Rosesilver Group Corp v Paton

On a summary judgment application, a defendant must provide evidence showing a real prospect of successfully defending the claim. The evidential standard is not the balance of probabilities, and the court must avoid conducting a mini-trial. However, mere assertion is insufficient. Where the proposed defence depends on an unusual collateral agreement, security arrangement, rectification, estoppel, undue influence or fiduciary conflict, the defendant must give a clear and reasonably plausible account of the agreement or relationship relied on. Commercial oddities may justify scrutiny, but they do not themselves establish an arguable defence. Specific performance may be refused on equitable grounds only where the evidence establishes a sufficient basis for doing so.

Rosesilver sought summary judgment for specific performance of a contract under which it had agreed to purchase the leasehold interest in 47 Belgravia Court, London, from Ian Paton. The contract had been varied by a supplemental agreement and Paton had executed a transfer in escrow.

Paton resisted completion. His proposed defences were that the transaction was intended as security for loans, or was subject to an agreement postponing or preventing completion until related litigation ended; that the contract should be rectified or treated as subject to a collateral agreement; and that it had been procured through undue influence or an undisclosed fiduciary conflict involving the solicitor, Stephen Brook. The central issue was whether the evidence disclosed a real prospect of a defence.

1. Application granted. The defendant had not demonstrated an arguable defence, and summary judgment was entered for the claimant on its claim for specific performance.
2. Under CPR Part 24, the respondent to a summary judgment application bears an evidential burden once the applicant has produced credible evidence. The respondent need only show a real prospect of success or another reason for trial, but the case must carry some degree of conviction. The court must not conduct a mini-trial, although it may consider evidence reasonably expected to be available at trial.
3. The alleged security arrangement was inadequately pleaded and evidenced. The evidence did not explain how a contract for sale of the property was intended to operate as security, particularly when a conventional charge had been granted contemporaneously. The alternative suggestion that the contract was a commercial inducement to repay loans was also unsupported and inconsistent with the asserted condition based on success in litigation. Mere assertion, without a reasonable level of explanation, did not establish a real prospect of a defence.
4. The alternative case based on a collateral agreement, rectification or estoppel also failed. The alleged agreement was not stated with sufficient clarity or plausibility, and the entire-contract clause would prevent reliance on a collateral contract, although it could not prevent a properly established rectification claim.
5. The evidence did not establish an arguable case of undue influence. There was no sufficient evidence of a relationship of influence, a transaction calling for explanation, or express influence. Nor was there evidence that Brook acted for Paton in the transaction while having an undisclosed personal interest capable of creating a conflict of fiduciary duty. The unusual features of the transaction and the puzzling correspondence did not cure those evidential deficiencies.
6. The late evidence from Paton was excluded because it was produced without adequate prior notice, would have prejudiced the claimant’s ability to respond, and followed an agreed period for evidence during which Paton had already served material.