England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
(HIS HONOUR JUDGE MACDUFF QC
(sitting as a deputy judge of the High Court))

		Royal Courts of Justice Strand London, WC2
		25th November 2005

1. LORD JUSTICE CHADWICK: This is an appeal from an order made on Monday 21st November 2005 by His Honour Judge MacDuff QC, sitting as a deputy judge of the High Court at Birmingham, in proceedings brought by Mr Salfraz Hussain against Birmingham City Council and others. No trial of those proceedings has yet taken place. A trial on liability is fixed to commence in Birmingham on Monday 28th November 2005, with an estimated duration of four days. It had appeared that, if the present appeal were not heard and determined today, it might be necessary for that trial to be adjourned. It is in those circumstances that this appeal, for which permission was granted by this court on Wednesday 23rd November 2005, has been given an expedited hearing.
2. In the event - and for reasons which I shall explain - it has not been necessary for this court to hear full argument on the appeal. We propose to allow the appeal and to direct that the trial be adjourned. But we do that in circumstances in which it may be that all those who are properly parties to the proceedings are not represented, or do not appear, at this hearing. And, as we are allowing an appeal from an order made in the course of case management, and in a way which affects the listing in the Birmingham court and disturbs a decision made by the judge, it is appropriate - and no more than courteous to the judge - that I should take a little time to explain why.
3. Before turning to the issues raised by the appeal and the events of this morning, it is necessary to say something of the issues in the action and of the procedural history.
4. The claim arises out of an accident which occurred as long ago as 30th June 1992. The claimant was then 6 years old. He was attending a karate class at premises at Muntz Street, Small Heath in Birmingham. His case is that, before or during the lesson, he was allowed or instructed to sit on a pile of crash mats placed at the side of the room adjacent to a window. The top of the pile of mats was at a level higher than the cill of the window. The window was either open; or, if shut, not securely fastened. The claimant fell through the window and onto the ground outside - a fall of approximately 25 feet. He suffered serious injury, including injury to the head which - it is said - has had lasting effects and will lead him to be permanently disadvantaged on the labour market, to be unlikely to obtain employment and to need care and supervision throughout his life.
5. There is not, I think, any dispute - or any real dispute - that the accident happened or that the claimant suffered serious injuries; although no admissions are made as to the extent of those injuries. The dispute is as to which of the defendants (if any) are liable for those injuries.
6. The claim, as originally brought, was brought against Birmingham City Council, as owners and occupiers of premises described as Small Heath Community Centre, and against Mr Coral Coulson as the class instructor.
7. It is Mr Coulson's case, by way of defence, that he had not arrived at the relevant time, and that the class was not in session. He was not an occupier of the premises for the purposes of the Occupiers' Liability Act 1957; and it was not any negligence of his in conducting the class which led to the accident. The class had not started and he was not there.
8. It is the Council's case that the class was held in a room - known as the dance studio - for which, at the time, it had no responsibility as occupier under the 1957 Act. The dance studio, it is said, was on premises for which the Governors of Small Heath Grant Maintained School were responsible as occupiers. Although the premises had been owned and occupied by the Council until at least 1st September 1989, it is said that with effect from that date the school had acquired grant-maintained status and responsibility for the premises had passed to the Governors of the school or to the Governing Body. I put it in that way - "the Governors of the school" or "the Governing Body" in the alternative - because it may become important, in subsequent proceedings in this case, to determine whether, at the date the accident occurred in June 1992, the governing body was a body corporate distinct from the individuals who were the governors. It is pertinent to have in mind that the provisions for the incorporation of the governing body of a school under Chapters II and IV of Part III of the Education Act 1996 were not then in effect; and it is not wholly clear (at least to me) whether the provisions in Chapter IV of the Education Reform Act 1988 had effect (and, if so, what effect and from what date) in the present case.
9. Be that as it may, it is the Governors' case - so far as it appears from the witness statements made on their behalf (no formal pleading having yet been served) - that, whatever the position might be as to formal ownership of the premises from which the claimant fell, use of and responsibility for the various parts of the Muntz Street premises was governed by an agreement made between the Council and a body known as the Education Assets Board at or about the time that grant-maintained status was acquired; and that, under that agreement and in the way that it was operated at the time, responsibility for the dance studio fell on the Council at the material time of day when the accident occurred.
