England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EDMONTON COUNTY COURT
(His Honour Mr Judge Riddell)

		Royal Courts of Justice Strand, London WC2
		25th July 2000

1. LADY JUSTICE HALE: This is an appeal from an order of HHJ Riddell in the Edmonton County Court made on 2nd July 1999.
2. The claimant company is a moneylender. On 31st January 1994 it entered into a loan agreement regulated under the Consumer Credit Act 1974 with the defendants who are husband and wife, although now estranged. It lent them a principal sum of £9012 secured by a first charge on their matrimonial home, 27 Nursery Street, Tottenham, London N17. After various deductions they received only £6,300-odd. The loan was repayable by 120 monthly instalments. The contractual instalment sum was £210.28 per month, representing an annual percentage rate of 32.74 per cent, but a side letter allowed instalments of £172.73, representing a rate of 24.67 per cent, provided that payments were received before the end of each month. The defendants fell into arrears but never by a very great sum until after the end of November 1996 when the installments were increased to the higher figure. Notice of default was given on 18th November 1997. A possession action was brought on 29th May 1998. At that time the arrears were £685.03.
3. Various defences were raised against the claim. Paragraph 2 of the amended defence and counterclaim, which is dated 20th July 1998, alleged that Home Counties Finance Limited acted as the credit broker. The claimant was put to strict proof as to whether they were licensed as such. The defence and counterclaim also claimed relief under sections 129 and 136 of the Consumer Credit Act 1974.
4. There were two affidavits filed on behalf of the claimant by a Mr Stern. The first dated 3rd July 1998, before the amended defence, produced the claimant's own licence under the 1974 Act. The second dated 28th September 1998, after the amended defence, stated in paragraph 5 that he was producing the licence issued to Home Counties Finance Limited, but he actually exhibited a licence for Home Counties Credit Limited with a place of business in Barkingside and a registered office in Finchley. The trial took place before DJ Morley on 30th September 1998. He dismissed the action. It had not been shown that the broker was licensed. It is common ground that in that event the agreement is unenforceable by virtue of section 149 of the 1974 Act. It appears that the claimant did not apply for a adjournment or to be nonsuited.
5. On 25th November 1998 the claimant applied for the district judge's order to be set aside and the case set down for rehearing. There was an affidavit dated 26th November 1998 from a solicitor, Mr Levy, who now produced a licence for Home County Finance Limited, with a totally different place of business in Wembley and a registered office in Golders Green. By this time the arrears had mounted to £861.43.
6. The application was made under Order 37, rule 1, of the County Court Rules 1981 which reads:

"In any proceedings tried without a jury the judge shall have power on application to order a rehearing where no error of the court at the hearing is alleged."

7. The time limit is provided under subrule 5:

"Any application for a rehearing under this rule shall be made on notice stating the grounds of the application and the notice shall be served on the opposite party not more than 14 days after the day of the trial and not less than 7 days before the day fixed for the hearing of the application."

8. The application was, therefore, made approximately six weeks late but there was then no application made to extend the time for making it.
9. On 24th February 1999 it came before DJ Rose. Only then was an application made to extend time to apply, and we have seen no evidence giving an explanation for the delay on that occasion. The district judge dismissed the application. According to the later judgment of HHJ Riddell he held, firstly, that the fresh evidence did not fulfill the requirements of Ladd v Marshall: it could have been obtained with reasonable diligence at the trial; and, secondly, that there was no reason to extend time: time limits were there to be obeyed.
10. The claimant appealed against that order. There was an affidavit from another solicitor, Mr Buchalter, dated 25th June 1999. It simply says in paragraph 4:

"This delay was caused by my firm's failure to address the County Court Rules in relation to time limits for the making of such an application. I was unaware until shortly before issuing the application on behalf of the claimant that the application had to be issued within a period of time or that delay would prejudice the claimant's case."

11. The arrears had now claimed to over £1800. He continued to assert that there was no prejudice to the defendants from this delay.
12. On 2nd July 1999 HHJ Riddell allowed the claimant's appeal. He did order the claimants to pay the costs but he imposed no other penalty, for example in relation to interest. He dealt first with the exercise of the discretion to order a rehearing. He referred to an argument raised by Mr Griffiths on behalf of the defendants that if there was no rehearing and the claimant tried to start new proceedings, these would be met with an argument that the issue of the enforceability of the contract was now res judicata. The judge did not decide that point but he did comment that:

"Here the position is that the consequences to the claimant of not allowing a rehearing would be disastrous if Mr Griffiths' res judicata argument were to be valid. There would, therefore, be very considerable prejudice to the claimant in those circumstances."

