National House Building Council v Relicpride Ltd & Ors

An application to set aside judgment in default under Civil Procedure Rules 1998, Part 13.3, requires the defendant to show either a real prospect of successfully defending the claim or some other good reason for setting aside the judgment. The application must also be made promptly. A merely speculative assertion that possible defences may emerge is insufficient. An arbitration clause will not ordinarily provide a good reason where the application is delayed, the clause has limited scope, and arbitration would not materially advance resolution of the dispute.

The claimant brought proceedings concerning liabilities arising from defects at a residential development and indemnities given by two individual defendants. Judgment in default of Defence was entered after the defendants failed to serve a Defence within extended deadlines.

The second, third and fourth defendants applied to set aside the judgment. They relied on possible defences, including limitation and arbitration. The central issues were whether the application had been made promptly, whether there was a real prospect of successfully defending the claim, and whether the arbitration arrangements supplied some other good reason under Part 13.3.

1. Application dismissed. The defendants had not acted promptly. The application was made six or seven weeks after judgment, without a satisfactory explanation for the delay. Any medical circumstances relied on had already been taken into account when earlier extensions were granted.
2. Under Part 13.3 of the Civil Procedure Rules 1998, the applicant must establish a real prospect of successfully defending the claim or some other good reason why judgment should be set aside or the defendant allowed to defend. Promptness is a mandatory consideration, viewed in the context of the overriding objective.
3. The defendants failed to identify an actual defence with a real prospect of success. The suggested limitation defence was untenable because the indemnities were deeds and attracted a 12-year limitation period. The assertion that other defences might emerge was speculative and insufficient.
4. The defendants also failed to show that arbitration supplied a good reason under Part 13.3(1)(b). The NHBC arbitration clause was limited to disputes under Rules 26 and 27. Rule 26 was irrelevant, and the claim was not wholly within Rule 27. The contemplated arbitration was unlikely to address the substance of the dispute or materially advance it. The defendants’ delay and the uncertainty about the company’s value were additional factors supporting refusal of the application.
5. The judgment in default remained in force. The assessment of damages was adjourned because the application had occupied the allocated hearing time, with directions to be considered so that assessment could be completed before the end of July.