ROYAL COURT
(Samedi Division)
11 October 1999
Before: F C Hamon, Deputy Bailiff, and
Jurats Myles and Le Breton
BetweenJersey Agencies LimitedPlaintiff
trading as Designer’s Choice
AndAnthony Maximillian Churchill AllenbyFirst Defendant
Lydia Allenby (née Babilla)Second Defendant
Application by Defendants to set aside default judgment
obtained on 9 August 1999
Advocate S J Young for the Plaintiff
Advocate M J Thompson for the Defendants
JUDGMENT
THE DEPUTY BAILIFF: On 9 August 1999 judgment was obtained against the Defendants. The Acte of Court reads as follows:-
"BETWEEN Anthony Maximillian Churchill Allenby and Lydia Babilla, his wife ("the defendants"), OF THE ONE PART: and Jersey Agencies Limited, trading as Designer’s Choice ("the plaintiff") OF THE OTHER PART; actioning the defendants to pay the sum of forty-two thousand nine hundred and sixty-six pounds fifteen pence, which the plaintiff claims to be due to it in respect of the balance due on accounts rendered.
The action was called on 24 July 1998 and was placed on the pending list.
On 4 September 1998 pleadings having been filed, the action was set down for hearing.
And this day, being the day fixed for the hearing of the action in accordance with the provisions of Rule 6/22 of the Royal Court Rules, 1992, as amended, and the defendants not having appeared, but upon hearing their advocate and the advocate for the plaintiff, the Court:-
(1)condemned the defendants to pay to the plaintiff:-
(a)the said sum of forty-two thousand nine hundred and sixty-six pounds fifteen pence;
(b)the sum of £15,591.99, being interest to 6th August, 1999;
(c)contractual interest on the sum claimed at the rate of 2.5% per month from 7th August, 1999 to the date of payment;
(d)the costs of the action on a full indemnity basis; and
(e)interest on such costs in accordance with Practice Direction 93/1 from this day to the date of payment;
(2)authorised the plaintiff to cause the defendants’ moveables to be distrained on and sold; and
(3)ordered that execution of this Act should be stayed for twenty-eight days."
The Defendants now apply to have that judgment set aside. At the hearing on 9 August Advocate Lakeman represented them. They are now represented, on legal aid, by Advocate Thompson.
Mr Allenby has sworn a detailed affidavit on his own behalf and on behalf of his wife.
In that affidavit, sworn on 20 September, Mr. Allenby says that on 25 May 1999 Advocate Lakeman informed the Defendants by letter that he "would be attending at the Judicial Greffier (sic) on Thursday 27th May 1999 to fix a date for the trial of the action." There is then an allegation which is, on the face of it, disturbing, that the Defendants were never apprised of the date that had been fixed. There was voluminous correspondence and contact by telephone but as Mr. Allenby says in his affidavit "during the period my wife and I concentrated on other matters which we viewed as more pressing, for example the completion of a business deal, believing that there was no immediate urgency requiring us to instruct Olsen Backhurst & Dorey in any detail either with our response for Further and Better Particulars or in relation to the wider case!". He goes on to say "Of course, had we known that a date for the trial had actually been fixed, we would have given our attention wholly to the preparations for the trial".
Mr. Allenby filed a second affidavit with the Court on the same day as his first affidavit. It contained letters and correspondence which he wished the Court to see but which he declined to show to the Plaintiff as he claimed that they would not be disclosed on discovery. That is not a matter of contention at this hearing but there was one letter that Advocate Thompson allowed us to refer to in open Court. It is a letter dated 4 August 1999 to Mr and Mrs Allenby in Preston and it has as its opening paragraph these words:-
"As advised in previous correspondence, the Royal Court has determined that the trial of the action brought by Designer’s Choice is heard on Monday next."
