Action group founder loses case against Clydesdale

He said at the time that his action could free hundreds of businesses from their debts to the bank, claiming that the Clydesdale’s fixed-rate tailored business loans (TBLs) were legally unenforceable and unfair under the Consumer Credit Act.

Now Lord Doherty has ruled unequivocally in the bank’s favour, though his judgment does not address the legality of the contract or issues of unfairness. Mr Glare said he planned to appeal.

The judge said the bank accepted the TBL was “not a suitable product” for Mr Glare and it was “wrong to conclude a contract of loan with the pursuer which had a fixed rate of interest for 25 years”. The bank also accepted liability for any loss or damage caused as a result of the sale.

However the judge said Mr Glare had failed to prove that he would have sought and obtained a variable rate loan instead of a TBL, and that his business would have succeeded as a result.

Mr Glare borrowed £3.95 million from the bank in February 2008, partly in order to repay a debt of £2.76m to Lloyds, and he promised to be able to grow a conference centre business in a former manor house in rural Dorset which he had bought in 2002 for £4.5m. But the business struggled, and the loan was terminated in September 2009.

Mr Glare was made bankrupt in February 2011 and discharged a year later. The bank received £2m from the sale of the manor later that year.

Lord Doherty said Mr Glare’s evidence had lacked credibility and “been influenced greatly by hindsight....he suggests that a concatenation of favourable circumstances would have occurred and that the upshot would have been that the business would have survived and prospered”. But in fact, “the history of the management and performance of the business up to 2009 does not inspire any confidence that a successful future was likely” as it had consistently failed to meet targets and projections.

The bank’s TBLs have come under scrutiny for their ‘break fees’ – a penalty for early surrender – with the bank claiming a break fee of £783,383 from Mr Glare, some 20 per cent of the loan.

The bank levied such fees on its widely-sold TBLs, on the basis that the loans were linked to market ‘swaps’ or derivatives intended to hedge against a rise in interest rates, but incurring a penalty to the bank if rates fell, as they did.

However, in response to questions from The Herald and from former Dundee West MP John McGovern in 2014, Clydesdale Bank admitted that a customer’s TBL was “not contracted into a swap or any other derivative in the market”.

In November 2014 Mr Glare’s lawyer, Gordon Deane of Balfour & Manson, said the bank had made a “significant U-turn” in the case, by admitting mis-sale of the loan. He said at the time: “The bank accepts that fixed-rate TBLs are not linked to an identifiable and distinct swap arrangement. Mr Glare is therefore arguing that the bank did not suffer any loss as a result of his alleged default.”

Mr Deane said the consequences for the bank could be “very serious”, prompting claims from current TBL customers and for the return of money from former TBL customers who had paid early surrender charges.

The bank responded at the time that the lawyer’s remarks were “misleading and inaccurate”.

Mr Deane was not available for comment this week. In his summing-up, Iain Mitchell QC appeared to say the break cost legality was "not a live issue".

Mr Glare commented: “The court did not deal with the central issues, the legality of the contract and the break cost. I do not apportion blame to either the court or my legal team, but it is clear to me that the bank was successful in avoiding these important issues that have adversely affected so many Scottish businesses. I plan to appeal to the Supreme Court and I am discussing this with my lawyers.”

Clydesdale Bank said: “We have received and accept the judgement of the Court of Session, which has found in favour of the bank.”