Nelson & Anor v Clearsprings (Management) Ltd

A judgment obtained after a trial against a defendant who was neither served, nor deemed served, with the claim form and had no notice of the proceedings is not governed by Civil Procedure Rules r 39.3(5). That rule presupposes valid service, or an order dispensing with it. The court may instead remedy the procedural error under rr 3.10 and 3.1(2)(m), applying the overriding objective.

The defendant will normally obtain an order setting the judgment aside. The discretion is not absolute, however. The court may refuse relief only where doing so causes no prejudice, ordinarily because service can justly be dispensed with and the claimant can show that the claim has no real prospect of failing. Inexcusable delay after learning of the judgment may also justify leaving it in force.

The claimants issued a possession claim for furnished residential property, with claims for rent, reparations and mesne profits. The claim form gave the respondent's incorrect address. It was therefore not served on the respondent, which had no knowledge of the proceedings or trial before judgment was entered in the claimants' favour.

District Judge Giles initially held that the respondent could obtain relief only if it satisfied Civil Procedure Rules r 39.3(5). On appeal, His Honour Judge Bush held that r 39.3 did not govern a defendant who had not been served and had no knowledge of the proceedings. The district judge subsequently found that those conditions were established and set the judgment aside.

The first claimant appealed. The central issue was whether an application to set aside a judgment entered after a trial, where the defendant had not been served in accordance with the Rules and knew nothing of the proceedings, was governed by r 39.3(5).

1. Appeal dismissed. A defendant who has not been served, and has not been deemed served, with the claim form is in a real sense a stranger to the proceedings. A trial judgment entered against that defendant is not subject to Civil Procedure Rules r 39.3(5). The whole of r 39.3 contemplates the absence of a party who has been properly served or in respect of whom service has been dispensed with.

2. The decision was distinguishable from Akram v Adam [2004] EWCA Civ 1601, where service was good under the Rules even though the defendant did not know of the claim. In this case there was no service in accordance with the Rules and no order dispensing with it. The detailed service provisions would be undermined if an unserved defendant had to show promptness, a good reason for absence and a reasonable prospect of success under r 39.3(5).

3. The court rejected an absolute entitlement under the CPR to set aside every such judgment ex debito justitiae. The pre-CPR approach in White v Weston [1968] 2 QB 647 did not determine the effect of the comprehensive procedural code. Attempted service at an impermissible address was an error of procedure within r 3.10. Rules 3.10 and 3.1(2)(m) conferred a broad discretion to remedy it, including by setting aside the irregular judgment.

4. Ordinarily, justice requires the judgment to be set aside and the defendant awarded the costs of applying. The court could refuse relief only where the defendant would suffer no prejudice, which would generally require the claimant to justify dispensing with service. A money judgment carrying interest and costs will ordinarily prevent that conclusion. The claimant may instead seek to dispense with service and make a summary-judgment application, with the burden remaining on the claimant. Inexcusable delay by the defendant after learning of the judgment may justify making no order.

5. On the facts, the respondent was entitled to have the judgment set aside under any applicable test. The underlying disputes were to proceed to trial.

• Court of Appeal (Civil Division): dismissed the first claimant's appeal and upheld the conclusion that Civil Procedure Rules r 39.3(5) did not govern the respondent's application.

• Leeds County Court, His Honour Judge Bush: allowed the respondent's appeal from the district judge's preliminary ruling. He held that the judgment should be set aside if the respondent had not been served and had no knowledge of the proceedings before judgment.

• Leeds County Court, District Judge Giles: subsequently found that the respondent had not been served and had no such knowledge, set aside the judgment, and gave case-management directions for the action.

• Leeds County Court, His Honour Judge Cockcroft: dismissed a later appeal from the order setting aside the judgment, save that the costs appeal was adjourned pending this appeal.