Advanced Industrial Technology Corporation Ltd v Bond Street Jewellers Ltd & Anor

Under Civil Procedure Rules 1998 Part 24, summary judgment may be entered where the defence has no real prospect of success and there is no compelling reason for a trial. The court must address the substance of any material factual dispute.

A person who pawns property represents by that conduct that he has title or authority to pledge it. Failure to disclose a lack of title or authority may amount to fraudulent misrepresentation. That deceit claim is independent of the implied warranty attaching to a pledge. A director remains personally liable for his own fraud when acting for a company.

The appellant lent £80,000 to a jeweller’s company against an Art Deco necklace entrusted to the company for sale or return. The second respondent, the company’s director, allegedly pledged the necklace without the owner’s authority and later failed to return it.

The High Court, Queen’s Bench Division, refused summary judgment. It treated the claim as dependent on an implied warranty of title and identified disputes about ownership, authority and the identity of the pawnor. The appeal concerned whether the evidence disclosed a real prospect of defending a personal claim in deceit and whether the respondent’s conduct could constitute a fraudulent representation.

Lord Justice Scott Baker gave the leading judgment, with Lady Justice Hallett agreeing.

1. The appeal was allowed. The lower judge had treated the claim as incapable of succeeding in law without deciding the central factual question: whether Mr Condrup told Mr Slack before the first agreement that the necklace belonged to a client and that he lacked authority to pawn it.
2. Under Civil Procedure Rules 1998 Part 24, the court had to determine whether the defence had a real prospect of success and whether any other compelling reason required a trial. The judge’s failure to analyse the evidence was material. The evidence made the defence fanciful, having regard to the formal pawn agreements, the release of the necklace to jewellers, the company’s financial position and inconsistencies in the respondent’s evidence.
3. A person who pawns an item is taken to undertake that he has title or the owner’s authority to pawn it: The Singer Manufacturing Company v Clark (1880) 61 LTR 591. If he lacks title or authority, he must disclose that fact; otherwise his conduct represents that he has the necessary title or authority. Active non-verbal conduct may amount to deceit, as illustrated by R v Barnard (1837) 7C + P 784, and an implied representation of authority may found a claim in deceit: Richardson v Silvester (1873) L.R. IX QB 34.
4. Non-disclosure may amount to fraudulent misrepresentation where there is a duty to speak. The claim may be brought independently of the implied warranty arising on a pledge. The authorities discussed in HIH Casualty and General Insurance Limited and Others v Chase Manhatton Bank and Others [2003] 2 Lloyd’s Law Reports 61 supported that conclusion.
5. A director is personally liable for his own fraudulent tort. His status as a director or agent of the company does not confer immunity: Standard Chartered Bank v Pakistan National Shipping Corporation [2002] 3 WLR 1547.
6. Summary judgment was entered for the appellant against the second respondent for £80,000, £4,750 representing the costs payable to Mr Hamilton, and interest at the contractual rate during the agreements and otherwise at the short-term investment rate.

• Court of Appeal (Civil Division): Allowed the appeal and entered summary judgment for the appellant against the second respondent in [2006] EWCA Civ 923.
• High Court of Justice, Queen’s Bench Division: His Honour Judge Seymour Q.C. refused the appellant’s application for summary judgment.