There are a number of interesting legal points arising from the judgment of the Court of Appeal in the matter of Salix Hones v. Mantato[2019] EWCA Civ 445 which will be of particular interest to landlords and mortgagees who have tenants/borrowers with long histories of default.

In 2009, the Claimant had obtained an order for possession suspended upon payment of the current rent plus contributions towards the arrears. Successive warrants for possession were issued as a result of defaults and the Defendant never cleared the arrears.

In May 2017, the Claimant issued new possession proceedings and a further suspended possession order was made (together with a money judgment) in June 2017. The Defendant did not attend the hearing in June 2017. The Tenant was evicted the following September and, in March 2018, made an application to set aside the possession order made in June 2017.

The application to set aside the possession order was heard by DDJ Thexton, who ruled that the Claimant was not entitled to a second possession order, whilst the 2009 order still existed (noting that the Claimant would have required permission to enforce this order, as it was over 6 years old). The Defendant therefore had an estoppel defence. In relation to the Claimant’s argument that the Defendant could not satisfy the test for setting aside the order under CPR 39.3(5) because there had been a 9 month delay in making the application (an application is required to be made promptly under this provision), the DDJ reasoned that CPR 39.3 was not applicable because the possession hearing in June 2017 had not been a trial; furthermore, he ruled that the estoppel defence was an absolute bar to proceedings and "a breach of the substantive law must trump a procedural argument".  DDJ Thexton set aside the possession order of June 2017 and struck out the new claim.

The Claimant sought leave to appeal and the application leapfrogged directly to the Court of Appeal.

The Court of Appeal’s unanimous verdict that was that the DDJ’s decision that the Defendant had a defence of Res Judicata, was “plainly wrong” as the facts entitling the Claimant to possession in 2009 were clearly different to those in 2017. Furthermore, the Court of Appeal noted that ”the absence of necessity to bring fresh proceedings for possession, in view of an earlier order, is neither a paraphrase nor a substitute for the test for cause of action estoppel”.

Turning to the DDJ’s decision that CPR 39.3(5) did not need to be satisfied, the Court noted that the DDJ had thought the approach was that as per Forcelux Ltd v Binnie [2009] EWCA Civ 854, rather than Hackney LBC v Findlay [2011] EWCA Civ 8. The Findley case required the Court, when considering setting aside a possession order under CPR 3.1 to apply CPR 39.3(5) by analogy unless there were unusual and compelling circumstances. The Court of Appeal found that there were no unusual and compelling circumstances and so the Judge was wrong not to consider the test in CPR 39.3(5). 

Accordingly, the Court of Appeal allowed the appeal and restored the June 2007 possession order.