Medical Associates of Northern Virginia Inc., Profit Sharing Plan v Steward Malta Ltd & Ors

This is an application for summary judgment pursuant to CPR Part 24 and to strike out the Defendants’ Defence pursuant to CPR 3.4(2). However, Mr Shapiro QC helpfully conceded that if he did not succeed in his summary judgment application he could not succeed in his alternative application and I therefore concentrate on the summary judgment application.

The facts of the matter can be shortly stated.

CPR Part 24 provides as follows:

“Grounds for summary judgment

24.2

The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –

(a)

it considers that –

(i)

that claimant has no real prospect of succeeding on the claim or issue; or

(ii)

that defendant has no real prospect of successfully defending the claim or issue; and

(b)

there is no other compelling reason why the case or issue should be disposed of at a trial.”

The principles to be applied on a summary judgment have been comprehensively laid down by Lewison J (as he then was) in Easyair Ltd (t/a Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch), in a passage which has been approved by the Court of Appeal. He said:

“As Ms Anderson QC rightly reminded me, the court must be careful before giving summary judgment on a claim. The correct approach on applications by defendants is, in my judgment, as follows:

i)

The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman [2001] 1 All ER 91;

ii)

A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel

[2003] EWCA Civ 472 at [8] iii) In reaching its conclusion the court must not conduct a “mini-trial”: Swainv Hillman

iv)

This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products vPatel at [10]

v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: RoyalBrompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;

vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd

[2007] FSR 63;

vii)

On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent’s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant’s case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals &Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.”

There was no dispute before me but that these are the relevant principles.

Turning to the Defence put forward here, the relevant paragraphs are paragraphs 5 to 9 and 13 to 15 which read as follows:

“5.BIM was successful in its bid for the concession for the Healthcare Project which was granted to BIM’s subsidiary companies (the Defendants) (the “Concession”) and for which the Claimant, through its representative, Mr. Ambrish Gupta, MD (“Dr. Gupta”), was one of the initial investors. The Defendants understand that the Settlement Deed intended to resolve disputes between the Claimant and other investors in connection with their collaboration in the Concession, its funding and equity shares.

Ms Briggs, for the Defendants, submitted that summary judgment should not be granted because the Claimant was not able to show that either limb of CPR Part 24 was satisfied.

Starting with CPR Part 24(1)(a), she submitted that the non-admission in paragraph 15

She did however submit that there was a compelling reason to allow the claim to go further, to trial or at least towards trial, to permit disclosure in order to enable proper inquiry to be made into the circumstances surrounding the grant of the concession and the entering into of the settlement agreement. The matters relied on are those set out in the pleading and quoted above. I was not however shown the various press reports relied on, which had not been put into evidence by the Defendants.

After a degree of pressing, she clarified that the defence which might exist and which the Defendants contend might impugn the validity of the settlement agreement is as follows:

Ms Briggs emphasised that she was not in fact making these allegations, since she did not have the evidence to support such. However, the Defendants, as she put it, had concerns as to whether the above scenario was in fact the case, arising out of the press reports referred to in the pleadings. Hence, since the Defendants wished to have time to investigate these matters and since they required documentation which, she submitted, the new beneficial owners of the Defendants did not have, or, in the words of Mr Giles, were not aware that they had, the defence should not be struck out at this stage.

I asked for further submissions as to whether, in the event that I was not persuaded that unconditional leave to defend should be granted, I should allow leave to defence on a conditional basis. It was accepted by both parties that I have jurisdiction to order this.

The relevant principles, as set out in the Practice Direction to Part 24, are as follows:

“The court’s approach

4.

Where it appears to the court possible that a claim or defence may succeed but improbable that it will do so, the court may make a conditional order, as described below.

Orders the Court may make

5.1

The orders the court may make on an application under Part 24 include:

(1)

judgment on the claim,

(2)

the striking out or dismissal of the claim, (3) the dismissal of the application,

(4)

a conditional order.

5.2

A conditional order is an order which requires a party:

(1)

to pay a sum of money into court, or

(2)

to take a specified step in relation to his claim or defence, as the case may be, and provides that that party’s claim will be dismissed or his statement of case will be struck out if he does not comply.

(Note – the court will not follow its former practice of granting leave to a defendant to defend a claim, whether conditionally or unconditionally.)”

The Defendants, for their part, relied on the decisions of the Court of Appeal in Allen & Bloomsbury Publishing Ltd v JK Rowling [2011] EWCA Civ 943, Global Flood Defence Systems Ltd (and others) v Van Den Noort Innovations BV (and others), [2015] EWHC 153 (IPEC) and Abbot Investments (North Africa) Ltd v Nestoil Ltd [2017] EWHC 119 (Comm). In the latter case, Teare J set out the relevant principles, as follows:

“20.

