Sucden Financial Limited v TMT Metals AG & Ors

On summary judgment, the court must decide whether the defence has a realistic prospect of success without conducting a mini-trial. A defendant must substantiate its case with evidence and cannot rely on the prospect that further evidence may emerge.

A contractual term preventing a party from deliberately preventing performance may be implied where necessary or obvious. A contractual discretion must also be exercised honestly, in good faith and without arbitrariness, capriciousness or unreasonableness. Express contractual wording requiring reasonableness does not necessarily exclude that obligation.

Where the proposed defences are fanciful, unsupported or contradicted by the contract and contemporaneous evidence, summary judgment may be granted and amendment refused as futile.

Sucden provided TMT with a futures and options trading facility under a contract governed by English law. Following a sharp rise in nickel prices, TMT failed to meet margin calls and made only partial payments. Sucden claimed US$6,637,746.65, plus interest.

Sucden applied for summary judgment against TMT. TMT relied on proposed defences involving prevention of performance, alleged arbitrary or capricious exercise of contractual powers, waiver or estoppel, and an alleged inconsistency in the basis and amount of the debt. TMT also sought leave to amend its Defence.

The central issues were whether those defences had a realistic prospect of success and whether the proposed amendments should be permitted.

1. Summary judgment principles. The court applied the established approach that the applicant must show that the defence has no real prospect of success and that there is no other compelling reason for trial. The court must avoid a mini-trial, but need not accept unsupported assertions or assertions contradicted by contemporaneous documents. A party cannot simply assert that evidence will become available later (paras [20]-[26]).
2. Proposed amendment. The draft Amended Defence was considered on a de bene esse basis, as though permission had been granted. This avoided an artificial assessment of the summary judgment application by reference only to the existing pleading. The proposed case was assessed by reference to the same prospects-of-success standard applicable under CPR Part 24 (paras [28]-[31]).
3. Prevention of performance. A term was implied into the Contract that Sucden would not prevent TMT from performing its contractual obligations. The implication was necessary or obvious and remained appropriate despite the detailed contractual terms. However, the alleged pressure was insufficiently pleaded and unsupported. Sucden was exercising contractual rights to demand margin and protect itself against loss. The prevention defence therefore had no real prospect of success (paras [34]-[46]).
4. Contractual discretion. Sucden was under an obligation not to exercise its contractual entitlement arbitrarily, capriciously or unreasonably. The express reference to exercising the discretion reasonably did not exclude the implied obligation. There was, however, no real evidential basis for alleging arbitrary, capricious or unreasonable conduct, and the chronology did not establish causation (paras [47]-[53]).
5. Other defences. The express non-waiver provision defeated the waiver and estoppel case. The alleged distinction between margin calls and settlement of positions was raised too late and, in any event, clause 8.1 was sufficiently broad to cover actual crystallised loss and risk of loss. The alleged discrepancy in the amount claimed was explained by rounding, subsequent payment and the sale of security (paras [54]-[63]).
6. Disposition. Summary judgment was granted for Sucden in the principal amount. Leave to amend was refused because the proposed amendments were futile and, principally, had no real prospect of success (paras [64]-[65]).