In National Westminster Bank v Frankham, the English High Court considered the issue of whether the bank exceeded its role as a lender by taking over the management of a funded development.
The bank brought proceedings against Mrs Frankham for the recovery of moneys lent to her. By way of amended defence, Mrs Frankham raised the claim of equitable set off and made a counter claim based on the allegation that the bank, without her consent, gave instructions and made unauthorised payments to fund a development, leading to delay and further adverse consequences.
On appeal, the High Court reiterated that a bank does not ordinarily take on any obligations in relation to a funded project. Nonetheless, it might assume responsibility for additional obligations by acting, for example, as project manager, as asserted by Mrs Frankham. The bank would then owe a duty to "carry out those acts with appropriate skill and care". In relation to the issue of equitable set-off, the court found that the cross-claim was sufficiently connected with the bank's claim and that limitation was not a bar. As concerns damages for the asserted delay of the development, it was found that loss in the market value can be recoverable in certain situations. Therefore, it was held that Mrs Frankham's allegations had a real prospect of success and that this part of her amended defence should have been permitted.
See court decision here.