A/2001/0929
Neutral Citation Number: [2002] EWCA Civ 289
IN THE SUPREME COURT OF JUDICATURE                                                  
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM ADMINISTRATIVE COURT
(LORD CARLILE OF BERRIEW QC)
                                  Royal Courts of Justice
                                  Strand
                                  London WC2
 
                             Thursday, 31st January 2002
B e f o r e :

LORD JUSTICE SCHIEMANN

-and-

SIR CHRISTOPHER STAUGHTON

- - - - - - - -

BLACK ARROW FINANCE LIMITED
Claimant
- v -

(1) ORDERDAILY LIMITED
(2) ELKA WILKINSON
(3) TOTAL TECHNOLOGIES LIMITED
(4) MALCOLM BOURNE
(5) JOHN STEVENS
(6) ALAN WILKINSON
Defendants
- - - - - - - -
(Computer Aided Transcript of the Stenograph Notes of
Smith Bernal Reporting Limited
190 Fleet Street, London EC4A 2AG
Telephone No: 020 7421 4040
Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
- - - - - - - -
MR R BAILEY (instructed by Brooks & Co, Surrey KT22 9ET) appeared on behalf of the Claimant
MR R HIGGINS (instructed by Heckford Norton, Hertfordshire SG1 3BU)appeared on behalf of the Respondent
- - - - - - - -
J U D G M E N T
Thursday, 31st January 2002
1.	LORD JUSTICE SCHIEMANN: Sir Christopher Staughton will deliver the first judgment.
2.	SIR CHRISTOPHER STAUGHTON: The claimants, Black Arrow Finance Limited, are a finance house. Their claim is that in 1997 they were victims of a scam. This was achieved, so they say, by the first defendants, Total Technology Limited, purporting to sell refrigeration equipment worth £42,250 plus VAT to Black Arrow, who then leased the goods to the first defendants, Orderdaily Limited. The obligations of Orderdaily under the lease to pay the rental were guaranteed by Mrs Elka Wilkinson, the second defendant. That was all done on 15th September 1997. The only difficulty was that there were no goods. That would not have mattered to Black Arrow if the rental under the lease had been paid in the required instalments. But that did not happen. The first payment was due on 15th October, and the second on 15th November. Those may or may not have been paid.
3.	On 28th November 1997 a cheque reached Black Arrow for an amount equal to one of the instalments purporting to be drawn on the account of Orderdaily Limited and signed by Mr Alan Wilkinson, now the sixth defendant. We were told that no other payments reached Black Arrow. Then it was discovered there were no goods which they could recover to compensate for their loss.
4.	It would seem that the prospects of recovery in money from the first five defendants were not promising. So on 19th May 2000 Black Arrow amended their particulars of claim by leave of Master Prebble so as to include a claim against Mr Wilkinson as the sixth defendant. It was said in the amended pleading that he was the de facto controller and manager of Orderdaily Limited. In the pleading, as amended, there is first paragraph 14(a), which said:
“On 28th November 1997 the sixth Defendant, being a signatory on the first Defendant's account with National Westminister Bank plc, drew a cheque on the said account in favour of the Claimant in payment of the first instalment of the rental due under the lease. The sixth Defendant thereby represented to the Claimant that the goods had been delivered to the first Defendant.” 
5.	There the pleading stopped at that stage. There was no allegation that the representation was untrue. There was no allegation that Black Arrow had relied on that representation to their detriment. As Miss Bailey pointed out, they had parted with their money over two months before, when they paid it to Total Technologies. It may be that this payment persuaded Black Arrow to continue with the lease rather than holding it determined. It may even be that they were persuaded that there must be some goods because of this payment. But that is not asserted in paragraph 14(a).
6.	The other amendment was in the addition of paragraph 17(a), which said:
“If, which is not admitted by the Claimant, the signatures on the said documents were forged, the same were forged by the sixth Defendant and/or with the knowledge and consent of the second and/or sixth Defendant and in the further knowledge of both that the goods did not exist. In the premises the sixth and second Defendants conspired with each other to defraud the Claimant of the monies paid by the Claimant under the lease, by reason whereof the Claimant has suffered loss and damage.” 
7.	It is to be noticed there, that the allegation is contingent on the said documents being forged. It states that if that was the case it was done either with the knowledge of the second defendant, Mrs Wilkinson, and/or the sixth defendant, Mr Wilkinson.
8.	The “said” documents must, I suppose, be those referred to in the previous paragraph - that is to say the lease and the guarantee, though quite why Mr Wilkinson should forge his wife's guarantee with her knowledge and consent escapes me. But that may be just a minor issue. What I think was intended to be said was that Mr and Mrs Wilkinson were party to arranging the lease and the guarantee, whether genuine or forged, for which there were no goods which Black Arrow could fall back on if there were a default. In the prayer it is said that damages are claimed against the 6th defendant under paragraph 17(a).
