MASSIVE DELAY, SETTING ASIDE JUDGMENT AND THE MITCHELL PRINCIPLES: MID-EAST SALES LTD –v- UNITED ENGINEERING & THE ISLAMIC REPUBLIC OF PAKISTAN CONSIDERED
One of the many moot points that arise from Mitchell is how far the amendment to the overriding objective and CPR 3.9 impact upon applications to have judgment set aside. This issue was considered by Burton J in Mid-East Sales Ltd –v- United Engineering & The Islamic Republic of Pakistan  EWHC 1457 (Comm).
In the Mid-East case Burton J considered an application by the Defendant to challenge the proceedings on the grounds of absence of jurisdiction . The delay in making the application was massive.
- Proceedings were issued on 11 June 2007.
- Leave to serve out of the jurisdiction was granted more than six years previously.
- Proceedings had been served 5 years previously.
- Judgment in default had been entered (by court order) 3 years previously.
- The default judgement was served 1 ½ years previously.
The defendant eventually applied (only after the Claimant had issued third party debt applications) to set aside service and for a stay of proceedings on the grounds of lack of jurisdiction, lack of arguable case and non-disclosure.
DELAY IN SEEKING TO CHALLENGE THE JURISDICTION
The case contains a detailed review of the case law relating to delay in making an application to challenge the jurisdiction or have judgment set aside (the cases going back to 1887).
CONSIDERATION OF THE EFFECT OF MITCHELL
The judge considered whether the amendment to CPR 3.9 and the Mitchell case had an effect on the court’s approach to delay in these circumstances.
THE DEFENDANT DID NOT GET PERMISSION TO SET ASIDE THE JUDGMENT ON THE ISSUE OF JURISDICTION
The judge found that the Mitchell principles applied to the Defendant’s application to seek to set aside the order on the grounds of absence of jurisdiction. The delay meant that this application would not be granted.
“85.I am accordingly considering CPR Rule 3.9 but (again pace Lord Dyson in Matthews) also Rule 13.3 as in Hussain. I am satisfied, as was Silber J in Samara, that the new approach described by Lord Dyson’s Implementation Lecture and exemplified in Mitchell is intended to be of universal effect, i.e. across the board in relation to the CPR, by reference at least to the amended Overriding Objective, just as in Agrinvest(as set out in paragraph 45(viii) above) it was considered that the introduction of the CPR itself would and should have an accelerating effect.
- IRP was plainly guilty of very substantial delay in bringing this application, which was at least in part clearly the result of a tactical decision (which the first instance Judge had found in Rayner (at 766) not to be the case there). But for the pause for thought set out below, I am satisfied that, as in Reynolds, decided 126 years before Mitchell, although this is a case of depriving a party not otherwise subject to the jurisdiction of this court the opportunity to challenge it, the order for service out should not be set aside in order to give the opportunity to IRP for an extended period of time for a Part 11 challenge. Accordingly, I would not, after this lapse of time and in the light of the ‘defence strategy‘, give relief from sanctions, even if there may have been ground for dispute as to the seriousness of the issues to be tried, and in any event not in respect of the belated allegations of material non-disclosure.”
THE DEFENDANT DID GET PERMISSION TO SET ASIDE JUDGMENT ON THE GROUNDS THAT IT HAD AN ARGUABLE DEFENCE
The judge set aside the default judgment so as to allow the defendant to defend the case on its merits. He held that applications under CPR 13.3 (to set aside a judgment on the grounds that the defendant had a real prospect of successfully defending the claim) this was a different approach to a case that fell within CPR 3.8 and where relief was required under CPR 3.9.
“88. It seems to me clear that, although applications under CPR 13.3 do fall to be considered by reference to the new approach, there needs to be, and here I differ from Silber J, a somewhat different approach from that in relation to a case, as in Mitchell, falling within CPR 3.8. A sanction set out by the Rule itself for breach may be said to be pre-estimated as the appropriate course, absent good reason. But a sanction imposed pursuant to CPR 3.9, or an application by reference to CPR 3.9 and 13.3, may allow different or wider considerations to be taken into account, or more than trivial delays to be addressed. In this case:
(i) The passage of time was 7½ months, though IRP was entitled to 2 of those months, so the delay was 5½ months.
(ii) IRP plainly has arguable defences, such as more than to satisfy the first condition in CPR 13.3(1).
(iii) There is in this case the important issue of allowing the claim of immunity to be resolved on the balance of probabilities.
- Notwithstanding my criticism of the delay by IRP from 2 September 2012 to 10 April 2013, and the very belated making of the application, I will permit the judgment to be set aside so that it may defend the Claimant’s case within the jurisdiction, and file a defence accordingly. However I will only do so on terms (see the note to CPR 13.3 set out in paragraph 40 above).”
SO DO THE MITCHELL PRINCIPLES APPLY TO APPLICATIONS TO HAVE JUDGMENTS SET ASIDE ON THE MERITS?
- It appears that the court takes the “new approach into consideration “ when considering an application to have judgment set aside on the grounds that there is reasonable prospect of success (CPR 3.9)
- However the Mitchell principles do not trump everything.
- 13.3 applications may allow different or wider considerations to be taken into account.
- Further more than trivial delays can be addressed (and forgiven) on an application to have judgment set aside.
THE TEST IN CPR 13.3: THE DEFENDANT HAS A REAL PROSPECT OF SUCCESSFULLY DEFENDING THE CLAIM
There is a reference in the judgment to the defendant having an “arguable defence” which satisfied the first condition of CPR 13.3(1). The test in the rules, however, is much more rigorous than this. A defendant has to satisfy the court that it has a “real prospect” of successfully defending the claim.
Cases where the court may set aside or vary judgment entered under Part 12
(1) In any other case, the court may set aside or vary a judgment entered under Part 12 if –
(a) the defendant has a real prospect of successfully defending the claim; or
(b) it appears to the court that there is some other good reason why –
(i) the judgment should be set aside or varied; or
(ii) the defendant should be allowed to defend the claim.”
THE NEED FOR A DEFENDANT TO ACT PROMPTLY IS ENSHRINED IN THE RULES
I cannot find in the judgment (and I may have missed this) any specific reference to CPR 13.3(2)
“(2) In considering whether to set aside or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.”
The judge decided that the 3.9 criteria did not apply. I cannot see that the judge expressly considered 13.3(2), although there is extensive consideration of the case law relating to the need to act promptly.
It is difficult to gauge the precise practical effect of this judgment. Part of it is highly technical and case specific. In essence:
- Applications to dispute the jurisdiction made late are unlikely to succeed.
- In an application to set aside judgment the court can take account of the “new regime” but it does not appear to be a dominating factor.
- A judgment can still be set aside after 5 ½ months of unjustifiable delay.
- The requirement, expressly set out in the rules, for the court to consider whether the application was made promptly, does not appear to have been expressly considered.