Hope Capital 2 Ltd v Mr Stephen Michael Jones
| Jurisdiction | England & Wales |
| Judge | Master Clark |
| Judgment Date | 21 December 2022 |
| Neutral Citation | [2022] EWHC 3206 (Ch) |
| Docket Number | Case No: BL-2021-001669 |
| Court | Chancery Division |
[2022] EWHC 3206 (Ch)
Master Clark
Case No: BL-2021-001669
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Carly Sandbach (instructed by Prosperity Law LLP) for the Claimant
Damian Falkowski (instructed by Anton Van Dellen) for the Defendant
Hearing date: 18 November 2022
Approved Judgment
I direct that this approved judgment, sent to the parties by email at 10am on 21 December 2022, shall deemed to be handed down on that date, and copies of this version as handed down may be treated as authentic.
Application
This is my judgment on the application of the claimant, Hope Capital 2 Limited, by notice dated 10 September 2021 (“the application”), seeking
(1) summary judgment;
(2) an order striking out the Defence.
Parties and the claim
The claimant is a specialist provider of business loans. The defendant was at all material times a director of a company called Sphere Property 2 Limited (“the company”). His co-director was Alexander Collier.
The company owned the freehold properties known as:
(1) 18 Balcombe Road, Poole BH13 6DY (Title Number DT261185); and
(2) 18a Balcombe Road, Poole BH13 6DY (Title Number DT409305);
(together, “the Properties”).
In October 2018, the claimant entered into a suite of agreements (“the Agreements”) including a loan agreement (“the loan agreement”) with the company under which it provided a loan of £2.1 million (“the loan”) to the company, secured on the Properties. In support of the loan, the defendant and Mr Collier entered into a Deed of Guarantee and Indemnity dated 29 October 2018 (“the Guarantee”).
The following facts are common ground:
(1) The loan fell due on 29 April 2019;
(2) The company failed to make payment of any of the loan on the due date;
(3) The amount of the loan has been reduced by the sale of the Properties by LPA receivers appointed for that purpose;
(4) Substantial sums remain outstanding;
(5) The claimant has demanded payment from the defendant under the Guarantee;
(6) The defendant has failed to pay.
On 20 January 2020 another company in which Mr Collier was (and remains) the sole director, Sphere Property 3 Ltd (‘Sphere 3’), entered into a second charge (“the second Charge”) in favour of the claimant in respect of 20 Balcombe Road, Poole BH13 6DY, in order to provide the claimant with additional security in respect of the company's indebtedness to it. Shortly afterwards, on 15 May 2020, LPA Receivers were also appointed over 20 Balcombe Road, who sold it. The net proceeds of sale were less than the debt owed to the first charge holder, and the claimant did not receive anything in respect of the second charge.
The claim is for the balance of the loan due. Of the defences raised by the defendant, it is only necessary to consider those remaining after the order dated 6 July 2022 of Deputy Master Glover striking out parts of the Defence. The defences to be considered fall into two categories: remaining defences raised in the original Defence as filed, and defences raised in the proposed amended Defence.
Defences in the Defence as pleaded
The main remaining defence in the Defence can be summarised as follows:
(1) The defendant relied upon a representation made by the claimant that sums would only be advanced under the loan agreement if an independent valuation report in respect of the Properties was obtained by the claimant: ¶¶12, 16 Defence;
(2) That representation was false as the claimant did not commission an independent valuation report, but instead relied upon a valuation prepared by Mr Collier which had been deliberately inflated: ¶18 Defence;
(3) The defendant relied upon the accuracy of the valuation obtained: ¶17 Defence;
(4) Had an independent valuation report been commissioned by the claimant, the valuations of the Properties would have been substantially lower and the defendant would not have entered into the Guarantee: ¶19 Defence.
