ED & F Man Liquid Products Ltd v Patel & Anor

On an application concerning a default judgment, the court must assess whether the proposed defence has a real prospect of success. The application should not become a mini-trial. Where the evidence raises substantial factual disputes requiring investigation and cross-examination, particularly disputes about the parties’ contractual relationship and alleged dishonesty, the issues should ordinarily proceed to trial. A specific price in invoices does not necessarily establish a straight sale arrangement where the surrounding evidence may support a joint venture and profit-sharing structure.

Default judgment was entered against Jitendra Patel in a claim concerning two alleged contracts of sale. His application to set aside the judgment was rejected by His Honour Judge Michael Dean QC, who considered the proposed defence fanciful, dishonest and incapable of success. Mahesh Patel had separately obtained the setting aside of default judgment on the basis that he had a real prospect of showing that he was not Jitendra Patel’s partner and was not personally liable.

Jitendra Patel applied for permission to appeal. The central issues were whether the evidence disclosed a real prospect of defending the claim and whether the judge had impermissibly determined disputed factual and credibility issues summarily.

1. Permission to appeal. Permission was granted to Jitendra Patel because there was a real prospect that the court would conclude that the proposed defence had a real prospect of successfully defending the claim.
2. Assessment on a summary application. The repeated acknowledgments of indebtedness and payments totalling $225,000 created serious difficulties for the defence. They did not, however, eliminate the need to investigate the disputed evidence at trial. The evidential basis for the alleged transition from a joint venture to a straight sale arrangement remained thin, and the claimant’s evidence had not challenged the explanation given for the acknowledgments and payments.
3. No mini-trial. The judge may have erred by treating the application as a mini-trial and by making findings of dishonesty against both defendants without their having the opportunity to give evidence and be cross-examined. Such disputed issues should be investigated at trial.
4. Contractual characterisation. The fact that invoices specified a price did not necessarily establish that the parties had abandoned profit sharing or entered a straight sale relationship. The invoices might have reflected an agreement as to the division of profit within an ongoing joint venture.
5. Costs application. Permission to appeal was refused to Mahesh Patel on the costs issue. There was no reason to interfere with the judge’s discretionary order that there be no order as to costs.

• High Court, Queen’s Bench Division: His Honour Judge Michael Dean QC refused Jitendra Patel’s application to set aside default judgment, finding that the proposed defence had no prospect of success. Mahesh Patel obtained the setting aside of default judgment on a separate issue concerning partnership and personal liability.
• Court of Appeal (Civil Division): Permission to appeal was granted to Jitendra Patel. Permission was refused to Mahesh Patel on the costs order.