Cases for order 13 and order 22 setting aside

Evans Appellant; v Bartlam Respondent.

Lord Atkin, Lord Thankerton , Lord Russell of Killowen , Lord Wright , and Lord Roche .

Practice—Setting aside judgment obtained by default—Discretion of judge—Jurisdiction of Court of

Appeal to interfere with exercise of judge's discretion— R. S. C. Order XIII., r. 10; Order XXVII., r. 15.

Where a discretionary jurisdiction is given to the Court or a judge, the judge in Chambers is in no
way fettered by the previous exercise of discretion by the Master, although no doubt he will give the
weight it deserves to that decision.

A judgment debtor who asks for and obtains a stay of execution does not thereby approbate the
judgment or elect to treat it as binding so as to preclude him from thereafter seeking to set it aside
whether on appeal or otherwise.

While the Court of Appeal will not normally interfere except on grounds of law with the exercise of
the judge's discretion, if it is seen that on other grounds his decision would result in injustice being
done, the Court of Appeal has both the power and the duty to remedy it.

APPEAL by the defendant Evans from a decision of the Court of Appeal .

The defendant had betting transactions with, resulting in indebtedness to, the plaintiff. The latter's
agent threatened to report the defendant as a defaulter if he failed to pay the losses. Thereupon the
defendant, as the plaintiff alleged, promised to pay. The defendant not having paid, the plaintiff
brought an action against him for the amount, but the defendant failed to enter an appearance
within the stipulated time and judgment was signed against him by default. In reply to an application
by the plaintiff's solicitor for payment of the amount of the judgment, the defendant asked for time
so that he could make arrangements to pay, and time was given to him. Subsequently the defendant
entered an appearance to the writ, applied to have the judgment set aside, and for leave to defend.
The Master dismissed the application, but Greaves-Lord J. in Chambers set aside the judgment and
gave leave to defend upon terms.

On appeal to the Court of Appeal Slesser and Scott L.JJ. (Greer L.J. dissenting) came to the conclusion
that the judge was precluded from exercising his discretion to set aside the judgment by the fact
that with knowledge of the judgment the defendant applied for the matter to stand over for him to
see if he could arrange to pay, and the plaintiff had consented to let it stand over for seven days. In
Slesser L.J.'s opinion the defendant was seeking to approbate and reprobate; Scott L.J. took the view
that the defendant knew or must be presumed to know that he had the right to apply to set aside
the judgment, and by asking for and obtaining time he irrevocably elected to abide by the judgment.

The defendant appealed to this House.

Beyfus K.C. and Charles L. Henderson for the appellant. The view taken by the majority of the Court
of Appeal that the doctrine of approbation and reprobation or election applied to the facts of this
case has no application. Under Order XIII., r. 10 , the Court is expressly given power to set aside or
vary a judgment obtained by default upon such terms as may be just; see also Order XXVII., r. 15, to
the like effect, and Watt v. Barnett . Greaves-Lord J. made an order setting aside the judgment
obtained by default and giving leave to defend on terms. In doing so he exercised his discretion,
which was unfettered by the view taken by the Master in Chambers, and having done so his decision
cannot be interfered with. In Campbell & Co. v. Pollak , Viscount Cave said : "When a judge,
deliberately intending to exercise his discretionary powers, has acted on facts connected with or
leading up to the litigation which have been proved before him .... then it seems to me that a Court
of Appeal, although it may deem his reasons insufficient and may disagree with his conclusion, is
prohibited by the statute from entertaining an appeal from it." The principle there stated applies
precisely to the present case. See also Wright v. Mills 5 and Andromeda Handelsaktieselskab v.
Holme. 6 In the latter case Atkin L.J. said: "I think it is important to make it clear that nothing which
is said in this decision will affect the complete discretion of the Master or a judge when asked to set
aside a judgment regularly obtained to impose any just and reasonable terms upon the party so
applying." With that exercise of judicial discretion the Court of Appeal should not interfere unless for
very special reasons which are not present in this case.

Croom-Johnson K.C. and Shanly for the respondent. To entitle a litigant against whom a judgment
has been regularly signed to have it set aside he must satisfy the Court of two things, first, that there
is a real defence to the claim, and secondly how it is that judgment has been signed against him by
default, and he must give some satisfactory explanation why he did not defend the action. A plaintiff
who gets a judgment obtains thereby a right of property of which he should not be deprived unless
certain conditions have been fulfilled. In Haigh v. Haigh7 Pearson J., after citing certain passages
from Atwood v. Chichester 8 , said that there was no case which showed that the rule as to setting
aside a judgment obtained by default could be acted upon where the party seeking to put it in force
had, with full knowledge and wilfully, allowed judgment to go by default. Further, the judge in
Chambers ought not to overrule the exercise of the Master's discretion, where the Master who has
the powers of a judge in Chambers - see Order LIV., r. 12 - has exercised his discretion on right
principles.
[LORD ATKIN. Masters are not intended to be the final judges between the parties.]

[LORD ROCHE. The hearing before the judge is a rehearing.]

The judge must have some materials upon which to exercise his discretion, and we contend that
there were no materials in this case upon which he could do so.

