Rosesilver Group Corp v Paton [2015] EWHC 1758 (Ch)

Case No HC-2014-001808[2015] EWHC 1758 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Rolls Building, 7 Rolls Buildings, Fetter Lane, London EC4A 1NLDate 19/06/2015
Before
MR JUSTICE MANN
Between
Rosesilver Group Corp.ClaimantIan PatonDefendant
Mr Barry Isaacs QC and Ms Helen Galley (instructed by Gordons Solicitors) for ClaimantMr Kavan Gunaratna (instructed by Strafford Law Ltd) for DefendantHearing Hearing dates: 11 th& 12 th June 2015
Judgment
[1]This is an application for summary judgment on a claim for specific performance which is brought by the purchaser under a contract for the purchase and sale of the leasehold interest in property known as 47 Belgravia Court, Ebury Street, London SW1. The claimant (“Rosesilver”) is the purchaser and the defendant is the registered proprietor and vendor.[2]Before setting out the terms of the contract it is necessary to set out some background, and in particular to refer to some litigation which features heavily in this case. The defendant (Mr Paton) and his partner, Miss Amanda Clutterbuck, are and were at all material times experienced property developers. Rosesilver and a related company, Sator Properties Ltd (“Sator”), are both BVI companies. Mr Martin Forrester has provided Rosesilver’s witness statement in support of this application and says he is the sole beneficial owner of both companies. Sator had lent substantial sums of money both to Mr Paton and, in due course, to Miss Clutterbuck. As at the date of the contract Mr Paton and Miss Clutterbuck had engaged in, or were about to be engaged in, litigation (called “the Al Amoudi litigation”), and other litigation called “the EN litigation”, in which they were making claims which, they apparently believed, would yield very significant sums of money were they to be successful. The uncontested evidence of Mr Forrester was that by April 2010 Sator had lent Mr Paton the sum of £1.5 million as an agreed sum. As part of the security for that sum he had given a charge over the parking space at the property (but not the property itself). Over the following two or three years Sator lent further sums both to Mr Paton and then to Miss Clutterbuck. Mr Forrester exhibited a schedule of the sums lent to Miss Clutterbuck. That schedule showed that as at a point of time in this year the debt owed by Miss Clutterbuck was £1.5 million. However, Miss Clutterbuck disputes that amount, and it is right to observe that that sum does not reflect any sum which was paid to her, or which fell to be treated as paid to her, under the two agreements which are the subject of this action (as to which see below), contrary to the arrangements as they are described by Mr Forrester. As far as Mr Forrester was concerned, the loan monies were mostly used to pay for general living expenses and for investing in new prospective businesses and some legal costs.[3]Both sets of litigation have not, at least up until now, resulted in success. The fate of the EN proceedings was not clear to me, but it was not suggested that they had been successful. So far as the Al Amoudi proceedings are concerned, on 20th February 2012 Asplin J delivered judgment at the end of a twenty day trial in which the claimants (Mr Paton and Miss Clutterbuck) failed on all claims [2014] EWHC 383 (Ch). They were refused permission to appeal to the Court of Appeal, but they have now apparently made a renewed application in which they are alleging that the judgment was procured by fraud. The hearing of their renewed application is to take place later this year. As things stand, they have failed in the litigation, and they do not have permission to appeal.[4]I turn now to the contract sued on, and its amendment. The contract which is sued on has been varied. The original contract is dated 10th May 2011 and it contains the following relevant provisions:(a) The price is expressed to be £850,000.(b) The purchase price is said to be payable as to £90,000 on the date of the contract, £210,000 to Miss Clutterbuck, and as to £550,000 on completion.(c) The deposit is said to be £300,000 pounds.

(d) Clause 3 says:

“A deposit in the sum specified in the Schedule has been paid either by telegraphic transfer to the Seller’s Solicitors client account…”
. The solicitors are identified as Messrs Brook Martin and Co. One of the principals in that firm is a Mr Stephen Brook; further reference will be made to him below. (e) The completion date is said to be “Upon seven days written notice to be served by the Buyer upon the Seller”. Added to those typed words are the manuscript words “and upon completion Amanda Clutterbuck will if in occupation deliver vacant possession of the property”. (f) Clause 24 is an “Entire Contract” clause which provides: “This agreement constitutes the entire agreement between the parties to the exclusion of any antecedent statement or representation whether oral or written and/or implied… and the Buyer hereby acknowledges that save as to the written statements of the Seller’s Solicitors prior to the making of this Agreement the Buyer has not entered into this agreement in reliance wholly or partly on any statement or representation made to the Buyer and the parties agree that this Agreement may only be varied or modified (whether by way of collateral contract or otherwise) in writing under the hands of the parties or their Solicitors.” (g) Clause 26 provides: “Amanda Clutterbuck hereby acknowledges that at the request of Ian Paton the Buyer has paid direct to her the sum of £210,000 prior to the date hereof and Ian Paton acknowledges that he so directed payment and that the same be a credit against the purchase price herein.” (h) The Buyer is defined in the schedule as being the present claimant. Miss Clutterbuck’s name also appears there, but it has been deleted and the deletion initialled. The amount of the deposit and the “capacity in which deposit is held” have been inserted in manuscript, and those additions, together with the manuscript addition to the completion date provision (identified above) have all been initialled apparently by Mr Paton and Miss Clutterbuck. Miss Clutterbuck has also signed the contract.[5]The contract was varied by a Supplemental Agreement dated 31st May 2013. This document has the following effect:(a) The purchase price is deemed to be £1,000,000 instead of £850,000 and is deemed to be inclusive of the payments to be made in accordance with clause 4. In fact in his evidence Mr Forrester says that the clause 4 sums were to be paid in addition to the £1m.