Bank of Scotland v Pereira & Ors [2011] EWCA Civ 241

Case No B5/2009/2066[2011] EWCA Civ 241
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE POOLE COUNTY COURT
HIS HONOUR JUDGE MILLIGAN
AND FROM THE CROYDON COUNTY COURT
HIS HONOUR JUDGE ELLIS
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 09/03/2011
Before
THE MASTER OF THE ROLLSLORD JUSTICE LLOYDLORD JUSTICE GROSS
Between
BANK OF SCOTLANDClaimant
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Joanna Shaw (instructed by Paul Smith & Co) for Appellant, Ms PereiraGary Lidington (instructed by Aldridge and Brownlee) for Respondents, Mr & Mrs PainHearing Hearing date: 15 December 2010
JudgmentLord Neuberger MR:
[1]On 21 June 2007, in the Poole County Court (sitting at Southampton), His Honour Judge Milligan made an order (“the Order”) against Ms Juliana Pereira, in her absence, and on 6 August 2009, in the Croydon County Court (to which the proceedings had in the meantime been transferred), His Honour Judge Ellis rejected Ms Pereira’s application to set aside parts of the Order. Ms Pereira now seeks to appeal against Judge Ellis’s decision refusing to set aside parts of the Order, and to apply for permission to appeal out of time against Judge Milligan’s Order.[2]The route of appeal in respect of the Order is to the Court of Appeal, as the case was allocated to the multi-track. In June 2010, Rimer LJ, on the basis of reading the papers, refused Ms Pereira’s application for an extension of time and for permission to appeal against the Order. Ms Pereira renewed her application, and the oral hearing of the renewal of that application was the matter listed before us.[3]The route of appeal in respect of Judge Ellis’s refusal to set aside the Order was to the High Court. In November 2009, Peter Smith J granted Ms Pereira permission to appeal against Judge Ellis’s decision. That appeal was, however, stayed pending the hearing of the application in respect of the Order. When Ms Pereira’s application for permission to appeal against the Order came on before us, we invited the parties to agree that the hearing of the appeal against Judge Ellis’s decision be heard by us at the same time. This was sensibly agreed, and accordingly, pursuant to section 57 of the Access to Justice Act 1999, I directed that the appeal be brought to this court, and accordingly we heard the two appeals together.[4]The hearings before Judge Milligan and Judge Ellis arose out of possession proceedings brought by the Bank of Scotland (“the Bank”), against Mr Howard Pain and Mrs Linda Pain (“the Pains”) and Ms Pereira, in respect of 19 Whitecliff Crescent, Poole, Bournemouth (“the Property”). In summary terms, the background to those proceedings was as follows.

The background facts

[5]In 2003, the Pains lived in and owned the Property. They were experiencing financial difficulties with their family business, which faced a number of legal claims. Accordingly, they were seeking access to some capital. The Pains were introduced to a Mr James, who said that he could arrange for them to sell the Property, on terms that they could continue to live there rent free for the rest of their lives. In order to induce them to do this, he told them that, if they did so, a company he controlled, Styllpoint Ltd, which had £11 million of assets under its control, would provide them with access to funds of £250,000 to assist them with the legal costs of the litigation in which they were involved.[6]Mr James agreed with, or persuaded, Ms Pereira, who was in a relationship with Mr James at the time, to be the contracting purchaser of the Property, and that was accepted by the Pains. The purchase price was recorded in the paperwork as being £276,000. To enable Ms Pereira to purchase the Property, the Bank agreed to advance her £238,000, which was to be secured by way of a first legal charge over the Property. On 23 January 2004, the purchase was completed, and the Pains transferred the Property to Ms Pereira in return for £238,000, the balance of the recorded purchase price of £276,000 being pure fiction. Shortly thereafter, Ms Pereira was registered as the proprietor at the Land Registry, and the Bank’s charge was registered against the title.[7]The £238,000 was paid to Styllpoint rather than the Pains, who received no benefit from that money, save to the extent of £10,109.96 which was used to discharge an existing registered charge over the Property. Furthermore, the Pains never got access to the alleged £250,000 funds, promised by Mr James: this was unsurprising, as the funds plainly never existed.[8]Under the arrangement between Mr James and Ms Pereira, Styllpoint was responsible for paying the mortgage installments and, for a short period of time, it made those payments, but soon stopped. This resulted in the Bank making investigations, and discovering that the sale of the Property had been part of a fraudulent scheme, orchestrated by Mr James. Contrary to the Bank’s understanding of what would happen at the time it agreed to advance the money, Ms Pereira had never lived at the Property, and the Pains continued to live there.

The Order made by Judge Milligan

[9]In 2006, the Bank decided to bring possession proceedings against the Pains, as the occupiers of the Property, and Ms Pereira, as the registered proprietor. The Pains defended the claim; they also counterclaimed against Ms Pereira, seeking rescission of the transfer of the Property to Ms Pereira, and rectification of the register, re-registering them as proprietors of the Property. Ms Pereira took no part in the proceedings. The Pains served her with a proposed amended counterclaim on 14 June 2007, one week before the hearing of the case was due to take place, in which they added a claim against her for damages.[10]The claim and counterclaim came on for hearing on 21 June 2007 before Judge Milligan. Ms Pereira did not attend and was not represented. The Bank and the Pains were separately represented, and Mrs Pain gave brief evidence as to Ms Pereira’s apparent knowledge of Mr James’s wrongdoing, and in particular his misrepresentations. The Judge gave permission to the Pains to amend their defence and counterclaim, by adding a claim for damages against Ms Pereira. Although he did not give a reasoned judgment (which was unfortunate) we have seen a transcript of the hearing.[11]At the end of the hearing of 21 June 2007 Judge Milligan made the Order, which included the following provisions:• The Bank recover possession of the Property;• Ms Pereira pay the Bank £298,183.60, being the sum loaned plus interest and costs;• The sale and transfer of the Property be rescinded, and the title be rectified accordingly; and• Ms Pereira pay damages to the Pains, such damages to be assessed following completion of the sale of the Property, and to include the Pains’ costs of the proceedings.[12]The Pains have now been re-registered as proprietors of the Property, but it remains subject to the Bank’s registered charge. The Pains have been paying the instalments due to the Bank under the charge. The Bank has also obtained a charging order over Ms Pereira’s home at Gipsy Road, West Norwood (“Gipsy Road”), where she lives with her two children (whose father is Mr James). It was at Gipsy Road that all documents in connection with the proceedings were served on her. The Pains have not yet had their assessment of damages, although they have applied for it. At least as it seems to me at the moment, they may have difficulty in proceeding with the assessment, at least unless the Order is varied, as the Order appears to envisage the assessment taking place only after the Property is sold, which it has not been.[13]Be that as it may, Ms Pereira did not, as mentioned, attend the hearing before Judge Milligan. Although she received written notice of the hearing date some seven weeks ahead, and although she appears to have faxed to the court an application for an adjournment on 20 June, she claims that she did not realise that the hearing would be going ahead on 21 June 2007. On learning of the judgment against her, she appears to have written to the court asking for an extension of time for appealing on 5 July 2007, although she claims that letter was forged – presumably by Mr James. In its reply, sent to Gipsy Road on 13 July, the court advised her of her right to seek permission to appeal from the Court of Appeal.

