). The latter was described as a "problem". The response (also sent on Apr 12) in effect stated that it was for Eagle Star to evaluate the site and the increase seemed to depend on market trends and a perception of how difficult it was to negotiate with certain tenants of the property adding: However it is believed that the answers to these questions will come from Eagle Star for the reason that they issue the guarantee and take risk. Mr Genma responded on Apr 13, saying that it was considered that Sanwa should decline to participate in the loan because it exceeded the purchase price and -- . . . even though there is an Eagle Star guarantee we should not rely on the policy from the beginning because this is against healthy lending policy. Mr Genma was not confident that the loan would perform and felt it was wrong to rely on the policy despite his belief that the policy meant the bank would get its money back. Mr Kobayashi said he was told by BBL that the valuers had to be approved by Eagle Star and that their valuation had to be acceptable to them and he thought that the valuation was reliable. He accepted that he had quite a struggle with Tokyo to get both the Cornlease and Bridgecirc loans approved but he felt strongly that London's judgment was right and the objections from Japan were overcome. MrTanimoto said that he thought the London business department should be given the opportunity to participate in the loan because they had worked out that interest would be paid, BBL was a reliable and trustworthy bank to be arranger and agent and Eagle Star, a very good corporate credit, was carrying the risk in the final resort. These were the arguments which were used to seek to persuade Sanwa in Tokyo to change its mind. Mr Yamada said he was persuaded to approve the deal because it involved no risk as in the last resort the risk was taken by Eagle Star. That made the difference between a transaction which was too risky and one with acceptable risk. Mr Genma was also persuaded as London thought the loan would perform and the Eagle Star indemnity would pay if called upon, and as he knew BBL were to take £20 m and Sanwa £35 m other banks would also have to be involved if it was to go ahead and so they must think the loan commercially acceptable. These views were discussed in the course of telephone calls from London to Tokyo and as a result approval was given for the transaction. On Apr 13 Sanwa, London faxed Sanwa, Tokyo thanking the latter for that approval for a participation which was now to be of £35 m and setting out the structure of the Eagle Star policy without reference to any disclosure provisions. Indeed Mr Kobayashi said he never saw the wording of the Eagle Star policy. Sanwa had no further contact with Japan until the application for final approval on June 14. Nor did Sanwa consult lawyers, as Mr Harland considered himself to be competent to deal with the documents. Sumitomo in London were also called on to explain the difference between the valuation and the purchase price. Mr Leatherdale did that in a memorandum dated 13 Apr. He said that he believed that the information he imparted came from Mr Markovits and it satisfied him. Put shortly the information was that the purchase was heavily discounted from market value because three properties were involved and after limited refurbishment and re-letting a much improved rental income would be achievable. Mr Kubo said he too was satisfied with the explanation and valuation and apparently so were Eagle Star which was important. Part of Sumitomo's approval procedures involved obtaining comments from its corporate research department. Their comments, made on Apr 13, set out a number of "problems" which required to be dealt with before making a loan and added "fundamentally we have to rely on the insurance of Eagle Star". Sumitomo's credit analysis carried out in London by Mr Wada was also dated Apr 13. It included a description of the policy and the claim procedures under it without reference to any question of disclosure. On Apr 13 Arab Bank acknowledged the approval from Amman stating: The insurance policy will not be issued until nearer completion date and we shall send a copy to you as soon as it is available. Simmons & Simmons, our lawyers, will be advising us on the validity and protection of the policy prior to drawdown of the loan. The witnesses from Arab Bank said they saw the role of Simmons & Simmons in advising on the policy as one where they were acting not only for BBL but also providing advice to the syndicate. Mr Fraser said Simmons & Simmons while instructed initially by BBL to act for BBL had thereafter acted for the benefit of the syndicate. Arab Bank's London committee met on Apr 13.The minutes of the meeting referred to a facility arranged by BBL "on a club basis" and to 100 per cent credit risk insurance to be provided by Eagle Star. Until about Apr 13 or 14, Simmons & Simmons were acting for Eagle Star as well as BBL on the Cornlease transaction. They appear then to have concluded that it was inappropriate to do so and Eagle Star instructed Barlow Lyde & Gilbert to advise it on the policy wording. At this time another loan transaction, known as "Openhouse", was being negotiated by BBL with a borrower introduced by Mr Markovits which was also to be the subject of an Eagle Star MIG. It was the proposed Openhouse policy on which most of the negotiations took place but the terms which were finalised for that policy were in substance the same as those which were eventually agreed for the Cornlease transaction and Mr Fraser said it was recognized at the time that that would be so. On Apr 14 Simmons & Simmons sent copies of the draft loan documents to BBL and each of the plaintiff banks ready for a meeting of all the banks to discuss them on Monday Apr 17. Also on Apr 14 Mr Leatherdale spoke to Mr Wood of Allen & Overy to say that "the indemnity policy will be ours" meaning the Hill of Rubislaw (Britoil) wording. Mr Markovits and Mr Fraser entered into an agreement on Apr 14 for Mr Fraser to provide consultancy services to Mr Markovits from a date to be agreed but not later than three months after Apr 11. The terms of this agreement included an initial fee payable to Mr Fraser of 1 per cent of the gross receipts of Mr Markovits' business between January, 1989 and the date when the services began and thereafter a fee at a higher percentage with a minimum guarantee of £50,000 pa. Mr Fraser said that his discussions with Mr Markovits on this proposal had firmed up at the end of 1988. He had not told the banks or Eagle Star about them save that Mr Parker of Arab Bank had been made aware of the discussions in 1988. Nor had he told any of them that his initial fee would be payable on Mr Markovits' receipts from Jan 1, 1989. Mr Kobu and Mr Noda said Sumitomo's preliminary approval of the loan was given by Tokyo orally on about Apr 14. On Apr 16, 1989 Sumitomo, London faxed to Tokyo a response to some queries raised by Tokyo. This fax stated that it would be -- . . . a condition precedent that the Banks were satisfied with the terms and conditions of the Eagle Star Policy. Therefore we are assured that our principal loan amount of £89.55m will be fully covered by Eagle Star's Policy. The fax gave an explanation of the commercial rationale of Eagle Star issuing such policies as a method for them to participate in prime property investments and under the heading "Insurance Claim Procedures" explained that the extent of the cover was for any shortfall on sale. To make the point clear Mr Digby-Rogers added to Mr Leatherdale's handwritten paper the words -- . . . if the buildings sell for only £1m then, without any doubt, Eagle Star will have to pay £89m. Mr Digby-Rogers said that this was intended to give a simple illustration to Tokyo of what the indemnity would do and his understanding that the indemnity had the effect of transferring the risk to Eagle Star. It was to emphasise the certainty of calculation of a claim if a claim had to be made. But he agreed that the effect was to say that there was no doubt as to Eagle Star's liability to pay under the policy. On Apr 17 BBL sent a fax message to all the proposed participant banks which included the statement: You should by now have received a copy of the proposed insurance policy which has been sent to Eagle Star solicitors for review. On the same day there are copies of faxes from Mr Chalmers of Simmons & Simmons sending "the first draft of the Eagle Star Indemnity" to BBL, Mr Markovits, Mr Leatherdale of Sumitomo, Mr Varley of Arab Bank, Mr Harland of Sanwa and Credit du Nord. The fax to Mr Markovits also referred to the Openhouse policy and referred to Mr Chalmers' intention to discuss the structure of the policy with Eagle Star and to the draft following the form of the Sumitomo policy on Hill of Rubislaw. Similar comments were made in a fax to Barlow Lyde & Gilbert of the same date. The draft policy referred to contained a disclosure clause in the same terms as the Hill of Rubislaw (Britoil) policy, that is a blanket exclusion of the duty of disclosure. There is some real doubt as to whether Sanwa and Arab Bank received these faxes. There is a confirmation of despatch in each case but not of receipt. The fax and draft have not been found in any of the plaintiff banks' papers and Mr Harland of Sanwa was very confident the only draft policy he saw was one in the final form. As a matter of probability I find that the fax and draft did not reach at least the intended addressees at either bank. It did reach Sumitomo because Mr Digby-Rogers made some notes on the draft the next day and Mr Leatherdale, although he had no recollection of it, sent a copy of it to Allen & Overy on Apr 18. Allen & Overy had been put on stand-by by Sumitomo when Sumitomo had thought that they would get the mandate for the loan. On Apr 18, BBL wrote to each of the participant banks setting out the terms on which their participation had been agreed, which differed as the result of separate negotiations with them. Simmons & Simmons also sent each party revised drafts of the loan agreement following the meeting on Apr 17. On Apr 18, Sumitomo gave official approval to the loan participation on condition that -- . . . the insurance cover by Eagle Star must be fulfilled unconditionally only if the sales price of the real estate is appropriate. That was a reference to how the indemnity should be calculated in the event the property had to be sold but also demonstrated that Sumitomo in Tokyo believed the Eagle Star indemnity was unconditional. It was at this time that Barlow Lyde & Gilbert had begun work on the terms of the Openhouse policy. On Apr 18 Mr Atkins sent Mr Chalmers a marked-up draft of the Hill of Rubislaw (Britoil) policy. The blanket exclusion in cl 5.3 was deleted and to be substituted by a clause to read (with my emphasis): The Insured and the Banks shall be under a duty of disclosure in relation to and for the purposes of this Policy provided that such duty shall be treated as having been fulfilled if: 1. The Insured and the Banks have carried out all such investigations and made all such enquiries in relation to the Borrower and the Property as would normally be carried out or made by a reasonably prudent banker proposing to make a loan of the type and in the amount prescribed by the Loan Agreement and the Insured and/or the Banks have disclosed prior to the date hereof any of the information revealed by such investigations and enquiry which in the reasonable opinion of the Insured and/or the Banks ought to be disclosed to an insurance company proposing to issue a policy of indemnity of this type and for this amount. Barlow Lyde & Gilbert's amendments to the Openhouse policy were discussed by them with Simmons & Simmons on Apr 19 and further amendments were then sent by Barlow Lyde & Gilbert to Simmons & Simmons on Apr 20, none of which related to cl 5.3. Simmons & Simmons responded on Apr 21 enclosing a re-draft which they said was still subject to their clients' comments. The letter also referred to "their client" speaking to Eagle Star and Mr Fraser agreed this could be a reference to him. The re-draft was much closer to the eventual final wording and in particular deleted the references to the duty of disclosure being one of the insured and the banks and references to a prudent banker were replaced with references to enquiries that the insured would make as if proposing to make the loan agreement without the benefit of insurance save for 20 per cent of any shortfall in recoveries if the loan defaulted. Mr Fraser said that the expression "prudent banker" had been the subject of discussions between him and Simmons & Simmons conscious of the fact that as the wording was developed for Openhouse so it would presumably feed through to Cornlease. He and Simmons & Simmons had thought that it was a particularly onerous or difficult clause to accept. They had discussed BBL's normal procedures and Simmons & Simmons were advising BBL of the importance of the clause. Mr Fraser also remembered speaking directly to Barlow Lyde & Gilbert and to Eagle Star on the reference to a prudent banker and describing to the former in some detail BBL's procedures so they could be clear about them. His objective was to conclude with a draft with which everyone was happy and in particular for BBL to know precisely what their duties were under the clause so that they should not inadvertently breach them. It was plainly these exchanges which must have led to the wording which was finally adopted as heralded by the re-draft sent by Simmons & Simmons on April 21. There is no evidence that the plaintiff banks were involved in these exchanges or any discussions or negotiations with Barlow Lyde & Gilbert or Eagle Star about the wording or it fulfilment. On Apr 22 Arab Bank, Amman issued a full approval for Arab Bank to participate in the Cornlease loan. On Apr 24 the Openhouse loan was completed and BBL's credit committee formally approved its participation in the