Martin v Barclays Bank Plc

Summary judgment may be inappropriate where a defendant has produced evidence and legal arguments giving the defence a real prospect of success, even though the court considers success at trial improbable. The court may instead impose a conditional order requiring security under the CPR 24 Practice Direction. A defendant relying on unauthorised transactions, breach of mandate or negligence need not provide a comprehensive account before disclosure, but must identify at least some specific examples and ultimately plead the case with particularity. The court may revisit summary judgment after disclosure if the defence remains inadequately particularised.

The bank obtained summary judgment for £398,786.97 against Mr Martin under a personal guarantee of liabilities owed by IDG Management Services Limited. The guaranteed debt arose through a cross-guarantee relating to another group company. Mr Martin alleged that the group’s finance director had misappropriated funds and that the bank had processed unauthorised transactions or acted negligently. Master Ayer held that the allegations were too vague to provide a defence with a real prospect of success.

On appeal, Mr Martin relied on further Barclaycard material and advanced arguments concerning the effect of the customer’s dissolution, consolidation of accounts, and the no-set-off clause. The central issue was whether the new material and legal arguments required the summary judgment order to stand, be set aside, or be replaced by a conditional order.

1. The appeal succeeded. The Master’s order was set aside conditionally upon Mr Martin providing security of £325,000, or equivalent security such as a first-class bank guarantee.
2. The argument that dissolution of the principal debtor ended liability under the personal guarantee was weak, but it was strongly arguable that the guarantee covered undischarged indebtedness whether or not the customer was later dissolved.
3. It was strongly arguable that the definition of customer liabilities did not require the customer’s current-account position to be consolidated with its liabilities as surety under the cross-guarantee. The proposed cross-claim based on alleged defalcations was also sufficiently arguable to proceed, although clause 14.1 of the cross-guarantee created substantial difficulty and the fairness issue under the Unfair Contract Terms Act 1977 was not finally decided.
4. The additional evidence showed a finance director’s gambling problem and substantial, potentially unauthorised Barclaycard expenditure administered by the bank. It did not yet identify specific payments to gambling entities or establish that more than £211,000 of company funds had been misused. The defence therefore remained weak, vague and incomplete, but had a real prospect of success when assessed with the realistic prospect of further evidence through disclosure.
5. Under CPR 24.2, the court had to consider both the present evidence and the realistic prospect that pre-trial procedures would strengthen it. Applying paragraphs 4, 5.1 and 5.2 of the CPR 24 Practice Direction, a conditional order was appropriate because success at trial appeared improbable, but summary disposal was not yet justified.
6. After disclosure, Mr Martin would have to plead the alleged defalcations with particularity. If he could not do so, the bank could renew its summary judgment application. If adequate particulars were provided, the claim would proceed to trial.

Master Ayer granted the bank summary judgment for £398,786.97 under CPR 24. The High Court set that order aside conditionally on provision of £325,000 security.