Setting aside judgments
It
is a surprising feature of the Civil Procedure Rules that there is still
considerable doubt surrounding the powers available to judges to set judgments
aside (other than by way of an appeal), unless the judgment was obtained in default.
Ongoing debate about the scope of rule 3.1(7) – the power to vary or revoke an
order – is one example.
Some
of the other issues have very recently been clarified by the Court of Appeal in
the case of (1) David Nelson (2) Shirene Veronica Hanley v Clearsprings
(Management) Limited, CA, 22/9/06.
Part
39 of the Civil Procedure Rules is something of a catch-all, entitled as it is
‘Miscellaneous Provisions Relating to Hearings.’ The content of rule 39.3 –
failure to attend the trial – is at first glance wholly unsurprising. In
essence, if you don’t turn up expect to reap the consequences! But what happens
where a party fails to attend a final hearing because they have never been
served with proceedings?
In
practice, this may be rare. A party in this predicament is usually woken up
with a judgment in default or by a bailiff seeking to enforce the same. The
remedy is to apply to set judgment aside pursuant to CPR Part 13.
But what happens if the Claimant
does not attempt to enter judgment in default and simply proceeds to prove the
case? How then should Part 39.3 be applied? Is it still possible to have such a
judgment set aside as of right – ex debito justitiae – independently of
the CPR and does the approach adopted in White v Weston [1968] 2 QB 647
still apply?
These were the issues in the Nelson case, which was itself the second appeal, the matter having gone from a
District Judge to a Circuit Judge and then to the Court of Appeal. The facts
may be shortly summarised.
The Claimants filed a claim form
seeking possession of residential premises at 8 Woodland Grove, Potternewton, Leeds, together with arrears of rent and mesne profits. The Defendant was named as
Clearsprings (Management) Limited, 28 Brook Road, Brook Road Business Park, Rayleigh. Proceedings were issued on 14th May 2004 and were approved
for postal service on 20th May 2004. The deemed date of service was
22nd May and the notice of issue stated that the claim would be
heard on 14th June 2004.
In fact, a mistake had been made.
The Defendant’s address was 26 Brook Road, which the Claimants well knew.
The matter was heard on 14th June and judgment was given in the Claimants’ favour, in the absence of the
Defendant. On 29th June 2004 the Defendant issued an application to
set aside the judgment supported by evidence to the effect that the claim form
had never been served and that the Defendant had, at an earlier stage, advised
the Claimants’ then solicitors (no longer on the record) to serve any
proceedings on their own solicitors.
Although initially opened as an
application to set aside judgment in default, it was soon realised that the
application was more appropriately made pursuant to CPR Part 39.3, which is set
out in full:
(1) The court may proceed with a trial in the absence of a party but -
(a) if no party attends the trial, it may strike out (GL) the whole of the
proceedings;
(b) if the claimant does not attend, it may strike out his claim and any
defence to counterclaim; and
(c) if a defendant does not attend, it may strike out his defence or
counterclaim (or both).
(2) Where the court strikes out proceedings, or any part of them, under this
rule, it may subsequently restore the proceedings, or that part.
(3) Where a party does not attend and the court gives judgment or makes an
order against him, the party who failed to attend may apply for the judgment or
order to be set aside (GL).
(4) An application under paragraph (2) or paragraph (3) must be supported by
evidence.
(5) Where an application is made under paragraph (2) or (3) by a party who
failed to attend the trial, the court may grant the application only if the
applicant -
(a) acted promptly when he found out that the court had exercised its power to
strike out (GL) or to enter judgment or make an order against him;
(b) had a good reason for not attending the trial; and
(c) has a reasonable prospect of success at the trial.
The Defendant submitted not only that it satisfied
the conditions in Part 39.3(5) but also that it was entitled to have the
judgment set aside as of right.
The procedural history was then complicated by the
lack of representation until a relatively late stage – it was not until 1st September 2005 that both parties were represented by counsel – but in essence
the District Judge determined that the Defendant had to show that a different
result might follow if he was allowed to attend a trial and the Circuit Judge
disagreed, preferring to set the judgment aside as of right and to follow White
v Weston. It should be noted that, although it appears to have been in
issue at some stages, it was found as a fact that the Defendant had never been
correctly served with proceedings.
The Court of Appeal very quickly dealt with the
pre-CPR position. Following White v Weston and other cases, Sir Anthony
Clarke MR in delivering the judgment of the Court concluded that it was clear
that if the case had occurred before the CPR the court would have set aside
judgment. The Defendant, coming as a stranger to the proceedings, was entitled
to that relief, whether as of right or as a matter of the Court exercising a
discretion that could only go one way.
