Shandong Chenming Paper Holding Ltd & Ors v Saga Forest Carriers INTL AS & Anor

Under Civil Procedure Rules r 13.3, a default judgment may be set aside where the defendant shows a real prospect of successfully defending the claim and has acted promptly. A limitation or time-bar defence may by itself satisfy the real-prospect requirement at the interlocutory stage if the available evidence provides a solid foundation for it. The court need not investigate the merits further where that defence is sufficient. Promptness is assessed in all the circumstances, including the need for factual investigations, holiday periods, prejudice and the parties’ conduct. Even where promptness is doubtful, the discretion may favour setting aside if delay is limited and causes no substantial prejudice. Conditions requiring payment into court should not be imposed where the defendant has a clear real prospect of success, acted promptly and has no further conduct warranting such terms.

The claimants brought proceedings concerning damage to pulp cargo carried on the vessel Saga Merchant. The first defendant was the charterer and bill-of-lading carrier. Service was effected in Norway, but the first defendant failed to acknowledge service, and a default judgment on liability was entered on 3 December 2007.

The first defendant applied under Civil Procedure Rules r 13.3 to set aside the judgment. It relied principally on a one-year contractual time bar, contending that delivery occurred when the cargo was discharged at Qingdao on 19 June 2006, so that the claim issued on 20 June 2007 was out of time. The central issues were whether there was a real prospect of establishing that defence, whether the application was made promptly, and whether any conditions should be imposed.

1. The application to set aside the default judgment was allowed. The first defendant had a real prospect of successfully defending the claim on the time-bar defence. The court’s assessment was based on the evidence available at that stage and did not predetermine the eventual trial.

2. The parties agreed that liability was discharged unless suit was brought within one year after delivery. The documentary evidence provided a sound basis for arguing that the cargo was discharged on 19 June 2006, that a delivery order had been obtained in exchange for the bill of lading, and that the cargo could thereafter be collected by the claimant. It was strongly arguable that, under the custom of Qingdao, the port authority was the claimant’s agent for taking delivery. The competing argument that the port authority remained the carrier’s agent could not be treated as plainly correct.

3. Because the time-bar defence gave the first defendant a real prospect of success, it was unnecessary at this stage to determine the alternative bill-of-lading clause argument or the merits apart from limitation.

4. The application was made promptly for the purposes of Civil Procedure Rules r 13.3(2). Several weeks were reasonably required to investigate events in China and assemble the evidence. The Christmas and New Year period, communications between the parties and their insurers, the limited delay, absence of substantial prejudice, and the claimants’ own lack of expedition were relevant circumstances.

5. No order requiring payment into court was justified. The appropriate condition was as to costs, with consequential directions to be agreed or determined under the contingent directions already given.

The judgment records that Flaux J entered default judgment on liability on 3 December 2007 after the first defendant failed to acknowledge service. This court set that judgment aside on the first defendant’s application under Civil Procedure Rules r 13.3.