Momenta Holdings (PPI) Ltd v Cheval Legal Ltd & Ors

On strike out and summary judgment applications, the court must distinguish between a difficult case and one with no realistic prospect of success. Disputed evidence about an alleged oral agreement, its survival alongside later written agreements, and rectification generally requires a trial where the claim is legally coherent and supported by evidence with some degree of conviction.

A proprietary freezing order attracts the American Cyanamid principles. The applicant must show a serious issue to be tried, inadequacy of damages, an adequate cross-undertaking, and a balance of convenience favouring relief. Where the fund may be trust property, ordinary business expenses should not ordinarily be paid from it, although direct costs of generating the trust income, including counsel’s fees and adverse costs, may be permitted.

The claimant alleged that it had entered into a joint venture with the first defendant to pursue Plevin claims, and that later outsourcing agreements did not displace that arrangement. It claimed unpaid sums and asserted a proprietary interest in money held in the defendant’s client account.

The first defendant applied to strike out the claim and alternatively sought summary judgment. The claimant sought an interim injunction restraining dissipation of the funds. The court had to decide whether the pleaded case was legally coherent and had a realistic prospect of success, and whether the claimant had established the basis for proprietary freezing relief pending trial.

1. Strike out and summary judgment. The claim disclosed legally coherent causes of action and was not shown to be an abuse of process. The alleged prior joint venture and its intended survival alongside the outsourcing agreements raised hotly disputed factual issues requiring cross-examination. The claimant therefore had a realistic, rather than fanciful, prospect of success. The strike out and summary judgment applications were dismissed.
2. The entire agreement clause did not justify summary disposal. Although the claimant accepted that rectification was necessary, the burden was substantial and convincing proof would be required. At this stage, however, the evidence and incomplete disclosure meant that the rectification claim could not be characterised as fanciful or unrealistic.
3. There was also a compelling reason for trial under CPR 24.2(b), because related proceedings threatened by the defendant would require the same issues to be litigated and summary disposal risked conflicting judgments.
4. Interim injunction. The order sought was proprietary because the claimant alleged that the money in the client account was held on trust for the joint venture. The court therefore applied the American Cyanamid approach. There was a serious issue to be tried; damages would not be adequate because the fund could be substantially depleted; and the cross-undertakings were adequate.
5. The balance of convenience favoured relief, but on modified terms. Ordinary legal and business expenses were excluded because they might be paid from trust property. Counsel’s fees and adverse costs were allowed as direct costs of operating the joint venture and generating the trust income. Weekly reporting of deductions was ordered, with further deductions permitted by agreement or, failing agreement, by the court.

The strike out application was dismissed and the interim injunction application allowed on materially the same terms as the prior undertaking, subject to the stated modifications.