In Bank of Scotland v Hussain, the bank agreed an overdraft facility of £19.5 million for the defendant's development company to enable it to fund the purchase and development of a site. The defendant entered into a personal guarantee. The overdraft was exceeded without a new facility being put in place and the value of the development declined due to the then current market. The company went into liquidation and the bank sought to enforce the defendant's personal guarantee. It applied for summary judgment.

Among other things in his defence, the defendant put the bank to proof that he had given the guarantee. He also alleged that:

  • the bank had agreed to finance the entire cost of the development;
  • it had agreed to provide a further £10 million of funds if the overdraft was brought back within the agreed limit;
  • he had intended to enter into a guarantee for a costs overrun, not the overdraft facility; and
  • the bank had been in breach of its fiduciary duty to him.

The court held that on an application for summary judgment, the applicant had to demonstrate that the defendant had no real prospect of successfully defending the claim or issue and there was no other compelling reason why the claim or issue should be disposed of at trial. A real prospect of success is one that is more than fanciful or merely arguable. If it was clear there was no substance in the defence because it was contradicted by the documentation, then it could be disposed of at an early stage.

The court considered the evidence in this case. It concluded that none of the allegations in the defence were substantiated by any of the documentation and were in fact inconsistent with the evidence. There was no fiduciary duty owed here (i.e. no relationship of trust and confidence). This was a commercial banking relationship relating to an overdraft facility agreed on certain terms and conditions. The court considered that the defendant had no real prospect of success and the bank was therefore entitled to summary judgment.

Things to consider

Summary judgment is often not suitable for more complex cases as the court cannot conduct a mini-trial on the documents alone without discovery or oral evidence. However, where the evidence clearly contradicts the alleged defences, the court will consider making an order.