Heath (C.E.) Plc v Ceram Holding Company
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE KERR,LORD JUSTICE NEILL |
| Judgment Date | 05 July 1988 |
| Judgment citation (vLex) | [1988] EWCA Civ J0705-1 |
| Docket Number | 88/0578 |
| Court | Court of Appeal (Civil Division) |
| Date | 05 July 1988 |
[1988] EWCA Civ J0705-1
Lord Justice Kerr
and
Lord Justice Neill
88/0578
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR. JUSTICE HIRST)
Royal Courts of Justice
MR. GAVIN LIGHTMAN, Q.C. and MR. MICHAEL BRIGGS (instructed by Messrs. John Wood & Co., Solicitors, London W1R 4BY) appeared on behalf of the First Defendant (Appellant).
MR. JOHN CHADWICK, Q.C. and MR. JOHN MUMMERY (instructed by Messrs. Herbert Smith, Solicitors, London EC4M 5SD) appeared on behalf of the Plaintiff (Respondent).
MR. JOHN MUMMERY (instructed by Messrs. Booth & Blackwell, Solicitors, London W1P 4AT) appeared on behalf of the Second Defendant (Respondent).
I have asked Lord Justice Neill to give the first judgment.
This is an appeal from an order of Mr. Justice Hirst dated 26th May 1988, whereby he dismissed the application by the first defendants to strike out the summons by the second defendants for summary judgment against the first defendants. It is now clear from the amended respondents' notice and from the amended summons that the second defendants seek summary judgment, first under 0.16 rr.4, 8(3) and 11; secondly under the Supreme Court Act 1981 and thirdly under the inherent jurisdiction of the court.
The question which arises for decision in this case is whether one of two defendants who make a counterclaim against the plaintiff and the other defendant can obtain summary judgment against that defendant. At this stage the merits of the action, and indeed of the summons for summary judgment, do not require investigation.
I can outline the facts very shortly. The specially indorsed writ was issued on 2nd January 1986. The plaintiffs claimed against the first defendants, an unlimited company incorporated in Gibralter, to be entitled to a sum in excess of £6.2m. provided by the first defendants by way of security. On 5th February 1987 the first defendants served points of defence alleging that the sum in fact represented the deferred purchase price for the sale in 1982 by the plaintiffs of their then subsidiary the second defendants, at that time known as Motolease, and that the sum was irrecoverable because the sale agreement was illegal as being a fraud on the creditors of the second defendants, including the Revenue, and also involved a breach of section 42 of the Companies Act 1981.
On 24th July 1987 the second defendants applied to be joined as a party. In support of their application they exhibited a draft defence and counterclaim. On 18th September 1987 the second defendants were joined; the counterclaim was against both the plaintiffs and the first defendants. I understand that it was served in October 1987. The relief sought against the plaintiffs and the first defendants, as set out on pages 71 and 72 of the bundle before us, was as follows:
"(1) A declaration that the plaintiff and the first defendant are jointly and severally liable as constructive trustees to account for and pay to Second Defendant the sum of money now standing in the joint account in their names at Mercantile Credit Company Limited in London and that the said sum is held upon trust by them for the Second Defendant.
"(2) A declaration that the sum standing in the said joint account in the joint names of the Plaintiff and the First Defendant a Mercantile Credit Company Limited in London is an asset of the Second Defendant.
"(3) An order under s.172 of the Law of Property Act 1925 setting aside the transfer or transfers of money out of the account of the Second Defendant with Handels Kredit, Zurich on the ground that such transfer or transfers of money were made with intent to defraud the creditors of the Second Defendant.
"(4) An account of all moneys directly or indirectly received by or on behalf of the Plaintiff and the First Defendant in respect of the sale by the Second Defendant of its leasing contracts and payment to the Second Defendant of all sums found due from them to the Second Defendant on the taking of such account."
and further and other relief including necessary consequential accounts and directions.
