Applying to set aside possession, or when is a trial not a trial?

Forcelux Ltd v Binnie [2009] EWCA Civ 854

This was the Court of Appeal hearing of an appeal from a decision by a Circuit judge on an appeal from a order to set aside a possession order and grant of relief from forfeiture (Still with us? Good). It is potentially an important case for anyone looking to apply for set aside of a possession order made at first hearing of a possession claim, as it gives the Court a broader discretion to make a set aside order under CPR 3.1(2) than the strict requirements of CPR 39.3.

Forcelux was the landlord of the flat concerned and Mr Binnie held a long lease at a ground rent, with about 94 years left to run. The lease contained a provision for forfeiture on non-payment of ground rent.

Mr Binne fell into arrears of ground rent of about £300 and £600 insurance premiums. Forcelux obtained a default judgment on the sums, but no payment was made. In June 2007, Forcelux served a notice on Mr Binnie under section 146 Law of Property Act 1925 and section 81 Housing Act 1996. The notice relied on non-payment of insurance premiums in the sum of £599.05.

In July 2007, Forcelux began County Court possession proceedings. The claim form gave the flat as Mr Binnie’s address. A hearing was set for September 2007. The Court attempted to serve proceedings by post, which were returned marked ‘gone away’. In fact Mr Binnie had not been living at the flat for some time, he was living with his girlfriend and, despite the girlfriend’s flat being in the same building, his evidence was that he had not picked up any post for a long time. Mr Binnie was thus unaware of proceedings.

At the September 2007 hearing, in the absence of Mr Binnie, a possession order was made. The Court served the order by post on the flat – again returned marked gone away. In evidence, Forcelux showed photos of the flat boarded up and apparently vacant. In October 2007, Forcelux sent people to take possession, they were seen by Mr Binnie’s girlfriend, who alerted him. This was the first that Mr Binnie was aware of the proceedings. he obtained papers a saw solicitors. There was a delay of three weeks before they asked Forcelux for a copy of the lease. At the beginning of December, Mr Binnie sent a cheque for the £900 to Forcelux’s solicitors. It was returned. It was not until February 2008 that Mr Binnie made an application to set aside the posession order and relief from forfeiture. At initial hearing, the District Judge found that the Claim was deemed served. This is not appealed (if the claim was not served in compliance with the CPR, an application to set aside would not fall under CPR 39.3). At the subsequent hearing in July 2008, the District Judge set aside the possession order and granted relief.

Forcelux appealed. The Circuit Judge dismissed the appeal. Forcelux appealed to the Court of Appeal.

Forcelux contended that Mr Binnie had not ‘acted promptly’ once he found out the possession order had been made, as required by CPR Rule 39.3(5)(a). CPR 39.3(5) states that the Court may only grant a set aside application if the applicant:

(a) acted promptly when he found out that the court had exercised its power to……enter judgment or make an order against him;

(b) had a good reason for not attending the trial; and

(c) has a reasonable prospect of success at trial.

So acting promptly is a requirement before a set aside can be granted. Forcelux argued that the DJ had therefore been wrong to make the set aside order.

But Rule 39.3 is expressly concerned with ‘trial’. Was the hearing of September 2007 a trial? Rule 55, dealing with possession proceedings states at 55.1 that once the claim has been issued, the Court is to fix a date for ‘the hearing’. And at 55.8 the rule states:

(1) At the hearing fixed in accordance with rule 55.5(1) or at any adjournment of that hearing, the court may

(a) decide the claim; or

(b) give case management directions.

(2) Where the claim is genuinely disputed on grounds which appear to be substantial, case management directions given under paragraph (1)(b) will include the allocation of the claim to a track or directions to enable it to be allocated.

(3) Except where –

(a) the claim is allocated to the fast track or the multi-track; or

(b) the court orders otherwise,

any fact that needs to be proved by the evidence of witnesses at a hearing referred to in paragraph (1) may be proved by evidence in writing.

