Nationwide Building Society v Dunlop Haywards Ltd & Anor

Summary judgment may be granted in a claim involving fraud or dishonesty where the evidence establishes that the defendant has no real prospect of successfully defending the claim and there is no compelling reason for a trial. The seriousness of the allegation requires careful scrutiny, but dishonesty allegations do not automatically require oral evidence.

In deceit, the claimant must prove a false and material representation, knowledge of its falsity or recklessness, an intention that the claimant rely on it, reliance, and resulting loss. Contributory negligence is not a defence. A claimant’s failure to discover the truth through ordinary care does not defeat the claim.

Nationwide sought summary judgment under CPR 24.2 for damages to be assessed and interim payments arising from three allegedly fraudulent commercial property valuations prepared by the defendants. The valuations concerned Adderley Road, Carmarthen and Oldbury.

The defendants accepted that Nationwide had been the victim of fraud but disputed whether their relevant employees had participated in it. They also relied on the seriousness of the allegations, the unavailability of a key witness, possible issues concerning inducement, and Nationwide’s own carelessness.

The central issues were whether the evidence established deceit and vicarious liability, whether Nationwide had relied on the representations, and whether there was any compelling reason why those issues should proceed to trial.

1. Summary judgment. The court applied the test in CPR 24.2: the defendant must have no real prospect of successfully defending the claim, and there must be no other compelling reason for trial. The defence must have a real, rather than illusory or merely fanciful, prospect of success. Allegations of fraud do not by themselves create a compelling reason for trial, although the court must bear in mind the risk of injustice where credibility and dishonesty are disputed.
2. Deceit. The essential elements were a false and material representation, made knowingly or recklessly, an intention that the claimant should rely on it, reliance, and resulting loss. The evidence showed that the valuation reports contained false statements about inspections, property condition and leases. The valuations appeared to be desk-top valuations based on supposed leases, although the reports represented that physical inspections and assessments of condition had occurred.
3. The substantial disparity between the reported values and the expert evidence, particularly the vacant-possession values, supported the conclusion that the representations were not merely the result of incompetence or irrationality. The court was satisfied that the relevant statements were made recklessly as to their truth, that Nationwide was intended to rely on them, and that it did so in making loans exceeding £25 million.
4. Nationwide’s failure to discover the fraud through greater care was no defence. The fraud exception also prevented knowledge acquired by an agent defrauding the principal in the same transaction from being attributed to the principal. Any alleged fraud by Nationwide’s employee would not defeat inducement on the facts, since he was not the operative decision-maker.
5. The absence of access to the defendants’ key witness did not relieve them of the obligation to defend the claim. The court considered it unrealistic that his future evidence would materially alter the position. Final judgment was therefore appropriate, with damages to be assessed: against DHL for Adderley Road and Carmarthen, and against Limited for Oldbury. The parties subsequently settled on confidential terms.