The court's jurisdiction to make such an order is not found inCPR Part24which deals with applications for summary judgment. It is to be found inCPR3.1(3); seeDeutsche Bank v Unitech Global [2016] 1 WLR 3598at paragraphs 72-77.CPR Part 24.6provides that the court determining a summary judgment application may give directions for the filing of a defence and notes thatCPR Part3.1(3)provides that the court may attach conditions when it makes an order. PD 24 paragraph 4 provides that where the court considers that it is possible that a defence may succeed but improbable that it will do so, the court may make a conditional order. Paragraph 5 provides that such an order may require a party to pay a sum of money into court.

21.

Since the court's jurisdiction stems fromCPR Part 3.1(3)it follows from the judgment of Moore-Bick LJ inHuscroft v P&O Ferries [2011] 1 WLR 939at paragraph 19 that "before exercising a power given byrule 3.1(3)the court should identify the purpose of imposing a condition and satisfy itself that the condition it has in mind represents a proportionate and effective means of achieving that

purpose ……………"

22.

Where the making of such an order may stifle the defence the court will only make such an order in an exceptional case; seeOlatawura v Abiloye [2003] 1 WLR275at paragraph 22 andAli v Hudson [2004] CP Rep 15at paragraph 40.

23.

Mr. Kulkarni relied upon the statement by Simon Brown LJ inOlatawura vAbiloye [2003] 1 WLR 275at paragraph 26 that an order for security for costs will usually not be justified merely because the claim or defence is "somewhat weak". Simon Brown LJ stated that "the court will be reluctant to be drawn into an assessment of the merits beyond what is necessary to establish whether the person concerned has "no real prospect of succeeding" and the occasions when security for costs is ordered solely because the case appears weak may be expected to be few and far between." Mr. Kulkarni submitted that the same approach must apply when the court is considering making an order that a sum be paid into court to secure a claim. In my judgment care must be exercised when considering what is meant by a "weak" case in this context. Obviously, the fact that a court may consider that a defence is only just more likely to fail than succeed would not justify a conditional order. But where a defence is very likely to fail because, for example, the evidence relied upon appears to be inconsistent with the contemporaneous documents, such circumstances are typically regarded as justifying an order for payment in of a sum of money which will secure the claim; see, for example, Homebase Limited v LSS Services Limited [2004] EWHC 3182 (Ch) per Peter Smith J. at paragraphs 31-34. In this regard it is, I think, significant that inOlatawura v Abiloye [2003] 1 WLR 275at paragraph 23 Simon Brown LJ referred to orders under the old rules for payment in securing a claim in respect of an "unpromising defence." He did not say that the court's discretion to make such orders was now more restrictive. On the contrary, he observed thatCPR 24is now wider than it was before and enables payments in to be made to secure the defendant's costs of an "unpromising claim." Although PD 24 paragraph 5 notes in parenthesis that the court will not follow its former practice of granting leave to a defendant to defend a claim, whether conditionally or unconditionally, that merely reflected a change in the form of the order (to a conditional order as defined in PD 24 paragraph 5). In the light of PD 24 paragraph 4 (which provides that the court may make a conditional order when a claim or defence is improbable) it is unlikely that the previous practice of ordering a payment in of the whole or part of the sum claimed when the defence appeared particularly weak was intended to be changed. Peter Smith J in Homebase Limited v LSS Services Limited [2004] EWHC 3182 (Ch) at paragraph 33 referred to the case where doubts were raised by the contemporaneous evidence as a "classic justification" for a conditional order. Mr. Kulkarni relied on the decision of Flaux J. inShagang Shipping v HNA Group[2014] EWHC 2241 (Comm). However, that was a case where a defence of bribery was alleged by amendment in circumstances where it was supported by a report of the Chinese police. The claimant did not seek to say that the application to amend should be refused on the grounds that it had no real prospect of success but said that permission to amend should only be given on terms that security was provided for the costs dealing with the defence on the grounds that the defence was concocted, a sham or shadowy. Those grounds were not supported by evidence; see paragraphs 7-9. The judge refused to make a conditional order because the defence was arguable, it had a reasonable prospect of success and the claimant had no evidence to suggest that it was a sham. It is a very different case from a case, like the present, where although it cannot be said that the defence has no real prospect of success there are real grounds to doubt the reliability of the evidence on which it is based.”

The Defendants submitted that this case does not fall within the category of cases in which a conditional order can or should be made under CPR Part 24. Here, the ‘nub’ of the issue is not whether or to what extent the Defence as pleaded “may succeed”. The central point is that the Claimant has not provided the Defendants with key documents that were reasonably requested within the Defence in order to allow them to respond to the claim and plead a full Defence, particularly in light of the enquiry currently being conducted in Malta. This is a compelling reason why the case should proceed under Part 24.2(b).

