Kallakis v AIB Group Plc & Ors

At the summary judgment or strike-out stage, the court asks whether the claim has a realistic, rather than fanciful, prospect of success. It must avoid a mini-trial, while analysing assertions that are contradicted by contemporaneous documents and considering evidence reasonably expected at trial.

A foreign company’s derivative claim is governed by the law of its country of incorporation. A derivative claim on behalf of a trustee may proceed in special circumstances where the trustee has failed to protect beneficiaries’ interests. The narrow reflective-loss exception may apply where the defendant’s wrongdoing directly causes the company’s legal impossibility of bringing a claim.

The claimant, a beneficiary of a trust, brought claims arising from the Bank’s lending, alleged seizure of property-holding companies and subsequent sale of properties. He advanced claims personally, by assignment of the trustee’s alleged claims, and derivatively on behalf of the trustee and the BVI-incorporated special-purpose companies.

The first, second and fifth defendants applied for strike out and summary judgment. The issues included the viability of derivative claims, the alleged mortgagee’s duties, misrepresentation, reflective loss, and whether the claims were properly brought against the relevant bank entity. The defendants also applied to substitute the fifth defendant for the first and second defendants.

1. Summary judgment principles. The court applied the principles summarised in Magdeev v Tsvetkov [2019] EWHC 1557 (Comm), including the requirement for a realistic prospect of success, the prohibition on a mini-trial, and the need to consider evidence reasonably expected at trial. The court may decide a short point of law where the evidence is sufficient and the parties have had a proper opportunity to argue it.
2. Claims involving the SPVs. The fact that the BVI companies had been struck off did not, without evidence of BVI law or restoration procedures, establish that a derivative claim was impossible. However, the claimant had no real prospect of pursuing a derivative claim on behalf of the SPVs because the pleaded claims did not arise from a director’s breach of duty or trust and would not succeed under the relevant common-law principles.
3. Trustee’s personal claims. The trustee’s alleged misrepresentation claims were not dependent on legal ownership of the SPV shares. Reliance remained a matter for trial, and the claim in negligent misrepresentation had a realistic prospect even if deceit could not be established. The alleged seizure, lawful exercise of the power of sale and undervalue sale also involved factual issues unsuitable for summary determination.
4. Reflective loss. The court proceeded on the basis of the law stated in Sevilleja Garcia v Marex Financial Ltd [2018] EWCA Civ 1468. The exception to the reflective-loss rule is narrow and requires legal impossibility directly caused by the defendant’s wrongdoing. On the evidence, the SPVs’ inability to maintain registration appeared to stem from the Bank’s conduct, and there was no evidence that the trustee or beneficiaries could fund proceedings or otherwise make a claim possible. The trustee therefore had a realistic prospect of overcoming the reflective-loss objection.
5. Derivative claim on behalf of the trustee. Applying Roberts v Gill [2011] 1 AC 240, special circumstances may exist where a trustee has failed, excusably or inexcusably, to protect beneficiaries’ interests. The pleaded circumstances gave the derivative claim a realistic prospect.
6. Disposition. Claims based on the SPVs’ derivative claims, fraudulent misrepresentation by the claimant personally, and the personal claims concerning the sale without legal authority and undervalue sale were struck out. The remaining negligent misrepresentation and assigned or derivative trustee claims were not struck out and were not subject to summary judgment. The Variation Application was granted.