A non-party may apply to set aside default judgment if they are ‘directly affected’ (CPR 40.9)

joanna_hastie_pi By Joanna Hastie

Abdelmamoud v The Egyptian Association In Great Britain Limited [2015] EWHC 1013 (Ch)

Facts:

  • Cs claim against the EAGB was for repayment of a loan of just over £30,000 made under the terms of a loan agreement dated 14 December 2012.
  • The EAGB is a charity organised as a company limited by guarantee.
  • The loan was repayable on demand, and C demanded repayment on 29 April 2013. C issued proceedings on 16 May 2013. No acknowledgement of service or defence was filed by EAGB, and C was granted judgment in default in the sum of £38,025 on 26 June 2013 and a final third party debt order was made on 4 September 2013.
  • The Applicants (members of the EAGB charity) subsequently successfully applied to stay the third party debt order and to have the judgment in default and the third party debt order set aside.
  • C appealed on the following grounds:

i) That the Applicants did not have legal standing to set aside the default judgment obtained in Cs favour.

ii) That if the Applicants did have standing to set aside the order, they had no real prospect of successfully defending C’s claim.

  • The High Court granted Cs appeal. The court found that the Applicants did not have legal standing to apply to set aside the default judgment obtained in Cs favour.

Legal standing of a non party to set aside default judgment:

  • 9 permits a person who is not a party to proceedings but who is “directly affected” by a judgment or order made in those proceedings to have it set aside or varied.
  • The court emphasised that whether a non-party is ‘directly affected’ needs to be carefully scrutinised for the purposes of this rule.
  • For a non-party to be directly affected they must be more than merely affected.
  • Some recognisable interest of the Applicants, legal or equitable, must be affected by the relevant judgment or order. There must be some personal connection between the judgment or order and rights or property of the non-party that are affected.
  • 2 cases were considered in support of this argument: Hepworht Group Ltdv Stockley [2006] EWHC 3626 (Ch), [2007] 2 All ER (Comm) 82 and Latif v Imaan Inc [2007] EWHC 3179 (Ch)
  • C argued that although there was little authority on the meaning of “directly affected” for the purposes of CPR Rule 40.9 these two cases,Hepworht and Latif are sufficient to show that in order for a non—party applicant under the rule to be “directly affected” the applicant must show that some interest of the applicant capable of recognition by the law is affected.
  • In the present case the court concluded that the Applicants did not have legal standing as their interest was not capable of recognition by the law
  • Deputy Judge Murray stated that although the Applicants had various rights as members of the EAGB, , including the right to vote at general meetings, the members had no proprietary interest in any funds or other assets of the company and no direct liability for the debts of the company.
  • “A conscientious and interested member of any company, including a charitable company, will naturally be interested in the company’s conduct of its business, including its conduct (or lack of conduct) of the defence of proceedings brought against the company. But this interest, however sincere or enthusiastic, even passionate, is not, without more, a legal interest, that is, an interest protected by a legal rule or equitable principle.”(paragraph 60).
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3 comments

  1. […] Joanne Hastie of Zenith Chambers on a non-party may apply to set aside default judgment if they are “directly affected”.  […]

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  3. […] Hastie considered the circumstances in which “A non-party may apply to set aside default judgment if they are ‘directly affected’ (CPR 40.9… (June […]

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