The application to Judge Ellis to set aside the Order

[14]On 8 July 2009, Ms Pereira made an application under CPR 39.3to set aside part of the Order, namely the judgment for rescission and damages. On 6 August 2009, that application came before Judge Ellis, who refused the application, for reasons which he gave in a full and careful judgment. In summary, Judge Ellis concluded that Ms Pereira had failed to satisfy at least two of the three requirements for setting aside judgment set out in CPR 39.3, in that she had failed to act promptly on discovering judgment had been given, and she did not have a good reason for not having attended the hearing. (The third requirement was that she would have a reasonable prospect of success at a retrial, which Judge Ellis also considered presented her with difficulties).[15]Judge Ellis said that he was satisfied, on the basis of the evidence before him, that Ms Pereira knew that the case would be heard on 21 June 2007, and had made a conscious decision not to attend that hearing, and did not have a good reason for not having attended. He rejected her evidence that she believed that the hearing would not take place, not least in the light of her having sent a letter (which she accepted that she had signed) on 12 June asking for an adjournment, and a faxed letter to the court (on which she now claims that her signature was forged presumably by Mr James) on 20 June, stating that she would not be attending the hearing the following day.[16]Judge Ellis also held that Ms Pereira was aware that judgment had been given against her shortly after 21 June 2007, in any event by the time that she wrote the letter of 5 July, as he found she did despite her contention that her signature on the letter had been forged by Mr James. Therefore, in considering whether she acted promptly in seeking to set aside that judgment, time ran from early July 2007. That delay, Judge Ellis unsurprisingly concluded, was much too long for the application in July 2009 to satisfy the requirement of promptness.[17]According to her evidence, the first time Ms Pereira knew about the Order was in February 2009 (although it seems likely to have been December 2008 given the date of the notice), when she received a notice of hearing to attend court in relation to the assessment of damages. She then instructed solicitors, Montas & Co. The Judge said that, even if he was wrong in concluding that she knew about the Order much earlier, the period of more than five (or seven) months between February 2009 (or December 2008) and the July 2009 application was too long a gap. Judge Ellis rejected Ms Pereira’s contention that Montas & Co were to blame for the delay rather than herself, saying that “this is a case where the normal rule should apply that a party has to bear responsibility for delay whether it be caused by him or his solicitor”.

The applications before this court

[18]Faced with this outcome, Ms Pereira then made two applications for permission to appeal. The first, to the High Court, was against Judge Ellis’s refusal to set aside the Order, and it was lodged in time, on 26 August 2009. The second, to the Court of Appeal, against the Order, was not made until 22 September 2009, well over two years out of time, in the light of the 21 day time limit specified in CPR 52.4(2)(b).[19]In effect, Ms Pereira seeks to justify her failure to attend the trial on 21 June 2007, and her subsequent inactivity on the facts that(a) she was duped or defrauded by Mr James until about May 2009, when Mr James was sentenced to a term of over four years in prison in May 2009 for fraudulent trading, and(b) thereafter her former solicitors were slow in acting, partly as a result of which she instructed new solicitors, who now act for her.[20]More specifically, Ms Pereira alleges that the reason that she did not attend the trial on 21 June 2007 was because she thought that Mr James was dealing with the case on her behalf, as she says that he told her. Although she accepts that various letters were apparently sent by her from Gipsy Road, thereby appearing to undermine her case, she says that they were forged by Mr James. Similarly, she accepts (as she must) that a number of letters and other documents were sent to Gipsy Road in connection with the trial demonstrating that it was imminent, and after the trial showing that the Order had been made against her. However she says that those letters must have been taken by Mr James, as she had not seen them, and he had a key to the house. Her evidence is that she was only advised by her current solicitors, Paul Smith & Co, that she should appeal against the Order in September 2009.[21]So far as the substantive merits of the case are concerned, Ms Pereira’s case is that she was merely the nominee for Styllpoint and was entirely ignorant of the making of Mr James’s representations to the Pains.[22]Ms Shaw submitted on Ms Pereira’s behalf, that we should grant her an extension of time in respect of the application for permission to appeal the Order and grant the application and allow the appeal against the Order, or alternatively that we should reverse the decision of Judge Ellis, and set aside the Order. The main basis for this argument was, ultimately, a simple point of fundamental procedural justice, namely that she has not been afforded a fair hearing to date, in that she has never had the opportunity to present her case on the merits and to test and challenge the Bank’s case and the Pains’ case against her at a hearing, and that she had a good arguable case in that connection.[23]Before considering the arguments in relation to this case, it is worth considering the principles which apply to Ms Pereira’s two applications and their interrelationship.

The applicable principles to these applications

[24]First, the application to appeal Judge Ellis’s refusal under CPR 39.3 to set aside the Order. An application to set aside judgment given in the applicant’s absence is now subject to clear rules. As was made clear by Simon Brown LJ in Regency Rolls Ltd v Carnall [2000] EWCA Civ 379, the court no longer has a broad discretion whether to grant such an application: all three of the conditions listed in CPR 39.3(5) must be satisfied before it can be invoked to enable the court to set aside an order. So, if the application is not made promptly, or if the applicant had no good reason for being absent from the original hearing, or if the applicant would have no substantive case at a retrial, the application to set aside must be refused.[25]On the other hand, if each of those three hurdles is crossed, it seems to me that it would be a very exceptional case where the court did not set aside the order. It is a fundamental principle of any civilised legal system, enshrined in the common law and in article 6 of the Convention, that all parties in a case are entitled to the opportunity to have their case dealt with at a hearing at which they or their representatives are present and are heard. If the case is disposed of in the absence of a party, and the party(i) has not attended for good reasons,(ii) has an arguable case on the merits, and(iii) has applied to set aside promptly, it would require very unusual circumstances indeed before the court would not set aside the order.[26]The strictness of this trio of hurdles is plain, but the rigour of the rule is modified by three factors. First, what constitutes promptness and what constitutes a good reason for not attending is, in each case, very fact-sensitive, and the court should, at least in many cases, not be very rigorous when considering the applicant’s conduct; similarly, the court should not pre-judge the applicant’s case, particularly where there is an issue of fact, when considering the third hurdle. Secondly, like all other rules, CPR 39.3 is subject to the overriding objective, and must be applied in that light. Thirdly, the fact that an application under CPR 39.3 to set aside an order fails does not prevent the applicant seeking permission to appeal the order. It is not very convenient, but an applicant may be well advised to issue both a CPR 39.3 application and an application for permission to appeal at the same time, or to get agreement from the other party for an extension of time for the application for permission to appeal.[27]An appeal against a judge’s decision under CPR 39.3 to refuse (or indeed to allow) an application to set aside a judgment does not, at least normally, involve challenging a discretion. However, an appellate court should be slow to overturn a decision of this nature, unless satisfied that the judge went wrong in principle. The decision will often involve making findings of fact, and, while the findings will normally be based on written evidence only, an appellate court should never lose sight of the principle that the first instance tribunal is the primary finder of fact. In so far as the decision involves a balancing exercise, an appellate court should pay proper respect to the judge’s views. Another way of making essentially the same point is that the appellate court normally has a reviewing, as opposed to a rehearing, function in such a case, and it can therefore only interfere if satisfied that the judge was wrong.[28]That brings me to the application to this court for an extension of time to appeal, and for permission to appeal, against the Order. Plainly, the jurisdiction of a court on an application for permission to appeal, made out of time, is rather less circumscribed. If the application had been in time, so the sole issue was whether permission to appeal should be given, the only question is normally whether the projected appeal has a real prospect of success. If it does, permission should almost always be granted; if it does not, then permission should normally be refused. There are cases where there is a prospect of success, but permission can nonetheless be refused: for instance if an appeal would be pointless or is in respect of an interlocutory point which should be considered later, if necessary. Equally, there will be cases where the court considers that, although there appears to be no real chance of an appeal succeeding, permission should be given for “some other compelling reason”, as is provided in terms in CPR 52.[29]As for an application for extension of time for seeking permission to appeal, the court must consider it by reference to all the relevant circumstances, including the specific factors mentioned in CPR 3.9 – see Sayers v Clarke Walker [2002] EWCA Civ 654, paragraph 21. The list of factors in CPR 3.9 is valuable in that it ensures that, in every case where that rule applies, the judge will consider those factors. However, the rule does not, and cannot, tell the court what weight to give to each of those factors, as that must be a matter of judgement on the particular facts of the particular case. Further, as with any exercise of this sort, the court must bear in mind the overriding objective.

