ADL Advanced Contractors Ltd v Avnish Patel
| Jurisdiction | England & Wales |
| Judge | Sir Nigel Teare |
| Judgment Date | 04 August 2021 |
| Neutral Citation | [2021] EWHC 2200 (Comm) |
| Docket Number | Case No: CL-2020-000204 |
| Court | Queen's Bench Division (Commercial Court) |
[2021] EWHC 2200 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Nigel Teare
SITTING AS A JUDGE OF THE HIGH COURT
Case No: CL-2020-000204
Mr James Medd (instructed by Candey Limited) for the Claimant
Mr Seb Oram (instructed by Clarkslegal LLP) for the Defendant
Hearing dates: 19 July 2021
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Sir Nigel Teare SITTING AS A JUDGE OF THE HIGH COURT
This application, at its inception, was an application by a creditor for summary judgment against a guarantor of the liability of the principal debtor. After the exchange of evidence the application was altered to one in which the creditor sought the determination of three issues as against the guarantor, which issues were said to be issues of law. Objection was taken to this re-framed application. It was said that the reframed application was an application for the determination of preliminary issues in circumstances where the court had not determined that the issues were suitable for determination as preliminary issues. Accordingly counsel for the Claimant, the creditor, applied for permission to have the three issues determined summarily upon the grounds that the Defendant, the guarantor, had no real prospect of succeeding on them, that the issues were issues of law and that no issue of fact was relevant to their determination. The application was opposed and the hearing of that application took most of the morning of the hearing. I reserved judgment on that application and invited argument on the issues of law so that, if I decided the application for permission in favour of the Claimant, the court would be able to determine the issues in question. In the event, by reason of pressure of time, only the first issue was argued orally. However, I had the benefit of the parties' written submissions on the other two issues.
The background to the claim
The background to the claim was described in this way by counsel for the Claimant, ADL Advanced Contractors Ltd. Both the Claimant and Verdi Construction Limited (“Verdi”—a company now in liquidation) are building contractors. The Defendant is a director of Verdi. The Claimant carried out extensive building works for Verdi on 6 different sites between 2016 and 2019 pursuant to various sub-contracts. Except in respect of one of the sites known as the High Trees site, the work related to sites which were being developed by SPVs set up by Mr Ashank Patel—“Ashank”, Mr Iqbal and Mr Haq under the umbrella of the Equity Real Estate Group of Companies. On the Equity sites, the contractual chain was from the relevant SPV to Verdi to the Claimant.
Verdi did not pay the Claimant promptly and by November 2017 there were considerable sums owed. The Defendant entered into a guarantee on 10 November 2017—“the 2017 Guarantee”—by which he, jointly with Ashank and Mr Iqbal, guaranteed to pay Verdi's debts and liabilities to the Claimant, which at that time were substantial. The Defendant's evidence is that the reason for Verdi's indebtedness is that Verdi was not being paid by the SPVs.
Following the entering into of the 2017 Guarantee, the level of Verdi's indebtedness to the Claimant initially improved, but it then deteriorated again.
As a result, in January 2019 the Claimant entered into various other agreements—“the 2019 Agreements”. The Claimant entered into two loan agreements with two of the Equity Group SPVs, “Omega” and “Sigma”. The effect of the loan agreements was that the SPVs took on £1.5m of Verdi's debt to the Claimant and £1.5m of that debt was deemed satisfied in full.
The Claimant also entered into two further guarantees—“the 2019 Guarantees”. These were:
i) a joint guarantee—“the Joint Guarantee”—which was entered into by Ashank, Mr Iqbal and Mr Haq by which they guaranteed Omega's liability to the Claimant up to a maximum of £350,000.
ii) a further guarantee—“the Iqbal Guarantee”—by which Mr Iqbal guaranteed the remaining £750,000 of Omega's liability to the Claimant.
The Joint Guarantee released and discharged Ashank and Mr Iqbal from their liability under the 2017 Guarantee, but it expressly provided that the Defendant was not so released. The Iqbal Guarantee also released Mr Iqbal from his liability under the 2017 Guarantee but did not contain an express reservation in respect of the Defendant's liability under the 2017 Guarantee (though the Joint Guarantee expressly referred to the Iqbal Guarantee in the release clause).