9.	There was evidently some difficulty in serving the proceedings on Mr Wilkinson after the Master allowed the amendments to bring him into the case. No address for him was available; and he was not to be found. It seems that he was in Florida, at any rate some of the time. He claimed to be a police informer who had to move around various places and not disclose his address. On 20th July 2000 the solicitor for Black Arrow sought an order for an alternative method of service. They stated that Mr Wilkinson was believed to be resident in Florida. They said that they had asked the solicitors for Mrs Wilkinson whether she had an address for Mr Wilkinson and the solicitor replied that she would find out whether such an address could be given or obtained. There was no subsequent response from the solicitor for Mrs Wilkinson.
10.	It was also asserted before the Master that Mr and Mrs Wilkinson were not only married, but also had a small child together. This was in the application form for an order for alternative service, in which the solicitor for Black Arrow said:
“Although I have not heard back from the second Defendant's solicitor in that regard I believe from my conversation with her that her client is aware of the sixth Defendant's whereabouts and is in contact with him.” 
11.	He went on:
“Indeed these defendants are not only married but they have a small child together and it is unlikely that they do not feel the need to communicate on matters relating to their child if not relating to these proceedings.” 
12.	He concludes:
“In view of the above I believe that documents which are served on the second Defendant, including on her solicitors, are likely to come to the attention of the sixth Defendant.”
13.	There is then a statement: 
“(I believe) (The applicant believes) the facts stated in Part C are true” 
	- and there is an instruction to delete as appropriate. That has not been complied with; and the solicitor signs.
14.	Some time before in an application for an injunction Mrs Wilkinson had made a witness statement as follows on page 52:
“My husband and I are separated, which led to my return to the United Kingdom in late 1988, and are currently in the process of divorce proceedings. My husband previously attempted to seize my daughter and return with her to the United States although this attempt failed as a result of me obtaining a court order preventing him from taking my daughter out of the country. Until December 1999 my husband was remanded in custody charged with soliciting my murder in that he arranged for a contract to be put on my life in order, I believe, to make a claim on a policy of insurance on my life which was worth £350,000 and which named him as a beneficiary.” 
15.	That was on 28th February 2000. In my view the information in that paragraph should certainly have been put before the Master on the application for leave to serve document intended for Mr Wilkinson on Mrs Wilkinson's solicitor in an envelope addressed to him. The Master was not told that. It is said by Mr Higgins that it was apparent from what was said that husband and wife were not living together. But that, to my mind, is not a sufficient answer.
16.	Miss Bailey, for Mr Wilkinson, goes further and says there was a conflict of interest between them. The claim against Mr Wilkinson was, in effect, an alternative to the claim against Mrs Wilkinson. I myself regard that as rather far fetched and think it unlikely that on that ground either the solicitors or Mrs Wilkinson herself would decline to pass on the information to Mr Wilkinson that he was being sued; but for all one knows there may be something in it. At the later stage when the solicitor for Black Arrow telephoned the solicitor for Mrs Wilkinson and got through to the secretary of the solicitor, he had no difficulty in obtaining from the secretary the information that the documents supposed to be passed on to Mr Wilkinson were no longer in the file at Mrs Wilkinson's solicitors. This degree of co-operation was not in the interest of Mr Wilkinson.
17.	I regard that as a circumstance which makes one regard these default judgments in this case with caution. Of course it is right to say, as is said for Black Arrow, that there was no other way of serving Mr Wilkinson except perhaps to put an advertisement in the paper either here or in Florida. The Master may have thought that the best thing to do was to have a try and see if it worked.
18.	A month and a half later on 7th September Mr Wilkinson telephoned the solicitor for Black Arrow. A charging order had recently, as I gather, been imposed on some property of his. He spoke on his mobile phone; so the call could not be traced. He had been told, he said, that there was an action against him. The conversation that follow is recorded on the part of Black Arrow by Mr Brooks, their solicitor. Amongst other things he said to Mr Wilkinson that he had obtained default judgment against Mr Wilkinson. This was an unfortunate error. What had happened was that papers had been lodged for the purpose of obtaining a default judgment. The office staff had told Mr Brooks that default judgment had been entered and that it was going to the Master. What exactly happened I do not know, but it was not until November that a default judgment was in fact entered. Mr Brook is not to be reproached for that, although he may have wondered as time went by why nothing emerged from the offices of the court.