The interrelationship between the two applications

[30]It seems clear that we should first consider the appeal against Judge Ellis’s refusal to set aside the Order. If that appeal succeeds, then it would be unnecessary to consider the appeal against the Order; indeed, it would be inappropriate to do so, as those parts of the Order to which Ms Pereira objects would have been set aside. However, if we were to uphold Judge Ellis’s refusal to set aside the Order, we would then have to consider the application for permission to appeal against the Order, in which case a difficult issue arises. That issue is the interrelationship between a defendant’s application to set aside an order under CPR 39.3 and her right of appeal under CPR 52. (I refer to a defendant, as experience shows that it normally is a defendant who fails to attend trial, but my comments apply equally where it is a claimant).[31]In Tennero Ltd v Arnold [2007] 1 WLR 1025, [2006] EWHC 1530 (QB), judgment in the County Court was given against a defendant following a trial in his absence, after the trial judge had first considered and refused the defendant’s application for an adjournment made in a letter sent from abroad. The defendant issued a notice of appeal to the Court of Appeal some two weeks out of time, and he then applied to the County Court to set aside the trial judge’s order under CPR 39.3. The CPR 39.3 application came on for hearing, and it failed, on the grounds that he did not have a good reason for not having attended the trial, and he had not made the application promptly. Meanwhile, he discovered that his attempt to appeal against the original order should have been made to the High Court rather than the Court of Appeal, and he then sought permission to appeal to the High Court against the original order. Jack J refused such permission on the ground that, in the light of his failed attempt to seek a retrial, the defendant’s attempt to appeal against the order was an abuse of process.[32]In that case, the sole argument which the defendant would otherwise have had any realistic prospect of maintaining on his projected appeal was that the trial judge ought not have refused his application for an adjournment. Jack J made two points at [2007] 1 WLR 1025, para 17. First, he said that the defendant did “not have a choice” between seeking to appeal the original order or making a CPR 39.3 application, as CPR 39.3 “provides for an appropriate course of action in the circumstances”, and that it “should override the general right of appeal”. Secondly, he said that appealing the refusal to adjourn “could be a way of side-stepping that process [sc. The CPR 39.3 procedure], a process which the Rule Committee has considered appropriate.”[33]At [2007] 1 WLR 1025, para 18, Jack J said that, by pursuing the CPR 39.3 procedure, the defendant had “made his choice of remedy”, that it “would clearly be an abuse of the court’s process to proceed with both [a CPR 39.3 application and an appeal against the original order] at the same time”, and that it “must equally be an abuse to pursue one, and having failed, to revive the other.”[34]Tennero [2007] 1 WLR 1025 was distinguished by the Court of Appeal in Attorney General of Zambia v Meer Care & Desai [2008] EWCA Civ 754 (known as Boutique Basilique) ,where a defendant, against whom judgment had been given in his absence, appealed to the Court of Appeal. His grounds of appeal included, but were not limited to, the contention that he should be permitted to adduce further evidence. In the only reasoned judgment, Lloyd LJ distinguished the reasoning of Jack J on the ground there were “separate grounds of appeal, even without any fresh evidence, on which permission to appeal has been granted” – [2008] EWCA Civ 754 para 26. In the preceding paragraph of his judgment, Lloyd LJ did “not disagree with anything in the judgment of Jack J … in relation to the facts he had to consider, where there was no basis for a separate appeal, and where the appellant had taken the proper course, applying under CPR 39.3”.[35]CPR 39.3 exists essentially to ensure that a defendant has an opportunity to present her case to a judge. If she had no good reason for not attending the trial, she has had the opportunity to appear and did not take it. If she fails to apply to set aside the order promptly, she has also lost the opportunity afforded to her by the rules to set aside the original judgment, and present her case at a rehearing. If she fails to persuade the judge at the CPR 39.3 hearing that she would have an arguable case at a rehearing, setting aside the original judgment would be pointless – and anyway she has had the opportunity to put her case to a judge, namely the judge hearing the CPR 39.3 application.[36]While the purpose of CPR 39.3 is thus readily apparent, the relationship between a defendant’s application under CPR 39.3 to set aside an order, and any attempt to appeal against the order is more difficult. Experience and common sense suggest that it may well be impossible to lay down rules in that connection which would cover every case. However, I consider that there are six points which can at least act as guidelines, and would apply in the great majority of cases.[37]First, where the defendant is seeking a new trial on the ground that she did not attend the trial, then, even though she may have other possible grounds of appeal, she should normally proceed under CPR 39.3, provided she reasonably believes that she can satisfy the three requirements of CPR 39.3. The fact that she wishes to raise other arguments for attacking the trial judge’s decision should not preclude her proceeding under CPR 39.3, because that is the specific provision which applies if she did not appear at the trial (and gives her a potential right to a new trial) as Jack J pointed out. Further, if she has a retrial, the other arguments which she wishes to raise could be raised at the retrial (and they may be considered by the judge who hears her CPR 39.3 application). This is not to suggest that in Boutique Basilique [2008] EWCA Civ 754 the court proceeded on a mistaken basis. If a defendant seeks to appeal without first making a CPR 39.3 application, when she could have made such an application, the appellate court could still entertain her appeal, although particularly following our judgments in this case, it will normally require unusual facts before it should do so.[38]Secondly, if the defendant concludes that she cannot establish that she had a good reason for not attending the trial and/or that she made her CPR 39.3 application promptly, it would obviously be silly for her to make a CPR 39.3 application. In such a case, she can nonetheless seek to appeal against the trial judge’s decision in the same way as any other defendant. I do not see why the rights of appeal of an unsuccessful defendant should be any different in principle depending on whether the judgment was given in her presence or her absence. If the trial judge made an appealable decision, either in his final judgment or during the hearing, the defendant’s ability to challenge the decision by way of an appeal under CPR 52 should in principle be the same. CPR 39.3 is, in that sense, merely an additional potential course given to a defendant who, with good reason, was unable to attend the trial.[39]It is important to emphasise the words “in principle” in the previous paragraph. In practice, a defendant who has not attended the trial may face greater difficulties in pursuing an appeal than one who has. First, as this case and Tennero [2007] 1 WLR 1025 suggest, her application for permission to appeal is likely to be out of time, and she will have to persuade the appellate court to extend time. Secondly, a defendant who has not attended trial is far more likely to have to persuade the appellate court that she should be permitted to adduce evidence or raise arguments of law not adduced or raised at trial (as to which see paras 44-45 below).[40]Thirdly, where a defendant makes an application under CPR 39.3 and that application fails on the ground that she had no good reason for not attending the trial and/or that she did not make her CPR 39.3 application promptly, it seems to me that her right to appeal the trial judge’s order should, in principle, be no different from what it would have been if she had not made the CPR 39.3 application. Unless she appeals against the dismissal of her CPR 39.3 application, she would not be able to argue on any attempt to appeal the trial judge’s order that the judgment should be set aside simply because it was given in her absence.[41]However, if she had applied for an adjournment of the trial, I do not see why the fact that she had made a CPR 39.3 application which had failed on the grounds just mentioned (or that she had not made a CPR 39.3 application at all), should preclude her from arguing on an appeal that the trial judge erred in refusing her application to adjourn the trial. A defendant who attended the trial and asked for an adjournment, would be entitled (subject to obtaining permission to do so) to appeal the judge’s refusal of an adjournment, and I do not see why a defendant who did not attend the trial and whose written application for an adjournment was applied for in writing should be in any different position. The mere fact that she had failed in a CPR 39.3 application for the reasons just referred to should not make any difference to her rights of appeal.[42]Where a defendant seeks to appeal against the trial judge’s order after making a failed CPR 39.3 application, I do not consider that, in the light of the discrete and interlocutory nature of a CPR 39.3 application, strict issue estoppel would apply on any question of fact so far as the appellate court is concerned. However, the appellate court considering an appeal or an application to appeal should take a great deal of persuading before departing from a conclusion expressed by the judge who heard the application to set aside; to do so, in the absence of good reason would be invidious, as Gross LJ said in argument.[43]Fourthly, where the defendant has made a CPR 39.3 application which failed on the ground that her arguments on the substantive issues would have no prospect of succeeding at any retrial, she should not normally be entitled to raise the same arguments through the medium of an appeal against the trial judge’s decision. The proper course would usually be to challenge the refusal of the CPR 39.3 application on this ground. However, there will be exceptional cases. For instance, where the CPR 39.3 application was also refused on the grounds that there was no good excuse for not appearing at the trial and/or that there was a lack of promptness in making the CPR 39.3 application, it may well be pointless to appeal the refusal, as it would be upheld on those grounds. In such a case, at least as at present advised, I think it would be wrong if the defendant were precluded from seeking permission to appeal the trial judge’s decision, simply because she was seeking to say that he was wrong for reasons which had been rejected in her CPR 39.3 application.[44]Fifthly, where the defendant’s CPR 39.3 application fails, she will normally be in severe difficulties in seeking to contend, by way of appeal against the trial judge’s order, that she should be entitled to rely on evidence which was not before the trial Judge, or that she should have a retrial. In such cases, the appellate court’s approach must depend to some extent on the facts. In general, the appellate court will bear in mind not only the requirements of CPR 39.3, but also the post-CPR application of the Ladd v Marshall principles (as discussed in Hertfordshire Investments Ltd v Bubb [2000] 1 WLR 2318, 2325, and Sharab v Al-Saud [2009] EWCA Civ 353, para 52).[45]Where the new evidence could not reasonably have been available to the defendant even if she had properly prepared for and attended the trial, it seems to me that the defendant’s position should normally be no different from a defendant who had attended at trial. So too where her application for a retrial is not dependent upon the fact that she did not attend the trial. In such circumstances, her application to adduce and rely on new evidence or for a retrial would not be related to her position as a defendant who did not attend the trial.[46]However, it would be very different where the defendant’s application to adduce new evidence, or to have a retrial, is essentially based on the fact that she did not attend the trial. If she has already failed in her CPR 39.3 application, it seems to me that to allow her to appeal against the trial judge’s order on such a ground would involve letting her in through the back door after having firmly locked the front door. The policy behind CPR 39.3, as interpreted in Regency Rolls [2000] EWCA Civ 379, is to prevent a defendant from seeking a retrial if she did not attend the trial, unless the three requirements in CPR 39.3.5 are satisfied. Where her CPR 39.3 application has been refused because she has failed to satisfy one or more of those requirements, it seems to me that it would be wrong in principle for an appellate court to grant her a retrial on grounds which, in reality, amount to no more than her having been absent from, and therefore not having given evidence at, the trial.[47]Sixthly, if the defendant makes no CPR 39.3 application, but appeals the trial judge’s decision and seeks to put in new evidence or an order for a retrial, very similar considerations seem to me to apply. However, as it will not have been determined whether the three requirements of CPR 39.3.5 have been satisfied, the appellate court may have to make that decision for itself (unless it decides that the defendant should first have applied under CPR 39.3 to set aside the trial judge’s order (in which case the appellate court may nonetheless decide the issue itself, remit the issue to the court below as a CPR 39.3 application, or make some other appropriate order). .[48]In the light of the fact that Jack J’s judgment in Tennero [2007] 1 WLR 1025 has been reported and may be applied in other cases, it is right to add that it seems to me to follow from the above analysis that, while there is much in Jack J’s analysis with which I agree, and while his actual conclusion seems to me to have been right, there are some of his remarks with which I do not agree. However, there is nothing in the judgment of Lloyd LJ in Boutique Basilique [2008] EWCA Civ 754 with which I disagree. As pointed out above, my first point does not mean that there is an absolute bar in every case to a defendant seeking to appeal against a decision, when she could first have made a CPR 39.3 application. As to the third point, Lloyd LJ’s approval of Tennero [2007] 1 WLR 1025 proceeded on the basis that the issue raised in the CPR 39.3 application in that case was the same as the issue raised on the appeal.