13. He summed up his reasons for allowing the appeal on this point at pages 17 to 18 of his judgment thus:

"The relevant factors are, it seems to me, the importance of the new evidence -- that evidence, as I have said, is obviously important; the reliability of the new evidence -- there is no question as to that; whether the new evidence could have been obtained with reasonable diligence -- it clearly could have been; why that evidence was not adduced at the first hearing -- it was a mistake, a mistake mitigated as regards culpability by the similarity of the name, so to that extent understandable. Another factor is, of course, the consequences to the parties of the case being reopened or not being reopened, a risk of considerable detriment to the claimant if the case is not reheard. There is no prejudice to the defendant by granting the application for a rehearing, other than to deprive him of the fruits of his victory before the District Judge, a victory which on that issue was the result of a fortuitous development.

"The defendant can, of course, be compensated in costs for all that has occurred, at any rate up to the launching of this appeal. A factor, though, to be taken into account is the continuing strain and worry to him, but if the application for a rehearing was to be refused by me he would, I am afraid, still be faced with that anxiety because fresh proceedings would be launched -- inevitably as the arrears are accumulating.

"As I have said, weighing up those factors, applying the over-riding objective, having regard to what is just and fair in these circumstances, I consider that the appellant succeeds on that issue."

14. It is noteworthy that the judge decided, as was clear, that the evidence could have been produced with reasonable diligence at the trial.
15. The judge dealt next with the extension of time. He referred to the cases of Mortgage Corporation v Sandoes (1997) 141 Sol Jo 30, Costellow v Somerset County Council [1993] 1 All ER 952, and Finnegan v Parkside Health Authority, The Times, 16 December 1997, the last two emphasising that it could rarely be appropriate to deny an extension of time because of a procedural default which, even if unjustified, had caused the defendant no prejudice for which he could not be compensated by an award for costs.
16. The judge considered the factors laid down in the Civil Procedure Rules, rule 3.9, relevant to deciding whether or not to grant relief from sanctions. He concluded at page 22 of his judgment that the vital factor which caused him also to decide this point in favour of the claimant was the effect of the claimant's claimants not being allowed a rehearing in the circumstances of the case. The first defendant now appeals from that order with the permission of Brooke LJ.
17. Mr Crane QC, who appears for the appellant, emphasises that this case concerns events after a final judgment had been given following a trial on the merits at which both parties were present and represented. This has an important bearing, both on the application for a rehearing and on the application to extend time. As Leggatt LJ said in the case of Shocked v Goldsmith [1998] 1 All ER 373 at page 382c:

"To equate judgments by default with judgments given after trial is heretical."

18. That is an important distinction between this case and the case of Vann v Awford (1986) 130 Sol Jo 682, to which the learned judge had referred.
19. Mr Crane argues that the principles applicable to the power to order a rehearing under Order 37 rule 1 of the County Court Rules on the ground of fresh evidence should be the same as those applicable to the power of the Court of Appeal to order a rehearing on appeal from the High Court.
20. The history of the relevant provisions is conveniently set out by Ward J, as he then was, in the case of B-T v B-T [1990] 2 FLR 1. Before the Judicature Act 1873 there was a variety of powers in the courts of Chancery, common law and matrimonial causes to order a review or retrial of their own decisions. The 1873 Act set up the Court of Appeal which was given those powers. The relevant provision is now contained in section 17 of the Supreme Court Act 1981. Subsection (1) provides:

"Where any cause or matter or any issue in any cause or matter has been tried in the High Court any application for a new trial thereof or to set aside a verdict, finding or judgment therein shall be heard and determined by the Court of Appeal except where rules of court provide otherwise."

21. Subsection 2 provides:

"As regards cases where the trial was by a judge alone and no error of the court at the trial was alleged or any prescribed class in such cases, rules of court may provide that any such application as is mentioned in subsection (1) shall be heard and determined by the High Court."

