GE Capital Woodchester Ltd and Another (plaintiffs) v Aktiv Kapital and Others

• Jurisdiction: Ireland
• Judge: Mr. Justice Clarke
• Judgment Date: 19 November 2009
• Neutral Citation: [2009] IEHC 512
• Court: High Court
• Date: 19 November 2009

GE Capital Woodchester Limited & GE Capital Woodchester Finance Limited v Aktiv Kapital Asset Investment Limited & Aktiv Kapital ASA

[2009] IEHC 512

COMMERCIAL

BETWEEN

GE CAPITAL WOODCHESTER LIMITED AND GE CAPITAL WOODCHESTER FINANCE LIMITED

PLAINTIFFS

AND

AKTIV KAPITAL ASSET INVESTMENT LIMITED AND AKTIV KAPITAL ASA

DEFENDANTS

[2009] IEHC 512

[No. 3082 S 2009]

THE HIGH COURT

PRACTICE AND PROCEDURE

Summary judgment

Commercial list - Summary summons - Motion for summary judgment - Contract - Sale and purchase of debts - Monthly assignment - Failure to pay purchase price - Alleged breach of agreement - Sudden increase in qualifying debts - Possibility of non-compliance with obligations under agreement - Suggestion of sale of debts to third party - Failure to provide notice of consistency of recovery decision criteria - Failure to sell specified amount of qualifying debts - Applicable principles - Fair or reasonable possibility of bona fide defence - Necessity for affidavit evidence - Possibility of defence resting in evidence - Whether credible basis for asserting particular state of facts might be established by discovery or interrogatories - Construction of agreement - Relevancy of oral evidence - Whether credible basis for suggesting agreement not properly operated - Banc de Paris v de Naray [1984] 1 Lloyd's Law Rep 21; First National Commercial Bank v Anglin [1996] 1 IR 75; Aer Rianta v Ryanair [2001] 4 IR 607; Harrigsrange Ltd v Duncan [2003] 4 IR 1 and McGrath v O'Driscoll [2006] IEHC 195 (Unrep, Clarke J, 14/6/2006) considered - Liberty to defend granted on confined basis (2009/3082S - Clarke J - 19/11/2009) [2009] IEHC 512

GE Capital Woodchester Limited v Aktiv Kapital Asset Investment Limited

Facts These proceedings arose out of contractual arrangements entered into between the parties regarding the sale of debts owed to the plaintiffs by their customers. In 2008, the first named defendant served the plaintiffs with a six month notice of termination of the contract. Proceedings were commenced by way of summary summons and the plaintiffs herein sought summary judgment in the sum of €2,158,652.45 owed by the defendants for the purchase of certain qualifying debts assigned in March 2009. The summary judgment application was resisted by the defendants (the second named defendant was a guarantor of the obligations of the first defendant under the contract). The defendants claimed that there were four potential defences to the plaintiff's claim, namely: 1. that there was a breach of the agreement by the plaintiff due to the sudden and extreme increase in the volume of qualifying debts, 2. the large increase in the volume of qualifying debts in March, when coupled with the fact that the plaintiffs approached the defendant in relation to the sale of a one off batch of debts in May 2008 gave rise to at least a realistic possibility that the plaintiffs may not have properly complied with their obligations under the agreement, 3.there was a breach of the agreement by the plaintiff in failing to provide notice of the consistency of the recovery decision criteria in relation to the qualifying debts and 4. there was a breach of the agreement in failing to sell no less than 80% of the qualifying debts listed alphabetically or randomly. The defendants submitted that the volume of qualifying debts for March was so far above any previous monthly volume that it amounted to breach of an implied term of the agreement. The plaintiffs accepted that technical breaches of the agreement occurred but submitted that no damage was caused by those breaches and they did not provide a defence to the proceedings. There was no dispute between the parties as to the proper principles to be applied to the application herein.

Held by Clarke J. in granting the defendants liberty to defend: 1.That the mere assertion of a defence was insufficient to warrant the granting of liberty to defend a summary judgment claim. However, it might not always be possible and consequently was not necessary for the defendant to put before the court direct evidence in relation to an asserted defence. Having said that, the defendant was required to show that there was a credible basis for asserting that a particular state of facts might exist, which state of facts, if they were to exist could be established by appropriate discovery and/or interrogatories.

2. That the two breaches of agreement alleged could not provide the defendants with a defence to these proceedings as it was not established that such breaches entitled the defendants to set aside the agreement or that they caused losses which might arguably extinguish the claim made by the plaintiffs.

