Mid-East Sales Ltd v United Engineering And Trading Company (PVT) Ltd & Anor

Applications to set aside jurisdictional orders and a default judgment must be made promptly. Under the post-2013 Civil Procedure Rules, the court adopts a robust, generally applicable approach to compliance with rules and orders. Promptness remains highly significant, although an application under CPR 13.3 permits consideration of the defendant’s real prospect of success and other circumstances. Where a defendant has arguable substantive defences, including an immunity issue requiring determination on the balance of probabilities, the court may set aside a default judgment on terms despite substantial delay. The court may nevertheless refuse to reopen an order permitting service out where the delay was tactical and the challenge is stale. Material non-disclosure will not ordinarily justify setting aside an ex parte order after very substantial delay.

Mid-East Sales Limited, a Liberian company, claimed payment from the Islamic Republic of Pakistan and United Engineering and Trading Company in respect of power-station equipment, spare parts and services. The claimant relied on contractual terms providing for English law and jurisdiction.

The Islamic Republic applied, more than four years after the order permitting service out and after a default judgment, to set aside the jurisdictional order, extend time for a jurisdiction challenge, and set aside the default judgment. It relied on lack of a serious issue to be tried, limitation, the status of the contracting entities, non-disclosure and forum non conveniens. The central questions were whether the delay should be excused and whether the Islamic Republic had sufficiently arguable defences.

1. Jurisdictional order. The application to set aside the order permitting service out was refused. There was a good arguable case that the claimant’s General and Special Conditions had been incorporated into later supplies and that the Islamic Republic was liable under the contract. There was also a serious issue to be tried as to whether KRL was a separate legal entity or an organ of the Pakistani state. The court could not resolve those contested factual and expert issues finally at this stage.
2. State-organ issue. The approach in La Générale des Carrières et des Mines v F.G. Hemisphere Associates LLC [2012] UKPC 27 required attention not merely to separate legal personality but also to function and the entity’s effective separate existence. Applying that approach, the claimant had a serious issue to be tried. Article 173(3) of the Constitution of Pakistan did not defeat the claimant’s arguable case.
3. Delay and procedural compliance. The post-2013 approach in Mitchell v News Group Newspapers Ltd [2014] 1 WLR 295 applied across the CPR. Promptness was of substantial significance. The Islamic Republic’s decision not to participate, its knowledge of the proceedings, and its failure to act until enforcement steps were taken justified refusing relief from the consequences of delay in challenging the jurisdictional order. The alleged non-disclosure of the Pakistani counterclaim was insufficient, and in any event was raised too late.
4. Default judgment. The court distinguished the reasoning in A-G v Matthews [2011] UKPC 38. A sanction had in fact arisen through the subsequent entry of judgment in default, and CPR 3.9 and 13.3 could be considered together. The Islamic Republic had a real prospect of successfully defending the claim, particularly on limitation and contractual liability. The issue of state immunity also warranted determination on the balance of probabilities.
5. The default judgment was therefore set aside under CPR 13.3, on terms concerning costs and continuation of security for the sums caught by the interim third-party debt orders. All other applications were dismissed. The English court was the appropriate forum.