So is the post-CPR landscape any different? The
argument against looking outside the CPR to determine this issue was a
compelling one and stood on three main pillars:
As a matter of fact there was a trial (by reference
to the procedural rules governing possession actions) at which the Defendant
failed to attend. In those circumstances the wording of Part 39.3 is apposite
and clear and provides that judgment can be set aside ‘only if’ the applicant
satisfies the conditions there set out.
There is no distinction in principle between a
defendant who knows nothing of the proceedings but is served in accordance with
the CPR (e.g. where it is correctly served at his last known residence but he
is away for a protracted period) and one who, because of some mistake – as here
– is not correctly served.
Further, rule 3.10 provides that an error of
procedure does not invalidate any step taken in proceedings and in Vinos v
Marks & Spencer plc [2001] 3 All ER 784 the Court of Appeal made it
clear that this did not extend to permitting a court to do what another rule
expressly forbade.
While acknowledging that there was some force in
these submissions, the Court of Appeal did not accept them: ‘The essential
question is whether this is a situation to which CPR 39.2 applies. So far as we
are aware, there is no case in which the rule has been held to apply where the
defendant has not been served with proceedings in accordance with the CPR and
is ignorant of them. To accede to Mr Jones’ submissions involves disregarding
the complex provisions for service of process under the CPR and holding that,
notwithstanding the fact that he has not been served (or deemed to have been
served) with the proceedings, the burden is on the defendant to satisfy the
criteria in subparagraphs (a), (b) and (c) of the CPR 39.3(5).’
The Court was obviously keen to avoid recourse to
Part 39.3 and justified it in a number of ways:
i) There are detailed rules as to the service of a
claim form. If rule 39.3(5) applied in cases where the defendant had not been
served in accordance with those rules, they would be rendered almost
meaningless.
ii) In every case the defendant would have to bear
the burden of showing a reasonable prospect of success in circumstances where a
claimant – had proceedings been properly served – would have to demonstrate
that the defendant had no real prospect of success in order to obtain a
judgment at the same stage pursuant to CPR Part 24.
iii) The predecessor to CPR Part 39.3 was CCR O.37
r.2, which was drafted in less stringent terms. The tenor of the rule
contemplates a judgment obtained against a party who has been validly served
but nevertheless fails to attend.
iv) Interest payable on a money judgment runs from
the date of judgment until payment, which is an unjust result where proceedings
have not been served and there has been no order dispensing with service.
It was therefore held that CPR Part 39.3 did not
apply in cases where there has not been service in accordance with the rules,
but the Court went on to say: ‘It does not, however, follow that under the CPR
the defendant is entitled to have the judgment set aside as of right, ex
debito justitiae, or indeed that, if there is a discretion it can be
exercised in only one way.’ It may, for example, serve no useful purpose to
require a claimant to commence fresh proceedings in circumstances where the
original ones could not be saved by an application to extend time for service.
This approach created a further problem – on what
basis then could the judgment be set aside: ‘While it is perhaps possible that
there is no rule of the CPR which governs an application to set aside such a
judgment and that the court’s power to do so stems from some more general power
to set aside a judgment ex debito justitiae, it seems unlikely that such
a comprehensive code does not cover such a situation.’
To get around the paradox of a comprehensive code
which does not deal comprehensively with the problem in hand the Court of
Appeal followed a paper trail of more general rules. Firstly, it was held that
attempted service at the wrong address was an “error of procedure” within the
meaning of rule 3.10. This surprising result opens the door to the general power
to remedy that error, whether under 3.10(b) or 3.1(2)(m). The possibility that
rule 3.1(7) may also apply was expressly left out of consideration.
By approaching the procedural issue in this way, the effect
is to leave the Court with a discretion as to whether or not to set aside a
judgment obtained in these circumstances. Some limited guidance was given as to
how that discretion should be exercised, although it was envisaged that the
just order will, ‘almost always be to set aside the judgment.’ It would be
necessary for a claimant to show that there was no prejudice to the defendant
and: ‘We do not at present see how that will be possible in a case where the
judgment includes a money judgment of an aggregate sum inclusive of interest
and costs because of liability to interest on the aggregate sum under the
Judgments Act or the County Courts Act. Nor do we see how it will be possible
where the judgment ordered the defendant to pay the costs.’
Examples of circumstances in which the judgment may
be preserved were offered. It may not be appropriate to set aside the whole
judgment where the defendant has delayed inexcusably in making his application
after receiving notice of the judgment. An alternative would be for the
claimant to cross apply for an order dispensing with service and for summary
judgment pursuant to Part 24, the significance being that the burden of proof
would rest with the claimant.
Whether this invitation to claimants will be taken up
remains to be seen. What also remains to be seen is whether the Rules Committee
take up the Court of Appeal’s parting recommendation, that a new rule is
introduced to deal expressly with those cases where judgment has been entered
even though the defendant has never been served with the claim form at all
(even by virtue of “deemed service”). So much for a comprehensive code!
Ben Leech
12 King’s Bench Walk
September 2006
