England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE TAMESIDE COUNTY COURT

		The Royal Courts of Justice The Strand London WC2A Thursday 18 January 2000

Thursday 18 January 2001

1. LORD JUSTICE SIMON BROWN: On 11th April 2000 the respondent, Mr Law, entered judgment in default of defence for £5,100 in respect of the cost of replacing the engine of his vessel, "Hasty 1", said to have been vandalised during the currency of a marine policy of insurance covering the vessel against such loss.
2. The trouble is that the judgment is entered against the appellants, who, they contend, acted merely as insurance brokers. Certainly on the face of it it seems tolerably clear that any claim under the policy should instead have been directed against the underwriters. How is it, then, that this state of affairs came about? More particularly, how have the proceedings reached as far as this court in the attempts to cure the situation; to put right what, say the appellants, is a manifest wrong?
3. The story is a sorry one. The claim was issued on 29 February 2000 by the respondent acting in person. On 9 March 2000, that is, with reasonable promptness, the appellants' solicitors (acting also, and indeed principally as solicitors for the underwriters) wrote to the respondent in these terms:

"We act for the Underwriters of HASTY 1 and the Claim Form which you have issued in the Tameside County Court in respect of alleged engine damage has been forward to us to respondent to.

We notice, however, that the named Defendants in the claim form are St Margarets Insurances Limited, who are merely the Insurance Brokers who placed this business with our Clients and who act in the capacity of administrators of the insurance.

St Margarets Insurances Limited cannot therefore have any liability for your claim, which we note from the Particulars of Claim you acknowledge is against the Lloyd's Underwriters who actually subscribed to the policy.

The Defendant named in the Claim Form ought therefore to be amended, and their correct designation should be "Certain Underwriters at Lloyd's subscribing to policy number 1WS-SA-65663".

4. To facilitate the correction of this error we have obtained limited authority from St Margarets Insurances Limited to act on their behalf for the purpose of rectifying the Claim Form, and we can therefore confirm on behalf of both St Margarets Insurances Limited and our Client Underwriters that they will consent to an application to the Court to make the appropriate amendment. We can also confirm that St Margarets Insurances Limited will not seek any Order for costs in respect of the service of the Claim Form upon them, provided that an immediate application to amend is made.
5. In the circumstances, we are not at this stage filing the Acknowledgement of Service form with the Court, and we are copying this letter to the Court with the request that no action should be taken in respect of this pending receipt of your application to amend.
6. Finally, we confirm that we are instructed to accept service of the amended Claim Form on behalf of the Underwriters.
7. The respondent does not accept that only the underwriters are liable under the policy of insurance. Rather he maintains that he has a direct contract of indemnity with the appellant brokers themselves. That is a surprising contention, but one which this court is certainly not going to deal with today.
8. Accordingly, the letter of 9 March notwithstanding, Mr Law took no corrective action. In the event he was rewarded by the appellant's failure (for a failure it undoubtedly was) to acknowledge service and enter a defence in the usual way - a failure which gave him the opportunity to enter judgment in default, which is precisely what he did.
9. Not surprisingly, the appellants at that point applied promptly to set the judgment aside. However, they then made their second mistake. The application form properly indicated the evidence upon which they wished to rely in support of the application to set aside judgment (namely that they were merely the brokers who, by their letter of 9 March, had expressly invited the respondent to amend his claim to pursue the underwriters instead) but, alas, the appellants, or more particularly their solicitors, failed to complete the statement of truth in the application form satisfactorily. It was erroneously signed in the name of the appellants' firm of solicitors, Hill Dickinson, rather than by an individual solicitor within the firm who could properly attest to the truth of the facts relied upon.
10. When that application came before District Judge Osborne in the Tameside County Court on 8 May 2000, it was simply dismissed as defective. The district judge observed, however, that the appellants would be able to make the application afresh in proper form. That, therefore, is what they then did. This second application came initially before District Judge Gaunt on 26 May but, understandably, he declined to go behind District Judge's Osborne's earlier order and instead directed that the application be listed before District Judge Osborne.
11. On 2 June this second application duly came before District Judge Osborne. On this occasion he dismissed it, apparently on the ground that he had no jurisdiction to hear it under the provisions of Order 37 rule 1 of the County Court Rules which, of course, are incorporated into the Civil Procedure Rules under schedule 2. At this stage, therefore, the appellants had no option but to appeal to the circuit judge. This they did in respect of both of District Judge Osborne's decisions, that is, his successive dismissals of their applications respectively on 8 May and 2 June.
12. The appeal came before Judge Carter QC at Oldham County Court on 21 August. It in turn was dismissed. Judge Carter referred to this court's recent decision in Tanfern Ltd v Cameron-MacDonald [2000] 2 AllER 801. His basic approach was that under CPR part 52.11(3)(a) he could not properly allow the appeal against District Judge Osborne's decisions unless one or other or both of them were "wrong". He took the view that they were not wrong; that District Judge Osborne had been entitled to dismiss the first setting-aside application because of the defect in the form of statement of truth, and that he had been entitled to dismiss the second application also.
13. I do not, I confess, find his reasoning altogether easy to follow. It reads thus:

"Mr Burns [who at that stage was counsel for the appellants] disagrees with the approach of District Judge Osbourne [sic] on that date [2 June]. In effect Mr Burns says that District Judge Osbourne did not seek to exercise a discretion which he clearly has under part 13; that by dismissing the appeal in the way that he did, he did not come to grips with the case and did not apply his mind to the merits of the case as he should under part 13. In an attractive argument Mr Burns states that, furthermore, District Judge Osbourne failed to take on board part 3.10 of the Civil Procedure Rules in relation to what was a procedural defect.