19.	There are two significant points here. First, any delay on the part of Mr Wilkinson in seeking to have the judgment set aside could not start to run on 7th September when he was told there had been a default judgment, not until 17th November when there actually was a default judgment. Secondly, and this is speculation, it may be that Mr Wilkinson arranged his future affairs on the basis that there had been a default judgment already, rather than on the basis that one had been applied for but not yet granted.
20.	There is a dispute as to whether Mr Wilkinson said that he had not received any papers. The tenor of the attendance note would seem to show that he was saying that he had not received any papers in the action, as he has said since. He says that during the conversation he asked for the papers to be sent to Droitwich Police Station. That does not feature in the attendance note from Black Arrow's solicitor. What does feature in the attendance note, is that Mr Wilkinson ended up by saying he would call the court for advice. He declined the telephone number of Albion & Co, who presumably were then the solicitors of Mrs Wilkinson, and said he would speak to the police who would probably provide an address so that he could be sent the papers.
21.	By an order made on 17th November 2000, in which Mr Wilkinson was described as Mr Alan Wilkinson and others, the defendants, it was said:
“No acknowledgement of service having been filed... it was ordered that the defendant must pay the claimant an amount which the court will decide, and costs. To prepare for the hearing.” 
22.	The order continued:
“Master Prebble orders that: Application for directions for the assessment should await the outcome of the trial of liability as between the claimant and the 2nd defendant.” 
23.	That was a point which was raised later by Rix LJ on the application for permission to appeal by Mr Wilkinson. The allegation against Mr Wilkinson in paragraph 17(a) of the amended pleading was conditional. It said if, which was not admitted, the signatures on the lease were forged they were forged by Mr Wilkinson. That remained contingent at the date of the judgment.
24.	On 20th December 2000 a further order was made by Master Prebble. It recited hearing counsel for the claimants, and the defendants not attending, and then ordered that damage be assessed against the third, fourth, fifth and sixth defendants in the sum of £62,286.31, inclusive of interest plus costs. Once again the judgment was served on the solicitors for Mrs Wilkinson so that they should pass it on to Mr Wilkinson.
25.	In a separate order of the same date it was provided that claim against the second defendant be stayed, pursuant to CPR Part 26.4, until further order. Part 26.4 of the Civil Procedure Rules does not give one much enlightenment as to the purpose of that, it merely states that a stay may be granted. In fact it was nearly a year later on 30th October 2001 when the particulars of claim were reamended, no doubt in consequence of what Rix LJ had said about the claim against Mr Wilkinson being contingent, or for some other reason. I shall return to that in a moment.
26.	Rix LJ said in his judgment that it seemed that Mr Wilkinson only learnt of the judgment of 17th November on 19th January 2001. I am not sure whether that is accepted, it probably is not; but that is what seemed to him to be the case. It was accepted by Lord Carlisle QC, that Mr Wilkinson could be taken as having applied to set the judgment aside on 31st January. In view of the fact that there was no default judgment until 17th November the complaint about delay is considerably diminished. It was not in fact until 5th March 2001 that the application to set aside was put in motion. But the judge was prepared to condone part of that delay; no doubt it was due to difficulty with legal aid and such like.
27.	The application to set aside the judgment in default came before Lord Carlisle on 5th April 2001. It was dismissed. He referred to it as a proceeding based on fraudulent misrepresentation, but that seems to me doubtful in the light of pleading in paragraph 14(a).
	Part 13.3 of the Civil Procedure Rules provides:
“... the court may set aside or vary a judgment entered under Part 12 if -
(a) 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.” 
28.	In (2) it says the court must have regard to whether the application has been made promptly.
29.	Lord Carlisle paid considerable attention to the question whether there was a real prospect of successfully defending the claim, and held that there was not. He also attached importance to delay, which he attributed as dating back to September. He appears to have omitted to notice, if he was told, that there had been no default judgment on 7th September. He may not have known that the parties were estranged at the time when the order was made for alternative service. He may not have known that the Master had not been told that. We are of course reminded that the witness statement of Mrs Wilkinson may well have been in the bundle both before the Master and before the judge. There may have been a great many other documents as well. So one cannot on that ground say that the Master must have been well aware of that. The judge apparently failed to observe that the judgment was based on a contingency.
