England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		22 May 2009

Mr Justice Akenhead :

1. This is an application by the Defendants, Relicpride Construction Limited, Gerald Smythe and Anthony Smythe, to set aside a judgment in default of Defence that was entered on 6 April 2009.
2. The background to the claim which the Claimants, the National House Building Council ("the NHBC"), brought relates to the development by the Defendants of some Victorian premises known as Stanmore Hall. In September 1996, the Second Defendant, Relicpride, of which the two other Defendants were directors, registered with the NHBC.
3. Stanmore Hall was to be converted into a number of separate dwellings. The work was apparently done in 1997 and 1998 and thereafter, it seems (although I make no precise findings about this), a number of complaints were made under the NHBC arrangements against Relicpride. These related to what were said to be defects. Matters blew up into a greater dispute when it was said that Relicpride did not put right all the defects of which they were notified. It is pleaded that the consequence of that is that the Claimant entered into a compromise agreement with the residents' association, Stanmore Hall Properties Limited, in November 2002.
4. The two individual Defendants, who are brothers, Gerald and Anthony Smythe, gave indemnities, in effect, to back up the responsibilities of Relicpride to the NHBC. Those are dated 10 October 1996. The terms of them, briefly, are that each of them undertook to indemnify the NHBC against

"any costs, losses, expenses, damages or fines for which the NHBC becomes liable as a result of the failure by the member to comply with its obligations under…"

the NHBC rules of membership and the Build Mark insurance cover which is provided by the NHBC to the owners of the dwellings.

5. Proceedings were issued in September 2008 by the NHBC against these three Defendants.
6. Ramsey J, on 17 December 2008, ordered that service on the Defendants' solicitors, CKFT, would be deemed to be good service. It was clear by that stage that those three Defendants were instructing those solicitors and so it seemed to be a sensible approach.
7. An Acknowledgment of Service (qualified) was served and lodged within time.
8. Particulars of Claim had been served with the Claim Form on 18 December 2008, which set out in some detail what the claim was and is. Details of the defects for which it was said that the Defendants were liable were contained in an Appendix 1 to the Particulars of Claim, which lists a variety of defects ranging from water ingress to problems with kitchen sinks, bathroom mixer taps, paint, cisterns, cracking tiles, parquet flooring lifting and various other defects. The major complaint appears to be (I know not) is the penetration of damp, roof leaks and the like.
9. The Defence was due on 15 January 2009. On 19 January 2009, no Defences having been served, the Defendants made an application for an extension of time to object to jurisdiction. The NHBC's solicitors agreed that there should be an extension of time up to 5 February to object to jurisdiction and four weeks up to 12 February for the service of the Defence.
10. By a consent order of 5 February 2009, the Defendants were granted a further four week extension of time for the service of any Defence up to 12 March 2009.
11. On 20 February, there was a hearing at which the Defendant's application to extend time to object to jurisdiction was adjourned for seven days to allow the Defendants to provide evidence in support. I heard that application. Mr Roden, the solicitor for these Defendants, attended.
12. The following week, on 27 February, I heard a further application by the Defendants. I dismissed the application for an extension of time to object to jurisdiction. That has not been challenged or appealed. I granted the Defendants a further two weeks' extension of time for service of the Defence. That was not a final order, and I indicated during my judgment on that application that, if there was to be an application for further time, it would need to be supported by clear evidence and the application should be made before the further time extension up to 27 March expired.
13. Unknown to the Court, on 26 March 2009, the Defendants' solicitors sought a further four week extension from the Claimant's solicitors for the service of the Defence. The Claimant's solicitors gave an extension of time on 31 March until 1 April, but indicated that they would agree a further extension until 10 April if certain conditions, such as it being a final order and that costs orders should be paid, were met. Those conditions were not accepted by the Defendants.
14. The Defendants' solicitors prepared an application on or about 1 April 2009 to extend time for service till 24 April. Unknown to them, on that day the Court received an application (ex parte necessarily) from the Claimant for leave in effect to sign judgment in default of Defence against the Defendants. That was, as I recall, the Thursday and I received the papers and decided to defer giving permission to sign judgment until the following Monday, expecting that there might be an application by the Defendants for further time. There was no such application and, on Monday 6 April 2009, I approved the entering of judgment in default against the Defendants.
15. That draft application from the Defendants' solicitors, which I have seen, was never served because, on 6 April, the Defendants' solicitors were informed that judgment in default had been entered.
16. That draft application was supported by a sworn and signed statement by Mr Roden, which made it clear that he and his firm had by then received substantive instructions to prepare the Defence, but needed until 24 April to do so. The Defendants through Mr Roden made it clear that a ground previously advanced about illness of a young daughter of one of the individual Defendants was something which had been overcome and that she was now out of danger, as a result of which Mr Roden and his partner, Mr Taylor, had lengthy telephone conferences on 26 March 2009 and with the Third Defendant on 31 March 2009. There seems, therefore, to have been no good reason why the Defence could not have been served within the timetable that Mr Roden himself, based on instructions, was putting forward at that time.
17. Thus it was that a further seven weeks went by and the Claimant decided, unsurprisingly, to seek to have its damages assessed. That application was issued some ten days ago and statements in support of that application are dated 18 May and I am told (and I have no reason to doubt) were served either on that day or the following day, 19 May, for a hearing on the assessment of damages today.
18. Last night, after close of business, this Court's office received a witness statement, timed at about 6.45 in the evening, again from Mr Roden, in effect, supporting an application to set aside the judgment that had been entered in default some six or seven weeks before. That was supported by a skeleton argument, which was finalised this morning, from Counsel for the Defendants.
19. The witness statement of Mr Roden served late yesterday does not seek to explain in any way why it has taken since 6 April to apply to set aside. Similarly, it does not seek to explain why the Defence, at least in draft, could not have been prepared by now. Mr Steynor, Counsel for the Defendants, has made it clear that, for him (and indeed I suspect any Counsel), it would take three to four weeks to prepare the Defence. So, contrary to what had been said by Mr Roden in his witness statement in early April, a substantial further amount of time is now required.
20. CPR Part 13.3 provides:

"(1) In any other case, the court may set aside or vary a judgment entered under Part 12 if –

(a) the defendant has a real prospect of successfully defending the claim; or

(b) it appears to the court that there is some other good reason why –

(i) the judgment should be set aside or varied; or

(ii) the defendant should be allowed to defend the claim.

(2) In considering whether to set aside or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly."

One needs also to look at this in the context of the overriding objective.

21. As I have already indicated, no ground is advanced in Mr Roden's witness statement for the delay in making this application. Mr Steynor has indicated that there are or may be reasons. There may possibly be medical reasons why there has been a delay in making the application, but that seems a surprising matter to put forward given what Mr Roden himself said in the witness statement to which I have referred earlier in this judgment. Mr Steynor submits that his clients might wish to have more time before I give this judgment to put in further evidence to support their application as to any possible medical reasons why this application has been made late.
22. So far as any medical reasons are concerned, it seems to me clear that, if there were any before judgment was entered, I (and I suspect the Claimants) had already taken those into account in granting an extension of time for the service of the Defence up until the date in March. As Mr Roden has said, the medical reasons relating to the Third Defendant's daughter had, fortunately, disappeared before the end of March. I simply do not find it credible that there are or may be some medical reasons now to explain the delay in making this application. I am, therefore, quite satisfied that the application to set aside has not been made promptly.
23. I have been referred to a decision of His Honour Judge Coulson QC (as he then was) in Salim Khan v Edgbaston Holdings Limited [2007] EWHC 2444 QB I have no reason to consider that the learned Judge did not set out the law and practice accurately so far as what "promptly" meant. He refers with approval to what Simon Brown LJ (as he then was) said in Regency Rolls Ltd v Murat Carnall [2000] EWCA (Civ) 379, that it is necessary for an applicant to establish that:

"… he has acted with all reasonable celerity in the circumstances."

