Malik v Henley Homes Plc

Factual and Procedural Background

This appeal concerns the decision of a Deputy High Court Judge to grant summary judgment in favour of the Plaintiff on the balance of outstanding loans due from the Defendant company. The Defendant did not dispute the existence of a substantial loan balance exceeding £2.3 million but contended that repayment was not due on demand. Instead, the Defendant asserted an oral agreement among the Plaintiff and two other equal shareholders that repayment was only to occur upon a sale, liquidity event, or unanimous consent of the shareholders.

The three individuals involved are the Plaintiff and two brothers-in-law, who were equal shareholders and former directors of the Defendant company. The Plaintiff was removed as a director by a shareholders' resolution passed by the other two shareholders, who remain directors. The Defendant operates as a holding company for various property development ventures, with loans advanced by the three men to assist the business. The Plaintiff claims entitlement to repayment on demand following his removal as director, while the Defendant denies immediate repayability based on the alleged oral agreement.

The Deputy High Court Judge granted summary judgment to the Plaintiff, concluding that the Defendant's defence lacked a real or realistic prospect of success. The Defendant appealed this decision.

Legal Issues Presented

1. Whether the Deputy High Court Judge erred in granting summary judgment by finding that the Defendant's defence did not have a real or realistic prospect of success.
2. Whether the oral agreement alleged by the Defendant, restricting repayment of loans to specific conditions, was supported by evidence and contemporaneous documents.
3. Whether the Defendant was entitled to an extension of time to make an interim payment following the summary judgment.

Arguments of the Parties

Appellant's Arguments

• The Judge impermissibly conducted a mini-trial at the summary judgment stage and wrongly concluded that a fuller investigation of the facts at trial would not affect the outcome.
• The Judge was incorrect to find that the Defendant's case was unsupported by contemporaneous documents and that the case had been advanced inconsistently.
• The Judge failed to consider evidence undermining the Plaintiff's case and supporting the Defendant's position.
• The Judge unreasonably refused to grant the Defendant a six-month period to make the interim payment (although this ground was not pursued if other grounds failed).

Table of Precedents Cited

Court's Reasoning and Analysis

The Court undertook a detailed analysis of the evidence and submissions. It emphasized that the critical issue was whether the Defendant had a real or realistic prospect of establishing the alleged oral agreement that loans were repayable only on a liquidity event or unanimous consent.

The Court noted the following key points from the Judge’s reasoning:

• The contemporaneous documents, including the Defendant’s audited accounts and nominal ledger, referred consistently to "directors' loans" rather than "shareholders' loans," undermining the Defendant’s case that the loans were shareholder loans subject to the alleged restrictions.
• There was a notable absence of contemporaneous documentation or electronic correspondence evidencing the unusual and restrictive terms alleged by the Defendant, despite the long history and familial/business relationship among the parties.
• The Defendant’s explanation for the classification of loans as repayable within one year was unconvincing, and the accounting treatment did not support the claimed terms.
• The Defendant’s pleaded case and witness evidence were inconsistent and deficient in particularisation regarding the terms and timing of the alleged oral agreement.
• The parties’ conduct over two decades, including equal and mutually agreed drawings from the loan account, was at best neutral and did not establish the restrictive repayment terms.
• The Judge was entitled to reject the Defendant’s contention that further disclosure or evidence at trial would materially alter the position, as no relevant documentation had been produced despite ample opportunity.

The Court also considered the standard of appellate review and concluded that it was not persuaded that the Judge’s conclusion was wrong or outside the range of reasonable decisions.

Holding and Implications

The Court DISMISSED THE APPEAL, upholding the summary judgment in favour of the Plaintiff.

The direct effect is that the Defendant company remains liable to repay the Plaintiff the outstanding loan sums on demand, with the terms of repayment not restricted by the alleged oral agreement. The Court’s decision confirms that the Defendant’s defence lacked a real or realistic prospect of success and that the summary judgment was properly granted. No new legal precedent was established by this decision; it reinforces established principles regarding the evidential requirements for oral agreements and the threshold for summary judgment under CPR Part 24.