Capcon Holdings Plc v Edwards & Ors

On a summary judgment application, the court must ask whether the defending party has no real prospect of success and whether there is any compelling reason for trial. It must avoid a mini-trial and allow for the possibility of further disclosure and cross-examination.

For estoppel, detriment is a broad and substantial concept. It may consist of losing an opportunity that would have been available had the represented right been exercised earlier. Rescission may be barred where the party seeking it cannot make proper restitution. However, fraudulent misrepresentation may provide a defence to specific performance even where rescission is unavailable. The discretionary nature of specific performance may therefore make summary judgment inappropriate.

The claimants sought payment of further consideration and specific performance of an agreement for the sale of shares in Argen Limited. Capcon alleged that the agreement had been induced by negligent or fraudulent misrepresentations concerning ownership of shares in a subsidiary.

The Deputy Master granted specific performance and ordered Capcon to procure certificates relating to profits under the agreement. Capcon complied with that order but appealed, challenging findings on estoppel, restitution, delay and the discretion to grant specific performance. The central issues were whether the appeal remained competent, whether the contractual accounting mechanism had been satisfied, and whether Capcon had a real prospect of resisting specific performance at trial.

1. Appeal competent. The appeal was not pointless merely because Capcon had complied with the order. The order was for specific performance, and the entitlement to that remedy remained res judicata subject to appeal. Capcon could also appeal the costs order.
2. Contractual accounting mechanism. Clause 6.2 required the production of draft accounts. The agreement imposed no gradation of draft accounts. The accounts supplied enabled the auditors to issue the required certificates, and the contractual dispute procedure remained available. The four-day delay in supplying the 2004 accounts did not preclude enforcement.
3. Summary judgment test. Under CPR 24.2, the court had to determine whether Capcon had no real prospect of successfully defending the claim and whether there was any compelling reason for trial. It should not conduct a mini-trial, particularly where further disclosure and cross-examination might assist.
4. Estoppel. Capcon’s conduct from September 2004 represented unequivocally that it had waived rescission and would perform the agreement. Applying Gillett v Holt [2001] 1 Ch 210, detriment was not confined to financial loss. The loss of an opportunity to retake control of the company or sell its shares, together with Mr Edwards’s assistance in the subsidiary sale and later resignation, was sufficient substantial detriment. It would be unconscionable for Capcon to withdraw its assurance.
5. Restitution. Capcon had no real prospect of establishing a right to rescind because it could not properly restore what it had received. The business had been transferred to a subsidiary, dividends had been paid, the German subsidiary shares had been sold, and personnel had changed. The reasoning in Sheffield Nickel and Silver Plating Company Limited v Unwin [1877] 2 QBD 214 supported the conclusion on these facts.
6. Specific performance. The loss of rescission did not automatically require specific performance. Fraudulent misrepresentation may provide a defence to that discretionary remedy: Re Bannister [1879] LR 12 Ch 131. Since Capcon had a real prospect of proving fraud and resisting specific performance, summary judgment was inappropriate.
7. The appeal was allowed and the Deputy Master’s order was set aside. Further directions were to be considered to secure the prompt trial of the claim and counterclaim.

1. High Court (Chancery Division): appeal from the order of Deputy Master Beruns dated 26 April 2007. The appeal was allowed and the order granting specific performance was set aside.