The Defendants further submitted that there can be no fair judgment made as to the relative probability of any defence succeeding at this stage and it is, in the Defendants’ submission, not correct for the court to impose a conditional order in these circumstances. To do so would not only be outside the guidelines set out in the Practice Direction but would, in effect, prejudice the Defendants because of the Claimant’s failure to cooperate in providing the documents reasonably requested and instead move to a premature application for summary judgment.

Secondly, the Defendants submitted that this is not an order sought by the Claimant in its application and it has submitted no evidence in support of such relief. To the extent the Claimant now seeks a conditional order requiring payment in of any substantial sum, the court should not make any order requiring the same without giving the parties full opportunity to submit evidence going to the grounds upon which such order is said to be appropriate, the purpose for which such sum is sought, whether it is a reasonable and proportionate means of achieving said purpose and importantly the Defendants’ means and ability to meet any such order without it having the effect of stifling the defence.

Thirdly, in this case it was submitted that the circumstances do not merit (or come close to meriting) any such order, even if this case did fall prima facie into the category of such cases where an order should be considered. In particular the Defendants submitted:

Fourthly, the Defendants submitted that the purpose of requiring a payment-in has not been identified. Nor has any submission been made to the effect that a payment in is “necessary to do justice” between the parties. There is no significant prejudice to the Claimant in being kept out of the funds or proceeding on an unsecured basis for a short additional period whilst it provides disclosure of documents that it could (and the Defendants’ say should) have provided promptly in response to the Defence rather than waste further time and costs making this application before having done so. Contractual interest is set at 8%. As such it cannot be said that the Claimant will be unduly prejudiced by a short further delay.

The Defendants submitted that the timetable for the disclosure is within the hands of the Claimant. The Defendants have, in the witness statement of Mr Giles (paragraph 29), proposed a period of just 28 days to amend their Defence (if advised) following disclosure. Thus the extent of any further ‘delay’ really lies within the hands of the Claimant in providing the documents required. Had they already done so rather than make this application, it is submitted that much, if not all, of the further delay could have been avoided. This is another reason why it would be unjust, unnecessary and disproportionate to order any payment-in by the Defendants.

In the Defendants’ submission, a requirement to pay into Court any significant sum by way of security for costs or the principal sum is not necessary (or likely) to achieve any purpose and certainly cannot be said to be a proportionate or effective means of achieving anything other than to cause significant prejudice to the Defendants, who have done nothing wrong either procedurally or substantially. The court is reminded that the Defendants have complied with all Orders thus far and submitted their Defence within the timetable agreed via Consent Order. As set out above, it is the Claimant’s failure to cooperate in the provision of further key documents that has led to any undue delay.

The Defendants submitted that to the extent the Claimant is genuinely concerned about further delay and/or the potential for wasted costs in relation to the requirement for disclosure prior to the pleading of any further Defence, a proportionate and effective response to address those concerns, which would achieve justice between the parties, would be to make appropriate case management directions per Rule 24.6(b) as follows:

The Defendants submitted that in summary this is not a case where a conditional order is appropriate under the Rules. To the extent the application is dismissed, the court implicitly recognises that the Defendants reasonably need the further disclosure requested in order to be able to respond to the claim and plead their Defence. No explanation has been given for why the Claimant did not, prior to making this application, simply provide the documents sought (other than making the unhelpful assertion the Defendants ought to have them). To the extent there is any further delay, this could have been avoided by volunteering the disclosure.

An indication was given at the hearing that disclosure ought to be provided either voluntarily or that the parties ought to cooperate in this regard. As set out above, the Defendants believe that an appropriate order, taking due consideration of any timetable the Clamant proposes for the exercise, would be more helpful and avoid further applications and delay.

The Defendants submitted that even if this case did fall prima facie into the category of cases where a conditional order could be considered, it is not one of the rare cases where a conditional order requiring a payment-in is required or justified in order to do justice between the parties. It would unfairly penalise the Defendants. It will not serve any legitimate purpose and would not be a proportionate, necessary or effective means of case management.

The Defendants submitted that what is required is an order for disclosure and a requirement for any consequential amendments to the Defence to be made within a suitable timetable with appropriate penalty for any failure to comply. That will adequately address any concerns the Claimant may have as to further significant delay (although as above it is noted that the provision of the disclosure is and always has been within their hands) and attaching an appropriate sanction in relation to the timetable for the provision of an amended Defence will be adequate so as to ensure that the Defendants do (as they always have) meet any court ordered or agreed timetable.

The requests for disclosure / further information were made in paragraph 16 of the Defence and paragraph 25 of Mr Giles’ witness statement.

