A Settlement agreement excludes the right to defend case and a Court considers that no reasonable grounds exists for not granting summary judgment even if a Cross-claim called for further investigation into the facts of the case before summary judgment was passed.
In the case of IG Index Ltd v Ehrentreu [2013] EWCA Civ 95 (22 February 2013)the Court of appeal decided that there were no reasonable grounds upon the facts of the case calling for further investigation allowing for a court hearing to be held and thus dismissed the appeal against an order granting summary judgment.
In deciding this it considered that had the settlement agreement not blocked or excluded the right to defend the claim the summary judgment would have been granted.
Does this go to show that the counter-claim by virtue of being a counterclaim by virtue of or even a free standing claim will not withstand an application for a summary judgment unless it amounts to a defence?( set-off or equitable set-off or even a normal defence?).No, according to our opinion what it means is that upon the facts of the case no reasonable grounds existed for the courts further investigation into the facts of the case that could add or alter the evidence available to a trial and change the outcome of the case.
As to the case settlement agreement it the Court ruled that there was enough evidence before it in order to “grasp the nettle” and decide its effect. So neither it could be said that the construction of the points of law of the settlement agreement should await trial.
More specifically, The case was that the defendant had signed a settlement agreement in which he acknowledged his debt, this on the evidence pleaded was found by the court to exclude any right of defence ( be it a set-off , equitable or even legal ) and most importantly called for an immediate right to the payment of the debt owed by the defendant without having to wait for any defence to be heard first. As the facts where clear and the court interpreted the compromise , “settlement agreement ” to work in that way it decided that summary judgment should be granted. What one needs to understand from this case is not that the Court dismissed the appeal and affirmed an order for summary judgment not only because the right to defend the case was precluded but simply because acknowledgment of the debt through the settlement agreement was part of a set of facts which where undisputed and allowed the granting of a summary judgment. The facts of that case being merely that the plaintiff agreed to pay his debt now and argue later.
The Court will not grant a summary judgment if there is a factual dispute that could be prima facie be supported by the evidence. In this case the counterclaim raised very important issues that needed to be tried before judgment would be passed ( issues of causation and breach of contract, contributory negligence on the part of the defendant). However the settlement agreement eliminated every chance of avoiding the claim being tried together with the counter -claim because its purpose was to render the payments expressly payable, thus suspending the effect of potential defences to the debt.
First, the Court found that the settlement agreement purported to secure the right of payment of the debt expressly, otherwise if the claimant had to wait and expend further costs for the cross claim to proceed at trial the settlement agreement would be of no avail, it would certainly not be an express or an agreement aiming to addresses not merely the amount to be paid, but also the mechanics and timing of payments. So as well as dealing with liability it also deals expressly with cash flow ( a key component of the defence of set-off)
More importantly, the Court found that although the settlement agreement excluded the right to postpone payments due to the claimant before the cross -claim was heard, the cross claim was not extinguished. That meant that the defendant did not waive his cross -claim and that he could pursue it after judgment was granted against him on the debt payable to him. The settlement agreement was branded by the Court as merely a “pay now and argue later” agreement. it was said that the settlement agreement was “not incompatible with a right on the part of Mr Ehrentreu, at some time within the six years following the events of which he complains, from pursuing a claim for unliquidated damages for alleged breaches of the Customer Agreement or alleged breach of statutory duty”.
This case is an important one because it shows that when a debt is acknowledged through a compromise agreement and provided that it is clear upon the facts that no reasonable grounds existed 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 even though the cross claim if heard would affect the outcome of the case . In IG Index the Court decided that since the settlement agreement was part of the case, the exclusion of a defence to that claim provided no reasonable grounds for calling a further investigation thus dismissing the application for a summary judgment.