1937. April 9. The House took time for consideration. April 30. LORD ATKIN.

My Lords, this is an appeal by the defendant from an order of the Court of Appeal (Slesser and Scott
L.JJ., Greer L.J. dissenting), who reversed an order of Greaves-Lord J., sitting in Chambers, setting
aside on terms a judgment obtained against the defendant on default of appearance. The case came
before the learned judge in Chambers on appeal from a Master who had refused the application. It
appears that the defendant in 1931 had incurred losses to the plaintiff, a bookmaker, for bets on
horse races to the amount of 1336l. which by the end of 1932 had been reduced by small payments
on account to 1241l. 11s. 9d. In May, 1935, the plaintiff, not having received any further payments,
gave an authority in writing to one Irving, who carried on business as the National Turf Protection
Society in the name of A. Harrison Ford, to recover the amount claimed by any steps he deemed
expedient by further reporting the debtor to the Committee of Tattersalls or other authority. On
May 13 Mr. Irving saw the defendant, and according to an affidavit made by Mr. Irving sworn on
October 9, 1935, he told the defendant that the default would be reported to Tattersalls, and
eventually agreed with him that the case would be withheld from Tattersalls so long as Mr. Irving
was satisfied that the defendant would settle within a reasonable time. No further payments were
made: there was a correspondence in which the defendant appeared to make it clear that he had no
means to pay and that if pressed he would have to plead the Gaming Act . On July 19, 1935, the writ
in the action was issued, the endorsement being for 1241l. 11s. 9d., "the amount due to the plaintiff
under and by virtue of an agreement made on May 13 between the Proprietor Secretary of the
National Turf Protection Society acting as duly authorized agents of the plaintiff and the defendant."
The writ was not *477 served until September 16, 1935, when it was served personally on the
defendant by Mr. Irving. The defendant says that he was then told by Mr. Irving that he had three or
four weeks for appearance; Mr. Irving denies this. On September 24 the plaintiff's solicitors signed
judgment on default of

Page 2

appearance and on the same day wrote to inform the defendant and asked for a cheque. Two letters
followed which form the ground for the decision of the majority of the Court of Appeal. On
September 26 the defendant wrote to the plaintiff's solicitor: "I am in receipt of yours of the 24th
and note contents. I have seen Mr. Bartlam to-day and explained my position and he is willing for
the matter to stand over so that I can see if I can make any arrangement to pay . I have never refused
to pay him but have not had any income to do it with owing to bad trade. He is writing to Mr. Ford
to-night. At the moment I have nothing and no assets and know he does not want to lose his money.
P.S. - Kindly hold over for me and oblige." The solicitor's answer was on September 28, 1935: "I am in
receipt of your letter of the 26th inst. I have also received a letter from my client who states that he
wishes me to do whatever may be necessary to obtain satisfaction of the judgment obtained against
you. You will readily appreciate that you have brought the present position upon yourself. You have
made numerous promises both to my client and to his agent Mr. Harrison Ford as to the settlement
of the amount due. No one of such promises has been performed by you and my client was left
without option but to proceed as he did. In all the circumstances I am prepared to let the matter
stand over for a further period of seven days, but I must ask you to understand please that, unless at
the expiration of that period I receive payment of the total amount due, proceedings will be taken to
enforce the judgment without further notice to you." On October 3, 1935, the defendant took out a
summons to set aside the default judgment and supported it by an affidavit in which he made the
statement above mentioned as to having been told by Mr. Irving that he need not take any steps for
a month, and stated that the alleged contract, if made at *478 all, which was denied, was a contract
by way of gaming and wagering. The Master dismissed the application; the learned judge on appeal
granted it and set aside the judgment on terms as to costs. The power to set aside a judgment
obtained on default of appearance is given to the Court or a judge under Order XIII., r. 10 ; and a
similar power extending to judgments by default under any rule is given by Order XXVII., r. 15 . It is a
power entrusted to the discretion of the Court or judge, and by Order LIV., r. 12 , the Master is given
jurisdiction to exercise the discretion.

As to the limits of the discretion, if any, it may be necessary to say a word or two later. I only stay to
mention a contention of the respondent that the Master having exercised his discretion the judge in
Chambers should not reverse him unless it was made evident that the Master has exercised his
discretion on wrong principles. I wish to state my conviction that where there is a discretionary
jurisdiction given to the Court or a judge the judge in Chambers is in no way fettered by the previous
exercise of the Master's discretion. His own discretion is intended by the rules to determine the
parties' rights: and he is entitled to exercise it as though the matter came before him for the first
time. He will, of course, give the weight it deserves to the previous decision of the Master: but he is
in no way bound by it. This in my experience has always been the practice in Chambers, and I am
glad to find it confirmed by the recent decision of the Court of Appeal in Cooper v. Cooper10 , with
which I entirely agree.
On appeal to the Court of Appeal by special leave the majority, Slesser and Scott L.JJ., came to the
conclusion that the judge was precluded from exercising his discretion to set aside the judgment by
the fact that with knowledge of the judgment the defendant had applied for the matter to stand
over for him to see if he could arrange to pay and the plaintiff had consented to let it stand over for
seven days. Slesser L.J. preferred to put it on the ground that the defendant was seeking to
approbate and reprobate. He took a benefit under the judgment, namely, seven days' time, and
could *479 not thereafter be allowed to seek to set it aside. Scott L.J. preferred to put it on election.
The defendant knew or must be presumed to know that he had the right to apply to set the
judgment aside and by asking for and obtaining time he irrevocably elected to abide by the
judgment.

