Neutral Citation Number: [2011] EWCA Civ 1387
Case No: B5/2011/0446/PTA+A
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Preston County Court
District Judge Anson
Claim No: 7ZP01482
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 29/11/2011
Before :

THE CHANCELLOR OF THE HIGH COURT
LORD JUSTICE HOOPER
and
LADY JUSTICE RAFFERTY
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Between :

	(1)	RICHARD ALAN HARDY
(2)	PAULINE HARDY	Claimants / Respondents	
	- and -		
	(1)	JOHN EDMUND HASELDEN
(by his personal representatives, IRIS HASELDEN and JILL HASELDEN)
(2)	IRIS HASELDEN
(3)	JILL ELIZABETH HASELDEN (OTHERWISE OLLERTON)
	Defendants / Appellants	
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Christopher McNall (instructed by SFN Solicitors) for the Appellants
Elisabeth Tythcott (instructed by Lomax Geddes & Co) for the Respondents

Hearing date : 10 November 2011
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Judgment

The Chancellor : 
Introduction

1.	Mr and Mrs Haselden and their daughter Mrs Ollerton were, and Mrs Haselden and Mrs Ollerton personally and as personal representatives of Mr Haselden still are, the registered proprietors in respect of the freehold of a 60 acre livestock farm (“the Farm”) called Brock Clough Farm, Whitewell Bottom, Hapton, Burnley, Lancs under title number LA575066.   In September 1997 the Haseldens met the claimants Mr and Mrs Hardy on one or more occasions to discuss terms on which Mr and Mrs Hardy might occupy the Farm or part of it.  In October 1997 the Hardys moved into the Farmhouse and carried out certain repairs and other works.   There was no written agreement, lease or tenancy agreement.

2.	On 17th September 2007 the Hardys issued a part 7 claim in the Burnley County Court against Mr and Mrs Haselden and Mrs Ollerton seeking a declaration that they had a tenancy of the Farm for their lives taking effect as a term of 90 years pursuant to s.149(6) Law of Property Act 1925 at a rent of £200 a month.  In addition they sought an order for specific performance of an oral agreement to that effect they alleged to have been made in or about August 1997 and damages for breach of an implied covenant for quiet enjoyment.  The proceedings were duly served on each of the defendants.  Following a number of more or less ineffective hearings, none of which was attended by any of the defendants, the matter was transferred to the Preston County Court and came before District Judge Anson on 18th September 2008 on the basis of witness statements made by the first claimant, Mr Hardy, on 1st December 2007 and 14th February 2008 and of Mrs Hardy also made on 14th February 2008.  The District Judge made the declaration sought, ordered the defendants to execute the appropriate lease and gave judgment in favour of the Hardys for £40,095 and their costs.

3.	Mr Haselden had a heart attack on 2nd October 2008 and died intestate three weeks later.  Letters of Administration to his estate were issued to Mrs Haselden and Mrs Ollerton on 6th October 2009.   In the meantime, on 16th February 2009, a deputy District Judge executed a lease on behalf of the defendants demising the Farm to the Hardys for a term of 90 years from 1st September 1997  but without any provision for determination on the deaths of either or both of them.

4.	On 23rd September 2009 solicitors for the defendants issued an application in the Preston County Court supported by a witness statement of Mrs Ollerton, made on behalf of herself and her mother, for an order under CPR Rule 39.3 to set aside the order of District Judge Anson made on 18th September 2008 and for permission to file the draft defence to the claim of the Hardys she thereto exhibited.   That application was dismissed by District Judge Bland on 26th January 2010.  Mrs Haselden and Mrs Ollerton appealed and for that purpose each made two further witness statements in March and June 2010.   Their appeal was dismissed by HH Judge Appleton on 8th February 2011.  

