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England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Page v Champion Financial Managementltd & Ors  EWHC 1778 (QB) (06 June 2014)
Cite as:  EWHC 1778 (QB)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
(sitting as a Deputy Judge of the High Court)
| JOHN PAGE
|- and -
|(1) CHAMPION FINANCIAL MANAGEMENT LIMITED
(2) CHAMPION BUSINESS SOLUTIONS LIMITED
(3) CHAMPION CONSULTING LIMITED
(4) CHAMPION ACCOUNTANTS LLP
(5) PARK ROW ASSOCIATES LIMITED (IN LIQUIDATION)
Nigel Burroughs (instructed by Hewitsons LLP) for the Fifth Defendant.
Hearing date: 14 May 2014
Crown Copyright ©
MR SIMON PICKEN QC:
"the issue between the Claimant and the Fifth Defendant as to the effect of the default judgment against the First Defendant, and the operation and effect of section 39 of the Financial Services and Markets Act 2000, on the right of the Fifth Defendant to defend the claim against it on the grounds that the First Defendant was neither negligent nor guilty of any breach of contract".
"(1) If a person (other than an authorised person) –
(a) is a party to a contract with an authorised person ("his principal") which –
(i) permits or requires him to carry on business of a prescribed description, and
(ii) complies with such requirements as may be prescribed, and
(b) is someone for whose activities in carrying on the whole or part of that business his principal has accepted responsibility in writing,
he is exempt from the general prohibition in relation to any regulated activity comprised in the carrying on of that business for which his principal has accepted responsibility."
"The principal of an appointed representative is responsible, to the same extent as if he had expressly permitted it, for anything done or omitted by the representative in carrying on the business for which he has accepted responsibility."
"In the light of these confirmations, the Fifth Defendant looks to the Claimant to either withdraw the claim on a voluntary basis. Alternatively, if the Claimant is unwilling to do so, then the Fifth Defendant's position is that the Claim Form should be served, without a stay of the proceedings being granted, to enable a strike out application to be made. …".
"I do not want a full review of my financial situation but would like advice with respect to my existing investments and the suitability of this recommendation".
"No box was ticked on the client response form in relation to Stocksearch, but as the forms were completed and returned together, the Claimant reasonably presumed that the request in relation to Scion would be reciprocated in relation to Stocksearch. None of the Defendants gave any indication otherwise."
"I refer to your letter of the 8th May 2013 addressed to Champion Financial Management Ltd [the First Defendant]. Whilst we do not act for them we do act as insurance brokers for other Champion companies. Our understanding of the position regarding Champion Financial Management Ltd is that:
The Company no longer trades. It has not traded since May 2008.
The Company was an appointed representative of Park Row Associates Ltd [the Fifth Defendant] (FSA Appointed representative ref: 216759. FSA Principal Ref: 194087). The financial advice provided by the Company was given by Park Row authorised advisors. All investment business undertaken by Champion Financial Management Ltd was done as an appointed representative of and written by Park Row Associates. The Company did not carry any Professional Indemnity cover of its own as being an appointed representative of Park Row Associates Ltd it was included in their cover.
I understand that in the event of a claim being made against Park Row Associates Ltd and any of its appointed representatives the claimant must contact KPMG, …".
"2.04 Therefore, under the Act, our client is permitted to enforce any Judgment or Order obtained in respect of the 1st Defendant against your client, as if your client were the 1st Defendant.
2.5 The CMC will provide a timetable for expert evidence and document exchange (if necessary) in relation to the claim against the 1st Defendant. A date for a final hearing will also be scheduled. At that hearing the Master will order the 1st Defendant pay our client a specific amount.
2.6 Once that order has been obtained, our client will enforce against your client, relying on section 39 of the Act. Your client will not be able to contest the order at that stage."
"20. It is therefore the Claimant's intention to obtain Judgment for a specified amount against the 1st Defendant and then enforce this against the 5th Defendant, relying on section 39(3) of the Act.
22. Proceedings will not be served on the 2nd, 3rd and 4th Defendants until after the Pre-Action Protocol has been exhausted, and could be as late as 10.11.2013 (which is the final date that the court stated proceedings could be served on those parties). I have been informed by the 5th Defendant's solicitor that the 5th Defendant is presently looking to wind up the company. If the Claimant has to wait until proceedings are served on the 2nd, 3rd and 4th Defendant before proceeding with the claim against the 1st Defendant, there is a real risk that by that time the 5th Defendant will have disposed of its assets and been wound up. This will mean that the Claimant will not be able to enforce the Judgment for a specified amount that it has obtained against the 1st Defendant on the 5th Defendant, as the 5th Defendant may no longer exist."