The appeal against Judge Ellis’s refusal to set aside the Order

[49]Judge Ellis was entitled, indeed right, to reject aspects of Ms Pereira’s evidence which were crucial to the success of her application before him. She may well have been subject to Mr James’s influence, at least to some extent, during the time leading up to the hearing before Judge Milligan. However, her relationship with Mr James had come to an end by 2005, at the latest, and she is not stupid. Judge Ellis was entitled to conclude that she was aware that the hearing was taking place in the light of the documents which she must have received, not least because she did not deny having written to the court asking for an adjournment, quite apart from the fact, as the Judge held, she had sent the court a fax the day before the hearing, saying she would not be attending.[50]Further, since the end of the relationship, Ms Pereira’s initial evidence was that thereafter Mr James only visited Gipsy Road about once every two weeks. Her evidence then changed somewhat, and was to the effect that he visited her house significantly more often in connection with their children. Even assuming in Ms Pereira’s favour that Mr James had a key and visited her house relatively frequently, he cannot have removed every communication about the proceedings before she had had an opportunity to open and read it, unless Ms Pereira never opened the post, which she does not suggest.[51]Equally, Judge Ellis was entitled to conclude, for very similar reasons, that Ms Pereira was aware of the Order within a week or two of its having been made. If that was so, her delay of around two years in making the CPR 39.3 application could not possibly be described as prompt, even on the most generous-minded and indulgent view. Even on the assumption that, contrary to Judge Ellis’s opinion, Ms Pereira did not know of the Order until February 2009, her failure to apply to set it aside until late August 2009 appears to me to justify his conclusion that she did not act promptly. Another judge might have taken the view that, on that assumption, her application was made promptly, but such a view would surely have been on the generous side. There was no special reason justifying or explaining the delay, other than Ms Pereira’s contention that her solicitors were dilatory or did not give her the right advice. However, if her solicitors were to blame, that is a matter between them and her, as Judge Ellis said.[52]It was argued that, once Judge Ellis was disinclined to accept Ms Pereira’s evidence in its entirety, he could not fairly have disbelieved her without her being given the opportunity to give oral evidence and being cross-examined. I do not agree. As the Judge said, this would be inconvenient and time-consuming, and “the court has wherever possible to scrutinise [applications under CPR 39.3] and deal with them on the basis of written evidence”.[53]In the great majority of cases, a judge hearing such an application should not allow oral evidence on the basis that he or she can properly(i) accept all the factual evidence given by the applicant, and allow the application,(ii) dismiss the application even on the assumption that all the applicant’s evidence is true,(iii) allow the application even though of the view that some of the applicant’s evidence is or may be untrue, or(iv) reject some (or even all) of the applicant’s evidence on the basis that it is inconsistent or inherently improbable, and accordingly dismiss the application.[54]In the case of the instant application, it seems to me that option (ii) applied, on the basis that the application was not made promptly even on the applicant’s case, and, if it did not, then option (iv) applied, on the basis that, for good reasons, the Judge did not accept that the applicant was unaware that the case was to be heard when it was, or, for some eighteen months thereafter, that it had been heard. It will be only in exceptional cases, where there is no reason on the face of it to doubt the applicant’s evidence, the respondent reasonably wishes to challenge the evidence, and the evidence is likely to be crucial to the outcome of the application that the court should even consider allowing oral evidence and cross-examination on a CPR 39.3 application.[55]As it is, the decision reached by Judge Ellis, and the reasoning by which he reached that decision, appear to me to be unassailable.