(b) Under clause 26 of the first agreement, the sum of £210,000 (payable to Miss Clutterbuck) should be deemed to read £360,000, and in the Supplemental Agreement Miss Clutterbuck acknowledged at the request of the Seller that the buyer had paid that sum to her directly prior to the date thereof, and the Seller acknowledged that he had so directed payment and that the same be credited against the purchase price.(c) Mr Paton and Miss Clutterbuck acknowledged that the amounts respectively paid to them to date in cash and amounting in aggregate to £450,000 were paid by Sator on behalf of the Seller. This averment does not make sense. I suspect that the “by” should be a “to”.(d) Under clause 3.1 the seller agreed to make and pursue a ninety year lease extension. On completion the seller was to assign for no consideration the benefit of that claim. Clause 4 provided that the buyer would provide to the Seller all payments due in order to conclude the making of such a claim.(e) The agreement was signed by Mr Paton and Miss Clutterbuck.[6]In addition to that agreement, Mr Paton also executed a transfer in escrow of the property in favour of the claimant.[7]There was for some significant time no insistence on completion, but in due course the claimant sought completion and gave an appropriate notice. The defendant refused to complete and these proceedings were brought. The claim form was issued in or about November 2014. A Defence was served dated 8 January 2015, and signed by Mr Paton’s solicitor. It is necessary to have in mind some of its specific terms.(a) The two contracts were admitted as being documents entered into by Mr Paton and the claimant. However, it was averred that the manuscript addition about completion was not original and had been added after execution by a person unknown and without the knowledge of Mr Paton. This allegation was made notwithstanding the fact that he seemed to have initialled those words. Mr Barry Isaacs QC, who appeared for the claimant on this application, described that as an allegation of forgery. I’m not sure that that is a fair characterisation of the allegation, but it is right to observe that by the time the application came before me that point seems to have been abandoned by Mr Paton.(b) Paragraph 4 reads: “4 The Defendant entered into the May 2011 agreement in order to provide security for loan finance from [Sator] to the defendant and/or Amanda Clutterbuck (“Ms Clutterbuck”), the primary purpose of such loans… being to finance the Defendant’s and Ms Clutterbuck’s proceedings against a woman going by the name of Sarah Al Amoudi (“the Al Amoudi litigation”) and related litigation. As at 2011 the property was worth approximately £1.1 million and the Defendant simply would not have sold it for £850,000. The Defendant was induced to enter into the May 2011 agreement by Stephen Brook (“Mr Brook”) a partner of Brook Martin & Co-solicitors (“BM”). In particular: (a) Mr Brook was and had been since approximately 2004 the Defendant’s and Ms Clutterbuck’s solicitor and the Defendant trusted Mr Brook to act in his best interests; (b) In breach of his duties including fiduciary duties to the Defendant, and despite representing BM [Brook Martin, Mr Brook’s firm] as being the Defendant’s solicitors, in (and possibly before) and after 2011 Mr Brook was in reality acting primarily or solely for the Claimant and (unknown to the Defendant at the time) acting primarily to promote the best interests of the Claimant and/or Sator at the Defendant’s expense;(c) The Defendant entered into the May 2011 agreement and into the agreement dated 31st May 2013 referred to in the Particulars of Claim… relying upon representations by the Claimant and by Mr Brook (in reality on the Claimant’s behalf) that the Claimant had no intention whatever of taking any action to compel the sale and/or transfer the property from the Defendant to the Claimant unless the Al Amoudi litigation and related litigation were completely unsuccessful; such representations were made fraudulently either known by the maker not to be true or with the maker’s recklessness as to whether or not they were true;(d) As at 2013, the value of the property had increased such that it was worth significantly more than £1.1 million.” (c) Paragraph 5 pleads that by reason of breaches of fiduciary duty and fraudulent misrepresentation Mr Paton was entitled to, and thereby did, treat the two agreements as rescinded.[8]The remaining paragraphs of the pleading refer to certain regulatory matters which it is unnecessary for me to refer to.[9]An application for summary judgment was made by the claimant on 16th February 2015. On 30th March 2015 the court made a consent order under which Mr Paton could serve and file evidence in answer by 8th May 2015 and evidence in reply was to be served by 2nd June 2015. The claimant supported its application with a witness statement from Mr Martin Forrester, whose evidence said he was the sole beneficial owner of the claimant and Sator. Mr Paton apparently supported his resistance by a witness statement from Miss Clutterbuck (but surprisingly none from him), dated and served on 8th May 2015. It contained about 1 ½ lever arch files of exhibits, very few of which were of any assistance on the application. There was no reply evidence from Rosesilver.[10]The window for the hearing of this application opened on Wednesday, 10th June 2015. It was not listed for that day but was listed for hearing the next day, Thursday 11th June. The listing was originally before me at 10.30. However, because my previous case overran I could not take it at 10.30 and it was listed to be heard, and was started, at 2pm on 11th June. Up until the evening of 10th June neither the court nor the claimant had received anything in the form of a skeleton argument from the defendant. However, during the course of the evening the defendant provided a skeleton argument of counsel (Mr Gunaratna, instructed late in the day) accompanied by a form of proposed amended defence (not showing deletions and excissions) prepared by the defendant’s solicitor in support of an application which he had issued that day for permission to amend. It is not necessary for me to set out much of that document, and it is sufficient to observe the following: (a) Paragraph 5 contained a repetition of the averment that the May 2011 agreement was “to provide security”, in the same terms as the paragraph set out above, but ending with the words:
