Fashion Gossip Ltd v Esprit Telecoms UK Ltd & Ors

Summary judgment under Civil Procedure Rules Part 24 is inappropriate where the defence raises non-frivolous issues of developing law that depend on disputed facts. This is especially so where liability depends on allegations of fraud, dishonesty, unlawful conduct or a sham transaction which the defendant denies.

The court should not resolve uncertain questions of restitution or conspiracy from documents alone where disclosure and oral evidence may determine whether conduct was a legitimate exercise of contractual rights or an actionable exploitation of another party’s error.

Esprit supplied pre-paid telephone cards in Belgium and Holland. A rate-allocation error meant that calls to certain United Kingdom premium-rate numbers were debited at an ordinary international rate rather than the premium rate.

Fashion Gossip bought cards and arranged for calls to be made to its own premium-rate services. It made a substantial profit while Esprit incurred charges exceeding £1 million. Esprit alleged unjust enrichment and conspiracy by deceit. Fashion Gossip maintained that it had lawfully exercised the rights conferred by the cards and denied dishonesty.

Goldring J granted Esprit summary judgment under Civil Procedure Rules Part 24. Fashion Gossip appealed. The central question was whether the disputed claims, including the character of the scheme and the consequences of Esprit’s known error, could properly be determined without a trial.

1. The appeal was allowed unanimously. Lord Justice Judge gave the leading judgment, with which Mr Justice Bell and Lord Justice Ward agreed. The summary judgment was set aside.

2. Under Civil Procedure Rules Part 24, summary judgment requires both the absence of a real prospect of a successful defence and no other reason for a trial. This was not a plain or obvious case. The defence raised arguable and unresolved questions concerning restitution and conspiracy.

3. The court did not determine whether Fashion Gossip’s gain was unjust, whether Esprit had assumed the commercial risk of exploitation, or whether the conduct amounted to unlawful-means conspiracy. Those questions depended on the contractual arrangements, the nature and consequences of Esprit’s internal error, the parties’ knowledge, and the purpose and character of the calls.

4. Those issues required disclosure and factual findings. They also required oral evidence, particularly because Fashion Gossip strongly denied allegations of fraud and dishonesty and its managing director had not had the opportunity to explain the conduct alleged against him. The alleged offence under the Telecommunications Act 1984 likewise should not be found on documents alone.

5. Lord Justice Judge treated the competing arguments about mistake and misprediction, including the discussion in Kleinwort Benson Ltd v Lincoln City Council [1998] 3 WLR 1095, as matters that should remain open for trial. Lord Justice Ward emphasised that developing law and allegations of fraud required a firm factual foundation before legal conclusions could be reached.

6. The complaints about case management did not justify appellate intervention because no actual prejudice from the expedited procedure had been established. The parties were to agree a timetable for the future conduct of the action, failing which there would be a case-management hearing.

• Court of Appeal (Civil Division) — allowed Fashion Gossip’s appeal and set aside the summary judgment: [2000] EWCA Civ 233.
• Queen’s Bench Division — Goldring J, on 6 March 2000, granted Esprit summary judgment under Civil Procedure Rules Part 24. No citation is stated in the judgment.