My Lords, I do not find myself convinced by these judgments. I find nothing in the facts analogous to
cases where a party having obtained and enjoyed material benefit from a judgment has been held
precluded from attacking it while he still is in enjoyment of the benefit. I cannot bring myself to think
that a judgment debtor who asks for and receives a stay of execution approbates the judgment, so
as to preclude him thereafter from seeking to set it aside whether by appeal or otherwise. Nor do I
find it possible to apply the doctrine of election. It is a simple answer to say that to infer election it
must be shown that the person concerned had full knowledge of the various rights amongst which
he elects. There is here no evidence that the defendant at the time he asked for and received time
had any knowledge of his right to apply to set the judgment aside. I cannot think that there is any
presumption that he knew of this remedy either sufficiently for the purposes of the doctrine as to
election or at all. For my part I am not prepared to accept the view that there is in law any
presumption that any one, even a judge, knows all the rules and orders of the Supreme Court. The
fact is that there is not and never has been a presumption that every one knows the law. There is the
rule that ignorance of the

Page 3

law does not excuse, a maxim of very different scope and application. Neither of the Lords Justices
expressed any intention to review the discretion exercised by the judge in Chambers except by
reference to the point which in their opinion in law precluded him from exercising any discretion in
favour of the defendant. Coming to the conclusion that this point of law is ill-founded, I think it
follows that the appeal to the Court of Appeal should have been dismissed. I find myself in
agreement with the reasoning of Greer L.J. except on one point. I agree that both rules, Order XIII., r.
10, and Order XXVII., r. 15, give a discretionary power to the judge in *480 Chambers to set aside a
default judgment. The discretion is in terms unconditional. The Courts, however, have laid down for
themselves rules to guide them in the normal exercise of their discretion. One is that where the
judgment was obtained regularly there must be an affidavit of merits, meaning that the applicant
must produce to the Court evidence that he has a prima facie defence. It was suggested in argument
that there is another rule that the applicant must satisfy the Court that there is a reasonable
explanation why judgment was allowed to go by default, such as mistake, accident, fraud or the like.
I do not think that any such rule exists, though obviously the reason, if any, for allowing judgment
and thereafter applying to set it aside is one of the matters to which the Court will have regard in
exercising its discretion. If there were a rigid rule that no one could have a default judgment set
aside who knew at the time and intended that there should be a judgment signed, the two rules
would be deprived of most of their efficacy. The principle obviously is that unless and until the Court
has pronounced a judgment upon the merits or by consent, it is to have the power to revoke the
expression of its coercive power where that has only been obtained by a failure to follow any of the
rules of procedure.

But in any case in my opinion the Court does not, and I doubt whether it can, lay down rigid rules
which deprive it of jurisdiction. Even the first rule as to affidavit of merits could, in no doubt rare but
appropriate cases, be departed from. The supposed second rule does not in my opinion exist. But
while the judge has such a discretion as I have mentioned I conceive it to be a mistake to hold, as
Greer L.J. seems to do, that the jurisdiction of the Court of Appeal on appeal from such an order is
limited so that, as the Lord Justice said, the Court of Appeal "have no power to interfere with his
exercise of discretion unless we think that he acted upon some wrong principle of law." Appellate
jurisdiction is always statutory: there is in the statute no restriction upon the jurisdiction of the Court
of Appeal: and while the appellate Court in the exercise of its appellate power is no *481 doubt
entirely justified in saying that normally it will not interfere with the exercise of the judge's
discretion except on grounds of law, yet if it sees that on other grounds the decision will result in
injustice being done it has both the power and the duty to remedy it. The decision in Campbell & Co.
v. Pollak11 was based upon the fact that an appeal in the matter of costs was expressly excluded
from the jurisdiction of the Court of Appeal by the Act and rules.

It follows from what I have said that in this case there was no reason for interfering with the
discretion of Greaves-Lord J. The appeal should be allowed and the order of the Court of Appeal set
aside and the order of Greaves-Lord J. dated October 18, 1935, restored. The appellant should have
the costs here and in the Court of Appeal.

LORD THANKERTON.

My Lords, I concur.
LORD RUSSELL OF KILLOWEN.

My Lords, Order XIII., r. 10, in its terms is unfettered by any conditions, and purports to confer upon
the Court or a judge full power to set aside a judgment signed in default of appearance, and if
thought fit to impose such terms, as a condition of the setting aside, as may be just.

It was argued by counsel for the respondent that before the Court or a judge could exercise the
power conferred by this rule, the applicant was bound to prove (a) that he had some serious defence
to the action and (b) that he had some satisfactory explanation for his failure to enter an appearance
to the writ. It was said that until those two matters had been proved the door was closed to the
judicial discretion; in other words, that the proof of those two matters was a condition precedent to
the existence or (what amounts to the same thing) to the exercise of the judicial discretion.

For myself I can find no justification for this view in any of the authorities which were cited in
argument; nor, if such authority existed, could it be easily justified in face of the wording of the rule.
It would be adding a limitation which the rule does not impose.

*482

Page 4

The contention no doubt contains this element of truth, that from the nature of the case no judge
could, in exercising the discretion conferred on him by the rule, fail to consider both (a) whether any
useful purpose could be served by setting aside the judgment, and obviously no useful purpose
would be served if there were no possible defence to the action, and (b) how it came about that the
applicant found himself bound by a judgment regularly obtained, to which he could have set up
some serious defence. But to say that these two matters must necessarily enter into the judge's
consideration is quite a different thing from asserting that their proof is a condition precedent to the
existence or exercise of the discretionary power to set aside a judgment signed in default of
appearance.