Cornlease loan. On Apr 25 Mr Chalmers "at the request of BBL" sent each participating bank a copy of the Eagle Star indemnity saying it was still subject to Eagle Star's comments. Once again Sumitomo sent the draft on to Allen & Overy. The copy was in the terms of the re-draft I have set out above and thus for the first time, on the evidence, the banks were made aware of the proposed terms of the disclosure obligation and Sumitomo and Allen & Overy were made aware that the Hill of Rubislaw (Britoil) blanket exclusion was not to apply. Mr Digby-Rogers did not think he saw this draft of the policy. Mr Leatherdale said he sent it to Allen & Overy having realized that there were differences from the Hill of Rubislaw (Britoil) policy and because he needed Allen & Overy's advice on their significance. There is a note dated Apr 26 made by Mrs Reece of Allen & Overy which records that she had spoken to Mr Leatherdale about the Eagle Star indemnity that day. Mrs Reece, not surprisingly, had no recollection of any conversation but believed she would have said that the draft was weaker from Sumitomo's point of view as the disclosure obligations were wider than the Hill of Rubislaw (Britoil) policy. Mr Wood, also not surprisingly, remembered little about the transaction. He said that if he had had any points on the policy, which he agreed he would have reviewed, his normal practice would have been to raise them with the client and leave the client to take them up with the agent bank. He did believe that he would have advised Sumitomo that the disclosure risk was "a major point". Mr Leatherdale accepted that Allen & Overy had advised that the wording of the disclosure clause was weaker as far as Sumitomo was concerned and that this was an important point which needed to be looked at carefully and on which Sumitomo needed to satisfy themselves. He said his particular concern was that he was confused whether the obligation was on BBL alone or the banks as well and that needed to be clarified. Mr Leatherdale said that he discussed the matter with Mr Noda and Mr Kubo and shortly after his conversation with Allen & Overy he raised the matter with Mr Fraser in a telephone conversation. Mr Leatherdale said that Mr Fraser's response was that the obligations under the indemnity applied only to BBL and placed no duty of disclosure on Sumitomo or the other syndicate members and that BBL would go through its normal procedures and Mr Leatherdale need not concern himself about it. Mr Leatherdale said he referred to the Hill of Rubislaw (Britoil) policy as the ideal to be arrived at and shortly after the conversation faxed a copy of that policy to Mr Fraser. Mr Leatherdale said he was relaxed about the position as a result of his conversation with Mr Fraser and did not go back to Allen & Overy. He also said that soon afterwards there was a meeting at Simmons & Simmons' offices with BBL and the other banks at which he asked Mr Chalmers whether the banks had any obligations under the indemnity and Mr Chalmers confirmed that only BBL was a party to the indemnity. There was no challenge to this conversation and no representative of Simmons & Simmons gave evidence. It must be probable that Simmons & Simmons had given the same advice to Mr Fraser especially so in view of the deletion of the banks from Barlow Lyde & Gilbert's draft of the disclosure clause. Mr Fraser's evidence was that a number of conversations had taken place between him and Mr Leatherdale including one in which Mr Leatherdale had raised a question as to the complexity of the disclosure clause compared to the Hill of Rubislaw (Britoil) wording. He agreed that Mr Leatherdale had sent him a copy of that policy and said he had raised it with Mr Buxton of Eagle Star who had said that things had moved on and no one would be able to get a policy like that now and Mr Fraser had told Mr Leatherdale of this conversation. Mr Fraser did not recall any conversation such as Mr Leatherdale asserted, but said that if he had been asked about BBL's compliance with its obligations under the policy and in particular cl 5.3 he would have said that BBL were relying on Simmons & Simmons, would not have said the only duties of disclosure were on BBL as it was his view that the banks were joined in the policy, and the most the would have said was that he believed BBL would comply with its obligations under the policy. He would not have made and could not have made a representation that BBL would comply as that would have been contrary to his mandate that the syndication was to be without recourse to BBL. He did however accept that if he had been asked the question at the time of drawdown he would have said that BBL had complied with its obligations under cl 5.3. Mr Leatherdale agreed that the effect of what Mr Fraser had said to him was that he, Mr Fraser, believed that BBL would comply with its obligations of disclosure. He also agreed that MrFraser may well have said that he would speak to Mr Buxton to see why the Hill of Rubislaw wording could not be used and that Mr Fraser may later have called him to say that it was not possible to go back to that wording as Barlow Lyde and Gilbert had advised Eagle Star about it. There is no written record of the conversation. However I do not find that particularly surprising. While the point was obviously of some importance it is easy to exaggerate it with hindsight. As Mr Leatherdale said, the responsibilities envisaged by the clause did not seem that enormous and having spoken to Mr Fraser he believed BBL would carry them out. It is also the case that no reference was made to the conversation in the pleadings until an amendment was made in June, 1995. That. too, raises some doubts about the matter but Mr Leatherdale said he had first raised it with Sumitomo's present solicitors in the middle of 1994 and probably earlier with Allen & Overy when they had been acting for Sumitomo. There was no reference in Mr Leatherdale's statement to his discussing the matter with Mr Kubo and Mr Noda and Mr Leatherdale agreed that he had only recollected doing so some time after signing his statement in April, 1996. Mr Kubo confirmed in his Civil Evidence Act statement that Mr Leatherdale had explained his conversation with Mr Fraser and he had understood the disclosure obligations were BBL's and that they would comply with them. He believed that understanding would have come from what Mr Leatherdale told him of his conversation with Mr Fraser. Of course that cannot prove the conversation which Mr Leatherdale asserts but it does provide some small corroboration for it. While not doubting Mr Fraser's lack of recollection of the conversations, I am satisfied that the substance of the conversations was as described by Mr Leatherdale. After he had spoken to Allen & Overy Mr Leatherdale was concerned. Yet that concern was never thereafter expressed. Mr Fraser had been aware of, and involved in, the negotiations with Eagle Star and Barlow, Lyde & Gilbert about the wording of the disclosure obligation and in particular the reference to a prudent banker. When that was excised the obligation was expressed in terms of BBL's normal investigations and enquiries (which Mr Fraser had explained to Barlow Lyde & Gilbert) and the reference to an obligation on the banks was deleted. Mr Fraser must have been aware of that at the time he spoke to Mr Leatherdale as it had occurred only a short time before. I would have expected him to have had it very well in mind. Mr Fraser said that BBL "were very confident in following our procedures" and that he would not have agreed the wording if he had had any doubts about BBL complying with it. Plainly, as he said, Mr Fraser thought the policies were or would be valid and enforceable and so must also have thought that BBL's obligations of disclosure would be discharged as he accepted that he was aware that if they were not the policy would be voidable. If he had really thought that the banks also had disclosure obligations it is remarkable that he did not raise that with them. Nor do I think Mr Fraser would have seen an assurance as contrary to the "without recourse" nature of the syndication. I doubt very much whether he would have thought of the disclosure obligation in those terms particularly so as he saw compliance with them as a matter of no great difficulty and believed that BBL would do so. In those circumstances I see no reason why Mr Fraser's response should have been in any way vague or qualified if that is what is suggested and if it had been Mr Leatherdale would have been most unlikely to have left matters as he did. I therefore find as a fact that Mr Fraser did say that the obligations of disclosure were obligations of BBL alone and not of the banks and assured Mr Leatherdale that BBL was aware of that and that he believed BBL would comply with the obligation. Mr Harland of Sanwa was not aware that Sumitomo had wanted a different form of policy. He was happy with the terms of the policy sent to him on Apr 25. Mr Darby of Arab Bank said he had read the disclosure provision and it didn't cause him any concern and he expected BBL to comply with it. Mr Carney and Mr Varley gave evidence to the same effect. On Apr 26 Arab Bank in London responded to Amman sending the terms of the draft policy received on Apr 25 and requesting an increase in their line limit for Eagle Star. On Apr 27 Amman approved the transaction on the basis that London's final participation would be reduced to £10 m. In fact that did not occur. Mr Parker said that such a reduction was only on a "best endeavours" basis from the point of view of the London office. On Apr 28 a pre-completion meeting on Cornlease was held at the offices of Simmons & Simmons to sign up the documents ready for completion on May 2. On Apr 28 Sumitomo, London sought final approval of the loan from Tokyo stating that the conditions stated by Tokyo had been fulfilled. No reference was made to the disclosure obligations in the policy. Mr Leatherdale said that as there were no significant changes from the preliminary approval final approval was a formality. Also on Apr 28 Mr Fraser gave notice of his resignation to BBL saying that he had decided to act independently with a continuing interest in property finance. As from about mid-June, 1989 he went to work as a consultant to Mr Markovits under the terms of the consultancy agreement dated Apr 14. On Apr 29 Arab Bank, Amman passed the copy of the draft policy to its legal department for comments. Mr Troke, as part of Arab Bank's established procedures, in London at about this time confirmed that he had examined the documents relating to the loan and that they conformed with the terms of the credit approval. The Cornlease transaction was completed on 2 May and on that date BBL sent drawdown telexes to each of the plaintiff banks stating: Please be advised that we have received notice of drawdown from the Borrower for value 2nd May 1989 . . . Kindly therefore arrange to remit . . . being your total pro rata share in the loan to Barclays Bank . . . for account BBL . . . We confirm that the conditions precedent have been met. On May 3 Arab Bank's legal department in Amman commented on the draft policy expressing the opinion that it was "correct and duly prepared from the legal point" adding: However please note that: 2. The Agent (the Insured) should confirm the fulfilment of his obligations under the Indemnity Agreement, namely, under clauses 5.3 and 5.5 thereof. These comments reached London on May 4, that is after completion. Mr Carney said that head office in Amman often asked for things which London thought were unnecessary and this London saw as an example of just that. It was not until June 14 that Sanwa sought final approval for the Cornlease loan. In doing so Mr Ozawa described the -- . . . reasons for taking up the loan [as (1)] the risk is Eagle Star's risk the bank's risk is converted to Eagle Star's risk because the loan is 100% covered by insurance by Eagle Star [and (2)] the property is good . . . and the pricing was reasonable and further introductions could be expected from BBL. When Allen & Overy prepared their account dated July 13, 1989 for their advice to Sumitomo on Cornlease the narrative referred to advice in connection with the security documents -- . . . including an indemnity policy with Eagle Star [and] negotiating with Simmons & Simmons . . . concerning the draft loan documentation and security documents. Mr Leatherdale, in cross-examination, and before the terms of this account were put to him, said that Allen & Overy had not attended the meetings at Simmons & Simmons which he attended and that Allen & Overy had no function to perform in negotiations at all. He said he looked to Simmons & Simmons to protect Sumitomo's interests vis-a-vis the borrower; Allen & Overy's role was only to review the documentation submitted to Sumitomo. Despite the terms of the account I accept this evidence. There is, moreover, no correspondence or document which is before the Court which suggests there was any direct contact between Allen & Overy and Simmons & Simmons. Neither Mr Wood nor Mrs Reece could remember if there had been any such negotiation or indeed contact with Simmons & Simmons and Mr Wood acknowledged that the wording of the bill might not be accurate. Cornlease went into default on Aug 2, 1990. On May 11, 1989 Mr Markovits wrote to Mr Fraser at BBL about the Bridgecirc proposal. The next day Mr Fraser and Mrs Andrews prepared a memorandum seeking approval from the credit committee for the transaction referring under "security" to (inter alia) "Eagle Star indemnity for 100% of advance". Approval was given on 12 May and an offer letter was sent to the borrowers. Mr Markovits (who was to have a 51 per cent interest in the borrower for the transaction) questioned BBL's fees for this transaction as set out in the offer letter and Mr Fraser wrote to him on May 17 to explain them. In this letter Mr Fraser said: It may be helpful for you to know that the insurance policy