Net Insurance SPA & Anor v Torzi & Ors

On an application applying the CPR Pt 24 approach, summary judgment is appropriate where the defendant has no real prospect of successfully defending the claim and there is no other compelling reason for a trial.

A contractual right may be exercised by conduct where the agreement specifies no machinery for its exercise, but the conduct must clearly and unequivocally manifest the election and must be communicated to the other party. Enforcement of security does not ordinarily discharge the underlying payment obligation unless the agreement clearly provides for that result. Contractual duties of co-operation do not require a party to provide inaccurate documents. A set-off defence may proceed to trial where witness evidence and some supporting documentation disclose a real issue requiring fuller investigation.

Net Insurance SPA and Net Insurance Life SPA brought two related applications arising from a settlement of claims concerning Italian treasury bonds.

In the first action, Net sought enforcement of the Settlement Agreement against Gianluigi Torzi and Sunset Financials Ltd, including a €10 million payment obligation. In the second action, Net sought summary judgment against Mr Torzi for €2 million plus interest under a guarantee securing part of Sunset’s obligations.

The principal issues were whether Net had exercised a contractual right to purchase the bonds, whether Net had breached contractual duties of co-operation or confidence, whether Mr Torzi or Sunset had a viable set-off defence, and whether the guarantee had been terminated for repudiatory breach.

1. Summary judgment approach. The court applied the established CPR Pt 24 test: the applicant had to show that the defendant had no real prospect of successfully defending the claim and that there was no other compelling reason for trial.
2. Exercise of the purchase right. The Settlement Agreement did not require written notice before the right to purchase the Augusto Bonds could be exercised. Clause 20 dealt only with the form of notices required elsewhere. The right could therefore be exercised by conduct, but the conduct had to be clear and unequivocal and communicated to Sunset. The communications relied upon did not satisfy that standard. Net already held full title under Italian law, subject to Sunset’s contractual reversionary rights, so references to Net as owner did not demonstrate an election.
3. Effect of enforcing security. Sunset’s failure to perform clause 3.3 created a First Transfer Event of Default. Net was entitled to enforce its security and claim against the issuer of the bonds. Enforcement of the security or obtaining judgment against the issuer did not extinguish Sunset’s underlying obligation. The Settlement Agreement contained no such provision, and commercial common sense supported continued liability subject to accounting for any surplus and the no-double-recovery provisions.
4. Co-operation and confidence. Clauses 6.3 and 6.4 did not require Net to provide an inaccurate letter. The alleged breaches of co-operation and confidence had no real prospect of defeating the claims. Any claim based on the alleged breach of confidence was personal to Mr Torzi and could not assist Sunset.
5. Set-off and guarantee. Mr Torzi’s alleged breach-of-confidence counterclaim was sufficiently connected with the guarantee claim to be capable of supporting equitable set-off. Although the evidence of loss was limited, witness evidence and documentation required fuller investigation. Summary judgment was therefore refused in the guarantee action on that issue. The alleged repudiatory breach did not terminate the guarantee, and accrued liabilities would in any event have remained payable.
6. The court was minded to grant the principal relief in the enforcement action, subject to amendments and further submissions on costs. The guarantee action was to proceed to trial only on the alleged set-off defence.

Not stated in the judgment.