BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
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ROBERT JEWKES |
Claimant |
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- and - |
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(1) SAMUEL ALEXANDER WATSON (2) EMILY REBECCA WATSON |
Defendants |
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The Defendants in person
Hearing date: 17 November 2023
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Crown Copyright ©
Remote hand-down: This judgment was handed down remotely at 10am on 30 November 2023 by circulation to the parties or their representatives by email and by release to The National Archives.
Master Clark:
Parties and the claim
Background
(1) the Personal Agreements – agreements between the claimant and Mr Watson;
(2) the Corporate Agreements - agreements between the claimant and the company;
(3) the ESL Agreements – agreements between the claimant and ESL (in fact, there is only one).
"Dear Samuel and Emily
This is the formal document for signing later
Please read it, yes, it sounds rather daunting but it is what it is and Daddy will make sure you guys are not affected by it!
We can talk about it later, just let me know when suits you
Daddy"
(1) By clause 2.1 the Debt was assigned to the defendants:
"in consideration of the sum of US$727,000 (the "Consideration") together with interest as aftermentioned, to be paid by [the defendants} to [the claimant] in accordance with Part 6 of the Schedule to this Deed, [the claimant] hereby assigns to [the defendants] absolutely all [the claimant]'s rights, title, interest and benefits in and to the Debt and the Agreements, with effect from the Effective Date".
Clause 1.1 defines the Effective Date as the date of the Deed, i.e. 15 September 2021.
(2) By clause 2.2, the defendants agreed with the claimant that:
(i) that they would be bound by the Agreements from the Effective Date as if they were each a party to the Agreements in place of the claimant; and
(ii) undertook to the claimant that they would discharge the Debt and all the claimant's liabilities and perform all the claimant's obligations under the Agreements due to be discharged or performed.
(3) Pursuant to clause 3.1, the defendants agreed to pay the Consideration and all accrued interest to the claimant in the following instalments (the amounts and the dates of which were set out in Part 6 of the Schedule to the Deed):
(i) US$30,000 by 30 November 2021;
(ii) US$30,000 by 28 February 2022;
(iii) $US$60,000 by 31 May 2022;
(iv) US$60,000 by 31 August 2022;
(v) the remaining balance plus interest of 10% on 31 August 2022.
(4) By clause 3.2, if the defendants did not make payment of any sum due, then all amounts (including interest) would become immediately due.
"Emily and I are writing to advise you that there is a possibility that this month's payment may be delayed due to personal circumstances that have arisen over the last few months. Our father was diagnosed with an aggressive form of cancer in late September and has undergone a number of urgent operations and treatment prior to his departure back to the UK pre Xmas. The treatment continues here in the UK. With no medical insurance to cover this (in Hong Kong) the cost was high both financially and mentally on the family. The diagnosis was out of the blue and obviously very concerning, and we have not taken its ramifications lightly.
We expect that as a result of this outlay, there may be a delay in payment. However, we can assure you that payment will be made albeit possibly slightly later than previously arranged, possibly 1 to 3 weeks, just waiting on our father to firm up this.
Furthermore, we would like to take this opportunity to request and discuss a more manageable payment plan. We would like to request that the current plan is further spread out so that we would still provide you with the repayments, in smaller amounts, over a longer period, which would allow us to be able to deliver these payments to you consistently on time and in full with interest paid on all outstanding amounts."
"I am saddened to hear of your father's illness. It is for you to decide whether to take these circumstances into account when seeking to recover sums to which you are entitled under the loans assigned to you under the Deed. These circumstances are not relevant to the arrangements between us, and have no bearing on your obligations to me under the Deed."
(1) Non est factum;
(2) Undue influence;
(3) Duress;
(4) Frustration of the Deed.
Claimant's application
Evidence
(1) a "Statement of Case" filed on 9 May 2023;
(2) the Defence Statement of Samuel and Emily Watson dated 9 November 2023 and the exhibits to it ("the Defence Statement");
(3) a witness statement dated 14 November 2023 signed by both defendants;
(4) a witness statement dated 15 November 2023 of the defendants' mother, Paula Watson.
Striking out and summary judgment – the principles
"3.4— Power to strike out a statement of case
(2) The court may strike out a statement of case if it appears to the court–
(a) that the statement of case discloses no reasonable grounds for bringing …the claim;
(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings;
(c) that there has been a failure to comply with a rule, practice direction or court order."
