Nelson & Anor v Clearsprings (Management) Ltd

An application to set aside an irregular judgment entered without service is not governed by CPR 39.3(5) or the strict ex debito justitiae principle in White v Weston [1968] 2 QB 647. The court has a discretion, likely to be exercised in favour of setting aside where the judgment should not stand. Costs depend on the overall merits and conduct of the litigation. A party who prolongs preliminary disputes despite an inevitable result may bear the resulting costs, while costs caused by the other party’s wholly inappropriate procedural step may be treated separately.

Judgment had been entered in proceedings which, as later established, had not been served on the respondent. The respondent sought to set it aside, initially relying on the principle in White v Weston [1968] 2 QB 647 and later on CPR 39.3(5). District Judge Giles accepted the claimants’ preliminary submissions. HHJ Bush allowed the respondent’s appeal and held that the judgment could be set aside ex debito justitiae.

The Court of Appeal subsequently held that neither the strict White v Weston principle nor CPR 39.3(5) governed the application. It held that the court had a discretion which, on the facts, would lead to the judgment being set aside. This judgment concerned the correction of an order made by misunderstanding and the allocation of costs arising from the litigation.

Disposition. The court set aside paragraph 2 of the sealed order, which had mistakenly required the appellant to pay the respondent’s appeal costs. Sir Anthony Clarke MR gave the reasons; Lord Justice Waller agreed entirely. The appellant was ordered to pay the respondent’s costs of the appeal.

1. The appellant’s success on the White v Weston point did not justify a costs order in his favour. The central issue had been whether CPR 39.3(5) governed the application, and the court had held that it did not. Neither that rule nor the strict White v Weston principle applied. The court instead had a discretion, which was likely to result in the judgment being set aside.
2. Once the merits were considered, the judgment was bound to be set aside so that the underlying dispute could be determined at trial. The appellant had pursued every available point to resist that outcome and had been the prime mover in incurring considerable costs. Applying the overall merits, the conduct of the litigation, the overriding objective and the need to avoid disproportionate expenditure, it was fair that he bear the costs of the litigation apart from one hearing.
3. The court had jurisdiction to make costs orders as between the appellant and respondent for earlier stages, even though the co-claimant was not a party to this appeal. There was no reason to interfere with the costs order made by HHJ Bush.
4. There was to be no order as to costs for the September 2004 hearing because it had been adjourned after the respondent relied on CPR 13, which was wholly inappropriate since the judgment had not been given in default. The appellant was to pay the respondent’s costs of the January and June 2005 hearings and of the proceedings before HHJ Cockcroft, so far as not already ordered.

Order: Appellants to pay the respondent’s costs.

1. Court of Appeal (Civil Division): On 22 September 2006, dismissed Mr Nelson’s appeal. It held that CPR 39.3(5) did not govern an application to set aside an irregular judgment of this kind and that the judgment should be set aside on the merits.
2. Leeds County Court, HHJ Bush: Allowed the respondent’s appeal from District Judge Giles and held that the judgment could be set aside under the principle in White v Weston [1968] 2 QB 647.
3. District Judge Giles: Initially accepted the claimants’ position on the preliminary issue. On 20 June 2005 he found that the proceedings had not been served. HHJ Cockcroft dismissed the appeal on that factual issue, and permission to appeal to the Court of Appeal was refused.

The present judgment corrected the previous costs order and determined the allocation of costs for the relevant hearings.