A3/2002/1225
Neutral Citation Number: [2002] EWCA Civ 1323
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
(Mr Peter Leaver QC
sitting as a Judge of the High Court)
 
The Royal Courts of Justice
The Strand
London WC2A 2LL

Wednesday, 18 September 2002

Before: 

LORD JUSTICE CARNWATH 

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IRENE WATSON 
Claimant/Respondent

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BLUEMOOR PROPERTIES LTD 
Defendant/Applicant
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Computer-aided Transcription of the Stenograph Notes of
Smith Bernal WordWave
190 Fleet Street   London EC4A 2AG
Tel:  020 7404-1400   Fax:  020 7404-1424
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The Applicant was represented by its Director, MR M CARTER
The Respondent did not appear and was not represented
 
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JUDGMENT
Wednesday, 18 September 2002 
1.	LORD JUSTICE CARNWATH: This is an application for permission to appeal from a decision of Mr Leaver QC sitting in the High Court. The background concerns a plot of land on which the defendant company had obtained permission to build a house, subject to a section 106 agreement requiring demolition of a bungalow on adjoining land. The land for the house was sold to the claimant. But in 2000, when her house was built and ready to occupy, the defendant, it was claimed, failed to demolish the bungalow, and these proceedings were begun for an injunction and damages. Shortly after that, as a result of pressure from the district council, in September 2000 the bungalow was demolished. 
2.	With that really one might have thought the substance of the case disappeared. But there was the outstanding claim for damages, which the claim said were likely to be in excess of £50,000. Faced with that, a counterclaim was mounted by the defendant, alleging that the building which was eventually built was in breach of covenants on the sale agreement, because consent had not been obtained to variations which had been made in the building.
3.	I can move on from there to last year. In July 2001 Master Moncaster dealt with the matter in this way. He gave a declaration that the defendant was in breach of the covenant (presumably on the basis that by then the injunction ceased to be necessary). Apparently the position before him was that the claim for damages had been abandoned by the claimant, which I understand to have been notified to the defendant in or around May 2001. So that disposed of the claim apart from the question of costs, which the master reserved to the judge who was to try the counterclaim. There was also apparently before him an application to strike out parts of the counterclaim, but he dismissed that. He then gave directions for the hearing of the counterclaim. There were further directions in December relating to the trial of the counterclaim, which included a direction that trial would be of liability only. 
4.	The matter came on before His Honour Judge Rich for trial on 29 January 2002. However, by this time Mr Carter, who had been a director of the company and had represented it at the hearings, had become bankrupt and was therefore disqualified to act as a director. The point was taken before His Honour Judge Rich that he was not able to appear for the company. That being the case, there was no one to appear for the company. His Honour Judge Rich therefore took the position that he should treat the counterclaim as not being supported before him and he struck it out. He said this: 
“It is by no means clear to me whether the defendant company would wish to pursue a claim so based, or if it does, what its proper remedy should be. But it has not today appeared to prove such claim, and in those circumstances, under Part 39(3), the court may proceed to strike out the counterclaim. It seems to me that, in the circumstances of this case, is the appropriate thing to do, although in making consequential orders I do have regard to the fact that the company itself clearly has not attended today because it did not know of today's hearing.”
5.	He went on to say that he anticipated that the company might apply to set aside the order, as Order 39 enables it to do if the application is made promptly and includes evidence of reasonable prospect of success at trial. He also said that if the company wished to make the application, it would be well advised to appear by someone entitled to appear on its behalf, and he suggested that perhaps Mr Carter would not be the best person to do that. 
6.	Having reached that position, he understandably said that the costs of the counterclaim should be paid to the claimant. He also awarded the claimant:
“ . . . the costs reserved of the claim, which appear to me to be the costs in the issue which was not abandoned -- namely, the claim for an injunction, replaced after the demolition of the building by a declaration.”
7.	He said that such costs were to be the subject of detailed assessment if not agreed, and he ordered that there be an interim payment of £10,000.
