Paul Milburn v Supercar International Ltd

On an application to set aside a default judgment, the court should examine both the merits of the proposed defence and the conduct leading to the default. Procedural default and delay are not decisive where the applicant has a substantial defence requiring trial. Solicitor neglect should not automatically be visited on the client. The court may also consider whether the default judgment appears excessive and whether unresolved contractual or statutory issues make a trial necessary.

Supercar International Ltd appealed after the Newcastle-upon-Tyne County Court refused to set aside a default judgment entered when the company failed to respond to proceedings. A later judgment assessed damages. The company said the summons had not reached the relevant office, that the failure resulted from solicitor neglect, and that it had substantial defences concerning agency, contractual exclusions, misrepresentation and the amount of damages. The central issue was whether the judgments should remain in place or be set aside so that the claim could be tried.

Lord Justice Morritt gave the leading judgment, with Lord Justice Thorpe agreeing.

1. Disposition. The appeal was allowed. The judgments entered on 17 April and 12 July 1996 were set aside so that the claim could be tried in the ordinary way, with the evidence of both sides. Supercar International Ltd was ordered to pay the costs below forthwith. There was no order for costs in the appeal, subject to legal aid taxation of the respondent’s costs.
2. Procedural approach. The objection that the application concerning the later judgment had not been properly made was rejected because the purpose of the application had been clear throughout. The court therefore considered the merits rather than allowing procedural defaults to determine the outcome. The setting-aside approach was discussed by reference to Alpine Bulk Transport Company Incorporated v Saudi Eagle Shipping Company Incorporated [1986] 2 Lloyds Rep 221.
3. Merits. The court was not trying the action, but found a substantial defence suitable for consideration at trial. A disclosed agent can be a party to a contract, depending on the construction of a written contract or, otherwise, all the circumstances. The invoice wording strongly suggested that Supercar International Ltd was a contracting party, so the agency defence was unlikely to succeed. Other issues remained arguable, including consumer status, the effect of the invoice clause under the Sale of Goods Act 1979 and the Unfair Contract Terms Act 1977, and whether the guilty plea under the Trade Descriptions Act 1968 affected the reasonable-belief defence under the Misrepresentation Act 1967. The order also appeared excessive because Mr Milburn retained the car while receiving damages in full.
4. Default and solicitor conduct. The delay after notice of the default judgment, and the failure to prevent the assessment of damages, were troubling. Nevertheless, it would be wrong to visit the solicitors’ lamentable neglect on the client where the merits disclosed a substantial case for trial.

• Court of Appeal (Civil Division): On 2 December 1997, allowed the appeal and set aside the judgments entered on 17 April and 12 July 1996.
• Newcastle-upon-Tyne County Court: On 10 January 1997, His Honour Judge Stephenson dismissed Supercar International Ltd’s appeal from the refusal to set aside the default judgment and treated the application concerning the later judgment as dismissed.
• Newcastle-upon-Tyne County Court: District Judge Powell refused on 20 September 1996 to set aside the default judgment entered on 17 April 1996. Damages were subsequently assessed and judgment entered on 12 July 1996.