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Court orders payment into court of amount claimed where Defendant’s case was “particularly weak” but did not satisfy the test for summary judgment

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management - Other

22-08-2017

Abbot Investments (North Africa) Ltd v Nestoil Ltd (Formerly Nestoil Plc) [2017] EWHC 119 (Comm)

Facts of the case

  • Abbott Investments North Africa (Ltd) (“C”) sold a company to Momentum Far East Pte (“Momentum”), pursuant to a sale and purchase agreement (the “SPA”). Momentum then assigned its rights to Scorpio Mauritius (“Scorpio”).
  • Part of the consideration for the sale took the form of a loan note which was guaranteed by Nestoil Limited (“D”). The loan note fell due for payment, but was not paid. C claimed the sums due under the loan note from the D.
  • Following service of proceedings, (i) Scorpio purported to rescind the SPA; (ii) Momentum purported to rescind the loan note; and (iii) D contended that the effect of such rescissions was to discharge its liability under the guarantee.
  • C applied for summary judgment against D, arguing that there were no real prospects of establishing a right for Scorpio to rescind the SPA or Momentum the loan note.

The decision

  • Teare J held that it could not be said that D had “no real prospect of success”, and therefore refused C’s application for summary judgment.
  • However, in light of the “particularly weak” defence (i.e. one “very likely to fail”), Teare J held that it was appropriate to make a conditional order requiring D to pay almost 100 per cent of the amount claimed into court, failing which the court could enter judgment.

Analysis and practical advice

  • Even where a summary judgment application is unsuccessful, parties should be alive to the possibility of a conditional order being made in the alternative, e.g. a payment of money into court, or the taking of a specified step in relation to the claim/defence.
  • Any condition sought will need to “represent a proportionate and effective means of achieving that purpose”. In this case, a payment of almost 100 per cent of the amount claimed was found to be appropriate because the defence related to the totality of the claim.
  • The condition sought must also be capable of being complied with. While a court might order a party which has no assets and which has ceased trading to make a payment into court where there is evidence that it would be able to raise the necessary funds, only in exceptional circumstances will it make such an order where a defendant can demonstrate that the order would probably stifle its ability to run a defence.

 

 

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