Morgan v Smalley

J U D G M E N T

1. LORD JUSTICE WARD: This is the appeal of Miss Cole Morgan against the order made by Mr Justice Ferris on 7 November when he refused her application for the adjournment of the matter before him. That matter was her application by notice dated 22 August 2002 to set aside a judgment and order made by Mr David Oliver QC, sitting as a Deputy Judge of the High Court, on 15 May 2001. Mr Oliver was to hear the trial of two actions between Miss Cole Morgan and Mr Kenneth Smalley relating to the disentanglement of their, to some extent personal, but essentially, business affairs to which I will refer shortly. Because Miss Cole Morgan did not attend before the deputy judge, he - having heard counsel, having received explanations of the issues and taken the evidence of Mr Smalley - entered judgment against Miss Cole Morgan for some £36,503.03 in one action and £57,140 in another together with interest, which seems to have been clocking up at the rate of £20 a day.

2. Miss Cole Morgan's application to Mr Justice Ferris to set that judgment aside was dismissed and so, with permission of Lord Justice Aldous, she appeals to this court.

3. I shall try to give a short summary of the background. Miss Cole Morgan and Mr Smalley began a relationship some time in about 1987 or 1888 and lived together in Miss Cole Morgan's home. Not only were they thus personally involved but they also became involved in a gymnasium which was being run by Mr Smalley in Milton Keynes somewhere. Both the personal relationship and the business relationship came to a sudden end in 1999 and that led to this litigation. Miss Cole Morgan issued a claim alleging that she was in partnership with Mr Smalley in that business. The company which eventually was running the gymnasium brought its separate claim alleging that Miss Cole Morgan had fraudulently taken money from the company accounts. Those were consolidated proceedings and were eventually listed for hearing on 14 May 2001. In fact the date had been given some 10 months previously.

4. Miss Cole Morgan has, it seems, from medical evidence before the court, suffered from some depression perhaps going back to April 2000. That may not be totally a surprise. When there was some arson attack on her property early in April or May 2001 that was a further upsetting incident which she said made it impossible to attend the trial fixed for 14 May. Thus on Friday 11 May application was made to Mr Justice Lightman to vacate that hearing date. It was not successful and Mr Justice Lightman refused the application for the adjournment.

5. The solicitors who represented Miss Cole Morgan then applied to come off the record and that application was granted by Mr Oliver QC on the morning of the trial. I shall assume in Miss Cole Morgan's favour that she knew neither that the application was going to be made, nor, having entrusted matters to her solicitors, that she had to appear at the hearing before the judge. He was left with little option but to carry on, as Mr Smalley was there with counsel ready to pursue his claims and his defence.

6. What happened then is set out in a witness statement by Miss Cole Morgan. In short time she learned that the judgment had been entered against her. At first she considered an appeal against the decision but for one reason or another did not pursue that appeal, nor any appeal against the order of Mr Justice Lightman. She had - I have no reason to disbelieve her on this - huge difficulty in finding solicitors to represent her. The harsh reality of her position is that she had run out of money which is why her solicitors had come off the record and their inability to get proper instructions from her, and time passed. There was a huge wake-up call when Mr Smalley applied in the County Court for charging orders against her property to secure payment of his judgment and subsequently, as I understand it, orders for sale have been made and it may even be that there has been an order for possession to be given of her home. Those have since been stayed by order of the court. That prospect of a sale of her home did inject urgency into the matter and eventually - through the good offices of the Citizens Advice Bureau here in London - she was able to obtain the advice of London solicitors who eventually, in August, made their formal application to set the order aside.

7. The new solicitors ran into difficulties in funding the litigation. There is perhaps a dispute as to whether or not they ever had legal aid to pursue the application to set aside. They had legal aid to assist Miss Cole Morgan in the County Court in connection with the charging orders, and there was great difficulty in obtaining proper legal aid for Miss Cole Morgan.

8. Eventually the matter came before Mr Justice Ferris. It had been preceded by an application she made to adjourn that hearing; that was heard by Mr Justice Pumfrey on 9 October. He made an order that her application was to stand over for 28 days to show cause why it should not be dismissed, and the costs were reserved. Nothing more seems to have happened.

9. The case in due time came on before Mr Justice Ferris with the legal aid position being this. The Legal Services Commission had given notice to Miss Cole Morgan to show cause why her public funding was not to be terminated and they gave the date 12 December 2002 for the hearing of that matter. They were not able to give her public funding on an exceptional basis and so counsel appearing on her behalf before Mr Justice Ferris was there with the ability to do no more than to explain her current legal aid difficulties and to seek a further adjournment. There was no legal aid in fact to prosecute the application. So Mr Justice Ferris had to hear the application for the adjournment which he refused. He went on then to deal with the application to set aside and dismissed that as well.

