No general equitable duty of good faith in lending relationships
In Standish v RBoS, recently reported, a customer tried to extend the duties a receiver owes to a borrower in a receivership to the whole of the relationship between a Bank and its customer, especially when it is not exercising its security rights.
The claim was one in the series of cases where customers of RBoS and their shareholders alleged that they had been required by the actions of the bank and one of its appointees to maximise the return to the bank at the expense of the shareholders via two restructurings of their company, which operated Bowling sites.
The claim failed and was struck out as having no basis, nor any chance of becoming a case changing the law. The courts have shown themselves over the years to be loth to extend radically the duties owed by lenders to borrowers in business lending and those affected by the actions of banks.
To my mind it is quite impossible to extrapolate from the very specific facts in Medforth v Blake, and the context of the Vice Chancellor's observations, a wide-ranging proposition that will apply to a lender, if it happens to have security by way of mortgage of land but has not exercised, or threatened to exercise, that security...... It seems to me there is no basis upon which the claimants' radical proposition about the equitable duties owed by a bank with security has any prospect of success. ”