Anglo-Eastern Trust Ltd. & Anor v Kermanshahchi

A conditional order may be made where a defence has a real possibility of success but is unlikely to succeed. The court must not require payment of a sum which the defendant cannot raise, because that would stifle the defence and be equivalent to summary judgment.

The court may impose a smaller, realistically obtainable condition. It may use common sense when assessing whether relatives or friends are likely to assist. Ordinarily, an exceptional conditional order should not be made without appropriate prior notice and an opportunity to submit evidence of means.

The claimant company sought repayment of more than £850,000, alleged to be interest-bearing loans. The defendant maintained that the payments represented the price of an interest in an Israeli property development and that any agreement was with the company's owner personally.

HH Judge Hegarty QC refused summary judgment because the defence had some prospect of success, but considered success improbable. He ordered the defendant to pay £1 million into court within 28 days, failing which the defence would be struck out and judgment entered.

The defendant appealed against that conditional order. The principal questions were whether it would stifle the defence, whether fresh evidence of means should be admitted, and what condition, if any, should replace it.

1. Appeal allowed in part. Park J, with whom Mance and Brooke LJJ agreed, held that the judge was entitled to find the defence possible but improbable. That conclusion was open to him on the documentary evidence and could not be shown to be wrong on a review under the appellate jurisdiction.

2. A court must not require a defendant to pay a sum which the defendant cannot raise as the price of defending a claim. Such an order would stifle the defence and would have the practical effect of summary judgment even though the court had found an issue fit for trial. Yorke Motors v Edwards [1982] 1 WLR 444 and Chapple v Williams were applied.

3. The same result was supported by article 6 of the European Convention on Human Rights. A financial condition may legitimately limit access to a court where compliance is reasonably possible. If the defendant cannot comply and the evidence demonstrates that inability, the order impairs the essence of the right of access. The domestic principle was sufficient to decide the point.

4. The Court of Appeal admitted the fresh evidence of means. Although appellate courts ordinarily refuse evidence which could have been produced below, the defendant had received no adequate advance notice of the proposed £1 million condition. The request arose only in the claimant's reply at a compressed hearing. Any fault by the defendant's advisers was insufficient to justify excluding evidence necessary to prevent serious injustice.

5. On that evidence, the defendant could neither pay nor borrow £1 million. It was also unreasonable to pressure his wife and sons to place that sum at risk. The £1 million condition therefore had to be set aside.

6. A smaller condition remained justified because the defence was weak and aspects of the defendant's evidence about his assets caused legitimate concern. The court could reasonably infer that his family could assist with £75,000 and require that sum as an assurance that the defence was genuine. The order was varied by substituting £75,000 for £1 million.

7. Brooke LJ added that, as a general rule, an exceptional conditional order should not be made without evidence of means unless the defendant has received appropriate prior notice. A formal application for alternative conditional relief is not required by the procedural rules; informal notice by letter may suffice. The defendant should receive an opportunity to place evidence of means before the order is perfected.

1. Court of Appeal (Civil Division): The appeal was allowed in part. The conditional order was varied by substituting £75,000 for £1 million.

2. High Court: HH Judge Hegarty QC refused summary judgment but ordered the defendant to pay £1 million into court within 28 days, failing which the defence would be struck out and judgment entered for the claimant.