Greenstein & Anor v Broome and Wellington LP

On an application for summary judgment or an interim payment, a substantial commercial debt may be sufficiently proved by direct witness evidence supported by other evidence, even where detailed underlying records are not exhibited. Detailed records become necessary where the defendant raises a specific, particularised challenge. A general assertion that further investigation may reveal a defence does not require the matter to proceed entirely to trial, particularly where relevant information has been supplied and no adjournment or focused challenge is made. A pleaded defence may be rejected as having no reasonable prospect of success where unexplained delay, evidential deficiencies and commercial implausibility materially undermine it.

Broome and Wellington LP claimed against the Greensteins under guarantees of liabilities arising from a 2004 asset-sale agreement. The principal debtor had entered United States insolvency proceedings, and the underlying debt was later recorded in a consent judgment for $7,018,710.

On an application under Part 24 and Part 25, HHJ Waksman permitted the defendants to defend limited quantum issues, ordered an interim payment of $3.5m, and refused permission to defend on misrepresentation and counterclaim grounds. The defendants appealed, seeking permission to defend generally. The central issues were whether the proposed defences had a reasonable prospect of success and whether the evidence sufficiently established the debt for summary judgment or an interim payment.

Mann J gave the judgment of the court. Lloyd LJ and Longmore LJ agreed. The appeal was dismissed.

1. Misrepresentation. The judge below was entitled, and correct, to conclude that the alleged misrepresentation had no reasonable prospect of success. The allegation was raised late, without satisfactory explanation or contemporaneous complaint. The defendants had been closely involved in the earlier dispute and would naturally have raised the matter in the principal debtor’s insolvency proceedings if it had been genuine. The pleading and evidence also lacked context and were commercially implausible. The structure of the transaction, including deductions from asset proceeds and the possibility that the purchase price would not be fully realised from assets, was inconsistent with the alleged representation that the transaction would be self-funding.
2. Proof of debt and interim payment. An interim payment should be ordered only where the court is satisfied that at least the amount awarded will ultimately be payable. A claimant may sufficiently prove a commercial debt by evidence from a deponent verifying the amount, supported by a judgment against the principal debtor. The fact that underlying commercial detail is not exhibited does not, without more, require the entire issue to be left to trial. The defendants had received the relevant information, had been involved in the dispute for several years, and had raised no particularised challenges beyond the quantum points already identified. The judge was therefore entitled to find that the debt was sufficiently established, subject to the permitted deductions.
3. Counterclaim. The proposed counterclaim under the 1998 agreement was also properly rejected. It was advanced only after substantial delay, was inadequately pleaded and evidenced, and was unsupported by a clear explanation of the alleged entitlement under the capital-accumulation provision. The contemporaneous material strongly suggested acquiescence in the financing charge actually used.
4. Construction of the financing obligation. An obligation to finance a business operation did not, without much clearer wording, require B&W to make a gift of stock or bear the company’s overheads without reimbursement. The separate treatment of management charges in the audited accounts supported the more commercially sensible construction. The proposed counterclaim therefore did not provide an arguable defence.

• Court of Appeal (Civil Division): Appeal dismissed.
• Manchester District Registry, Chancery Division: On 26 September 2008, HHJ Waksman allowed the defendants to defend limited quantum issues, ordered an interim payment of $3.5m, and refused permission to defend on the remaining matters.