Nationwide Building Society v Dunlop Haywards Ltd

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMR JUSTICE DAVID STEEL,Mr Justice David Steel,MR JUSTICE SIMON,Mr Justice Simon,MR JUSTICE CHRISTOPHER CLARKE
Judgment Date18 Feb 2009
Neutral Citation[2008] EWHC 51 (Comm),[2009] EWHC 254 (Comm),[2007] EWHC 1374 (Comm)
Docket NumberCase No: 2007 FOLIO NO. 717,Case No: 2007717,Claim No.2006 Folio 923

[2007] EWHC 1374 (Com)

IN THE HIGH COURT OF JUSTICE

QUEEN's BENCH DIVISION

Commercial Court

Before

The Hon Mr Justice Simon

Claim No.2006 Folio 923

Between:
Nationwide Building Society
Claimant
and
(1) Dunlop Haywards Limited
(2) Dunlop Haywards (DHL) Limited
Defendants

Mr Justin Fenwick QC and Mr Ben Hubble (instructed by Mayer, Brown, Rowe & Maw LLP) for the Claimant

Mr Roger Stewart QC and Mr Ben Patten (instructed by Berrymans Lace Mawer) for the Defendants

Hearing dates: 30 April—1 May

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

MR JUSTICE SIMON Mr Justice Simon

Mr Justice Simon

The Application

1

In this case the Claimant ('Nationwide') claims approximately £27m as damages for deceit against the First and Second Defendants ('DH') in relation to three valuation reports which dealt with: (1) Units 7 & 8, Saltley Industrial Estate, Adderley Road, Birmingham ('Adderley Road'), (2) St Ivel Works, Llansteffan Road, Johnstown, Carmarthen ('Carmarthen'), and (3) BIP Offices, Popes Lance, Oldbury, Birmingham ('Oldbury').

2

In the present applications Nationwide applies for summary judgment, pursuant to CPR 24.2, for damages (to be assessed) and an interim payment in respect of such damages, against the Second Defendant ('DHL') in relation to Adderley Road and Carmarthen, and against the First Defendant ('Limited') in relation to Oldbury.

The issues: an overview

3

At the core of Nationwide's case is the contention that three valuation reports: dated 27 September 2005 (in respect of Adderley Road), 30 November 2005 (in respect of Carmarthen) and 7 January 2006 (in respect of Oldbury) contained false statements which DH knew to be untrue, or in respect of which it was reckless as to their truth, with the intention that Nationwide should rely on those statements, as it did.

4

Nationwide focus in particular on the statements by DH.

i) That it had inspected the properties;

ii) That on completion each property was to be let to a tenant or tenants of substantial covenant strength on full repairing and insuring leases at high rents;

iii) That refurbishment work and/or repairs either had been or were being carried out to each property;

iv) About the Open Market value of each property on the basis of rents at which it stated the properties were to be let; and

v) About the Vacant Possession value of each property.

5

In broad summary DH resists the application on the basis that:

i) While accepting that there was a fraud practiced on Nationwide (albeit facilitated by, at least, the carelessness of Nationwide's own employees and professional advisors), there are real questions as to whether those for whose acts DH is liable (a director, Mr McGarry, and his subordinate, Mr McNabb) were parties to the frauds, as distinct from themselves being careless victims of the frauds practised on Nationwide.

ii) The granting of summary judgment is inappropriate in circumstances where serious allegations of deceit are made, and the person who is said to have made the fraudulent representations (Mr McGarry), is unwilling to assist the defence.

iii) In the light of the general uncertainty at this stage as to Mr McGarry's involvement and as to what caused the Claimant to make the loans in question, the Court should allow the case to go to trial for the proper investigation of the facts.

iv) There are a number of particular features of the claim which make it inappropriate to enter a Part 24 judgment.

The Court's approach to the applications

6

Before considering the Court's general approach to summary judgment under the CPR, it is right to note that this is not a case in which a claimant is in a position to contend that the application for summary judgment involves a short point which can be easily disposed of by the consideration of a few contemporary documents. On the contrary, in the present case Nationwide has deployed a considerable amount of evidence. There are 14 lever-arch files of documents, Nationwide has adduced the evidence of 16 factual witnesses, and expert evidence is put before the Court by each side.