5.	On 24th February 2011 Mrs Haselden and Mrs Ollerton issued the appellants’ notice now before us on appeal from the order of District Judge Anson made on 18th September 2008.   They seek (1) an extension of time within which to file their appellants’ notice, (2) permission to adduce fresh evidence in the form of the witness statements of Mrs Ollerton and Mrs Haselden which were before District Judge Bland and HH Judge Appleton and a further witness statement made by each of them on 16th March 2011, (3) permission to appeal and (4) an order setting aside the order of District Judge Anson and directing a new trial of the Hardys’ claim.  On 28th June 2011 Lloyd LJ, having considered the papers, directed that these applications be listed for argument before the full court with the appeal to follow if permission were granted.  

6.	We have heard full argument on all the issues which may arise if permission were granted before deciding whether or not to grant it.  I will consider the submissions of counsel on the four applications in due course.  First it is necessary to set out (1) the facts in more detail, (2) the reasons given by District Judge Bland and HH Judge Appleton for dismissing the application to set aside the order of District Judge Anson and (3) the impact of the recent decision of this court in Bank of Scotland v Pereira [2011] EWCA Civ 241 and 1 WLR 2391.

The Facts

7.	The Farm was acquired by Mr and Mrs Haselden and their daughter Jill Haselden in 1988.  Thereafter it was farmed by their daughter, later Mrs Ollerton, and Mr Haselden, a retired civil servant, in partnership.  In about 1996 Mrs Ollerton bought another farm, New Barn Farm at Hapton, and went to live there.  The agricultural land at Brock Clough Farm was then occupied by several farmers but the farmhouse, certain outbuildings and its garden were empty.   The Hardys  and the Haseldens were introduced to each other by a farmer friend in 1997.  They met on one or two occasions in August and September 1997.

8.	In their particulars of claim the Hardys alleged that they orally accepted an offer made orally by Mr Haselden in the presence of his wife and daughter in or around August 1997 by Mr Hardy in the following terms:
“(i) that the Claimants move to the [Farm] and occupy a mobile home situate at the property for the purpose of securing it from trespassers;
(ii) that the Claimants could live at the [Farm] for so long as they wished to in the expectation that the Claimants would move into the farm within a very short time;
(iii) that the Claimants could keep livestock, including horses, sheep and pigs at the Farm;
(iv) that the claimants pay rent to the Defendants in the sum of £200 per month and discharge all bills;
(v) that the Claimants renovate and refurbish the farmhouse located at the [Farm];
(vi) that the Defendants would reimburse the Claimants for the cost of the aforesaid renovation and refurbishment.”

9.	The particulars of claim then alleged that in reliance on the agreement and representations made in the course of the meeting the Hardys moved into the Farm, paid the rent and carried out works of renovation at a total cost of £31,399.30.   In paragraph 8 it was alleged:
“By reason of the matters aforesaid it is alleged and averred that the Claimants have a tenancy of the property for their lives at a rent of £200.00 per month.  By reason of s.149(6) Law of Property Act 1925 it is averred that the said tenancy takes effect as for a term of 90 years.”

10.	The Hardys moved into the Farm in October 1997.  They then carried out the works specified in paragraph 7 of the particulars of claim for which they claimed £31,399.30.  Thereafter they paid the defendants the sum of £200 per month referred to in paragraph 8(iv).  In about October 2002 the Hardys sought to extend their activities into that of a child care business.  They sought and obtained the consent of the Haseldens to such a use.  In March 2004 the Haseldens sold part of the Farm to one Grace Titterington.  So matters might have continued indefinitely, but in July 2006 it came to the attention of the Hardys that a mortgagee of the Farm, Farming and Agricultural Finance Ltd, was seeking an order for possession against the Haseldens and anyone else who might be in occupation of any part of it.  Then, if not before, the Hardys began to press the Haseldens for a formal grant of a lease for lives and for payment of the sums spent by them as alleged in paragraph 7 of the particulars of claim.   On 23rd January 2007 an order for possession of the Farm was made by District Judge Geddes.  It was later discharged following the redemption of the mortgage in June 2007.  But the requests of the Hardys for a formal lease and for reimbursement of the sums spent on repairs went unheeded.

