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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Nelson & Anor v Clearsprings (Management) Ltd [2006] EWCA Civ 1854 (20 December 2006) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2006/1854.html Cite as: [2006] EWCA Civ 1854

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IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LEEDS COUNTY COURT
(HIS HONOUR JUDGE BUSH)

		Royal Courts of Justice Strand London, WC2
		20th December 2006

1. SIR ANTHONY CLARKE MR: On 22 September 2006 the judgment of this court was handed down dismissing Mr Nelson's appeal from an order made by HHJ Bush on 9 May 2005, allowing the appeal of the respondent from an order made by HHJ Giles on 7 January 2005. Owing to a misunderstanding, an order was made and drawn up by this court ordering the appellant to pay the respondent's costs of the appeal. It is not necessary to say anything about how the misunderstanding arose, because the respondent has properly recognised that the appellant should be permitted to make submissions on costs. We therefore formally set aside paragraph 2 of the sealed order, which bears the Court of Appeal stamp dated 28 September. We now consider what is the appropriate order for the court to make.
2. Before District Judge Giles, the respondent invited him to determine a preliminary point, namely whether, on the assumption that the proceedings were not served on the respondent, the respondent was entitled to have a judgment given in the proceedings set aside, ex debito justitiae, on the basis of the principle in White v Weston [1968] 2 QB 647. The appellant and his co-claimant, Miss Handley, argued that the answer to that question was no. They also argued that the court's jurisdiction to set aside the judgment was exclusively governed by CPR 39.3(5) and that the court could only set aside the judgment if the respondent showed that it had "a real prospect of success at the trial" (see our judgment at paragraph 7).
3. The district judge accepted the claimant's submissions. As I indicated a minute ago, the reason why the district judge determined the matter at a preliminary issue was that the respondent had asked it to do so. The district judge reserved the costs. The respondent appealed to the circuit judge. The circuit judge, HHJ Bush, allowed the respondent's appeal. On the same assumption as the absence of service, HHJ Bush held that the principle in White v Weston still applied and that the respondent was entitled to have the judgment set aside ex debito justitiae. Before HHJ Bush, the issues which had been argued before District HHJ Giles were also debated, namely what I may call the White v Weston point and the CPR 39.5 point. However, as I understand it, his decision was based upon what may be called the White v Weston point.
4. We are told by Mr Smith that the question how, if there were a wider discretion, it should be exercised, was raised before HHJ Bush although he did not determine it. HHJ Bush ordered the claimants to pay the respondent's costs. The decision of the HHJ Bush was made on, I think, 9 May 2005. So far as the position on the underlying merits is concerned, the respondent's case was first outlined in paragraphs 9 to 14 in a statement by Miss Kirby, dated 24 June 2004. That was made for the purposes of the first hearing before HHJ Giles, which was on 8 September 2004. That hearing was adjourned because the respondent had first put its case on the basis of CPR 13 and it was pointed out on that occasion that this was not a case to which CPR 13 could apply, because this was not a case in which judgment had been given in default. It was because the respondent first put the case on the basis of the wrong rule that the matter was adjourned between 8 September 2004 and 7 January 2005.
5. In March 2005 the respondents served or, more accurately, sent to the claimants a draft defence, which was thus available before Judge Bush. The appellant, that is to say Mr Nelson, but not his co-claimant, issued an Appellant's Notice on 23 May 2005. The matter next came before the court on 20 June 2005, again before District Judge Giles. On that occasion, he tried the question of fact whether there had in fact been service of the original proceedings upon the respondent. He held that there had been no such service on the respondent. It followed that the assumption upon which District Judge Giles and HHJ Bush had made their decisions was proved to be correct. The claimants appealed that decision of District Judge Giles to HHJ Cockcroft. HHJ Cockcroft dismissed the appeal on that question. Nothing daunted, the claimants sought permission to appeal from this court. That application for permission was refused.
6. The position as to costs, when the matter was before District Judge Giles on 20 June 2005, is summarised in paragraph 10 of our judgment. The district judge ordered the claimants to pay the respondent's costs of the application to set aside the judgment and made an interim order for the payment of costs in the sum of £4,000. When the matter was before HHJ Cockcroft, he adjourned the claimant's appeal from the order of costs made by District Judge Giles, pending the outcome of this appeal, and he reserved the costs of the appeal before him. I note in passing that subsequently District Judge Giles suspended the operation of the case management directions which he had given, pending the outcome of this appeal. We were told that the adjourned hearing of the appeal against the order for costs and the question of the costs of the appeal to HHJ Cockcroft was to have been heard by HHJ Cockcroft this very day, but that has now been put off until 31 January 2007.
7. The matter is to some extent complicated by the fact that those proceedings, indeed all the proceedings except this appeal, have been between both claimants and the respondent, whereas this appeal is only between the appellant -- that is, Mr Nelson -- and the respondent. I will return to that in a moment.
8. On this appeal we heard argument on three matters: the White v Weston point; the CPR 39.3(5) point; and how the discretion should be exercised on the assumption that the principles in White v Weston did not apply and that CPR 39.3(5) did not apply. We considered the discretion of the court in this class of case in some detail (see paragraphs 20 to 51 of our judgment). We held that the court does have a discretion in this class of case, although one which is likely to be exercised in favour of setting aside a judgment, but that the position under the CPR is not governed by the strict principles in White v Weston.
9. Mr Jones submits that the appellant won the White v Weston issue in this appeal. However, while there is some truth in that submission, it has to be put in its context. It is clear from our judgment, especially from paragraph 12, that we identified as "the one central issue of principle in the appeal" whether, where an irregular judgment is given in favour of the claimant in the absence of service of the proceedings on the defendant, the application to set aside the judgment is governed by CPR 39.3(5). We held that it was not. The appellant thus lost on that issue.
10. It follows that if the preliminary issue or, more accurately, the preliminary issues before the district judge had been resolved as we have resolved them, he would have held that neither the principle in White v Weston, which the respondent was contending for, nor the principles in CPR 39.3(5), which the claimants were contending for, was applicable. Thus the claimants would have won on the White v Weston point but would have lost on the rule 39.3(5) point. It appears to me that that would inevitably have involved a consideration, either on that occasion or very shortly thereafter of the question: what then was the nature of the court's discretion in a case of this kind, and when and how should it be exercised? That is the discretion which we have considered in some detail and it appears to me that it would very soon have been appreciated that, on the facts of this case, any such discretion was almost bound to be exercised in favour of the respondent. This can be seen from paragraphs 52 to 55 of our judgment. In paragraph 52 we included this sentence:

