Stratford Coin & Bullion Inc v Henien & Ors

Summary judgment is inappropriate where the defence, although improbable and facing significant evidential difficulties, cannot properly be described as fanciful. The court must avoid conducting a mini-trial and should leave disputed credibility issues to trial. This caution is particularly important where the allegations involve serious misconduct, although fraud allegations do not create an absolute bar to summary judgment.

Where a defendant relies on a disputed factual agreement but cannot establish a real prospect of defending part of the claim, judgment may be entered for the undisputed excess. Conditional leave to defend may require security where the defendant has not provided clear evidence of inability to raise funds, including from associates or family members.

The claimant, a Florida company trading in precious metals and coins, alleged that the defendants had misappropriated funds held through a London trading structure. It sought summary judgment for sums allegedly transferred from trading and bank accounts.

The defendants contended that an oral agreement entitled them to share the trading profits equally and that part of the retained money was held against possible tax liabilities. The claimant sought judgment on its primary claim, alternatively for the amount exceeding the alleged 50 per cent entitlement, and against two corporate defendants. It also sought a conditional order under CPR 24.6(b).

The central issues were whether the disputed agreement could be resolved summarily, whether the defendants had a real prospect of defending the alternative claim, and whether conditional security was justified.

1. Primary claim against the first and second defendants. CPR 24.2 required the claimant to show that the defendants had no real prospect of successfully defending the claim. A fanciful prospect is required before summary judgment can be granted. The court must avoid a mini-trial and should not choose between apparently credible factual accounts where that assessment depends on disclosure, oral evidence and cross-examination.
2. The alleged profit-sharing agreement was improbable and the defendants’ evidence faced substantial difficulties. However, the defence could not properly be characterised as fanciful. The claimant’s case depended on disputed factual issues, the circumstances in which the trading structure was established, and allegations of serious misconduct. Summary judgment on the primary claim was therefore refused.
3. Alternative claim. Even assuming that the defendants were entitled to half the net trading profits, the evidence established an excess retained sum of US$301,713.63. The alleged tax liability was unpleaded and unsupported by identified accounting advice or documentary evidence. Summary judgment in restitution was therefore granted against the first and second defendants for that sum, with interest to be determined and the order framed to prevent double recovery.
4. Corporate defendants. Judgment was granted against the third defendant for US$26,762.44, which it had received without a pleaded defence concerning that sum. Judgment was also granted against the fourth defendant for US$73,179.50 remaining in its trading account and held to the claimant’s order.
5. Conditional order. The defendants had the burden of showing clearly that they could not provide security. That required frank disclosure of their own assets and their ability to obtain funds from relatives, friends and business associates. Their evidence was inadequate, including in relation to family resources, lifestyle expenditure and recent transfers of value. A substantial conditional order was therefore appropriate, although the precise amount was reserved for further submissions.

Not stated in the judgment.