Lords define proper scope of summary decree

Judge has to be satisfied that defence bound to fail before granting motion

News, 11 May 2006

The rule allowing a court to grant summary decree must be applied so as to promote the interests of justice, and not in a way that could cause injustice by denying a defender the chance to prove what might amount to a defence, the House of Lords ruled yesterday.

The Law Lords allowed an appeal by a company called Nova Scotia Ltd, which owns the Letham Grange Country Club and Resort in Angus, against a decree by the Court of Session reducing the company's title in favour of the liquidator of the previous owners, Letham Grange Co Ltd, who claimed that title had been transferred for inadequate consideration.

The same businessman, Mr Liu, was heavily involved in both companies and the sale price was £248,000 when the premises had a value of around £2 million. However Nova Scotia's defences also claimed they had assumed liability for £1.85 million of debt to Mr Liu's family. This did not appear from the documents of transfer, but a resolution signed by Mr Liu was produced confirming the assumption of the debt.

In the Court of Session, Lord Hardie giving the Inner House judgment said that the defence appeared to be "neither genuine nor authentic". But in a single judgment the five Law Lords said that, applying the test of relevancy of pleadings, "defences will not be dismissed as irrelevant unless they must necessarily fail even if all the defender's averments are proved".

Rule "must not create injustice"

The rule allowing summary decree where the court was satisfied there was no defence to the action, the judges added, "serves the interests of justice and helps to make the legal system work more efficiently". But they added: "The rule must be interpreted and applied in a manner which promotes those ends and does not create injustice for defenders."

Where there were disputed issues of fact, the appropriate person to resolve them was the judge who heard the proof, and a judge who heard a motion for summary decree should not attempt to forecast the outcome of a proof.

"In our view, therefore, a judge who is considering a motion for summary decree is entitled to proceed not merely on what is said in the defences, but on the basis of any facts which can be clarified, from documents, articles and affidavits, without trespassing on the role of the proof judge in resolving factual disputes after hearing the evidence. The judge can grant summary decree if he is satisfied, first, that there is no issue raised by the defender which can be properly resolved only at proof and, secondly, that, on the facts which have been clarified in this way, the defender has no defence to all, or any part, of the action. In other words, before he grants summary decree, the judge has to be satisfied that, even if the defender succeeds in proving the substance of his defence as it has been clarified, his case must fail."

The judgement concluded that while there were many points on which Nova Scotia's witnesses could expect to be challenged, substantial issues were raised and it could not be said that their case was bound to fail, or that the defence was "neither genuine nor authentic".

The Lords' decision can be read at http://www.publications.parliament.uk/pa/ld200506/ldjudgmt/jd060510/hend-2.htm .