In the case now under discussion the judge in Chambers thought it proper, in the exercise of his
discretion, to set aside the judgment; and unless an appellate Court is satisfied that the discretion
has been wrongly exercised and should have been exercised in the contrary way, the judge's order
should be affirmed. The Court of Appeal (by a majority) has set aside the judge's order not upon the
ground of a wrong exercise of the discretion, but upon the ground that, on the facts of the case, the
judge was unable to exercise any discretion at all, the defendant being in some way debarred from
seeking relief.
Slesser and Scott L.JJ. held that because the defendant against whom judgment had been signed had
asked for and obtained a promise that the judgment would not be immediately enforced, but that
the matter would be allowed to stand over for seven days, he was no longer entitled to apply to
have the judgment set aside. They put it on three grounds. That he had elected not to apply to have
the judgment set aside. That he could not both approbate and reprobate, and could not accordingly
accept the judgment as binding and thereafter seek to set it aside. That his application for delay was
a representation that he accepted the judgment which estopped him from applying to set it aside.

My Lords, I confess to a feeling of some bewilderment at the *483 theory that a man (who so long as
it stands must perforce acknowledge and bow to a judgment of the Court regularly obtained) by
seeking and obtaining a temporary suspension of its execution thereby binds himself never to
dispute its validity or its correctness, and never to seek to have it set aside or reversed. If this were
right, no defeated litigant could safely ask his adversary for a stay of execution pending an appeal;
for the grant of the request would end the right of appeal. The doctrine of election only applies to a
man who elects with full knowledge of the facts. There is no suggestion that the defendant knew
that he could apply to set the judgment aside. The doctrine of approbation and reprobation requires
for its foundation inconsistency of conduct; as where a man having accepted a benefit given him by
a judgment cannot allege the invalidity of the judgment which conferred the benefit. To obtain a
stay of execution of a judgment is not the acceptance of any benefit conferred by the judgment. The
doctrine of estoppel requires the statement of a fact, upon the faith of the truth of which another
alters his position. To ask for a stay of execution is no statement of any fact. Even if it could be said
(which it could not) to amount to a statement that no application would be made to set the
judgment aside, that would only be a statement of intention and could ground no estoppel.

There being no justification for the grounds upon which the majority of the Court of Appeal
proceeded in setting aside the judge's order, the question remains whether any reason exists for
holding that the judge exercised his discretion otherwise than rightly. For myself I can find no such
reason. Indeed, I would go further and say that having read and considered the evidence and letters
in the case (and there is here no question of seeing witnesses and hearing them cross-examined) I
would myself have come to the same conclusion as that which was reached by the learned judge.

I would accordingly allow this appeal.

LORD WRIGHT.

My Lords, the Court of Appeal by a majority (Greer L.J. dissenting) have reversed an order of *484
Greaves-Lord J. setting aside a judgment in default given against the appellant in favour of the
respondents. The Master had, in the exercise of his discretion under Order XXVII., r. 15, or Order
XIII., r. 10, refused to set aside the judgment. But it is clear that where the Court of Appeal is
required to review a discretionary order of a judge reversing the Master the substantial discretion is
that of the judge, and it is the judge's order which must particularly be considered by the appellate
Court: Cooper v. Cooper.12 The Masters admirably exercise their discretion in routine matters of
pleading, discovery, interrogatories, venue, mode of trial, and other interlocutory directions, without
any appeal being necessary. But such matters may on occasion raise questions most vital to the final
issue of the case. The decision of such questions is properly for the judge who will no doubt consider
carefully the order

Page 5

of the Master. If a further appeal is taken to the Court of Appeal it is the judge's discretion which
that Court has either to support or vary or reverse.

In the Court of Appeal in the present case Slesser and Scott L.JJ., who formed the majority, held that
the judge's order should be reversed and leave to set aside the default judgment refused on the
ground that the appellant had by his conduct shut himself out of any right to claim to have the
judgment set aside. What was relied upon was that he had requested the respondents to give him
time so as to see if he could make any arrangement to pay, and that the respondent had granted
that request by agreeing to let the matter stand over for seven days. Slesser and Scott L.JJ. held that
thereby the appellant was estopped from contesting the validity of the judgment, or must be
deemed to have elected not to do so, since otherwise he would be both approbating and
reprobating the judgment. It was said that he had "obtained this advantage on the basis that he did
not dispute the validity of the judgment." I am not clear on what legal principle this conclusion is
based. Estoppel seems to me to be out of the question since estoppel is a rule of evidence which
prevents the person estopped from denying the existence of a fact; but *485 what is postulated here
is that the appellant has barred himself from exercising a legal right to apply to the Court. Election is
a question of fact. I can find no facts here to show that the elements of election such as intention or
knowledge of his legal rights were present. Nor can I find any evidence to justify the inference that
the appellant had undertaken not to dispute the validity of the judgment. Such an undertaking, if
given for sufficient consideration, so as to bind the appellant, might have supported the conclusion
of the Court of Appeal; nothing less would have sufficed, though even then it would, I incline to
think, still be only a matter to be considered in the exercise by the Court of its statutory discretion.
But from the bare evidence that the appellant had requested and been granted a few days' time I
find it impossible to draw the inference necessary to justify the conclusion. The cases cited by Slesser
L.J. seem to me to deal with different circumstances. The appellant here has not taken anything
under the judgment, nor has he deluded the respondents to their disadvantage. A judgment creditor
may be well advised in his own interests to give a gratuitous delay to his debtor in the hope that to
avoid publicity or other reasons the debtor will not seek to impeach the judgment. There was no
more than that in the present case. It may be regarded as being analogous to asking for a stay of
execution.