is the last item the Bank addresses in putting together a transaction. We have to prepare a structure that stands on its own and in fact have to warrant to the insurance company upon cover application that we have structured a loan and taken all due diligences as though insurance does not exist. Furthermore you should know that the policy itself is not a "shelf product" that is we have to negotiate very special conditions to apply to our structure on a case by case basis. Thus, part of Mr Fraser's justification for BBL's fees was its role in negotiating the terms of the policy and its undertaking of the disclosure obligation. In justification of the proposed agency fee the letter referred to BBL's practical experience of the administration requirements required with multi-tenant transactions. On May 18 Mr Fraser sought approval from BBL's credit committee to increase the underwriting and lending limits on MIG backed transactions to £150 m and £100 m respectively. The memorandum referred to "Limits on Eagle Star"and stated (with my emphases): It will be helpful to elaborate on the form of the insurance indemnity and describe how we arrived at the current position. (1) Why Eagle Star. Eagle Star are the acknowledged industry leaders in underwriting commercial property risks and consequently they were our starting point in developing a policy to suit our requirements. We concurrently approached Sun Alliance and together with our solicitors, Simmons & Simmons, worked over a two week period to develop an acceptable policy . . . (2) Indemnity Policy Development The policy was drafted between BBL, Eagle Star and our respective solicitors (Simmons & Simmons and Barlow, Lyde & Gilbert). The policy was drafted to reflect the requirements of an actual transaction (Openhouse) and to add even further comfort, the same policy was reviewed independently by Sumitomo, Sanwa and solicitors Allen & Overy, in connection with a subsequent transaction that was arranged. (3) Form of Indemnity The insurance policy is written by Eagle Star for the insured party (BBL) against receipt of a premium . The policy defines a very clear procedure for BBL to follow so that we cannot inadvertently breach conditions that invalidate our cover. (4) Conditions Precedent to Cover. (a) Eagle Star and their solicitors received from our solicitors a complete set of documentation . . . in this way we are 100% certain that we have satisfied up front the conditions of the policy . . . This memorandum fully accords with Mr Fraser's evidence about his involvement with the wording of cl 5.3 and his understanding of it to which I have referred above. It demonstrates that Mr Fraser was aware that BBL alone was the insured and that the wording of the policy had been chosen so that BBL knew exactly what was required of them "'up front" to ensure that the policy would be effective. That, as Mr Fraser accepted, was a particular objective of BBL and Simmons & Simmons. The London credit committee "strongly recommended" the proposal on the day it was made and BBL, Brussels approved it on May 31. On May 22 Bridgecirc accepted BBL's offer letter. On May 31 BBL sent Sanwa the invitation letter which Sanwa relies on in support of the representations it alleges in respect of the Bridgecirc loan. So far as material the letter stated: I enclose a photocopy of brief details provided by Maurice Markovits. BBL has been awarded the mandate to complete the financing based upon a structure very similar to [Cornlease] . . . Security inter alia: (h) Bottom slice 0 to 70% plus top slice 70 to 90% insurance to be provided in an acceptable form to the Bank(s). Sanwa's "Ringi" for Bridgecirc was dated 6June 6. It proposed a £45 m participation. It referred to the proposal as one which "parallels" Cornlease, and stated (wrongly) that valuation was conducted by a valuer approved by Eagle Star and that -- . . . we rely on the judgement of Eagle Star that the property is valuable. On June 26, Mr Fraser (now acting as a consultant to Mr Markovits) sent Mrs Andrews a draft of the proposed Bridgecirc policy reflecting "the major changes discussed so far". This draft contained an assumption of value clause and a disclosure clause similar to those which appeared in the final policy. On June 30 Sanwa informed BBL of their agreement to participate to the extent of £45 m subject to documentation noting that, Mr Markovits was to own 51 per cent of the borrowed On July 20 Simmons & Simmons sent BBL "the first draft of the policy". Mrs Andrews sent a copy to Mr Harland the same day asking for his comments. This draft also contained the assumption of value clause and the disclosure clause in terms similar to the final version. Mr Harland raised the assumption of value clause at a meeting at Simmons & Simmons' offices with BBL at which Eagle Star was present. In his statement Mr Harland said the point which emerged was that Eagle Star was concerned to cover a real drop in value and not one created by an over-valuation and that he found that to be fair and agreed to it in the knowledge that there would be a claim against the valuers if there was an over-valuation. Mr Harland accepted that the information presented to head office was in effect that Eagle Star were responsible for and took the risk of the valuation and that was not accurate. He added that the risk of an over-valuation was of course a risk that banks took on themselves as a matter of course in their normal property lending transactions. In the exchanges concerning the drafting of the Bridgecirc loan agreement Nabarro Nathanson, who were acting for the borrower, deleted representation 14(A)(14) which provided that the borrower represented and warranted the validity of the Eagle Star policy and that it was not void or voidable. They did so on the basis of their comment that -- . . . this indemnity is between Eagle Star and the Agent which should so satisfy itself. Mr Fraser was of course at this time also acting for the borrower. The Bridgecirc transaction was completed on July 21, 1989. It went into default on July 23,1990. The assumption of value clause was not drawn to the attention of Tokyo at any time. Mr Harland said that he saw it as a "bank execution risk" and so not the sort of thing which would go in a credit application. Mr Genma also pointed out that if the valuation was not adequate the bank would seek a remedy against the valuers. Mrs Andrews of BBL (who did not give evidence) is on record in a revealing paper prepared for BBL Brussels in May, 1990 that the existence of the full insurance indemnity was the reason why BBL lent up to 90 per cent of the market valuation of the property "whereas without the policy we may only have lent 70 to 75 %". She recorded that this fact -- . . . had been very clearly stated in writing to the insurer as our reason for making 90% advances, but in all other respects our facilities are documented and monitored as if the policy did not exist. In the same paper Mrs Andrews explained that each policy was negotiated as a "one-off" and: . . . the insurer begins by requiring the broadest terms, which invariably are subject to very broad interpretation. This is never acceptable to the Bank, and our task is to tighten the terms, and make every aspect of our duties under the policies as clear and as well defined as possible. We and our legal advisers believe this has been achieved in all our policies. Eagle Star . . . Their negotiating position has tightened considerably since we did our first transaction and at a recent meeting with them . they stated that the wording we achieved for our policies would no longer be accepted by them, ie, they are too restrictive on the insurance company. Thus during negotiations and up to signing of the policy, discussions are very prolonged and aggressive, the lawyers ensuring the terms are legally binding, with the Bank and the insurer negotiating the commercial position. The expert evidence and market practice Before I address the particular issues which arise I propose to consider the expert evidence and "market practice". It was at the forefront of BBL's submissions that the contentions of the banks were inconsistent with market practice and so must fail. There were a number of strings to this bow but essentially they amounted to a submission that the relationship of the banks as proposed participants in a syndicated loan, including their relationship with the arranging and agent bank, was such that each would recognize that, absent an express contractual provision to the contrary, all their dealings were on a non-recourse basis, so that each was alone liable and responsible to the extent of its participation and their rights were to be found in and only in the loan agreement which was a complete code governing the matter. Thus it was submitted that the only effective choices open to the plaintiff banks in this case were to take a commercial decision to take the risk of BBL not complying with the disclosure obligation, or to get a warranty that they would do so or to seek a change in the policy wording or simply to withdraw from the transaction. Although Mr Scott submitted that the witnesses called by the banks agreed that these were the only choices I do not think that is a fair reflection of their evidence at all. Without exception each made plain their belief that as regards the disclosure obligation they looked to BBL to perform it and would expect to have a claim against BBL if it did not do so. The equation of a commercial decision and acceptance of no recourse was to their minds, and is to my mind, misconceived. The credit risk of the loan and indeed of Eagle Star and the risk of the documentation not providing adequate protection within its terms is one thing; acceptance that there should be no recourse if BBL was negligent in the performance of a task it was to perform in the interests of all the banks is another. There is no reason why the "commercial" risk should include the risk of loss caused by negligence as opposed to the risk that, as with the valuers or the solicitors for example, you might have to resort to a claim in negligence to recover your loss. In the same way while it was generally accepted by the witnesses that the loan agreement was at least the starting point where one would look to find any obligation between the banks that was not so as regards the obligations to which the disclosure clause gave rise. Thus, as Mr Harland said, he saw no need to seek confirmation from a reputable bank that it would perform what he considered to be a not very onerous task and one which involved it doing no more than it would normally do. As he put it, it would have given him no problem if such an obligation had been undertaken by Sanwa. MrCarney also took the view that the nature of the disclosure obligation was not that exceptional and that it went without saying so far as he was concerned that BBL would perform it. Mr Digby-Rogers' view was that if a bank which was relied upon was negligent then it would rightly be exposed to a claim from the participant banks and whether or not that was spelt out in the documentation. Mr Darby said it would never have occurred to him that BBL would not comply with the disclosure obligation under the policy especially as it appeared to have been specifically negotiated. I agree. I can well see that if it were to be contended that BBL had undertaken an absolute obligation to make the disclosure required by the policy one would expect to find that in writing. But I do not accept that that would be so in the case of a commercial organization as regards an obligation to exercise proper care in performing a professional task the extent of which it had negotiated and which it had undertaken to perform. Both the experts, Mr Malin and Mr Samengo-Turner, were agreed that BBL had the role of arranging bank prior to the conclusion of the loan agreement. BBL's mandate came from the borrower not the banks. The relationship of the parties prior to the loan agreement was therefore that of prospective participants in a transaction being arranged by BBL. At that time there was no contract between the parties. Thus it was BBL who instructed Simmons & Simmons and the valuers and BBL which negotiated the terms of the loan agreement and policy. The experts were also agreed that the credit risk was to be taken by each participant to the extent of its own participation and the security was to be shared between them. That was reflected in cl 20(F) of the loan agreement. BBL's role as agent bank only became operative upon the signing of the loan agreement and that role was to administer the loan. Beyond that, on the evidence, I cannot accept that there was any relevant market practice at all. Mr Malin said MIGs had first begun to be applied to commercial property lending in the mid-1980s. Their use came to an end in about mid-1990 following the dramatic fall in property values with the resulting losses to insurers. He said there were many loans made by single banks which were MIGsupported but not syndicated loans and there was no "market" in syndicated MIG loans and so no relevant market practice. It is apparent from the evidence in this case that the terms of MIGs were themselves, especially as regards obligations of disclosure, under development at the time. Thus the transactions to which I have been referred in this case exemplified MIGs with an unqualified (in the sense of unprovided for) duty of disclosure; MIGs where the duty was wholly excluded; and MIGs such as those involved in Cornlease and Bridgecirc where the duty was both defined and limited. I agree with Mr Malin that it would be most surprising if any established practices, had developed at all in those circumstances and not at all surprising that the circumstances of each loan would be both the starting and finishing point for consideration of the obligations to which they might give rise. It was Mr Malin's opinion that the banks would and would be entitled to expect BBL to procure adequate and proper