Newland Shipping and Forwarding Ltd v Toba Trading FZC and Others

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeThe Hon. Mr Justice Males,Mr Justice Males
Judgment Date18 June 2014
Neutral Citation[2014] EWHC 1986 (Comm)
Date18 June 2014
Docket NumberCase No: 2011 FOLIO 1213

[2014] EWHC 1986 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Hon. Mr Justice Males

Case No: 2011 FOLIO 1213

Between:
Newland Shipping and Forwarding Limited
Claimant
and
(1) Toba Trading FZC
(2) Seyed Majed Taheri
(3) Hossein Rahbarian
Defendants

Mr Alan Maclean QC (instructed by Holman Fenwick Willan LLP) for the Claimant

Mr Peter Ferrer (instructed by Stephenson Harwood LLP) for the Third Defendant

Hearing date: 13 th June 2014

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

The Hon. Mr Justice Males Mr Justice Males

Introduction

1

This is an application by the third defendant Mr Hossein Rahbarian to set aside a default judgment entered by Field J on 15 November 2013. The judgment initially entered was in the sum of US $7,260,382, but that sum was subsequently varied to US $6,605,673 by an order made by Hamblen J on 7 February 2014.

2

This application was made pursuant to CPR 13.2 on the basis that Mr Rahbarian had not been validly served with the proceedings, and also pursuant to CPR 13.3 on the basis that he had a real prospect of successfully defending the claim and/or that there was some other good reason why the judgment should be set aside.

3

However, Mr Peter Ferrer (who represented Mr Rahbarian) abandoned reliance on CPR 13.2, accepting that the proceedings have been validly served on Mr Rahbarian and that this court has jurisdiction. Accordingly the first question is whether Mr Rahbarian has a real prospect of successfully defending the claim (the same test as applies on a summary judgment application) or there is some other good reason why the judgment should be set aside. If so, the court has a discretion to set the judgment aside and, in considering how to exercise that discretion, is required by CPR 13.3(2) to have regard to "whether the person seeking to set aside the judgment made an application to do so promptly."

4

Further, at least at first instance, it is established (and was common ground before me) that an application to set aside a default judgment pursuant to CPR 13.3 is an application for relief against sanctions: see Samara v MBI & Partners UK Ltd [2014] EWHC 563 (QB) (Silber J); and Mid-East Sales Ltd v United Engineering & Trading Company (PVT) Ltd [2014] EWHC 1457 (Comm) (Burton J). The analysis here is that CPR 10.3 requires a defendant served with a claim form to file an acknowledgement of service within a specified period and that CPR 10.2 provides, as a sanction, that if the defendant fails to do so the claimant may enter judgment.

5

CPR 3.9 (1) provides that:

"On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need—

(a) for litigation to be conducted efficiently and at proportionate cost; and

(b) to enforce compliance with rules, practice directions and orders."

6

As is now well known, CPR 3.9 must be applied in accordance with the guidance set out in Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537, [2014] 1 WLR 795, delivered on 27 November 2013 two weeks after Field J ordered that judgment be entered against Mr Rahbarian in this case. As Mr Alan Maclean QC who represented the claimant observed, that judgment went round the English legal profession like wildfire. It is possible, however, that its full implications were not pored over with the same intensity in Iran where Mr Rahbarian resides, he being at that time unrepresented in this action.

7

Mitchell has, to say the least, proved to be a controversial decision, but until it is reversed or modified by a higher court it is binding on first instance judges. The guidance which it contains has now been considered (I was told) in over 40 reserved judgments available on the internet. This, I suppose, will make one more. For present purposes a useful summary is provided by Davis LJ in Chartwell Estate Agents Ltd v Fergies Properties SA [2014] EWCA Civ 506 at [34]:

"Regard must of course be had to the totality of the decision in Mitchell. But the guidance can, I think, for present purposes be summarised as follows:

i) It is necessary to consider whether the nature of the non-compliance is such that it can be regarded as trivial.

ii) If the non-compliance is not trivial, it is necessary to consider whether there is a good reason explaining the non-compliance.

iii) The promptness (or otherwise) of an application to court for an extension of time and relief from sanction for these purposes will be material.

iv) If the non-compliance is not trivial and if there is no good reason for the non-compliance then the "expectation" is that the sanction will apply. The court has power to grant relief but, if the non-compliance is not trivial and if there is no good reason for it, the expectation is that the factors mentioned in (a) and (b) of the rule will 'usually trump other circumstances'."

