Bank of Leumi (UK) Plc v Akrill

A conditional order granting permission to defend may require payment into court where the defence appears possible but improbable. The sum must test the defendant’s bona fides, provide some protection to the claimant and discourage delay, while remaining one which the defendant can realistically raise. The court must consider the defendant’s means, including accessible assistance from third parties. A defendant resisting a condition on grounds of impecuniosity must provide proper, evaluable evidence of financial resources and attempted sources of funding. Existing security for the debt is relevant and may reduce the amount required. The court must also respect the defendant’s right of access to a court under Article 6 of the European Convention on Human Rights.

The claimant sued on guarantees securing the liabilities of two companies controlled by the defendant. Summary judgment had initially been entered for approximately £3.7 million. The Court of Appeal considered the defendant’s proposed defences improbable but not wholly implausible and granted conditional leave to defend. It remitted the matter to the High Court to determine the appropriate conditions.

The issue was the amount and form of the conditions, including whether the defendant should pay money into court and provide further evidence concerning the value of property relied upon as security.

1. The court identified the governing principles under the practice direction to CPR Part 24. A conditional order is available where a claim or defence may succeed but is improbable. It may require payment into court or the taking of a specified step, with dismissal or striking out following non-compliance.

2. The principal purpose of requiring security is to test the bona fides of a defendant whose case is shadowy or dubious. The condition may also provide some protection to the claimant and discourage litigation delay. The latter consideration had diminished in importance because judicial case management under the Civil Procedure Rules now controls the timetable more closely.

3. The amount ordered must be one which the defendant can pay. The court must consider the defendant’s means and Article 6 of the European Convention on Human Rights. A defendant asserting impecuniosity must show that the necessary resources are unavailable and cannot be raised from business associates, friends or relatives. Inadequate evidence about family or third-party support may justify inferences that undisclosed or accessible assets exist.

4. The defendant’s evidence did not provide a complete or reliable picture of his financial affairs. The court inferred that he had, or could access or raise, liquid funds. The claimant had valuable, although not demonstrably complete, security over the development site. That security reduced the sum which would otherwise have been required.

5. A payment of £1 million was appropriate. It was substantial enough to test bona fides, but proportionate to the defendant’s declared assets and capable of being raised within three months. The defendant was also required to file and serve a witness statement verifying matters relating to the valuation on which he relied.

• High Court (Chancery Division): Summary judgment was initially entered for the claimant on the guarantee claim.
• Court of Appeal: The defendant was granted conditional leave to defend because his proposed defences were improbable but not wholly implausible. The issue of appropriate conditions was remitted to the High Court.
• High Court (Chancery Division): The present court ordered payment of £1 million into court within three months and required further evidence concerning the valuation.