I cannot, with all respect, agree with Slesser and Scott L.JJ. in their conclusion that the appellant was
barred from applying under Order XXVII., r. 15. On this footing the order of Greaves-Lord J. has been
attacked on behalf of the respondents as not being a good exercise of his discretion under the rule;
on the other hand Greer L.J., who dissented from the other members of the Court, took the view
that the Court ought not to interfere with the order of the judge made in the exercise of his
discretion. He said: "I take the decision in Campbell v. Pollak13 in the House of Lords as meaning that
wherever the judge in Chambers is invested with a discretion the Court of Appeal has no power to
set aside an order made by him *486 in the exercise of his discretion unless the Court comes to the
conclusion that he exercised his discretion on grounds which were wholly irrelevant to the matters
which he had to consider."

If that were so, it would be unnecessary to consider the contention of Mr. Croom-Johnson that the
judge wrongly exercised his discretion. But with all deference to the learned Lord Justice, I am
unable to accept what he said as a correct statement of the law or practice in this matter. Campbell
& Co. v. Pollak14 is no authority for that proposition. If it were it would have changed the law and
the practice. But in truth it did not. It is dealing merely with the judge's discretion in regard to costs,
which is a statutory discretion, precisely defined by statutes and statutory rules. Thus Lord Cave L.C.
says 15 : "The jurisdiction of the Court of Appeal to review an order of the trial Court as to costs
depends on statutes and on rules of Court which have the force of a statute." I need not discuss in
detail the examination by the House of that precisely limited right of review. But there is in that case
no reference to or discussion of the duty or power of the Court of Appeal to review the general
discretion of a judge in interlocutory matters, the extent of which has been illustrated by numerous
cases before and since Pollak's case 16 . It is clear that the Court of Appeal should not interfere with
the discretion of a judge acting within his jurisdiction unless the Court is clearly satisfied that he was
wrong. But the Court is not entitled simply to say that if the judge had jurisdiction and had all the
facts before him, the Court of Appeal cannot review his order unless he is shown to have applied a
wrong principle. The Court must if necessary examine anew the relevant facts and circumstances in
order to exercise a discretion by way of review which may reverse or vary the order. Otherwise in
interlocutory matters the judge might be regarded as independent of supervision. Yet an
interlocutory order of the judge may often be of decisive importance on the final issue of the case,
and one which requires a careful examination *487 by the Court of Appeal. Thus in Gardner v. Jay 17
, Bowen L.J. in discussing the discretion of the judge as regards mode of trial says: "That discretion,
like other judicial discretions,

Page 6

must be exercised according to common sense and according to justice, and if there is a miscarriage
in the exercise of it it will be reviewed." Bowen L.J. in that case held that the appellant had not
satisfied the onus of showing that the discretion of the judge had been wrongly exercised. But there
are many cases in the books where it has been held that the appellant has satisfied the onus of
showing that the exercise of the discretion by the judge was not justified on the facts. A judge's
order fixing the date of trial or refusing to grant an adjournment is a typical exercise of purely
discretionary powers, and would be interfered with by the Court of Appeal only in exceptional cases,
yet it may be reviewed by the Court of Appeal. Thus in Maxwell v. Keun 18 the Court of Appeal
reversed the trial judge's order refusing to the plaintiff an adjournment. That was a pure matter of
discretion on the facts. Atkin L.J. said 19 : "I quite agree the Court of Appeal ought to be very slow
indeed to interfere with the discretion of the learned judge on such a question as an adjournment of
a trial, and it very seldom does so; but, on the other hand, if it appears that the result of the order
made below is to defeat the rights of the parties altogether, and to do that which the Court of
Appeal is satisfied would be an injustice to one or other of the parties, then the Court has power to
review such an order, and it is, to my mind, its duty to do so." The reporter adds a note that the
plaintiff succeeded in the action when it came on at the adjourned date. A recent case in which the
Court of Appeal set aside a judge's order remitting an action in tort to the County Court was Stevens
v. Walker 20 , where it was held that the circumstances did not justify the order. I need not multiply
authorities save to observe that in Watt v. Barnett 21 , to which I shall refer later, the Court of
Appeal, affirming the Divisional Court, *488 reversed the order of the judge who had refused to set
aside a default judgment. There is at least one other case reported where this was done by an
appellate Court.

