Ffinal 09 AG v Floreat Merchant Banking Ltd

Summary judgment should be granted only where the claim or defence has no realistic prospect of success. The court must avoid a mini-trial, while assessing the evidence with appropriate analysis and considering evidence reasonably expected to be available at trial.

Applications are unsuitable for resolving legal issues that are complex, developing, or insufficiently worked out in the authorities. Where the operation of a change of position defence depends on disputed facts, context, disclosure and the meaning of good faith, the issue should ordinarily be determined at trial.

The claimant sought summary judgment for CHF325,000, alleging that four payments made to the defendant were loans or, alternatively, recoverable by restitution. The defendant disputed the claimant’s status as the true counterparty and relied on evidence suggesting that the payments were made on behalf of another entity, or had been accounted for through a wider reconciliation of the parties’ affairs.

The defendant also relied on a possible change of position defence concerning a CHF250,000 payment made to an individual believed to be the claimant’s beneficial owner. The central issue was whether the claimant had demonstrated that the defendant had no realistically arguable defence.

1. The application for summary judgment was dismissed. The defendant had demonstrated a realistically arguable defence.

2. The court adopted the principles in Easyair v Opal Telecom [2009] EWHC 339 (Ch). Summary judgment requires a realistic, rather than fanciful, prospect of success. The court must not conduct a mini-trial, but need not accept factual assertions without analysis. It must consider evidence already available and evidence reasonably expected at trial.

3. Summary judgment and strike-out applications are inappropriate for legal issues that are not short, straightforward, clear or obvious, or for issues requiring detailed argument and mature consideration. That was supported by AK Investments CJSC v Kyrgyz Mobil Tel Ltd [2012] 1 WLR 1804. It was also inappropriate to resolve an issue in a developing area of law, as explained in X (Minors) v Bedfordshire County Council [1995] 2 AC 633.

4. The absence of a loan agreement did not establish that the defendant had no real defence. The surrounding relationship, incomplete documentation, accounting material and the alleged reconciliation required fuller investigation. It was realistically arguable that the payments were to be accounted for between Trustees and the defendant rather than between the claimant and the defendant.

5. The possible change of position defence raised a developing and fact-sensitive issue. Applying the approach in Niru Battery Manufacturing Company v Milestone Trading Ltd [2002] EWHC 1425 (Comm), the relevance of good faith and the circumstances in which the money was paid away could not safely be determined without disclosure, factual findings and, if necessary, cross-examination.

6. It would have been impermissible to reject the evidence of the defendant’s independent professional accountant without testing it at trial. Determining the competing explanations would have required the mini-trial which summary judgment procedure excludes.