8.	There was then an application to set aside that order before Mr Leaver. This is the order appealed against before me. The company was, I think, represented by a solicitor at that hearing. But the judge rejected the application. He considered it under the three heads of Order 39.3(5) which say that a court may set aside the order if the applicant (a) acted promptly, (b) had a good reason for not attending the trial and (c) has a reasonable prospect of success at the trial. He said he would have exercised his discretion in favour of the company in relation to the question of good reason for not attending trial. As far as the failure to act promptly was concerned, he seems to have identified the failure as being one day late, for which he said there was no explanation. However, as it seems to me, the substantial reason for refusing leave was his view of the likely prospect of success on the counterclaim. On that question, he said that the counterclaim was “an extremely vague and unparticularised document” and was “hopelessly shadowy”. 
9.	Mr Carter has appeared before me seeking permission to appeal against that. I have also had in front of me letters from the solicitors for the claimant saying that he is in breach of orders to make the payments of interim costs, and saying also that his application to this court was out of time. As to that last point, Mr Carter has explained to me that he was told by the court office that he could file the appeal when he did, having regard to the delays caused by the Jubilee period when the court was closed. So I do not think that by itself would rule him out. 
10.	He has also asked me to hear him on behalf of the company. He has now been discharged as a bankrupt and been reinstated as a director, and there is a form from the company authorising him to appear. I gave permission, and I have certainly been assisted by his representations. 
11.	However, his main point is that he has not really had a fair hearing at any stage. He did not have a fair hearing before His Honour Judge Rich because he declined to hear him (for reasons that I have explained) and he says he did not have a fair hearing before Mr Leaver because Mr Leaver did not go into, in any detail, the merits of the counterclaim.
12.	I find this a troubling case for two reasons. First, the circumstances in which Mr Carter was not heard at the time fixed for trial were very unusual and did have the effect that the merits of the counterclaim were not gone into at that stage. Although Mr Leaver seems to have looked at it on the merits, it is not at all clear to me why he says that the counterclaim is so hopeless that it offers no reasonable prospect of success. He mentions that the breach alleged is that the house is on three floors instead of two which, on the face of it, appears to be a fairly clear and striking allegation. Whether it would result in any damage if it was indeed a breach of the covenant is, of course, a matter which would have to be gone into; but I find it difficult to understand why Mr Leaver treated it as so hopeless that it had no prospect of success, particularly in circumstances where Master Moncaster had refused to strike it out and there was no appeal against that.
13.	The other thing that I find troubling is the question of costs. As I have said, Master Moncaster reserved the costs of the claim. I have no detail of what the costs of the claim were, but clearly Master Moncaster thought that the trial judge ought to have an opportunity to consider that issue on the merits. One was faced with a case which in substance was resolved by the demolition of the bungalow in September 1990, but it was then continued in relation to a claim for £50,000 damages which was then abandoned shortly before Master Moncaster's order. On the face of it, there would be argument as to what extent the costs of the proceedings as a whole were inflated by that. That issue does not seem to have been investigated before Judge Rich, who seems simply to have assumed that his order would relate to those relevant to the Declaration. The issue of costs does not seem to me to have been investigated at all -- in Mr Leaver's court.
14.	I am left with the feeling that there are issues here which should be investigated. On the other hand, I am very conscious that I do not have a complete picture from the papers before me, and I think the right thing to do, rather than simply to grant permission to appeal, is to adjourn the application for permission to come on on notice to the claimant, but to direct that, if permission is granted, the hearing of the appeal follow immediately on the grant of permission. That will enable the claimant to put before me any material which she and her advisers think is relevant to the proper understanding of the way matters have proceeded here, but will also not cause additional expense by having yet a further adjourned hearing. In the meantime, pending further order, I would granted a stay of the interim costs orders but I would direct that if there are to be applications in respect of them, they can come on at the same time as the adjourned hearing. It is a matter that I direct be suitable for two Lords Justices and I would give it an estimate of half day, allowing for the possibility of permission being granted.
ORDER: Application adjourned to be heard as soon as possible on notice before two Lords Justices with appeal to follow if permission granted. Time estimate of half a day. Interim costs to be stayed, with any applications in respect of them to be heard at the adjourned hearing.
(Order not part of approved judgment)