Black Arrow Finance Ltd v Orderdaily Ltd & Ors

A default judgment should be set aside where there is a good procedural reason to do so, even if the court need not assess the merits of the proposed defence. A default judgment rests on the defendant’s deemed acceptance of the liability case pleaded against them. It cannot stand where the pleaded case did not support the relief granted, or where a later amendment introduced a materially different case. The court should also scrutinise whether alternative service was likely to bring the proceedings to the defendant’s attention. Promptness is assessed from the date judgment was actually entered, rather than from an earlier notification that judgment had been entered when it had only been sought.

Black Arrow Finance Ltd v Orderdaily Ltd & Ors alleged that a finance transaction involving non-existent refrigeration equipment was fraudulent. Default judgment and damages were entered against Alan Wilkinson after documents were served through his wife’s solicitors. He applied under Part 13.3 of the Civil Procedure Rules 1998 to set the judgment aside. The Administrative Court, presided over by Lord Carlisle of Berriew QC, dismissed the application, treating the claim as one for fraudulent misrepresentation and taking account of delay. The central issues on appeal were whether the claim had been adequately pleaded, whether alternative service was properly authorised, when delay began to run, and whether the judgment remained justified after the pleading was amended.

1. Disposition. Sir Christopher Staughton delivered the leading judgment. Lord Justice Schiemann agreed substantially with his reasons. The appeal was allowed, permission to appeal and permission to rely on further evidence was granted, and the default judgment of 17 November 2000 was set aside. Costs were reserved to the trial judge.
2. Default judgment and Part 13.3. A judgment in default ordinarily rests on the defendant’s deemed acceptance of the assertions in the particulars of claim concerning liability. Under Part 13.3 of the Civil Procedure Rules 1998, the court may set aside or vary such a judgment where the defendant has a real prospect of successfully defending the claim or where there is some other good reason. The court must also have regard to promptness. In this case, the procedural defects provided a sufficient good reason, so it was unnecessary to decide the merits of the proposed defence.
3. Defective and changing pleadings. The original pleading alleged that a cheque represented that the goods had been delivered, but did not allege that the representation was false or that the claimant relied on it. It therefore did not appear to justify damages for fraudulent misrepresentation. The conspiracy allegation was also contingent on the documents being forged and alleged a conspiracy between Mr and Mrs Wilkinson. The later re-amendment added an allegation that Mr Wilkinson knew the goods did not exist and substituted a materially different allegation of conspiracy with other defendants. Accordingly, even if the judgment had initially been justified, it was no longer justified by the state of the proceedings.
4. Other procedural concerns. The order for alternative service appeared to have been obtained without full disclosure of the parties’ estrangement and divorce proceedings. It was also unclear whether the papers reached Mr Wilkinson. Any delay could not begin on 7 September, when he was mistakenly told that judgment had already been entered, because judgment was not entered until 17 November. These matters reinforced the need for caution, although the pleading defect alone was determinative.

• Court of Appeal (Civil Division) — [2002] EWCA Civ 289. Appeal allowed and default judgment set aside.
• Administrative Court — Lord Carlisle of Berriew QC dismissed Mr Wilkinson’s application to set aside the default judgment.