Regera SÀRL v Phillip Ean Cohen & Ors

For an application to set aside a default judgment, the claimant must establish valid service. Where service relies on a contractual process-agent clause, the clause must bind the defendant and be enforceable against the defendant. A contractual term allowing the lender unilaterally to appoint a replacement agent without requiring notice to consumer guarantors may be unfair under the Consumer Rights Act 2015.

Under CPR rule 13.3, a defendant must show a real prospect of successfully defending the claim or another good reason for relief. The court must also consider promptness and apply the three-stage approach in Denton. Where defendants were unaware of service before judgment and have arguable factual and legal defences, default judgments may properly be set aside.

The claimant sought payment from the first and second defendants under personal guarantees contained in a facility agreement. Proceedings were purportedly served on Law Debenture, appointed by the claimant as replacement process agent after the original agent was dissolved. Default judgments were entered when the defendants did not acknowledge service or file defences.

The defendants applied under CPR rules 13.2 and 13.3. They disputed that they were parties to the facility agreement, challenged the replacement-agent mechanism as unfair, and relied on possible defences concerning execution, misrepresentation, economic duress, demand requirements and consumer-credit enforceability. The central issues were whether service was valid and, alternatively, whether the default judgments should be set aside.

1. CPR rule 13.2. The claimant bore the burden of proving valid service. The applicable standard was the balance of probabilities, including where the validity of the defendants’ contractual status was central to the service issue. The claimant had not established that the first and second defendants were bound by the facility agreement. Their evidence concerning the signing and conditional release of their signatures raised issues requiring trial. Service on Law Debenture therefore could not presently be treated as service on them.
2. Replacement process agent. Clause 40.2.2 provided a mechanism for replacement of the original process agent. However, it was not binding on the defendants because it was unfair under sections 62(1), 62(4) and 62(5) of the Consumer Rights Act 2015. The term created a significant imbalance because the lender could appoint a replacement without involving or notifying consumer guarantors, exposing them to default judgment without awareness of service. The fact that service-agent clauses are commonly used in commercial contracts, or that the term did not appear in Schedule 2, did not prevent it being unfair.
3. The court rejected the defendants’ other CPR rule 13.2 grounds. Notification of the appointment had been given to the borrower and the evidence did not establish non-compliance with the consumer-credit requirements. The court nevertheless observed that, had the agreement been unenforceable under consumer-credit legislation, service with a view to obtaining judgment would likely have been an act of enforcement, and clause 40.2 could not have been severed from the unenforceable agreement.
4. CPR rule 13.3. Had rule 13.2 not applied, the defendants had a real prospect of defending the claim. Serious issues existed concerning execution, the release of signatures, alleged representations, entitlement to demand under the guarantees and consumer-credit enforceability. The court did not need to assess every pleaded defence.
5. The defendants acted promptly, or any delay was insufficient to justify refusal of relief. Their failure to acknowledge service was unwitting because they were unaware of the proceedings before judgment. Applying Denton, the default judgments were set aside. The conditional payment order sought by the claimant was refused.