Redbourn Group Ltd v Fairgate Development Ltd, Court of Appeal - Technology and Construction Court, June 08, 2017, [2017] EWHC 1223 (TCC)

Issuing Organization:Technology and Construction Court
Actores:Redbourn Group Ltd v Fairgate Development Ltd
Resolution Date:June 08, 2017
 
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Neutral Citation Number: [2017] EWHC 1223 (TCC)

Case No: HT-2016-000363

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL

Date: 26 May 2017

Before:

THE HON MR JUSTICE COULSON

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Between:

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Mr Benjamin Fowler (instructed by Taylor Walton LLP) for the Claimant

Mr Simon Hale (instructed by Debenhams Ottaway Solicitors) for the Defendant

Hearing Date: 19 May 2017

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The Hon. Mr Justice Coulson :

  1. INTRODUCTION

  2. On 9 March 2017, the claimant (``RGL'') obtained judgment in default against the defendant (``FDL''). By an application dated 14 March 2017, FDL sought to set aside that judgment pursuant to CPR r.13.3. The application was opposed by RGL. There are four relevant witness statements, three of which have been served in the last few days. The hearing on 19 May took the full half day that had been allowed and I was obliged to reserve judgment.

  3. I set out an outline chronology in Section 2. I detail the applicable principles of law in Section 3. I deal with whether or not FDL has demonstrated a realistic prospect of successfully defending this claim and/or whether there is some other good reason to set aside judgment in Section 4. I address whether the application to set aside was made promptly in Section 5. I then go on to analyse the seriousness of FDL's failure and the reasons for that failure in Section 6. In Section 7 I consider all the circumstances of the case. There is a short summary of my conclusions at Section 8.

  4. OUTLINE CHRONOLOGY

  5. FDL appointed RGL to act as development and project manager in respect of a proposed development at 390-406, Wembley High Road. The proposed development involved three adjoining but distinct parcels of land: FDL's own building; the next door building, Pitman House, which FDL had bought but which was still tenanted; and the land at the back of both buildings, which was owned by Network Rail (``NWR''), but which was the subject of a proposed long lease to FDL.

  6. The contract between FDL and RGL was dated 26 February 2015, although it is common ground that RGL had performed some services prior to that date. The contract envisaged that, amongst other things, RGL would assist FDL in obtaining vacant possession of Pitman House, and negotiating the terms of the lease with NWR for the land at the back.

  7. The relevant terms of the contract included:

    (a) Clause 2, which obliged RGL to exercise the reasonable skill, care and diligence to be expected of a competent professional development manager in carrying out the services in accordance with the contract;

    (b) Clause 4, which dealt with remuneration by reference to schedule 4 of the contract;

    (c) Clause 7, which dealt with termination and gave each party the right to terminate if the other failed to remedy a material breach within 14 days of notification;

    (d) Schedule 3, which set out the services to be performed by RGL.

  8. In February 2016, the contractual relationship between the parties came to an end. Each side says that the other wrongly repudiated the contract. The complaints made by FDL about RGL's performance were set out in a letter of 24 February 2016, which I address in greater detail below.

  9. On 6 May 2016, RGL's solicitors sent a detailed letter of claim identifying specific sums due under the contract and noting that a future claim would be made for the damages caused by FDL's wrongful repudiation of the contract. FDL's solicitors replied on 17 May in relatively brief terms. RGL's solicitors sent further letters on 19 and 28 July 2016, which provided particulars of the fee claim and set out details of the damages claim. They also set out a full response to the general allegations of breach that had been made by FDL. In reply, on 29 July, FDL's solicitors said that they were still investigating FDL's own claim, and sought to dissuade RGL's solicitors from commencing adjudication proceedings. A fuller response was provided by FDL's solicitors on 28 September 2016, in which they again indicated that they were still assessing FDL's losses due to RGL's termination. This letter, the most detailed ever provided on behalf of FDL, made no criticisms of RGL that had not already been stated in the letter of 24 February.

  10. RGL served the particulars of claim in draft on 16 November 2016. FDL's solicitors did not reply until 1 December 2016, and then merely said that they were taking instructions. Hearing nothing further, RGL's solicitors commenced these proceedings on 23 December.