(Rule 32.2(1) sets out the general rule about evidence. Rule 32.2(2) provides that rule 32.2(1) is subject to any provision to the contrary)

(4) Subject to paragraph (5), all witness statements must be filed and served at least 2 days before the hearing.

Rule 32 addresses evidence both at trial and at hearing other than trial.

So there is nothing to state that the first listed hearing is a trial, even if the case is decided at that hearing. Where the CPR does define trial, it is at the end of a process, with allocation and case management directions given.

The Court of Appeal were not persuaded that the hearing of September 2007, the first listed hearing after issue, was a trial:

32. The judge (in practice the district judge) is given, expressly, two options under Rule 55.8(1). He may either decide the claim or he may give case management directions. Where the claim is genuinely disputed on grounds which appear to be substantial, case management directions are to be given, including allocation to a track. The aim of such directions must be to bring about a final disposal of the claim. Unless allocated, by agreement, to the small claims track, case allocation will be either to the fast track or the multi-track. In either case, case management directions are made with a view to an eventual “trial” – the word used in both Rules 28.2 and 29.2.

33. If the first option – deciding the claim – is adopted it can only be because the judge considers that he is able to decide the case on the evidence before him. In an exceptional case, it may be that he could, then and there, conduct a hearing on the merits. Thus, suppose his list has collapsed and he has half a day spare; suppose both sides are present and represented; and suppose that both sides have all their evidence available and agree that the matter should proceed. In these circumstances, the hearing could properly be called a trial. The judge would in effect be exercising his case management powers and bringing forward the trial to the date of the hearing.

34. But that would be an exceptional sort of case. The more usual sort of case, in a busy possession list with perhaps 5 to 10 minutes allowed for each case, will be an undefended case where the defendant, if he attends at all, has nothing to say. The judge will look at the evidence from the claimant – probably all the evidence there is – and make a determination and decision: he will satisfy himself that the case is made out on the claimant’s evidence and satisfy himself that any necessary statutory requirements are fulfilled; he will make a possession order (suspended or not as the case may be).

[…]

36. I do not consider that such a process of determination and decision can sensibly be called a trial as a matter of the ordinary use of the word. Nor do I consider that it is been seen as a trial within Rule 39.3; the word is not to be given some special and wider meaning in the context of that Rule. Rather, it can be seen more as a summary procedure in the sense of a procedure carried out rapidly with the omission of most of the steps which in an ordinary case lead to trial. It also has a lot in common with a disposal hearing as referred to in the PD to Part 26, which I have already described, and which is clearly not a trial either in the ordinary sense of the word or in the context of the CPR.

The decision of a case in this manner is closer to summary judgment than trial. Against Forcelux’ assertion that a hearing under Rule 55.8(1) is necessarily a trial, it is clearly the case that such a hearing may simply involve giving directions to trial.

It is true that s.138(9A) County Court Act 1984, permitting applications for relief from forfeiture, only applies to a tenant whose lease has been forfeited for non-payment of rent and where possession has been recovered under s.138(3). S.138(3) states that a requirement for a possession order is that “the court at the trial is satisfied that the lessor is entitled to enforce the right of re-entry or forfeiture.” This may appear to mean that the relief from forfeiture provision only applies where the possession order was made at trial. However, there was no reason to presume that ‘trial’ has the same meaning in s.138 as it does in CPR 39.3. After all, before CPR 55 was introduced, a possession order could have been made by summary judgment under Part 24. Part 55 introduced a new ‘summary’ route with the hearing. It was unlikely that Parliament intended s.138 not to apply where the possession order had been obtained by summary judgment.