The view taken by District Judge Osborne, in my judgment, was to this effect. In relation to the progress or lack of it as far as this case is concerned, if I have regard (and Mr Burns asks me to and I do in a different context) to the overriding objective in part 1, and to part 1.1(2) which provides:

'Dealing with the case justly includes so far as is practicable ensuring the parties are on an equal footing, saving expense, dealing with the case in ways which are proportionate to the amount of money involved, to the importance of the case, to the complexity of the issues and to the financial position of each party, ensuring that it is dealt with expeditiously and fairly and allotting [to it; the words "it" and "to" have been transposed] an appropriate share of the court's resources while taking into account the need to allot resources to other cases . . .'

Mr Law, if he was a lawyer would say to me: 'Come on, enough is enough in relation to this case. Are you going to put the clock back to the beginning in relation to a claim for £5,000 and continue the legal process, taking up the time of the court when none of this should be necessary?' My answer in this ex tempore judgment is: No, I am not going to put the clock back.

I accept that in relation to the appeal procedure as it now is, I do not agree with the submission that District Judge Osbourne was wrong. Therefore, this appeal fails."

14. This being a second appeal, Judge Carter rightly recognised that he himself had no power to allow it to go ahead: only the Court of Appeal in these circumstances can grant permission to appeal. In granting permission, Jonathan Parker LJ on 9 October 2000 said this:

"This is a second-tier appeal, to which CPR 52.13 applies. However, the appeal does seem to me to raise an important point of principle or practice, in that the Judge appears to have wrongly interpreted the overriding objective. The judge appears to have treated the overriding objective as supporting a result which would appear to be wholly unsustainable, namely that a judgment entered in default against the wrong defendant should not be set aside, in circumstances where the only defect in the original application to the District Judge to set aside the judgment was a formal one, capable of being remedied immediately, and where on a second application to the same District Judge (made in correct form) the District Judge declined to consider the merits of the application (namely that the judgment was against the wrong defendant) but dismissed the application on the ground that the right procedural course for the applicant was to appeal his earlier decision."

15. That, I have to say, is precisely my own reaction to the present situation. True it is that the appellants made two initial mistakes, as I have already endeavoured to explain. Strictly, they should not have relied upon their letter of 9 March to persuade Mr Law to correct his apparent error in pursuing the wrong party, but should instead themselves have filed a formal acknowledgement and defence; and when they needed in the event to apply to set judgment aside, they should not have made the silly mistake with regard to the form of the statement of truth. But those were in fact their only errors, and such errors cannot, to my mind, justify shutting out for all time a substantive, and apparently sound, defence to the claim.
16. For the life of me I cannot see why District Judge Osborne, on the first application before him on 8 May, could not simply have permitted a fresh form of application with a properly completed statement of truth, to be filed then and there so as to deal with the matter. Justice would in those circumstances have compelled him to set the judgment aside. That would have been the quickest, cheapest and most obvious solution to the problem. Failing that, however, I cannot see why the district judge, concerned with the overriding objective of enabling the court to deal with cases justly, could not under Order 37 rule 1 have acceded to the second application forthwith to redetermine the matter now that an application in proper form was before him. In common with Jonathan Parker LJ, it seems to me that Judge Carter QC, when he came to be seised of the appeal, took an impermissible view of the demands of CPR 1.1, the overriding objective rule, in the particular circumstances of this case.
17. Mr Law, who appears again in person before this court today, can do no more than seek to assert that District Judge Osborne acted correctly throughout and, similarly, that Judge Carter QC also was entitled to do what he did. For my part, I profoundly disagree. Justice here to my mind demanded that these relatively venial earlier errors should not have been regarded as incurable to the extent of allowing this apparently inappropriate judgment to stand. I would accordingly accept that there is indeed an important point of principle involved in this case, in that the overriding objective must be furthered, even at this late stage, by setting aside this judgment so that there may be a proper hearing on the merits of the applicant's claim, both as to the party against whom it should be directed and, no doubt, as to its inherent soundness in respect of the insurance cover in question.
18. I would accordingly allow the appeal, and set aside the judgment entered in default on 11 April 2000.
19. LORD JUSTICE LONGMORE: I agree. There is nothing that I wish to add.
ORDER: Appeal allowed and judgment set aside. Defence to be filed within 7 days. The respondent to repay whatever sum was paid to him to the appellants' solicitors within 28 days. Permission to amend granted if required. No order for costs here or below. (Order not part of approved judgment)