Roundstone Nurseries Ltd v Stephenson Holdings Ltd

A regular default judgment may nevertheless be set aside where the defendant has a real prospect of successfully defending the claim or there is some other good reason to do so. A claimant who knows that a defendant has a real prospect of defending should not rely on a technical entitlement to enter default judgment, and may bear the resulting costs. Material disclosed during the Pre-Action Protocol process or mediation may be considered when assessing that prospect. Mediation costs may be recoverable where the mediation forms an integral part of the agreed protocol process. Costs thrown away by an unjustified cancellation were payable on the standard basis, not the indemnity basis.

Roundstone brought TCC proceedings against Stephenson concerning defects in a concrete floor slab. The proceedings were stayed twice to allow compliance with the Pre-Action Protocol for Construction and Engineering Disputes and a mediation. The second stay expired without either party applying to extend it. Roundstone then obtained judgment in default after Stephenson cancelled the mediation shortly before it was due to occur. Stephenson applied to set aside the judgment. Roundstone accepted that the judgment should be set aside on the merits but disputed the costs consequences. Roundstone also sought the costs thrown away by the cancelled mediation, on an indemnity basis. The issues were whether the default judgment was irregular, whether it should be set aside under CPR 13.3, whether the mediation costs were recoverable as incidental to the litigation, and the appropriate basis and timing of assessment.

1. Default judgment. The judgment was not irregular under CPR 13.2. The stay had expired, no defence had been served within the applicable period, and Roundstone was technically entitled to enter judgment.
2. Nevertheless, both grounds under CPR 13.3 were established. Stephenson had a real prospect of successfully defending the claim, including on the issues whether there was a contract with Roundstone and whether the defects concerned design rather than workmanship. There was also some other good reason: Roundstone knew that Stephenson considered a further stay necessary, had acquiesced in that approach, and had itself failed to comply with the order requiring notification to the court. Entering judgment in those circumstances was unreasonable and improper. The judgment was therefore set aside under CPR 13.3 and the overriding objective in CPR 1.1. Stephenson received the costs of the application.
3. In assessing real prospects, the court could consider material already provided in correspondence, an expert report, the Pre-Action Protocol process and the proposed mediation. It would be artificial to impose admissibility rules based on whether a point was repeated in the application or witness evidence, or whether it had been provided without prejudice.
4. The mediation was an integral part of the parties’ agreed Pre-Action Protocol process. Its costs could in principle be costs incidental to the litigation because the parties had not agreed that each would bear its own mediation costs. Stephenson was wrong to cancel it: it was required to complete the Protocol’s without-prejudice meeting, and the mediation should have proceeded even without Bridge.
5. Stephenson was ordered to pay the costs thrown away by the cancellation. The costs were payable on the standard basis. The cancellation was a bona fide but incorrect decision and did not warrant indemnity costs. The judge declined to assess the costs summarily; assessment was left to agreement or the costs judge, and was deferred until further order.