30.	For my part I consider that the procedural errors in this case need to be considered without regard to the prospects of Mr Wilkinson successfully defending the claim. I have mentioned more than once that the order for alternative service was made apparently without the full facts. That in itself is a matter for concern. What is also a matter for concern is that the pleading as it stood did not appear to justify the remedy sought. In paragraph 14(a), as I have said, there was no allegation sufficient to justify damages for fraudulent misrepresentation. It is not said that Mr Wilkinson knew that what he said was untrue. It was not shown that Black Arrow relied upon it. As to the claim in paragraph 17(a) that in the premises Mr and Mrs Wilkinson conspired with each other to defraud the claimant of the moneys paid by the claimant, that was put on the hypothesis, which Black Arrow denied, that the signatures on the guarantee and the lease were forged by the sixth and second defendants.
31.	The matter is taken much further, as it seems to me, by a reamended pleading made pursuant to the order of Master Eyre, as it says on its face, dated 26th October 2001 - that is to say sometime after the application for permission to appeal before Roberts Walker and Rix LJJ. In that pleading, first there is added at the end of paragraph 14(a) the words “when the sixth defendant well knew that the same did not exist” - that is the goods; and paragraph 17(a) is rewritten by the deletion of the words “by the sixth defendant”, where it is said the same were forged with the knowledge and consent of the sixth defendant also, and replaced, so far as the sixth defendant is concerned, by a paragraph 22(a). It says that the sixth defendant conspired with the fourth and fifth defendants to defraud the claimant of the moneys paid by the claimant under the lease, by reason whereof the claimant has suffered loss and damage.
32.	Mr Higgins said that that pleading was merely directed at the second defendant, Mrs Wilkinson, when there was an application for summary judgment by her at some time in December 2001 or January 2002. But it is the pleading which is amended, not the pleading as against anyone in particular. And it is apparent that the amendments to the pleading include matters which affect Mr Wilkinson. In particular the words added at paragraph 14(a) affect him, and the words deleted in paragraph 17(a) affect him, as they removed the claim against him. And it again affects him in paragraph 22(a) where it is said that the sixth defendant conspired with the fourth and fifth defendants, not as previously said, the second defendant.
33.	The rationale of a judgment in default of defence, as it seems to me - at any rate in the ordinary way - is that a defendant who has failed to acknowledge service or serve a defence is deemed to have accepted the assertions in the particulars of claim so far as they concern him and so far as they concern liability. That is the ground upon which judgment in default can be entered. So on the one hand the amended pleading before it was reamended did not have any justification for a finding of fraudulent misrepresentation, which is what the judge appears to have acted upon. On the other hand, when it was reamended it produced a new and different charge against Mr Wilkinson that he had conspired, not with the second defendant, but with the fourth and fifth defendants.
34.	In those circumstances it seems to me that the judgment entered on 17th November 2001 if, which I doubt, it was justified by the state of the pleadings at the time, is certainly no longer justified by the present state of the proceedings. On that ground alone I would set it aside. I say nothing whatever about the merits of this case which remain to be tried. The other procedural errors cause me some concern but they are not in the event determinative. I would allow this appeal.
35.	 LORD JUSTICE SCHIEMANN: For substantially the reasons given by my Lord I agree that there is good reason why this judgment should be set aside. Not all of these reasons existed when Lord Carlisle QC gave judgment. The points that have weighed with me are first, that the case against the sixth defendant was not clearly pleaded initially; second, that it is by no means clear that the order for service by alternative methods was obtained after a clear disclosure of the marital situation between Mr and Mrs Wilkinson, a situation of which the claimant's solicitor was cognisant; third, it is by no means clear that the particulars of claim in fact reached Mr Wilkinson; and fourth, that there is now no longer any conspiracy alleged in clear terms between the sixth defendant and the second defendant. Judgment was obtained on the basis of such a conspiracy between those two parties.
36.	In those circumstances we grant permission to appeal; we grant permission to rely on the further evidence; we allow the appeal and the judgment of 17th November will be set aside.
(Application for permission to appeal granted; application for permission to rely on further evidence granted; appeal allowed; costs reserved to the trial judge).