7

CPR Part 24 .2 provides:

The court may give summary judgment against a claimant or 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 trial.

8

There is little issue between the parties as to the relevant test. It is common ground that the test of 'no real prospect of successfully defending the claim' requires a respondent to the claim to show some real (rather than illusory or forensically fanciful) chance of success at trial. The actual or likely defence must be better that merely arguable; see International Finance Corp v Utexafrica Sprl [2001] C.L.C. 1361 and ED & F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472; but does not have to meet a more rigorous test of being likely to succeed at trial, see also the White Book 2007. Vol.1 at 24.2.3.

9

The test of 'no other compelling reason for trial' is not confined. The fact that a claim may involve allegations of bad faith (or dishonesty) is not by itself a compelling reason for trial. Findings of bad faith (or dishonesty) can be reached in a summary judgment application if, in the circumstances of the case, such issues can be determined without a trial: Wrexham Association Football Club Ltd v Crucialmove Ltd [2006] EWCA Civ 237. However, as Dyson LJ noted at §§57–58.

I do not underestimate the importance of a finding adverse to the integrity of one of the parties. In itself, the risk of such a finding may provide a compelling reason for allowing a case to proceed to full oral hearing, notwithstanding the apparent strength of the claim on paper, and the confident expectation, based on the papers, that the defendant lacks any real prospect of success. Experience teaches us that on occasion apparently overwhelming cases of fraud and dishonesty somehow inexplicably disintegrate. In short, oral testimony may show that some such cases are only tissue paper strong. As Lord Steyn observed in Medcalf v Weatherill [2003] 2 AC 120 at paragraph 42, when considering wasted costs orders:

The law reports are replete with cases which were thought to be hopeless before investigation but were decided the other way after the Court allowed the matter to be tried.”

And that is why I commented in Esprit Telecoms UK Ltd and others v Fashion Gossip Ltd, unreported, 27 July 2000 that I was troubled about entering summary judgment in a case in which the success of the claimant's case involves, as this one does, establishing allegations of dishonesty and fraud, which are strongly denied, and which cannot be conclusively proved by, for example, a conviction before a criminal court.

This collective judicial experience does not always, or inevitably, provide a compelling reason for allowing the case to proceed to trial, nor for that matter require the judge considering the application to reject the conclusion that there is no real prospect of the successful defence of the claim if he is satisfied that there is none. That is not what the Rules provide, and if that had been intended, express provision would have been made. It is however a factor constantly to be borne in mind, if and when, as here, the reasons for concluding summary judgment is appropriate is consequent on a disputed finding, adverse to the integrity of the unsuccessful party.

10

On a Part 24 application, it may also be prudent for the Court to have in mind the observations of Mummery LJ in Doncaster Pharmaceuticals Group Ltd. v Bolton Pharmaceutical Company [2007] FSR 63, §§ 10–18.

10. Everyone would agree that the summary disposal of rubbishy defences is in the interests of justice. The court has to be alert to the defendant, who seeks to avoid summary judgment by making a case look more complicated than it really is.

11. The court also has to guard against the cocky claimant, who, having decided to go for summary judgment, confidently presents the factual and legal issues as simpler and easier than they really are and urges the court to be “efficient” i.e. produce a rapid result in the claimant's favour.

12. In handling all applications for summary judgment the court's duty is to keep considerations of procedural justice in proper perspective. Appropriate procedures must be used for the disposal of cases. Otherwise there is a serious risk of injustice …

17. It is well settled by the authorities that the court should exercise caution in granting summary judgment in certain kinds of case. The classic instance is where there are conflicts of fact on relevant issues, which have to be resolved before a judgment can be given (see White Book Vol 1 24.2.5). A mini-trial on the facts conducted under CPR Part 24 without having gone through the normal pre-trial procedures must be avoided, as it runs a real risk of producing summary injustice.

18. In my judgment, the court should also hesitate about making a final decision without trial where, even though there is no obvious conflict of fact at the time of the application, reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case”.

The Law of Deceit

11

The parties agreed that the elements of the tort of deceit are, so far as material to the present case, as follows. A claimant must prove that (1) the defendant made a false and material representation, either knowing it to be untrue or being reckless as to whether it is true,...

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