10. It is important, in my judgment, to see exactly what was in front of the judge. There was an application to adjourn, a matter which he could deal with in the exercise of his discretion, and there was the application to set aside which was governed by CPR 39.3 (5) which provides that:

"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."

11. In the light of the fact that Mr Justice Pumfrey had refused the adjournment it is no surprise that Mr Justice Ferris likewise felt that the matter could not be further adjourned. He had to have regard not only to the interests of Miss Cole Morgan but to the position of the other parties to the matter before him. As he observed, they had the benefit of judgments then 18 months old and had been unable to do anything effective to enjoy the fruits of that judgment. As to CPR 39.3, he held:

"I find it impossible to say that Miss Cole Morgan has acted promptly. She knew very well that the action was coming on for trial on 15 May and if she did not attend it was likely to have an unhappy outcome so far as she was concerned. She must have known what that outcome was very soon after 15 May. Nevertheless no challenge was made to that judgment until August 2002, a delay of some 15 months which, on the face of it, seems to me to be grossly excessive."

12. I am bound to say for my part that I cannot disagree with that view of the matter. The requirement that she has to satisfy is to show she acted promptly when she found out about this judgment. Although she made her efforts to obtain representation, she in fact was unable to secure help for many, many months indeed. One has to take a position eventually where the duty to act promptly has to mean what it says, and the delay in this case was rightly categorised as excessive. So I cannot see how Miss Cole Morgan can say that Mr Justice Ferris was plainly wrong in his assessment of that factor.

13. The second question is whether she had a good reason for not attending the trial. The judge assumed in her favour that her medical evidence would have been sufficient to establish her case that she was unable to attend. I am happy to make a similar concession and assumption in her favour. There may have been another reason why she did not attend. It may have been that she was confused as to what was going to happen and had no knowledge that her solicitors would be applying to come off the record. Be that as it may, the judge has found that factor in her favour and I would not challenge it.

14. The focus of attention turns to whether she has a reasonable prospect of success at the trial. As to that the judge said this:

"All I know about that is that Mr David Oliver was satisfied that judgment ought to be given against her. She has not, as I said earlier, produced in support of this application any significant additional evidence. It is said that further evidence is capable of being produced and will be produced if and when public funding is available. I cannot believe that that is a satisfactory acceptable state of affairs. It seems to me that in doing justice to this case I must have regard to all the circumstances, including the fact that, as it appears to me, although I indicate no concluded opinion on it, this is, as presently formulated, an extremely weak application to set aside judgment."

15. I have been concerned to try, in fairness to Miss Cole Morgan, to establish exactly how her case could be presented. There is no doubt that her case has not been adequately prepared. It seems in summary that, perhaps acting on advice, areas of the business were hived off between Miss Cole Morgan and Mr Smalley and so - for whatever reason, fiscal or not - she began to run the clothing part of the business and the supply of supplements. He ran the other parts of the empire. There appeared to be no partnership accounts to indicate that this was a partnership at all. I am told by counsel Mr Carey, for whose help I am indebted, that, on the contrary, there were separate accounts for the separate parts of the business they were running. There was a matter of concern about capital she had injected. The answer to that is that since she was running her part of the business rent-free, the rent she ought to have paid was to be set against the repayment of such capital as she put in. I suspect that their affairs were intermingled and inter-mixed to a considerable extent. I suspect that it would be hugely difficult, as a forensic accounting exercise, to establish who took what from which account and for what purpose and with what justification.

16. There is nothing, sadly, in Miss Cole Morgan's submissions to us today which point so compellingly to her having an answer to the case against her that justice would demand that this order of Mr Oliver be set aside. For my part, I can see no error in the judge's exercise of discretion. Indeed, I agree with it. Nor do I see that Article 6 of the Human Rights Convention, which guarantees Miss Cole Morgan a fair trial, is engaged at all. Her legal aid difficulties are difficulties which are often encountered and it is not disproportionate to say that even at the late stage at which she was confronted with these legal aid difficulties that we should intervene.

17. I am extremely sorry for Miss Cole Morgan, but it would, in my judgment, be quite unkind to permit her success in this appeal. The harsh facts are really these. She has no money to pay for advice. She has no prospect of legal aid because it has already been refused. She is totally unlikely to get any exceptional grant of legal aid. If she were successful she would have to pay the cost thrown away of innumerable applications. There is limited equity in her home. There are insuperable difficulties in her mounting any proper defence as a litigant in person and, although she will never fully understand it, it is probably better that this unhappy chapter in her life come to an end today.

18. Those remarks are really an aside to the crux of the case which, in my judgment, is this. Mr Justice Ferris exercised his discretion in a way which is beyond reproach, and the appeal for that reason has to be dismissed.

19. LORD JUSTICE MUMMERY: I agree.

20. LORD JUSTICE RIX: I also agree.

Order: Appeal dismissed with the costs.