The High Court granted Skyjets’ appeal, represented by Saima Hanif (led by Philip Coppel QC), to set aside a default judgment obtained by Lombard (an RBS subsidiary).
The case raises an important legal issue about the validity of loan termination notices which incorrectly state loan arrears, and the extent to which a lender owes a duty of care to a borrower when specifying the outstanding sums.
Skyjets took out a loan facility with Lombard for commercial purposes. Lombard later served a termination notice stating that Skyjets was in arrears of $294,376.92, that the facility was being called in and Lombard would seize the underlying assets. Skyjets went into liquidation. Lombard then issued proceedings against Skyjets for the alleged outstanding arrears and obtained a default judgment.
It was later discovered that Lombard’s termination notice was incorrect, as the outstanding arrears were in fact only $179.99, not the originally-stated sum of $294,376.92. 4 years after the default judgment, Skyjets issued an application to set it aside pursuant to CPR 13.
In granting permission to set aside the default judgment, the Court concluded that the merits of Skyjets’ defence (that the termination notice was invalid because it misstated the amount of arrears) were ‘sufficiently substantial’ and therefore had a real prospect of success. The Court also held that the prospects of success outweighed the 4-year delay in making the application to set aside.
The case has major potential ramifications for both lenders and borrowers. It is also a rare instance of the Court granting an application to set aside, despite a lengthy period of time having elapsed since the default judgment. The judgment is available here.