UK (Aid) Ltd. v Damian & Ors

Summary judgment may be granted where the defendant has no real prospect of successfully defending the claim. The court must consider the evidence as a whole and ask whether there is a fair or reasonable probability of a real or bona fide defence.

Serious allegations of fraud or dishonesty require caution because oral evidence may undermine an apparently overwhelming case. That caution is an important factor, but it does not create a higher threshold or prevent summary judgment where the defence is incredible and the evidence establishes that there is no real prospect of success.

The claimant company, in creditors’ voluntary liquidation, sought orders requiring two former directors, Martin Mitchell and Leslie Silverman, to account for or compensate the company for funds allegedly misappropriated in breach of fiduciary duty. It also sought judgment in default or summary judgment against Silverman and an interim payment of £5.5 million.

Mitchell denied wrongdoing and maintained that payments to a British Virgin Islands company were legitimate commissions for business introduced by a third party. He had served a defence. Silverman had not served a defence and was incapable of giving instructions because of mental disorder; the Official Solicitor acted as his litigation friend.

The central issues were whether either defendant had a real prospect of successfully defending the claim and whether the proceedings against Silverman should be delayed indefinitely.

1. Summary judgment test. The claimant had to show that the defendant had no real prospect of defending the claim under Civil Procedure Rules 1998, Part 24. The appropriate question was whether there was a fair or reasonable probability of a real or bona fide defence. The former approach of refusing to reject inherently implausible evidence at the summary stage was too restrictive.
2. Fraud and dishonesty. The court must exercise particular caution where summary judgment would involve findings that a defendant had deliberately lied or acted fraudulently. That caution did not impose a special or higher test. It remained open to the court to grant summary judgment where the evidence, taken as a whole, demonstrated that the defence had no real prospect of success.
3. Mitchell. The evidence concerning the use of the funds transferred to LCI, the defendants’ close connections with the recipient entities, the size and timing of the payments, Mitchell’s false and inconsistent evidence, and his breaches of the freezing and disclosure order made the defence incredible. The evidence was sufficient at the summary stage without relying heavily on the family trusts or missing accounting records. Summary judgment was therefore granted.
4. Silverman. A defendant’s incapacity did not require the claim to be postponed indefinitely. The court could assess the prospects of a defence using all available documentary and other evidence, making allowance for the defendant’s inability to give instructions or evidence. Silverman had no real prospect of successfully defending the claim. Relief from the debarring order was granted, but an extension for service of a defence was refused, and judgment was entered under Part 24.
5. Interim payment. The court considered the claim a clear case for an interim payment and ordered Mitchell and Silverman to make an interim payment of £5.5 million.