So, the hearing in September 2007 was not a trial. Therefore Rule 39.3 did not apply. In making the set aside order, the DJ presumed the order was made under the discretion in 39.3(3). This was not the case. While in Estate Acquisition and Development Ltd v Wiltshire [2006] EWCA Civ 533, the Court of Appeal had applied CPR 39.3 in an application from relief from forfeiture on a possession order made at first hearing, the issue of whether this was a trial or not had not been raised or argued, so it was not an authority on the point.

As 39.3 was not at issue, ‘acting promptly’ was not a requirement, but simply a factor to be taken into account. The rule that covered the situation was Rule 3.1(2) (m) “take any other step or make any other order for the purpose of managing the case and furthering the overriding objective”, which gave ample power to set aside an order if the interests of justice demand it. Further, Rule 3.1(7), providing a power of the court under these Rules to make an order, includes a power to vary or revoke the order, shows that there is a power to do so under Rule 31.2(m).

In considering the exercise of the power under Rule 3.1(2) as the Circuit Judge had done, the checklist in Rule 3.9(1) is a useful guide, although not directly applicable. In this case:

a. the interests of the administration of justice; there is nothing which suggests that the interest of the administration of justice would be prejudiced or compromised if the application for relief were granted;
b. whether the application for relief has been made promptly; I doubt very much that it was and proceed on the footing that it was not;
c. whether there is a good explanation for the failure; none has been provided. HH Judge Hampton herself observed that there was no explanation (but see paragraph 65 below);
d. whether the failure was caused by the party or his legal representative; the failure appears to have been entirely that of Mr Binnie’s solicitors;
e. the effect which the failure to comply had on each party; Mr Binnie will lose a valuable asset for want of payment of a comparatively modest sum which he attempted to pay by cheque in December 2007, his cheque being returned.
f. the effect which the granting of relief would have on each party; the Lease would be reinstated. Forcelux would lose what I think can fairly be described as a windfall.

This was a case for the exercise of discretion in favour of Mr Binnie. He had not acted promptly (and in principle would be held with the delay of his legal representatives, Training in Compliance Ltd v Dewse [2001] CP Rep 46, although Rule 3.9(1)(f) does mean that whether the delay was due to the the applicant or his representatives can be considered as a factor in the exercise of discretion). However, the delay was not such as to disentitle him from relief and enable Forcelux to keep their windfall. The Court of Appeal exercised the discretion under Rule 3.1(2) replacing the DJ’s set aside order, and dismissed the appeal.

In the costs hearing Forcelux Ltd v Binnie [2009] EWCA Civ 1077, Forcelux argued that it was entitled to recoup its costs from Mr Binnie under the lease, which had a covenant on Mr Binnie:

To pay all costs charges and expenses (including legal costs and also charges payable to a Surveyor) which may be incurred by the Lessor or in contemplation of any application to the Lessor for any consent pursuant the covenants herein contained and of any steps or proceedings or the service of any notice under Sections 146 or 147 of the Law of Property Act 1925 including the reasonable costs charges and expenses aforesaid of and incidental to the inspection of the Demised Premises the drawing up of schedules of dilapidations and notices and any inspection to ascertain whether any notice has been complied with and such costs charges and expenses shall be paid whether or not any right of re-entry or forfeiture has been waived by the Lessor or avoided otherwise than by relief granted by the Court

The Court agreed that possession proceedings brought to enforce a right of re-entry following a notice under section 146(1) could be construed as proceedings “under” section 146 and so fall under the clause.

However, “(a) that the contractual point was not raised below [in the set aside hearing or first appeal] or before us on the appeal (b) that costs orders were made below including the one made by DJ Hudson which deprived Forcelux of an element of its costs and (c) that the appeal failed on both the “trial” point and the issue of the exercise of discretion. ”

While the general principle is that the Court’s discretion on the award of costs should be exercised in line with the contractual provision. the general principle is not a rule of law and it may be that in particular cases, or classes of cases the discretion should override the contract.