"As the argument proceeded it became plain that whatever the answer to the issues raised by the application of rule 39.3(5), which the claimant raised as a preliminary issue, the judgment would have to be set aside."

We then set out the facts, as we understood them, in some detail. In paragraph 55 we said:

"It is not appropriate for this court to consider any of these matters in any detail, but we have no doubt that whatever test is applied and whatever discretion is being exercised, the respondent is entitled to have the judgment set aside so that the whole matter can be determined at a trial, both as between the second claimant and the respondent, and as between the appellant and the respondent. In our view, that should have been plain to all at the outset, and much time and money could have been saved if the district judge had been asked to consider the merits and not presented with a preliminary issue. However that may be, in the result the appeal must be dismissed on the ground that the judge was correct to hold that CPR 39.3(5) does not apply to an application to set aside an irregular judgment of this kind."

11. Mr Jones essentially makes two submissions, which are related. The first is that the appellant has won the White v Weston point and that the order for costs should reflect that fact. Secondly, he submits that this whole process of hearing and appeals has been bedevilled by the fact that the respondent took the preliminary point of raising the White v Weston issue before HHJ Giles in early 2005. I can see that this point has some forensic attraction. However, to my mind, the essential position is as follows: whatever the correct principle to be applied in this case, sooner or later this judgment would be set aside. That is something which should have been appreciated by the appellant from the outset. Yet he has sought throughout these proceedings to take every point available to him to avoid the setting aside of the judgment.
12. Although it can be said on his behalf that it was the respondent who raised the White v Weston point as a preliminary issue, it was the appellant and his co-claimant who raised the 39.3(5) point before the district judge and, as I indicated a few moments ago, if the district judge had decided the issues in the same way as we have done, the position would have been that although the respondent would have lost the White v Weston point, the claimants would have lost the 39.3(5) point, and it is inevitable that, very soon after that the whole question of discretion would have been raised, and it would have become quite clear that on any footing this judgment should be set aside. It appears to me that, looking at the overall merits of this matter, it is the appellant who appears to have been the prime mover in this litigation, who has been responsible for the incurring of very considerable costs.
13. In all due circumstances I, for my part, do not think that it would be just for us to make any order in relation to the costs of this appeal, other than that the appellant should pay the respondent's costs. Equally I see no reason to interfere with the decision on costs of the judge.
14. The question remains whether we should consider making any order in relation to the costs before District Judge Giles in September 2004 and January 2005, and June 2005, or the costs before HHJ Cockcroft, which have been reserved. There has been some debate about that. I recognise that Miss Handley is not a party to this appeal, so we cannot make an order which would affect her in any way. However, it appears to me that this court has jurisdiction to make an appropriate order in relation to those costs as between the appellant, Mr Nelson, and the respondent.
15. Ironically, it is Mr Jones who invites us to do that in order to save further costs, whereas Mr Smith invites us not to do it. However, we have taken the view that we should consider those costs because there has already been a disproportionate expenditure of costs in this not very substantial case and that we should therefore try at least to minimise the possibility of further expenditure of costs. Maybe it would be possible for some settlement to be reached between Miss Handly and the respondent, if we were to make orders as between the appellant and the respondent.
16. What then should be done? The first hearing to which I should refer, in respect of which the costs are open for consideration, is the one of the September 2004. It appears to me that the appropriate order in relation to that would be no order for costs. I do not think that it is appropriate that the appellant should pay the costs of that hearing, which had to be adjourned because the respondent was relying on CPR 13, which was wholly inappropriate.
17. What then of the costs in January 2005? As to those, I have reached the conclusion that the considerations which I outlined a few moments ago apply to that application. It appears to me that, having regard to the overriding objective and the justice of the whole matter, the appropriate order is that the appellant should pay the respondent's costs of that hearing. Indeed, the same is true of the proceedings before District Judge Giles in June 2005 and indeed before HHJ Cockcroft, insofar as he has not already made an order in relation to them. I should have observed earlier that it is of some significance perhaps that District Judge Giles had already made his decision on the facts before Ward LJ granted permission to appeal on 10 July 2005.
18. In short, stepping back from this whole matter, to my mind the fair order is that, apart from the one matter to which I have referred, the appellant should pay the respondent's costs of this litigation.
19. LORD JUSTICE WALLER: I entirely agree. The real issue between these parties, once judgment had been entered, was whether it should be set aside. Once the merits were examined, this was a case where the judgment was bound to be set aside and that is the position which the claimant could and should have accepted at a very early stage. His failure to do that has caused almost all the costs which have been incurred: those before the district judge, those before HHJ Bush, those before HHJ Cockcroft and those in this court. The only exception is those for the hearing on 8 September, where I agree with my Lord there should be no order as to costs.

Order: Appellants to pay Respondent's costs.