SETTING ASIDE AN ORDER WHEN THE DEFENDANT DID NOT APPEAR: THE RULES SHOULD BE FOLLOWED

There are several unusual aspects about the decision of Salix Homes v Mantato [2019] EWCA Civ 445, not least it is an appeal directly from a Deputy District Judge to the Court of Appeal. In addition to the point of  law the Court of Appeal reiterated the importance of looking at the factors in CPR 39.3 when considering an application to set aside an order made when a party was not present.

 

    1. CPR 39.3 addresses the situation where a party fails to attend the trial. CPR 39.3(5) provides as follows:

“(5) Where an application is made [to set aside an order] … by a party who failed to attend the trial, the court may grant the application only if the applicant—

(a) acted promptly when he found out that the court had exercised its power … to enter judgment or make an order against him;

(b) had a good reason for not attending the trial; and

(c) has a reasonable prospect of success at the trial

 

THE CASE

The claimant landlord claimed possession of a property due to non-payment of rent. Proceedings were issued and the defendant failed to appear at the hearing for possession.  An eviction order was made.

THE DEFENDANT’S APPLICATION

The defendant paid the arrears of rent, but only after the eviction had taken place.  He applied to set aside the possession order.  Not on the grounds of payment but because there had been possession proceedings in 2008. In that case the order for possession had been suspended. The defendant never paid off all the arrears in that action.  The defendant argued that this second action was barred by res judicata.

THE DISTRICT JUDGE

The District Judge found that the particulars of claim failed to comply with the rules in that they did not set out any previous steps and court proceedings.   Since six years had elapsed since the first set of  proceedings the claimant would have required permission of the court to issue a warrant of possession.

  1. He said that, had DJ Khan been aware of the original possession order, it was “highly likely that he would have sought more information and the resulting [June 2017] order could well have been different”.
  2. He said that the defence of cause of action estoppel was an absolute bar to the proceedings, and that “a breach of the substantive law must trump a procedural argument”, and that it followed that the claim should be struck out and the warrant be set aside.

