Social Money Limited v Attwells Solicitors LLP & Anor

Summary judgment is appropriate where the evidence permits a short point of law or construction to be decided, but not where a defendant has a realistic prospect of success or further disclosure may affect the result. Contractual undertakings are construed in their particular context and, where their meaning is uncertain, generally in favour of the recipient. The court will not require performance of an impossible obligation. Client money held by solicitors is held on trust, but the terms of that trust may depend on the proper construction of the relevant undertakings. A possible defence under section 61 of the Trustee Act 1925 may also require factual investigation. Defective pleading should ordinarily be amendable before strike out is ordered.

Social Money Limited lent money for a proposed bridging transaction secured on two properties. Attwells Solicitors LLP acted for the purported borrower and gave undertakings concerning the use of the advance and registration of charges. The borrower was later found to have been an imposter.

SoMo applied for summary judgment, alternatively strike out, on claims for breach of contractual undertaking and breach of trust. Attwells contended that the undertakings were properly construed as requiring only the use of the money for the proposed borrower’s business purposes and the making of applications to the Land Registry. It also relied on possible defences including common mistake, failure of basis and section 61 of the Trustee Act 1925. The central issue was whether those matters could fairly be resolved without a trial.

1. Application dismissed. Attwells had a real, rather than fanciful, prospect of defending the claims. No part of the case was suitable for strike out.
2. The unusual factual pattern, and Attwells’ Part 20 claim against JMW, did not constitute a compelling reason under CPR rule 24.3(b) for refusing to decide the application. Nevertheless, the construction issues themselves required a trial.
3. The contractual undertakings were capable of more than one meaning. Undertaking 1 did not necessarily require Attwells to procure a legally effective charge or ensure that the money was paid to the true owner of the properties. It was arguable that it imposed a negative obligation concerning use of the money, rather than a positive obligation to ensure the success of the transaction.
4. Undertaking 4 was also capable of being construed as requiring an application for registration within five working days, rather than completion of registration within that period. That construction was consistent with undertakings 8 and 10 and with the principle that the court will not require performance of the impossible. Further disclosure might assist in resolving the competing constructions.
5. The possible defences based on failure of basis and common mistake faced difficulties but were not suitable for summary determination. Quantum also required further investigation.
6. The advance held by Attwells was held on trust. The terms of that trust were found in the undertakings, so the question whether payment to the purported borrower constituted a breach of trust depended on their construction and had to go to trial.
7. Section 61 of the Trustee Act 1925 potentially afforded Attwells relief. The trustee bore the burden of showing that it acted honestly and reasonably, followed by the discretionary question whether it ought fairly to be excused. The defence was inadequately particularised, but amendment should be considered before strike out.