On 30th October 1987 the second defendants issued a summons for judgment. This summons has now been amended with the leave of this court and without objection. The application is now for the following directions under 0.16 rr.4, 8(3) and 11 of the Rules of the Supreme Court and/or the Supreme Court Act 1981 and/or the inherent jurisdiction of the court:
"1. That final judgment be entered in favour of the second defendant against the First Defendants in the terms of the declarations and other relief sought in the Points of Counterclaim served herein.
"2. That such other judgment or order be made as the nature of the case requires.
"3. That the costs of the Second Defendants' claim against the First Defendants including the costs of this applciation be taxed and paid by the First Defendants."
It seems that some accommodation has now been reached between the second defendants and the plaintiffs, but the action by the plaintiffs and the counterclaim against the plaintiffs remain in being.
On 2nd December 1987 the first defendants issued the summons which is the subject of the present appeal.
The argument for the first defendants can be stated in three propositions:
(1) The power to grant summary judgment without a full trial is a power conferred by statute and by the rules.
(2) The court has no residual or inherent power to grant summary judgments.
(3) The rules do not confer any power to grant summary judgment against a co-defendant where there is a counterclaim, or could be a counterclaim.
The first defendants recognise that there is an apparent lacuna in the rules and that the situation is anomalous. But they submit that this is a matter for the Rules Committee and that the court should not be tempted to place a strained interpretation on the plain words of 0. 16 r.8.
In support of this argument we were referred to 0. 14 r.5(l) and to 0. 16 r.8, and in particular to 0. 16 r.8(2). I should start by reading these provisions in their present form. 0. 14 r.5 provides as follows:
"(1) Where a defendant to an action in the Queen's Bench Division (including the Admiralty Court) or Chancery Division, begun by writ, has served a counterclaim on the plaintiff, then, subject to paragraph (3) the defendant may, on the ground that the plaintiff has no defence to a claim made in the counterclaim, or to a particular part of such a claim, apply to the court for judgment against the plaintiff on that claim or part."
The next two paragraphs of the rules deal with consequential provisions.
Paragraph (3) provides that the rule shall not apply to a counterclaim which includes any such claim as is referred to in r.1(2); those are the well known exclusions of claims such as claims for libel, false imprisonment and where there is an allegation based on fraud.
In order to examine the argument presented on behalf of the first defendants it is necessary to make some reference to the history and development of the Rules of Court governing four separate forms of procedure: First, summary judgment under 0.14; secondly, counterclaims; thirdly, third party proceedings and summary judgments against third parties; and finally, proceedings between co-defendants and summary judgment against a co-defendant. Before turning to these specific forms of procedure, however, it will be convenient to remind oneself of the framework within which the individual Rules of Court are set.
For the purposes of the present appeal it is unnecessary to consider the forms of procedure in existence before the Judicature Act 1873. Thus, it was common ground at the hearing before us that before 1873, (a) that save as provided by the Summary Procedure on Bills of Exchange Act, 1855 there was no power to grant summary judgment on the lines now covered by 0.14; (b) that a defendant who wished to make a counterclaim against a plaintiff had to bring a separate action against the plaintiff and could not introduce a counterclaim into the plaintiff's action; (c) that a defendant who wished to obtain an indemnity or other relief against a third party had to bring a separate action against that third party.
In 1873 the Supreme Court of Judicature was created by the Supreme Court of Judicature Act of that year. At the same time it was provided by section 24 of the 1873 Act that law and equity should be concurrently administered. We were referred in particular to section 24(3) and (7); I should read those provisions. I read the opening words of section 24:
"In every civil cause or matter commenced in the High Court of Justice law and equity shall be administered by the High Court of Justice and the Court of Appeal respectively according to the Rules following."
Then, in subsection (3):
"The said Courts respectively, and every Judge thereof, shall also have power to grant to any defendant in respect of any equitable estate or right, or other matter of equity, and also in respect of any legal estate, right, or title claimed or asserted by him, all such relief against any plaintiff or petitioner as such defendant shall have properly claimed by his pleading, and as the said Courts respectively, or any Judge thereof, might have granted in any suit instituted for that purpose by the same defendant against the same plaintiff or petitioner; and...
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