Regency Rolls Ltd & Anor v Carnall

An application to set aside a judgment made after a party’s non-attendance at trial may succeed under rule 39.3(5) only if the applicant satisfies all of the stated conditions. A reasonable prospect of success means a real, rather than fanciful, prospect. The court may reject an application where the existing evidence makes the proposed case inherently incredible.

“Promptly” does not require an absence of every avoidable delay. It requires action with all reasonable celerity in the circumstances. A delay of about a month, against a long and unsatisfactory procedural history, failed that requirement on the facts.

The claimants alleged that Mr Carnall had wrongfully entered and interfered with the affairs and property of Regency Rolls Ltd. He contended that Mr Kemp had appointed him a director and resigned his own directorship.

After Mr Carnall failed to attend the resumed trial of preliminary issues, His Honour Judge Behrens found that no such appointment or resignation had occurred. He made declaratory and injunctive orders and ordered indemnity costs. Mr Carnall later applied to set aside those orders under rule 39.3(3) of the Civil Procedure Rules. The judge accepted that his illness was genuine but refused relief because the application was not prompt and had no reasonable prospect of success.

Mr Carnall appealed that refusal and separately appealed the indemnity-costs order.

1. The Court of Appeal unanimously dismissed the substantive appeal. It held that the conditions in rule 39.3(5) of the Civil Procedure Rules were cumulative. Mr Carnall had a good reason for his non-attendance, but he did not establish a reasonable prospect of success. The Court was content to equate that expression with a real prospect that was not fanciful.

2. Lady Justice Arden held that Mr Carnall’s account of his appointment as a director lacked the necessary credibility. It was inconsistent with the surrounding evidence, Mr Kemp’s conduct before and after the alleged meeting, and the limited and inconclusive supporting evidence. Lord Justice Rix and Lord Justice Simon Brown agreed that the case was wholly implausible and did not meet the reasonable-prospect threshold.

3. As to promptness, Lord Justice Simon Brown construed the requirement as action with all reasonable celerity in the circumstances, rather than an absolute absence of needless delay. Even on that construction, the delay of about 30 days before issuing the application was too long. Lady Justice Arden and Lord Justice Rix also considered that Mr Carnall had not acted promptly.

4. Lady Justice Arden further held that Article 95 of the adopted Table A required authority from the directors collectively for an additional appointment. On the evidence, there was no reasonable prospect of proving such authority. Article 105 could not validate an appointment that was contrary to the articles or where there had been no appointment, consistently with Morris v Kanssen [1946] AC 459.

5. The separate appeal against the indemnity-costs order was allowed by agreement. Mr Carnall remained liable for the preliminary-issue costs on the standard basis. The costs of the two appeals were to be set off.

• Court of Appeal (Civil Division): In [2000] EWCA Civ 379, dismissed the appeal from the refusal to set aside the judgment after non-attendance, but allowed the separate appeal concerning indemnity costs.

• Chancery Division (His Honour Judge Behrens sitting as a High Court judge): On 29 September 2000, refused Mr Carnall’s application under rule 39.3 of the Civil Procedure Rules to set aside the orders made on 22 March 1999. The judge held that the application was not prompt and that Mr Carnall had no reasonable prospect of success.

• Chancery Division (His Honour Judge Behrens sitting as a High Court judge): On 22 March 1999, declared that Mr Carnall had not been appointed a director, that Mr Kemp had not resigned, granted consequential restraints, and ordered indemnity costs after Mr Carnall did not attend the resumed trial.