Summary

On the available evidence before the court, the judge was wrong to enter summary judgment in favour of the claimant, since it had been shown that the defendant had a real prospect of successfully defending the claim brought against him.

Facts

Defendant's appeal from the order of HH Judge Rich QC made on 18 January 1999 allowing the claimant's appeal from the order of Master Winegarten made on 21 October 1998 and ordering that summary judgment, pursuant to RSC O.14, be entered for the claimant. Mr Paul was a property developer who entered a joint venture agreement with Mr Duval, a partner in a firm of solicitors, on 8 August 1988. In that agreement the parties agreed to purchase a property in Bournemouth for the purpose of developing and selling the property at a profit. The purchasing company was to be Oldive Investments Ltd ('Oldive'), a company owned by Mr Duval. The scheme set out in the agreement was that Oldive would fund the purchase and Mr Paul would carry out the development. Under clause 7 of the agreement, profits and losses would split equally between Mr Duval and Mr Paul on sale of the property. However, by clause 15 of the agreement Oldive had a discretion whether to sell the property on Mr Paul's request before development had taken place. In September 1988 the property was purchased for £360,000 by Oldive and conveyed into the name of Orchard Lane Ltd, a company in which Mr Paul and Oldive held equal shares. Unfortunately matters did not proceed as planned, since there were problems in gaining planning permission, securing an extended lease and due to the fall of the property market. The property was marketed at £500,000 and reduced to £450,000 but was not sold. Mr Paul allegedly asked Mr Duval to agree to market the property at a price so that an early sale could be achieved. However, Mr Duval did not agree to sell the property at a reduced price but in mid-May 1989 sold his interest in the joint venture to another company, in which he had an interest. Eventually the property was sold for £237,000 and substantial losses were incurred by the parties. Due to those losses, a third party, Mr Rowe, whose money had been invested in the joint venture by Mr Duval, commenced proceedings against Mr Duval and the company claiming losses incurred as a result of his being duped by Mr Duval into investing in the agreement. As part of the settlement of Mr Rowe's claim the company assigned its rights to the Solicitors' Indemnity Fund ('SIF') who, on 30 March 1998, brought proceedings against Mr Paul claiming reimbursement of 50 per cent of the losses incurred under the joint venture. On 26 May 1998 the defendant served a defence alleging that Oldive and/or the assignee had breached its duty in relation to the joint venture by failing to act in the best interests of both parties to the agreement. SIF issued a summons on 19 June 1998 under RSC O.14 claiming summary judgment. The Master refused the application and granted Mr Paul unconditional leave to defend. SIF appealed and the judge held that on the pleadings the defence was unarguable. Accordingly, summary judgment was entered against Mr Paul. Mr Paul appealed, contending, inter alia, that the judge was wrong to hold that his defence was unarguable.

Held

(1) The Court of Appeal reached the conclusion that it would not be right for the court to, in the exercise its discretion, order summary judgment to be entered against the defendant. The question to be answered was whether, pursuant to CPR 24.2(a), the defendant had a real prospect of successfully defending the claim against him.

(2) In the court's opinion the defendant did have a real prospect of defending the claim made against him. The agreement was a joint venture between Mr Paul and Oldive for the acquisition and development of the property. Further, it was implicit in the joint venture that Oldive would exercise its exclusive discretion under clause 15 of the agreement in the interests of the parties to the joint venture and not solely in the interests of Oldive or Mr Duval.

(3) It was clear that Oldive had acted in its own interest in disregard of the joint venture and had been in breach of its duty to the agreement. It followed that Mr Paul was entitled to set-off that loss against the loss claimed by SIF. Furthermore, there was no evidence from Mr Duval to contradict Mr Paul's evidence. In all the circumstances of the case, Mr Paul had a real prospect of successfully defending the claim on the available evidence before the court. Accordingly, summary judgment would be set aside but the defendant to, within 14 days, apply for permission to amend its defence and state on what basis he sought to defend the claim.

Appeal dismissed.