11.	In those circumstances the claim form was issued in September 2007.  In addition to the claims for a declaration and an order for specific performance the Hardys sought reimbursement of the sum of £31,399 and an additional sum of £8,000 said to be the estimate of their loss of profits in the child care business due to the uncertainty generated by the application for an order for possession made by Farming and Agricultural Finance Ltd.  As I have said, the claim came before District Judge Anson on 18th September 2008. The Hardys appeared by counsel and gave oral evidence in addition to the witness statements of Mr Hardy and Mrs Hardy.  The Haseldens did not appear and were not represented.

12.	The transcript of the hearing before District Judge Anson shows that counsel for the Hardys properly drew the District Judge’s attention to the fact that the expenditure on repairs had been incurred over six years before the action was brought but that as limitation is a matter of defence to be pleaded it was no bar to the money judgment he sought.   The District Judge then questioned counsel as to whether there had been any response of any of the defendants at any stage of the proceedings.  In the light of the answers of counsel the District Judge suggested that the Haseldens had effectively abandoned the Farm.  The oral evidence was directed to the expenditure incurred by the Hardys and the loss of profits arising from the uncertainty generated by the possession order.  It appears to have been assumed that the Hardys were entitled to a tenancy subject to the terms of s.149(6) Law of Property Act 1925.

13.	I have to say that I see nothing in paragraphs 1 to 7 of the particulars of claim, in the witness statements made or oral evidence given by Mr Hardy or Mrs Hardy in support of their claim to justify the conclusion in paragraph 8.  The alleged terms, in particular that set out in paragraph 8(ii) above, are not consistent with the grant of any lease or tenancy as there is no term certain, see Berrisford v Mexfield Housing Cooperative Ltd [2011] UKSC 52, paras 23-37.  Whilst those terms might give rise to a life tenancy, ibid. paras 45-53, there was no written disposition or contract.  Accordingly, unless the disposition sought to be effected complied with s.54(2) Law of Property Act 1925, which, for the reason I have given, it did not, there was no disposition of an equitable interest in the land sufficient to satisfy s.53 Law of Property Act 1925 nor any contract, see s.2(1) Law of Property (Miscellaneous Provisions) Act 1989.  It must follow for these reasons alone that there was no grant of a lease for lives to which s.149(6) Law of Property Act 1925 could apply nor any contract of which specific performance could be granted.  Accordingly, the declaration and order for the execution of a lease made by District Judge Anson on 18th September 2008 were unjustified and wrong in law.  I did not understand counsel for the Hardys eventually to contend otherwise.  

14.	On 13th October 2008 District Judge Anson made an interim charging order on New Barn Farm to secure the amount of the money judgment for £40,095 he had given on 18th September 2008.  That order was made absolute on 6th January 2009.  As I have already recorded Mr Haselden had a heart attack on 2nd October and died on 28th October 2008.  On 16th February 2009 a deputy District Judge executed the lease ordered by District Judge Anson on behalf of Mr and Mrs Haselden and Mrs Ollerton.  On 14th August 2009 an eviction order in respect of New Barn Farm by way of enforcement of the charging order was made in the Burnley County Court to take effect on 9th September 2009.

15.	On 4th September 2009 Mrs Ollerton on behalf of herself and her mother applied to the Preston County Court to set aside the orders of District Judge Anson.  The formal application was issued by solicitors on their behalf on 23rd September 2009, the solicitors also acting for them in connection with the application for letters of administration to the estate of Mr Haselden. The application was supported by a 13 page witness statement made by Mrs Ollerton on the same day.   In her witness statement Mrs Ollerton set out what she described as “a long and sorry story”.  She did not deny that each defendant had been properly served with the proceedings.  She described in some detail the relationship between her father, mother and herself, dominated as it was by her father.  She described her father’s declining health and her progressive depressive condition culminating in consulting a consultant psychiatrist whose reports she exhibited.   In paragraph 16 she apologised to the court and to the Hardys for her complete failure to deal with the proceedings until then.  She continued:
“As I hope is clear, I was so unwell that I could not have coped.  Given my father’s nature, his habits of intercepting and secreting post away in his room, and then leaving it unopened, I genuinely doubt how much even father knew about the proceedings at the time.”
She then made observations on what she considered were the prospects of success in their defences if she and her mother were able to defend the action and exhibited a draft defence.

