Factual and Procedural Background
By an agreement dated 20 July 2017, three respondents lent £700,000 to Company A for property development at The City. The Appellant was the principal director of Company A and provided personal guarantees to each respondent dated the same day. An additional £34,000 was loaned in November 2017. On 14 February 2022, the respondents commenced proceedings against the Appellant seeking repayment under the personal guarantees. The Appellant admitted the guarantees were valid but contended liability had not crystallised as the redemption date was extended to the sale date of the property, which had not yet occurred at the time of the defence. The property was sold on 15 June 2022, but the respondents only discovered this shortly before a summary judgment hearing in October 2023.
At the first case management conference (CMC) on 15 June 2023, the Appellant revealed he had initiated separate Part 8 proceedings in the Chancery Division alleging undue influence to invalidate the guarantees. The respondents sought summary judgment on 21 July 2023, which was granted by the judge on 5 October 2023. The Appellant appealed, challenging the judge’s approach to the allegations raised in the separate proceedings.
Legal Issues Presented
- What is the proper approach to allegations made in separate proceedings on an application for summary judgment under CPR Part 24?
- Does the defence of undue influence raised in separate proceedings give rise to a realistic prospect of success to resist summary judgment in the present proceedings?
Arguments of the Parties
Appellant's Arguments
- The personal guarantees were invalid due to undue influence exerted by a representative of the respondents.
- The Appellant was not afforded an opportunity to obtain independent legal advice before signing the guarantees.
- The personal guarantees were backdated, undermining their validity.
- The defence of undue influence was properly raised in separate Chancery proceedings and should be given weight in resisting summary judgment.
Respondents' Arguments
- The validity of the personal guarantees was admitted in the present proceedings and no amendment to the defence was made.
- The allegations in the separate proceedings do not constitute a realistic defence in these proceedings.
- The Appellant’s delay in raising the undue influence defence and lack of supporting evidence undermine its credibility.
- The additional £34,000 loan was not contested on appeal and was properly included in the judgment.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Swain v Hillman [2001] 1 All ER 91 |
Summary judgment may be granted if a claim or defence has no real prospect of success; court must consider 'realistic' not 'fanciful' prospects. |
Court confirmed it should not conduct a mini-trial but must assess whether the defence has a realistic prospect of success. |
| ED&F Man Liquid Products v Patel [2003] EWCA Civ 472 |
A realistic defence must carry some degree of conviction, more than merely arguable. |
Supported the court’s approach to assessing the strength of the undue influence defence. |
| Elite Property Holdings Ltd v Barclays Bank PLC [2019] EWCA Civ 204 |
Clarified when a claim has no realistic prospect: fanciful factual basis, lack of supporting material, or insufficient pleaded facts. |
Used to illustrate the court’s power to reject implausible defences lacking evidential support. |
| ICI Chemical and Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725 |
Short points of law can be disposed of by summary judgment. |
Referenced to support the court’s summary dismissal of weak defences. |
| Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceuticals Co 100 Ltd [2007] PSR 3 |
Court should hesitate to grant summary judgment if a fuller investigation might affect the outcome. |
Considered but found no reasonable grounds for further investigation in this case. |
| Royal Brompton Hospital NHS Trust v Hammond (No.5) [2001] EWCA Civ 550 |
Court must consider evidence reasonably expected to be available at trial. |
Applied to evaluate the evidence supporting the Appellant’s defence. |
| Folgender Holdings Ltd v Letraz Properties Ltd [2019] EWHC 2131 (Ch) |
Defendant must put forward their best case at summary judgment stage. |
Used to emphasize the Appellant’s obligation to present a realistic defence. |
| Mishcon De Reya LLP v RJI (Middle East) Ltd [2020] EWHC 1670 (QB) |
Judges may consider unpleaded matters and possible amendments when assessing real prospects of success. |
Supported the court’s consideration of the possibility of amendment despite the defence not being pleaded here. |
| Royal Bank of Scotland PLC v Etridge (No.2) [2001] UK HL 44 |
Claims of undue influence must be raised early and supported by clear evidence. |
Applied to assess the Appellant’s undue influence allegations as lacking timely and clear evidential support. |
| Cavell v Transport for London [2015] EWHC 2283 (QB) |
Difficulty in resiling from admissions made in pleadings. |
Referenced to explain why the Appellant could not amend defence to deny validity of guarantees after admission. |
| The Royal Automobile Club v Wright [2018] EWHC 913 (QB) |
Emphasizes the challenge of withdrawing admissions and the importance of promptness. |
Supported the court’s conclusion that late amendment would fail due to delay and admissions. |
Court's Reasoning and Analysis
The court began by recognising that the Appellant admitted the validity of the personal guarantees and the crystallisation of liability upon the property sale. The judge below found the separate Chancery proceedings challenging the guarantees created a procedural difficulty but did not constitute a defence with a real prospect of success in these proceedings.
The court considered established principles under CPR Part 24, emphasising that summary judgment is appropriate where there is no realistic defence. The court assessed the Appellant’s undue influence claim, noting it was raised late, lacked clear evidence, and was not pleaded in the current proceedings. The Appellant’s allegations of bullying, lack of independent legal advice, and backdating were found unsupported or implausible.
The court also noted the Appellant’s failure to disclose the property sale in the current proceedings and the absence of contemporaneous evidence undermined the undue influence defence. The possibility of amending the defence was considered but rejected due to the Appellant’s prior admissions and delay.
While the judge below gave some weight to the procedural issue of separate proceedings, the appellate court disagreed that this was decisive. Instead, the focus was on whether the undue influence defence had a realistic prospect of success, concluding it did not. The court also rejected the argument concerning the additional £34,000 loan as it was not pursued on appeal.
Holding and Implications
The court held that the judge's first reason for granting summary judgment—ignoring allegations in separate proceedings—was incorrect, but the second reason—that the defence of undue influence had no realistic prospect of success—was correct.
Accordingly, the summary judgment in favour of the respondents for the sum of £778,607 was upheld.
The decision directly disposes of the Appellant’s defence and confirms the enforceability of the personal guarantees. No new legal precedent was established; rather, the court applied well-known principles of summary judgment and undue influence to the facts presented.