MIG cover and to carry out their obligations under the disclosure clause properly, just as they would expect the solicitors to do their work properly, and that BBL would expect the banks to rely on it to do so. He pointed out that the wording of the disclosure obligation was such that the banks were -- . . . powerless to know or to discover whether or not BBL had complied . . . with the obligation. While he agreed that there was no impediment to seeking a warranty he considered it "unrealistic" to expect the banks to have asked BBL for a specific warranty that BBL had complied with the disclosure obligation pointing out that MrFraser's evidence was that BBL themselves were happy with the wording and felt comfortable about the position. Mr Samengo-Turner said that: . . . as a matter of market practice, the Arranging Bank is essentially no more than a conduit for the flow of information between the parties involved. It was on this basis that he said that it was market practice that (apart from actual knowledge to the contrary) information imparted by the arranging bank was given without responsibility on its part for its accuracy. However in cross-examination it emerged that the reason for this view was that each bank took the credit and funding risk of its participation, and, even in that context, as Mr Malinpointed out, the position cannot be as absolute as Mr Samengo-Turner stated it. The question of responsibility must depend on the nature of the information imparted. Thus while there might well be and I would expect there to be no responsibility for information provided such as audited accounts I see no reason why that should follow if the information imparted was, for example, information that the bank had dealt with the borrower for years and the borrower had always honoured its commitments. There were therefore two main planks to MrSamengo-Turner's opinion. First that the arranging bank was merely a conduit and second the basic principle that the participants accepted responsibility for their participations. However, as it seems to me, it is quite inappropriate to describe the disclosure obligation in the policies in terms of a "conduit" and, on analysis of his evidence, I am satisfied that Mr Samengo-Turner was talking of the credit risk when talking of acceptance of responsibility for participations, that is in effect the matters dealt with in cl 20(F) of the loan agreement, and not about the specific terms of the MIGs negotiated for these transactions. Thus Mr Samengo-Turner readily and rightly accepted that if an agent bank performed one of the functions of the agent negligently (absent an exclusion of liability) he would incur a liability to the other banks as that was not a lending or funding risk which had been "syndicated". He was then cross-examined about the disclosure obligation in the policy on the basis that, in the same sense, that obligation had not been syndicated. While MrSamengo-Turner had great difficulty in accepting that the obligation of disclosure was an obligation on BBL alone (as I have held it was) there followed the following questions and answers: [Q.] Mr Fraser accepted in his evidence that clause 5.3 was like a condition precedent and that if the condition precedent was not fulfilled there would be no cover, and he also accepted that if BBL failed to comply with the condition precedent, there would be no cover for any of the banks. So working on that assumption, therefore, and working on the assumption that BBL's failure to comply with the conditions precedent in clause 5.3 would mean that there would be no cover for anybody, now one turns to the question I asked a moment ago, which is in the terms of identifying whether BBL has carried out all its normal enquiries and investigations such as it would normally do in the absence of top slice cover, but assuming all the other security, only BBL would know that. The participating banks would not know whether it had undertaken those things? [A.] Maybe it would only know for itself, but again the point that I make is if I were another bank I would want to know -- in reading that clause, I would see that as an obligation of the syndicate and not just of BBL. [Q.] Let us just assume that it is not an obligation of the syndicate; it is an obligation of BBL. We have to assume that because I am asking you to do so? [A.] Quite. [Q.] If that is the case, and coming back to my original question, only BBL would know whether it had undertaken and completed its normal enquiries and investigations? [A.] Yes. [Q.] As we discussed a moment ago, the clause goes on to say that the condition precedent, or the duty of disclosure is deemed to be fulfilled, if, having done that, it discloses to Eagle Star, or whoever the insurer is, anything which it has not already disclosed which might induce it not to enter into the Loan Agreement? [A.] Yes. [Q.] I paraphrase. Of course, only BBL would know whether it had made disclosure of that matter. No other bank would know whether it had done so or not? [A.] Yes. [Q.] So, you are in the position, are you not, where BBL has taken on, on the basis of my assumption -- do not forget the assumption --has taken on a role and a responsibility and in accordance with what we know Mr Fraser has said BBL knows that the other banks are relying upon BBL to perform that role and responsibility competently, as you would expect, would you not? [A.] Under your assumption, yes. [Q.] If BBL wished not to have any liability tothe other banks in the event that it failed to perform its functions carefully, then you would expect BBL to say to the other banks, "We wish to have an exoneration of liability in this context"? [A.] The answer is yes, but I am afraid I have to come back to . . . you see, your assumption is constricting, shall I say, for my line of thinking. If I look at it logically, I cannot see how -- and if I put myself in the position, even, of the insurer -- I would want disclosure only from a participant which has a very small piece of the transaction and I'm really not interested in disclosure from other lenders with very large pieces of the transaction. It seems to me totally out of line with the whole concept of the whole syndicated transaction. So, if I look at it from the point of view of another bank and I have been invited by BBL into this transaction, I would see this as two things: (a) that I had an obligation because I am a member of the syndicate and (b) that I would want to make damn sure that BBL had complied and I would want them to confirm to me that they had complied. [Q.] I follow that but putting away this terrible assumption, or rather assuming this terrible assumption against your better nature, I think your answer to my question was yes. You would expect that if BBL did not want to assume the responsibility, it would seek a specific exoneration from that responsibility? [A.] Yes. [Q.] Again, taking that terrible assumption as read, against your better nature, if that exoneration did not exist, you would accept that BBL would be responsible to the other banks? [A.] Yes. That exchange, as it seems to me, knocks away the foundation of any case made by BBL on market practice or the need for writing. As one would expect, the obligations of the parties depend on the circumstances of the particular transaction and in this case the particular terms of the disclosure clause. Mr Samengo-Turner was accepting that if the obligation was on BBL alone and it alone could know whether it had been discharged then BBL would be responsible to the banks absent an express exoneration. It was also in the context of market practice that Mr Samengo-Turner placed some emphasis on this being as he said it was a "club deal". As I have recorded, Sanwa's documentation so described it, although Mr Harland disagreed with the description. The same description was used in some documentation of Arab Bank. Mr Carney was content with the description on the basis that the transaction had been proposed to them by BBL on the basis BBL had underwritten it in full and only a small number of banks were being asked to take a participation. Mr Malin said neither the Cornlease nor Bridgecirc transactions were in his opinion club deals as he understood the description to apply only where a small number of banks were selected by the proposed borrower and they were to act more as a group of "co-arrangers" who would share information and fees. I am quite satisfied on all the evidence that there is and was no recognized definition of the term and indeed that was amply demonstrated by the evidence of various texts none of which appeared to agree on what the expression meant. The same could really be said for the witnesses. I am also quite satisfied that whether or not these transactions could be described as "club deals" no legal consequence would follow from that. Whatever label might be attached the real question involves the nature of the relationship between the particular parties to the particular transaction. So far as that is concerned, I accept that each of the banks did its own credit assessment and had the opportunity to consider and comment on the draft documentation including the draft of the policies, but that does not take BBL anywhere near the destination they seek to reach. I therefore reject the submission that there was any market practice relevant to the performance of the disclosure obligation under the policies as BBL submitted. I would add that that conclusion was also amply borne out by Mr Fraser's own evidence to which I refer below in considering the duty of care issue. The issues (1) Introduction By way of a preface to my consideration of the issues I think there is in cases of this sort a distinct danger that it may prove to be a somewhat artificial exercise to seek to spell out from communications between the parties implicit representations when the essence of the claim is (as I think it is here) that the defendant owed a duty of care at common law to the plaintiffs and were in breach of it. The skills of the draftsmen of pleadings is such that many and even apparently reasonable interpretations can be put on what is said or done but when one examines them carefully one is left wondering whether they have added anything to the reality of the relationship of the parties in the context of the well established principles on which a duty of care can be founded. It needs to be remembered that the effect of a representation which (as is alleged here) induces a party to enter into a contract is that the burden of proving that there were reasonable grounds to believe the fact represented were true rests, under the 1967 Misrepresentation Act, on the representor. In the case of a common law duty the representation or statement is only actionable if it is established that a duty of care is owed in making it and the representee proves that the representor was negligent. In this case, it is accepted that BBL did not warrant or guarantee that it would discharge the disclosure obligation in cl 5.3. There was no absolute representation or agreement to that effect. It is also accepted, on the other hand, that BBL was under a duty to the banks and in effect represented to them that it would not proceed with the loan if it actually knew that it had not discharged that duty. The battleground is therefore whether or not BBL was under a duty to the bank to, or represented to the banks that it would, exercise proper and reasonable care to discharge the disclosure obligation which (as I have held) was its and its alone to discharge. Whether that is approached by way of the established principles in which such a duty of care can arise or by representations or statements to that effect seems to me to be little to the point. If the substantial representation was that BBL would take proper care to perform the obligation of disclosure in cl 5.3 then the banks still bear the burden of proof in establishing that was not done. Otherwise there would be no misrepresentation. Thus, unless the banks can establish some implicit representation to a different and more stringent effect representations add nothing to the reality of the position. It is for that reason that I propose to consider first the issue whether or not BBL owed the banks a duty of care in performing its disclosure obligations. (2) Duty of care Two basic approaches to the question whether in a given case a duty of care arises can be discerned from the leading authorities. The first can be summarized in the familiar rubric of foreseeability, proximity, and whether the imposition of a duty of care would be fair, just and reasonable. The second can be summarized in the words "voluntary assumption of responsibility". In this case, I do not think it matters which approach is taken as in my judgment the result is the same on either basis but I will set out what I think to be the major statements of principle supporting the two approaches. First, Caparo Industries Plc v Dickman, [1990] 2 AC 605. I need not state the facts. The principles are to be found in the speeches of Lord Bridge at pp 620-621 and Lord Oliver at p 638. Lord Bridge said: The salient feature of all these cases (cases where a duty of care had been held to arise) is that the defendant giving advice or information was fully aware of the nature of the transaction which the plaintiff had in contemplation, knew that the advice or information would be communicated to him directly or indirectly and knew that it was very likely that the plaintiff would rely on that advice or information in deciding whether or not to engage in the transaction in contemplation. In these circumstances the defendant could clearly be expected, subject always to any disclaimer of responsibility, specifically to anticipate that the plaintiff would rely on the advice or information given by the defendant for the very purpose for which he did in the event rely on it. So also the plaintiff, subject again to the effect of any disclaimer, would in that situation reasonably suppose