“its being envisaged that such loans would be repaid following successful conclusion of the Al Amoudi litigation or the Defendant and Ms Clutterbuck’s claim [described as “the EN litigation”]. (b) Paragraph 6 contains the same denial that the manuscript addition to the completion provision was present on the original contract. (c) Paragraph 8 reads: “Immediately prior to the Defendant’s signing the May 2011 agreement, Mr Brook confirmed to the Defendant that the purpose of the May 2011 agreement was to provide Sator with security for its said loans in case the Defendant was unable to repay the loan if the Al Amoudi litigation was lost. It was agreed that part of the loan monies would therefore be treated as a deposit paid, in the event that a sale was to be pursued. The Defendant was told by Mr Brook as agent for the Claimant that the Claimant would not take any action to compel the sale and/or transfer of the property from the Defendant to the Claimant unless the Al Amoudi litigation and related litigation [being the EN litigation] concluded completely unsuccessfully; and that if the Defendant and/or Ms Clutterbuck repaid the said loan to Sator, the May 2011 agreement would cease to have effect. This amounted to a promise by the Claimant, which the Defendant accepted, and it was an expressly agreed term that the sale would not proceed unless the Defendant had failed to repay the loan on conclusion of the Al Amoudi litigation.” (d) paragraph 9 pleads that the Al Amoudi application had not been concluded. Paragraph 10 records that the May 2011 agreement failed to record the expressly agreed term, that that failure was an oversight and seeks rectification. Paragraph 12 pleads breach of fiduciary duty on the part of Mr Brook, based on his acting as solicitor for the Claimant as well as being “solicitor and trusted adviser of the Defendant”
. There is an alternative averment that Mr Brook had “a connection or financial interest in Sator which was not declared to the Defendant at the time of the agreement.” (d) paragraphs 14 and 15 contain an undue influence claim against Mr Brook.[11]At that stage there was no further evidence proffered by Mr Paton. The application commenced, in the normal way, by Mr Isaacs opening his case and supporting his claim. After he had completed his submissions Mr Gunaratna rose and indicated, for the first time, that he had a different form of amended Defence available (the main difference being that it showed deletions and additions marked up in the normal way, though it was not entirely consistent with the previous version), and more significantly indicated that he wished to introduce more evidence from Mr Paton. That evidence had (it was said) only become available, in the form of a signed witness statement from Mr Paton, during the course of Mr Isaacs’ opening that afternoon (during which, as I understand it, Mr Paton was sitting behind Mr Gunaratna). The possibility further evidence had been foreshadowed in a prior witness statement of Mr Paton’s solicitor (supporting the application for permission to amend) and in previous correspondence over the preceding couple of days, but it still only arrived at the hearing. However, in the witness statement the evidence foreshadowed was evidence about “the very adverse effects of their dealings with [Brook Martin] and the links to the present actions”, not a further witness statement going to the merits.[12]I therefore had to deal with that application to amend the Defence and to admit further evidence before the application could go any further. By the time Mr Gunaratna had made his application we had reached the end of the court day, and I rose for the evening and so that I could consider the evidence de bene esse. On resuming the next day I heard further submissions and ruled that Mr Paton should not be allowed to introduce his evidence. I did not give reasons at the time, saying that I would give reasons in this judgment. My reasons were, briefly, as follows.[13]Procedurally speaking, the evidence was introduced in a manner which was unsatisfactory for reasons going beyond considerations of mere lateness. No application was made to wait until a new witness statement came. When he introduced it Mr Gunaratna explained that he was not in a position to say anything about it until he knew it was going to happen, and so far as his professional duties were concerned, if he did not have relevant instructions, then I accept he could not tell me. However, it seems to me to be quite wrong that he should not have received instructions to inform anyone of the possibility of the evidence coming. Both Mr Isaacs and I should have been told of the possibility. Its production as a very late rabbit out of a hat meant that Mr Isaacs’ submissions could not be directed to it, and he did not have the opportunity of waiting to see what was going to come. Furthermore, the evidence was late even beyond the usual standards of lateness which one has regrettably become accustomed to in some proceedings. It was so late that, had it not been for the entirely adventitious fact that the application did not come on for hearing on the first day, or on the morning of the second day, it would never have been available. It was only available to be considered at the application because the court’s listing requirements meant that the application did not start until the afternoon of the 11th. I would be very reluctant to allow the defendant the benefit of this happenstance, particularly bearing in mind the absence of any prior notification. In addition, it might be thought that proceeding in this way gives an unfair advantage to Mr Paton, who could tailor his further evidence to Mr Isaacs’ skeleton argument.