Bankers Trust Company v Galadari
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE KERR,LORD JUSTICE PARKER,LORD JUSTICE BALCOMBE |
| Judgment Date | 14 October 1986 |
| Neutral Citation | [1986] EWCA Civ J0707-3 |
| Judgment citation (vLex) | [1986] EWCA Civ J1014-2 |
| Docket Number | 86/0643,86/0877 |
| Court | Court of Appeal (Civil Division) |
| Date | 14 October 1986 |
and
[1986] EWCA Civ J0707-3
Lord Justice Kerr
Lord Justice Parker
and
Lord Justice Balcombe
86/0643
1986 B No. 1388
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR. JUSTICE WEBSTER)
Royal Courts of Justice
MR. RICHARD AIKENS QC (instructed by Messrs. Rowe & Maw, Solicitors, London EC4V 6HD) appeared on behalf of the Plaintiffs (Appellants)
MISS HILARY HEILBRON (instructed by Messrs. Norton Rose Botterell & Roche, Solicitors, London EC3A 7AN) appeared on behalf of the Second Defendant (Respondent)
This is an application for leave to appeal
against a decision of Mr. Justice Webster given in the Commercial Court on 6th June of this year, whereby—on the application of one of the defendants—he set aside a default judgment obtained by the plaintiff bankers against the defendants. On 17th June the judge refused leave to appeal. The plaintiffs' application for leave was adjourned by Parker LJ to the full court. Having read the papers in advance we thought it right, on the point under appeal to this court, (which was not, I should add, the main point with which the judge had to deal) to call at once on Miss Heilbron, counsel for one of the defendants, to see whether there were any grounds for upholding the judge's decision, since at first sight it appeared to us all that on this occasion there were no such grounds. That remains my view. Having heard Miss Heilbron's submissions, we consider that leave to the plaintiffs to appeal should certainly be given, and I now give my judgment on the appeal. For convenience I will refer to "the defendants" collectively, although only one of them is represented.
Briefly, the history is as follows. On 26th February 1986 the plaintiffs issued, and served, a writ on the defendants claiming the sum of $6m., together with substantial interest, on a promissory note originally dated 21st February 1984, in respect of which payment had been properly demanded on 23rd April 1985.
On 3rd March the defendants' solicitors wrote to the plaintiffs' then solicitors that they had filed an acknowledgement of service to the writ. The writer added that he anticipated that his firm would be instructed to apply for a stay of the proceedings, on the ground that the claim was already the subject of proceedings in Dubai. That letter was acknowledged by the plaintiffs' solicitors on 4th March.
On 5th March the defendants filed their acknowledgement of service, and on 18th March the plaintiffs served their points of claim. On 21st March the defendants issued a summons to stay the proceedings on the ground that the plaintiffs had also commenced proceedings in other jurisdictions, including by that time, I think, Dubai, New York and Switzerland. That was served on the plaintiffs' solicitors on 27th March.
On 3rd April the plaintiffs' solicitors wrote to the defendants' solicitors, warning them that if no points of defence were received by noon the following day, 4th April, judgment in default would be issued. That course was taken on 4th April, no defence having been served, nor any application for an extension of time having been made.
The matter then came before Mr. Justice Webster on 6th June in the form of two applications. The first was the application to which I have already referred, to stay the action on the ground of the other pending proceedings. Having considered the evidence, the judge rejected that application and there has been no appeal against that part of his decision. However, it is of some materiality to note that one of the matters which he took into account in rejecting that application was that there was no defence to the action. At any rate, no one had ever suggested that either defendant had any defence in any jurisdiction in which the plaintiffs could properly sue. The main ground on which the judge relied, in the light of the evidence, was that there was a substantial number of creditors, or alleged creditors, of the defendants, pursuing assets which might well either be insufficient to satisfy all claims, or extremely difficult to trace. In the result he held that the actions in different jurisdictions were not oppressive, and there has been no appeal against his refusal to stay the action here.