"2.02 On receipt of the Judgment for a specified amount, our client will make an application to amend the Particulars of Claim to plead that your client is liable to the 1st Defendant [sic] under section 39 in the amount of the Judgment against the 1st Defendant. Your client will then have the opportunity to amend its Defence.
2.03 We cannot see that your client will be able to raise a triable Defence. If this is the case, we will recommend to our client that he seeks summary judgment against your client for the amount obtained against the 1st Defendant."
The effect of the default judgment against the First Defendant (the question of principle)
The Claimant's submissions
"Their Lordships turn to the first ground. In their view there is no doubt that by the law of England, which is the law applicable for this purpose, a default judgment is capable of giving rise to an estoppel per rem judicatam. The question is not whether there can be such an estoppel, but rather what the judgment prayed in aid should be treated as concluding and for what conclusion it is to stand."
"In their Lordships' opinion the New Brunswick Railway Co case can be taken as containing an authoritative reinterpretation of the principle of Howlett v Tarte in simpler and less specialised terms. This reinterpretation amounts to saying that default judgments, though capable of giving rise to estoppels, must always be scrutinised with extreme particularity for the purpose of ascertaining the bare essence of what they must necessarily have decided and, to use the words of Lord Maugham LC [in New Brunswick Railway Co v British and French Trust Corporation Ltd at  AC 1, 21] they can estop only for what must "necessarily and with complete precision" have been thereby determined."
"It is contended that [the surety] is liable to pay any sum which an arbitrator shall say is the amount of the damages. The guarantee must be expressed in very clear words indeed before I could assent to a construction which might lead to the grossest injustice. It is perfectly clear that in an action against a surety the amount of the damage cannot be proved by any admissions of the principal. No act of the principal can enlarge the guarantee, and no admission or acknowledgment by him can fix the surety with an amount other than that which was really due and which alone the surety was liable to pay. If a surety chooses to make himself liable to pay what any person may say is the loss which the creditor has sustained, of course he can do so, and if he has entered into such a contract he must abide by it. But it would be a strong thing to say that he has done so, unless you find that he has said so in so many words. The arbitration is a proceeding to which he is no party; it is a proceeding between
the creditor and the person who is alleged to have broken his contract, and if the surety is bound by it, any letter which the principal debtor had written, any expression he had used, or any step he had taken in the arbitration would be binding upon the surety. The principal debtor might entirely neglect to defend the surety properly in the arbitration; he might make admissions of various things which would be binding as against him, but which would not, in the absence of agreement, be binding as against the surety. It would be monstrous that a man who is not bound by any admission of the principal debtor, should be bound by an agreement between the creditor and the principal debtor as to the mode in which the liability should be ascertained. That is enough to dispose of the case."
"A judgment given in any action brought in any part of the United Kingdom by or on behalf of the person who suffered the damage in question against any person from whom contribution is sought under this section shall be conclusive in the proceedings for contribution as to any issue determined by that judgment in favour of the person from whom contribution is sought".
"The object of the rule of res judicata is always put upon two grounds – the one public policy, that it is the interest of the State that there should be an end of litigation, and the other, the hardship on the individual, that he should be vexed twice for the same cause."
"English law, and it is safe to say, all comparable legal systems, place high in the category of essential principles that which requires that limits be placed upon the right of citizens to open or to reopen disputes. The principle which we find in the Act of 1858 is the same principle as that which requires judgments in the courts to be binding, and that which prohibits litigation after the expiry of limitation periods. Any determination of disputable fact may, the law recognises, be imperfect: the law aims at providing the best and safest solution compatible with human fallibility and having reached that solution it closes the book. The law knows, and we all know, that sometimes fresh material may be found, which perhaps might lead to a different result, but, in the interest of peace, certainty and security it prevents further inquiry. It is said that in doing this, the law is preferring justice to truth. That may be so: these values cannot always coincide. The law does its best to reduce the gap. But there are cases where the certainty of justice prevails over the possibility of truth (I do not say that this is such a case), and these are cases where the law insists on finality. For a policy of closure to be compatible with justice, it must be attended with safeguards: so the law allows appeals: so the law, exceptionally, allows appeals out of time: so the law still more exceptionally allows judgments to be attacked on the ground of fraud: so limitation periods may, exceptionally, be extended. But these are exceptions to a general rule of high public importance, and as all the cases show, they are reserved for rare and limited cases, where the facts justifying them can be strictly proved."
"23. With all respect to Mr Weekes, as I think he appreciated during the course of argument, that particular submission really fails to appreciate the nature of a default judgment.
24. The default judgment that the court enters, whatever its precise form, is not one which is a judgment on the merits. It is a procedural judgment which the claimant is entitled to ask for if the claimant has served regularly on the relevant defendant because the relevant defendant has failed to comply with the rules, here with the rules requiring acknowledgment of service within a set period.