THE CLAIMANT’S APPEAL TO THE COURT OF APPEAL

The Court of Appeal allowed the claimant’s appeal against the District Judge’s decision.
    1. Mr Stark criticized Salix Homes for failing to disclose to DJ Khan the previous possession proceedings, the original possession order and the successive warrants for possession. He submitted that this was a breach of PD 55A 2.3(4) and that, had DJ Khan been aware of those matters, he might have made a different order or no order at all. Mr Stark made the related point that if, in circumstances such as the present, a landlord had the benefit of two different orders for possession, with different conditions for paying current rent and arrears, there could be unfairness to the tenant as the tenant would not know which conditions to comply with and the landlord could choose whichever set of conditions and order were most favourable. We can see that those matters might, depending on the facts, give rise to argument about abuse of process but that concept is, as Lord Sumption emphasised in the Virgin Atlantic Airways case, much broader than the principle of cause of action estoppel. The Deputy District Judge did not set aside the June 2017 possession order on the basis of anything other than cause of action estoppel and the merger of the cause of action in the original possession order. Nor is there any respondent’s notice seeking to uphold the order of the Deputy District Judge on the alternative or additional ground of abuse of process short of cause of action estoppel.
Delay and other matters in CPR 39.3(5)
    1. The Deputy District Judge considered that the proper approach to Mr Mantato’s application to set aside the June 2017 possession order was to apply the court’s general powers of management under CPR 3.1(2)(m) and (7) to make any order for the purpose of managing the case and furthering the overriding objective, including a power to vary or revoke an order, and to apply CPR 39.3(5) by way of a loose analogy rather than strictly. He took that approach to the application of CPR 39.3(5) because he considered that the situation in the present case was governed by the approach of the court in Forcelux Ltd v Binnie [2009] EWCA Civ 854[2010] HLR 20, rather than Hackney LBC v Findlay [2011] EWCA Civ 8[2011] HLR 15.
    2. The Forcelux case concerned an application to set aside an order for possession forfeiting a long lease at a ground rent on the ground of non-payment of rent and service charge. The Court of Appeal held that the hearing under CPR Part 55, at which the order had been made, was not a “trial” for the purposes of CPR Part 39.3; but it also held that the court had an analogous power to set aside the order under CPR Part 3.1(2)(m). The Court of Appeal held that, although Mr Binnie had not acted promptly, there was nevertheless a compelling case for setting aside the order. He had a strong claim for relief against forfeiture, and the denial of that claim would result in a large windfall for the landlord.
    3. The Findlay case concerned an application to set aside an order for possession against a secure tenant which had been based on non-payment of rent. By the time that the tenant applied to have the order set aside it had also been executed. Arden LJ (with whom Wilson and Toulson LJJ agreed) said (at [24]):
“… a court that is asked to set aside a possession order under CPR r.3.1 should in general apply the requirements of CPR r.39.3(5) by analogy. This is in addition to, and not in derogation of, applying CPR r.3.9 by analogy, as this court did in Forcelux, as that provision requires the court to have regard to all the circumstances in any event. However, in my judgement, for the reasons given above, in the absence of the unusual and compelling circumstances of a case such as Forcelux, this court should give precedence to the provisions of CPR r.39.3(5) above those enumerated in CPR r.3.9. Even that is subject to a qualification in the case of a secure tenant. Parliament clearly contemplated in s.85(2) of the Housing Act 1985 that the tenant should have the chance there described of persuading a court to modify an outright possession order. It follows that the requirements of CPR r.39.3(5) need not be applied in such a case with the same rigour as in the case of a final order that does not have this characteristic.”
    1. The Deputy District Judge considered that there were unusual and compelling circumstances in the present case because the doctrine of res judicata applied, the original possession order “operated by virtue of the merger of the cause of action in the judgment to prevent the issue of new proceedings” and so “the current proceedings should never have been brought”.
    2. Although we have concluded that the present proceedings are not barred by cause of action estoppel, Mr Stark contends that there are other features which bring them within the category of “unusual and compelling circumstances” mentioned by Arden LJ in the Findlay case. He appeared initially to contend that, to give rise to an unusual and compelling circumstances, it was sufficient that the cause of action estoppel defence was arguable. He then appeared to contend that it was an unusual and compelling circumstance that there cannot be a default judgment for possession but the actual hearing was probably no more than some 10 minutes. He also contended that it was an unusual and compelling circumstance that DJ Khan was not informed of the earlier proceedings and the original possession order and the successive warrants of possession, which might have led him to make a different form of order or at least require more information about the circumstances.
    3. We do not consider that any of those matters takes the application to set aside the original possession order outside the usual approach specified by Arden LJ in the Findlay case. Contrary to the view of the Deputy District Judge, cause of action estoppel does not bar the present proceedings and so is completely irrelevant to the exercise of any power of the court to allow an application to set aside the original possession order. The second matter relied upon, namely the inability to obtain a default judgment for possession and the brevity of a hearing for an order for possession when the tenant has not filed a defence and is not present at the hearing, is not unusual but standard in the case of actions for possession of an assured tenancy for non-payment of rent. The third matter relied upon, namely the failure of Salix Homes to disclose the previous history to DJ Khan, may be relevant to the prospects of success on any re-hearing of the claim for possession in the present proceedings, in the sense of Mr Mantato obtaining an order which will be more likely to enable him to continue in possession than the June 2017 order. It is not, however, an unusual and compelling circumstance in any way comparable to that in the Forcelux case, in which the tenant stood to lose a highly valuable long lease on the ground of a very small amount of unpaid rent and service charges. The same is true of Mr Stark’s criticism of Salix Homes that the Particulars of Claim in the present proceedings did not have a schedule for the rental history for the preceding two years, contrary to PD 55B 6.3, and that there was no evidence that such a schedule had been provided to Mr Mantato prior to the commencement of the proceedings in accordance with PD 55B 6.3A.
    4. It follows that, in deciding whether to allow Mr Mantato’s application to set aside the June 2017 possession order, the Deputy District Judge ought to have paid close attention, by way of analogy, to the three conditions in CPR 39.3(5). He did not do so. The only relevant observation he made in that regard concerned the condition in CPR 39.3(5)(a) that the applicant acted promptly when he found out that the court entered judgment or made an order against him. He observed that the application to set aside the June 2017 possession order was made on 19 March 2018, some nine months later, and he found as a fact that, at the very latest, by the end of August 2017 Mr Mantato should have been aware of the precarious situation in which he found himself. The Deputy District Judge did not express a conclusion about whether or not CPR 39.3(5)(a) was satisfied because, having reached the conclusion that the June 2017 possession order was barred by cause of action estoppel and the cause of action had merged in the original possession order, he said that he did not accept that CPR 39.3 was applicable at all.
    5. The Deputy District Judge expressed no view at all about whether, for the purposes of CPR 39.3(5)(b), Mr Mantato, whom the Deputy District Judge described as “not a reliable witness”, had a good reason for not attending the hearing of the possession claim on the return date.
    6. Mr Mantato faces the insuperable problem in this court that it was never argued before the Deputy District Judge that, even if Mr Mantato failed on the allegation of oppression in the execution of the warrant and on the cause of action estoppel point, and even if CPR 39.3(5) applied by way of close analogy, he nevertheless satisfied all the conditions in that sub-rule. Although Mr Mantato’s set-aside application of 19 March 2018 said that he was unaware of the proceedings until he received notice of the eviction, and that he was mentally unwell at the time and had been neglecting his affairs, his witness statement that was placed before Deputy District Judge on the hearing of the application gave no reason at all as to why Mr Mantato did not attend the hearing before DJ Khan. It is not surprising, in the circumstances, that no respondent’s notice has been filed seeking to uphold the order of the Deputy District Judge on other grounds.
Conclusion
  1. For the reasons above, we allow this appeal and restore the June 2017 possession order.