A project monitor can, to a degree, protect a bank providing development finance by keeping it abreast of costs and issues along the way. If something goes wrong, the project monitor can notify the bank who, in turn, can reduce or terminate its funding. However, this relationship can sometimes break down or fail to work as intended. The decision in Lloyds Bank Plc v McBains Cooper Consulting Limited is a further sign that the courts are moving away from placing the blame solely on the project monitor or, vice versa, the lender, should a development project go wrong and are, instead, leaning towards apportioning blame between the parties. 

In this instance, the court held that the claimant lender was able to establish reliance and causation on the defendant’s negligently prepared progress reports from 12 August 2008. However, the court also found that the lender had itself been negligent in entering into the loan in the first place; consequently, damages awarded were reduced by one third.


In May 2007, the lender – Lloyds Bank Plc - agreed to lend £2.625 million to Miracles Signs & Wonders Ltd (the Borrower) in order to redevelop a church in Willesden, London. The defendants – McBains Cooper Consulting Ltd – had been retained by the Bank over a year earlier, since February 2006, to act as its project monitor to check the progress and quality of the development works and approve applications for drawdown. 

From the start there were a number of irregularities: the facility amount had been increased by the Bank without this being communicated to McBains; McBains had, in turn, failed to request a copy of the Facility Letter. After several Progress Reports ("PRs") had been issued by McBains, there was a sudden mention of a ‘third floor’ and it was not clear as to whether this floor was to be redeveloped and, if so, whether it would be at the Borrower’s or the Bank’s expense. 

The facility was found to have been insufficient to cover the costs of the development from the very start, as it had failed to provide adequately for professional fees, contingencies and the fact that interest was payable quarterly. McBains also breached its contractual duties under the retainer to visit the site before preparing its PRs and, by adopting a ‘contractual’ approach that favoured form over substance, was slow to alert the Bank to variations that could adversely affect the Bank’s interests. 

The facility was nearly exhausted after 21 months with the development far from complete. McBains first reported to the Bank that there were insufficient funds in the facility to cover the development costs in PR No 17 issued on 17 March 2009; the Borrower was unable to repay the loan and the Bank sought to realise its security on the property. 

The Bank looked to McBains to recover the shortfall, issuing a Claim Form in July 2013 and Particulars of Claim on 4 April 2014. An adjudication in 2013 awarded nearly £290,000 in favour of the Bank, leaving an outstanding claim of £1.4 million.

No party is without blame

Both parties had fallen below the standard that was reasonably to be expected of them, as they ultimately conceded in their closing submissions; the court stating that "it is now quite clear that this loan should never have been made by the Bank in the first place (a decision for which it cannot blame McBains Cooper) and that during the course of the work McBains Cooper gave advice that was unquestionably negligent". 

The court had to decide whether the Bank relied on the PRs and whether such reliance caused it to suffer a loss.


The court affirmed that the Bank did not rely on McBains in entering the facility. However, the Bank was entitled to rely on the advice contained in the PRs during the course of the project for the monitoring of the development works. 

The court found that McBains should have advised the Bank of "any significant variations to the building contract" and that it is "an important part of a project monitor’s role to check the [drawdown] application so as to ensure that it is confined to expenditure falling within the scope of the facility", as failure to do so would clearly be contrary to the Bank’s interests. Applying this to the facts at hand, the joint expert report had stated that McBains should have advised "as soon as the borrower included costs of works to the third floor in any application for drawdown under the facility"; this was later reiterated by the court which noted that "it was [McBains’] duty to advise the Bank accordingly and not to recommend that those sums be included in the monthly drawdown". Indeed, the court considered it likely that the Bank would have disputed its obligation to pay if McBains had brought to the Bank’s attention the £10,000 for works on the third floor in clear terms.


Assessing the impact of McBains’ negligence in preparing the PRs, the court noted that "none of the breaches of duty by McBains Cooper caused any loss to the Bank until its failure to advise the Bank in PR No 10 of the fact that the current drawdown application included about £10,000 in respect of works to the third floor". This was because "[the Bank] accepts that it would have paid those sums in any event", for instance with regards to the removal of the additional asbestos. The crucial point arising from PR No 10, was that it included sums falling outside the scope of the facility, namely for the works to the third floor. 

Having established that McBains had caused the Bank loss from PR No 10 (being the sums paid which should not have been drawn down from the loan facility), the court then turned to examine whether it had been "the sole effective cause of this loss". The court concluded that the Bank knew, or ought to have known, that the facility was not adequate to cover the development costs and that it should have sought clarification of the inaccuracies in McBains’ PRs; the court assessed that the Bank was contributorily negligent. Accordingly, the award was reduced by one third.


Procedurally, this case encourages parties to demonstrate causation and plead a claim without delay, whilst contemporaneous documents are still available. The Bank was unable to prove their allegation that McBains had failed to attend site meetings (largely due to the passage of time). 

Whilst not altering the current law, this case is a stark reminder that lenders will not be able to escape their own failings in a matter by placing sole blame on a project monitor. The decision should provide reassurance to project monitors and other professionals – particularly surveyors - that the courts will not overlook the failings of the banks when awarding damages and is also a reminder to the monitor to pay close attention to the scope of the loan facility as a project develops on site. 

Further reading: Lloyds Bank Plc v McBains Cooper Consulting Limited [2015] EWHC 2372 (TCC)