that he was entitled to rely on that advice or information communicated to him for the very purpose for which he required it. The situation is entirely different where a statement is put into more or less general circulation and may foreseeably be relied on by strangers to the maker of the statement for any one of a variety of different purposes which the maker of the statement has no specific reason to anticipate. Lord Oliver said: What can be deduced from the Hedley Byrne case, therefore, is that the necessary relationship between the maker of a statement or giver of advice ("the adviser") and the recipient who acts upon it ("the advisee") may typically by held to exist where (1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the adviser at the time when the advice is given; (2) the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose; (3) it is known either actually or inferentially, that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent enquiry, and (4) it is so acted upon by the advisee to his detriment. Second, the approach in Henderson v Merrett Syndicates Ltd, [1994] 2 Lloyd's Rep 468; [1995] 2 AC 145 namely, whether it can be said that the defendant voluntarily assumed or undertook responsibility to the plaintiff in respect of the subject-matter of the representation. After an analysis of the speeches in Hedley Byrne, Lord Goff at pp 488-489; pp 180-181 said: From these statements, and from their application in Hedley Byrne, we can derive some understanding of the breadth of the principle underlying the case. We can see that it rests upon a relationship between the parties, which may be general or specific to the particular transaction, and which may or may not be contractual in nature. All of their Lordships spoke in terms of one party having assumed or undertaken responsibility towards the other . . . Again though Hedley Byrne was concerned with the provision of information and advice, the example given by Lord Devlin of the relationship between solicitor and client, and his and Lord Morris's statement of principle, show that the principle extends beyond the provision of information and advice to include the performance of other services. It follows, of course, that although, in the case of the provision of information and advice, reliance upon it by the other party will be necessary to establish a cause of action (because otherwise the negligence will have no causative effect), nevertheless there may be other circumstances in which there will be the necessary reliance to give rise to the application of the principle. In particular, as cases concerned with solicitors and client demonstrate, where the plaintiff entrusts the defendant with the conduct of his affairs, in general or in particular, he may be held to have relied on the defendant to exercise due skill and care in such conduct. . . . Furthermore, especially in a context concerned with a liability which may arise under a contract or in a situation "equivalent to contract", it must be expected that an objective test will be applied when asking the question whether, in a particular case, responsibility should be held to have been assumed by the defendant to the plaintiff: See Caparo per Lord Oliver. Lord Goff also addressed the relevance of the contractual context to the principles he had stated. He held that in principle the existence of concurrent remedies in contract and tort was established in law and that (at p 498, col 1; p 194): . . . an assumption of responsibility coupled with the concomitant reliance may give rise to a tortious duty of care irrespective of whether there is a contractual relationship between the parties, and in consequence unless his contract precludes him from doing so, the plaintiff who has available to him concurrent remedies in contract and tort may choose that remedy which appears to him to be the most advantageous. Those words must, in my judgment, apply a fortiori to circumstances where the relevant relationship and assumption of responsibility arises (if it arises) before the contract comes into existence and the relevant duty in tort should in practical terms have been performed at the time the contract was concluded. That was the position as regards the obligation of disclosure in this case and, moreover, as I have held, the relevant contract, namely the loan agreement, was not addressing that obligation nor inconsistent with it. That this is so is further illustrated by the unreported decision of the Court of Appeal in Holt v Payne Skillington and De Groot Collis, Dec 18,1995. That decision demonstrates that a duty of care can be owed in tort which is more extensive than the express or implied obligations to be derived from the terms of the contract made between the same parties. Lord Justice Hirst in giving the judgment of the Court said (at p 15), after referring to the passage from the speech of Lord Goff in Henderson v Merrett to which I have referred: . . . as Lord Goff made clear . . . it will frequently be the case that the relevant assumption of responsibility does occur within a contractual context. That fact does not mean that it must necessarily do so simply because, at some stage during the relevant course of dealing between the parties, they choose to and do enter into some form of contract. A consideration of the individual facts and circumstances of each case will determine whether any duty of care in tort which the general law may impose is of wider scope than any contract to which the same parties may agree at some stage during the same course of dealing. It is important to emphasise that the duty of care in tort is, in appropriate circumstances, imposed by the general law, whereas the contractual obligations result from the common intentions of the parties. In our opinion, there is no reason in principle why a Hedley Byrne type duty of care cannot arise in an overall set of circumstances where, by reference to certain limited aspects of those circumstances, the same parties enter into a contractual relationship involving more limited obligations than those imposed by the duty of care in tort. In such circumstances, the duty of care in tort and the duties imposed by the contract will be concurrent but not coextensive. The difference in scope between the two will reflect the more limited factual basis which gave rise to the contract and the absence of any term in that contract which precludes or restricts the wider duty of care in tort. Those words, in my judgment, apply here where the loan agreement established and looked forward to the role of BBL as agent bank but did not relate to or look back to their role as arranging bank prior to the agreement. BBL was putting together the transactions and had an interest in getting the banks to participate in them and indeed was being rewarded for that role. Mr Fraser himself readily acknowledged that the MIGs were for each of the banks a key part of the transaction and that he knew at the time that if BBL did not comply with the disclosure obligation in the policies Eagle Star could avoid the policies which would have the consequence for each of the banks that they would be unable to enforce them. MrFraser agreed that it would also have been obvious to the banks that that was so. While asserting his belief that the duty of disclosure rested on each of the banks he said he thought each of the banks, including BBL, had a duty of care "on one another" in effect to avoid that consequence. He agreed that the banks could not know or verify whether BBL had complied with the disclosure obligation and that each of the banks in each transaction relied on BBL to perform that obligation and he knew at the time that they did so. In addition it was his view, as it was the view of the banks, that the disclosure obligation was not an exceptional or onerous one and of course not only had it been negotiated by BBL but it was no greater than the "obligation" BBL in effect owed to itself in its own interests to establish the efficacy of the policy. The fact that Mr Fraser or BBL may have believed that the arrangements were "non-recourse" is in these circumstances of no materiality. That was not communicated to the banks and the test of duty is objective. On the other side, the banks had to rely on BBL performing the disclosure obligation as it was (as I have held) tailored to BBL's own procedures. Each bank expected and relied on BBL to perform the obligation and believed it would and indeed, and understandably, hardly contemplated that it would not do so. That expectation and reliance was in my judgment entirely reasonable. In these circumstances I think the relationship between BBL and the plaintiff banks was, to use the words of Lord Goff in Henderson v Merrett, a "classic example" of a relationship where a duty of care did arise on BBL to the banks as regards the performance of the disclosure obligations under the MIGs. There was an assumption of responsibility by BBL to the banks to perform that duty. BBL was "the arranger" of the facility. It assumed as such the obligation to negotiate and agree the MIGs with Eagle Star. It did so on terms whereby, as I have held, it and it alone was the insured under the policy and it and it alone had and could perform the disclosure obligation provided for in it which depended on its own expert procedures and its skill and judgment in deciding what should be disclosed to Eagle Star. BBL knew the validity of the policies depended on its proper performance of that obligation. It knew the policies were vital to the interests both of itself and the banks and that the banks were dependent upon it for the performance of the disclosure obligation which effectively was entrusted to it in all their interests. The banks relied on BBL accordingly as BBL knew they would. Loss to the banks if the duty was not performed was foreseeable and indeed foreseen by BBL. The duty arose in the context of the specific purpose of the loan transactions. Nor, for the reasons I have given, do I think the existence of a duty of care does any violence to or is in any way inconsistent with any market practice or the provisions of the loan agreements. For these reasons in my judgment, and whether one approaches the matter by way of Caparo or Henderson v Merrett, the answer is the same. BBL owed the plaintiff banks a duty of care in carrying out the disclosure obligation under the policies in relation to both the Cornlease and Bridgecirc transactions. (3) The representations (A) Pre-loan agreement Cornlease: Sumitomo rely on (i) the terms of the Apr 5 letter from BBL and in particular the reference to the provision of insurance for 90 per cent of the valuation; (ii) the sending to them on Apr 25 of the draft of the policy containing as it did the disclosure obligation in cl 5.3 in substance in the form which appeared in the final policy and (iii) the telephone conversation between Mr Leatherdale and Mr Fraser which took place on or about Apr 26. Sanwa and Arab Bank rely on (i) the letters from BBL dated Apr 11 and Apr 7 respectively and in particular the reference to the policy covering 100 per cent of the advance and "our structure" providing "full recourse on a good corporate credit (Eagle Star)"; and (ii) the sending to them on Apr 25 of the draft of the policy in the same terms as Sumitomo. Bridgecirc: Sanwa relies on (i) the letter from BBL dated May 31, 1989 and in particular the reference to the provision of insurance to 90 per cent of valuation and (ii) the sending to them of the draft policy on July 20, 1989 containing as it did the disclosure obligation in cl 5.3 in substance in the form which appeared in the final policy. As I have said, in the course of the hearing, it was accepted by Mr Kealey that these documents and exchanges could not be said to amount to warranties or guarantees by BBL that the policies would be valid and effective. I am sure that concession was rightly made. As Mr Wood said, and as is obvious, it would be a very wide responsibility for anyone to undertake and one he would not expect an arranging or agent bank to agree to. The thrust of the plaintiff banks' case was that BBL was in effect saying that it would procure policies which it believed would be valid and enforceable, and that would remain the case, unless corrected, until the time the policies were finally agreed. Insofar as that was a representation of opinion it did not matter as it would carry with it a representation that reasonable grounds existed for the opinion; see Chitty on Contracts (27th ed) vol 1, par 6-006; Highlands Insurance Co v Continental Insurance Co, [1987] 1 Lloyd's Rep 109 per Mr Justice Steyn at pp 112-113; and Bankers Trust International Ltd v PT Dharmala, [1996] CCL 518 per Mr Justice Mance at pp 530-531. Mr Scott submitted that at most and as he accepted BBL were representing that they knew of no reason why the policies would not be effective and he accepted that if BBL's actual knowledge had been otherwise at any time prior to the final agreement of the policies then BBL was under a duty to the banks to say so. It is well established in law and accepted by the parties that the question whether any and if so what particular representation was made depends on an objective assessment of what was said or done and its likely effect on the alleged representee in the context in which the particular parties were concerned. In other words, what would the documents and exchanges relied upon have conveyed to a prudent banker in the position of the plaintiff banks. As I have already held, BBL owed a duty to the plaintiff banks to take reasonable care in fulfilling the disclosure obligations in the policies. As is conceded BBL gave no guarantee that it would do so. In my judgment, the essence of what was said or represented by BBL prior to the loan agreement, including the Leatherdale/Fraser conversation, was, to each bank in each transaction, that there would be MlGs, that BBL was to procure them and would do so on the terms notified, that those terms would (unless