For example, if a lessor loses a piece of litigation at first instance which it was reasonable for him to fight, it might be wrong to deprive him of a contractual right to costs. But if he goes on to appeal the decision against him and loses the appeal, then it is not obvious to me that the general rule should be that the discretion should be exercised in accordance with the contractual right; or if it is the general rule, then the court should be willing to depart from it quite readily.

Here, “I consider that this is a case where, in the exercise of the court’s discretion, Mr Binnie is entitled to a costs order which departs from the contract. I would reach that conclusion even if the point had been taken at the beginning of this litigation before DJ Hudson. I would do so because application of the general rule in relation to the facts of this appeal would cause an injustice to Mr Binnie.”

About Giles Peaker

Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts, and still is Nearly Legal on Google +.
Posted in Housing law - All, Leasehold and shared ownership, Possession.

19 Comments

  1. This case represents perhaps the biggest upset to many advisers’ procedural assumptions for some time – well, certainly mine, and clearly also those of many involved in this case. It depends on the principle being extendable to all possession hearings where a properly tenable defence could be brought: I don’t see why it should not be.

    Instead of grappling with CPR 39.3’s tricksy hurdles, tenants’ and mortgagors’ solicitors, whose clients had a fair defence, should find it much easier to set aside orders that should never have been made in the first place, and probably would never have been if the defendant had only turned up. Will trying to find a sufficiently convincing “good reason” for not attending the possession hearing; and trying to explain why one’s client’s version of acting “promptly” is not the same as most fully-awake people’s (funding and appointment-making delays notwithstanding)become things of the past?

    It should give the district bench a wider discretion to overturn possession orders, which given the encouragement of well-drafted applications supported by good evidence, many may well want to use. The repercussions will take a while to filter through, and many DJs may not be aware of this one for a while. So go out there and tell ’em…

    • Rudy, while ‘acting promptly’ and ‘good reason’ for not being at trial are still factors to be considered, they are factors in the exercise of a discretion, rather than requirements to be met before the discretion can even be considered. So, not things of the past, but not absolute hurdles anymore either.

      I agree, this does potentially make quite a difference, which is why I tried to flag it up as being significant for all possession cases, not just leases. Given the struggles I’ve had with CPR 39.3 in the past, it makes me happy, certainly.

    • My point exactly: 39.3 closely fetters the court’s right to even consider the exercise of the discretion to set aside, perhaps understandably given that it was aimed at those missing “The Trial” (after a lengthy process presumably in which directions and preliminary orders had all been made), rather than those not turning up to a first hearing. One’s client can now be more dilatory than before and yet, if their defence is strong enough, they still have a fair chance of getting the order set aside, because the discretion will be available to exercise regardless.

      I’m just a bit surprised – judging by the meagre number of comments – that more of your erudite and knowledgeable readership aren’t more excited by this development. Or am I just (a) in need of a richer and more fulfilling life or (b) reading too much into this decision?

  2. Don’t fall into either category which is why it has taken me a while to catch on. Now using it to avoid criticism of judge’s decision under 39.3 bypassing with de novo hearing using CPR 3

  3. My pro-bono client did not turn up to his hearing on permission to appeal a county court judgment. Am I correct in assuming that this hearing was a trial and therefore the joys of CPR3.1 are unavailable to him? I must say I don’t fancy his chances on CPR39.3. Thanks.

    • Denis, I have no idea at all. But interestingly Rule 52.3 refers specifically to a permission to appeal ‘hearing’.

      But can one apply to set aside an order refusing permission to appeal resulting from a hearing? Rule 52.3(4B) means that there can be no application to set aside an order that a person seeking permission may not request an oral hearing, but that refers to Rule 3.3(5) – an order made on the Court’s own initiative – which an order out of a permission hearing isn’t.

      Unless your client went under a bus, I don’t fancy their chances much on either 3.1 or 39.3, though.

  4. Can anybody tell me, have there been any significant cases recently using this rule for setting aside mortgage possession orders not done so promptly?

