Black Arrow Finance Ltd v Four Seasons Dry Cleaning Ltd & Anor

An on-demand guarantee does not disclose a cause of action unless the required demand is pleaded. Where particulars of claim omit that demand, a default judgment should not stand, even if the defendant’s failure to file a defence resulted from an unfortunate procedural error. The appropriate course is to set aside the default judgment, leaving the claimant to seek permission to amend and, if appropriate, summary judgment. Filing by fax is permitted under the Civil Procedure Rules practice direction, and courts must maintain effective procedures for recording receipt and delivery times. These observations underline the importance of reliable court records, but the appeal was determined by the failure to plead a cause of action.

The claimant sued Four Seasons Dry Cleaning Ltd and Simon Wills on an alleged personal guarantee of the company’s liabilities under a leasing agreement. Default judgment was entered when the court’s records showed no defence. Mr Wills said that he had faxed defences and applied to set aside the judgment. Deputy District Judge Beith refused the application, and His Honour Judge Rudd dismissed the subsequent appeal.

Further evidence on appeal showed that the court’s records could not establish whether the defences had been received. The Court of Appeal also considered a new point: the guarantee was payable on demand, but the particulars of claim pleaded no demand. The central issue was whether the default judgment could remain in those circumstances.

1. Appeal allowed. The default judgment against the appellant was set aside. Lord Justice Longmore held that the guarantee was an on-demand guarantee. Since no demand was pleaded in the particulars of claim, the particulars disclosed no cause of action. It was therefore inappropriate to allow the claimant to rely on the defendant’s apparent failure to file a defence in order to preserve the judgment.
2. The court’s conclusion did not depend on resolving conclusively whether the defences had been faxed to the court. The evidence suggested that the appellant had communicated his intention to defend, but the court’s inadequate records made the filing history uncertain. The decisive point was the absence of a pleaded demand.
3. Setting aside the default judgment left the claimant free to apply for permission to amend the particulars of claim so as to plead a proper cause of action and, if advised, to seek summary judgment. The proposed defence based on an alleged misrepresentation concerning another guarantor was left for consideration on any such application.
4. Lord Justice Brooke agreed with Lord Justice Longmore and added significant observations concerning court administration. The practice direction to Part V of the Civil Procedure Rules permits filing by fax, treats delivery to the court’s fax machine as the time of filing, and requires filing and delivery details to be recorded. Courts operating under the Rules therefore have a duty to maintain effective procedures for recording receipt and delivery times. These observations were not necessary to the disposal of the appeal but highlighted the consequences of unreliable court records.

1. Court of Appeal (Civil Division): allowed the appeal and set aside the default judgment against the appellant.
2. Southampton County Court: His Honour Judge Rudd dismissed the appellant’s appeal from the refusal of Deputy District Judge Beith and allowed the default judgment to stand.
3. Southampton County Court: Deputy District Judge Beith refused the application to set aside the default judgment.
4. Brentford County Court: default judgment was entered against the defendants on 28 January 2000.