[14]The reasons given for its lateness were the need of Mr Paton to focus on other litigation, pressure of work on the solicitor and the non-availability of funding until recently. He claims that funds were not available because his assets are the subject of a freezing order obtained in the Al Amoudi litigation. I found this latter averment unconvincing. It may well be that the existence of a freezing order would make it harder to find funding to cover other litigation, but if (as seems likely judging by the hostile tone of the correspondence that I have seen in the Al Amoudi litigation) the person with the benefit of the freezing order does not consent to the liberation of funds, it is open to a defendant to apply to the court for an order allowing it. Mr Paton does not seem to have applied either to the counterparty in the Al Amoudi litigation or to the court for such relief. Furthermore, he seems to have been able to put together a witness statement from Miss Clutterbuck back in May, and I do not understand why he could not have done his own witness statement (which would have been rather more relevant than hers, bearing in mind that he is the seller and the defendant in these proceedings) at the time. All in all, Mr Paton had plenty of time (a period agreed by him) to put in his evidence, availed himself of that opportunity by putting in some evidence and then did nothing to bolster that evidence until a time which can be fairly considered as being beyond the last minute. In addition, the evidence seemed, on relevant points, to be inadequately particularised; I refer to some of these points below.[15]In all the circumstances I refused permission to adduce the evidence. Accordingly, the application proceeded on the basis of Miss Clutterbuck’s witness statement. It became less necessary to focus on whether or not there should be an amendment of the Defence, because the real question was whether or not Miss Clutterbuck’s evidence revealed an arguable defence. I have treated the amended Defence (in the form produced by Mr Gunaratna at the hearing, which was marked up to show deletions and additions, but which was not wholly consistent with the draft produced the previous evening) as encapsulating Mr Paton’s lines of defence.[16]Mr Gunaratna sought to run defences under two principal heads. The first head sought to rely on some form of agreement, prior to the May 2011 contract, under which completion was not to take place if there was success in the litigation referred to above. He said that the agreement was a form of security, or there was a further agreed term between the parties which was not recorded in the contract. In the alternative he sought to say that, even if a strict contractual route failed, then as a matter of discretion, bearing in mind what is said to have been said about non-completion, I should not grant specific performance. The second head involved the position of Mr Brook. It was said that Mr Brook, as a fiduciary, failed to disclose a conflict of interest which meant that the agreements could not stand. Alternatively, it was said that the agreements were procured by undue influence.[17]I deal with the first head first. In determining whether an arguable defence has been raised it is appropriate to start with the original Defence, so far as it is still relied on (allegations of fraudulent misrepresentation are no longer pursued). It contains an allegation that the agreement was to be security for loan finance in relation to the costs the Al Amoudi litigation. It is not explained how that was supposed to work, and in what sense it was “security”. The only clue is in the later paragraph of the Defence in which “representations” were relied on, the representations being that Rosesilver had no intention of compelling the sale unless the Al Amoudi litigation “and other related litigation” were completely unsuccessful. There is an allegation that the property was worth rather more than the contract price, and that would be consistent with some sort of arrangement under which Rosesilver would have the benefit of that excess by way of security, but quite how that was to work is not articulated. This leaves the defence in a significant state of uncertainty – one cannot really work out what it is that is being alleged in any plausible form. Mr Forrester’s evidence denies any security nature of the transaction, identifies the real security and denies undervalue, and he exhibits later documents which, while not being proper valuation evidence, would tend to support a valuer’s view that the property was not worth £1.1m in 2011. Taking that material in the round, the uncertainty in this document is not a very sure foundation for a saying that there is an arguable defence.[18]So far as relevant (and I bear in mind that it was not supported by a statement of truth) the proposed amended Defence adds a little, but not much more, clarity. It refers to its being envisaged that the loans would be repaid following the conclusion of successful litigation, but is equivocal as to whether it was one or both sets of litigation. It is equivocal as to valuation. It removes the original allegation that the property was worth more than £850,000 in 2011, but reintroduces it as a belief in the context of an undue influence claim (referred to below). It makes an allegation that Mr Brook confirmed it was to provide Sator with security for its loans, and that action to compel a sale would not be taken unless litigation concluded “completely unsuccessfully”, but again does not explain how this form of security was to work, and in what sense a contract for the sale of property was a form of security, particularly bearing in mind the (unpleaded, but accurate) fact that a separate security was taken over the flat anyway. I have already identified the wording used in the various forms of the Defence.[19]This being a summary judgment application, one would have expected a reasonable explanation of the circumstances in the supporting evidence, both because what is really meant by “security” in the Defence is not clear and, where a party is setting up terms which are not consistent with an apparently binding agreement, one would expect some form of explanation. The explanation in the evidence is extremely thin. One has to remember that Mr Forrester’s witness statement sought to meet the allegations made in the original form of Defence. He denied any notion of the agreement being any form of security and pointed out that, on the same day as the May 2011 agreement, Mr Paton had provided security over the property in favour of Sator in the form of a conventional charge in order to secure Miss Clutterbuck’s indebtedness. That was not disputed. The concept, therefore, that the May 2011 agreement should be security therefore requires a bit of explanation.[20]The only explanation given by Miss Clutterbuck in her witness statement occurs in just two sentences. The first is in paragraph 9. She says:
“9. Mr Brook represented to us before we exchanged contracts with Rosesilver that this contract would be mutually rescinded following the outcome of either the SAA [the Al Amoudi] litigation or the EN proceedings which contrary to Mr Forrester’s evidence are still both ongoing.”