See, in particular, paragraphs 40–41 and 58 of the judgment of the court. It is also stated (at paragraph 46):

'The new more robust approach that we have outlined above will mean that from now on relief from sanctions should be granted more sparingly than previously'."

8

Chartwell , it should be noted, was a case where the non-compliance was not trivial and there was no good reason for it, but where Globe J's decision to grant relief was upheld by the Court of Appeal. As Davis LJ explained at [57], the interests of justice remain a highly relevant consideration:

"It must not be overlooked that the Court of Appeal in Mitchell did not say that the two factors specified in CPR 3.9 will always prevail, as a matter of weight, over any other circumstances in a case where the default is not trivial and where there is no good justification. It is true that it later stated that the expectation is that the two factors mentioned in CPR 3.9 will 'usually' trump other circumstances. But it did not say that they always will. That, with respect, must be right. It must be right just because CPR 3.9 has required that all the circumstances are to be taken into account and has required that the application be dealt with justly."

9

In addition to this general guidance which applies to relief against sanctions for any kind of failure to comply with rules or court orders, CPR 13.3 cross-refers to CPR 3.1(3), thereby drawing attention to the court's power to attach conditions to any order which it may make to set aside a judgment. That indicates, to my mind, that when considering the exercise of discretion under CPR 13.3, the court should bear in mind that the entry of a default judgment may operate as an extreme sanction and that justice may be done by making the setting aside of such a judgment subject to conditions, for example as to the provision of security for some or all of the claim. That may represent a more proportionate sanction, requiring a defendant who has hitherto ignored the proceedings to demonstrate his commitment to them by, as it were, putting some of his money where his mouth is. But as ever, what is appropriate will always depend on the particular circumstances of the case.

The background

10

This dispute has already given rise to a somewhat tangled history. This is set out in the judgment of Hamblen J dated 6 February 2014 [2014] EWHC 210 (Comm) at [3] to [34] which, for ease of reference, I set out below:

" Factual Background

3. The Claimant, Newland Shipping and Forwarding Limited, supplied oil products to D1, which is an Iranian owned UAE company engaged in the business of trading oil and gasoline related products. D1 made certain advance payments but failed to pay the full amount due for the cargoes. The cargoes were sold elsewhere. A series of advance payments therefore built up which the parties agreed (by a contract dated 6 February 2011) would be deducted from sums due in respect of a series of five further cargoes, which in each case were to be delivered CFR Iranian Caspian Port.

4. The Second Defendant, Seyed Majed Taheri ("D2"), is said to be the commercial manager, shareholder and an (or the) alter ego of D1. D3 is said to be a board member, managing director and an (or the) alter ego of D1.

5. The Claimant's case is that, rather than waiting for reimbursement to be made in five stages as had been agreed, the Defendants resorted to stratagems to attempt to obtain the cargoes before payment. In the 1213 Action, D1 did obtain a cargo worth over $4 million formerly on board the vessel "TETI". The Defendants gave various reasons for delaying payment until the TETI finally put into port in Neka in Iran. Shortly afterwards, the cargo was arrested by the Iranian Courts in allegedly contrived proceedings between D1 and a company ("Chirreh"), which was (as is common ground) a company controlled by D3's sister.

6. In the 1214 Action, which relates to the delivery of cargo by rail, D1's alleged ruses to obtain the cargo without payment were unsuccessful, and the cargo was eventually sold elsewhere by C in a distressed sale. The claim in this action is only brought against D1.

7. The principal claim in the 1213 Action is for the purchase price of about US$4.5 million, and in the 1214 Action for the purchase price of about US$1 million, together in both actions with damages claims including (in the 1213 Action) a claim for conspiracy and conversion of the goods.

8. In both the 1213 and the 1214 Actions, D1 counterclaims for its advance payments of some US$3.6 million. There is an issue in respect of the counterclaims as to whether the 6 February 2011 contract...

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    ...that the defendant might succeed at trial." 57 It is established by a number of first instance decisions (see eg Newland Shipping & Forwarding Ltd v Toba Trading FZC [2014] EWHC 1986 Comm), and was common ground before me, that an application to set aside a default judgment pursuant to CPR ......

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