3. That having regard to the large increase in qualifying debt in March 2009, coupled with the events concerning the possible sale of debt to third parties, the defendants established that there was a credible basis for suggesting that the agreement may not have been properly operated by the plaintiffs in accordance with the terms and in accordance with the relevant criteria for debt selection. Furthermore, the argument that the plaintiffs failed to offer for sale 80% of the debts in one particular month might provide some limited basis for defence and could be pursued as a counterclaim or set off.

Reporter: L.O'S

RSC O.63A r2

CHITTY & BEALE & ARROWSMITH CHITTY ON CONTRACTS 29ED 2004 PARA 13.022

BANQUE DE PARIS & DES PAYS-BAS (SUISSE) SA v DE NARAY & WALTERS 1984 1 LLOYDS 21

FIRST NATIONAL COMMERCIAL BANK PLC v ANGLIN 1996 1 IR 75 1996/11/3337

AER RIANTA CPT v RYANAIR LTD 2001 4 IR 607 2002 1 ILRM 381 2001/1/68

HARRISRANGE LTD v DUNCAN 2003 4 IR 1 2002/12/2982

MCGRATH v O'DRISCOLL & ORS 2007 1 ILRM 203 2006/35/7529 2006 IEHC 195

1 Mr. Justice Clarke delivered the 19th November, 2009

1. Introduction

2 2 1.1 These proceedings arise out of contractual arrangements entered into between the parties relating to the sale of debts owed to the plaintiffs (together "GE Capital") by customers of those companies. The arrangements between the parties continued in an uncontroversial fashion for some time. However, notice of termination was served by the first named defendant ("Asset Investment") which, in accordance with the terms of the relevant contract, provided for a six month notice period. During the course of that notice period GE Capital were, at least at the level of principle, still entitled to the benefit of the Agreement which entitled them to sell between 80% and 100% of certain debts owed to it by its customers to Asset Investment. These proceedings relate to one such sale.

3 3 1.2 The proceedings were commenced by summary summons and, in the ordinary way, a notice of appearance having being filed, GE Capital bring these proceedings before the court on a motion for summary judgment. That summary judgement application is resisted, both by Asset Investment and the second named defendant ("ASA") who act as guarantor of the obligations of Asset Investment under the underlying contract. No separate issues are raised by ASA on the relevant guarantee so that the issues arising in relation to ASA are the same as those arising in relation to Asset Investment. In order to understand the basis of GE Capital's claim, the defence which it is said is available to Asset Investment and, therefore, to ASA in respect of that claim and the issues which I have to decide, it is necessary to turn briefly to the relevant factual background.

2. Factual Background

4 2 2.1 GE Capital are Irish companies who are in the business of finance and lending. GE Capital entered into an agreement with Asset Investment for the sale and purchase of debts owed to GE Capital by its customers. Asset Investment is an English registered company. ASA is a Norwegian registered company and is a related company of Asset Investment. As pointed out earlier ASA is joined to the proceedings as it agreed to guarantee the obligations of Asset Investment in relation to the sale and purchase of the relevant debts and undertook to indemnify GE Capital in respect of non-performance of that agreement by Asset Investment.

5 3 2.2 The agreement to purchase the relevant debts was evidenced in writing on the 1 ^st February, 2004 and subsequently amended by a side letter dated 19 ^th December, 2006, (together the "Agreement"). The Agreement provided that:-

6 a) GE Capital agreed to sell and Asset Investment agreed to purchase all of the GE Capital's rights, title and interest in certain debts and associated rights specified in the Agreement ("qualifying debts").

7 b) The sale and purchase of the qualifying debts would be by way of assignment executed by the GE Capital and Asset Investment, which said assignment would specify the purchase price in relation to the qualifying debts.

8 c) ASA agreed to irrevocably and unconditionally guarantee the due and punctual performance by Asset Investment of its obligations under the Agreement and agreed that if Asset Investment defaulted in performance of any such obligations, ASA would indemnify GE Capital in respect of such non-performance by Asset Investment.

9 4 2.3 The sale and purchase of the qualifying debts was to be completed by GE Capital executing a deed assigning the qualifying debts to Asset Investment. The individual contracts (between GE Capital and its customers) which gave rise to qualifying debts together with the associated rights were to be identified as a list of contracts attached to the relevant assignment.

10 5 2.4 As deposed to in the affidavit of Deirdre Hannigan, the chief risk officer in the GE Group, the Agreement provided for the purchase of debts arising out of individual contracts for the hire purchase or lease of motor vehicles and loan contracts which GE Capital had with its customers. The debts which were to be...