[21]No reason is given for that (there must have been one, if it happened). No explanation is given as to how or why, in the circumstances, the contract was in fact some form of security. Nothing is said about whether any particular result in those proceedings was significant (win, loss, partial win, recovery of moneys and so on). She returns to the point in paragraph 19, where she says:
“Mr Brook’s failure to induce me to sign my signature to [a particular consent document]… I believe caused Mr Brook to instigate these proceedings in breach of our understanding that the contract would be rescinded at the end of the SAA and EN proceedings.”
Once again, absolutely no explanation is given. All she says about it is to quote an email of 20th June 2014, to which I return below.[22]There is therefore no explanation in the evidence as to how it was that the alleged agreement came to be made or what it was really about. Nor is there any reference in her evidence to the agreement being any form of “security”. Mr Gunaratna pointed out, probably correctly, that it is not necessarily significant that the word “security” is not used, but if the word is not used then the concept ought to be expanded. Neither of those appears to be the case. Quite how it is that such an agreement can stand as security is not at all apparent from any other document. I return to this point below.[23]Although I did not admit the evidence, I would observe that the proposed evidence of Mr Paton does not (remarkably, in my view, bearing in mind the point at which it was produced and having the benefit of Mr Isaac’s submissions which referred to the poverty of the evidence) do any better. Like Miss Clutterbuck’s, his evidence lacks any real explanation and is expressed only in the form of an unexplained and unelaborated assertion that Mr Brook (on behalf of the buyer) said that the buyer would not require the sale to go through “unless we failed to recover enough from the litigation to repay the loans”. In the next paragraph he says “around the time of the variation agreement in early summer 2013, again Stephen again gave me to understand that this was about security.” That would have been the sum total of his (intended) direct evidence.[24]I have so far dealt with direct evidence in witness statements. However, it is right to say that in this application Mr Gunaratna relies on what is said to be some supporting material in the form of correspondence. He relies on two particular written documents, both of which are exhibited by Miss Clutterbuck. The first is a letter from Mr Brook dated 12th June 2014. It starts by referring to an application to extend the lease on the property, the funding for which was provided for in the supplemental agreement of May 2013. It goes on:
“The monies will be provided by Sator Properties Ltd who have a second all monies Charge on the property, as you know. As we have discussed in the past, the hope is that the outcome of your current litigation cases will be such as to allow you and Ian to repay Sator, at least, its capital debt which you will see from the enclosed current list this stands at £1,507,437.33 (and to which will be added the cost of the enfranchisement). That being the case you will be able to retain ownership of this flat in which, of course, the Lease will have been extended from 50 years with a ground rent to 140 years with no ground rent.”
You have already signed documentation to confirm that you will vacate the flat in the event of the Sale Contract to Rosesilver Group Corp proceeding to completion but for the sake of good order and from the perspective of Sator, I am enclosing a declaration for signing by you confirming what it says, ie that in the event that Sator calls in its loan you understand that you have to vacate …”[25]The enclosed document is a form of draft acknowledgement by Miss Clutterbuck that she will not claim any rights affecting the rights of Sator under its charge.[26]The second document is an email of 20th June 2014 from Mr Brook to Mr Paton, with the property as its subject, and in which the former says:
“See attached. [The attachment is not exhibited in these proceedings but can be inferred to be a document relating to the amount required to acquire the extended lease.] If you add Asbury’s fees it makes a totals [sic] of £195,044.80 which, from previous discussions, we are agreed is a very good price for a 90 year extension of both flat and parking space and extinguishment of the ground rent. Rosesilver Corp Group has to pay this under the sale contract and Martin [Mr Forrester] has confirmed that it will do so. I wrote to Amanda last week with a consent form to sign so that the housekeeping is in order and she told Guy that she was going to sign this before a solicitor and return it to me. Whether or not she signs it the fact is that the sale to Rosesilver is with vacant possession on completion and you have Beth [presumably “both”] signed the contract to so provide. My strategy, as you know, has been to try and so agree things with Martin that we wait for the outcome of the Nicholl case [the EN litigation] before he completes the contract to buy in the hope that you will be able to repay your debts to him (for which, as you know, I am now 50% responsible) and the contract can be mutually rescinded. However, with almost a one-month unexplained silence from you both and with all emails and voice messages ignored this is a difficult notion to sell and that should not surprise you…”
[27]Mr Gunaratna points to the apparent link in both communications between the repayment of loans at the end of the litigation (or some of it) and the coming to an end of the contract, and this is said to support the generalised case expressed in the witness statement. Both these extracts are quoted in Miss Clutterbuck’s witness statement. In the absence of any reply evidence from the claimant there is no explanation from the claimant as to what that link was.[28]Against the whole of this evidential background Mr Gunaratna submitted that there is an arguable defence in the form of an express term agreed between the parties that the agreement was a form of security and as such conditional on a failure by Mr Paton and Miss Clutterbuck to repay the loans that this agreement was intended to secure, and to give the borrowers an opportunity to repay their loan balances through their court proceedings. He accepted that this was no conventional form of security. The property already stood as security for Miss Clutterbuck’s debt. The purchase price was less than the value of the property, and the agreement introduced the threat of losing the property which his client wished to keep. This arrangement should be given effect to in one or more of three ways – rectification, a finding that there was an agreement for the sale of property which was not reduced entirely to writing (and which therefore was not a valid contract) and/or a refusal to grant specific performance on equitable grounds because it would be unfair to grant it in the face of a clear agreement or understanding of the parties that there should be no sale until both sets of proceedings were finally determined to be lost. Although the Al Amoudi proceedings had failed at first instance, and permission to appeal had been refused on paper, there was still an outstanding oral application for permission to appeal, so that final event had not yet arrived. Mr Gunaratna submitted that it was significant that there was no response from Mr Brook to any of this – it was Mr Brook who had all the dealings with Mr Paton and Miss Clutterbuck, and Mr Forrester had none. The existence of the escrow tended to support the fact that there was a security element to this transaction. Although there was no expert evidence of the value of the property at the time of the first contract in 2011, the Defence (verified by a statement of truth) did contain an averment of undervalue.