Promontoria (Chestnut) Ltd v Scott Simpson
| Jurisdiction | England & Wales |
| Judge | Stephen Davies |
| Judgment Date | 22 July 2020 |
| Neutral Citation | [2020] EWHC 2136 (Comm) |
| Date | 22 July 2020 |
| Docket Number | Case No: D40MA073 |
| Court | Queen's Bench Division (Commercial Court) |
[2020] EWHC 2136 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
CIRCUIT COMMERCIAL COURT (QBD)
(Sitting at Manchester)
Manchester Civil Justice Centre
1 Bridge Street West
Manchester
M60 9DJ
HIS HONOUR JUDGE Stephen Davies
(Sitting as a Judge of the High Court)
Case No: D40MA073
Mr Jamie Riley QC (instructed by Addleshaw Goddard LLP) for the Claimant
Mr John Pugh (instructed by Trinity Law) for the Defendants
Approved Judgment
I am giving this judgment on what is scheduled to be day 3 of a five-day trial in relation to three applications by the defendants. The first in time is an application to include additional documents into the trial bundle. That is now largely agreed. The second in time is the defendants' application for permission to re-amend their defence and to stay the proceedings. That is strongly opposed. The third in time is the defendants' application for specific disclosure. That has now largely been overtaken by the claimant's voluntary production of the majority of the documents sought. It has taken almost three days for these applications to be argued. That is very unusual, but it is explained by the importance of the re-amendment application to the parties and the detail in which it had to be argued, for reasons which I shall explain shortly before dealing with the substantive issues.
In short, the claimant, Promontoria (Chestnut) Limited, is seeking some £300,000, together with interest, against the defendants Mr Scott Simpson and Mrs Tracy Simpson, under two guarantees given by them to support lending from the Yorkshire Bank (“the bank”) to their former company Properties For Sale or Let Limited (“the company”). The claimant is a company within the Cerberus group of companies which claims to have acquired the bank's rights in relation to the primary lending liabilities of the company and the secondary liabilities of the defendants under their guarantees pursuant to a deed of assignment dated 5 June 2015. The claim was issued in September 2017. The defendants were initially legally represented and the defence, in its original and amended form, raised a large number of defences directed to the conduct of the bank. It also raised a number of points, putting it neutrally, as to whether or not the claimant as alleged assignee from the bank was entitled to recover against the defendants. The trial was listed to take place in July 2019, but was adjourned due to the first defendant's ill health at a time when the defendants were unrepresented. The adjourned trial was scheduled to take place in February 2020 but was adjourned on the same basis.
The application to add further documents to the trial bundle was made on 24 May 2020 in accordance with a timetable set in a previous order and at a time when the defendants were still unrepresented. It was, as I held and recorded in my order from the hearing on 7 July 2020, a confused and confusing application.
On 26 June 2020, the claimant's current solicitors came on the record and made the application to re-amend and to stay. The draft re-amended defence was pleaded by newly instructed counsel Mr Pugh who has appeared before me at this trial. The application for specific disclosure was then made as a result of a discussion at the hearing on 7 July by reference to a decision of Marcus Smith J in a case known as Promontoria (Oak) (No. 1) Ltd v Emanuel & Anor [2020] EWHC 104 (Ch), handed down on 30 January 2020, about which I shall have to say more later.
The draft re-amended defence does two things. Firstly, it withdraws all of the defences previously pleaded which relate to the conduct of the bank. It has been expressly confirmed that this is unconditional, in other words not dependent on the success of the amendment application as a whole. It is made, as Mr Pugh explained, on the eminently sensible and realistic basis that given the evidence and the scale of the company lending liabilities it cannot realistically be said that any of these defences would either amount to a complete defence or could provide a set off sufficient to reduce the balance to zero or anything under the combined guarantee limit of £300,000. This has considerably reduced the scope of the trial and is to be welcomed on that basis.
Secondly, it introduces what are effectively three proposed new grounds of defence. The first is a positive assertion that the assignment was ineffective on the ground that, based on the evidence produced both before the application and as at trial, the claims had already been assigned to the claimant's parent company Promontoria Holding 97 BV, under a sale and purchase agreement dated 27 July 2014. Alternatively, and due to the redactions made from the documents disclosed by the claimant, the claimant has failed to demonstrate that such is not, at least arguably, the case. Secondly, a positive assertion that the deed of assignment was ineffective on the further ground that based on the evidence produced both before the application and as at trial the claims have been assigned, if they had ever been effectively assigned to the claimant, to a commercial lender known as Nomura International Limited. Alternatively, again, due to the redactions made from the documents provided by the claimant, it has failed to demonstrate that such is not, at least arguably, the case. Thirdly, and finally, a positive assertion that the demand was invalid because at the time it was made by the claimant the claimant was operating the current account where the lending liabilities were held when it was not lawful for it to do so under the Payments Services Regulations 2009.
Although the defendants have not explained in evidence the circumstances in which these proposed amendments came to be formulated, what is clear is that whilst the facts and matters underlying the amendments have always been known to or at least discoverable by them or by their advisers it was only on the instruction of the new legal team that the potential significance of the Emanuel (No. 1) case was brought to their attention as was the possibility of running defences along the lines identified above.
The claimant, represented by leading counsel Mr Riley QC, submit that the application should be dismissed both on discretionary grounds due to the lateness of the application and the absence of good reasons for that lateness, together with the impact of at least one of those proposed defences upon the trial, but also, and more fundamentally, on the basis that they do not disclose any real prospect of success which is an essential requirement for the grant of permission to amend. He points to the fact that since the defendants say, in terms, that even if the amendments are allowed there would be no need for an adjournment and they are content to proceed to trial on the basis of the evidence already before the court, this court has a good opportunity to assess the prospects of success in a way which may be more difficult at an earlier stage before disclosure has taken place and other evidence has been produced. It is for that reason that the merits of the proposed claims have been investigated in some detail on this application.
I am also satisfied that it is not unfair to the defendants to proceed on this basis. Sometimes it can happen that if a heavily contested amendment application is made on the first day of the trial, before the judge has fully immersed himself or herself into the details of the existing case and the proposed amendments, the judge can fail to see the wood for the trees. Here, however, I have had the benefit of full argument in order to enable me to decide whether the proposed claims have merit on the basis of the test of a real prospect of success. If I decide that they do not, that will have been on the basis that the defendants will have been able, and have taken the opportunity, to put forward their best case on the merits.
Mr Pugh also submitted, correctly, that the court should decide this application by reference to the overriding objective, in particular those factors referred to in paragraph 1.12. As often, however, those factors can pull in different directions, Mr Pugh relied upon the importance of ensuring an equal footing between the parties and proportionality having regard to the financial position of the parties given the disparity of their resources. However, it is clear that those considerations could not, by themselves, justify allowing the defendants to run defences which, on a proper analysis, have no merit, or to obtain production of documents which, on a proper analysis, are not necessary for the fair determination of the case, out of some general sense of sympathy to the defendants as individuals without access to substantial resources, especially if that would involve unfairness to the claimant or any risk of loss of this trial date which could have been avoided had the defendants complied with the Civil Procedure Rules and with court orders.
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