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Project monitors’ duties and contributory negligence: Lloyds Bank Plc v McBains Cooper Consulting Ltd. DWF successful in the Court of Appeal.

DWF's Michael Robin and James McKay acted for the successful Appellant project monitor to overturn the decision of Mr Justice Edwards-Stuart that a project monitor provided 'advice' rather than 'information' to a Lender when providing monthly drawdown recommendations for the drawings under a development loan facility.


In late 2007 the Lender granted a £2.625 million development loan facility to an evangelical organisation called Miracles Signs and Wonders Limited, whose guiding mind was its pastor, Reverend James Chukwu.  The purpose of the loan was to develop a disused bingo hall into a place of worship together with space for other commercial activities.

The approved development comprised the ground floor and two upper floors, which was scaled down from Reverend Chukwu's original proposal for three upper floors but which the Lender had rejected as commercially unviable. The Lender appointed McBains as project monitors to check on progress of the works and approve applications made to the Lender by the borrower for drawdown of the loan facility.

Shortly after commencement of works McBains reported that Reverend Chukwu was considering an additional floor of accommodation but that no details were available yet. The following month McBains reported that they understood the additional cost for the 3rd floor was expected to be in the region of £250,000, that those works were expected to be instructed shortly, and that they understood that the additional expenditure was to be funded separately from the agreed facility.

In March 2009 the £2.625 million facility had been used up with the development still incomplete and by which point the Lender had paid out £259,792 in respect of 3rd floor works. Reverend Chukwu had no funds to complete the development and so, the property was sold with the Lender sustaining a loss on the loan of over £1.8 million.

The decision at first instance

McBains were found negligent for failing to report that payment applications 10, 11, 12, 14, 15 and 17 included sums referable to the third floor works, which fell outside the facility.

The Lender was awarded damages by reference to the judge's own counterfactual analysis of what the Lender would have done had McBains informed it that payment application 10 included £10,000 that was referable to the third floor works.   The judge found that (a) the Lender would have refused to allow drawdown of sums referable to the third floor works, and (b) a train of enquiry would have led to the Lender realising that there was a significant funding shortfall to complete the development, which Reverend Chukwu could not bridge and that fact would in turn have caused the facility to be terminated.

On this counterfactual analysis, McBains were held primarily liable for the sums that the Lender paid out from the facility in respect of the third floor works that it would not have paid, plus the totality of the all the sums the Lender paid from the facility from progress report 14 onwards that it would not have paid as a consequence of terminating the facility.   

The judge rejected McBains' argument that the  Lender's  recoverable losses were 'capped' by SAAMCO principles because when providing its monthly progress report, McBains was "effectively advising the Bank to pay the sum stated in the report" and therefore was providing 'advice' to pay, rather than 'information' on which the the Lender would rely in making its decision whether to pay.

The Lender was nevertheless one third contributory negligent for failing to ascertain from their borrower directly, at numerous points, the source of the funds required to pay for the third floor works, which would have revealed that Reverend Chukwu had no resources to pay for either the third floor, or the known shortfall on the approved development and resulted in the termination of the facility. 

McBains' was found liable for damages of just over £415,000.  

The decision of the Court of Appeal

By the unanimous decision of the Court of Appeal McBains' liability was reduced to only £86,597, which Lord Justice Longmore noted was less than McBains paid as the result of a pre-action adjudication (by over £200,000).

The only substantive judgment was given by Lord Justice Longmore who rejected the counterfactual analysis adopted by the judge at first instance.   His key reasoning was as follows:

  • McBains was responsible for the negligently wrong information and/or recommendation to pay for work done that fell outside the facility.    
  • The consequence of the negligent information was that the Lender paid for works to the third floor when they were not bound to do so.   The totality of such sums was £259,792.
  • On the facts found by the judge at first instance, the cause of the Bank continuing to pay out amounts pursuant to monthly progress reports 14-17 was not that McBains gave wrong information or advice in relation to the third floor works; it was the fact that the Lender continued to fund the development knowing that it was uneconomic to do so.  
  • Save for £259,792 referable to the third floor works, the amounts paid out in progress reports 14-17 were sums that were going to be lost in any event.  
  • McBains' primary liability was therefore the £259,792 referable to the third floor.
  • The apportionment of contributory negligence was reversed to reflect the Lender's failure to adhere to elementary banking principles.


This is the first time that project monitoring negligence has come before the Court of Appeal and provides a stark reminder to lending institutions that they cannot expect to recover from their advisors those losses that they would have sustained in any event, as a consequence of their own errant behaviour.  

Significantly, the Court of Appeal unusually chose to interfere with the trial judge's discretion to apportion the level of contributory negligence; the judgment records that "…the lion's share of the responsibility must be that of the bank for having started an unviable project and ignoring McBains' warnings about how viable it was".

The fact that the Bank must now repay over £200,000 of its original adjudication award reinforces the old adage "litigate in haste, repent at leisure".


For more information please contact James McKay, Senior Assoicate  James.McKay@dwf.law or Michael Robin, Partner Michael.Robin@dwf.law


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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.