Integral Petroleum SA v SCU-Finanz AG

The defendant's application to set aside a default judgment succeeded. The court held that purported service of particulars of claim by e-mail, although not in compliance with Practice Direction 6A, fell within the saving in CPR 3.10 and therefore commenced time for filing a defence so as to preclude an automatic right to set aside under CPR 13.2. On the merits the defendant had a real prospect of success because under Swiss law (the law of the company's constitution) the company required joint signatures of its prokurists and the contract bore only one signature, a defence which on the evidence defeated the claim. The judge exercised his discretion under CPR 13.3 to set the judgment aside despite delay and some culpable procedural failings by the claimant.

Background and nature of the claim: Integral, as buyer, sued SCU-Finanz for total non-delivery under a Supply Contract dated 18 October 2011. The contract contemplated addenda to specify product, quantities, delivery and price; none were agreed. Integral obtained judgment in default of defence for US$1,078,547 after particulars of claim were sent by e-mail and no defence was filed.

Procedural posture: SCU-Finanz applied to set aside the default judgment, asserting (i) that service by e-mail was ineffective and therefore judgment was wrongly entered under CPR 13.2, and alternatively (ii) that the court should exercise its discretion under CPR 13.3 because it had defences with a real prospect of success.

Issues framed:

• Whether the purported e-mail service of particulars of claim validly commenced time for filing a defence or whether CPR 13.2 entitled the defendant to set aside as of right;
• Whether SCU-Finanz had a real prospect of defending the claim on grounds including (a) that Swiss law required joint signatures of its prokurists so the contract was not binding, (b) that the buyer failed to open a documentary letter of credit as a condition precedent, and (c) issues as to quantification and exclusion of indirect losses under clause 13; and
• Whether the court should exercise its discretion under CPR 13.3, having regard to delay, prejudice and the strength of the defence.

Court's reasoning and result: The judge held that CPR 3.10 operates widely to validate procedural steps despite failure to comply with a rule or practice direction where the defect produced no substantial prejudice. Sending particulars by e-mail to the defendant's nominated European lawyer, from an address with which that lawyer had corresponded, brought the document to his attention and engaged CPR 3.10. Accordingly CPR 13.2 did not apply. On the merits the court treated the issue of whether a sole signatory could bind the company as a capacity/constitution question governed by Swiss law; under the Swiss Code of Obligations joint prokurists could only bind the company by joint signature, so SCU-Finanz had a complete defence. The letter-of-credit point failed because the evidence showed the conditions precedent had not matured. There were also material doubts about quantum and the effect of clause 13. Balancing factors under CPR 13.3, including the defendant's strong defence and the prejudice of leaving an unjust judgment in place, the court exercised its discretion to set aside the default judgment despite delay and the claimant's culpable procedural errors.

The defendant's application to set aside the default judgment is allowed. The court held that CPR 3.10 cured defects in service such that time for filing a defence had run and CPR 13.2 did not apply; nonetheless, on the merits SCU-Finanz had a real prospect of success because Swiss law governed the question of attribution (capacity/constitution) and required joint signatures of the company's prokurists so the Supply Contract was not binding. The judge accordingly exercised his discretion under CPR 13.3 to set aside the judgment, notwithstanding delay and procedural failings by the claimant.