The application for permission to appeal against the Order out of time

[56]Although Judge Ellis indicted that he did not consider that Ms Pereira had any arguments which would have been likely to succeed at a retrial, and I would uphold his decision to refuse to set aside the Order, I do not consider that that of itself disposes of her application for permission to appeal against the Order. My reasons are as set out in paras 38-40 and 43 above, and, in any event, she has appealed Judge Ellis’s decision, which I would uphold, for reasons which are not concerned with the strength of her case at any retrial. It is therefore necessary to consider her application for permission to appeal out of time.[57]To succeed on her appeal against the Order, Ms Pereira would either(i) have to establish that, on the evidence and statements of case before him, Judge Milligan should not have made it, or(ii) have to persuade this court to order a retrial, so that her case could be presented and her evidence heard at a retrial.[58]In my view, there would be little prospect of Ms Pereira succeeding in persuading this court on an appeal that, on the evidence and documents before him, Judge Milligan should not have made the Order against her, and in particular the judgment in damages in favour of the Pains. Ms Shaw made much of the fact that the Pains’ pleaded case was inadequate and their evidence inconsistent on the issue of Ms Pereira’s direct involvement in the fraudulent representations which induced them to agree to sell the Property. However, the allegation of fraud was properly pleaded against Mr James, and there was a pleaded allegation, albeit one which was briefly expressed, that he was Ms Pereira’s agent. Further, there was evidence given at the trial by Mrs Pain that Ms Pereira had been present when Mr James made the fraudulent misrepresentations, and it seems to me that the Judge was entitled to infer, on the basis of such unchallenged evidence and the relationship between Ms Pereira and Mr James, that she knew of their untruth.[59]Ms Shaw also contended that, even if Ms Pereira had no defence in principle, the Order should not have included rescission of the arrangement whereby the Property was transferred to Ms Pereira, as restitutio in integrum was not possible. The only fact relied on by Ms Shaw in this connection is that a possession order has been made in favour of the Bank. There is nothing in that point. First, I do not see why the order for possession prevents restitutio in integrum on any view; secondly, the Bank had a right to possession as a result of the charge (which is plainly a valid charge) in any event; thirdly, the possession order has not been executed.[60]Ms Shaw further relied on what she contended were two irregularities at the hearing before Judge Milligan, namely the grant of permission to amend the Pains’ counterclaim, and the absence of a reasoned judgment. The amendment was the adding of the claim for damages against Ms Pereira. Although Judge Milligan allowed the amendment in her absence, it was perfectly proper to have done so. She had advance notice that there would be an application to amend at the hearing, and she chose not to attend. There was no reason to refuse the amendment, as there is nothing in Ms Shaw’s point that damages could not be awarded in addition to rescission.[61]As for the absence of a reasoned judgment, I have no doubt that it would have been better if Judge Milligan had given a brief judgment, but I do not think it fatal that he did not. There was no defence served and no argument raised, even in writing, on behalf of Ms Pereira. In those circumstances, by virtue of CPR 12.11, the court should have given the Pains’ “such judgment as it appears to the court that [they were] entitled to on [their] statement of case”.[62]Accordingly, as I see it, if we acceded to Ms Pereira’s application for permission to appeal against the Order out of time, the only way she could succeed on the appeal would be if she persuaded the court to set aside the damages award contained in the Order and to direct a retrial. It is argued on behalf of the Pains that to permit Ms Pereira to appeal successfully against the Order when we had just upheld Judge Ellis’s refusal to set aside the Order under CPR 39.3, would involve letting Ms Pereira in through the back door after having firmly locked the front door, as discussed in paras 44-46 above. The reason for this court ordering a retrial on the damages issue would be because Ms Pereira should have the opportunity to adduce evidence, which Ms Pereira could have given to Judge Milligan, but did not do so because she took no part in the hearing before him. Yet, we have held that Judge Ellis rightly refused her the opportunity of a retrial which she had sought on the basis that she had not attended the trial before Judge Milligan.[63]Quite apart from that, even if we had a relatively unfettered discretion to extend time for the appeal, I would be unpersuaded that we should extend her time for appealing, and grant her permission to appeal.[64]It is convenient briefly to address the strength of Ms Pereira’s case if we were to grant her permission to appeal against the Order out of time. That is because, where the question whether to extend time for appealing is hard to resolve, the underlying merits of the applicant’s substantive case can be relevant, according to what was said in this court in Sayers [2002] EWCA Civ 654, para 34.[65]At the conclusion of the hearing, I inclined to the view that, even if her evidence had been heard and accepted by Judge Milligan, Ms Pereira would have had very little chance of resisting the Pains’ counterclaim against her. I formed this view essentially on the basis that, as the party who contracted with the Pains, but knowingly left the negotiations to Mr James, Ms Pereira could not escape liability for Mr James’s fraudulent misrepresentations: cf the reasoning of Lord Reid in Briess v Woolley [1954] AC 333, 348-349.[66]However, having considered the analysis in Lloyd LJ’s judgment on this appeal, which I have seen in draft, I am satisfied that this may well not be right. In particular, if Ms Pereira’s evidence that she had no idea as to what Mr James had said to the Pains was accepted, then, because she appears to have been merely a nominee contracting purchaser and known to be such by the Pains, there could very well be no basis for holding her liable to the Pains for the damages which Judge Milligan awarded against her in the Order.[67]Nonetheless, the fact that Ms Pereira might have successfully fought off the Pains’ money claim if she had given evidence which accorded with her current statements, and which had been accepted, does not mean that her projected appeal against the Order should succeed, if time is extended.[68]Most of the relevant CPR 3.9 factors can be taken relatively shortly, as many of them have already been discussed when considering the decision reached by Judge Ellis. It is clear that some of those factors militate against time being extended in Ms Pereira’s favour. First, she voluntarily took no part in the original hearing. Secondly, she is extraordinarily late in applying for permission to appeal the Order, and her reasons for delay are not impressive. There is no warrant for departing from the conclusions of Judge Ellis on those two points. The delay is close to being “deliberate”, but I would not be prepared confidently to characterise it in that way, in the light of the possible influence of Mr James until he went to prison in May 2009 and the alleged inactivity of the solicitors whom Ms Pereira first instructed in January 2009.[69]On the other hand, the delay has not caused enormous problems to the Pains or the Bank, in the sense that, if an appeal was to proceed and succeed, the consequences would not be particularly unfair. Any problems would, I think, be remediable by imposing a financial liability on Ms Pereira. The Pains have been paying the Bank the instalments due on the money charged on the Property, but, if appropriate, that could be dealt with by an appropriate order that Ms Pereira reimburse them. So, too, any wasted costs could be dealt with in a similar way.[70]On the face of it, the prejudice to Ms Pereira of shutting her out from appealing could be substantial: she would be unable to challenge an order in favour of the Pains for damages which could be well in excess of £200,000, and costs which will presumably exceed £10,000 – possibly substantially. However, closer analysis suggests that the potential benefit would not be so significant. If she was given permission to appeal, there would be exposure to significant anxiety and financial risk in terms of costs to her just as much as to the Pains. However, the point goes much further than that.[71]Ms Pereira’s liability to the Bank will remain on any view, and, if it is satisfied, that would very substantially reduce any obligation to the Pains, as the great bulk of her potential obligation to them under the current Order is in respect of what is, at least in economic terms, the same liability. Furthermore, even if Ms Pereira was to succeed in setting aside the damages order, it seems to me probable that, as between her and the Pains, she is “nearer the fire” so far as liability to the Bank is concerned, as she, albeit as nominee, actually received the money which is now effectively secured both on the Property and on Gipsy Road. As to costs, it seems to me that she would still be liable for the bulk of the Pains’ costs so far in any event, as she would have to bear the costs of, and in connection with, the original hearing as a condition of any retrial.[72]In all these circumstances, I have reached the conclusion that Ms Pereira’s application for permission to appeal should be rejected. It is fair to say that this is a conclusion I reach with some hesitation: it is disturbing to uphold a judgment against a defendant who has not had her case put at the hearing resulting in the judgment, particularly for a sum which is, at least on the face of it, very substantial from her perspective. Nonetheless, I have reached the conclusion that such an order is correct here. First, the only grounds of appeal which would stand a chance of success are grounds which arise directly and solely from the fact that Ms Pereira did not attend the trial, and she therefore faces the difficulty that we have upheld Judge Ellis’s refusal of her CPR 39.3 application. Secondly, even if we had an unfettered discretion, it seems to me that the CPR 3.9 factors, and in particular the extraordinary delay, the importance of finality to the Pains’, and the fact that the prejudice to Ms Pereira is not as great as first appears, weigh against permitting her an extension of time.

Conclusion

[73]For these reasons, I consider that Ms Pereira’s appeal against the decision of Judge Ellis refusing to set aside the Order made by Judge Milligan, and her application for an extension of time to apply for permission to appeal against that Order must both be dismissed. Lord Justice Lloyd:[74]I agree with the Master of the Rolls that Ms Pereira’s appeal against Judge Ellis’ order and her applications in relation to Judge Milligan’s order should be dismissed. Because of the interest of the case I add some observations of my own.

