Berntsen & Anor v Tait & Anor

Summary judgment is appropriate where the claimant has no real prospect of success and there is no other compelling reason for a trial. The court must assess the evidence available, or likely to be available, at trial, but must not conduct a full trial on the balance of probabilities at the preliminary stage. Public concern about similar conduct does not itself justify a trial where the particular claims have no realistic evidential basis. In insolvency proceedings, a claim concerning administrators’ conduct must identify a viable statutory basis, and a claimant must show a sufficient interest in the relief sought. A possible or contingent source of finance is insufficient to establish a realistic prospect that an insolvent business could have been rescued.

The appellants, members and creditors of a limited liability partnership that developed a hotel, claimed against the respondents, its administrators. They alleged that the administration was precipitate, that the respondents failed to secure available funding, that the hotel was sold at an undervalue through a conspiracy, and that the administrators had misconducted themselves.

Norris J allowed the claim to continue only after requiring further particulars and excluding claims outside paragraphs 74 and 75 of Schedule B1 to the Insolvency Act 1986. Morgan J later gave summary judgment on the rescue claim and subsequently on the extant claims. The appeals concerned whether those claims had a real prospect of success or whether another compelling reason required a trial.

1. Appeals dismissed. Permission to appeal was granted, but Morgan J’s summary judgment and the striking out of the examination claim were upheld.
2. Under CPR 24.2, the court had to consider whether the appellants had a real prospect of success on each claim and whether there was any other compelling reason for a trial. The assessment was based on the evidence available, or likely to be available, at trial. The court could not properly conduct a preliminary trial on the balance of probabilities.
3. The rescue claim had no real prospect of success. Lombard funding required personal guarantees which the appellants had not shown they would give. The alleged oral NatWest funding agreement had already failed in earlier proceedings, and the evidence of the relationship manager could not realistically improve the position. The VAT refund was contractually committed to reducing NatWest’s facilities. The proposed hotel lease did not provide a fixed income stream, and the council had made no funding offer. There was no evidential basis for concluding that NatWest would have provided further funding. Disclosure and repeated opportunities to challenge the position did not alter that conclusion.
4. The undervalue and conspiracy claim lacked a realistic evidential foundation. The difference between the Savills and Knight Frank valuations was explained by their different bases, and the hotel had been extensively marketed. West Register’s involvement justified scrutiny but could not overcome the evidence of the marketing process.
5. The examination claim under paragraph 75 of Schedule B1 could not be pursued by appellants who would suffer no direct loss from any repayment or release of administration costs. Any benefit would accrue to secured creditors, and no secured creditor had come forward.
6. Wider public concern identified in the Tomlinson report did not require a trial. Civil proceedings must address viable claims and do not become public inquiries merely because analogous conduct may raise matters of public interest.

• Court of Appeal (Civil Division): [2015] EWCA Civ 1001 — permission to appeal granted, but the appeals dismissed.
• High Court, Chancery Division, Companies Court: Morgan J entered summary judgment on the appellants’ claims by orders dated 31 January and 8 April 2014.
• High Court, Chancery Division, Companies Court: Norris J’s judgment of 1 February 2013 permitted a more particularised claim to proceed, while excluding claims outside paragraphs 74 and 75 of Schedule B1 to the Insolvency Act 1986.