Bedford Investments Ltd v Sellman

On a summary judgment application, the court may decide a short point of law or construction where the evidence is sufficient and the parties have had a proper opportunity to address it. A claim should proceed to trial where the defendant has a realistic prospect of success or there is another compelling reason for trial.

A contractual no-set-off clause will ordinarily be enforced. Departure from it requires exceptional circumstances. A higher contractual interest rate, stated as the primary rate and reduced on punctual performance, may nevertheless be capable of engaging the penalty rule where the reduction is withdrawn retrospectively after default. A plainly stated onerous term is not excluded merely because it has severe financial consequences.

The claimant sought summary judgment against the defendant under a guarantee securing a loan made to Kingsway Land Development LLP. The loan and guarantee had been assigned through several entities to the claimant after Kingsway defaulted.

The defendant raised eight issues: the validity of the assignments; set-off based on a counterclaim; penalty and onerous-term arguments concerning the interest provisions; construction of the loan’s interest clauses; estoppel; construction of the guarantee’s interest clause; and whether the parties’ relationship created another compelling reason for trial.

The central questions were whether the defences had a realistic prospect of success and whether any issue required determination at trial.

1. Summary judgment. The court applied CPR 24.2(a). The court may decide a short issue of law or construction summarily where it has the necessary evidence and the parties have had an adequate opportunity to make submissions. The court must not conduct a mini-trial, but it need not accept assertions lacking evidential substance.
2. Assignments. The agreements dated 13 December 2018 effectively assigned the loan, and the deed dated 13 August 2019 effectively assigned the guarantee. The email of 28 August 2019 gave adequate notice of the assignments. The requirements of section 136 of the Law of Property Act 1925 were therefore satisfied.
3. Set-off and compelling reason. Clause 9 of the guarantee excluded set-off. The breakdown of a joint venture and allegations concerning a common controlling mind were not exceptional circumstances. Giving effect to the clause did not impermissibly pierce the corporate veil. There was no other compelling reason for trial.
4. Penalty and onerous term. The defendant had an arguable case that the retrospective operation of the Standard Rate could amount to a penalty. That issue could be determined summarily as a legal issue, but the defendant’s argument succeeded only to the extent that it prevented summary judgment on Standard Rate interest. The onerous-term argument failed. The interest provisions were apparent on the face of the commercial loan documents.
5. Construction and estoppel. Clause 8.1 required Standard Rate interest from the date of the First Advance following default. The defendant identified no unequivocal representation supporting estoppel and no reliance on any such representation.
6. Guarantee. The reference to 3% in clause 4.1 was patently ambiguous as to the period, but the proper construction, having regard to the loan agreement and the commercial consequences, was 3% per month.
7. Disposition. The claimant obtained summary judgment for the capital and interest due at the Concessionary Rate. It also obtained guarantee interest at 3% per month from 23 February 2018. Standard Rate interest on the loan was not recovered summarily.