The relationship between an appeal and an application under CPR rule 39.3(3)

[75]Because Ms Pereira did not attend the trial at the conclusion of which Judge Milligan made the order against her which she seeks to challenge, the case raises the question of the interaction between a right of appeal against such an order and the right to apply to have it set aside under CPR rule 39.3(3). As the Master of the Rolls has said, this interaction has been the subject of decisions at first instance in Tennero Ltd v Arnold and in this court in Attorney-General of Zambia v Meer Care & Desai (which I will call Boutique Basile, the name of the particular appellant in that case, to avoid any confusion with a different appeal under the same name). In the latter case there had been no application under rule 39.3(3), only a direct appeal, but there were distinct grounds of appeal against the order below, which did not in any way depend on the defendant’s absence from the trial or on adducing new evidence, in addition to the grounds which were within the scope of rule 39.3(3), to which additional evidence was relevant.[76]It is convenient at this stage to set out rule 39.3(3) to (5):
“(3) Where a party does not attend and the court gives judgment or makes an order against him, the party who failed to attend may apply for the judgment or order to be set aside. (4) An application under paragraph (2) or paragraph (3) must be supported by evidence. (5) Where an application is made under paragraph (2) or (3) by a party who failed to attend the trial, the court may grant the application only if the applicant – (a) acted promptly when he found out that the court had exercised its power to strike out or 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 the trial.” (a) acted promptly when he found out that the court had exercised its power to strike out or 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 the trial.”
[77]I agree with the observations of the Master of the Rolls about the interaction between the two separate courses of action open to a party who did not attend the trial. The existence of the remedy under rule 39.3(3) does not affect the party’s right to appeal directly against the order. But if and to the extent that the grounds relied on in support of the appeal are matters within the scope of rule 39.3(3), and in particular within rule 39.3(5)(a) and (b), then the same approach should be adopted on an appeal as would be applied on an application under the rule.[78]The course taken in Boutique Basile was not consistent with the Master of the Rolls’ first guidance point, at paragraph [37] above. It was justifiable in the highly unusual circumstances of that case. I agree with the Master of the Rolls that the normal course should be to apply under the rule, even if there are independent grounds of appeal and even if an appeal has already been launched.[79]The Master of the Rolls’ second guidance point, at paragraphs [38] and [39], requires no further comment.[80]In relation to his third point of guidance, at paragraphs [40] to [42], what I said in Boutique Basile about the decision in Tennero Ltd v Arnold proceeded on the premise that there had been no basis for a separate appeal, apart from the factors relevant under rule 39.3(3) and (5). That may have been too narrow a view of the facts of that case. But in a case in which it is right, I would hold to my view that the proper course is to apply under the rule, that it is not open to a party, having applied unsuccessfully under the rule, to try again by a direct appeal, and that if, instead of applying under the rule, the party appeals directly against the order the appellate court should apply the criteria laid down under the rule to the appeal.[81]If a party does apply unsuccessfully under the rule, he can appeal against the refusal of the application. He can also appeal directly against the original order on other grounds. The decision under the rule should normally be taken as conclusive (subject to an appeal against that decision) as to the points on which it was based though, as the Master of the Rolls says at paragraph [43], that may often be as to factors relevant under 39.3(5)(a) or (b) or both, rather than (c). That is true in the present case where, although Judge Ellis expressed doubts as to the case on the merits, he decided the case on lack of good reason for not attending the trial and lack of promptness in making the application. If a decision under the rule is based on either or both of paragraph (a) or (b) and also on paragraph (c), then the decision on prospects of success should not necessarily be conclusive.[82]In relation to the fifth guidance point, at paragraphs [44] to [46], the provisions of rule 52.11(2) and the criteria laid down in Ladd v Marshall will apply in full to an appeal against the original order, if they cannot be avoided by a successful application under the rule, or a successful appeal against an order rejecting the application under the rule at first instance. Although evidence on the merits will have been put in under rule 39.3(4), such evidence can only be relied on in support of the appeal against the original order if rule 52.11(2) and Ladd v Marshall are satisfied. It seems to me inherently unlikely that they would be satisfied in those circumstances because, almost certainly, the evidence could have been adduced at trial if the party in question had attended the trial. The contrast is between the case contemplated in paragraph [45] of the Master of the Rolls’ judgment, which seems to me to be probably unusual and rare in practice, and the more common situation described in his paragraph [46].[83]Boutique Basile is an example of the type of case envisaged by the Master of the Rolls in his sixth point of guidance, at paragraph [47].

Ms Pereira’s prospects of a successful defence

[84]One question that is capable of being relevant to both appeals is what her prospects are of successfully defending the claim. Mr Lidington argued that she had no such prospects, because Mr James was alleged, and correctly identified, as being agent for her as the contracting party with Mr and Mrs Pain, and accordingly she was bound by his fraudulent misrepresentations and liable jointly with him in damages for deceit, which would be at large. I do not accept that this analysis is necessarily correct. In order to explain my reasons, I must go back over some of the facts.[85]Mr and Mrs Pain were introduced in 2003 to Mr James, who said that a company which he controlled, Styllpoint Ltd, had, or had access to, £11 million of assets and could provide access for the Pains to £250,000 to assist them with the costs of the litigation which they were then facing, if they would transfer the Property to Styllpoint or to a nominee for it. This transfer would be on the basis that they (and their son Andrew) would be able to continue to live in the Property for the rest of their lives, rent free. The Property was the subject of an existing mortgage on their part, with an outstanding debt of just over £10,000. The Pains understood that this would be repaid, but did not expect to receive any other money directly in return for the transfer.[86]Mr James arranged that Ms Pereira, with whom he was then in a relationship, would act as the nominee for Styllpoint Ltd as transferee of the Property, and therefore also as mortgagor to the Bank. Her identity and status as such nominee was made known to and accepted by the Pains. They met her on at least one occasion in or before January 2004. There may be a dispute as to whether they met her on other occasions before that.[87]So far as the Bank is concerned, Mr James arranged for Ms Pereira to borrow £238,000 from it on the security of a mortgage of the Property. For this purpose he had the transfer presented as being in consideration of the payment of £276,000 pursuant to a contract for sale. At first the Pains were represented in relation to the transaction by Buchanan & Llewellyn as their solicitors. That firm asked pertinent questions of Soorii Ayoola & Okri, the solicitors acting for Ms Pereira, about the relationship between Ms Pereira and Styllpoint and as to the fate of the proceeds of sale. If these points had been persisted in, the Pains would probably have been saved from entering into the transaction. No doubt because these properly raised queries did put the transaction in jeopardy, and no doubt at the instance of Mr James, on 12 January 2004 the Pains instructed a different firm, Winman Okri, as their solicitors. They confirmed to those solicitors that they expected to receive no money from the transaction other than the benefit of the payment of debts, including the discharge of the prior mortgage, and that the balance of the purchase money would be paid by the purchaser’s solicitor directly to Styllpoint, represented as being a creditor. The new solicitors were content to proceed on those instructions, possibly helped by the fact that Mr Okri was not only practising alone under the style Winman Okri but was also the senior partner of the firm of Soorii Ayoola & Okri.[88]On 23 January 2004 the Pains executed a transfer of the Property in favour of Ms Pereira, expressed to be in consideration of the payment of £276,000, Ms Pereira executed a mortgage in favour of the bank and the Pains also executed a deed of postponement in favour of the bank. The papers include a copy of a form of contract of sale signed by Ms Pereira, but the Pains deny having signed any such contract. The prior mortgage was paid off, then amounting to £10,109.96. The balance of the bank’s advance, possibly after discharging costs of the transaction, was no doubt paid to, or to the use of, Styllpoint or Mr James himself. No further benefit was received by the Pains, but they continued to live in the Property, without paying any rent or other consideration for their occupation. In due course Ms Pereira was registered as proprietor of the Property and the Bank as proprietor of its charge over the Property.[89]The Pains never had any benefit from the supposed litigation fund, which presumably never existed.[90]Looking at the matter with the benefit of hindsight, it is clear that the Pains entered into the transaction as a result of fraudulent misrepresentations made by Mr James, that Ms Pereira entered into it as nominee for Styllpoint, and that the Pains understood her position to be as such nominee. Ms Pereira does not assert that she is or ever was a beneficial owner of the Property, and does not claim the benefit of any equity in the Property subject to the charge in favour of the Bank. Her concern is to avoid personal liability for sums which she has never received (for her own benefit, at any rate) and for which she contends that she ought not to be made liable. She is undoubtedly liable to the Bank on the covenant in the mortgage. Accordingly she cannot and does not resist the liability in paragraph 2 of Judge Milligan’s Order, even though she never had any personal benefit from the loan. The current position appears to be that the Property has not yet been sold, and the Pains, now registered again as proprietors, are keeping up the payment of the sums due under the mortgage. As a result the Bank does not at present need to seek possession or to enforce the money judgment against Ms Pereira. It has, however, obtained a charging order over property belonging beneficially to Ms Pereira to secure payment of the mortgage debt, in case it be needed.[91]The order against Ms Pereira for payment of damages to be assessed is intended to compensate the Pains for having had what remained (beneficially) their property subjected to the liability in favour of the Bank from which they secured only the modest benefit (for which they have to account) of repayment of their previous mortgage. Clearly Styllpoint and Mr James would be liable to pay such damages to the Pains, but they are not worth suing. Mr James was made bankrupt in 2006. Accordingly the issue is whether Ms Pereira is liable for this amount herself, despite her position being, and being known to be, only as nominee for Styllpoint.[92]In the Defence and Counterclaim of the Pains, both the Bank and Ms Pereira being Defendants to the Counterclaim, the Pains alleged the transaction, the representations by Mr James and their falsity. In paragraph 15 the following allegation was made, which is the only allegation against Ms Pereira:
“Mr James made the representations fraudulently on behalf of himself and/or Styllpoint and/or the First Defendant [Ms Pereira] in that Mr James knew the representations to be false or did not believe it to be true or was reckless not caring whether it was true or false.”
[93]So the allegation was that Mr James made the representations, that they were false to his knowledge, and that he made them on behalf of (relevantly) Ms Pereira. The amendment to the Defence and Counterclaim which was permitted by the judge at the hearing was only to add a claim for damages arising from the same matters as had already been pleaded. The amendment did not add to or alter the basis of the claim against Ms Pereira.[94]At the hearing the judge had before him a witness statement made by Mrs Linda Pain. She described the way they had been introduced to Mr James and his representations to them on the basis of which they agreed to transfer the Property (and another property) to Styllpoint. Then she said this in paragraph 6:
“On abut 21st/22nd January 2004 we signed a transfer document transferring 19 Whitecliff Crescent to the person Neville James told us would be the nominee only. Her name was Juliana Pereira. We were introduced to her before we agreed to go ahead with the deal and she knew all about the scheme and the £11 million, which the Trust was supposed to have, and the £250,000 which would be set aside for us. She knew we would have the right to live at the property after the transfer. We understand that she has been involved as a nominee for other properties on behalf of the Trust and the Trust Protector Neville James e.g. 108 River Way Christchurch.”
[95]At the trial Mrs Pain gave oral evidence after verifying the truth of her witness statement. The relevant passage from the transcript (omitting irrelevant material) is as follows:
“Q. Could you tell the court how you know that Miss Pereira knew about the scheme? A. She told me herself. Agreed to everything. Q. When did she tell you? ... was there just one meeting? A. We did meet with Miss Pereira more than once. This was on the first meeting and the indication I got from her was that she knew everything that was going on, that she would be the nominee and she would work with us looking after the property in the trust, but that Neville was the boss, if you like. … and she had no intentions of moving into 19 and it would be ours and Andrew’s for life and she wasn’t really interested in the property at all except for that.”

