Deutsche Bank AG & Ors v Unitech Global Ltd & Ors

A court cannot use general case-management powers to circumvent the specific requirements of the Civil Procedure Rules governing summary judgment or interim payments. Where a defendant has a real prospect of establishing rescission, and that prospect is not improbable, summary judgment for the contractual debt should not be granted merely because rescission would require counter-restitution. A payment required as the price of equitable rescission is not ordinarily a judgment obtained by the claimant for the purposes of the interim-payment rule. Evidence said to show that payment would stifle a defence must be sufficient, proper and particularised.

The proceedings concerned claims by banks against borrowers and a guarantor arising from loan and swap transactions. Earlier, Cooke J held that rescission was unavailable, leading to summary judgment and refusal of permission to amend. The Court of Appeal reversed that interlocutory decision in [2013] EWCA Civ 1372, holding that rescission was available. The earlier orders based on the contrary issue estoppel therefore had to be reconsidered.

The principal issue was whether the court should require payment of approximately US$120 million into court, or make an interim payment, on the basis that any rescission would be conditional on counter-restitution.

1. The court set aside the rulings founded on the issue estoppel arising from Cooke J’s decision. In light of the Court of Appeal’s judgment, the defendants had a real prospect of establishing rescission, and that prospect could not be described as improbable. The summary judgment for approximately US$177 million was therefore set aside and the application for summary judgment was dismissed.

2. Under CPR Part 24, the relevant question was whether the defendants had a real prospect of successfully defending the bank’s contractual claim on the basis of rescission. The bank’s proposed counter-restitution was not itself the cause of action pleaded by the bank. It could not therefore justify a conditional order under CPR Part 24 or PD 24.

3. CPR 3.1(3) could not be used to impose a payment-in condition which CPR Part 24 did not permit. Following Huscroft v P&O Ferries [2011] 1 WLR 939, a general case-management power should not circumvent the requirements of a specific procedural regime.

4. An interim payment under CPR 25.7(1)(c) was unavailable. Although counter-restitution was an amount which might ultimately be ordered, the bank would not thereby have obtained judgment on its contractual cause of action. The court could not give the rule an interpretation it could not properly bear merely to reflect the likely economic outcome.

5. The further argument that payment would stifle the rescission defence also failed. The defendant carried a heavy evidential burden under Yorke Motors v Edwards [1982] 1 WLR 444. General and unparticularised evidence did not show that payment would be impossible.

6. The court made revised costs orders, including recovery of 70 per cent of the amendment costs, 60 per cent of the summary-judgment costs, and an interim costs payment of £95,000. The bank’s application for payment into court or an interim payment of US$120 million was dismissed.

1. Court of Appeal: in [2013] EWCA Civ 1372, the defendants’ appeal from Cooke J’s interlocutory decision was allowed. The Court of Appeal held that rescission was available.

2. High Court (Commercial Court): the present court set aside its rulings based on the former issue estoppel, dismissed the application for payment into court or an interim payment, and reconsidered costs.