Yeung v Jeckz Investment Ltd and others

Practice and procedure – Summary judgment – Loan agreement – Appellant giving personal guarantees on loan – Respondents seeking repayment of loan – Appellant admitting validity of guarantees in defence and counterclaim – Appellant bringing separate proceedings claiming guarantees invalid for undue influence – Respondents applying for summary judgment on their claim – Whether judge entitled to consider matters raised in separate proceedings – Whether appellant having realistic prospect of defending claim – Appeal dismissed In 2017, the three respondents agreed to lend a total of £700,000 to a company for the purpose of developing a property located at 48-54 Renshaw Street, Liverpool. The appellant was the principal director of the company. As part of the loan arrangement, the appellant provided personal guarantees to each of the respondents in respect of the loans. In 2022, the respondents commenced proceedings seeking repayment of the loans under the terms of the personal guarantees. The appellant served a defence and counterclaim in which he impliedly admitted the validity of the guarantees. However, the appellant then issued separate proceedings seeking declarations that the personal guarantees were invalid on the grounds of undue influence. The court subsequently granted the respondents’ application for summary judgment on their claim. The judge held that the validity of the personal guarantees was admitted and not contested and there had been no application to amend the defence and no basis upon which any such application, if made, could succeed. On that basis, it would be wrong for the court to allow the proceedings to be derailed by a defence which at some future point might be, but had not been, raised. Further, on the material before the court, there was no real prospect of success in defending the claim and no other compelling reason for the question to be left over to trial. It followed that there was no basis for dismissing or striking out the application or for staying it until some future date. The appellant appealed. Held: The appeal was dismissed. (1) CPR 24.3 provided that a court might grant summary judgment if it considered that the claim or defence had no real prospect of success, and there was no other compelling reason for the matter to proceed to trial. The court had to consider whether the claim or defence had a realistic, as opposed to a fanciful, prospect of success. A realistic defence had to carry some degree of conviction, and be more than merely arguable: Swain v Hillman [2001] 1 All ER 91 and ED&F Man Liquid Products v Patel [2003] EWCA Civ 472 considered. A claim did not have a realistic prospect of success where: (i) it was possible to say with confidence that the factual basis for the claim was fanciful because it was entirely without substance; (ii) the claimant did not have material to support at least a prima facie case that the allegations were correct; and/or (iii) the claim had pleaded insufficient facts in support of the case to entitle the court to draw the necessary inferences. The court was entitled to reject a version of the facts which was implausible, self-contradictory or not supported by the contemporaneous documents and it was appropriate for the court to consider whether the proposed pleading was coherent and contained the properly particularised elements of the cause of action relied upon: Elite Property Holdings Ltd v Barclays Bank PLC [2019] EWCA Civ 204 considered. (2) In arriving at a conclusion under Part 24, the court was not obliged to conduct a mini-trial but, at the same time, it was not obliged to take at face value and without analysis everything that a party had said in his statement. Short points of law could be disposed of by way of summary judgment, but the court should hesitate about making a final decision if there were reasonable grounds for believing that a fuller investigation than was permissible at summary judgment stage might affect the outcome. The court should take into account, not only the evidence that it had, but also the evidence that could reasonably be expected to be available at trial. However, a defendant meeting a claim for summary judgment had to put forward their best case. They were not entitled to wait, and hope that something might turn up later: Folgender Holdings Ltd v Letraz Properties Ltd [2019] EWHC 2131 (Ch); [2019] PLSCS 171 considered. (3) There was no firm and hard-edged rule that a judge, when considering an application for summary judgment, might only have regard to matters that were put in issue by the pleaded defence. Whilst the pleadings were relevant and important documents, a judge considering an application for summary judgment might need to take account of the possibility of an amendment when assessing whether the defence had a real prospect of success at trial. In this case, the judge had attached too much significance to the fact that the allegations concerning undue influence were raised in separate proceedings, rather than in the present proceedings. The fact there were two sets of proceedings was primarily a procedural matter, rather than a substantive issue. Moreover, the appellant was a litigant in person. He might simply not have realised that good practice and compliance with the Civil Procedure Rules required him to raise any collateral attack on the validity of the personal guarantees in the current proceedings, and not elsewhere.  What mattered was not the fact that an attack on the validity of the personal guarantees had been raised in separate proceedings, but whether that attack gave rise to a realistic prospect that the appellant might be able successfully to defend the claim in the present proceedings. To that extent, a judge was entitled, where appropriate, to look beyond the confines of the pleadings in the proceedings and to consider the possibility of new points being raised by way of amendment: Mishcon De Reya LLP v RJI (Middle East) Ltd [2020] EWHC 1670 (QB) applied. (4) The appellant had put forward no basis on which a judge could have concluded that, almost two years after signing the defence and counterclaim which assumed the validity of the personal guarantees, the appellant should be permitted to amend his defence to deny their validity.  There was, and would be, no material or plausible evidence to support a realistically arguable defence of undue influence; everything available to the court pointed firmly in the other direction. The judge’s secondary reason for granting summary judgment was correct. Accordingly, the judge’s first reason for granting summary judgment was wrong, but that his second reason was right. Therefore, he was right to grant the respondents summary judgment on the personal guarantees. Joshua Hitchens (instructed by London Law Chambers) appeared for the appellant; Sandip Patel KC (instructed by Lex-Avoca Solicitors) appeared for the respondents. Eileen O’Grady, barrister Click here to read a transcript of Yeung v Jeckz Investment Ltd and others