UK: We Have Some Issues: Summary Judgment Under CPR 24.2

ADL Advanced Contractors Ltd v Patel [2021] EWHC 2200 (Comm)

Background

This case concerned an application for the summary determination of three issues relating to the joint liability of co-guarantors in circumstances where some, but not all, were later discharged from the obligation.

The Claimant was a company to whom various debts were owed by a third-party Company ('the Company') pursuant to sub-contracts for building works carried out by the Claimant between 2016 and 2019. The Company, however, did not pay promptly, stating that the Company itself had not been paid by the head contractors, several third-party SPVs.

Accordingly, on 10 November 2017, the Defendant Director of the Company entered into a Guarantee Agreement jointly with two of those who had set up the SPVs, Messrs P, and I ('the Co-Guarantors'), to discharge the Company's outstanding liabilities ('the 2017 Guarantee').

In January 2019, the Claimant entered into further agreements with the SPVs to restructure the Company's debts ('the 2019 Agreements'); and two further Guarantee Agreements with the Co-Guarantors ('the 2019 Guarantees'). The first of the 2019 Guarantees released and discharged Messrs P and I from the 2017 Guarantee, but expressly held that the Defendant was not so released. The second of the 2019 Guarantees released Mr I's liability under the 2017 Guarantee but did not contain an express reservation in respect of the Defendant's liability under the 2017 Guarantee.

The Claim, Defence, and Summary Judgment Application

By letters before action dated 25 February 2020 and 1 April 2020, the Claimant made written demand under the 2017 Guarantee for payment in the total sum of £826,869.78. The present proceedings were subsequently issued.

Amongst the points taken by the Defendant in his Defence was that the effect in law of releasing the Co-Guarantors to the 2017 Guarantee under the 2019 Guarantees was to discharge the Defendant of liability under the 2017 Guarantee.

The Claimant disputed that this was the legal effect of the 2019 Guarantees. It initially issued an application for summary judgment on the entire claim, but by the time of the hearing had refined its position so as to seek summary determination of the following three issues:

1. whether the effect of the 2019 Guarantees was to release the Defendant from the 2017 Guarantee;
2. the effect of the 2019 Agreements on provisions relating to caps on the Guarantor's liability contained in the 2017 Guarantee;
3. the effect of a clause of the 2017 Guarantee relating to raising a dispute as to valuation.

The Claimant accepted that, owing to several remaining issues as to any outstanding indebtedness, the Claimant would not have been entitled to summary judgment on liability, even if these had been determined in its favour.

Accordingly, the present question was whether it was appropriate for the Claimant to seek summary determination of these issues arising in its claim.

The Rival Submissions

The Defendant relied on Anan Kasei Co Ltd v Neo Chemicals & Oxides (Europe) ltd [2021] EWHC 1035 (Ch) to submit that it was not. In that case, Fancourt J explained the jurisdiction to grant summary judgment under CPR 24 in the following terms (cited at [15]):

The Claimant submitted that this was too restrictive an approach and that "issue" in CPR Part 24 should be given a broader meaning to include any issue which arises in the case. The Claimant accordingly submitted that the issues were appropriate for summary determination on the following grounds:

1. CPR Part 24.2 provides that the court may give summary judgment "on the whole of a claim or on a particular issue".
2. The notes to Part 24 in the White Book at 24.1.1 suggest that issue means any issue in the case.
3. The three issues are issues of construction and hence of law which are not dependent upon any issue of fact.
4. The Defendant has no real prospect of succeeding on these issues. The determination of the issues will assist the parties to resolve the claim brought by the Claimant against the Defendant. There is no other compelling reason why the determination of these issues should await trial.

The Decision

The Judge (Sir Nigel Teare, as a Judge of the High Court) agreed with Fancourt J's understanding of 'issue' for the purpose of CPR Part 24. This was premised on there being a 'significant difference' between an application for summary judgment and an application for the determination of preliminary issues, as follows:

2. Applications for the determination of a preliminary issue require the court to form the view that it is desirable to decide a preliminary issue, notwithstanding the well-known dangers in so doing. If the court agrees that it is desirable to do so then a date is fixed for the trial of the preliminary issue, whether it be of law, fact or mixed law and fact.
3. Applications for summary judgment may be made without seeking the permission of the court to do so, on the basis that the applicant believes that the respondent has no real prospect of success, and that there is no reason why the "claim or issue" should await trial.