[29]Mr Isaacs’ submissions concentrated on the poverty of the defendant’s evidential case. He pointed out that it was not said in Miss Clutterbuck’s witness statement that it was served on behalf of Mr Paton, and there was no evidence that he had seen it. Nor was there evidence that Mr Paton believed its contents to be true. Then he went on to demonstrate inconsistencies in the accounts of the agreement relied on – in paragraph 9 of the Defence it referred to rescission if one or other of the two sets of proceedings was unsuccessful, but paragraph 19 referred to the event of both of them being unsuccessful. He pointed to findings by Asplin J in her judgment about the unreliable nature, in her proceedings, of both Miss Clutterbuck and Mr Paton as witnesses, including the production of backdated documents to bolster their claim. The email of 20th June 2014, far from demonstrating an agreement at the date of the contract, tended to suggest that the idea of rescinding the contract in the event of repayment was something which was discussed only more recently. The “Entire Contract” provision in the contract should be given its proper effect, which meant that there was not, and could not be, any other binding agreement between the parties entered into at the date of the contract. All in all, there was no prospect of establishing the agreement which the defendant needed in order to demonstrate that there was an arguable defence based on it.[30]I agree with the thrust of Mr Isaacs’ submissions about the poverty of the defendant’s evidential case. The sort of transaction which Mr Paton’s Defence seeks to set up cries out for a factual explanation. If this unusual arrangement took place one would have expected some form of discussion about it between the parties, and then for that discussion to have been referred to in the evidence by way of explanation. But the evidence in this case advances no explanation. It merely makes general and short assertions about the nature of the transaction.[31]In the light of the positive evidence of Mr Forrester that the transaction was a contract without any element of security, that weak form of pleading and evidencing does not give rise to an arguable defence. There might be thought to be two senses in which the contract might have been “security” for some other obligation. The first is that it provided the means of appropriating the asset to the discharge of the debt. But that does not make sense where the contract is one for the payment of the price for the property – there is no additional benefit to the purchaser (“chargee”) which amounts to security. If the property were worth more than the purchase price then there might be an additional benefit, but that factor seems to have been removed from the defendant’s case on security (it is only referred to in the context of undue influence), taking the amended Defence as the most recent formulation. Furthermore, having the contract stand as security in this sense is extremely odd where there was a contemporaneous transaction which was a proper security.[32]The second sense is that it was some sort of “ransom” - the prospect of having to part with the property might, of itself, provide an additional inducement to discharge debts, so that an agreement not to compel completion if debts were repaid would have some practical effect even if it were not security in a legal sense. However, that motivation is not spelled out in any of the evidence, and is mere surmise. On the evidence, the property was not the home of either Mr Paton or Miss Clutterbuck at the time of the 2011 contract, and was merely an investment property (though they apparently say that it has since become their home), so preserving a home cannot have been a motivation at the time. Furthermore, this way of viewing it as security does not lie with what is said, which is that a sale would be avoided by success in litigation. Achieving success in litigation is not something that lay in the power of Mr Paton or Miss Clutterbuck, so the prospect of an unwelcome sale would not be an effective inducement to do something which was within their power.[33]The concept of security (which lay at the heart of Mr Gunaratna’s submissions) therefore remains a fundamentally unexplained matter. As a defence in this application it remains merely at the level of an assertion of a transaction which is incomprehensible without further detail, especially when faced with the clear evidence of Mr Forrester. Had the point had some substance in fact it would not have been difficult to have provided a little more substance in a witness statement, even bearing in mind the fact that the defendant does not have to make his entire case on an application of this nature. As it stands the evidence is, in my view, insufficient to raise an arguable defence in terms of a “security”. It is, of course, not necessary for a defendant in a summary judgment application to advance the whole of his or her case at that stage of the proceedings. However, he or she must raise enough evidence to raise a real prospect of having some sort of defence, and where the defence depends on some form of agreement between the parties it behoves a defendant to proffer a reasonable level of explanation. Mere assertion of the kind provided by Miss Clutterbuck is not enough. Mr Gunaratna pointed out that the court is entitled to take into account evidence that may be given at the trial even if it does not appear on the summary judgment application, and I accept that, but that is not an excuse for producing only the most general of explanations, leaving all sorts of obvious questions unanswered, and saying that further details will be given at trial. A basic level of achievement going beyond mere assertion must be attained if an arguable defence is to be set up.