To defeat a summary judgment application the defence must have a realistic – as opposed to a fanciful – prospect of success, and the court needs to consider the possibility of an amendment when assessing the position.
The Court of Appeal has considered this issue, dismissing an appeal in Yeung v Jeckz Investment Ltd and others [2024] EWCA Civ 1413.
The case concerned an agreement by the three respondents to lend £700,000 to a company, of which the appellant was principal director, to develop a property in Renshaw Street, Liverpool. As part of the loan arrangement the appellant provided personal guarantees to each respondent in July 2017. A further loan of £34,000 was made in November 2017.
The respondents brought proceedings seeking repayment of the loans under the personal guarantees. The appellant admitted in his defence that the guarantees had been provided and the terms of them, but argued that the redemption date had been extended to the date of sale of the property, which had not yet occurred.
In June 2023 the appellant commenced separate proceedings seeking a declaration that the guarantees were invalid and unenforceable because of undue influence. He alleged that he had been bullied and pressurised into signing the documents, denied the opportunity to take independent legal advice and that the documents had been backdated.
The property was sold in June 2022, although the respondents only discovered it in October 2023 shortly before the hearing of their summary judgment application.
The application succeeded for two reasons: the allegations in the separate proceedings could be ignored because they had not been raised in these proceedings; and the material supporting the allegations was “thin to the point almost of invisibility”. The respondents were awarded £778,607.
On appeal, the Court of Appeal decided that the judge had attached too much significance to the fact that the undue influence allegations were raised in separate proceedings. This was a procedural not a substantive issue.
What mattered was whether the allegations represented a realistic prospect of the appellant successfully defending the claim in these proceedings. A judge must take account of the possibility of an amendment when assessing the position: Mishcon De Reya LLP v RJI (Middle East) Ltd [2020] EWHC 1670 (QB).
The merit of the undue influence allegations was the only point of relevance. There was nothing exceptional in most of the allegations and not a single document or piece of contemporaneous evidence to support them. There was no plausible evidence to support a realistically arguable defence of undue influence. The judge’s second reason for granting summary judgment was correct.
Louise Clark is a property law consultant and mediator