  5. Thank you NL, although that did make confusing reading! I am looking for good cases to use in relation to setting aside possession order on mortgaged property, awarded following defective service, but not applied for promptly. Anybody have any ideas?

  6. Order early 2010, she was out of jurisdiction, they knew she had not been at property for approx one year, she had nominated representative, they did not seek alternative method, place or jurisdiction, but filed on empty house. To me that is defective. Couple that with being confined to hospital, which they also knew and could not return, compounds the injustice. Arrears based on wrongly applied concession, plus defendant being stuck in hospital. Representative found letters, hearing date and order all at once when son came to property to give mail over. Rep could have paid arrears and it not gone to court, but in panic paid up after the event to keep house believing the tale that the fact that it was satisfied meant it would effectively go away. This was resurrected a year later Jan 2011, following further similar lack of communication, by this time tenanted. Rep applied to the court it wasn’t addressed as the limited time was spent keeping the roof over tenant. Resurrected again in 2012, Rep who was now living in property applied was dismissed saying no standing, and defendant applied dismissed due to not acting promptly. My argument being if it is defective service surely it should be “as of right” set aside and not discretionary and promptness? Any thoughts much appreciated?

    • LB Southwark v Jackson & Jackson might help
      http://nearlylegal.co.uk/2009/04/bits-from-lag/
      though only County Court.

      But surely you’ve got an issue with the nominated rep. Assuming the rep informed D of proceedings, what is D’s reason for delay when there were previous hearings at which this could have been raised. And is service on the property really defective service? Just the fact that D wasn’t there may not be sufficient.

    • Rep is friend, given authority to C to deal directly before leaving the country on business. C had been happily communicated by tel and in writing during 2009, then unannounced issued proceedings without notifying Rep, who did not have key to house. Rep would’ve gladly have paid from own money and avoided action. D stuck in hospital in and out for months, bronchial, chest, lungs etc, could not fly. Both relied on assertion of bank that satisfied, so would be no problem. C knew that not only had not lived there for nearly a year, but also confined to hospital, Rep kept updated due to concession agreed to give time to restructure business. Business deals protracted due to ill health, let house whilst D in and out country trying to complete deals. C continued to be selective when communicating with Rep and obstructed normal maintenance of account. Again in 2011, applied to court for warrant of execution, rep wrote long letter, explaining flouting of pre-action protocol and CPR, 10 min hearing, overran discussing tenants issues and Rep’s agreements with C about disputed arrears being charges for original erroneous action via formal complaint, which would have been avoided had they done as instructed and contacted Rep. Set aside not addressed. D in and out of country with little time to spare, staying at Rep’s house. Have likened it to the Derispaska case with “quality” of use of home etc, and to where it is mentioned in Kamali about C having reason to believe D living out of the country, thereby “must” apply for alternatives as per CPR 6, but as this is a mortgage possession judgment and not by the letter a default as per CPR 12, I do not know if 13.2 will apply for set aside as of right, or the 3.9(m) in Forcelux to avoid the promptness argument, but may be too discretionary?

    • All I can say is the best of luck! I think there is an uphill battle not just on delay but on the fact that there have been interim hearings, to D’s knowledge.

  7. Thank you NL.

    Yes it is, D had knowledge, but out of jurisdiction at the time, rep applied to be joined in as current occupier and requested set aside, based on service arguments, C complained that Rep had no standing unless held valid POA to bring action on behalf of D, court listened and dismissed case.

    If occupier is entitled to request to be joined in and to request set aside in their own right, they do not need POA. The Court should have not been led by C down that road. Is there a procedural error that can be addressed here?

  8. Ref took information from LAG Defending Possession Proceedings and it stated in their “occupiers entitled to……” so did giving the Court what they thought to be the ammunition for 13.2 mandatory set aside!

  9. Albeit, the account was not in arrears at the time either, so satisfied, so Court could have used its discretion on many fronts to set aside order.

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