Factual and Procedural Background
The Claimants, the National House Building Council ("the NHBC"), initiated proceedings in September 2008 against the Defendants, Relicpride Construction Limited and two individual Defendants who are directors of Relicpride. The dispute arose from a development project involving the conversion of Victorian premises known as Stanmore Hall into separate dwellings. Relicpride, registered with the NHBC since September 1996, was responsible for the development work completed in 1997 and 1998. Complaints were made under NHBC arrangements regarding various defects in the work, including issues such as water ingress, roof leaks, and defects in fixtures and fittings.
The individual Defendants provided indemnities in 1996 to support Relicpride's obligations under NHBC rules and Build Mark insurance cover. Procedurally, on 17 December 2008, service on the Defendants' solicitors was deemed good service. The Defence was due on 15 January 2009 but was not served. Extensions of time for service of Defence were granted until 12 March 2009 and then until 27 March 2009. The Defendants failed to serve a Defence within these deadlines.
On 6 April 2009, after no Defence was served and no timely application for extension was made, the Court approved the entering of judgment in default of Defence against the Defendants. Subsequently, the Defendants applied to set aside this judgment, supported by statements from their solicitor and Counsel. The Claimants sought to proceed with an assessment of damages, which was deferred due to the Defendants’ application.
Legal Issues Presented
- Whether the Defendants’ application to set aside the judgment in default of Defence should be granted.
- Whether the Defendants have a real prospect of successfully defending the claim.
- Whether the Defendants acted promptly in making the application to set aside the judgment.
- Whether the existence of an arbitration agreement between the parties provides a good reason to set aside the judgment.
Arguments of the Parties
Defendants' Arguments
- The Defendants sought an extension of time to serve their Defence, supported by evidence of prior illness affecting one Defendant’s family, which had since resolved.
- Counsel for the Defendants argued that the Defendants might have further defences on the merits, though no specific defence with a real prospect of success was identified.
- The Defendants contended that an arbitration agreement under the NHBC Rules might require disputes to be referred to arbitration, and thus the judgment should be set aside to allow an application under section 9 of the Arbitration Act 1996.
- Counsel indicated the need for more time to prepare the Defence and for possible further evidence regarding medical reasons for delay.
Claimants' Arguments
- The Claimants argued that the Defendants had not acted promptly in applying to set aside the judgment.
- The Claimants maintained that the Defendants had not established a real prospect of successfully defending the claim.
- The Claimants pointed out that the arbitration clause in the NHBC Rules was limited and did not cover all disputes raised in the claim.
- The Claimants refused further extensions of time without conditions, which the Defendants did not accept.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Salim Khan v Edgbaston Holdings Limited [2007] EWHC 2444 (QB) |
Definition of "promptly" in applications to set aside default judgments |
The Court accepted the legal standard set out by His Honour Judge Coulson QC regarding the necessity for applicants to act with reasonable celerity. |
| Regency Rolls Ltd v Murat Carnall [2000] EWCA (Civ) 379 |
Requirement that an applicant must act with all reasonable celerity when seeking to set aside judgment |
The Court referred approvingly to Simon Brown LJ's statement emphasizing the burden on the applicant to demonstrate prompt action. |
Court's Reasoning and Analysis
The Court examined whether the Defendants had met the criteria under CPR Part 13.3 to set aside a judgment entered under Part 12. This requires either a real prospect of successfully defending the claim or some other good reason to set aside the judgment, alongside promptness in making the application.
The Court found no satisfactory explanation for the delay in applying to set aside the judgment, noting that the Defendants’ solicitor had previously indicated that medical reasons affecting one Defendant’s family had resolved before the deadline. The Court was not persuaded by the Defendants’ late submission that medical reasons justified the delay and concluded that the application was not made promptly.
Regarding the real prospect of success, the Court noted that the Defendants failed to identify any substantive defence beyond speculative possibilities. The concession that limitation would not bar the claim further weakened their position. The Court found that the Defendants did not demonstrate a real prospect of successfully defending the claim.
The Court also considered the Defendants’ argument concerning arbitration. The arbitration clause in the NHBC Rules was limited in scope and did not cover all disputes raised. The Court found no good reason to set aside the judgment on this basis, especially given the lack of promptness and real prospect of success.
Additionally, the Court took into account the financial viability of the company Defendant, Relicpride, as a discretionary factor against setting aside the judgment.
Holding and Implications
The Court DISMISSED the Defendants’ application to set aside the judgment in default of Defence.
The direct effect is that the judgment entered on 6 April 2009 remains in force against the Defendants. The Defendants have not been granted permission to defend the claim, and the assessment of damages will proceed at a later date with directions to be given. The Court expressed an intention to resolve the damages assessment before the end of July. No new precedent was established by this decision.