Gama Aviation (UK) Ltd v Taleveras Petroleum Trading DMCC

Before imposing a condition requiring payment into court, the court must identify its purpose and ensure that the condition and sanction are proportionate and effective means of achieving it. A defendant must ordinarily receive notice and a reasonable opportunity to prove that the condition would stifle its defence.

A corporate defendant bears the burden of showing that neither its own resources nor funds available from owners or closely associated persons would enable compliance. A condition approaching the full claim requires particular caution. Judgment should not be entered for non-compliance where the merits remain undecided and the defendant might have a good defence.

The claimant sought summary judgment for sums allegedly due under an aircraft management agreement. Shortly before the hearing, the defendant served evidence disputing aspects of the claim and sought permission to rely upon it.

The deputy judge adjourned the application and admitted the evidence conditionally. He required the defendant to provide £1 million security, failing which judgment would be entered for the claimant. He had not heard submissions on the merits or decided that the defence was improbable.

The defendant appealed from the decision reported at [2018] EWHC 3090 (Comm). The issues were whether security could properly be required as the price of admitting the late evidence and whether judgment was a proportionate sanction for non-compliance.

Appeal allowed unanimously. The payment condition and the provision for judgment upon non-compliance were set aside. The defendant was permitted to rely on its late witness statement and Defence.

1. A court may make a conditional order on a summary judgment application under rule 24.6 of the Civil Procedure Rules 1998. Such an order may commonly be appropriate where a defence may succeed but probably will not. It may also be appropriate because of non-compliance or genuine doubt about whether litigation is being conducted in good faith.

2. Where a defendant has a real prospect of defending the claim, the court must not impose a condition with which compliance is likely to be impossible. The defendant bears the burden of establishing inability to comply. A company must address whether funds would be made available by its beneficial owners or closely associated persons. Bare assertions and an absence of evidence about ownership, accounts and financial support did not discharge that burden: MV Yorke Motors v Edwards [1982] 1 WLR 444 and Goldtrail Travel Ltd v Onur Air Tasimacilik AS [2017] UKSC 57.

3. Where no advance notice has been given that a payment condition will be sought, a defendant is not ordinarily at fault for failing to produce evidence of its means. Once the judge raised the condition, procedural fairness required a reasonable opportunity to provide that evidence. The judge's refusal to allow that opportunity was an error of principle. The fresh evidence was therefore admitted on appeal, although it failed to establish that the defence would be stifled.

4. The court must identify the purpose of a condition and determine whether the condition and supporting sanction are proportionate and effective means of achieving it. Although the stated purpose was to test whether the defence was genuine, security exceeding 90% of the principal claim was disproportionate. The judge could not fairly conclude that the defendant was merely delaying the inevitable without first hearing its arguments on the merits.

5. The sanction of entering judgment was independently disproportionate. It placed the defendant in a worse position than refusal of permission to rely on the statement and deprived it of arguments which did not depend on new evidence. Judgment could have followed despite a good defence and without judicial consideration of the merits.

6. The appropriate response to the late evidence was an order for the costs thrown away by the adjournment. Those costs could not be summarily assessed on the material before the Court of Appeal, so payment was not made a condition of reliance on the evidence.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The payment and judgment conditions were set aside, and the defendant was permitted to rely on its witness statement and Defence: [2019] EWCA Civ 119.
2. London Circuit Commercial Court: Mr Richard Salter QC admitted the late witness statement and adjourned the summary judgment application, subject to £1 million security and judgment upon non-compliance: [2018] EWHC 3090 (Comm).