The onus must be on the Applicant, and the Applicant has got nowhere near discharging that burden in this case.

24. The next matter I need to consider is whether or not the Defendants have established that they have a real prospect of successfully defending the claim. Again, the onus must be on the defendant making the application to set aside the judgment against him that he has a real prospect of successfully defending the claim.
25. Mr Steynor initially advanced the argument that a claim under the indemnities would or could be barred by limitation, but he conceded, wholly properly, in reply that, as the indemnities were given in forms which were executed as deeds by the individual brother Defendants there would be a 12 year limitation period running at least from 1996 onwards, therefore, there was unlikely to be a limitation Defence. Mr Steynor has suggested, and has gone as far as he properly can in suggesting, that there may be further Defences on the merits which may emerge.
26. It seems to me that that is not a sufficiently effective way of seeking to establish that the Defendants have a real prospect of successfully defending the claim. This may be attributable to the fact that this application has been left to beyond the eleventh hour to make, but, even with considerable skill, Mr Steynor has been unable to point to a defence upon which the Defendants would have a real prospect of successfully defending the claim. The most he can say is that there "may" be defences and that, with respect, cannot be enough.
27. It seems to me that the Defendants simply have not established that they have real prospects of successfully defending the claim. Nor have they established that they acted promptly in making this application. On that basis, the application should be and is dismissed.
28. I add one further point, which deals with an arbitration agreement between the NHBC and Relicpride. It is said by Mr Steynor that the company, Relicpride, would wish to proceed to arbitration to have this dispute resolved and that there was a time in 2004 when the NHBC and Relicpride did discuss in some detail the reference of the disputes to arbitration.
29. Under the NHBC Rules, there is an arbitration clause, but it is a limited one. It does not cover all disputes. It is only disputes under Rule 26 or 27 that are referred to arbitration by Clause 55a of the NHBC Rules. Rule 27 relates to work in respect of which the NHBC has given written notice to the builder to put right or to carry out which it has not carried out. Rule 26 relates to the unreasonable withholding of cover, and that is not relevant on any count.
30. It seems to me that whether or not there is an arbitration agreement between the parties is not something which goes to whether or not the Defendants have a real prospect of successfully defending the claim, but it might be the case that that would fall into one of the residual grounds in Part 13.3(1)(b), that

"… it appears to the Court that there is some other good reason why (i) the judgment should be set aside".

Thus, it is argued that the judgment should be set aside so that an application can be made under section 9 of the Arbitration Act 1996 to enable the disputes to be referred to arbitration.

31. I am not satisfied, however, that that would be a good ground. Certainly, the Defendants, Relicpride amongst them, have not acted promptly in any event in making the application to set aside. Secondly, as I have said, they have not established that they have any real prospect of successfully defending the claim. Thirdly, the NHBC arbitration clause is a limited one; and it is clear from the pleading that there are elements of the claim which are not in respect of liability arising under Rule 27, albeit that there are, however, some claims relating to what is in effect a liability under Rule 27.
32. Rule 27, however, suggests that the arbitration envisaged is one where there is a dispute between the NHBC and the builder as to whether or not any additional works which the NHBC notifies the builder should be done and there is some dispute about that before the work is done. That is unlikely to be the substance of the dispute between the parties. Its reference to arbitration would be one which would not materially take the matter forward.
33. I add a fourth reason that there is some reason to doubt whether Relicpride as a company is worth anything. Although that would not necessarily be a reason for refusal of an application under section 9 of the Arbitration Act 1996, it is a factor which it seems to me I can and do take into account in exercising my discretion to dismiss the application.
34. It follows from the above that the one and a half hours which was allocated to the assessment of damages has been taken up entirely by the Defendants' application, which I accept has been put forward properly as far as it goes albeit unsuccessfully. The result is that there is not time now to hear the assessment of damages, which will have to be deferred to a later date. I will hear the parties on appropriate directions for the assessment of damages. I make it clear, however, that, in line with the overriding objective, I am anxious to ensure that the assessment of damages is resolved before the end of July.