Turning to the submissions for the Claimant, Mr Shapiro QC submitted as follows in relation to the suggestion that the matter should be allowed to go further to permit investigation and disclosure:

In relation to conditional leave, Mr Shapiro QC accepted and adopted the statement as to the relevant principles set out in the judgment of Teare J in thje Abbot Investments case. He argued that the Defendants’ possible and as yet un-pleaded defence of a conspiracy is plainly “improbable” (at best). The second part of the criteria for a conditional order – the improbability of the defence – is met. The as yet un-pleaded, hypothetical defence is not known to the Defendants who wish to put it forward. It might only exist at all if it is discovered from the Claimant’s documents. It is the epitome of a particularly weak defence.

The Claimant submitted that the Defendants are asking the Court not to enter judgment in the sum of USD 6,316,164.38 for a debt plainly due under a Settlement Agreement. This indulgence is to allow them the opportunity to construct some sort of defence based only on documents to be provided by the Claimant, the Defendants themselves apparently having no knowledge of the same. The appropriate condition for the Defendants to avoid summary judgment and to be allowed to progress their improbable defence is the payment into Court of the full sum which is on the face of it outstanding (or the provision of an appropriately worded First Class London Bank Guarantee). It would be just for the Claimant to be secured for the amount it is, on the face of things, entitled to under the Settlement Agreement.

The Claimant submitted that the Defendants suggested that they wanted this resolved quickly and that the Claimant was protected by interest running at £1,000 per day. The Claimant is only protected if payment is actually going to be made, which will be effected by the payment in.

It is to be noted that there has been no suggestion from the Defendants of any inability to make the payment of the Judgment sum. Importantly, such a suggestion was not offered in evidence as a reason for the failure to pay. Further, it is clear from the Defendants’ evidence that their Defence is being driven by their beneficial owners, substantial US corporations which would have the means to pay. It has not been suggested to the Claimant prior to the service of this Skeleton that the Defendants cannot comply with a condition for the payment in of USD 6,316,164.38.

My starting point is the fact that, in my judgment, the Defence clearly pleads no tenable defence to the claim; indeed, in my view, Ms Briggs all but accepted this. The settlement agreement, on its face, establishes the Claimant’s rights to the relief sought.

Instead, the Defendants point to certain materials that they say may enable them in due course enable them to plead a defence, but which they cannot properly plead as yet.

I would make the following comments on the current state of the evidence and the sources for further evidence.

In these circumstances, it is my view that there is as yet no defence properly pleaded, but there is a possibility that there may in due course be such a defence.

However, I take the view that the most important question is likely to be the background to the bid itself. Here, the relevant knowledge will be that of the individuals who participated in the bid. Whether there was any corruption involved will be something which is likely to be within the knowledge of those individuals. Whether any such corruption as there may have been (and of course I am in no position to reach any conclusion on this) would have any legal impact on the settlement agreement is a yet further question. Those individuals include both the individuals formerly associated with the Defendants, who are no longer so associated, and Dr Gupta.

I have concluded that there is no question of simply dismissing the application for summary judgment. There is no tenable defence currently put forward; and I would describe the potential defence put forward as at best speculative on the facts. Moreover, the exact legal nature of the defence is not at the moment clear, and, as I have indicated, was something that only really emerged during the hearing.

In these circumstances, applying the approach adumbrated by Teare J in the Abbott Investments case, it seems to me that the defence put forward is no more than speculative; and that even then it cannot be said to be an obviously strong one, on the present evidence. It is, in the words of the Rule, improbable; and, in the words used by Teare J, unpromising.

In my judgment, this is a classic case for the imposition of conditions on the right to defend. I accept of course that the imposition of conditions cannot be regarded as the norm. However, the provisions of the CPR are intended to give the Court flexibility to reflect the differing circumstances in different cases. This is in my judgment an exceptional case, since the defence put forward is both speculative and difficult. I therefore order that the Defendants should pay into Court the full amount of the claim, inclusive of interest at the contractual rate as at the date of payment in, within 28 days of the date of this judgment being handed down. If the parties agree an alternative mode of security, then this alternative mode of security can be used; otherwise, payment in will have to be made.

Nor do I think that I should simply dismiss the current application, and allow the matter to proceed at large once payment in has been made or security given. Instead, in my judgment, the correct approach is to adjourn this application and make directions to enable the Defendants, once they have made payment in, to progress their investigations rapidly and replead their defence once they are able to do so.

In my judgment, an order for disclosure would however be appropriate, in order to enable the Defendant to plead its case out more fully. The Defendant has already, in its defence and in the witness statement of Mr Giles, set out the disclosure that it wishes to have. I order that this disclosure be given within 28 days of the date of payment in by the Defendant of the sums that I have ordered; and that within 28 days thereafter the Defendant plead its defence more fully.

I therefore order that:

I would be grateful if Counsel would draw up an Order reflecting what I have set out above.