The other defences or assertions put forward by the defendant can be summarised as follows:
(1) The defendant had no involvement in the negotiations between the claimant and the company which led to the Agreements, and was at all times completely reliant upon information provided to him by Mr Collier. The defendant reasonably believed that Mr Collier was providing information to the defendant which emanated from the claimant, with the express consent of the claimant to Mr Collier acting as the claimant's agent: ¶14 Defence;
(2) Mr Collier made false representations to the defendant as to the financial viability of the company and as to the defendant having a shareholding in that company: ¶¶20–21 Defence;
(3) The claimant and Mr Collier entered into a new loan agreement which the defendant was informed replaced the loan agreement: ¶23 Defence;
(4) The defendant would not have entered into the Guarantee without the undue influence of the claimant and/or Mr Collier acting as the claimant's agent: ¶28 Defence.
Defence in the proposed amended Defence
The defendant has applied to amend his Defence (see para 15 below). The proposed amended Defence includes one further defence: that a company called NCI Resources Limited (“NCI”) made misrepresentations to him in reliance on which he entered into the Guarantee, so that he is entitled to rescind the Guarantee, alternatively to damages for misrepresentation and/or breach of duty, which are to be set off against the sum claimed by the claimant.
Procedural chronology
The claim was issued on 29 April 2021. The Defence was filed on 25 June 2021. The application was issued on 10 September 2021. It was supported by a witness statement dated 17 August 2021 (“Sealey 1”) of Robert Sealey, the Chief Executive Officer of the claimant.
The defendant filed and served his evidence in opposition to the application (“Jones 1”) on 7 February 2022.
The first hearing of the application was listed on 14 February 2022, but was vacated (because the claimant's counsel had Covid). The first effective hearing was before Deputy Master Glover on 6 July 2022. At that hearing the defendant's counsel made an oral application to adjourn the hearing to enable him (as recorded in the order) to seek permission to amend his Defence in order to incorporate the allegations contained in paragraphs 45 and 46 of Jones 1 (discussed in paras 41 to 54 below), and to join additional parties.
On 20 July 2022 the defendant served upon the claimant a draft amended Defence. No application to amend the Defence in accordance with the draft was made at that stage.
On 27 July 2022 the defendant issued an application notice seeking to join 4 additional parties, and bring additional claims against them. The draft statement of case attached to the application notice included the proposed amendments in the draft amended Defence served on 20 July 2022; and the claimant was a respondent to the application. However, the application did not formally seek permission to amend the Defence at all. That application was not listed (and is therefore not before me today), apparently because the defendant did not respond to the court's directions that he file the parties' agreed dates and agreed time estimates for the hearing and pre-reading. It is unclear whether it has been served on the proposed additional parties.
On 11 November 2022, 7 days before the hearing before me, the defendant issued a further application seeking only to amend the Defence (and not to add additional parties); and to add a counterclaim alleging misrepresentation and/or breach of duty, and seeking rescission of the Guarantee, alternatively damages. The proposed amended Defence and Counterclaim is identical to that in the draft attached to the July application notice, albeit permission was not formally sought at that stage.
Legal principles
CPR 3.4(2) provides, so far as relevant:
“3.4—Power to strike out a statement of case
(2) The court may strike out a statement of case if it appears to the court–
(a) that the statement of case discloses no reasonable grounds for bringing …the claim;
(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings;”
CPR 24.2 provides, so far as relevant:
“The court may give summary judgment against … a defendant on the whole of a claim or on a particular issue if –
(a) it considers that –
…
(ii) that defendant has no real prospect of successfully defending the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial.”
The principles to be applied on applications for summary judgment are well established. They were summarised by Lewison J, as he then was, in Easyair Ltd v Opal Telecom Limited [2009] EWHC 339 (Ch), in a formulation approved in a number of subsequent cases at appellate level, including AC Ward & Sons v Catlin (Five) Limited [2009] EWCA Civ 1098 and Mellor v Partridge [2013] EWCA Civ 477. It is unnecessary to set them out.
As to striking out for no reasonable grounds, as noted in the White Book (para 3.4.21), there is a considerable overlap between the court's powers under CPR Part 24 and r.3.4; and the court has a discretion to treat an application made under CPR 3.4 (2)(a) as if it were an application under Part 24. In this case, there is no practical distinction in the test to be applied.
It was common ground that in determining the application for summary judgment, the court may take into account the draft amended Defence (and its prospects of success): see Bhamani v Sattar [2021] EWCA Civ 243 at [60] and [61].
Discussion and conclusions
Alleged misrepresentation by claimant...
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