In my opinion this House must consider, on all the circumstances of the case, the contentions on
behalf of the respondent that the order of Greaves-Lord J. was wrong, and that on the merits the
default judgment should not be set aside. For the reasons set out above this House has no guidance
in the matter from the Court of Appeal and must determine whether the respondent has satisfied
the onus of showing that the judge was wrong on the merits just as the Court of Appeal should have
done.
I see no reason to interfere with the judge's order. The respondent's counsel in my judgment has
entirely failed to satisfy the onus of showing that the judge was wrong. Order XXVII., r. 15, gives a
discretion untrammelled in terms: it does not even require an affidavit as a condition and the
discretion may be exercised on any proper material, though in practice an affidavit is generally
required. To quote again from Bowen L.J. in Gardner v. Jay22 : "When a tribunal is invested by Act of
Parliament or by Rules with a discretion, without any indication in the Act or Rules of the grounds
upon which the discretion is to be exercised, it is a mistake to lay down any rules with a view of
indicating the particular grooves in which the discretion should run, for if the Act or the Rules did not
fetter the discretion of the Judge why should the Court do so?" Similarly it has been held by the
Court of Appeal in Hope v. Great Western Ry. Co. 23 that the discretion to grant or refuse a jury in
King's Bench cases is in truth, as it is in terms, unfettered. It is, however, often convenient in practice
to lay down, not rules of law, but some general indications, to help the Court in exercising the
discretion, though in matters of discretion no one case can be an authority for another. As Kay L.J.
said in Jenkins v. Bushby 24 , "the Court cannot be bound by a previous decision, to exercise its
discretion in a particular way, because *489 that would be in effect putting an end to the discretion."
A discretion necessarily involves a latitude of individual choice according to the particular
circumstances, and differs from a case where the decision follows ex debito justitiae once the facts
are ascertained. In a case like the present there is a judgment, which, though by default, is a regular
judgment, and the applicant must show grounds why the discretion to set it aside should be
exercised in his favour. The primary consideration is whether he has merits to which the Court
should pay heed; if merits are shown the Court will not prima facie desire to let a judgment pass on
which there has been no proper adjudication. This point was emphasized in Watt v. Barnett 25 . Here
the appellant shows merits, in that the debt was primarily a gaming debt; he denies that he made
any new contract within Hyams v. Stuart King 26 , an authority which has not yet been considered by
this House. He clearly shows an issue which the Court should try. He has been guilty of no laches in
making the application to set aside the default judgment, though as Atwood v. Chichester 27 and
other cases show, the Court, while considering delay, have been lenient in excluding applicants on
that ground. The Court might also have regard to the applicant's explanation why he neglected to
appear after being served, though as a rule his fault (if any) in that respect can be sufficiently
punished by the terms as to costs or otherwise which the Court in its discretion is empowered by the
rule to impose. The appellant here has an explanation, the truth of which is indeed denied by the
respondent, but at this stage I see no reason why he should be disbelieved on what appears to me to
be a mere conflict on affidavits. For all these reasons no ground is shown to justify interference with
the judge's discretion and I think that the appeal should be allowed and that this House should make
the order which the Court of Appeal should have made.

LORD ROCHE.

My Lords, I agree that this appeal should be *490 allowed, and I have nothing to add to the reasons
for that conclusion which have been stated by your Lordships.

Representation

Solicitors for appellant: Maude & Tunnicliffe , for Stirk & Co., Wolverhampton. Solicitor for
respondent: Leslie Marrison .

Appeal allowed.

Alpine Bulk Transport Company Inc. v Saudi Eagle Shipping Company Limited

In the Supreme Court of Judicature

Court of Appeal (Civil Division)

On Appeal from the High Court of Justice

Queen's Bench Division

Commercial Court

1 July 1986

1986 WL 1255263

Lord Justice O'connor Sir Roger Ormrod

Tuesday 1st July 1986

Representation

MR A. P. CLARKE, Q.C. , and MR S. P. N. RAINEY , instructed by Messrs Denby & Co., appeared for the
Appellants (Defendants).

MR A. E. J. DIAMOND, Q.C. , and MR GRAHAM DUNNING , instructed by Messrs Holman Fenwick &
Willan, appeared for the Respondents (Plaintiffs).
JUDGMENT

SIR ROGER ORMROD:

This is the judgment of the court.

The problem in this case is to apply the propositions or guidelines set out by the House of Lords in
the leading case of Evans v Bartlam (1937) A.C. 473 and applied recently in this court in Vann v
Awford (15th April 1986, unreported) to the entirely different factual situation with which we are
confronted in the present case.

In Evans v Bartlam the defendant Evans owed the plaintiff Bartlam a substantial sum of money for
unsuccessful betting transactions. The plaintiff sued the defendant on an alleged new contract of the
Hyams v Stuart King (1908) 2 K.B. 696 type. The defendant did not enter an appearance and the
plaintiff signed judgment in default. Thereafter, the defendant asked for time to pay and the
plaintiff's solicitors gave him a further seven days. Before the expiry of the seven days the defendant
applied to the master to set aside the default judgment. The master dismissed the application but
the judge in chambers (Lord Justice Greaves) allowed the appeal on terms as to costs. The Court of
Appeal, by a majority, allowed the appeal on the ground that the judge had, as a matter of law, no
discretion in the matter because the defendant, in asking for and receiving an extension of time, had
elected to accept the validity of the default judgment or alternatively had approbated it and was
bound in law to submit to it. The House of Lords held that there was no such rule of law and that
consequently the Court of Appeal's order could not be supported. The appeal was therefore allowed
and the judge's order restored. The House considered his reasons for setting aside the default
judgment and agreed with them without giving details.

In Vann v Awford the plaintiffs, who were building owners, sued a firm of architects and the builder,
Blunden. Blunden, though properly served, did not give notice of intention to defend. The plaintiffs
signed judgment in default and later obtained an assessment of damages in the sum of £53,783 plus
interest and costs. Blunden still did nothing. But when the plaintiffs took garnishee proceedings and
obtained charging orders on Blunden's property, he reacted and applied for the assessment of
damages and the default judgment to be set aside. He put forward a wholly dishonest explanation
for

Page 1

his failure to give notice of intention to defend. The judge refused to set aside either the assessment
or the judgment on the ground that it was too late and that no extension of time should be granted
unless the defendant put forward a reasonable explanation, which he had failed to do. This court
held that this was a misdirection and that the judge had fettered his discretion by adopting a rigid
rule which was directly contrary to the principle laid down in Evans v Bartlam . This court then
reviewed the circumstances and found that, as was to be expected in a building dispute, there were
a great many items in dispute, and there was an arguable defence. The appeal was therefore
allowed and the judgment set aside.