10. It is, of course, not for this Court, on the hearing of this appeal, to form or express any view on where responsibility for the accident lay; but it is necessary to have some understanding of what the issues would be likely to be at a trial at which each of the Council, Mr Coulson and the Governors (or the Governing Body) were active defendants. At the risk of oversimplification, there would seem to be two principal issues on liability (i) to what extent was Mr Coulson in charge - or should have been in charge - at the relevant time and (ii) which of the Council on the one hand and the Governors or the Governing Body on the other hand were responsible for the premises at the relevant time as occupiers under the 1957 Act.
11. I have said that it is necessary to have some undertaking of what the issues would be likely to be at a trial at which each of the Council, Mr Coulson and the Governors or Governing Body were active defendants. I put it in those terms because - as matters now stand - neither the Governors nor the Governing Body will be active defendants at the trial on liability which is fixed to commence on Monday 28th November. The Governing Body has not been sued in that name. The reason why the Governors will not be active defendants is that default judgments have been entered against the Governors, and - so long as those judgments stand - they have no active role in the trial which will be concerned only with the liability (if any) of the Council and Mr Coulson.
12. I turn, therefore, to the procedural history which has led to the entry of a default judgment (or default judgments) against the Governors, to the application before Judge MacDuff on 21st November 2005, and to this appeal.
13. The claim form was issued on 4th December 2003. The claimant had, by then, just turned 18 - his birthday is in July. The defendants to the claim, as issued, were the Council and Mr Coulson. The claim form had been preceded by a letter, dated 3rd June 2003 from the claimant's solicitors to "the Board of Governors" at Small Heath School, explaining that proceedings were to be issued and that the Council had already indicated in correspondence their view that responsibility for the premises lay with the Governors, and inviting comments. There was no response to that letter. The Council then took the point, formally, in its defence served on or about 15th January 2004. The claimant's solicitors wrote again to the Board of Governors on 24th January, and on 11th February 2004; but again there was no response.
14. On 17th August 2004 the Council issued a claim form, under CPR Part 20, naming "the Governors of Small Heath Grant Maintained School" as Part 20 defendants and seeking contributions and indemnity from them in respect of the claim made by the claimant in the main action. That form was accompanied by amended Part 20 particulars which, on their face, indicated that the Council had already made a Part 20 claim against Mr Coulson. He had filed a Part 20 defence on or about 11th June 2004. Annexed to the particulars was a deed, dated 29th May 1996, made between the Council, the Education Assets Board and "the Governing Body of Small Heath School" - pursuant to section 198 and Schedule 10 of the Education Reform Act 1988. That deed transferred part, at least, of the Muntz Street premises to the Governing Body with effect from 1st September 1989. The Part 20 particulars (which, as I have said, were served in the context of a claim against "the Governors of Small Heath Grant Maintained School") relied on that deed to support the allegation that "at all material times you were the owners of the Dance Studio at Small Heath Grant Maintained School and were the occupiers of the School within the meaning of the Occupiers' Liability Act 1957."
15. It is, as it seems to me, more likely than not that the defendants to the Part 20 claim were the individuals who were governors on 17th August 2004 (the date when the claim was issued), rather than the body corporate known as the Governing Body of Small Heath Grant Maintained School; and more likely than not that (whoever else might be liable for the accident in June 1992 as occupiers of the premises) it was not those individuals (or at least not those of them who were not also governors in June 1992). Prima facie, as it seems to me, the claim could be made either against the Governing Body in reliance on the deed or, perhaps, against those individuals who were actually governors in June 1992.
16. The Governors filed no acknowledgement of service; and no defence to the Part 20 claim. On 6th October 2004 the District Judge made an order recording, under CPR 20.11(2), that the Governors were deemed to admit the Part 20 claim and that they would be bound by any judgment or decision in the main action. That order contained an order for a split trial; and directed that the trial on liability would be held within a trial window commencing on 7th February 2005.
17. On 25th January 2005 the claimant applied to join "the Governors of Small Heath Grant Maintained School" as third defendants to its claim in the main action. The solicitors wrote to the Board of Governors to inform them of that application; and to inform them of a hearing fixed for 16th March 2005 at which directions would be given. There was no response to that letter.
18. At the hearing on 16th March 2005 - at which the Governors were not represented - the District Judge made an order that they be joined as defendants to the main action, made orders for the service of amended particulars of claim and directed that the now third defendants file and serve a defence by 13th April 2005. The trial on liability was refixed for a window commencing on 15th July 2005. On 18th March 2005 the claimant's solicitors wrote to the Board of Governors to inform them of that order - and they enclosed with that letter the amended claim form, the particulars of claim, medical reports and notice of issue of a public funding certificate. That letter contained the following paragraph:

"At the hearing, the District Judge was informed that in addition to ourselves, the First Defendant's solicitors, namely Putsmans.wlc had been in correspondence with you, despite which, you have failed to respond and had failed to attend the last hearing. In the circumstances, the Judge had requested that we attempt to arrange an appointment with yourselves in order to discuss any issues concerning the action and the reason for your failure to respond to any communication sent and with regard to the Court proceedings. With this in mind, the writer, Mr Umran Sadiq, invites you or the Headmaster of your school, as you may [deem] appropriate, to provide an appointment with regard to discussing the matter. Therefore, we would be grateful if you could telephone Mr Sadiq's Secretary on the number provided above and arrange a mutually convenient appointment. We confirm that Mr Sadiq is prepared to attend at the school with regard to any such meeting."

That letter was addressed to the "Governors of Small Heath Grant Maintained School". There was no response to that letter and no defence was filed by 13th April 2005 or at all.

19. On 20th April 2005 the claimant's solicitors wrote again to the Governors, to say that, in view of the lack of response to previous letters and the failure to comply with directions of the court, an application had been made for the entry of judgment in default. The offer of a meeting made in the earlier letter was repeated.
20. That letter seems to have prompted a telephone call - to which the claimant's solicitors referred in their next letter dated 10th May 2005. They wrote to the Governors:

"We refer to previous correspondence and to the telephone call received from you on 27 April.

We understand that you are reviewing the matter, as unfortunately the lady who was dealing with the case was away from the office unwell. You had stated that you would contact us in due course."

And, again, the offer of a meeting to discuss the position was repeated.

