Overturning a summary judgment

Successful appeal against summary judgment

Our clients, the defendants, were a firm of London insurance brokers. The claimants were a firm of national insurance lenders. The claimant lends money to people taking out insurance policies, to pay their insurance premiums. Between 2010 and 2014, our client was the sole agent for the claimant. Our client had the claimant’s authority and a formal agency agreement was in place. However, in late 2014, the claimant issued a claim.

The claim alleged that our client had withheld monies from them. Therefore they claimed damages for breach of agency, breach of trust and fraudulent misrepresentation.

How summary judgment works

A summary judgement is where a court grants a pre-trial judgement, usually at quite an early stage of the proceedings, where the Claimant has made an application (the court will not give summary judgment of it's own volition) arguing that there is no good reason for a trial. Usually this is based on a claim that there is no genuine issue about the material facts, and that the Claimant is clearly likely to win.

The evidence required to obtain summary judgment must be very strong. Note also that an application for summary judgment will not succeed if there are facts which need to be proven by witness evidence and which would need to be ultimately tested under cross examination.

So, the types of cases where the prospects of successfully applying for summary judgment are quite narrow and the risks are high. Notwithstanding this, some claimants decide to take the risk of applying as a tactical manaeouvre to pressurise the defendant.

Appealing the judgment

We appealed to the Court of Appeal to set aside the summary judgement. Our appeal succeeded. Consequently our client was able to continue its defence against the main claim.

Our client argued that they did not transfer or deal with the funds direct. Therefore, they had no knowledge of monies being withheld. They believed that they had followed the terms of the agency agreement relating to the transfer of funds.

We argued that the High Court should not have granted a summary judgement because the proceedings were too complex. They hinged on fundamental conflicts between the parties and required various witnesses to account for their actions. A full trial was required because important oral evidence had to be given and a mini-trial was an inappropriate method of dealing with the summary judgement application. Furthermore, due to the seriousness of the allegations the defendants should have been given the opportunity to rebut the claimant’s dishonesty and fraud allegations. Finally, our client suspected the involvement of a third-party, but needed time to confirm this.

Subsequent court case

After the Court of Appeal awarded our client their costs for the initial hearing and the appeal, they also set directions for the management of the dispute resolution. Later our client’s suspicions about there being third party involvement were confirmed by disclosure. An intermediary first received our client’s payments and then paid the claimants through a chain of commission agreements. We successfully applied to the court to add the intermediary as an additional defendant, and won the ensuing counterclaim that we pursued.

Importance of tactical applications for dispute resolution

Businesses should understand litigation procedures and dispute resolution tactics. The claimant must now pay a large costs bill, due to their overly aggressive approach.