Q. When did she tell you? ... was there just one meeting?

[96]At page 16D of the transcript, immediately after that evidence had been given,

the judge said:

“If she is party to all this then she is party to the fraud.”
[97]A little later, at page 19F, he reverted to the point with the following exchange:
“Judge I am satisfied that Pereira knew of the scheme. Counsel Yes Judge How am I to be satisfied that she knew it was crooked? Counsel Well, Your Honour, I say she must have done, she knew that no money was being put in from anywhere else, other than from the mortgage that was apparently being raised to pay the property – Judge She had already applied for the mortgage? Counsel She applies for the mortgage, she is aware through her solicitors that the money that is raised by the mortgage is not going to the bank, because it is going to Mr James. She gives authority to Mr James to act on her behalf with - Judge Yes, yes.”

Counsel Yes

[98]On the basis of that evidence the judge proceeded on the footing that Ms Pereira was a party to the fraud, or at least that she knew about it and that Mr James’ misrepresentations could properly be regarded as having been made on her behalf.[99]Of course the judge had no evidence from Ms Pereira. We do have several witness statements from her, the first and most important (for this purpose) being that which she made in July 2009, having instructed her new solicitors, in support of her application to set aside the order, which came before Judge Ellis. In that witness statement Ms Pereira said that she could not remember having met the Pains before January 2004, and she denied that she knew anything about the scheme or about the trust or its £11 million. In terms she said at paragraph 31 “I had no idea that Neville James had mentioned anything about a £11 million Trust Fund, something that I did not know about”. More generally, at paragraph 26(c), she said that she “had no idea at all as to the arrangements that Neville James was putting in place or any of the detail that he had discussed with the Pains. I was never party to any of their business dealings or negotiations and no one ever explained matters to me. In particular I had no idea that the Pains were intending to stay in the property having sold it.”[100]In these passages and others (at paragraphs 27, 29 and 30) Ms Pereira gives evidence which, if accepted, would entirely negate the basis on which the judge decided the case against her, namely that she knew what was going on, knew what representations were made by Mr James, and knew they were false. She says that she merely allowed her name to be used as the nominee owner of the Property on behalf of Styllpoint, as she had done on two occasions before.[101]Mrs Pain disputed this in her witness statement filed in answer in the Croydon County Court. If the matter were to be re-opened there would no doubt be a real issue of fact on this point.[102]On Ms Pereira’s application the relevant question is as to her prospects of success if the order is set aside as regards the award of damages and that claim goes to a new trial. It does not seem to me that her evidence on this point is such that it could not be accepted. Therefore the question is whether, if it were accepted, it would be sufficient for her to resist the claim for damages.[103]Accepting that Mr James made fraudulent misrepresentations, he clearly did so on his own behalf and on behalf of Styllpoint, which was (if he himself was not) the principal in the transaction. Ms Pereira was of course involved in the transaction, but only as nominee and agent for Styllpoint, not in any respect for her own benefit: that was known and understood by all concerned. She held the Property, after the transfer, on trust for Styllpoint absolutely. In that situation it seems counter-intuitive, to say the least, to treat Mr James as being her agent when he made the misrepresentations.[104]Nevertheless Mr Lidington, for the Pains, submitted that Mr James was to be regarded as her agent, relying on Briess v Woolley [1954] AC 333. That was a very different case. The managing director of a company (NP Ltd) had approached the directors of another company with a view to the shares in NP Ltd being sold to them or to their company. Unknown to them or to the shareholders in NP Ltd he had been conducting the business of NP Ltd on a fraudulent basis, so that although the financial statements on which the proposal for sale was based were accurate, they reflected a fraudulent trade and the profits were therefore inflated. Those approached expressed interest in buying the shares, and the managing director then took the proposition to the shareholders of NP Ltd who authorised him to continue negotiations for the sale. A sale resulted, but the purchasers then discovered the fraud and sued the vendors for damages for deceit, based on the fraudulent misrepresentations made by the managing director as their agent. The trial judge held the vendors liable, and although the Court of Appeal reversed this, the House of Lords restored the judge’s decision. Although the vendors themselves were entirely innocent and unaware of the fraud, it was held that they could not on the one hand take the benefit of the transaction which the managing director had negotiated as their agent and on the other hand deny liability for representations made by him in relation to the transaction, even if made before the agency began.[105]I do not question that proposition in any way, but its relevance to the present case depends on whether Mr James is to be regarded as the agent of Ms Pereira for the purpose. If she had been intended or understood to be the purchaser of the Property for her own benefit, then I would agree that Mr James would have been, even if in practice self-appointed, her agent for the purposes of the acquisition. But she was not intended, or understood by anyone, to be a beneficial acquirer. She was herself an agent for Styllpoint. Accordingly, it seems to me to be well arguable that Mr James was acting for himself and for Styllpoint but not for her. It would be artificial, in such circumstances, to treat him as her agent, when he was treating her as his own agent and she understood herself to be in that position.[106]Nor does it seem to me that the Pains’ right to rescission of the transfer depends on showing that the misrepresentations were made on Ms Pereira’s behalf. Since Ms Pereira was known to be acting as nominee for Styllpoint, it would be sufficient for the misrepresentations to have been made on behalf of Styllpoint for the Pains to establish a right to rescission as against Ms Pereira as well as against Styllpoint. She could not set up a separate title or defence.[107]Accordingly it seems to me by no means clear that, if Ms Pereira’s account of the facts were accepted (including her lack of any knowledge of the dealings between Mr James and the Pains, other than that she was to be the nominee holder of the Property), she would be liable for Mr James’ misrepresentations on the basis that he was her agent. I regard her as having an arguable defence to the claim for damages for deceit (though not for rescission) on which she has reasonable prospects of success. The position urged upon us by Mr Lidington appears to be at odds with her status as nominee and agent. In my judgment it is inconsistent with that, not only at first sight, but on a true analysis of the position, at any rate given (as is accepted) that she was known by the Pains to be a nominee.[108]I agree with the Master of the Rolls in giving no particular weight to the point made by Miss Shaw about the pleading of the allegation, to which he refers at paragraph [58]. Of course a case of fraud has to be properly pleaded. The allegation as to the conduct of Mr James was well enough pleaded. The critical point is the allegation that he was Ms Pereira’s agent. That too needs to be properly pleaded, but it is not subject to the special obligations of particularity which apply to allegations of fraud.[109]What I have said about her possible defence to a claim for damages in deceit needs to be seen in context. The principal point of the claim is said to be to ensure that, as between her and the Pains, she bears the liability to the Bank. The Bank has a security over the Pains’ property to secure repayment of the advance which it made to Ms Pereira, with interest, costs and charges. She is undoubtedly liable to the Bank for that amount in contract, and her only recourse against that is a worthless claim against Mr James or Styllpoint. The Bank also has a security over her own property, by way of a charging order. If the Bank were to seek to enforce its legal charge against the Property, thereby affecting the Pains’ position, they would be entitled to contend that it was Ms Pereira who ought to bear that liability, probably by way of a restitutionary claim for an indemnity (treating them as being in the position of a surety for Ms Pereira’s principal liability). A claim in damages for deceit, however, would be by no means limited to recovering any such amount. That is the claim which, as it seems to me, Ms Pereira would have a reasonable chance of defeating on a re-trial, for the reasons that I have set out above. If the claim were limited to an indemnity against the amount due to the Bank if it were sought to be enforced against the Property, then I would take the view that she had no reasonable prospect of success, albeit that a liability for damages in deceit might not be the correct formulation of the claim.

