Korea Shipbuilding & Offshore Engineering Co, Ltd & Anor v F Whale Corporation TMT Co, Ltd

Under CPR 39.3, a party absent from trial may have judgment set aside only if it acted promptly, had a good reason for absence, and has a reasonable prospect of success at trial. The court must assess “good reason” in accordance with the overriding objective and Article 6, avoiding an excessively rigorous approach, particularly where the proposed case has real merit. The inability of a company’s principal or preferred representative to attend does not automatically establish a good reason where the party could reasonably have been represented. A proposed defence must carry some degree of conviction. A mere opportunity to present a case is insufficient, and the court need not set aside judgment where the proposed arguments cannot realistically succeed.

The defendants applied under CPR 39.3 to set aside judgments entered after they failed to attend a trial of six related claims. The claims concerned unpaid deferred instalments under shipbuilding contracts and associated guarantees. The defendants relied principally on the imprisonment of their alleged sole principal, Mr Morimoto, who said that he alone had sufficient knowledge and that legal representation could not be arranged.

The claimants contended that the defendants could have instructed lawyers or been represented by another director. The defendants also advanced proposed defences concerning the admissibility and sufficiency of a written demand, the contractual method of serving demand, and title to sue. The central issues were whether the defendants had a good reason for non-attendance and a reasonable prospect of success.

1. The applications were dismissed. The defendants satisfied the promptness requirement, but failed to establish both a good reason for non-attendance and a reasonable prospect of success sufficient to justify setting aside the judgments.
2. For the purposes of CPR 39.3(5)(b), the question is whether the party itself had a good reason for not attending. The imprisonment of a company principal may explain his personal absence, but does not by itself explain the defendants’ failure to attend. The court considered the availability of solicitors, counsel, or another suitable company representative.
3. In applying the good-reason requirement, the court had to give effect to the overriding objective and Article 6 of the European Convention on Human Rights. Following the guidance in Mohun-Smith v TBO Investments Ltd [2016] EWCA Civ 403, the court should usually avoid a very rigorous approach where the absent party has a reasonable prospect of success. Despite doubts about the evidence, the judge accepted that the defendants had shown a good reason for not attending through legal representation.
4. The proposed defences nevertheless failed CPR 39.3(5)(c). A reasonable prospect of success means a real prospect carrying some degree of conviction. The court should avoid prejudging a proposed defence, especially where facts are disputed, but an asserted opportunity to present a case is insufficient.
5. The alleged “without prejudice” demand did not provide a viable defence. There was no evidence of settlement negotiations, later demands were not marked without prejudice, and the guarantees required only a written demand. The proposed requirement that demand be sent by registered airmail or facsimile was unsupported because the shipbuilding contracts and guarantees had different parties, and the guarantees expressly required only writing.
6. The challenge to HHI’s title to sue had no reasonable prospect. The defendants did not show, or attempt to show, that the accepted expert evidence on transfer of title was wrong. In any event, if title had not passed, KSOE would remain entitled to judgment. The applications and related orders were therefore dismissed.