[34]There is another way of viewing the matter which does not depend on treating the contract as security, even though it is not apparent that the defendant actually puts his case in this way. That way is to consider whether there was some form of agreement of the parties, not intended to be viewed as a form of security, that there would be no sale of the property pending the outcome of the two sets of proceedings. There may be circumstances in which such an agreement could be deployed to resist summary judgment. Rectification might be available, or a collateral contract, or perhaps even estoppel, might be the legal form of the defence. However, to survive this summary judgment application such an agreement must be sufficiently clearly alleged and to have a degree of plausibility. On the evidence any case for such an agreement lacks both those characteristics in the same way as it lacks any cogency for the purposes of the security argument. It is not clearly alleged in Miss Clutterbuck’s witness statement. Paragraph 9 refers to “representations” about rescission following the outcome (not, be it noted, the successful outcome) of either of the sets of proceedings. One asks – what outcome, and in which proceedings? As an account of an agreement it does not make much sense. Paragraph 19 refers to an “understanding” that the contract would be rescinded at the end of both sets of proceedings, but does not say when that understanding was reached and does not put it as having arisen at the time of the contract. The correspondence she refers to refers to post-contract understandings. An assertion of an agreement at the date of the contract therefore lacks substance and plausibility. Furthermore, reliance on something in the nature of a collateral contract would be prevented by the wording of the “Entire Contract” clause (though I accept that clause could not stand in the way of a proper rectification claim).[35]There are, undoubtedly, significant oddities about the commercial relationship of the parties in this case. The documents reveal matters which suggest that there was more in play than the strict terms of the contract. For example:(i) Mr Forrester’s evidence was that the money which the contract stated to have been paid to Miss Clutterbuck was set off against her indebtedness to Sator, and had that not happened then Sator would not have then lent further moneys to her. However, a form of statement of account exhibited by Mr Forrester does not show any such reduction. In fact, it not only fails to record that reduction, it actually contains a positive note to the effect that the £450,000 payable to Miss Clutterbuck was to be “set off on completion against the deposit payable on the sale [of the property].” His witness statement suggests that he considered this to have been consistent with the contract and what he has said earlier about the treatment of the moneys, but it plainly is not.(ii) The two items of correspondence identified above demonstrate that there was apparently some discussion about rescinding the contract if the loans were repaid. These assertions, made by Mr Brook, who acted for Rosesilver in the matter, do not make obvious commercial sense if the matter was, as Mr Forrester would have it, a “normal” commercial contract for the sale of property at its proper value. There was obviously some discussion of the point, but the motivation for those discussions remains unclear and puzzling. Notwithstanding that, this correspondence does not go far enough to fill in the evidential shortcomings of Miss Clutterbuck’s witness statement so as to enable an arguable defence to be established.(iii) The provision in the contract for completion (on 7 days notice) is unusual.(iv) There is no satisfactory explanation as to why there was an increase in the purchase price in 2013. Mr Forrester does not offer one.

(v) An email of 6th August 2014 from Mr Brook to Mr Paton says:

“I will write to you separately regarding the sale of the property and the progress made since you and Amanda confirmed to me, on 28th February last, that the property was on the market with Best Gap. Can you please let me have an update as it seems odd that there have been no offers to date.”
It was not explained in the evidence why Mr Paton was selling a property which he had agreed to sell to Rosesilver, but by the same token this was not relied on in the application as demonstrating some other relationship in relation to the property.[36]These are puzzling features, but the existence of puzzling features does not, of itself, provide an arguable defence, and they do not bolster the bald, inadequate and (by themselves) implausible statements of Miss Clutterbuck.[37]I am live to the requirement, under a summary judgment application, not to conduct a mini-trial, and that the defendant does not have to do more than to adduce evidence demonstrating an arguable defence. I apply the principles summarised in the White Book at paragraph 24.3.5:
“If the applicant for summary judgment adduces credible evidence in support of their application, the respondent becomes subject to an evidential burden of proving some real prospect of success or some other reason for a trial. The standard of proof required of the respondent is not high. It suffices merely to rebut the applicant's statement of belief. The language of r.24.2 (no real prospect no other reason ) indicates that, in determining the question, the court must apply a negative test. The respondent's case must carry some degree of conviction: the court is not required to accept without question any assertion they make: Britannia Building Society v Prangley June 12, 2000, unrep. , Ch D; for pre- CPR authorities on this point see National Westminster Bank Plc v Daniel [1993] I W.L.R. 1453 ; [1994] 1 All E.R. 156 and the cases cited therein. However, the proper disposal of an issue under Pt 24 does not involve the judge in conducting a mini-trial (Swain v Hillman [2001] 1 All E.R. 91). Therefore, the Court hearing a Pt 24 application should be wary of trying issues of fact on evidence where the facts are apparently credible and are to be set against the facts being advanced by the other side. Choosing between them is the function of the trial judge, not the judge on an interim application, unless there is some inherent improbability in what is being asserted or some extraneous evidence which would contradict it (Fashion Gossip Ltd v Esprit Telecoms UK Ltd July 27, 2000, unrep. , CA; cf. Day v RAC Motoring Services Ltd [1999] 1 All E.R. 1007, per Ward L.J. at 1013 propounding the adoption of a negative test on applications to set aside default judgments). When deciding whether the respondent has some real prospect of success the court should not apply the standard which would be applicable at the trial, namely the balance of probabilities on the evidence presented; on an application for summary judgment the court should also consider the evidence that could reasonably be expected to be available at trial (Royal Brompton Hospital NHS Trust v Hammond (No.5) , [2001] EWCA Civ 550, CA).”
