Merchantbridge & Company Ltd v Safron General Partner I Ltd

Summary judgment under the Civil Procedure Rules 1998, Part 24, should not resolve a genuinely disputed oral compromise through a robust assessment of documents which does not explain why contrary evidence is rejected. Where the evidence makes the existence of the agreement reasonably arguable, the issue ordinarily requires a trial.

An appellate court should not uphold summary judgment on a different, unpleaded agreement advanced for the first time in a respondent’s notice, particularly where the judge below did not find that agreement. Questions about whether contractual conditions were exhaustive and whether a promise to execute a release amounted only to an agreement to agree were left open.

Merchantbridge appealed from an order of Morison J in the Commercial Court granting the defendant judgment under Part 24 on the basis that the claim had no real prospect of success.

The claim arose from the termination of an investment advisory agreement. The judge found that the parties had orally agreed that no wrongful-termination proceedings would be brought in return for payments meeting the claimant’s liabilities and wind-down costs. The claimant disputed making that agreement and had refused to sign the relevant minutes.

On appeal, the defendant accepted that the existence of the alleged agreement was reasonably arguable. It instead relied on an alternative agreement said to arise from a memorandum of 10 July 2001. The central issues were whether summary judgment was appropriate and whether it could be based on that unpleaded alternative case.

The appeal was allowed and the claim was directed to proceed to trial.

1. Disputed oral compromise. The judge had identified the correct ultimate question: whether the parties entered into a binding compromise. However, he assumed that the agreement had been reached and did not squarely address why the claimant’s contrary evidence should be rejected. In particular, he did not expressly deal with the claimant’s memorandum of 27 June 2001, which indicated that any agreement to forgo proceedings remained prospective. The Court of Appeal held that the judge had reached too robust and hasty a conclusion on disputed documentation. The alleged oral agreement therefore required determination at trial under Part 24 of the Civil Procedure Rules 1998.
2. Unpleaded alternative case. The defendant abandoned the reasoning on which the judge had decided the application. It relied instead on an alleged agreement formed by the claimant’s memorandum of 10 July and an acceptance communicated by Mr Jackson. That was a new case. The pleadings referred to the memorandum as recording terms already discussed and agreed, and did not plead the alternative agreement now advanced. Summary judgment could not properly be given on an unpleaded agreement which the judge himself had not found to exist.
3. Further matters and orders. The court left open whether the memorandum’s conditions were exhaustive and whether the promise to enter a mutual release could amount only to an agreement to agree. The defendant was ordered to pay the costs here and below on the standard basis, including the joinder application. The interim costs payment was to be repaid within 28 days with interest at 1% above base rate.

1. Court of Appeal (Civil Division) — The appeal was allowed. The alleged compromise required a trial, and the alternative agreement relied upon by the respondent was unpleaded: [2005] EWCA Civ 158.
2. High Court of Justice, Queen’s Bench Division, Commercial Court — Morison J granted the defendant judgment under Part 24 on the basis that the claim had no real prospect of success.