21. The claimant's application for default judgment was made by notice filed in April 2005. It was supported by a witness statement made by the claimant's solicitor, Mr Umran Sadiq, to which he exhibited all correspondence. The order was made on 25th April 2005. The order recorded that it was made without hearing or service, and that any party might apply to have it set aside or varied within seven days of the service on that party. That order was referred to in the letter of 10th May 2005 from the claimant's solicitors to the Governors - to which I have already referred. It is not clear when the order of 25th April 2005 was served - but it is not in dispute that it was served on the Clerk to the Governors.
22. There was a pre-trial review on 9th June 2005, at which the Council sought and (I think) obtained permission to rely on a further witness statement, which, as it was said in the application dated 26th May 2005, "will assist the trial judge in relation to the issue as to the ownership/maintenance responsibility of the studio from which the claimant allegedly fell."
23. On 13th September 2005 the Council, through solicitors, made a further application that the head teacher of Small Heath Grant Maintained School do provide the names and addresses of all the Governors of the school as at 30th June 1992 within 14 days. The form of that application suggests that the Council, at least, thought that the defendants to its Part 20 notice were the individual governors as at 30th June 1992. Just how the Council thought that that can be spelt out of the Part 20 notice I find difficult to understand. The application notice was accompanied by a letter of 13th September addressed to the head teacher, which made it clear that, in the Council's view at least, the defendants were the individuals who were governors on 30th June 1992.
24. That application was listed for hearing on 25th October 2005. It was that letter to the head teacher, perhaps, which prompted solicitors, Messrs Weightmans, to be consulted by the school. Those solicitors came on the record for "Small Heath school - a non-party" on 13th October 2005. The application for non-party disclosure was dismissed on 25th October 2005. There is no indication as to the reason for that; but it may be that the court did not think that the individuals who were governors on 30th June were indeed the defendants to the claim.
25. On 7th November 2005 the solicitors, Weightmans, came on the record for "the Governors of Small Heath School". That was the first time that the Governors had been represented by solicitors on the record. Those solicitors promptly made application by notice dated 9th November 2005, in which they sought an order that the order of the District Judge in the Part 20 proceedings should be set aside; an order that the order in the main proceedings entering default judgment against the Governors be set aside; an order that the third defendants be permitted to file a defence to the claimant's claim and defence to the proceedings; and an order that the trial date of 28th November be vacated.
26. The reasons in support of that application were set out very fully in Part C of the application notice; and the application was supported by a statement of Barbara Crozier, the business manager at Small Heath School - to which I shall need to return - and by the statement of Cecil Knight CBE, who had been headmaster at the school between 1983 and 2001.
27. The application made by notice on 9th November 2005 came before Judge MacDuff on 21st November. He dismissed the application with costs, and he refused permission to appeal. It is from that order that the Governors now appeal. As I have said, permission to appeal was granted by this court on 23rd November. In granting permission, Mummery LJ observed that - although this was the kind of case management decision with which this court is reluctant to interfere - he thought that there was a real prospect of success in this case for the reasons set out in the skeleton argument.
28. Power to set aside a judgment entered by default is conferred by CPR Part 13.3. Sub-rule (1)(a) empowers the court to set aside judgment by default if the defendant has a real prospect of successfully defending the claim. The judge accepted that that condition was satisfied in the present case. Mr Knight, in his witness statement, had explained the circumstances in which responsibility for the premises was shared in 1992; and, on the basis of his explanation, the judge was plainly right to take the view that he did. There is no challenge to that on this appeal. Subrule (3) requires the court to have regard as to whether the person making the application to set aside has acted promptly. It is plain that, in the present case, the applicant did not act promptly. Judgment in the main action was entered on 25th April 2005, some 6½ months before the application was made, and judgment in the Part 20 proceedings had been entered on 6th November 2004, some 13 months before the application was made.
