Abbot Investments (North Africa) Ltd v Nestoil Ltd

Summary judgment is inappropriate where the evidence gives the defendant a real, though potentially weak, prospect of success. Credibility issues ordinarily require a trial, particularly where relevant evidence remains unchallenged.

A guarantee will not necessarily cover liabilities arising from the claimant’s own fraud. Clear words may be required before such an extensive indemnity is construed as applying.

A conditional payment-in order is made under CPR 3.1(3). The court must identify its purpose and impose a proportionate and effective condition. Where a defence is possible but particularly weak, security may be ordered, unless the defendant proves that payment would probably stifle the defence. The inquiry may include resources available from directors or shareholders.

The claimant sought summary judgment for sums allegedly due under a guarantee of a loan note. The loan note had not been paid, and the defendant argued that rescission of the underlying sale agreement and loan note discharged its liability.

The defendant relied on an arguable case of fraudulent misrepresentation concerning liabilities associated with the GLEN ESK. The claimant disputed the credibility and fraudulence of that case and argued that rescission was unavailable.

The court also considered whether, if summary judgment were refused, the defendant should be required to pay US$2 million into court as a condition of defending the claim, and whether that order would probably stifle the defence.

1. Summary judgment. The claimant had not shown that the defendant had no real prospect of successfully defending the claim. The evidence concerning the alleged misrepresentations raised matters for cross-examination, but did not establish that the defendant’s evidence was incapable of belief. The alleged fraud, based on recklessness as to truth, also had a real prospect of being established.
2. Construction of the guarantee. If fraudulent misrepresentation were proved, there was a real prospect that the guarantee would not be construed as applying to liabilities arising from the claimant’s fraud. The relevant clause did not expressly refer to losses arising from fraud. The authorities relied on by the defendant, including Canada Steamship Lines v R [1952] AC 192 and Capita (Banstead 2011) Ltd v RFIB Group Ltd [2014] EWHC 2917 (Comm), supported consideration of whether clear words were required.
3. Conditional order. The jurisdiction arose under CPR 3.1(3), supplemented by CPR Part 24.6 and Practice Direction 24 paragraphs 4 and 5. The court had to identify the purpose of the condition and ensure that it was proportionate and effective. A defence which was possible but particularly weak could justify payment into court.
4. The defence was particularly weak because of its evolution and the failure to mention the alleged misrepresentation in contemporaneous documents. The proposed payment of US$2 million was proportionate because the defence concerned the whole claim.
5. The defendant bore the burden of showing that payment would probably stifle the defence. The court could consider both the defendant’s resources and funds available from directors or shareholders. The evidence did not establish probable stifling. The application for summary judgment was dismissed, but a conditional order was made requiring payment of US$2 million into court, failing which the claimant could enter judgment.