The appeal against Judge Ellis’ order refusing the application under rule 39.3(3)

[110]Like the Master of the Rolls, I consider that Ms Pereira’s appeal against the refusal of Judge Ellis to set aside the order made by Judge Milligan must be dismissed. His conclusion that neither paragraph (a) nor paragraph (b) of rule 39.3(5) was satisfied is unchallengeable. In relation to paragraph (a) at any rate it was not necessary for any of Ms Pereira’s evidence to be tested before the judge could reach that conclusion.

The appeal against Judge Milligan’s order made at the trial

(a) The appeal against Judge Milligan’s order made at the trial

[111]I therefore proceed to consider this appeal, and first Ms Pereira’s application for permission to appeal, on the basis of the failure of her application under the rule, for reasons of, at least, lack of promptness, but also on the basis, as explained above, that she has prospects of success on a retrial if she were able to get the order set aside.[112]I agree with the Master of the Rolls for the reasons he gives at paragraphs [58] to [61], that she does not, however, have any prospect of succeeding in showing that Judge Milligan was wrong on the material he had before him. She therefore has to rely on additional material (her own evidence, contesting that of Mrs Pain), but this is material which could have been before the court if she had attended and participated in the trial. So she needs both an extension of time for her appeal and the right to rely on additional evidence which was available to her at the time of the trial.[113]It seems to me that her need to rely on evidence which does not satisfy the Ladd v Marshall criteria (because it was available to the party at the time of the trial) brings up directly the issue of the interaction between the appeal and the application under rule 39.3(3). If she had attended the trial she could, and presumably would, have given evidence herself and would therefore have had the opportunity to give the evidence that is now relied on, by way of her witness statements, to show that she should not be held liable in damages. Since she has failed in her application to set the order aside under the rule, why should she have another opportunity to achieve the same, and therefore reopen the issues of fact, by way of an appeal?[114]For my part, I regard her application to rely on evidence which was not adduced before the court below as fatally flawed because it is evidence that does not satisfy the Ladd v Marshall criteria (having been available to her at the time of the trial) and her reliance on it therefore depends on her being able to reopen the matter, rather than to rely on any error on the part of Judge Milligan on the material that was before him. I say that even though, for reasons that I have already set out, I think she would have reasonable prospects of a successful defence to the damages claim if the case were re-opened. Her opportunity to have it re-opened depended on the success of her application under rule 39.3(3). Since that has failed, I do not see that she can rely on the same matters on a direct appeal against Judge Milligan’s order so as to show that she should be able to bring before the court evidence that she could have adduced if she had taken part in the trial.[115]Even if her ability to challenge Judge Milligan’s order were not excluded by the fact that, in order to do so, she must rely on evidence which she only did not adduce at trial because she did not attend, so that the failure of her application under rule 39.3(3) is fatal, I would agree with the Master of the Rolls that, balancing the various relevant factors under rule 3.9, for the purpose of assessing her application for an extension of time, the balance comes down clearly against her. One of the most important points, as I see the case, is that, for reasons which I have set out at paragraph [36] above, although she may be able to resist liability in damages for deceit, I do not see that she could resist a differently formulated claim by the Pains to recover any amount which they are required to pay, or to bear, if the Bank seeks to enforce its security against the Property. Despite her chance of success, the fact remains that she is liable to the Bank for the money judgment, and the point of the damages claim against her is to ensure that, as between her on the one hand and Mr and Mrs Pain on the other, it is she who bears that liability. I therefore agree that her applications in relation to Judge Milligan’s order should be dismissed. Lord Justice Gross:[116]I agree with the judgments of both the Master of the Rolls and Lloyd LJ and the disposal of the applications before this Court which they propose. I also respectfully agree with the guidance as to principle found at [36] – [48] of the Master of the Rolls’ judgment and [4] – [10] of Lloyd LJ’s judgment.[117]For my part, as brought out in much greater detail in the judgments of the Master of the Rolls and Lloyd LJ, there are two broad guiding principles governing the relationship between an appeal and an application under CPR rule 39.3(3): i) An applicant cannot achieve by the backdoor of an appeal that which could not have been achieved or which the applicant failed to achieve by way of an application under CPR rule 39.3(3). ii) There may, however, be distinct grounds, unconnected with the applicant’s absence from the trial, on which an applicant who has or would have failed in an application pursuant to CPR rule 39.3(3), may nonetheless be entitled to appeal. In this regard, the applicant’s position is and ought to be no different in principle from any other litigant, although, as demonstrated by both the Master of the Rolls and Lloyd LJ, there may well be acute practical difficulty in introducing new arguments or evidence which could have been advanced or adduced at the trial which the applicant failed to attend.[118]As to the application of the principles to the facts, in agreement with both the Master of the Rolls (at [62]) and Lloyd LJ (at [112] et seq), I am of the view that Ms Pereira’s need to rely on fresh evidence which does not satisfy the Ladd v Marshall criteria, is fatal to her application. If necessary to go further, then, for the reasons given by the Master of the Rolls in [63] et seq of his judgment, the result is the same.

Cited in 39 later judgments

and 30 more of the most senior