22. No such rules have been made for the High Court, apart from what used to be the Matrimonial Causes Rules 1977, rule 54, and is now contained in the Family Proceedings Rules 1991, rule 2.42: an application for a rehearing of a matrimonial cause tried by a judge alone (whether in the High Court or a divorce County Court) where no error of the court at the hearing is alleged, shall be made to a judge.
23. This means that anyone wishing a rehearing after a final order in the High Court, save in a matrimonial cause, has to come to the Court of Appeal. Where the ground alleged is fresh evidence, the matter was governed until this year by the rules of the Supreme Court Order 59, rule 10 (2) , subrule 2, the relevant part of which provides that:

"No such further evidence (other than evidence as to matters which have occurred after the date of the trial or hearing) shall be admitted except on special grounds."

24. Special grounds, as we all know, meant that the fresh evidence satisfied the principles in Ladd v Marshall [1954] 3 All ER 745: i.e. that it could not have been obtained with reasonable diligence for use at trial; if given it would probably have had an important influence on the result of the case; and it is apparently credible although not incontrovertible; although there are exceptional cases in which those principles do not apply, for example those involving the welfare of children.
25. There are, of course, strong reasons for this approach which has a long pedigree. It is in the interests of every litigant and the system as a whole that there should be an end to litigation. People should put their full case before the court at trial and should not be allowed to have a second bite at the cherry without a very good reason indeed.
26. The procedural position in county courts was different. The forerunner rule to Order 37 rule 1 of the County Court Rules reproduced section 93 of the County Courts Act 1888. This allowed the judge:

"... if he thinks just, to order a new trial to be heard on such terms as he shall think reasonable."

27. Despite those very wide terms, that discretion had to be exercised judicially on the same principles as would apply to the High Court. Those principles were laid down in the case of Brown v Dean [1910] AC 373 by the House of Lords, and it is noteworthy that Ladd v Marshall was itself adopting and applying those principles when it laid down the rules which have governed matters since then.
28. The procedure under Order 37 rule 1 was the proper procedure for applying to introduce new evidence in the county courts at that time. This was because under the county courts' legislation, until more recently, the rights of appeal to the Court of Appeal were limited. It was not possible to appeal to seek a rehearing on the grounds of fresh evidence. The reason was that the county courts were then designed as small claims courts. As Fletcher Moulton LJ had observed in the Court of Appeal in Brown v Dean [1909] 2 KB 573:

"The necessities of the case have led the legislature to restrict the guarantees against possible judicial error in view of the more practical advantage of rendering the procedure simple, speedy and cheap."

29. That gap was filled to some extent by the power to order a rehearing. Nevertheless it does not follow from that that the principles applicable to any such power are any different from those applicable in the Court of Appeal. Indeed, Fletcher Moulton LJ's suggestions that they might be wider were specifically rejected by the majority in the Court of Appeal and the House of Lords.
30. Since then, the County Courts Act 1984, in section 77(1), has given broader rights to appeal to any party dissatisfied with the determination of the judge in a County Court. Hence this court, in O'Connor v Diu [1997] 1 FLR 226, decided that a party who wishes to adduce fresh evidence after the trial has two routes: either to appeal to this court or to apply for a rehearing, although it was stressed in that case that an application for a rehearing was the preferable route especially where the evidence was likely to be disputed.
31. Meanwhile, the wording of the relevant rule changed in the County Court Rules 1981 to its present form. This brought the wording into line with what had been envisaged might be done in the Supreme Court by section 17(2) of the Supreme Court Act but has in fact only been done in matrimonial causes.
32. Mr Warwick for the claimant argues that the change in the wording imports a wider flexibility than had previously been the case. There is nothing at all in the case of B-T itself to suggest this. There is nothing in the commentary on the relevant rule in the last edition of the County Court Practice in 1998 to suggest this.
33. The rule is now incorporated into schedule 2 of the Civil Procedure Rules. The commentators suggest in the White Book at page 1205 that:

"It must be anticipated that an order for a rehearing will be exceptional, on strong grounds and on terms as to costs."