otherwise notified) include the disclosure obligations of cl 5.3 which it was for BBL and BBL alone to discharge, and that BBL as a responsible and prudent bank would exercise proper and reasonable care in addressing and discharging those obligations. BBL was also implicitly saying that (absent correction) this would be and in the event was the case as at May 2 (Cornlease) and July 21 (Bridgecirc). That is essentially the same obligation as I find arose at common law in any event. In cross-examination Mr Fraser accepted that he was implicitly saying to the plaintiff banks that there would be policies of insurance covering 100 per cent of the advance, that he was not aware at the time of any facts or matters which might jeopardise their validity or enforceability and that he believed the policies would be valid and enforceable "subject to the documentation" by which I think he meant only subject to the documentation being legally effective because it was properly drafted. He also accepted that he was saying that his belief was reasonably based which, I think, must mean that he had taken proper care to discharge the disclosure obligation. While Mr Scott submitted that the relevant question was how the banks viewed what he said the test is an objective one and I find Mr Fraser's evidence compelling as to how what was implicit in what he said would reasonably have been understood by banks in the position of the plaintiff banks. Although Mr Scott also submitted that there was no evidence that the plaintiff banks had read what Mr Fraser was saying in this manner I cannot agree. Each of them was relying on BBL to do its job properly and to inform them if there were any problems, and in any event I am satisfied that what Mr Fraser was saying would reasonably have been so understood by the banks. I should add a word about the interesting question whether a representation of opinion can be a representation within s 2(1) of the Misrepresentation Act, 1967. In Lancaster City Council v Unique Group Ltd, (unreported, Dec 15, 1995) Mr Justice Jonathan Parker held that it could not. For my part, granted that a representation of opinion may (as I think was the case here) carry with it the implication that the opinion is itself based on facts sufficient to provide reasonable grounds for believing it I have some difficulty in seeing why the section cannot operate sensibly in such a case. Nor do I see why in principle a representation that "I have taken proper care to do X" cannot be a representation within the section. However it does not matter. The effect would be that such a representation would only be a misrepresentation if the plaintiff proved the representor had not taken the relevant care. The burden of proof would not then be reversed under s 22(1). The effect would be no different from any negligent misstatement and reliance on the Act does not assist the plaintiffs. (B) The drawdown representation This applies only to Cornlease. The banks rely on the telexes of May 2 in which BBL confirmed that the conditions precedent in the loan agreement had been met. As I have already said, in giving the notice of drawdown BBL was undoubtedly acting as agent bank under the loan agreement. The relevant provisions of that agreement were predicated on BBL not having actual knowledge that the condition precedents had not been met (see "'Construction of the loan agreements" above). It is accepted that if BBL did know otherwise they were in breach of duty to the banks. Apart from that, in my judgment, the telexes alone cannot either by implication from their words or by way of an implied term or fiduciary obligation be read as giving rise to any wider or different obligation or representation. Reliance It is apparent from the evidence to which I have referred in connection with the approval procedures of the plaintiff banks that the efficacy of the policies was a vital factor in the transactions. All the witnesses made it clear that their participations would have been declined without the policies. It is true that none of the banks spelt out the disclosure obligation or referred to its importance in communicating with their head offices. That suggests to me, as the witnesses said, that none of them saw it as of such significance or a sufficient risk as to justify doing so and that, in each case, the adequacy of the documentation was a matter for London. I accept without reservation that those responsible in London considered that the disclosure obligation was satisfactory and that BBL should have no difficulty in discharging it. I would add that Mr Fraser himself accepted that he also did not tell the London credit committee or Brussels of the disclosure obligation in cl 5.3 despite his appreciation that the efficacy of the policies depended on compliance with it. The truth is that, apart from Mr Leatherdale who received the assurance I have held he did from Mr Fraser, the other banks were content to rely and did rely on BBL performing what they perceived to be, as Mr Fraser perceived it to be, a reasonably straightforward obligation. The fact that they may have assumed that BBL would discharge that obligation does not mean that they did not rely on BBL to do so. They did and reasonably so, in my judgment. Duties of the plaintiff banks to BBL Granted my decision that the terms of the MIGs imposed no obligations of disclosure on the banks and indeed excluded them there can in my judgment be no duty on the plaintiff banks to impart information to Eagle Star or BBL in that context. BBL nonetheless contend that the banks did owe a duty of care to it to disclose material information and if that is right BBL will presumably seek to contend at a future hearing that any breach of that duty it might establish was in some way causative of loss to BBL. The only area of information, apart from the disclosure obligation, where such a duty might arise would be in respect of the credit assessments made by the banks or their assessments of the properties. But cl 20(F) of the loan agreements makes it clear that each bank (including BBL as such) was not relying on the agent for such matters but responsible individually for its own assessment of them and it would be odd if the banks nonetheless owed a duty to the agent to impart that information and if the agent relied upon them to do so. As with the disclosure obligation, there is no evidence to suggest that BBL in fact ever sought from the banks any information of this type. Essentially BBL's case was that if BBL owed a duty to the banks so they must owe a duty to BBL. That ignores the fact that the disclosure obligation was an obligation of BBL alone. Nonetheless, BBL can rightly point to evidence which acknowledged that BBL could reasonably have expected the banks to impart information to them. Mr Malin accepted that it was not unreasonable for BBL to expect the banks to advise it of any matter of which they might become aware prior to completion which might prejudice the transaction. Mr Samengo-Turner said any bank could as a matter of market practice withdraw from the transaction prior to signing the loan documentation and if it did it would generally disclose its reasons -- . . . but is not bound to do so (and if it does give reasons, they may not necessarily be the right ones). But he also said that it was market practice that a proposed participant was obliged to share any material information it had relevant to the loan with all the other participants if it did not withdraw. Mr Digby-Rogers agreed that if a proposed participant was aware of a factor fundamental to the entire credit risk it would have a responsibility to the other banks to tell them. Mr Leatherdale said it would be standard professional practice that if he had found something material about the transaction which was not confidential to Sumitomo he would expect to discuss it with the agent. Mr Kobayashi of Sumitomo agreed that he would expect Sumitomo to share any concerns it had about the transaction with the arranging/agent bank. Mr Carney, on the other hand, did not agree that he would expect a participating bank to pass on to the other banks any particular concern it had about the deal. As he said, banks may well have different views about the credit risk or structure of the deal and they were entitled to walk away without explanation. He agreed only that if a bank knew something fraudulent would they behave professionally and bring it to the attention of the arranger. Mr Darby, however, "imagined" that if Arab Bank as a participant came across something material to the loan which was not confidential it would want to make sure that the agent and, indeed, Eagle Star knew about it and if he had been acting as agent he would have expected participants to do so. Mr Parker said much the same. Despite this evidence and while accepting that in the context of credit risks there may well be a professional practice to exchange information, I do not accept that a duty to take care in law to do so arose in the circumstances of this case. I have already referred to the terms of cl 20(F) and a professional practice is not the same thing as a duty of care. One can well see how it would be in the interests of the banks themselves if they had a concern to raise it so that they could assess whether or not to continue with their own participation. BBL really made no attempt to establish the essential ingredients of a duty of care on the part of the banks and, as I have said, they really put the matter as one of sauce for the goose so sauce for the gander. I cannot accept that. The disclosure obligations were not mutual. The assessment of the credit and property risks was a matter for each individual proposed participant. Contributory negligence There is no dispute that insofar as BBL may be held to have owed a duty of care in tort to the banks the normal principles of contributory negligence apply. It is also agreed that insofar as those principles do apply the test is an objective one referrable to the standard of the reasonably competent bank and not dependent on the particular practices of a particular bank. There is also no dispute that the principles of contributory negligence apply even where there is in addition a cause of action under the Misrepresentation Act: see Gran Gelato Ltd v Richcliff (Group) Ltd, [1992] Ch 560. There was some argument as to whether the principles of contributory negligence applied in a case where the only cause of action was under the Misrepresentation Act. In view of my decision, that does not arise and I do not propose to address it. The essential basis for the claim by the plaintiff banks is for breach of a duty of care in the discharge of BBL's obligations under cl 5.3 of the policies. To that claim BBL is entitled to allege that the plaintiff banks contributed to their own loss by their negligence. The preliminary issues I now turn to answer in the case of each of the plaintiff banks the preliminary issues which I have set out in Appendix A to this judgment. In doing so, I repeat that in my judgment the real basis for any claim by the plaintiff banks against BBL is for negligence in the discharge of the disclosure obligation under the policies and what I say about the alleged representations must be read subject to that. Sumitomo 1.7A(1) Yes, but not relevant, The statement that Eagle Star was to issue a policy was not a guarantee that the policy would be valid but simply a statement that there would be a document of insurance. (2) No. In my judgment, as expressed, this alleged representation amounts to a guarantee that BBL was not guilty of any conduct which might jeopardise the policies unqualified by knowledge or negligence that any such conduct might have that result. (3) Yes, but to prove that the representation was a misrepresentation the plaintiff bank would have to establish either actual knowledge of BBL to the effect alleged or that BBL ought to have been aware of a fact or matter which would or might adversely affect the recoverability of claims under the policies which, in effect, requires proof by Sumitomo of negligence on the part of BBL. (4) Yes, but again to prove the representation was false Sumitomo would bear the burden of proving negligence on the part of BBL. 7B. No, as expressed. The representation was that BBL would take reasonable care to comply with its obligations under cl 5.3 which is in substance the same as 7A(3) and (4). 2. The representation (so far as I have held that they were made) were continuous and continued in effect until and including May 2, 1989. 3. No. See 1 and 2, albeit the representations made included this representation. 4. No 5. (a) Yes. (b) The representations themselves, as I find, were (apart from actual knowledge) that care would be taken in fulfilling BBL's disclosure obligation under the policies. (c) Yes. The representations I have found were relied upon and reasonably so. (d) No; this allegation was withdrawn. 6. Does not arise: see 4. 6A. Yes. 7(1) Yes, but as to the security documents only, and subject to the terms of the loan agreement. (2) No. (3) No, and no claim is made on this basis. 8. The fiduciary duty arising under the loan agreement was in no wider terms than the duty owed by BBL as agent bank under that agreement: see 7. 9. No. 10. No. 11. No. In its closing submissions BBL put forward an alternative formulation of this issue which, as ordered by the Court, was limited to a duty in the context of the Eagle Star policies. The alternative formulation was as follows: If the plaintiff succeeds in the duties alleged by it against the Defendant, it owed the Defendant a duty of care in tort: (a) to inform BBL, alternatively Eagle Star, prior to the conclusion of the Cornlease Policies of all facts and circumstances of which it was aware material to the loan transaction; (b) In and about the compliance with its obligations under or in relation to the Eagle Star policies, and in particular its obligations of disclosure. I also reject this alternative formulation. 