BPC Hotels Ltd v Brooke North (A Firm)

Summary judgment requires the court to decide whether the claim has a realistic, rather than fanciful, prospect of success. The court must avoid a mini-trial and consider evidence reasonably expected to be available at trial. Where causation depends on hypothetical conduct by third parties, summary judgment is inappropriate unless the claimant’s case is shown to be impossible or unrealistic.

A reflective-loss objection should not be determined summarily where the company’s alleged loss and the shareholders’ alleged personal losses are arguably separate and non-duplicative.

The defendants applied for summary judgment and strike-out relief in two related claims arising from advice allegedly given in connection with the financing and construction of a hotel. The claimants alleged that negligent advice caused the company to accept increased borrowing rather than default on payments due under the construction contract.

The defendants argued that the company would have entered receivership in any event, that a claim concerning a further personal guarantee was untenable, and that claims for lost directors’ earnings and pension contributions were barred by the reflective-loss principle.

1. Summary judgment approach. The court adopted the approach stated in Easyair Ltd (t/a Openair) v Opal Telecom Ltd (Costs) [2009] EWHC 779 (Ch). It had to determine whether the claims had realistic prospects, without conducting a mini-trial, while considering evidence likely to be available at trial.
2. Causation. The causation case was weak but not fanciful. The counterfactual depended materially on what Costain and RBS would have done after non-payment. Their evidence had not been heard, and the court could not confidently conclude that the claimants would be unable to prove a materially different outcome. Summary judgment on the causation claim and the associated loss claim was therefore refused.
3. Further personal guarantee. The claim concerning Mrs Chandra’s alleged exposure to the further £450,000 guarantee could not succeed because the earlier judgment had set that guarantee aside as against her. The claimants accepted this point.
4. Reflective loss. Applying the principle discussed in Johnson v Gore Wood & Co [2002] 2 AC 1, it was arguable that the company’s claimed net trading loss excluded the directors’ alleged lost salary and pension contributions. The pleading therefore did not necessarily involve duplication or recovery of loss suffered by another claimant. Strike-out was inappropriate at that stage.
5. The defendants’ application was dismissed, subject to a consent declaration that Mrs Chandra could not claim the £450,000. The claimants were awarded £600 for personal travel and copying expenses, with other attendance costs to be costs in the case.