[38]In the present matter the defendant has not advanced a clear and plausible evidential case, and so far as Mr Gunaratna has sought to tease one out of the material, it still has a serious lack of clarity and plausibility. In saying that I am not making the sort of finding that would be appropriate after a trial. I am making a finding about the quality of the material presented to me in order to demonstrate an arguable defence. It does not do enough. I do not consider that Mr Paton has advanced a sufficiently clear and plausible case for saying that there was any form of binding (in any sense) arrangement, contemporaneously with the contract and its variation, which would restrict or restrain the enforcement of the contract. This also applies to Mr Gunaratna’s point based on discretion – the evidence on agreement is insufficient for this purpose too.[39]I reach that conclusion by taking into account what Miss Clutterbuck says in her witness statement and leaving out of account the technical points taken by Mr Isaacs as to its use in a summary judgment application. Had the witness statement contained material which amounted to an arguable defence, I would not have allowed his technical points to stand in the way of that defence being advanced. I would add that even if I had admitted it, Mr Paton’s own witness statement would not have helped, containing (as it did) generalised and unparticularised statements of matters which must have been in his knowledge if they existed and were relevant to his case.[40]Mr Gunaratna’s next points (his second head) are related in that they rely on the status of Mr Brook. It is said that Mr Brook was Mr Paton’s own solicitor and had been a trusted adviser for years. At the same time, he was acting for Rosesilver and Mr Forrester, and it is said that there is evidence that he was also interested in Rosesilver itself, or the loans. Mr Gunaratna relies on these facts as the starting point for claims that the two contracts ought to be set aside for undue influence or as having been procured in breach of fiduciary duty.[41]So far as undue influence is concerned, the original Defence contains no reference to it. Nor does Miss Clutterbuck’s witness statement foreshadow such a claim, or lay down any of the facts necessary to it. There is no evidence whatsoever of express undue influence. Mr Gunaratna indicated that he was relying on presumed undue influence. There is not really any evidence which would support this either. In order to rely on this doctrine there must be some evidence of a relationship of influence between the influencing party and the victim; and there must be a transaction which calls for an explanation (Snell’s Equity, 33rd Edn at para 8-022). If this doctrine is to be invoked then one would normally expect evidence from the influenced person. In the present case the admissible evidence comes only from Miss Clutterbuck, and she is not the counter-party to the relevant transaction. In any event, her evidence does not lay the evidential groundwork for this plea. She does not set out the relationship between Mr Brook and Mr Paton. Nor does she provide much evidence that the transaction in question requires explanation. It is true that Asplin J’s findings (at paragraph 23) refer to a close business relationship with Mr Paton, but that is different, and in any event she describes it as covering only the period from 2004 and 2009. Mr Gunaratna seemed to recognise that this plea would require some indication of a personal interest in the transaction, and Miss Clutterbuck does provide some suggestions that Mr Brook may have some sort of interest in the loans, or in Sator (it is understandable that in the circumstances she may not know of any covert relationship in relation to these matters) but they are no more than suggestions. While the transaction has unusual features (see above) they do not, in my view, even raise a prima facie case of a transaction requiring explanation as that requirement exists in the law of undue influence. Undue influence cases cannot be allowed to go forward on the basis of vague statements in evidence, coupled with speculative submissions on the part of counsel, especially in circumstances in which it appears to be a point added as an afterthought, and I find that the evidence as it stands does not raise an arguable case of undue influence.[42]Mr Gunaratna’s last proposed line of defence is rescission on the basis of an undisclosed conflict of interest. In his skeleton argument he said the contract ought to be set aside because it was procured by Mr Brook acting in breach of fiduciary duty, and it would be unconscionable for the claimant to rely on it given its notice of that conflict, acquired through Mr Brook who acted as its agent. The conflict is said to arise from Mr Brook’s having some sort of interest in Rosesilver and/or Sator. The draft amended Defence (which I am prepared to take as outlining the nature of the case of Mr Paton) is that Mr Brook was acting as solicitor and agent to the claimant with authority to conclude contracts, as well as the solicitor and trusted adviser of the defendant. There is an alternative plea that Mr Brook had an interest (unparticularised) in Sator. That is said to give rise to an undisclosed conflict of interest.[43]If it were the case that Mr Brook were acting in the transaction as solicitor for Mr Paton, and advising him, while at the same time having some sort of interest in the transaction himself, then there might be case for there being a conflict of duty which might be capable of justifying setting aside the contract. To that extent Mr Gunaratna’s submissions were capable of being based in principle. However, once again the problem for Mr Paton is that they are not based in evidence. The material for supposing that Mr Brook had an undisclosed interest in the transaction is no more than a passing supposition. More importantly, the important fact that Mr Brook was somehow acting for Mr Paton in the transaction is simply not vouched for in any way in the evidence. Once again Miss Clutterbuck’s (and Mr Paton’s) failure to explain how the transaction came about means that an important evidential basis is lacking. Just because he had acted for Mr Paton in the past does not mean that he was acting for him in this matter. Even Mr Paton’s unadmitted witness statement does not demonstrate that Mr Brook was acting for him in this transaction, which is particularly striking bearing in mind that this witness statement must have been created with the draft pleading in mind.[44]In the circumstances this line of defence, too, fails.[45]It follows that the defendant has not demonstrated an arguable defence, and the application for summary judgment succeeds.

Cited in 2 later judgments