12. (a) Yes; (b) as agreed, the relevant standard is that of a reasonable bank. Sanwa 1. As Sumitomo 1 for 7A. The additional alleged representation I reject as it would amount to a guarantee. 2. As Sumitomo 2. 3. As Sumitomo 3. 4. As Sumitomo 4. 5. (1) No. (2) No. See Sumitomo 1. 7A. (2). (3) As Sumitomo 1. 7A, (3). (4) As Sumitomo 1. 7A. (4). 6. The Bridgecirc representations (so far as I have held they were made) were also continuous and continued in effect until and including July 21, 1989. 6A. Yes. 7. As Sumitomo 3. 8. As Sumitomo 5. 9. As Sumitomo 6. 10. As Sumitomo 5. 11. As Sumitomo 7. 12. As Sumitomo 8. 13. No. 14. No. 15. No; and see Sumitomo 11. 16. No. 17. No. 18. No; and Sumitomo 11. 19. As Sumitomo 12. Arab Bank As Sanwa 1. 2. As Sumitomo 2. 3. As Sumitomo 3. 4. As Sumitomo 4. 5. As Sumitomo 5. 5. As Sumitomo 6. 6A. Yes. 7. As Sumitomo 7. 8. As Sumitomo 8. 9. No. 10. No. 11. No; and see Sumitomo 11. 12. As Sumitomo 12. APPENDIX "A" THE PRELIMINARY ISSUES (1) SUMITOMO 1. Whether BBL expressly and/or impliedly made to Sumitomo the representations alleged at par 7A and 7B of the re-amended points of claim on the basis of the facts therein alleged. These representations, as there pleaded, are as follows: 7A. BBL expressly or impliedly represented to Sumitomo by [a facsimile dated Apr 5, 1989 enclosing a copy of the offer letter sent by BBL to the borrower] and/or by sending to Sumitomo a copy of the proposed insurance policy to be issued by Eagle Star that: (1) Eagle Star was to issue a policy/policies of insurance providing insurance cover to the full value of the loan; and/or (2) BBL was not aware of any facts or matters, and/or was not guilty of any conduct, which would or might jeopardise the validity or enforceability of the proposed Eagle Star policy/ policies; and/or (3) there were no facts or matters which BBL was or ought to have been aware might adversely affect the recoverability of claims under the proposed Eagle Star policy/policies; and/or (4) BBL reasonably believed and/or held the opinion on the basis of reasonable grounds that the proposed Eagle Star policy/policies were or would be valid and enforceable. 7B . . . BBL expressly and/or impliedly represented to Sumitomo in the conversations between Mr Leatherdale and Mr Fraser referred to at paragraph 6A and 6B . . . that BBL would: (1) comply with its obligations under the proposed Eagle Star policies and in particular its obligations under clause 5.3 (of the policies); (2) follow its normal practices in relation to the investigations and enquiries required under clause 5.3. [The conversations referred to in par 6A and 6B were alleged to have been at meetings and in telephone conversations between Apr 25 and May 2, 1989]. 2. Whether if BBL made the express and/or implied representations alleged at pars 7A and 7B of the re-amended points of claim, each of the said representations was continuous, and continued in effect until Sumitomo entered into the Cornlease loan agreement and/or until Sumitomo made its advance thereunder; or whether each of the said representations was at most one the belief and/or intention of BBL at the time each was made, and did not continue in effect thereafter. 3. Whether, if the matters alleged in pars 7A and 7B of the re-amended points of claim gave rise to any representation in respect of the Eagle Star policies, it was no more than an implied representation that at the time when it was made, alternatively during any period in which it continued in effect, BBL had no actual knowledge that the policies proposed to be issued by Eagle Star were or would be invalid or unenforceable. 4. Whether BBL made any, and if so what express and/or implied representations to Sumitomo by virtue of the telex dated May 2, 1989 pleaded at par 15 of the re-amended points of claim. The telex referred to was the notification by BBL to Sumitomo that it had received a notice of drawdown from the borrower. Paragraph 15 alleges that by that telex: BBL expressly represented to Sumitomo . . . that the conditions precedent contained in the Cornlease Loan Agreement had been met and impliedly represented that, as far as it was reasonably aware, none of the further conditions which precluded the making of an advance under the Cornlease Loan Agreement applied. 5. Whether, if BBL made the, or any of the, express and/or implied representations alleged at pars 7A and 7B of the re-amended points of claim: (a) BBL did so with the intention that they should be relied upon by Sumitomo and/or in the knowledge alleged at par 8 of the re-amended points of claim. (b) BBL owed to Sumitomo any, and if so which, of the duties alleged at par 9A of the re-amended points of claim. (c) Sumitomo relied thereon in the manner alleged at par 10 of the re-amended points of claim; and, if Sumitomo did so, whether such reliance was unreasonable by reason of the matters alleged at par 10 of the amended points of defence; (d) the same amounted to collateral warranties as alleged at par 11 of the re-amended points of claim. The intention and knowledge of BBL alleged in par 8 are that Sumitomo would rely on the representations in deciding whether to participate in the Cornlease facility, in determining the extent of its participation and in making an advance thereunder. The duties alleged in par 9A are a duty of care in or about the making of the representations and/or to ensure that each of them was accurate. The reliance alleged in par 10 is the entry into the loan agreement. The allegations in the defence that such reliance (if any) was unreasonable are, in summary, that Sumitomo was expected to make its own assessment of the facility and did so including retaining Allen & Overy to advise and any information presented by BBL was to enable Sumitomo to do that. BBL also relies on cl 20(B)(3), D(1) and (F) of the loan agreement. 6. Whether, if BBL made the, or any of the, alleged representations pleaded at par 15 of the re-amended points of claim: (a) BBL owed to Sumitomo a duty of care in relation thereto; (b) Sumitomo relied thereon in the manner pleaded at par 16 of the re-amended points of claim; (c) any reliance by Sumitomo thereon was unreasonable as alleged by BBL in par 21 of the amended points of defence. The reliance pleaded in par 16 is the making of the advance under the Corn leaseloan agreement. The allegations in the defence that such reliance (if any) was unreasonable are the same as those recorded above under issue 5 save that BBL relies on the following provisions of the loan agreement. Clauses 5(B), 14(A)(14), (17), (18), and (B), 19(A)(2) and (12), 20(C)(5) and D(1), (3) and (4). 6A. Whether BBL owed Sumitomo a duty of care in tort to take reasonable care in or about the compliance with its obligations under or in relation to the proposed Eagle Star policies, and, in particular, its obligations of disclosure. 7. Whether the Cornlease loan agreement contained any, and if so which, of the implied terms alleged in par 13 of the re-amended points of claim. The implied terms alleged are that BBL, as agent for the purposes of the security documents: (1) would act with such skill and care as would reasonably be expected of a skilled and competent bank performing the role of agent in such a syndicated loan facility; (2) would take reasonable steps, prior to procuring or assenting to any drawdown of funds by the Borrower . . . to see that the conditions precedent identified in Clause 5(A) had been met and that none of the further conditions identified in Clause 5(B) which precluded the making of an advance applied; (3) would, in the event that a request to drawdown funds . . . was made . . . take all reasonable steps to inform (inter alia) (Sumitomo) if any, and if so which, of the conditions precedent identified in Clause 5(A) had not been met and if any, and if so which, of the further conditions identified in Clause 5(B) applied. 8. Whether the relationship between Sumitomo and BBL was of a fiduciary nature and, if it was, whether BBL owed any, and if so which, of the duties alleged at par 14 of the re-amended points of claim. The "duties" alleged are in the same terms as those set out under issue 7 above. 9. Whether Sumitomo owed any duties to Eagle Star by reason of the terms of the Cornlease policies. 10. Whether Sumitomo owed to Eagle Star a duty of the utmost good faith in respect of the Cornlease policies, including a duty at common law to disclose before the conclusion of the Cornlease policies all material facts which were known to it or which ought in the ordinary course of business to have been known to it. 11. Whether Sumitomo owed BBL as prospective agent a duty of care in tort to carry out and make all reasonable investigations and enquiries into the proposed Cornlease transaction and to inform BBL, alternatively Eagle Star, prior to the conclusion of the Cornlease policies of all facts and circumstances of which it was aware which were material to Eagle Star's decision to issue the Cornlease policies and/or the terms on which they were issued. 12. Whether, (a) in view of the Court's conclusions on the above issues, the principle of contributory negligence pleaded in par 71 of the amended points of defence can apply, and (b) if it can, whether the conduct of Sumitomo, its servants or agents in relation to investigations and enquiries into the Cornlease transaction is to be judged by reference to the standard of the reasonable bank, or by reference to the investigations and enquiries that Sumitomo would normally carry out, or had carried out on previous occasions, or was required by its own procedures to carry out, in relation to uninsured property loan transactions. APPENDIX "A" THE PRELIMINARY ISSUES (2) SANWA 1. Whether BBL expressly and/or impliedly made to Sanwa the representations alleged at par 7 of the amended points of claim on the basis of the facts therein alleged. The representations on which Sanwa rely are said to arise from the terms of a letter dated Apr 11, 1989 enclosing an outline of the terms of the proposed facility and from the terms of a draft of the policy sent to them. They are alleged in the same terms as those relied upon by Sumitomo in par 7A of its claim (see above) save that it is in addition alleged that BBL represented to Sanwa that: The loan was or would be secured in such a way as to provide full recourse against Eagle Star. The oral representations alleged by Sumitomo in par 7B of the "claim" are, of course, unique to Sumitomo and Sanwa do not allege any such oral representations were made to it. 2. Whether, if BBL made the express and/or implied representations alleged at par 7 of the amended points of claim, each of the said representations was continuous, and continued in effect until Sanwa entered into the Cornlease loan agreement and/or until Sanwa made its advance thereunder; or whether each of the said representations was at most one of the belief and/or intention of BBL at the time each was made, and did not continue in effect thereafter This mirrors Sumitomo's claim. 3. Whether, if the matters alleged in par 7 of the amended points of claim gave rise to any representation in respect of the Eagle Star policies, it was no more than an implied representation that at the time it was made, alternatively at any period in which it continued in effect. BBL had no actual knowledge that the policies proposed to be issued by Eagle Star were or would be invalid or unenforceable. This also mirrors Sumitomo's claim. 4. Whether BBL made any, and if so what, express and/or implied representations to Sanwa by virtue of the telex dated May 2, 1989 pleaded at par 15 of the amended points of claim. This also mirrors issue 4 of Sumitomo's claim as the telex to Sanwa was in the same terms as the telex to Sumitomo. 5. Whether BBL expressly and/or impliedly made to Sanwa the representations alleged at par29 of the amended points of claim on the basis of the facts therein alleged. These alleged representations apply to the Bridgecric loan in which only Sanwa of the plaintiff banks was concerned. The representations are said to have been made expressly or impliedly in the initial invitation letter dated May 31, 1989 from BBL to Sanwa concerning this loan and/or by sending a draft of the proposed policy for that loan. There are alleged to have been representations that: (1) the loan was or would be secured by insurance cover in layers 0-70 per cent and 70-90 per cent of the value of the property; and/ or (2) BBL was not aware of any facts or matters and/or was not guilty of any conduct, which would or might jeopardise the validity or enforceability of the proposed insurance; and/or (3) there was no fact or matter which BBL was or ought to have been aware might adversely affect the recoverability of claims under the proposed insurance; and/or (4) BBL reasonably believed and/or held the opinion based upon reasonable grounds that the proposed insurance was or would be valid and enforceable. Thus representations (2) to (4) are to the same effect as those alleged for the Cornlease loan. 6. Whether, if BBL made the express and/or implied representation alleged at par 29 of the amended points of claim, each of the said representations was continuous, and continued in effect until Sanwa entered into the Bridgecirc loan agreement and/or until Sanwa made its advance thereunder; or whether each of the said representations was at most one of belief and/or intention of BBL at the time each was made, and did not continue in effect thereafter. 6A. Whether BBL owed Sanwa a duty of care in tort to take reasonable care in or about the compliance with its obligations under or in relation to the proposed Eagle Star policies, and in particular, its obligation of disclosure, as alleged at pars 9B and 31B of the amended points of claim. This also mirrors Sumitomo's claim, issue 6A. 7. Whether, if the matters alleged at par 29 of the amended points of claim gave rise to any representation in respect of the Eagle Star policies, it was no more than an implied representation that at the time it was made, alternatively during any period in which it continued in effect, BBL had no actual knowledge that the policies proposed to be issued by Eagle Star were or would be invalid or unenforceable. 