The judgments of District Judge Bland and HH Judge Appleton

16.	The Defendants’ applications came before District Judge Bland on 26th January 2010.  Both the Hardys and the Haseldens were represented by counsel.  In paragraphs 1 to 5 the District Judge set out the facts.  In paragraph 6 he referred to CPR Rule 39.3 and quoted the terms of subparagraph (5).  In paragraph 7 he noted that all three criteria had to be satisfied if an order was to be made under rule 39.3(3).  In paragraphs 8 to 12 he considered the first criterion namely, whether the defendants had acted promptly when they found out that the District Judge Anson had given judgment against them.  He concluded in paragraph 12:
“…in respect of that first head, I do not find that the third defendant has acted promptly.  I also bear in mind that the second defendant again could have made this application, could have picked up the phone and telephoned solicitors, as it is accepted that she was receiving correspondence and documents separately from the other defendant.”

17.	District Judge Bland then considered the second criterion, namely whether the defendants had good reason for not attending the trial.  He analysed the evidence in some detail and concluded in paragraph 14 that there was no evidence to support the reason given for non-attendance at the trial.  He considered that for that reason the application should fail.  In relation to the third criterion, namely prospects of success in their defence the District Judge was not satisfied that they were reasonable.  In that connection he observed in paragraph 15:
“..it is accepted by implication in the pleadings that the claimants had some form of interest in the property, the issue is the extent in terms in terms of area and in terms of length of tenancy.  There was and remains a great dispute over the interpretation of the limited documentation that is available, some of which has only just come to light, but also in the oral evidence that would have had to have been given to the court.”

18.	District Judge Bland refused permission to appeal.  An application for such permission was made first to the Court of Appeal and was redirected by the Civil Appeals office to the circuit judge.  In support of the application and of the appeal if permission were granted Mrs Ollerton made a second witness statement and Mrs Haselden a first witness statement on 16th March 2010.  In addition Mrs Ollerton made a third witness statement and Mrs Haselden a second in June 2010.  In each case the witness expanded on her previous evidence as to relationships with Mr Haselden and her own health.  The application for permission to appeal came before HH Judge Appleton on 8th February 2011.

19.	The first submission was to the effect that the District Judge had not given due weight to the medical evidence when finding that the application had not been made promptly.   He noted that that evidence had been originally obtained for a different purpose and was critical of its use to support the application before him.  He rejected the criticism of the District Judge.  Accordingly the conclusion of the District Judge that the application had not been made promptly stood with the consequence that the first of the three essential criteria was not made out and the application for permission to appeal failed on that ground alone.  In those circumstances it was not necessary to consider the prospects of success in the defence of the defendants and he did not.  No appeal lay from the decision of the Circuit judge.  Accordingly the attempt to set aside the judgment of District Judge Anson failed.

Bank of Scotland v Pereira [2011] 1 WLR 2391

20.	In this case the Court of Appeal considered the interaction between an application under CPR rule 39.3 to set aside a default judgment and an application for permission to appeal under CPR Pt 52.  I need only quote the following paragraphs from the judgment of the Master of the Rolls with which Lloyd and Gross LJJ agreed:
“42. Where a defendant seeks to appeal against the trial judge's order after making a failed CPR 39.3 application, I do not consider that, in the light of the discrete and interlocutory nature of a CPR 39.3 application, strict issue estoppel would apply on any question of fact so far as the appellate court is concerned. However, the appellate court considering an appeal or an application to appeal should take a great deal of persuading before departing from a conclusion expressed by the judge who heard the application to set aside; to do so, in the absence of good reason would be invidious, as Gross LJ said in argument. 
43…
44. Fifthly, where the defendant's CPR 39.3 application fails, she will normally be in severe difficulties in seeking to contend, by way of appeal against the trial judge's order, that she should be entitled to rely on evidence which was not before the trial Judge, or that she should have a retrial. In such cases, the appellate court's approach must depend to some extent on the facts. In general, the appellate court will bear in mind not only the requirements of CPR 39.3, but also the post-CPR application of the Ladd v Marshall principles (as discussed in Hertfordshire Investments Ltd v Bubb [2000] 1 WLR 2318, 2325, and Sharab v Al-Saud [2009] EWCA Civ 353, para 52). 
45. Where the new evidence could not reasonably have been available to the defendant even if she had properly prepared for and attended the trial, it seems to me that the defendant's position should normally be no different from a defendant who had attended at trial. So too where her application for a retrial is not dependent upon the fact that she did not attend the trial. In such circumstances, her application to adduce and rely on new evidence or for a retrial would not be related to her position as a defendant who did not attend the trial. 