25. Since it is not a judgment on the merits, and since there are provisions in the rules that in certain circumstances a defendant against whom a default judgment has been entered may apply to set aside the default judgment - I have in mind Rule 13.3 - it seems to me that the effect of the default judgment is simply against Dunant. It has no effect whatsoever against any of the other defendants, either current defendants or defendants soon to be joined to the proceedings."
The Fifth Defendant's submissions
The Fifth Defendant's application to set aside the default judgment obtained against the First Defendant
CPR 12.8 and CPR 3.3 – the Court's own initiative
"(1) A claimant may obtain a default judgment on request under this Part on a claim for money or a claim for delivery of goods against one of two or more defendants, and proceed with his claim against the other defendants.
(2) Where a claimant applies for a default judgment against one of two or more defendants –
(a) if the claim can be dealt with separately from the claim against the other defendants –
(i) the court may enter a default judgment against that defendant; and
(ii) the claimant may continue the proceedings against the other defendants;
(b) if the claim cannot be dealt with separately from the claim against the other defendants –
(i) the court will not enter default judgment against that defendant; and
(ii) the court must deal with the application at the same time as it disposes of the claim against the other defendants."
"It is obvious that in the case of alternative liabilities in respect of the same matter, that the alternative claims cannot be dealt with separately from each other, at least where, as here, the claim against one is said to be contingent upon it being held that the claim against the other is wrong. ...".
On that basis, as Mitting J went on to say at paragraph , consistent with CPR 12.8(2)(b):
"the duty of the court was not to enter default judgment, but to deal with the application at the same time as the claim against the first defendant was disposed of".
"As the notes to that rule in the White Book make clear, Rule 12.8(2)(b) — that is to say the case where the claim cannot be dealt with separately — is essentially directing itself classically at the case where a claim is brought in the alternative against two defendants."
He then went on in paragraph  as follows:
"What it seems to me 12.8(b) [sic] is not dealing with is a case where the claimant has a claim against a number of defendants, not in the alternative, but on a several basis, and this, it seems to me, is a classic such case because, as I indicated earlier, the claimant's total claim is in the region of US$160 million plus interest, and so far as any judgment entered against Dunant is concerned, the effect of the judgment will be to impact upon in the region of US$30 million-odd, therefore a relatively small amount of that claim."
CPR 13.3 – the Fifth Defendant's own application
"(1) In any other case, the court may set aside or vary a judgment entered under Part 12 if –
(a) the 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.
(2) In considering whether to set aside or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly."
"It is very clear that in the new regime, the need for promptness has even greater significance than it had previously and that relief will be granted much more sparingly than hitherto."
"It seems to me clear that, although applications under CPR 13.3 do fall to be considered by reference to the new approach, there needs to be, and here I differ from Silber J, a somewhat different approach from that in relation to a case, as in Mitchell, falling within CPR 3.8. A sanction set out by the Rule itself for breach may be said to be pre-estimated as the appropriate course, absent good reason. But a sanction imposed pursuant to CPR 3.9, or an application by reference to CPR 3.9 and 13.3, may allow different or wider considerations to be taken into account, or more than trivial delays to be addressed ... ."
Burton J then went on to set aside the default judgment which had been obtained in the case before him, explaining that the delay concerned was 5½ months, that the applicant had "arguable defences, such as to more than satisfy the first condition in CPR 13.3(1)", and that there was "in this case the important issue of allowing the claim of immunity to be resolved" (the applicant being the Islamic Republic of Pakistan).
"The Civil Procedure Rules were intended to introduce a new era in civil litigation, in which both the parties and the courts were expected to pay more attention to promoting efficiency and avoiding delay. The overriding objective expressly recognised for the first time the importance of ensuring that cases are dealt with expeditiously and fairly and it is in that context that one finds for the first time in rule 13.3(2) an explicit requirement for the court to have regard on an application of this kind to whether the application was made promptly. No other factor is specifically identified for consideration, which suggests that promptness now carries much greater weight than before. It is not a condition that must be satisfied before the court can grant relief, because other factors may carry sufficient weight to persuade the court that relief should be granted, even though the application was not made promptly. The strength of the defence may well be one. However, promptness will always be
a factor of considerable significance ... if there has been a marked failure to make the application promptly, the court may well be justified in refusing relief, notwithstanding the possibility that the defendant might succeed at trial."
(1) I determine that it is open to the Fifth Defendant to defend the claim against it on the grounds that the First Defendant was neither negligent nor guilty of any breach of contract notwithstanding that the Claimant has obtained the default judgment against the First Defendant which it has obtained.
(2) Had I determined the question of principle differently, I would have set aside the default judgment in the exercise of my discretion under CPR
13.3. However, I would not have set aside the default judgment under CPR 3.3.