Wards Solicitors v Hendawi

Under CPR 13.3, a defendant seeking to set aside a regularly entered default judgment must show either a real prospect of successfully defending the claim or some other good reason. The court must also consider whether the application was made promptly. A defendant who has not received the claim form may establish a good reason, but non-receipt alone is insufficient where setting aside would serve no useful purpose.

For change of position in unjust enrichment, repayment of an immediately enforceable debt ordinarily does not constitute a relevant change of position. The defendant must also show a sufficient causal link between the mistaken payment and the alleged change. A reasonable bank charge incurred in returning the mistaken payment may, however, provide an arguable defence to that extent.

The claimant obtained a default judgment in January 2007 for money paid by mistake to the defendant. The claim form had been posted to the defendant’s last known residence, although he no longer lived there and did not learn of the proceedings until 2017.

The defendant applied under CPR 13.3 to set aside the judgment. He relied on a real prospect of defending the claim by invoking change of position, based on repayment of a private debt, automatic repayment of an overdraft and a bank transfer fee. He also relied on non-receipt of the proceedings, the claimant’s delay in enforcement and the circumstances of service.

The central issues were whether the judgment had been properly served and entered, whether the defendant had a real prospect of success or some other good reason, and whether he had applied promptly.

1. Service and jurisdiction. The claim form was properly served under the version of CPR 6.5 in force in 2006, which permitted service on an individual at his usual or last known residence. The later requirements in CPR 6.9(3)–(6) did not apply retrospectively. CPR 13.2 therefore did not apply, and the application fell within the court’s discretion under CPR 13.3.
2. Real prospect of success. The court should not conduct a mini-trial. The defendant had to show a real prospect of successfully defending the unjust enrichment claim or some other good reason. The defence of change of position is available where the recipient’s position has changed in a way causally linked to the mistaken payment and it would be inequitable to require restitution.
3. Repaying the £25,000 private debt did not amount to a relevant change of position. The creditor remained entitled to repayment, and replacing one immediately enforceable unsecured creditor with another did not create the necessary detriment. The payment was also insufficiently causally connected to the mistaken payment because the post-dated cheque had been issued before the mistaken payment and was banked without the defendant’s knowledge.
4. The same reasoning applied to the automatic discharge of the overdraft. The defendant had not deliberately changed his position by repaying a notional overdraft limit, and no sufficient causal link was shown.
5. The £25 bank charge was different. The defendant had an arguable defence to that part of the claim because he had incurred a reasonable cost in promptly returning the mistaken payment at the claimant’s insistence. The claimant’s mistake did not justify imposing on the defendant a liability greater than restitution of the funds.
6. Other good reason and promptness. Non-receipt of the claim form was a relevant factor but did not by itself justify setting aside the judgment. The defendant had not shown that setting aside would serve a useful purpose. The claimant’s delay in enforcement was not a good reason. In any event, the defendant’s nine-month delay after learning of the judgment was not prompt under CPR 13.3(2).
7. The application was dismissed.