In December 2006, Mr Morley, a commercial property developer, entered into a £75m, three-year loan with Royal Bank of Scotland plc to refinance his property portfolio, add new properties to it and provide him with a “bonus payment” for his personal use. The bank secured the loan over his portfolio of 21 commercial properties in the North of England valued at around £98m.

The 2008 financial crisis caused a significant fall in the value of Mr Morley’s property portfolio. Negotiations to restructure the loan ensued prior to its expiry. Although no agreement was reached by December 2009, the bank decided to continue negotiating rather than enforce its security. Eventually the parties signed a “split deal” in August 2010 whereby:

  1. £10 million of the loan was written off;
  2. 16 properties were transferred from Mr Morley’s portfolio to a subsidiary of the bank called West Register Property Investments Ltd at a favourable price for the bank; and
  3. Mr Morley retained five of the properties in his portfolio on payment of £20.5 million to the bank.

In 2017 Mr Morley started court proceedings against the bank seeking damages in the region of £30m and for the agreement to be set aside. The High Court dismissed Mr Morley’s claims. He appealed to the Court of Appeal – reported as Oliver Dean Morley t/a Morley Estates v The Royal Bank of Scotland plc [2021] EWCA Civ 338. The issues before the Court of Appeal were whether the bank:

  1. Breached an implied duty to provide banking services with reasonable care and skill under section 13 of the Supply of Goods and Services Act 1982;
  2. Breached a duty of good faith; and
  3. Coerced Mr Morley into accepting the agreement such that it was voidable for economic duress.

Reasonable skill and care

Mr Morley relied on section 13 of Supply of Goods and Services Act 1982:

“In a relevant contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill.”

The Court of Appeal held that this implied duty only applied to the services provided under the expired loan agreement, and not to the parties’ negotiations in 2010. That relationship was governed by the express terms of the mortgage over the properties and equitable principles.

With regards the express terms of the mortgage, the Court of Appeal held, it was inappropriate to imply a contractual duty into a mortgage. This conclusion was in line with the decisions in Yorkshire Bank Plc v Hall [1999] 1 WLR 1713 and Socimer International Bank Ltd v Standard Bank London Ltd  [2008] EWCA Civ 116. In any event, a mortgage is not a contract for the supply of services.

Even if the bank did owe an implied duty under section 13, the Court of Appeal found it was not breached. Importantly, the bank’s internal guidance, which detailed the bank’s general objective to support viable businesses, especially if the default was not the fault of the borrower, did not provide sufficient grounds to support a breach of duty.

Good faith

Mr Morley claimed the bank was under an implied duty to act in good faith, or not to act vexatiously or contrary to its legitimate commercial interests. He argued the bank breached this duty because it acted as a buyer and not a lender.

The Court of Appeal was unconvinced that such a duty arose during the negotiations. Even if such a duty had applied the Court of Appeal said that all the bank’s actions were “rationally connected to its commercial interests”: it was simply trying to secure recovery of as much of its loan as possible.

Economic duress

Mr Morley complained the bank coerced him to conclude an agreement during a meeting on 8 July 2010. He said the bank’s actions amounted to intimidation and economic duress.

The Court of Appeal found that at the meeting on the bank did tell Mr Morley that if he did not agree to sell the portfolio to West Register, the bank would appoint receivers to carry out the sale to West Register on a pre-pack basis. However, the Court of Appeal found Mr Morley was not coerced. As such, an essential ingredient of the tort of intimidation and economic duress was not satisfied. It decided the agreement resulted from “robust (and even aggressive) negotiation between commercial parties, each of which had legal advice and each of which was well able to look after itself in that negotiation.”

In addition, the parties negotiated for several weeks after the meeting and the final agreement was a “split deal” that Mr Morley had persistently advocated, not what the bank had sought during the meeting. This further illustrated that Mr Morley was not coerced.

Crucially, Mr Morley took no action to set aside the agreement for over five years. The Court of Appeal stated his inaction showed he endorsed the agreement and invalidated any possible finding of coercion. It concluded:

“With hindsight, Mr Morley may feel a sense of grievance. But he entered into the agreement with the bank of his own free will.”


The Court of Appeal’s decision is welcome for lenders. It provides reassurance for four reasons:

  1. It reiterates that contractual duties are not generally to be implied into mortgages.
  2. Banks’ internal guidance and policies are rarely viewed by the courts as providing a basis for claims for breach of duty.
  3. If a duty to act in good faith applies, it can be satisfied by demonstrating a genuine commercial interest in enforcing security or renegotiating agreements.
  4. Where banks are renegotiating with borrowers with legal representation the courts are slow to find that a renegotiated agreement arose from intimidation or economic duress.