8. Whether, if BBL made the, or any of the, express and/or implied representations alleged at par 7 of the amended points of claim: (a) BBL did so with the intention that they should be relied upon by Sanwa and/or in the knowledge alleged at par 8 of the amended points of claim; (b) BBL owed to Sanwa any, and if so which, of the duties alleged at par 9A of the amended points of claim; (c) Sanwa relied thereon in the manner alleged at par 10 of the amended points of claim; and, if Sanwa did so, whether such reliance was unreasonable by reason of the matters alleged at par 10 of the points of defence. (d) the same amounted to collateral warranties as alleged at par 11 of the amended points of claim. The issues are the same as those raised by issue 5 in Sumitomo's claim. 9. Whether, if BBL made the, or any of the, alleged representations pleaded at par 15 of the amended points of claim, (a) BBL owed to Sanwa a duty of care in relation thereto; (b) Sanwa relied thereon in the manner pleaded at par 16 of the amended points of claim; (c) any reliance by Sanwa thereon was unreasonable as alleged by BBL at par 21 of the points of defence. The issues are the same as those raised by issue 6 in Sumitomo's claim. 10. Whether, if BBL made the express and/or implied representations alleged at par 29 of the amended points of claim. (a) BBL did so with the intention that they should be relied upon by Sanwa, and/or in the knowledge alleged at par 30 of the amended points of claim; (b) BBL owed to Sanwa any, and if so which, of the duties alleged at par 31A of the amended points of claim; (c) Sanwa relied thereon in the manner alleged at par 32 of the amended points of claim; and, if Sanwa did so, whether such reliance was unreasonable by reason of the matters alleged at par 88 of the points of defence; (d) the same amounted to collateral warranties as alleged at par 33 of the amended points of claim. Save that this issue relates to the Bridgecric loan, the allegations are in the same terms as for the Cornlease loan: see issue 8 above and issue 5 in Sumitomo's claim. 11. Whether the Cornlease loan agreement contained any, and if so which, of the implied terms alleged at par 13 of the amended points of claim. See issue 7 in Sumitomo's claim. 12. Whether the relationship between Sanwa and BBL was of a fiduciary nature and, if it was, whether BBL owed any, and if so which, of the duties alleged at par 14 of the amended points of claim. See issue 8 in Sumitomo's claim. 13. Whether Sanwa owed any duties to Eagle Star by reason of the terms of the Cornlease policies. See issue 9 in Sumitomo's claim. 14. Whether Sanwa owed to Eagle Star a duty of the utmost good faith in respect of the Cornlease policies, including a duty at common law to disclose before the conclusion of the Cornlease policies all material facts which were known to it or which ought in the ordinary course of business to have been known to it. See issue 10 in Sumitomo's claim. 15. Whether Sumitomo owed BBL as prospective agent a duty of care in tort to carry out and make all reasonable investigations and enquiries into the proposed Cornlease transaction and to inform BBL, alternatively Eagle Star, prior to the conclusion of the Cornlease policies of all facts and circumstances of which it was aware or ought to have been aware which were material to Eagle Star's decision to issue the Cornlease policies and/ or the terms on which they were issued. See issue 11 in Sumitomo's claim. 16. Whether Sanwa owed any duties to Eagle Star by reason of the terms of the Bridgecirc policies. 17. Whether Sanwa owed to Eagle Star a duty of the utmost good faith in respect of the Bridgecirc policies, including a duty at common law to disclose before the conclusion of the Bridgecirc policies all material facts which were known to it or which ought in the ordinary course of business to have been known to it. 18. Whether Sanwa owed BBL as prospective agent a duty of care in tort to carry out and make all reasonable investigations and enquiries into the proposed Bridgecirc transaction and to inform BBL, alternatively Eagle Star, prior to the conclusion of the Bridgecirc policies of all facts and circumstances of which it was aware or ought to have been aware which were material to Eagle Star's decision to issue the Bridgecirc policies and/ or the terms on which they were issued. 19. Whether (a) in view of the Court's conclusions on the above issues, the principle of contributory negligence pleaded in pars 71 and 144 of the points of defence can apply; and (b) if it can, whether the conduct of Sanwa, its servants or agents in relation to investigations and enquiries into the Cornlease and Bridgecirc transactions is to be judged by reference to the standard of the reasonable bank or by reference to the investigations and enquiries that the plaintiff would normally carry out, or had carried out on previous occasions, or was required by its own procedures to carry out, in relation to uninsured property loan transactions. APPENDIX "A" THE PRELIMINARY ISSUES (3) ARAB BANK 1. Whether BBL expressly and/or impliedly made to Arab Bank the representations alleged at par 7 of the amended points of claim on the basis of the facts therein alleged. Arab Bank relies on the terms of a letter dated Apr 7, 1989 enclosing an outline of the terms of the proposed facility and on the terms of a draft of the policy sent to them. The representations alleged are the same as those alleged by Sanwa: see issue 1 in the Sanwa claim. 2. Whether, if BBL made the express and/or implied representations alleged at par 7 of the amended points of claim, each of the said representations was continuous, and continued in effect until Arab Bank entered into the Cornlease loan agreement and/or until Arab Bank made its advance thereunder; or whether each of the said representations was at most one of the belief and/or intention of BBL at the time each was made, and did not continue in effect thereafter. This mirrors Sumitomo's claim. 3. Whether, if the matters alleged in par 7 of the amended points of claim gave rise to any representation in respect of the Eagle Star policies, it was no more than an implied representation than at the time when it was made, alternatively during any period in which it continued in effect, BBL had no actual knowledge that the policies proposed to be issued by Eagle Star were or would be invalid or unenforceable. This also mirrors Sumitomo's claim. 4. Whether BBL made any, and if so what, express or implied representations to Arab Bank by virtue of the telex dated May 2, 1989 pleaded at par 15 of the amended points of claim. This also mirrors Sumitomo's claim as the telex to Arab Bank was in the same terms as the telex to Sumitomo. 5. Whether, if BBL made the, or any of the, express and/or implied representations alleged in par 7 of the amended points of claim: (a) BBL did so with the intention that they should be relied upon by Arab Bank and/or in the knowledge alleged at par 8 of the amended points of claim; (b) BBL owed to Arab Bank any, and if so which, of the duties alleged at par 9A of the amended points of claim; (c) Arab Bank relied thereon in the manner alleged at par 10 of the amended points of claim; and, if Arab Bank did so, whether such reliance was unreasonable by reason of the matters alleged at par 10 of the points of defence; (d) the same amounted to collateral warranties as alleged at par 11 of the amended points of claim. This also mirrors Sumitomo's claim. 6. Whether, if BBL made the, or any of the, alleged representations pleaded by par 15 of the amended points of claim, (a) BBL owed to Arab Bank a duty of care in relation thereto; (b) Arab Bank relied thereon in the manner pleaded at par 16 of the amended points of claim; (c) any reliance by Arab Bank thereon was unreasonable as alleged by BBL at par 21 of the points of defence. This also mirrors Sumitomo's claim. 6A. Whether BBL owed Arab Bank a duty of care in tort to take reasonable care in or about the compliance with its obligations under or in relation to the proposed Eagle Star policies, and, in particular, its obligations of disclosure. 7. Whether the Cornlease loan agreement contained any, and if so which, of the implied terms alleged at par 13 of the amended points of claim. This also mirrors Sumitomo's claim. 8. Whether the relationship between Arab Bank and BBL was of a fiduciary nature and, if it was, whether BBL owed any, and if so which, of the duties alleged at par 14 of the amended points of claim. This also mirrors Sumitomo's claim. 9. Whether Arab Bank owed any duties to Eagle Star by reason of the terms of the Cornlease policies. 10. Whether Arab Bank owed to Eagle Star a duty of the utmost good faith in respect of the Cornlease policies, including a duty at common law to disclose before the conclusion of the Cornlease policies all material facts which were known to it or which ought in the ordinary course of business to have been known to it. 11. Whether Arab Bank owed BBL as prospective agent a duty of care in tort to carry out and make all reasonable investigations and enquiries into the proposed Cornlease transaction and to inform BBL, alternatively Eagle Star, prior to the conclusion of the Cornlease policies of all facts and circumstances of which it was aware or ought to have been aware which were material to Eagle Star's decision to issue the Cornlease policies and/ or the terms on which they were issued. 12. Whether, (a) in view of the Court's conclusions on the above issues, the principle of contributory negligence pleaded in par 71 of the points of defence can apply; and (b) if it can, whether the conduct of Arab Bank, its servants or agents in relation to investigations and enquiries into the Cornlease transaction is to be judged by reference to the standard of the reasonable bank, or by reference to the investigations and enquiries that Arab Bank would normally carry out, or had carried out on previous occasions, or was required by its own procedures to carry out, in relation to uninsured property loan transactions. APPENDIX ""B" DRAMATIS PERSONAE * indicates that a witness gave oral evidence. + indicates service of a Civil Evidence Act notice. 1 THE SUMITOMO BANK LIMITED JAPAN 1 Senior Managing Director T Morikawa + INTERNATIONAL CREDIT DEPARTMENT General Manager K Kobayashi * Joint General Manager Y Kitamoto + LONDON BRANCH Managing Director Okabe Joint Managing Director K Noda + General Manager Y Abe + INTERNATIONAL CREDIT DEPARTMENT Joint General Manager S Seno + Others K Wada + CORPORATE RESEARCH DEPARTMENT Head H Obata + Assistant Manager T Matsunaga + PROPERTY FINANCE DEPARTMENT Head T Kubo + Assistant General Manager J Digby-Rogers * P Leatherdale * ALLEN & OVERY (SUMITOMO'S SOLICITORS) Partner P Wood * Assistant Solicitor K Reece * 2 THE SANWA BANK LIMITED JAPAN Deputy President Yassufuku + Senior Managing Director T Okada + Y Fujiwara + ICAD General Manager Y Genma * Assistant General Manager T Yamada + Y Mizuno + Others T Matsuda + LONDON BRANCH Director & General Manager K Tanimoto + K Kawashima + Joint General Manager Yoshizawa + M Takaoka + Special Finance Depanment S Harland * T Kobayashi * J Watkins * evidence agrees as witness statement) Y Oxawa + J Wyncoll Credit Review T Oda + S Yoshikawa + Others S Aoyama + Y Irobe + 3 ARAB BANK PLC JORDAN Chairman & General Manager E El-Hadj + Deputy General Manager K Shoman Assistant General Manager AH Shoman CREDIT DEPARTMENT El Issa LONDON BRANCH Regional Manager E El-Hadj + Senior Manager J Carney * BUSINESS DEVELOPMENT GROUP Manager L Parker * Others R Darby * D Varley * CREDIT B Yarde B Thomas LOANS ADMINISTRATION G Troke 4 BANQUE BRUXELLES LAMBERT SA BRUSSELS COMITE DE DIRECTION COMITE DES CREDITS ETRANGERS LONDON BRANCE EXECUTIVE COMMITTEE OF LONDON BRANCH CORPORATE FINANCE DEPARTMENT P Phipps O Ross S Fraser * (until June 16, 1989) A Andrews RISK ANALYSIS AND LOANS ADMINISTRATION DEPARTMENT MC Swinnen-Paramesh J Bailey DOCUMENTATION AND SECURITIES M Hood D South SIMMONS & SIMMONS (BBL'S SOLICITORS) partner (Commercial) H Chalmers Partner (Property) A Butler Partner (Property) J Holloway Assistant Solicitor I Enright J Goodman N Norris EAGLE STAR INSURANCE COMPANY LIMITED ("EAGLE STAR") FINANCIAL INSURANCES DEPARTMENT Manager R Buxton Others D Crowley A Dixon G Ward R Levy BARLOW LYDE & GILBERT (EAGLE STAR'S SOLICITORS) Partner Clifford Atkins J Mitchell Assitant Solicitor A Ward EXPERT WITNESSES For the Banks: Richard Malin Mr Malin is now an independent property financial consultant and banking expert. From 1971 to 1985 he worked for the Chase Manhattan Bank NA working in the UK real estate finance group. Thereafter he worked for an independent commercial property finance advisory service until 1990 and thereafter until 1995 in structuring and arranging UK commercial property finance transactions on behalf of Richard Ellis. For BBL: Fabian Samengo-Turner Mr Samengo-Turner is a retired banker, who worked for Citibank from 1967 to 1995. He was head of European Syndication for Citibank from 1985 to 1991. Citibank was, and is, a market leader in the syndication market in Europe, the USA and the Far East albeit Citibank was not involved in syndicated property lending nor in MIG-backed transactions. I should add to this list Mr Maurice MARKOVITS who was the moving force in putting together the Cornlease and Bridgecirc and indeed other loans with which the banks were concerned. For present purposes it is enough to say that he had contacts with all the banks, Eagle Star and LPT and appears to have received substantial commissions for his work from a number of sources. COUNSEL For the plaintiff banks: Mr G Kealey QC and Mr D Edwards; For BBL: Mr P Scott, QC and Mr D Railton DISPOSITION: Judgment accordingly SOLICITORS: Clifford Chancey; Linklaters & Paines