"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 –
…
(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."
(1) The court must consider whether the defendant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 2 All ER 91;
(2) A "realistic" defence is one that carries some degree of conviction. This means a defence that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8];
(3) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman;
(4) This does not mean that the court must take at face value and without analysis everything that a defendant 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 v Patel at [10];
(5) 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: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;
(6) 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;
(7) 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.
"… the assessment that the judge undertakes under Part 24 is one of assessing the evidence, not the pleadings. The question is not whether the pleaded defence has a prospect of succeeding, but whether the defendant has no real prospect of successfully defending the claim. What then is a judge to do if the defendant's evidence appears sufficient to raise a triable issue, but the defendant has served a defence in which the relevant defence has not yet been pleaded? Unless the judge can rule out any possibility of amendment (which would be unusual) I see nothing wrong in the judge concluding that the defendant had some real prospect of success even though this would require the defendant to amend."
Non est factum – the law
"a party is not permitted to escape the effect of a document that he has signed merely because he did not intend to sign a contract or a contract of the type he has in fact signed. … the courts have placed strict limits on the doctrine of non est factum. The "key elements" for a successful plea of non est factum have been summarised thus:
(a) the belief of the signer that the person is signing a document of one character or effect whereas its character and effect were quite different;
(b) the need for some sort of disability which gives rise to that state of mind;
(c) the plea cannot be invoked by someone who does not take the trouble to find out at least the general effect of the document".
Difference in character and effect of the document
"It will not suffice if the signer thought that in some respect it would have a different legal effect from what it has; nor will it suffice if in some respects it departs from what he thought it would contain. The difference…must be such that the document signed is entirely…or fundamentally different from that which it was thought to be, so that it can be said that it was never the signer's intention to execute the document"
(emphasis added)
"a document should be held to be void (as opposed to voidable) only when the element of consent to it is totally lacking, that is, more concretely, when the transaction which the document purports to effect is essentially different in substance or in kind from the transaction intended"
(emphasis added)
"the difference to support a plea of non est factum must be in a particular which goes to the substance of the whole consideration or to the root of the matter"
Disability or trickery
"Originally this extension [of the plea] appears to have been made in favour of those who were unable to read owing to blindness or illiteracy and who therefore had to trust someone to tell them what they were signing. I think it must also apply in favour of those who are permanently or temporarily unable through no fault of their own to have without explanation any real understanding of the purport of a particular document, whether that be from defective education, illness or innate incapacity."
To these cases, Lord Wilberforce added at 1025F, cases of:
"… persons who may be tricked into putting their signature on a piece of paper which has legal consequences totally different from anything they intended."
Negligence
"Want of care on the part of the person who signs a document which he afterwards seeks to disown is relevant. The burden of proving non est factum is on the party disowning his signature; this includes proof that he or she took care. There is no burden on the opposite party to prove want of care".
Documents signed in blank
"The plea of non est factum is likewise potentially applicable where one person signs a document in blank and hands it to another, leaving him to fill in the details and complete the transaction. However, where erroneous details are inserted which are not in accord with the instructions of the person executing the document, he may yet be liable if the transaction which the document purports to effect is not essentially different in substance or in kind from the transaction intended. Moreover, the onus is on the person signing the document to show that he has acted carefully, and if he fails to discharge that onus he will be bound."
Non est factum – analysis and conclusions
(1) they only signed the signing page of final version of the Deed; and
(2) the final version was substantially different from the draft Deed.
(1) Clause 2.2:
"[The Defendants] agree with [the Claimant] that that they shall be bound by the Agreements from the Effective Date as if they were each a party to the Agreements in place of [the Claimant] and undertake to [the Claimant] that they shall discharge the Debt and all [the Claimant]'s liabilities and perform all [the Claimant]'s obligations under the Agreements due to be discharged or performed."
(2) Clause 3.2
"If [the defendants] fail to make payment of any sum due and payable under the Deed, then all amounts outstanding, including all accrued interest, shall become immediately due and payable by [the defendants]."
(3) Clause 7.4
"Each [Defendant] represents and warrants to the [Claimant] that on the Effective Date:
…
he resides in the United Kingdom and shall continue to do so until all the Consideration and all accrued interest has been paid to [the claimant] and no further payments are due under this Deed."