46. However, it would be very different where the defendant's application to adduce new evidence, or to have a retrial, is essentially based on the fact that she did not attend the trial. If she has already failed in her CPR 39.3 application, it seems to me that to allow her to appeal against the trial judge's order on such a ground would involve letting her in through the back door after having firmly locked the front door. The policy behind CPR 39.3, as interpreted in Regency Rolls [2000] EWCA Civ 379, is to prevent a defendant from seeking a retrial if she did not attend the trial, unless the three requirements in CPR 39.3.5 are satisfied. Where her CPR 39.3 application has been refused because she has failed to satisfy one or more of those requirements, it seems to me that it would be wrong in principle for an appellate court to grant her a retrial on grounds which, in reality, amount to no more than her having been absent from, and therefore not having given evidence at, the trial.”

21.	The paragraphs I have quoted point to the following propositions:
(1) the dismissal of an application under CPR Rule 39.3 does not, of itself, give rise to an issue estoppel so as to preclude an appeal from the judgment which has not been set aside;
(2) the fact that an application under CPR rule 39.3 has failed is a weighty, though not conclusive, consideration in determining an application for permission to adduce fresh evidence on appeal or for a retrial.

22.	The appeal for which this application seeks permission is for the purpose of obtaining an order for a new trial.  Further, the application includes an application for permission to adduce fresh evidence not only in the form of the five witness statements of Mrs Ollerton and Mrs Haselden which were before HH Judge Appleton but two more made on 16th March 2011 by respectively Mrs Ollerton and Mrs Haselden.  Both of them recognise that this court may be reluctant to allow them to rely on them.  In each the respective witness seeks to describe in detail what she remembers of the dealings with the Hardys in September 2007. In addition they describe the state of Mr Haselden’s papers at the time of his death in October 2008.  The purpose of doing so is to account for the delay in producing Mr Haselden’s diary for 2007 in which, they contend, he noted the relevant events of September 2007.  Mrs Ollerton produces pages from the diary and translates and explains some of the material entries.  But neither of them gives any explanation of when, where and how the diary was discovered.  In the light of its contents they have sought to amend their prospective defence to the Hardys’ claim.

Submissions of counsel and my conclusion

23.	I turn then to consider the submissions of counsel in respect of the four parts of this application I summarised in paragraph 5.  Counsel for the defendants emphasises that the discretion of this court in dealing with each of those parts of the defendants’ application is to be exercised in the light of the overriding objective set out in CPR Rule 1(1) namely to deal with the case justly having regard, inter alia, to the importance of the case.  He points out that a 90 year lease terminable on lives has a substantial effect on the value of the unencumbered freehold.  He submits that the decision of District Judge Anson in granting it was wrong in law even on the evidence of the Hardys.  He contends that the monetary judgment was unjustified too as, first, it included items, such as labour, not covered by the alleged agreement and, second, it embraced loss of profits as damages for breach of the covenant for quiet enjoyment which must have fallen with the claim for the lease.  He relies on the evidence before District Judge Bland and HH Judge Appleton as to the character of Mr Haselden, its effect on the knowledge of Mrs Ollerton and Mrs Haselden and their illnesses as a sufficient explanation for the delay between September 2008 and September 2009.  Outside those dates he contends that the time elapsed was not due to any lack of activity on the part of his clients.