The Judge, therefore, concluded that there was no jurisdiction to grant summary judgment on the issues as framed by the Claimant's application. In addition, the Judge further noted that Fancourt J's analysis of the jurisdiction to grant summary judgment was followed by Steyn J in Vardy v Rooney [2021] EWHC 1888 (QB) notwithstanding a substantial argument to the contrary. Where the issue had, thus, been considered by two High Court judges, the Judge was of the view that, in any event, he should follow their decisions.

Applied to the issues under present consideration, the Judge concluded that they were not determinative of the claim or any part of it. They were properly issues in the case, and an application could have been made for their determination as preliminary issues. Had such application been made, the court and the parties would have had an opportunity to consider whether it was desirable to do so. However, the Claimant had instead sought summary judgment on three issues which were not determinative of the claim or any part of it; and, in the words of counsel for the Defendant, "unilaterally selected by the Claimant".

Accordingly, the Judge ruled that Issue 1 was unsuitable for summary determination under CPR Part 24. Given that Issue 2 was bound up with Issue 1, Issue 2 was also unsuitable for summary determination. Issue 3, on the other hand, appeared to be a simple point of contractual construction which, had there been jurisdiction to grant summary judgment, the Judge would have determined Issue 3 in favour of the Claimant.

If, however, the Judge had been wrong to conclude as he did and to follow Fancourt J and Steyn J, Issue 1 would not have been, in any event, suitable for summary determination for the following reasons:

2. The principle that a co-surety is not released where a joint debt is discharged has, given the commentary in Chitty, the 'flavour' of a developing area of law; accordingly, Issue 1 could only "safely and prudently" be determined at trial;
3. There was evidence that not all of the 2019 Agreements were presently before the court; accordingly, it could not be said that a trial judge would be in no better a position to decide the issue of liability.

Commentary

This case usefully sets out the difference between 'issues in the case' and 'issues' on which summary judgment may be given under CPR Part 24.

Only those issues that are determinative of a claim or part of it are within the jurisdiction to grant summary judgment. A party is free to apply for summary judgment on such issues and, subject to compliance with the rules, the court will determine it, whether it depends on an issue of law, fact or mixed fact and law.

Issues arising in the case, on the other hand, is a broader category encompassing issues that are not determinative of a claim or part of it. Whether any such issue should be determined in advance of trial is a matter for the court to decide. A party may apply for a direction in this regard, but the court will weigh up various case management considerations and guidance from appellate courts when deciding whether the overriding objective is best served by directing the trial of a preliminary issue at that stage. Practitioners should note that the Judge singled out one particularly relevant consideration in modern case management: whether the resolution of a preliminary issue is likely to assist the parties to settle the claim or part of the claim.

Finally, the fact that an issue is one of pure law makes 'no difference' to whether it may be determined summarily. In the words of the Judge:

Legal issues are often the only relevantly disputed question in a claim or part of a claim. Where the issue of law is relatively straightforward and the court is satisfied that it has before it all relevant material and that a trial judge would be in no better position to decide it, the court generally decides the issue of law finally, on a balance of probabilities, and not merely on the basis of whether the respondent has a realistically arguable case.That does not mean that any issue of law can properly be the subject of a summary judgment application.

There is a final subtlety in the judgment, which it is important to clarify. Some of the language distinguishes between "preliminary issues" and issues which can be the subject of a summary judgment application. For example, paragraphs [37] and [38] say "if CPR Part 24 allows for the determination of preliminary issues." which could be read as suggesting that any issue which could be a preliminary issue cannot be dealt with under Part 24. However, read as a whole, it is clear that the judgment did not intend to go that far.

'Preliminary issues' and 'summary judgment issues' are not mutually exclusive categories - some preliminary issues cannot be decided under Part 24, but the reverse does not follow. There would be nothing improper in having a preliminary issue trial over a "severable part of the proceedings" or "a component of a single claim" which could be decided on a summary judgment application. And if a preliminary issue trial were listed for such a part or component, nothing in ADL would prevent a party from applying for summary judgment in respect of it (although the circumstances in which such a course would be sensible are likely to be rare). It would be a misreading of the judgment to assume that any issue can only be either a preliminary issue or a summary judgment issue; it can be both.

This case summary was written by Simon Kerry and Amy Held.

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