Advocate Thompson told us that he had reviewed the whole file but could find no "previous correspondence" that referred to the date of the hearing. If that is so, then there has been a serious omission by the Defendants’ former legal advisers. It means that the Defendants first heard of a trial on 9 August when they received a letter in Preston on Saturday 7 August.
Advocate Young expressed the view that rather than instructing Advocate Lakeman to press for an adjournment, Mr Allenby should have taken immediate steps to have come to Jersey to explain his predicament to the Court. That may well be a council of excellence. In any event, it did not happen. The Court heard both counsel. It made the order but it suspended it for 28 days to allow the Defendants to take further action if they thought fit.
They have now done so. They have replaced Advocate Lakeman with Advocate Thompson again on a legal aid certificate. They were both in Court as was a Director of the Plaintiff Company.
We have been addressed in law and we have examined the affidavits and correspondence that have been filed. In particular, we have an affidavit of James de la Cloche, the Managing Director of the Plaintiff Company and an affidavit of Advocate Geoffrey Le Vesconte Fiott made on 23 February 1999. The affidavits are a devastating indictment of the Defendants.
In effect matters have got worse. The Defendants have fitted up a luxury flat with the Plaintiff’s materials. They have failed to pay their rental and in an action for unpaid rent the landlord has exercised his lien on goods which were the Plaintiff’s and which may as yet not have been paid for. They are living with friends. On the file of correspondence is a facsimile of a letter sent to Mr de la Cloche on 3 August 1998. It cannot be privileged. It has already been disclosed. It explains how Mrs Allenby is now deemed non-resident for UK Tax. They are both high profile business executives heavily engaged on a business venture which, we were told in Court, through counsel, could yield a profit of £500,000.
Advocate Thompson relied heavily on an English appeal case Shocked & Anor -v- Goldschmidt & Ors (1998) 1 All ER 372. That case clarified the position as to whether the test for setting aside a judgment is the same as that for setting aside a default judgment.
At page 381 Leggatt L.J explained the criteria:-
"....each case depends on its own facts and... the weight to be accorded to the relevant factors will alter accordingly ... I derive the following propositions or "general indications" ... (1) Where a party with notice of proceedings has disregarded the opportunity of appearing at and participating in the trial, he will normally be bound by the decision. (2) Where judgment has been given after a trial it is the explanation for the absence of the absent party that is most important: unless the absence was not deliberate but was due to accident or mistake, the court will be unlikely to allow a rehearing. (3) Where the setting aside of judgment would entail a complete retrial on matters of fact which have already been investigated by the court the application will not be granted unless there are very strong reasons for doing so. (4) The court will not consider setting aside judgment regularly obtained unless the party applying enjoys real prospects of success. (5) Delay in applying to set aside is relevant, particularly if during the period of delay the successful party has acted on the judgment, or third parties have acquired rights by reference to it. (6) In considering justice between parties, the conduct of the person applying to set aside the judgment has to be considered: where he has failed to comply with orders of the court, the court will be less ready to exercise its discretion in his favour. (7) A material consideration is whether the successful party would be prejudiced by the judgment being set aside, especially if he cannot be protected against the financial consequences. (8) There is a public interest in there being an end to litigation and in not having the time of the court occupied by two trials, particularly if neither is short."
With respect to Advocate Thompson’s enthusiastic support for this case, it is important but not overly so in the context of our decision. The Defendants are outside the 28 day suspension but it is clear that they did not delay in applying for a new counsel to represent them and once Advocate Thompson had been appointed he moved as speedily as the Court calendar allowed to fix a date. We can take these circumstances into account and in our view concentrate on rules and judgments in this jurisdiction.
Rule 9(3) of the Royal Court Rules, 1992, states that "any judgment by default may be set aside by the Court on such terms as to costs or otherwise as it thinks fit."
