Watson v Bluemoor Properties Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE POTTER,Mr Justice Sullivan,MR JUSTICE SULLIVAN |
| Judgment Date | 10 December 2002 |
| Neutral Citation | [2002] EWCA Civ 1875 |
| Docket Number | A3/2002/1225 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 December 2002 |
[2002] EWCA Civ 1875
Lord Justice Potter
Mr Justice Sullivan
A3/2002/1225
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR PETER LEAVER QC)
Royal Courts of Justice
Strand
London, WC2
MR M CARTER appeared on behalf of the Applicant
MISS K OLLEY (instructed by Messrs Bury & Walkers, Leeds LS1 5JS) Appeared on behalf of the Respondent
Mr Justice Sullivan will give the first judgment.
This is an adjourned application for permission to appeal against a decision of Mr Peter Leaver QC sitting as a deputy judge of the Chancery Division on 21st May 2002 dismissing the applicant's application to set aside an order of His Honour Judge Rich QC sitting as a judge of the Chancery Division on 29th January 2002.
On 18th September Carnwath LJ adjourned the application for permission to appeal so that it could proceed on notice to the respondent, and directed that if permission was granted the hearing of the appeal should follow immediately thereafter. At the outset of the hearing the court indicated that it considered that this was an appropriate case in which to grant permission and thereafter proceeded to consider the appeal.
The history of the litigation is somewhat convoluted, but in summary the background is as follows. The defendant company (the applicant in the present proceedings) owned a plot of land on which it had obtained planning permission to erect a house, subject to an agreement under section 106 of the Town and Country Planning Act 1990 which required the demolition of a bungalow on adjoining land. The land for the house was sold to the claimant. In 2000, when the house was built and ready for occupation, the defendant failed to demolish the bungalow. The claimant brought proceedings for an injunction and damages. As a result of pressure from the District Council the bungalow was demolished in September 2000, so there was no longer any need for an injunction. The claimant's claim for damages "in excess of £50,000" remained and in response the defendant company advanced a counterclaim alleging, among other matters, that the new house had been erected in breach of covenants in the sale agreement, because the company's consent had not been granted for variations between the building as permitted by the planning permission and the building as erected. Various other complaints were made, including failure to pay for water usage and damage to land drains. The counterclaim was said to be limited in value to £49,999. At a case management conference on 7th March 2001 the claimant abandoned her claim for damages, so the only outstanding matter on the claim was her claim for costs.
On 16th May 2001 the claimant applied order striking out various paragraphs of the counterclaim pursuant to rules 3.4 and/or 24.2 of the CPR, on the basis that there were no reasonable grounds for making the allegations in the counterclaim and that it had no real prospect of success.
When the matter came before Master Moncaster on 2nd July 2001 he gave the claimant a declaration that the defendant was in breach of covenant as at the date of the claim form, and ordered that the costs of the claim should be reserved to the judge who was to try the counterclaim. He dismissed the claimant's application to strike out the various parts of the counterclaim and gave directions for hearing it. Further directions included a direction that the trial of the counterclaim was to be limited to liability only.
Thus matters stood when the matter came before His Honour Judge Rich on 29th January 2002. Mr Carter was there and sought permission to represent the defendant company, as he had been permitted to do at some of the earlier procedural stages in the litigation. However, he had been made bankrupt on 13th December 2001 and so was disqualified from acting as a director of the company. His Honour Judge Rich said this:
"There has come on for trial today, however, a counterclaim which was made in the name of the defendant company, although the person acting on behalf of the company, at some stages with the permission of Master Monkaster, is a Mr Carter, who was until recently a Director of the defendant company. Since December, he has been disqualified from acting as a Director, and has resigned. There therefore appears before me today, nobody entitled to appear on behalf of the defendant company, but it appears the defendant many has not only not been represented here, or not properly represented, it has been wholly unaware of today's hearing."
Having summarised the nature of the company's counterclaim, he continued:
"It is by no means clear to me whether the defendant company would wish to pursue a claim so based, or if it does, what its proper remedy in fact should be. But it has not today appeared to prove such claim, and in those circumstances, under Part 39(3), the court may proceed to strike out the counterclaim. It seems to me that that, in the circumstances of this case, is the appropriate thing to do, although in making consequential orders I do have regard to the fact that the company itself clearly has not attended today because it did not know of today's hearing. It may well not have known of the claim that had been made in its name; that I know not, and that no doubt will be something which will give rise to consideration by the defendant as to whether or not it wishes to avail itself of the right which derives from striking out on non-attendance, that it may make application to set aside the order, if an application is promptly made and supported by evidence, including evidence as to the reasonable prospect of success at the trial."
So he struck out the counterclaim pursuant to rule 39.3(1)(c) of the CPR, ordered the defendant to pay the reserved costs of the claimant's claim and the claimant's costs of the counterclaim, and ordered that the defendant make an interim payment of £10,000 on account of costs by 26th February 2002.
Pausing there, three matters are immediately apparent: firstly, the merits of the counterclaim were not addressed, his Honour Judge Rich taking the view that it was appropriate to strike out the counterclaim simply upon the basis that the company had not appeared; secondly, the judge did not give any reason for ordering that the defendant company should pay all the reserved costs of the claimant's claim, notwithstanding the fact that the claim for damages had been abandoned; thirdly, the judge himself envisaged that the company might wish to apply to set aside his order under rule 39.3(5). Rule 39.3 provides, so far as material:
"(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.
(4) An application under … paragraph (3) must be supported by evidence.
(5) Where an application is made under paragraph … (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 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."
In paragraph 11 of his judgment Mr Leaver QC pointed out that the three requirements in 39.3(5) are cumulative: thus the applicant had to satisfy the requirements of each of the sub-paragraphs (a) to (c) before the court's discretion could come into play.
So far as the requirement in sub-paragraph (b) is concerned, Mr Leaver was not impressed by the company's explanation for its failure to attend the hearing before His Honour Judge Rich, but said if this point had stood alone he would probably have allowed the appeal and exercised the court's discretion in the company's favour. He took the view that the claimant could have been compensated in costs for the company's failure to arrange appropriate representation and the consequential adjournment.
I endorse that conclusion. The facts of this case were somewhat unusual. Unlike certain cases where there is no appearance whatsoever, and no explanation is forthcoming, Mr Carter had appeared before His Honour Judge Rich. There is an issue as to the extent to which the defendant company is, in truth, his alter ego, but in any event it is plain that he was (prior to his disqualification as a director) allowed to represent the company on a number of occasions during the course of the litigation. As a bankrupt, he could no longer represent the company as a director, but having regard to the history of the proceedings, and in particular the extent of his involvement as advocate, and witness, on behalf of the company, the reasonable course, rather than striking out the counterclaim, would have been to adjourn for a short period (at the company's cost) in order to ascertain whether it did indeed wish to pursue the counterclaim that Mr Carter was seeking to advance on its behalf.
The CPR deliberately introduced a greater measure of flexibility into the ability of companies to choose their representative. They no longer have to be represented by directors, but may be represented by an authorised employee, whether or not that employee is a director, provided always that the court is...
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