Undue influence – legal principles
Actual undue influence
Presumed undue influence
Existence of presumption
"it is well established that the child reposes trust and confidence in the parent, even though the child may have attained his majority not long before. If a gift is made to a parent shortly after the child reaches the age of majority, the parent will be required to show that the child was acting independently of his influence. This presumption can continue even after marriage, although the duration of the presumption is a question of fact and degree in the circumstances of each particular case. This presumption of a relationship of influence is thus a rebuttable one."
Transaction not explicable by ordinary motives
"… not reasonably to be accounted for on the grounds of friendship, relationship, charity or other ordinary motives on which ordinary men act."
Rebutting the presumption
"In order to rebut the presumption of undue influence, evidence must be adduced to satisfy the court "that the donor was acting independently of any influence from the donee and with the full appreciation of what he was doing". The most usual, though not the only, way of rebutting the presumption is to prove that the claimant had competent and independent advice"
Undue influence by a third party: actual or constructive knowledge
"Where one party seeks to avoid a contract on the ground of undue influence by a third person, it must appear either that the third person was acting as the other party's agent, or that the other party had actual or constructive notice of the undue influence. [See Bank of Credit and Commerce International SA v Aboody [1990] 1 Q.B. 923, 973; Barclays Bank Plc v O'Brien [1994] 1 AC 180]"
(1) In cases involving suretyship or any other non-commercial agreement between husband and wife, a lender will be put on inquiry (i.e. is taken to have notice of the risk of undue influence): Royal Bank of Scotland Plc v Etridge (No.2) [2001] UKHL 44, [2002] 2 AC 773;
(2) In standard contractual scenarios, for example, where money is being advanced to the husband and wife jointly, then the lender is not put on inquiry, unless it is aware that the loan is being made for the husband's purposes, as distinct from their joint purposes: CIBC Mortgages Plc v Pitt [1994] 1 AC 200;
(3) The Etridge principle has not been applied outside the context of suretyship;
(4) The facts in Darjan were more akin to joint borrowing than suretyship because the wife received a direct benefit under the lease in the form of an interest in land;
(5) Constructive notice on the part of the landlord was therefore insufficient – actual notice was required; and in that case "[t]here was nothing about it to set any alarm bells ringing".
(6) The wife therefore failed to show that there were substantial grounds for setting aside the lease on the basis of undue influence by the husband.
"in the case of a father and daughter, knowledge by the bank of the relationship of father and daughter should suffice to put the bank on inquiry. When the bank knows of the relationship, it must then take reasonable steps to ensure the daughter knows what she is letting herself into."
Undue influence – analysis and conclusions
Actual undue influence
Presumed undue influence
Transaction not explicable by ordinary motives
Rebutting the presumption
Actual or constructive knowledge by the claimant
Actual knowledge of the claimant
Constructive knowledge of the claimant
Duress – legal principles
"3. The boundaries of the doctrine of lawful act duress are not fixed and the courts should approach any extension with caution, particularly in the context of contractual negotiations between commercial entities. In any development of the doctrine of lawful act duress it will also be important to bear in mind not only that analogous remedies already exist in equity, such as the doctrines of undue influence and unconscionable bargains, but also the absence in English law of any overriding doctrine of good faith in contracting or any doctrine of imbalance of bargaining power…. .
4. If one focuses on the few cases in which a remedy has been provided for what would now be analysed as lawful act duress, there are to date two circumstances in which the English courts have recognised and provided a remedy for such duress. The first circumstance is where a defendant uses his knowledge of criminal activity by the claimant or a member of the claimant's close family to obtain a personal benefit from the claimant by the express or implicit threat to report the crime or initiate a prosecution. The second circumstance is where the defendant, having exposed himself to a civil claim by the claimant, for example, for damages for breach of contract, deliberately manoeuvres the claimant into a position of vulnerability by means which the law regards as illegitimate and thereby forces the claimant to waive his claim. In both categories of case the defendant has behaved in a highly reprehensible way which the courts have treated as amounting to illegitimate pressure."
Duress – analysis and conclusions
Defendants' case on duress
"Their purported assent to the Deed was procured under duress, without a full understanding or any actual benefit derived from the funds that constituted the original agreements".
Frustration – legal principles
Frustration – analysis and conclusion
Conclusions
(1) I will strike out those parts of the Statement of Case dated 9 May 2023 and the Defence Statement dated 14 November 2023 that set out defences of non est factum, duress and frustration;
(2) I will dismiss the application for summary judgment.