RAEL HODES v JACK FRANKEL

On an application for summary judgment, the court must decide whether the relevant claim or defence has a realistic, rather than fanciful, prospect of success and whether there is any other compelling reason for trial. The court must avoid conducting a mini-trial, but may assess whether factual assertions have real substance by reference to contemporaneous documents. Summary judgment may be appropriate where the evidence is sufficient to determine a short point of law or construction. A defence based on estoppel by convention should be expressly pleaded. At the summary judgment stage, an accord and satisfaction, including release inferred from conduct, is ordinarily a question of fact. A defence may succeed on those issues even though related contractual transactions were never completed.

The claimant lent the defendants £650,000 under a personal loan agreement intended to operate as an interim measure while proposed investment arrangements involving a property-owning special purpose vehicle were negotiated. The proposed corporate loan, shareholders’ and waterfall agreements were signed only in draft and were not completed.

The claimant sought summary judgment and/or strike-out, arguing that the loan had become repayable because the contractual condition was not satisfied. The defendants relied on alleged common assumptions or representations, estoppel, discharge or release, and election. The central questions were whether those defences had a real prospect of success and whether the pleaded case disclosed reasonable grounds for defending the claim.

1. Summary judgment principles. Under Civil Procedure Rules 1998, rules 3.2(a) and 24.2, the court applied the principles formulated in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) and approved in AC Ward & Sons Ltd v Catlin (Five) Ltd [2009] EWCA Civ 1098; [2010] Lloyd’s Rep. I.R. 301. The relevant prospect must be realistic and carry some degree of conviction. The court must not conduct a mini-trial, although it need not accept unsupported factual assertions at face value. It must consider evidence reasonably expected to be available at trial and should hesitate to decide finally where fuller factual investigation might affect the outcome.
2. A short point of law or construction may nevertheless be decided summarily where the court has the evidence necessary for proper determination and the parties have had a fair opportunity to address it. The court applied that approach to the present application.
3. The evidence gave the defendants a real prospect of establishing that the parties proceeded on a common assumption, or that representations were made, that the claimant or his nominee had invested in the SPV. There was also a real prospect of proving detrimental reliance, including failure to seek an alternative investor. The estoppel by convention and representation defences therefore had real prospects of success.
4. An estoppel by convention is a reason for denying liability under the agreement and should be pleaded expressly in accordance with Civil Procedure Rules 1998, rule 16.5(2)(a). The defence could be amended if relied upon at trial.
5. The defences that the Company Transactions had completed, and that the claimant had been put to an election between rights under those transactions and rights under the personal loan, had no real prospect of success. The transactions were neither dated nor exchanged and had not completed. Summary judgment was therefore granted on those two narrow issues. The application was otherwise dismissed.