The application with which we are concerned on this appeal was to have the default judgment set aside which had been obtained by the plaintiffs in the interim. The application was In the following terms:
"That the judgment entered herein in default of defence against the first defendant on 4th April 1986 be set aside on the ground that a summons was issued herein on 21st March 1986 for an order that the proceedings herein be stayed under the inherent jurisdiction of the court, there being proceedings pending in both the United States District Court of New York and also in Dubai Civil Court, concerning the same subject matter and claiming the same relief as in this action".
It can therefore be seen that the application to set aside the default judgment was in effect made on precisely the same ground as the application to stay, but there was no suggestion that the judgment which had been obtained was in any respect irregular, contrary to Rules of the Supreme Court 0. 2 r.2(2) and the note 13/9/6 in the Annual Practice.
It may be convenient to read at once that part of the note of the judge's reasons in which he dealt with this second matter. He said:
"Dealing with the judgment in default, judgment was not obtained in breach of an Order of the Rules of Court and was therefore not irregularly obtained. In these circumstances it is a matter for my discretion as to whether to set aside the judgment. The ground upon which the First Defendant can rely is that when judgment was obtained the Plaintiff knew of the First Defendant's application for a stay of the proceedings. It is true that the First Defendant, instead of letting matters proceed in the way that he did, could have asked for an extension of time for the service of the defence. But this would have been an unrealistic situation in that the Defendants have no defence.
"I accept that it is an almost inflexible rule that if a judgment has to be set aside, there should be evidence of merits from the Defendants that is that they have an arguable defence. I emphasize 'almost'. I appreciate that if I do set the judgment aside it will not benefit the First Defendant greatly because it will not be long before the Plaintiff can obtain a similar judgment. In the circumstances however, it seems that although I do not criticise the Plaintiff's action, it smacks of an abuse of the process of the Court and therefore for that reason I shall set the judgment aside".
He ordered that the application for a stay be dismissed with costs, but that the application to set aside the judgment be granted with costs in any event, and that the time for service of the defence be extended by eight days from the date of his order, such extension being final.
Two points immediately come to mind. The first is that the judge said, as indeed is common ground, that the defendants have no defence, but nevertheless ordered a defence to be delivered in eight days. The second is that he said that he did not criticise the plaintiffs' action, but nevertheless set aside the judgment because it "smacks of an abuse of the process of the Court".
With the greatest respect to the judge, I think that on this occasion he has plainly erred in the exercise of his discretion, and that the approach which he adopted is untenable. But, before coming to the question of discretion, Miss Heilbron has submitted, and tells us that it was also submitted below, that the judge in fact had no discretion in this case, because the judgment was irregular. In that connection, the mainly relevant provisions of the Rules of the Supreme Court are 0.2 r.l(1) and r.2.
R.l(1) reads:
"Where, in beginning or purporting to begin any proceedings or at any stage in the course of or in connection with any proceedings, there has, by reason of any thing done or left undone, been a failure to comply with the requirements of these rules, whether in respect of time, place, manner, form or content or in any other respect, the failure shall be treated as an irregularity and shall not nullify the proceedings, any step taken in the proceedings, or any document, judgment or order therein".
Pausing there, all that is there referred to as being an irregularity is a failure to comply with any requirements of the rules.
R.2 provides as follows:
"(1) An application to set aside for irregularity any proceedings, any step taken in any proceedings or any document, judgment or order therein shall not be allowed unless it is made within a reasonable time and before the party applying has taken any fresh step after becoming aware of the irregularity".
"(2) An application under this rule may be made by summons or motion and the grounds of objection must be stated in the summons or motion".
That adds nothing to r.l for present purposes and certainly lends no support whatever to the submission that an irregularity is not confined to a failure to comply in some respect with the Rules of the Supreme Court. Miss Heilbron submitted that the concept of irregularity is wider, in the sense of something which, for one reason or another, is to be disapproved of. She submits that this is the situation in the present case in relation to the plaintiffs'...
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