Failure to give notices of sums in arrears counts as 'exceptional circumstances' to set aside a County Court judgment.
Summary
The High Court held that it has the power under CPR 3.1(7) to set aside a final order in exceptional circumstances, including where the defendant filed an admission to the claim. The claimant's failure to send annual statements under s.77A and arrears notices under s.86B Consumer Credit Act 1974 (CCA) constituted exceptional circumstances.
Background
This case decided an application by a judgment creditor to set aside 371 county court judgments that, at the time they were entered, related to agreements that were unenforceable due to non-compliance with requirements of the Consumer Credit Act 1974.
The unusual nature of the application was a result of the Financial Conduct Authority instructing the claimant to make the application to set aside the judgments.
Statutory notices due under s.77A and s.86B CCA had not been properly served and this impacted subsequent notices of sums in arrears. Borrowers had also not received pre-contract information as required by s.55(1) CCA.
The majority of the judgments were registered in default (meaning the court did not receive a reply to the claim), but in 35 instances the defendant had filed an admission. Only the applicant was represented in the proceedings.
The court's decision
The default judgments presented the court with little difficulty as CPR 13.3(1)(b) allows for the setting aside of judgments on an administrative process if “it appears to the court that there is some other good reason why…the judgment should be set aside or varied”.
Mr Justice Hyland found that the judgments should never have been obtained due to the nature of the non-compliance with the CCA. This was a sufficiently “good reason” to set the judgments aside, even though the requirement to make the application promptly had not been met. The issue of promptness was overridden by the “exceptional circumstances” of the case as well as the fact that both parties were in agreement about the outcome.
The court then went on to consider the 35 judgments obtained on admissions. The court considered the inherent power of the court and invoked CPR 3.1(7) and counsel for the applicant referred to CPR 40.1, which relates to judgments and final orders. A final order should not be set aside save possibly “in truly exceptional circumstances”. This would normally only include judgments obtained by fraud, oppression, or abuse of process.
Because the cases were dealt with administratively with no judicial input, the exceptional circumstances of the case meant that they should be set aside. No order for costs was made due to the defendants being litigants in person and having no costs to recover above that rate.
Comment
It is encouraging to see the court taking the view that non-compliance with notice requirements constitutes “exceptional circumstances”, and this judgment could prove useful to debtors in some applications to set aside judgments following non-compliance with the Consumer Credit Act 1974.
Where evidence has been considered by a judge who has made a final decision this process is not available. A defendant who unsuccessfully raises non-compliance with the CCA in their defence must appeal the court's decision.
Read more about setting aside a judgment made in default or after a hearing in Money claims and judgments on Shelter Legal.