Tenant Narrowly Escapes £63,000 Bill

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Litigants who fail strictly to comply with judges’ orders risk the dire consequence of having their cases dismissed without a hearing. In a case recently reviewed by litigation expert David Watson, that very nearly happened to a commercial tenant in a dispute over alleged rent arrears.

The tenant, an accountant, had rented two floors of an office building from the same landlord for over 30 years. The landlord launched proceedings against him, claiming that he owed substantial arrears of rent and business rates.

The tenant disputed the extent of the rent arrears and denied any liability in respect of business rates. He also sought to set off against any sums owing damages in respect of the property’s alleged state of disrepair and the value of accountancy services he had provided to the landlord and her husband.

Pending the trial of the action, the tenant agreed to pay £300 a month in rent by bank transfer. That obligation was subsequently enshrined in a court order which stated that any failure of compliance would result in the tenant’s defence and counterclaim being struck out and judgement being entered for the landlord.

Exactly that came to pass after subsequent payments made by the tenant were sporadic and sometimes late. They were also made by cheque rather than bank transfer. The landlord was awarded a default judgement against the tenant for over £63,000, plus interest and legal costs. The tenant later applied for relief from the sanctions that had been imposed on him, but without success.

In upholding the tenant’s appeal against that outcome, the High Court found that his breaches of the order, although significant, were towards the bottom end of the range of seriousness. The sanctions were wholly disproportionate in that the tenant’s counterclaim was potentially of substantial value and the default judgement had in effect delivered a windfall to the landlord. The default judgement was overturned and the tenant’s defence and counterclaim reinstated.

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