Watson v Bluemoor Properties Ltd

An order made after a party fails to attend trial may be set aside only if all three requirements in rule 39.3(5) of the Civil Procedure Rules 1998 are satisfied. The applicant must have acted promptly after learning of the order, had a good reason for not attending, and possess a reasonable prospect of success at trial.

Promptness depends upon all the circumstances; no fixed period applies. A court should not resolve an untested factual dispute when assessing reasonable prospects of success. Once the requirements are met, the court retains a discretion, exercised consistently with the overriding objective, and may impose appropriate conditions concerning costs or security.

The claimant sold land to the defendant subject to contractual covenants concerning the construction of a house. After the claimant abandoned most of her claim, the defendant's counterclaim remained for trial. His Honour Judge Rich QC struck out that counterclaim under rule 39.3(1)(c) of the Civil Procedure Rules 1998 when the company did not appear through an authorised representative.

Mr Peter Leaver QC, sitting as a deputy High Court judge, dismissed the company's application under rule 39.3(5) to set aside that order. He found that the company had neither acted promptly nor shown a reasonable prospect of succeeding at trial. The company appealed after receiving permission from the Court of Appeal. The central issues were whether the three cumulative conditions in rule 39.3(5) were satisfied and, if so, how the court's discretion should be exercised.

Allowing the appeal conditionally, unanimously, per Sullivan J, with whom Potter LJ agreed:

1. The three requirements in rule 39.3(5) of the Civil Procedure Rules 1998 were cumulative. Each was satisfied, so the court's discretion to set aside the order arose.

2. The company had a good reason for not attending through an authorised representative. Mr Carter had previously represented it but became disqualified from acting as a director following his bankruptcy. Given his extensive earlier involvement and the possible misunderstanding about representation by an employee under rule 39.6, the reasonable course at trial would have been a short adjournment at the company's expense to establish whether it wished to pursue the counterclaim.

3. The company acted promptly. Promptness under rule 39.3(5)(a) depends upon all the circumstances because the rules prescribe no fixed period. The solicitor reasonably needed time to consider extensive documents, clarify the relationship between Mr Carter and the Isle of Man company, and obtain the company's authority before applying. The six-week interval did not amount to a failure to act promptly. Prejudice to the opposing party was no longer part of the rule 39.3(5) test, although the absence of particular prejudice was relevant context.

4. The counterclaim had a reasonable prospect of success. Its principal allegation raised a factual dispute about whether the vendor had approved alterations to the building. Conflicting witness statements had not been tested. The counterclaim could not properly be dismissed as vague or hopeless without examining that factual basis, particularly when an earlier application under rules 3.4 and 24.2 had failed.

5. The discretion should be exercised to permit adjudication of the counterclaim on its merits, consistently with the overriding objective of dealing with cases justly. Reinstatement was nevertheless conditional upon an interim costs payment of £10,000 and security of a further £10,000 for the future costs of the counterclaim. If those conditions were not met, the counterclaim would remain struck out.

1. Court of Appeal (Civil Division): Permission to appeal was granted and the appeal was allowed conditionally. The counterclaim could be reinstated upon payment of £10,000 towards costs and provision of £10,000 security for future costs.
2. High Court, Chancery Division: Mr Peter Leaver QC, sitting as a deputy judge on 21 May 2002, dismissed the company's application to set aside the striking-out order.
3. High Court, Chancery Division: His Honour Judge Rich QC struck out the counterclaim on 29 January 2002 because the company did not attend through an authorised representative. He also made costs orders, including an interim payment of £10,000.