Obtaining summary judgment to dismiss fraudulent claims – difficult but not impossible

In a recent decision, the High Court granted summary judgment dismissing a claim on the basis that the transaction relied on by the claimant was a fiction and the key documentary evidence had been fabricated. In doing so, it rejected the claimant's argument that the defendant's allegations of fraud and forgery could only properly be determined at trial, rather than on a summary application: Verdi Law Group P.C. v BNP Paribas S.A. and others [2023] EWHC 1860.

The judgment provides a useful illustration of the court's approach to applications for summary judgment in cases where a defendant alleges fraud on the part of the claimant. It is not enough to demonstrate that the claimant's version of events is inherently implausible. The court must be satisfied that there is no real prospect of the claimant establishing the key factual foundations of its claim, taking into account the possibility that a full investigation into the facts by the time of trial could add to or alter the evidence available. That is particularly the case regarding allegations of fraud, given the courts' well-established requirement for cogent evidence to support such serious allegations.

However, the decision demonstrates that those factors do not mean that a defendant can never obtain summary judgment on an allegedly fraudulent claim.  Where there is sufficiently compelling evidence, the courts are prepared to dispose of such claims at a summary stage rather than allowing claimants to pursue the matter to trial in the hope that something may arise that could improve their case.

Background

The claimant, Verdi, was a small California-based law firm claiming a contractual entitlement to a payment in respect of its alleged role as an introducing party in a substantial investment funding transaction.

The transaction was said to have involved the first defendant (BNP) providing a stand-by letter of credit for €500 million, backed by cash held in a BNP branch by an asset management company (Sparx). That letter of credit would be used to obtain credit from the Bank of Singapore, which would be used by a third party to conduct leverage trading in medium-term notes. Verdi claimed that, under a non-recourse monetisation agreement, the third party had agreed to remit to Verdi payments totalling over €1.4 billion once the letter of credit was issued, but that no payments had been made.

Verdi commenced proceedings against the various financial institutions and other entities said to be involved in the transaction. As against BNP, the clams included inducing breach of contract, unlawful means conspiracy, breach of a tortious duty of care and misrepresentation.  The claimant relied on various emails and SWIFT messages purportedly sent by BNP confirming the standby letter of credit arrangement.

BNP's case was that the entire transaction was a fiction and that the documentary evidence in respect of its involvement had been fabricated.  It applied for summary judgment or to strike out the claim against it, on the grounds that the claim had no real prospect of success (CPR 24.2(a)).

Decision

The High Court (Mr Justice Picken) granted summary judgment in favour of BNP.

It was common ground that the central question for the court on the application was whether the issue of the authenticity of the various documents needed to be considered at trial, rather than in a summary application.  Verdi argued that it was only at trial that the issues could be properly and confidently resolved.

The court briefly considered the authorities and principles governing the courts' approach to summary judgment applications, including in cases involving allegations of fraud.  It noted that:

• although a court hearing a summary application should not attempt to conduct a mini-trial, "… that does not mean that the court has to accept without analysis everything said by a party in his statements before the court" and "In some cases it may be clear that there is no real substance in factual assertions made…" (Easyair Ltd v Opal Telecom Limited[2009] EWHC 339);
• the court must evaluate the claimant's prospects of success (on the balance of probabilities) on the evidence presented in the application but also considering the evidence that could be reasonably be expected to be available at trial;
• while there is no bar to summary judgment being entered where fraud is alleged, the court must be very cautious and bear in mind the need for cogent evidence commensurate with the seriousness of the allegations.

Applying those principles to the facts here, the court began by noting several factors that made it "inherently implausible" that the transaction was authentic: the payment to which Verdi claimed a contractual entitlement was of a vast amount, was not dependant on it making any investment or even any trading taking place, and was out of all proportion to its alleged role in the transaction.

However, those factors on their own would not be sufficient to justify a conclusion that Verdi had no real prospect of succeeding in the claim. Rather, they represented the context in which the court needed to consider more substantive issues underpinning Verdi's case: the authenticity of the Sparx account with BNP and the SWIFT messages and emails purportedly sent by BNP.

Verdi did not substantively challenge much of the evidence adduced by BNP on those issues, but  argued that they were matters that should be determined at trial because it may be that, by the time a trial took place, the court would be better placed to determine the issue with more confidence.

However, the court was satisfied that, without conducting a mini-trial, it could comfortably make the following factual findings on the basis of "compelling" evidence adduced by BNP:

• The Sparx account did not exist. The court accepted uncontroverted evidence to that effect from a BNP officer, including that the account number denoted a defunct Paris branch of BNP which did not exist at the relevant time. Further, based on the court's own review of a photo of a computer screen record of the alleged account, it regarded BNP's allegation that the photo had been doctored as "unanswerable". In the court's view, it was fanciful to suggest that, were the matter to go to trial, this was an issue on which Verdi might be able to put forward a stronger case: "There is not anything. There will not be anything."

• The SWIFT messages were quite clearly "inauthentic" and "fake" and the court saw no prospect of Verdi being able to establish the contrary at trial. The evidence in that regard included letters from the General Counsel of the SWIFT organisation confirming that the messages could never have been transmitted over the SWIFT network.

• Emails purportedly from an employee of BNP were similarly fabricated. On this issue, the court fully accepted the expert evidence of an IT specialist adduced by BNP, in preference to a competing opinion served by Verdi (leaving aside the fact that that opinion did not meet the procedural requirements for expert evidence and was not formally relied on as such).

In light of those factual findings, the court considered that it was not appropriate for Verdi to be allowed to pursue the claim to trial "in the hope … that issues might arise which allow it to succeed".

Finally, the court also considered a late argument by Verdi that there was some "other compelling reason why the case … should be disposed of at a trial" (CPR 24.2(b)). Verdi argued that it would be inappropriate for the authenticity of the documents to be determined once and for all as between Verdi and BNP since there were other defendants who would be affected by that determination and were entitled to be heard on the issue. The court rejected that argument. The other defendants had not positively asserted the authenticity of the documents and, in any case, there was no potential for any issue estoppel or res judicata to arise in these circumstances. Further, those other defendants had ample to opportunity to express any such concern and had not done so.