The Claim
The Particulars of Claim describe the claim against the Defendant in these terms. By letters before action dated 25 February 2020 and 1 April 2020, served by the Claimant's solicitors, the Claimant made written demand under the 2017 Guarantee for payment of Guaranteed Obligations in the total sum of £826,869.78, calculated as follows:
1. Principal: for work done under the Contracts £1,718,442.95
2. Interest: statutory interest of £269,663.64.
3. Retention: £300,219.08.
4. Unpaid Construction Industry Scheme advance payments of the Claimant's tax liability: £38,544.11.
5. LESS £1.5 million deemed satisfied under the Omega Loan and the Sigma Loan.
6. Sub-total of Guaranteed Obligations due and owing under the Guarantee: £826,869.78.
Additional sums by way of costs and interest are also claimed.
In circumstances where the 2017 Guarantee was a joint guarantee by the Defendant, Ashank and Mr. Iqbal and where the latter two were released from liability by the 2019 Guarantees to which the Defendant was not party it is not surprising that amongst the points taken by the Defendant by way of defence to the claim is that the effect in law of the release of the other two guarantors is to discharge the Defendant from liability under the 2017 Guarantee; see paragraph 15 of the Defence.
The Claimant disputes that that is the effect in law of the 2019 Guarantees and seeks summary determination of the following issue:
“1. Whether, as the Defendant contends, the effect of the 2019 Guarantees was to release him from the 2017 Guarantee?”
The other two issues upon which summary determination is sought are:
“2. What if any, was the effect of 2019 Agreements on the cap on the Guarantor's liability of £1.8m which cap was provided for by clause 2.4(b) of the 2017 Guarantee? The Defendant's case is that it reduced the maximum amount for which the Defendant could be liable from £1.8m to £300,000.
3. What, if any, was the effect of clause 2.3 (b)(i) of the 2017 Guarantee if Verdi failed to dispute a valuation within 5 days? The Defendant contends that if Verdi raised a dispute about a valuation at any time, that triggered the requirement in that clause for the parties to undertake a dispute resolution process.”
Issues 1 and 3 go to liability but it is important to note that the Claimant does not seek summary judgment on liability with the quantum of that liability to be determined. Even if issues 1 and 3 are determined in favour of the Claimant it would not be possible to say that the Claimant is entitled to judgment on liability. That is because, for reasons explained by counsel for the Defendant, there remain issues as to whether there is any outstanding indebtedness. The issues mentioned by counsel for the Defendant were, first, the effect of the 2019 Agreements by which £1.5m of Verdi's debt was extinguished, second, the effect of the termination of the sub-contracts in 2019 and, third, the extent to which sums arising from variations were part of the Guaranteed Obligations. It is unnecessary to explain these points any further because counsel for the Claimant accepted that they demonstrated the wisdom of the Claimant's decision not to seek judgment on liability with damages to be assessed.
Thus the question arises whether it is appropriate for the Claimant to seek summary determination of three issues which arise in connection with the Claimant's claim. The Claimant submits that it is, on these grounds:
i) CPR Part 24.2 provides that the court may give summary judgment “ on the whole of a claim or on a particular issue”.
ii) The notes to Part 24 in the White Book at 24.1.1 suggest that issue means any issue in the case.
iii) The three issues are issues of construction and hence of law which are not dependent upon any issue of fact.
iv) The Defendant has no real prospect of succeeding on these issues. The determination of the issues will assist the parties to resolve the claim brought by the Claimant against the Defendant. There is no other compelling reason why the determination of these issues should await trial.
On behalf of the Defendant it was submitted that the application for the determination of these issues is misconceived. In Anan Kasei Co. Ltd. and another v Neo Chemicals & Oxides (Europe) ltd and others [2021] EWHC 1035 (Ch) Fancourt J. explained the scope of Part 24 as follows:
“ The summary judgment application
79. There was no application for the trial of preliminary issues. Mr Mitcheson said that Rhodia would strongly have objected to a suggestion that there should be preliminary issues determined at this stage, but it was content to take the summary judgment application on the chin on the basis that, in relation to each point of law, Rhodia clearly has at least a realistic prospect of success at trial. Mr Cuddigan implied that the difference between preliminary issues and...
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