Judgment in default of defence – Application to set aside – Proceedings stayed to enable compliance with pre-action protocol including mediation – Claimant entering judgment following aborted mediation hearing and after stay expiring – Claimant consenting to setting aside judgment following service of defence – Liability for costs of application to set aside – Whether claimant acting unreasonably in entering judgment – Costs awarded in favour of defendant
In 2008, the claimant brought proceedings against the defendant relating to its alleged liability for defects in a concrete floor slab that the defendant had built at the claimant’s nursery. The defendant maintained that it was not at fault but that the problems resulted from design defects for which another contractor was responsible. The parties twice asked the court to stay the proceedings to enable them to comply with the Pre-Action Protocol for Construction and Engineering Disputes, into which they wanted to incorporate a mediation hearing. The mediation was due to take place in April 2009, after the expiry of the stay, but was cancelled at the last minute when the defendant refused to participate owing to concerns that the mediation would achieve no useful purpose without the participation of the other contractor, which had indicated that it would not be attending. A few days later, the claimant obtained judgment in default of defence against the defendant.
The defendant applied to set aside the judgment pursuant to CPR 13. The claimant opposed that application and further sought an order that the defendant pay, on an indemnity basis, the costs wasted by its late decision to withdraw from the mediation. The day before the hearing of the application, the defendant served a detailed defence. The claimant thereupon agreed that the judgment in default should be set aside and the defendant’s application should be allowed by consent. A dispute arose as to who should bear the costs of the application. The claimant contended that the defendant should pay its costs, since its consent to the setting aside of the judgment had been caused by the defendant’s last-minute service of a defence. The defendant, however, submitted that costs should be awarded against the claimant on the ground that the judgment in default should not have been entered in the first place.
Held: The defendant was awarded its costs of the application to set aside judgment in default; the claimant was awarded its costs of the cancelled mediation hearing.
(1) There was no irregularity in the judgment in default within the meaning of CPR 13.2. The claimant had technically been entitled to enter judgment since the parties had, owing to their concentration on the mediation hearing, omitted to seek an extension of the stay previously granted by the court. However, the fact that a claimant was technically able to enter judgment in default did not mean that it was entitled to do so, if it had known that the defendant had a real prospect of defending the claim and therefore of setting aside such judgment. If a claimant entered judgment in default, in circumstances where it was enabled to do so by some technical glitch but was aware that the defendant had a real prospect of successfully defending the claim, it would be liable for the costs consequences of that decision. The claimant had acted unreasonably in seeking to enter judgment in default. The cancellation of the mediation by the defendant was not a proper excuse for the claimant’s decision to apply for judgment in default without reference to the defendant’s solicitor and in the knowledge that such an application would have be resisted had the defendant been so notified. The claimant accepted that the defendant did have a real prospect of successfully defending the claim. Consequently, the judgment in default had been obtained in an improper manner as a result of unreasonable conduct, and this was a “good reason” for setting aside the judgment, within the meaning of CPR 13.3(b). The defendant was entitled to its costs of the application to set aside.
(2) The defendant should not have cancelled the mediation hearing at short notice in circumstances where it formed an agreed part of the pre-action protocol process and, without the mediation, the pre-action protocol requirement for a without-prejudice meeting between the claimant and defendant could be fulfilled. Consequently, the defendant should pay the claimant’s wasted costs because of the late cancellation, but not on an indemnity basis since the defendant’s decision to withdraw had been made bona fides, albeit incorrectly. The assessment of wasted costs was properly a matter for agreement between the parties or, failing such agreement, for the costs judge. It was not a matter for the judge assigned to the case; consequently, no summary assessment would be made: Bovis Homes Ltd v Kendrick Construction Ltd [2009] EWHC 1359 (TCC) applied.
Thomas Crangle (instructed by Coffin Mew LLP, of Southampton) appeared for the claimant; Gideon Scott Holland (instructed by Shadbolt LLP, of Reigate) appeared for the defendant.
Sally Dobson, barrister