Close Invoice Finance Ltd v Watts & Anor

The Court of Appeal allowed the claimant's appeal against an order of HH Judge Simon Brown QC which had set aside an earlier summary judgment. The claimant had obtained summary judgment under CPR Part 24 on a claim under a written Guarantee limited to £50,000. The defendants relied on an asserted assurance and a subjective belief that the claimant's credit protection element (CPE) insurance covered the debtor Glyn Webb. The Court held there was no arguable defence: the Discounting Agreement did not promise insurance irrespective of the underwriter's decision, there was no evidence Glyn Webb ever became insurable or that the claimant could have procured cover, and the defendants' subjective belief did not establish repudiatory breach, collateral contract or negligence. The appeal was therefore allowed and the order setting aside summary judgment was overturned.

This is an appeal from an order of HH Judge Simon Brown QC (Birmingham District Registry) dated 5 December 2008 (amended 20 December 2008) which had set aside summary judgment previously given on 16 September 2008. The claimant, Close Invoice Finance Limited (Close), carried on factoring business and had entered into a Discounting Agreement and related Guarantee and Indemnities with Haydon & Jackway Limited and with the defendants, Mr and Mrs Watts, as guarantors and indemnitees.

Background and procedural posture:

• Nature of the claim/application: Close sought summary judgment under CPR Part 24 for £50,000 under the written Guarantee (and accepted that the remainder of its claim under Indemnities required trial).
• Key facts: the Discounting Agreement provided for a monthly administration charge including a credit protection element (CPE). CPE cover required the underwriter (Euler Hermes) to give individual credit limits for debtors. Euler Hermes had given Glyn Webb a nil endorsement; Glyn Webb remained uninsured. Close nonetheless invoiced and received minimum CPE charges from Haydon. Haydon became insolvent and Close demanded repayment of pre-payments and called on the Guarantee and Indemnities.
• Procedural path: Close obtained summary judgment on 16 September 2008 after the defendants failed to attend. The defendants later applied to set aside that judgment and HH Judge Brown set aside his earlier order on 5 December 2008, finding the defendants had a reasonable prospect of success. Close appealed to this court. The defendants were adjudicated bankrupt on 4 August 2009 but no trustee had been appointed; the claimant wished to continue the appeal and the Court permitted it.

Issues framed by the court:

• Whether there was any arguable defence to the claim on the Guarantee arising from (a) an alleged assurance that CPE would come into force for Glyn Webb when it became insurable, (b) an asserted collateral contract or negligence in failing to procure insurance cover, or (c) the defendants' alleged understanding that they were insured.
• Whether summary judgment under CPR Part 24 had been properly obtained and should be restored.

Reasoning and disposition:

• The court accepted the undisputed factual matrix that CPE cover required a positive endorsement from Euler Hermes and that a nil endorsement had been given in respect of Glyn Webb and remained unchanged.
• The Discounting Agreement contained no term (and none could be implied) that CPE would extend to customers despite a nil endorsement by the underwriter; the alleged assurance that cover would take effect if Glyn Webb became insurable could not defeat the Guarantee because there was no evidence Glyn Webb ever became insurable or that Close could and should have procured a positive rating.
• The defendants' subjective belief (from invoices and correspondence) that they were insured was held not credible and, in any event, irrelevant to the pleaded causes of action of repudiatory breach, collateral contract and negligence when there was no factual basis that the underwriter had changed its position.
• Even if a separate claim for repayment of CPE charges might be arguable, such a claim would not have reduced Haydon's indebtedness below the £50,000 cap of the Guarantee.

Accordingly the Court of Appeal concluded there was no defence to the Guarantee claim and allowed the claimant's appeal, refusing the defendants' application to set aside the earlier summary judgment.

Appeal allowed. The Court held there was no arguable defence to the claim on the written Guarantee. The alleged assurance about CPE insurance did not establish a term, collateral contract or negligence sufficient to defeat summary judgment because (i) the underwriter had refused cover for Glyn Webb and there was no evidence that Glyn Webb became insurable, (ii) the Discounting Agreement did not and could not be construed to promise cover irrespective of the underwriter's endorsement, and (iii) the defendants' subjective belief was irrelevant to the pleaded causes of action. The judge's order setting aside summary judgment was set aside and the defendants' application to set aside the earlier summary judgment was refused.

Appeal from HH Judge Simon Brown QC in the Queen's Bench Division, Birmingham District Registry: HH Judge Brown gave summary judgment for the claimant on 16 September 2008; he later set aside that order by judgment on 5 December 2008 (amended 20 December 2008). The claimant appealed to the Court of Appeal, which delivered judgment in this appeal [2009] EWCA Civ 1182 on 2 September 2009, allowing the appeal and refusing the defendants' application to set aside the earlier summary judgment.