The whole meaning of the Rule has been examined by the Court of Appeal in Strata Surveys Limited -v- Flaherty and Company Limited (1994) JLR 69 CofA. In its conclusion the Court said this:-
"Since, in my judgment, the Royal Court approached this application on the basis of an incorrect interpretation of r.9/3, we have to review the exercise of the discretion under para.(2) of that rule afresh. My conclusion is that the discretion should be exercised in favour of setting aside the default judgment because, amongst other reasons (a) Strata has a reasonably arguable defence to the claim; (b) the default arose through no fault of Strata but solely through the error of its lawyer; (c) there was no delay by Strata before applying to set aside the default judgment; (d) serious injustice would be done to Strata if it were not be allowed to defend the action and to have the claim and its defences heard at trial; and (e) the plaintiff will suffer no injustice if the default judgment is set aside and its claim against Strata proceeds to trial. Accordingly, in my judgment we should give leave to appeal and to file further evidence on the appeal, and on the substantive appeal, the judgment in default dated August 20th 1993 should be set aside.
There are two final points which I wish to mention. The first is that I have no doubt that if the Royal Court had approached this matter on the basis of the interpretation of r.9/3 which I have held to be the correct interpretation, it would have reached the same conclusions on the facts as I have.
The second point is to note that in this case, as indeed in many other cases, the plaintiff gains nothing from taking a default judgment in August 1993 which has had to be set aside in February 1994 and has simply been delayed in the prosecution of its claim against all of the six defendants."
This is no place to enter into the merits of the claim. There are two accepted anomalies immediately apparent.
1.The quantum of the claim is not correct. That could of course be rectified by reference to the Judicial Greffier.
2.Although Advocate Lakeman was in Court, he did not demur when the Plaintiffs applied for and were granted contractual interest on the sum claimed at a rate of 2.5% per month from 7 August to the date of payment. We now find it difficult to see that contractual interest was ever agreed. The rate may well be too high a rate in any event.
We have carefully weighed up the criteria set out by the Court of Appeal. We cannot accept that the Plaintiff will suffer no injustice if the default judgment against the Defendants is set aside and the claim proceeds to trial. The Plaintiff has been out of its funds since 1998 and has already incurred substantial costs. We cannot enter into the merits of the claim when correspondence put before us on affidavit is claimed to be privileged. There is much in that correspondence that requires comment.
In its judgment, Strata Survey -v- Flaherty & Co. the Court cited with approval the words of Lord Atkin in Evans -v- Bartlam (1937) AC 473 at 480:-
"The principle obviously is that unless and until the Court has pronounced a judgment upon the merits or by consent it is to have the power to revoke the expression of its coercive power where that has only been obtained by a failure to follow any of the rules of procedure."
The Court later in its judgment said this:-
"...when an application is made under r.9 to set aside a default judgment, (a) the affidavit in support should deal with any defences on which the defendant wishes to rely if the judgment is set aside; (b) the affidavit in support should deal with the error or other reasons which led to the default; (c) the court should weigh all relevant factors including the merits of the defences put forward by the defendant, and the error or other cause of the default; and (d) in deciding whether or not to set aside the judgment, the court should keep in mind the fundamental principle stated by Lord Atkin in the words I have already quoted from Evans v. Bartlam."
We have no doubt that the judgment must be set aside but again we have no doubt that it will be set aside on terms.
If the Defendants wish to progress their defence they must deposit £15,000 by way of security for the Plaintiff’s costs. That deposit must be paid into Court within 28 days of the date of this judgment. If it is not paid within that time (or if the Court does not give an extension after application made during that time) then judgment will be entered for the Plaintiffs.
The quantum of that judgment and the interest thereon shall be assessed by the Judicial Greffier in the usual way.
If the deposit is made within the time stipulated then this Court would not expect any unreasonable delay before the action is heard. Counsel are to progress this matter timeously.
Authorities
Shocked & Anor -v- Goldschmidt & Ors (1998) 1 All ER 372.
Strata Surveys, Limited -v- Flaherty & Company, Limited (1994) JLR CofA.
Evans -v- Bartlam (1937) AC 473.