34. In the light of that history, the reasons for the procedural difference between the High Court and the County Court, the fact that there is now a choice of remedies between an appeal and an application for a rehearing in the County Court, and the underlying principle of the Civil Procedure Rules that the rules or principles should be the same whatever the court in which the proceedings are brought, it must be correct, as Mr Crane argues, that the principles governing the exercise of the power to reopen a case after final judgment because of fresh evidence should be the same whatever the procedural route adopted. It would be most unjust if a party to County Court proceedings could reopen matters when a party to High Court proceedings could not.
35. The position governing applications to adduce fresh evidence on appeal is now governed by the Civil Procedure Rules, rule 52.11(2). The court will not consider evidence which was not before the court below unless it has given permission for it to be used. It is no longer necessary to show "special grounds". The discretion must also be exercised in accordance with the overriding objective of doing justice. However, in the very recent case of Banks v Cox, decided on 17th July 2000, for which we have the benefit of an, as yet, unpublished transcript, Morritt LJ said this:

"In my view, the principles reflected in the rules in Ladd v Marshall remain relevant to any application for permission to rely on further evidence, not as rules but as matters which must necessarily be considered in an exercise of the discretion whether or not to permit an appellant to rely on evidence not before the court below."

36. He referred to another decision of this court, Hickey v Marks, on 6th July 2000 to that effect. He then went on to consider each of the requirements in Ladd v Marshall in that case. He found that they had all been satisfied and he then went on to consider whether it was just to order a retrial and did so.
37. It follows from all of this that it cannot be a simple balancing exercise as the judge in this case seemed to think. He had to approach it on the basis that strong grounds were required. The Ladd v Marshall criteria are principles rather than rules but, nevertheless, they should be looked at with considerable care and in this particular case, of course, the first of those principles was not fulfilled: The evidence could clearly have been available readily at trial.
38. A similar difficulty arises in relation to the application to extend time. The time limit under rule 37(5) is a strict one: the application must not only be made but served within 14 days of the order which it is desired to have set aside.
39. The judge referred to cases on pretrial delay or default in the timetable. He did not address his mind to the position after trial. In Regalbourne Ltd v East Lindsay District Council [1994] 58 LGLR 81, page 85, the Master of the Rolls made it clear that what he had said in Costellow was not applicable to an application for permission to appeal out of time.
40. The judge in this case went carefully through the factors set out in the Civil Procedure Rules, rule 3.9 on relief from sanctions. But these are, clearly, mainly directed towards pretrial defaults; they would not otherwise include as factor (g) the extent to which the trial date has been put in jeopardy. The Civil Procedure Rules do not otherwise deal expressly with a power to extend time under rule 37.(1).
41. They do deal with applications to set aside small claims and other judgments obtained in the absence of the party concerned. Both allow setting aside only if certain conditions are fulfilled. Rule 27.11(3) allows setting aside small claims judgments only if there was a good reason for not attending or being represented at the hearing and the case has a reasonable prospect of success. Rule 39.3(5) allows setting aside of other judgments obtained in the absence of a party only if the party acted promptly when he found out, had good reason for not attending and has a reasonable prospect of success. Both of those are more stringent than the comparable Rules of the Supreme Court, Order 35 rule 2, and the County Court Rules which they replace. These give strong support for the proposition that the position after trial is different from the position before and there must normally be a good reason for the delay if one is to extend time.
42. What then is the conclusion of all of this? This was, of course, an exercise of discretion by the trial judge. But in my view he was unduly affected by the potential prejudice to the claimant. He did not properly address his mind to the fact that this was a final judgment obtained after trial at which both parties had been represented. He did not consider the public policy in there being an end to litigation. In this particular case there was no excuse at all for not producing the proper evidence at the trial: it could have been obtained. There is also no excuse at all for the delay in applying to set aside the order: solicitors should know the rules. It is simply not good enough for professional litigators with legal representation to ask for a double indulgence when there has been no excuse for either default. If this was granted in this case, it is difficult to see a case in which it would not be granted. For those reasons, therefore, I would allow this appeal.
43. LORD JUSTICE SEDLEY: I agree
44. LORD JUSTICE SWINTON THOMAS: I also agree.
Order: Appeal allowed with costs. Claimant ordered to pay the first defendant's costs, to include the costs of the hearings on 30th September 1998, 24th February 1999 and 2nd July 1999. There will be a detailed assessment and legal aid assessment of the first defendant's costs. Costs of leading counsel only. Order does not form part of approved judgment