24.	Counsel for the Hardys submits that we should have regard also to the lack of activity on the part of the defendants from even before the claim form was issued.  Thus the Hardys’ just claim for the grant of a lease and reimbursement of their expenses was ignored.  No notice was taken by any defendant of any of the formal court documents served on each of them by way of service of the claim form and subsequent applications.  She relies on the decisions of District Judge Bland and HH Judge Appleton as demonstrating that the delay of the defendants is unjustified.  She invites us to refuse all four applications.

25.	I can state the reasons for my conclusions relatively shortly.   The overriding objective requires the court to deal with this case justly.   It is not our function to penalise the defendants for failing to deal promptly and sensibly with their business affairs.  Nor should we be astute to preserve for the Hardys the benefit of a judgment to which, on their own case, they are not entitled.   Equally we should not deprive them of the benefit of a judgment obtained because the defendants failed, without good reason, to appear at the trial, if, after a retrial, it might be re-granted.   
26.	In my view it is clear, for the reasons I have given in paragraph 13 above, that the order of District Judge Anson declaring the Hardys to be entitled to a lease for 90 years terminable on death and ordering specific performance of the oral agreement was wrong in law.  It does not need any evidence from the defendants to demonstrate that.  Nor is the conclusion open to doubt as counsel for the Hardys found herself unable to support it.  In so concluding I am not gainsaying any conclusion of District Judge Bland or of HH Judge Appleton on the CPR Rule 39.3 application.  Accordingly I would grant the extension of time sought for filing the appellants’ notice and give permission to appeal.   In addition I would allow the appeal and order a retrial of that part of the claim.

27.	Counsel for the Hardys strenuously argued that even if we came to that conclusion we should not interfere with the monetary judgment.  In relation to the sum for lost profits, namely £8,000, prima facie the judgment is excessive because the covenant for quiet enjoyment implied into the lease for 90 years terminable on death falls with the lease.  Without that covenant the recovery of any such amount would depend on an entirely new cause of action.  There is no reason why the defendants should be precluded from contesting it.

28.	The sum of £31,000 is claimed to be recoverable under the terms of the oral agreement.  It is not self-evident that that part of the agreement is either valid or invalid but the invalidity of the contract as an agreement for a lease plainly raises arguments not previously considered, as well as the other issues to which counsel for the Hardys referred.   In the circumstance that there will be a retrial of part of the claim I consider that the better course is to set aside the whole of the order of District Judge Anson.

29.	Given that I have concluded that there should be a retrial on the basis of the matters before District Judge Anson, namely the particulars of claim and the written and oral evidence of the Hardys, it has not been necessary to consider any of the additional evidence on which the defendants sought to rely.  Nor will they need permission to rely on it at any new trial.  Accordingly it is not necessary to deal with that part of the application of the defendants.  I say no more about it.

30.	If the other members of the court agree with my conclusions then consideration should be given to the future conduct of these proceedings.  In the course of argument we suggested that we might remit the claim to the Manchester County Court with a direction that it be tried there by one of the specialist Chancery Circuit Judges.  I understood that in the event that we allowed the appeal and ordered a new trial that course would be welcomed by both parties.  Accordingly I would make that order and give that direction.  In addition I would direct the claimant to issue an application returnable before one of those judges seeking directions as to the future conduct of this claim.

Summary of Conclusions

31.	For all these reasons, I would:
(1) extend the time of the defendants for filing the appellants’ notice,
(2) give them permission to appeal,
(3) allow the appeal, set aside the order of District Judge Anson and order a retrial of the claim,
(4) remit the claim to the County Court in Manchester and direct that it be tried by one of the specialist Chancery Circuit Judges,
(5) require the Hardys to issue an application returnable before one of those judges seeking directions as to the future conduct of the claim.

Lord Justice Hooper 

32.	I agree.

Lady Justice Rafferty

33.	I also agree.