  11. The particulars of claim set out the claims for unpaid invoices and also the claim for damages arising out of the repudiation. It is common ground that, pursuant to the CPR, a defence had to be served by 25 January 2017. Mr Love, FDL's solicitor, said that he became aware of the claim on 3 January, but he did not seek any extension of time for the service of the defence until 20 January. He then sought an extension of time of 28 days (i.e. up to 22 February 2017) from RGL's solicitors.

  12. Mr Haider, the solicitor acting for RGL, replied on 24 January, refusing to agree to an extension of 28 days, but offering an extension of 7 days, until 4:00pm on 1 February. Mr Love then had a choice: he either had to agree to the 7 day extension offered by Mr Haider or, since time otherwise expired on 25 January, he had to make an immediate application to the court for a longer extension. In fact, he did neither. Instead he waited until 1 February 2017 (the extended date offered to him by Mr Haider which he had not accepted) and then made a formal application to the court for an extension of time until 22 February.

  13. At paragraph 16 of his second statement, Mr Love accepted that ``at this point I erred in that I mistakenly thought that the application would be listed in any event without further input on my part. I now appreciate that I misunderstood how the CE Portal operated and this was my error for which I apologise.'' Whilst I do not criticise Mr Love for this initial error, I consider that his witness statement is disingenuous and misleading. The documents show that Mr Haider expressly warned him by letter on 13 February that he needed to be proactive in order to fix a hearing date. Mr Love makes no mention of that letter in his statement, probably because he did nothing at all about it.

  14. The period for which FDL had sought an extension expired at 4:00pm on 22 February. No defence or counterclaim was served during that period. There was no communication of any kind between Mr Love and either the court or Mr Haider (other than Mr Haider's letter of 13 February, which Mr Love ignored). Accordingly, on 23 February, RGL applied to the TCC for judgment to be entered in default. I considered that application on the papers on 9 March 2017. Because FDL had failed to file a defence in the extended period which they themselves had sought, or in the two weeks thereafter, I entered judgment in default.

  15. On 14 March 2017, FDL made an application to set aside that judgment, supported by a short statement from Mr Love. Mr Haider responded on 10 May 2017. It was not until 11 May that FDL purported to serve a defence and counterclaim. This was followed by a second, more detailed statement from Mr Love of 15 May, purporting to deal with the merits of FDL's position. Since this contained matters which had never before been raised, I permitted RGL to rely on a subsequent statement from Mr McGovern, dated 16 May 2017, in response. Mr McGovern had been closely involved in all the relevant events on behalf of RGL.

  16. THE APPLICABLE PRINCIPLES

  17. In my view, two parts of the CPR are relevant to this application. They are r.3.9 (relief from sanctions) and r.13.3 (setting aside judgment).

  18. Rule 3.9 provides as follows:

    ``3.9 - Relief from sanctions

    3.9 (1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need--

    (a) for litigation to be conducted efficiently and at proportionate cost; and

    (b) to enforce compliance with rules, practice directions and orders.

    (2) An application for relief must be supported by evidence.''

  19. Rule 13.3 provides as follows:

    ``13.3 - Cases where the court may set aside or vary judgment entered under Part 12

    13.3 (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.''

  20. There was some debate in the original skeleton arguments as to whether r.3.9 was relevant to an application under r.13.3: Mr Fowler, on behalf of RGL, said that it was; Mr Hale, on behalf of FDL, said that it was not. My view, prior to being shown any authorities, was that r.3.9 was plainly relevant to any application to set aside: after all, there is no greater sanction than judgment being entered in default of a defence, and no more important relief from sanction than being allowed to set aside that judgment, so as to be able to put forward a defence. That initial view found some support in the notes at paragraph 13.3.5 of the White Book and the decision of HHJ Richardson QC (sitting as a High Court Judge) in Hockley v North Lincolnshire and Goule NHS Foundation Trust, 19 September 2014 (unreported).

  21. However, it subsequently became apparent that the relevance of r.3.9 to any application...

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