The present case arises out of a charterparty, the plaintiffs being the charterers, the defendants the
shipowners. It is a claim for damages for breach of contract by the defendants who refused to load
the cargo. The breach took place in November 1981. On 29th October 1982 the plaintiffs arrested
the defendants' ship (the “Saudi Eagle” ) at Rotterdam. The defendants then gave security in the
form of a bond from the Amsterdam/Rotterdam bank and obtained the release of the ship. A year
later the plaintiffs issued, with leave, a writ for service out of the jurisdiction. This was served ten
months later in August 1984 in Saudi Arabia. No notice of intention to defend was given and
interlocutory judgment was signed on 1st October 1984. An order for assessment of damages was
made and damages were assessed on 18th April 1985. Final judgment was given in U.S. $49,000 and
costs in the sum of £3,000. It is common ground that a deliberate decision was made in August 1984
not to defend the plaintiffs' claim because the defendant company had no assets, having sold its only
ship in July 1984. Shortly after final judgment had been given someone on the defendants' side
remembered that the plaintiffs had obtained security in Rotterdam in 1982 and were holding the
bond. So the plaintiffs' judgment was not barren as had been supposed. Application was then made
to Mr Justice Staughton to set aside the judgment and for leave to defend. At that stage the only
defence suggested was that the plaintiffs had sued the wrong defendant. The judge dismissed the
application. He directed himself on the lines laid down in Evans v Bartlam , carefully avoiding any
rigid rules or fetters, but in the course of his extempore judgment he gave two reasons for refusing
to exercise his discretion in favour of the defendants. He said that the proposed defence was “not by
any means a meritorious one although technically it has merits … I can see it is an arguable point
that the plaintiffs should have sued Saudi Ambassador Shipping Co. Ltd or Saudi International
Shipping Co. and not Saudi Eagle Shipping Co. Ltd” . He then turned to the reasons given for the
default and concluded that the defendants had deliberately allowed the plaintiffs' claim to go by
default, believing that all they could get would be a barren judgment, until they remembered about
the security. This the judge described as “insouciance” and said that the defendants had treated the
court “with contempt and therefore, the Defendants are not deserving of the court's exercise of its
discretion in their favour” .

With great respect to the learned judge, and making full allowance for the difficulty of putting into
words, particularly extempore, the reasons for making a discretionary decision, we do not think that
his decision can be supported on these grounds although, as will appear, we are in agreement with
him, though for different reasons, that the defendants' application for an order setting aside the
judgment should be dismissed. His reasons seem to be a two-pronged moral judgment on the
behaviour of the defendants to the court rather than an assessment of the justice of the case as
between the parties. Consequently, we must review the circumstances of the case and exercise our
own discretion.

The following “general indications to help the Court in exercising the discretion” (per Lord Wright at
page 488) can be extracted from the speeches in Evans v Bartlam (1937) A.C. 473 , bearing in mind
that “in matters of discretion no one case can be authority for another” (ibid. page 488):

(i) a judgment signed in default is a regular judgment from which, subject to (ii) below, the plaintiff
derives rights of property;

(ii) the Rules of Court give to the judge a discretionary power to set aside the default judgment
which is in terms “unconditional” and the court should not “lay down rigid rules which deprive it of
jurisdiction” (per Lord Atkin at page 486);

(iii) the purpose of this discretionary power is to avoid the injustice which might be caused if
judgment followed automatically on default;

(iv) the primary consideration is whether the defendant “has merits to which the Court should

Page 2

pay heed” (per Lord Wright at page 489), not as a rule of law but as a matter of common sense, since
there is no point in setting aside a judgment if the defendant has no defence and if he has shown
“merits” the “Court will not, prima facie, desire to let a judgment pass on which there has been no
proper adjudication” (ibid. page 489 and per Lord Russell of Killowen at page 482).

(v) Again as a matter of common sense, though not making it a condition precedent, the court will
take into account the explanation as to how it came about that the defendant “found himself bound
by a judgment regularly obtained to which he could have set up some serious defence” (per Lord
Russell of Killowen at page 482).

In applying these “general indications” it is important in our judgment to be clear what the “primary
consideration” really means. In the course of his argument Mr Clarke Q.C. used the phrase “an
arguable case” and it, or an equivalent, occurs in some of the reported cases (e.g. Burns v Kendel
(1977) 1 Ll.L.R. 554 and Vann v Awford ). This phrase is commonly used in relation to Order 14 to
indicate the standard to be met by a defendant who is seeking leave to defend. If it is used in the
same sense in relation to setting aside a default judgment, it does not accord, in our judgment, with
the standard indicated by each of their Lordships in Evans v Bartlam . All of them clearly
contemplated that a defendant who is asking the court to exercise its discretion in his favour should
show that he has a defence which has a real prospect of success. (In Evans v Bartlam there was an
obvious defence under the Gaming Act and in Vann v Awford a reasonable prospect of reducing the
quantum of the claim). Indeed it would be surprising if the standard required for obtaining leave to
defend (which has only to displace the plaintiff's assertion that there is no defence) were the same
as that required to displace a regular judgment of the court and with it the rights acquired by the
plaintiff. In our opinion, therefore, to arrive at a reasoned assessment of the justice of the case the
court must form a provisional view of the probable outcome if the judgment were to be set aside
and the defence developed. The “arguable” defence must carry some degree of conviction.

Applying these “general indications” to the facts of the present case we have come to the following
conclusions. Dealing first with the primary consideration, Mr Clarke submitted that there were three
defences which in summary are the wrong defendant, the wrong plaintiff and the wrong contract.