29. But it must be borne in mind that this was not a straightforward contest between a claimant and a single defendant, where the effect of a default judgment (if allowed to stand) would be that there will be no trial. In present case, on any basis, there will be a trial between the claimant and the Council and Mr Coulson; and, at that trial, the court will have to investigate the issue which would arise if the Governors were taking part in that trial - that is to say, who, as between the Council and the Governors (or perhaps the Governing Body), was to be treated as having responsibility for the premises for the purposes of the Occupiers' Liability Act 1957. The Court would have to investigate that issue because the issue lies at the heart of the Council's defence to the claimant's claim. So, although a factor to be taken into account, the failure to act promptly, of itself, must (as it seems to me) carry rather less weight than it would in a case where the effect of the default judgment, if left undisturbed, is that there would be finality. This is not a case where the default judgment - or default judgments - relieves either the claimant or the first defendant of the need to go to trial; or relieves the Court of the need to decide the issue of responsibility under the 1957 Act.
30. I have referred to the provisions of CPR 13.3. But there are, of course, other provisions of the Civil Procedure Rules which are of relevance. First, there is the overriding objective, to which the court must give effect when exercising any power given to it under the Rules (CPR 1.2), subject always to the specific limitation in CPR 13.3(1). That requirement applies as much to the exercise of the power to set aside a default judgment as it does to the exercise of other powers. Second, there is, by analogy, the guidance given in CPR 3.9(1) (relief from sanctions) and in CPR 39.3(5) (setting aside judgment where a party has failed to attend at trial).
31. The latter rule itself includes the need for the applicant to show a reasonable chance of success, and (in mandatory terms - by contrast to CPR 13.3) the need for the applicant to act promptly. It also requires the applicant to show good reason for his failure to attend. Again - in contrast to CPR 13.3(1) - that requirement is mandatory.
32. CPR 3.9 emphasises the need for the Court to consider all the circumstances when deciding whether to relieve a party from any sanction imposed on a failure to comply with any rule, practice direction or court order; and it sets out a checklist of nine matters which should be taken into the balance. It may be said that those are matters to which the Court would be bound to have regard (whether or not they were set out in CPR 3.9(1)) in deciding how best to give effect to the overriding objective. But, in the context of this case, it is pertinent to draw attention to five of them: (a) the interests of the administration of justice; (c) whether the failure to comply was intentional, coupled with (d) whether there is a good explanation for the failure; (g) whether the trial date can still be met if relief is granted; and (i) the effect which the granting of relief would have on each party.
33. In mentioning those matters I have regard to the observation of the judge that "many proud jurists from the past would turn in their graves if someone were to tell them that the CPR had to include the express provision that courts and judges should deal with cases justly and give various subheadings of what should be included in that. What, might a judge from the past ask, have we been doing over these years?" Nevertheless, those are the rules as they now stand.
34. It is, of course, a striking feature of the present case that, seen from the perspective of the claimant, the Council and the Court (and perhaps also through the eyes of Mr Coulson - although he seems to have been less concerned in the Governors' lack of participation), the Governors took no steps at all to look after their own interests between the date of the first letter from the claimant's solicitors in June 2003 until Weightmans came on the record on 7th November 2005. The circumstances which lay behind that apparent inactivity appear from the statement of Barbara Crozier dated 14th November 2005, to which I have already referred; although - as the judge observed - that statement leaves many questions unanswered. It is not in dispute that the orders and correspondence reached Susan Page, the Clerk to the Governors; and not in dispute that she had knowledge of the proceedings and of the steps that were being taken by the Council and by the claimant's solicitors. Ms Page did not provide a witness statement to explain what she had or had not done. The judge summarised Miss Crozier's statement in his judgment in these terms:

"She [Miss Crozier] only became aware of the proceedings at the end of April 2005. She later states that she knew for some months before that Sue Page was dealing with a claim. Not only did she know but Peter Slough knew and they assumed that it was being dealt with appropriately. Why should they not? She was the Clerk to the Governors and it was her job. But in April 2005 the post arrived on 27 April and it was opened by Barbara Crozier the business manager. It undoubtedly contained the Judgment which I've seen which has a meaning and a plain meaning and yet she says she did not understand what it meant and she phoned Solicitors and phoned Sue Page even though she was not at work. Sue Page came in the next day and said she had a pile of papers. If anyone other than Sue Page should have picked on the problem it was then Barbara Crozier and she was fully entitled to panic but that panic was not translated into any effective action."

Then a little later the judge goes on:

"What is the thrust of this evidence? It seems to me to be suggesting on the one hand that Sue Page was the cause of the problems by not taking appropriate steps on behalf of her employer and keeping matters hidden. But Sue Page remains an employee of the Third Defendant who is charged with dealing with this sort of problem of claims and litigation and she should be under effective supervision by her Principals but it is clear that from the end of April here was evidence available to the headmaster and to the business manager and to the Governors that Judgment had been signed and not dealt with in a significant case of which they had knowledge."

35. Returning therefore to the checklist in CPR 3.9(1): (b) the application was not made promptly; (c) the failure to comply was not intentional (in the sense of contumacious), it occurred through incompetence rather through any deliberate intention to flout the orders of the court; (d) there was no good reason for the failure; (f) it was impossible to say that the failure was caused by a legal representative because, whatever Ms Page may have done, the Governors never instructed solicitors. Nothing in any of those factors would lead the Court to relieve the Governors of the sanction which the entry of judgment in default imposes.
36. But it must be kept in mind that discretionary powers are to not to be exercised in order to punish a party for incompetence - they must be exercised in order to further the overriding objective. In the present case, as the judge recognised, the essential question was whether the risk of injustice to the Governors (in denying them the opportunity to advance at trial a defence which - as the judge himself said - had a good prospect of success) outweighed the risk of injustice to the claimant and other defendants if the Governors were allowed (at this late stage) to participate in the proceedings.
37. That was the question for the judge and he decided it against the Governors. He might have taken a different view had he been aware (as we were made aware this morning) that there is a very serious doubt as to whether the Governors - a fortiori, those who were Governors in 2004 or 2005 - were properly made defendants to these proceedings at all. It can now be seen that this is a claim which has probably been made against the wrong party; as well as being a claim to which the right party is likely to have a good defence.
38. Faced with that position - and in particular, perhaps, faced with the (no doubt, welcome) position where the Governing Body has now come on the scene with the benefit of its insurance company - both the claimant and the Council and Mr Coulson (who has been consulted) take the view, sensibly, that this is not a case in which these default judgments can be allowed to stand. That, as it seems to me, is a view which can properly be taken; and in those circumstances it is unnecessary for me to indicate whether, in any event, I would have declined to uphold the judge's order.
39. I would allow the appeals from the order refusing to set aside the default judgments of 4th October 2004 and 25th April 2005. I would do that in the circumstances that all the parties who have taken part in these proceedings agree that that is the proper order to make. In those circumstances, it is necessary to consider whether the trial of the matter listed to commence on 28th November should be adjourned. I am very conscious that this court should be slow to interfere with case management decisions made by the trial judge. But this is a case in which it is reasonably clear from his judgment that, had Judge MacDuff himself taken the view that the default judgments should be set aside, he would have regarded it as inevitable that the trial be adjourned. It seems to me inevitable; not only so that the issues which do arise against the Governors of Small Heath Grant Maintained School can be properly identified and explored - if necessary by further discovery and further evidence - but also because both the claimant and the City Council need an opportunity to take a view as to which of the Governors or the Governing Body they actually do want to sue in relation to the accident on 30th June 1992.
40. In those circumstances, it seems to me that this matter should be remitted to the trial judge on Monday 28th November; not so that he can commence a trial, but so that he can give case management directions for the future conduct of these proceedings. That will inevitably impose delay. But the delay must be seen in the context, first, that this is a claim which is brought some 11 years after the accident occurred. That is through no fault of the claimant (who was a minor during the relevant period); but we are now some 13 years away from the accident. And, second, that, whatever the decision on liability, there will have to be either a trial or a negotiation on quantum before the claimant is actually in receipt of any money as a result of this action.
41. For those reasons, I would make an order in the terms of the draft minute which has been handed up to us and to which all the parties who are present and Mr Coulson give consent.
42. I should add that it is a term of that draft that an undertaking is given by counsel for the Governors (being counsel for the Royal Sun Alliance, the insurers of the Governing Body of the Small Heath Grant Maintained School for these purposes) that the insurers will pay the costs of the claimant, the first defendant and the second defendant of the application heard on 21st November 2005, this appeal and the costs thrown away by the vacation of the trial on liability due to be heard on 28th November 2005; those costs to be the subject of a detailed assessment unless agreed.
43. LORD JUSTICE RIX: I agree.
44. LORD JUSTICE KEENE: I also agree.

ORDER: Appeal allowed by consent; order as drafted and provided to the court.

(Order not part of approved judgment) ______________________________