Canada Maritime Limited v Oerlikon Aerospace Inc.

When deciding whether to set aside a judgment, the court must assess the character of the judgment and the circumstances of the case. The distinction between default judgments and judgments following a trial is not rigid. An Order 14 judgment may fall within an intermediate category where the issues were only summarily examined.

A real prospect of success on a substantial defence may provide strong grounds for setting aside, even where there has been delay, prejudice and unsatisfactory conduct. In carriage cases, a Himalaya clause may provide an arguable defence despite privity difficulties. An appellate court should not interfere with a discretionary decision absent an error of principle.

Oerlikon Aerospace Inc and Her Majesty the Queen in Right of Canada appealed against an order setting aside judgments obtained by Canada Maritime Limited in counterclaims against Maritima Valenciana SA and Transportes Fuente SL.

The judgments had been entered under Order 14 and Order 19, rule 7. The respondents relied on a Himalaya clause in the bill of lading, although they were not parties to it. The issues were whether they had a real prospect of success and whether the judge had exercised his discretion according to principle.

1. Appeal dismissed. The judgments against Maritima Valenciana SA and Transportes Fuente SL were properly set aside. The order was made with costs, and leave to appeal to the House of Lords was refused.

2. The principles identified in Shocked v Goldsmidt [1998] 1 All ER 372 distinguish, at the extremes, default judgments from judgments following a trial. They do not create rigid categories. Each application depends on its facts and the weight given to the relevant factors varies.

3. An Order 14 judgment may occupy an intermediate position. The judgment against Maritima Valenciana was given after only a short hearing, involved a technical distinction concerning bailment, and did not consider the Himalaya-clause defence or the later decision in The Mahkutai [1996] AC 650.

4. The Himalaya clause gave both respondents a real prospect of success. The Mahkutai showed that, in carriage cases, the law of privity might develop towards a fully effective exception. It was therefore unnecessary to determine the detailed ratification arguments.

5. Delay, misleading explanations, prejudice caused by a settlement, the public interest in finality and the respondents’ conduct were material considerations. They did not outweigh the strong merits of the proposed defence. The court’s task was to balance all relevant circumstances.

6. The appellate court’s function was not to exercise the discretion afresh. Since the judge had taken the material factors into account and had made no error of principle, the Court of Appeal would not interfere.

• Court of Appeal (Civil Division): Appeal from the order of Tuckey J dated 23 May 1997 dismissed with costs.
• Queen’s Bench Division, Commercial Court: Tuckey J set aside the summary judgment and default judgment previously entered by Rix J.
• Queen’s Bench Division, Commercial Court: Rix J had entered judgment under Order 14 against Maritima Valenciana SA and judgment in default under Order 19, rule 7 against Transportes Fuente SL.