So far as the last two suggested defences are concerned we do not think that there is any substance
in either of them. The wrong plaintiff suggestion depends on the assertion that the sums claimed in
this action to have been expended by the plaintiffs in consequence of the defendants' breach of
contract were actually paid by an associated company. But if this were so they were clearly paid on
behalf of the plaintiffs. So far as the wrong contract is concerned what is said is that the plaintiffs are
alleging a repudiatory breach of the charterparty by the defendants in refusing to load the plaintiffs'
cargo of barley whereas in fact the parties, after an initial refusal to load by the defendants, came to
a fresh agreement that the defendants would accept the cargo on the plaintiffs' undertaking to bear
the cost of fumigating the ship on arrival at Antwerp. (The defendants were alleging that the barley
was infested with weevils). Nevertheless the defendants again refused to load the cargo, therein
breaching the second agreement. Neither of these points was argued before the learned judge nor is
either of them referred to in the affidavits sworn in these proceedings on behalf of the defendants
by their solicitor, Mr P. J. Denby. We consider that neither of these suggested defences has any
prospect of success.

The first suggested defence was relied upon before the learned judge and is the basis of Mr Denby's
affidavit of 21st June 1985 in support of the defendants' application to set aside the default
judgment. It turns on a question of construction of the addendum to the Liner Booking Note. Like
most questions of construction it is “arguable” . The real question is whether it is a “prima facie”
defence (per Lord Atkin in Evans v Bartlam at page 480, a “serious” defence, (per Lord Russell of
Killowen, ibid, at page 482) or has merits to which “the Court should pay heed” (per Lord Wright at
page 489). In our judgment, as a question of construction, this court is in a position to form a view of
it. We do not find the defendants' contention convincing. It is common ground that the plaintiffs
were dealing with a group of single ship companies managed as a group.

The liner booking note is dated 29th October 1981 and made between “Saudi International Shipping
S.A., as Managers for Owners” as “Carrier” and the plaintiffs as “Charterers” . The vessel named is
“Saudi Ambassador” . That vessel was owned by Saudi Ambassador Shipping Co. Ltd. The contract

Page 3

was expressly made subject to the terms of the Conlinebill form which were printed on the back of
the document. On 5th November 1981 the plaintiffs agreed to an alteration as evidenced by the
document called “addendum No. 1 to ‘Saudi Ambassador’ booking note dated 29th October 1981”
signed by them. That document reads: “IT IS THIS DAY MUTUALLY AGREED between Owners, Saudi
International Shipping S.A., and Charterers, Alpine Bulk Transport Co. Inc., that m.v. ‘SAUDI EAGLE’
will be performing the voyage under the above contract and the laydays/cancelling dates are
amended to 10/18 November, 1981.

“All other terms, conditions and exceptions of the Booking note dated 29th October, 1981 remain
unaltered.”

We cannot read that document as changing the status of Saudi International Shipping S.A. in the
contract. This would be so on the plain construction of the documents but if it were thought that
there was any ambiguity it is resolved by Clause 17 of the printed terms:

“17. Identity of Carrier

“The Contract evidenced by this Bill of Lading is between the Merchant and the Owner of the vessel
named herein (or substitute) and it is therefore agreed that said Shipowner only shall be liable for
any damage or loss due to any breach or non-performance of any obligation arising out of the
contract of carriage, whether or not relating to the vessel's seaworthiness. If, despite the foregoing,
it is adjudged that any other is the Carrier and/or bailee of the goods shipped hereunder, all
limitations of, and exonerations from, liability provided for by law or by this Bill of Lading shall be
available to such other.

“It is further understood and agreed that as the Line, Company or Agents who has executed this Bill
of Lading for and on behalf of the Master is not a principal in the transaction, said Line, Company or
Agents shall not be under any liability arising out of the contract of carriage, nor as Carrier nor bailee
of the goods.”

In the course of argument in this court Mr Clarke Q.C. relied strongly upon the submission that the
defendants could not have been parties to the Addendum No. 1 because at the material time the
Saudi Eagle was on time charter to Saudi International Shipping Co. Ltd. who were therefore acting
as principals in the transaction recorded in Addendum No. 1. This very important point was not
argued before the learned judge, nor is it referred to in Mr Denby's affidavit in support of the
application for leave to appeal. The only evidence that there was such a time charter appears in
paragraph 15 of Mr Denby's affidavit of 21st June 1985 where it is baldly stated: “Saudi Eagle
Shipping Company Ltd provided their vessel to S.I.S. under a three year time charterparty on the
N.Y.P.E. form” . The charterparty is not exhibited either in the original or by copy. No dates are given
for the period of the charter. No suggestion of such a situation was made in the proceedings in
Rotterdam after the arrest of the Saudi Eagle. Moreover, Mr T. H. B. Reynardson, the solicitor acting
for the plaintiffs, in paragraph 26 of his affidavit sworn on 9th July 1985 in opposition to the
summons to set aside the default judgment specifically challenged this piece of evidence. No
attempt has been made by the defendants to meet this challenge by producing the charterparty or
supplementing Mr Denby's evidence. In these circumstances we are justified in saying that the
evidence falls short of proof that the Saudi Eagle was on time charter to S.I.S. at the relevant time. In
the circumstances we do not think that the defendants have shown that they have a defence which
has any reasonable prospect of success.

The conduct of the defendants in this respect and in deliberately deciding not to give notice of
intention to defend because it suited the interests of the group to let the plaintiffs proceed against
these defendants is a matter to be taken into account in assessing the justice of the case. While it
does not amount to an estoppel in law, the court can and must consider it. The principle of election
and the maxim about approbating and reprobating are, in origin, rules of equity and as such give
some indication of where the justice of a case may lie.

We therefore give leave to appeal but dismiss the appeal.

Order: Appeal dismissed with costs here and below; leave to appeal to the House of Lords refused.