Mentmore International Ltd & Ors v Abbey Healthcare (Festival) Ltd & Anor

Summary judgment on a disputed factual case is appropriate only where the opposing account is fanciful or entirely without substance. Improbability, evidential weakness and material suitable for powerful cross-examination do not suffice. The court should avoid determining complex inferences without disclosure and oral evidence.

A contractual reference to best endeavours qualifies an apparently absolute undertaking where that construction gives the words their evident purpose. An expressly contemplated step need be taken only where the contract makes it conditional and the condition is satisfied.

Abbey Healthcare bought five care-home businesses from Mentmore under a share purchase agreement. Part of the price was deferred and subject to adjustment. Abbey also undertook to use its best endeavours to procure the release of personal guarantees given by two former directors.

The deputy judge granted summary relief after finding that Abbey had no realistic prospect of defending an allegation that it had failed to use best endeavours. He also ordered £1 million into court pending determination of the deferred consideration.

Abbey appealed against the summary disposition and payment-in order. Mentmore sought permission to cross-appeal, including on whether the undertaking imposed an absolute obligation. The principal questions were whether Abbey's evidence could be rejected summarily and whether there was a proper foundation for retaining £1 million.

1. The appeal was allowed. Abbey was given permission to defend the best-endeavours claim. Its evidence might have appeared improbable and lacked documentary support, but it was not inherently incredible. If accepted at trial, it provided a possible answer to the claim. The deputy judge had therefore gone beyond the permissible limits of summary judgment by resolving matters requiring disclosure, oral evidence and cross-examination.

2. The share purchase agreement imposed a best-endeavours obligation, not an absolute obligation to obtain release of the guarantees. The reference to best endeavours had to qualify the otherwise absolute wording. Permission to cross-appeal on that construction was refused.

3. The contemplated offer of a buyer's guarantee or other security was required only if the banks required it as a means of securing release. The agreement did not oblige Abbey to make an offer which, on its evidence, had no practical prospect of achieving that objective. The deputy judge had impermissibly treated the absence of such a specific offer as conclusive.

4. The former directors' entitlement to enforce the undertaking under section 1 of the Contracts (Rights of Third Parties) Act 1999 was not suitable for final determination at the summary stage. The potentially novel interaction between the undertaking and the agreement's general exclusion of third-party rights might require fuller consideration at trial.

5. The original order requiring £1 million to be paid into court lacked the necessary foundation. At the time it was made, the deputy judge had accepted that no deferred consideration was presently payable. There was consequently no present obligation capable of specific enforcement by requiring money to be retained under the agreement.

6. On the disposition of the money, Arden LJ, with whom Morgan J agreed, held that the £1 million should be repaid to Abbey. Since Abbey could no longer dispute that at least £400,000 was due under the first instalment, the court would order an interim payment of that sum under the Civil Procedure Rules. It was to be held under the contractual retention clause. Carnwath LJ would instead have remitted the whole question concerning the money in court to the High Court.

7. The applications associated with the proposed cross-appeal and for further evidence were dismissed, apart from evidence concerning the expert determination and consequential exchanges.

1. Court of Appeal (Civil Division): The appeal was allowed. Abbey received permission to defend the best-endeavours claim. By a majority on the disposition of the fund, the £1 million was to be repaid subject to an interim payment of £400,000 to be held under the contractual retention clause.
2. High Court, Chancery Division: The deputy judge held summarily that Abbey had failed to use its best endeavours, directed disclosure and continuing provision of information, and ordered £1 million into court pending the expert determination. No citation is stated in the judgment.