Court of Appeal judgment in Al Nesnas proceedings

The Court of Appeal allowed the appeal in part. The court held that the judge below had erred in granting summary judgment on the full misrepresentation case because she had not made the necessary findings about which specific representations were made, whether they were false at the time, whether they were fraudulent and whether they induced the claimant to contract. The court applied the test for summary judgment in CPR Part 24 r 24.2 and related guidance (including Easyair) and rejected late evidence under CPR Part 52 r 21(2).

However, the court found there was sufficient and uncontradicted material that the monies paid by the claimant had not been applied for the projects and could not be traced in the companies’ accounts. That justified summary judgment on the narrower ground of repudiatory breach of contract (and related remedies), so the Court of Appeal substituted the judge’s order with summary judgment for breach of contract and an order for damages to be assessed.

This appeal arose from a claim by Mr Al-Nesnas that he was induced to invest approximately £1.6 million into two property projects by representations made by Mr Al-Najar and companies in the Prestige group. The pleadings advanced claims of fraudulent or negligent misrepresentation, repudiatory breach of contract and unjust enrichment. The dispute involved two projects: a development at 27 The Bishops Avenue and a proposed Porcelanosa franchise outlet at 3B Winterhill Retail Park, Milton Keynes. The claimant alleged (i) that two other investors had represented they would invest alongside him, (ii) that projects existed as described, and (iii) that shareholders agreements represented a particular share capital and shareholding which did not exist.

Procedural history: summary judgment for the claimant was given by HHJ Walden-Smith ([2017] EWHC 568 (Ch) ex tempore; fuller reasons at [2017] EWHC 902 (Ch)). The judge ordered repayment of the sums invested and permitted an inquiry to trace funds. The defendants applied for permission to appeal; Patten LJ directed a hearing of permission and granted a stay of execution. At the Court of Appeal hearing the appellants did not appear; the court declined to admit late evidence served hours before the hearing and declined to stay the first appellant’s application despite his bankruptcy (s285 Insolvency Act 1986).

Issues before the Court of Appeal included:

• whether the judge below had made the necessary particularised findings to justify summary judgment on the alleged misrepresentations;
• whether the defendants had a real prospect of successfully defending the misrepresentation claims such that trial was required under CPR Part 24 r 24.2;
• whether summary judgment could properly have been given on negligent misrepresentation in the alternative to fraudulent misrepresentation;
• whether, nonetheless, there was a basis to uphold summary judgment on alternative grounds such as repudiatory breach and unjust enrichment because the claimant’s money had been diverted.

The Court of Appeal (Birss J, with the agreement of Floyd LJ) concluded that the judge below had not properly analysed or made the specific findings necessary to support summary judgment on the pleaded misrepresentations about (a) the presence and investment intention of the two named third parties and (b) the precise nature and existence of the two projects. Those matters involved disputed factual issues or distinctions (for example purchase versus development or lease) which could not fairly be resolved on the material before the judge. The court therefore granted permission to appeal and allowed the appeal on the misrepresentation grounds.

Separately, the Court of Appeal accepted the judge’s factual findings that the companies’ accounts and available documents showed the claimant’s funds had not been applied to the projects and that the defendants had not explained what happened to the monies. That absence of any adequate explanation, together with the documentary account evidence, meant the defendants had no real prospect of defending claims based on diversion/misappropriation of the funds. The court therefore substituted the order below by granting summary judgment for repudiatory breach of contract and gave the claimant liberty to apply for assessment of damages. The court declined to admit the late witness statement under CPR Part 52 r 21(2).

Appeal allowed in part. The Court of Appeal held that the judge below was wrong to grant summary judgment on the broad misrepresentation case because she did not make specific findings about which representations were made, whether they were false when made, whether they were fraudulent and whether they induced the claimant; those contested matters required trial. However, on the uncontested documentary evidence that the claimant’s monies were not shown in the companies’ accounts and no explanation was provided by the defendants, the court substituted summary judgment on the narrower ground of repudiatory breach of contract (with damages to be assessed). The court refused to admit late evidence under CPR Part 52 r 21(2) and declined to stay the appeal under s285 Insolvency Act 1986.

First-instance summary judgment by HHJ Walden-Smith, ex tempore judgment [2017] EWHC 568 (Ch) and fuller judgment [2017] EWHC 902 (Ch). Applications for permission to appeal led Patten LJ to direct a hearing and grant a stay of execution pending appeal. Permission to appeal was heard before the Court of Appeal, which refused to admit late evidence and heard argument on 13 June 2018. Judgment of the Court of Appeal delivered 10 July 2018 ([2018] EWCA Civ 1619).