Dunbar Assets Plc v Dorcas Holdings Ltd & Ors

A court may consider at the outset of a trial whether a pleaded defence discloses a triable issue, even without a formal striking-out application. It must first give the defendant a fair opportunity to respond and must hear and consider the defendant’s submissions.

Determining the issue against a party without hearing that party is a fundamental denial of procedural justice. Such an irregularity can constitute injustice under the appellate rules even where the substantive decision may have been correct. The absence of consequential prejudice does not invariably cure a grave procedural wrong.

A mortgagee obtained a possession order against the corporate owner of residential property and its occupiers. The admitted legal charge secured admitted indebtedness. The pleaded defences relied on an alleged agreement, an estoppel preventing demand for repayment and an unliquidated damages set-off.

On the listed trial date, the Brentford County Court dealt with applications to amend the defences and then granted possession summarily. It did so without inviting or hearing submissions on whether the amended pleadings disclosed a defence to possession. The defendants appealed under rule 52.11(3)(b), alleging a serious procedural irregularity.

The central issue was whether the denial of an opportunity to address the decisive striking-out question made the possession order unjust, notwithstanding the mortgagee’s contention that the order was substantively correct.

1. Appeal allowed. The judge had, in substance, disposed summarily of the pleaded defences without first inviting and hearing the defendants’ submissions on whether those defences disclosed a triable answer to the possession claim. That was a serious procedural irregularity: paras 14–17.

2. A trial judge may entertain at the outset of a trial a submission that the defence discloses no answer to the claim, even where the claimant has made no formal striking-out application. Such a course may save substantial time and expense. The judge must, however, ensure that the defendants have a fair opportunity to respond and must hear their submissions before deciding the issue: para 15.

3. The principles in Markus Albert Frey v Labrouche [2012] EWCA Civ 881 applied equally where a judge allowed, rather than refused, what was in substance a striking-out application without hearing the affected party. There is no automatic right to a full trial where the pleadings disclose no triable issue. It is nevertheless fundamentally unjust to decide that a defence is legally defective without first inviting, hearing and considering argument: paras 16–17.

4. The court considered whether the possession order could stand because the result was plainly correct. A mortgagee’s right to possession ordinarily arises immediately, without prior demand unless the mortgage provides otherwise. An unliquidated damages counterclaim or set-off does not ordinarily defeat that right. The possibility that the security had to be exercised in good faith and for its proper purpose meant, however, that the mortgagee’s contention that no defence existed was not overwhelming: paras 22–27.

5. A conclusion that the substantive decision was correct does not invariably prevent a serious procedural irregularity from constituting injustice under rule 52.11(3)(b). Denying a party any opportunity to present submissions is capable of being a fundamental injustice in itself, regardless of its consequences. Although many procedural irregularities cause no injustice without adverse consequences, a residue of grave cases falls outside that principle. This was such a case: para 28.

6. The possession order was set aside, including as against the alleged tenant. The proceedings were remitted for transfer and trial in the Central London County Court, with permission for the mortgagee to seek striking out in the meantime: paras 29–30. Tomlinson and Thorpe LJJ agreed.

• Court of Appeal (Civil Division): In [2013] EWCA Civ 864, unanimously allowed the defendants’ appeal, set aside the possession order and remitted the proceedings for transfer and trial in the Central London County Court.
• Brentford County Court: HHJ Powles QC granted the mortgagee a possession order on 20 June 2012 after dealing with amendment applications, without hearing submissions on whether the pleaded defences disclosed a triable answer to possession.