When setting aside a default judgment the court has to consider whether the application was made “promptly”. The relevance and importance of a “prompt” application has been considered several times on this blog. The issue was considered again in Page -v- Champion Financial Ltd  EWHC 1778 (QB). The judge indicated that he would set aside judgment despite a three month delay, and where the failure to apply earlier had been, in part, a tactical decision by the relevant defendant.
Judgement in default had been entered against the first defendant in the action a judgment for which the fifth defendant could be liable to pay. The fifth defendant applied to set the judgment aside. The first issue was whether the fifth defendant was bound by a default judgment.
ONE DEFENDANT NOT BOUND BY THE TERMS OF A DEFAULT JUDGMENT AGAINST ANOTHER DEFENDANT
The judge considered this issue in detail and concluded:
I conclude that the answer to the question of principle posed at the beginning of this judgment is that a default judgment obtained against one defendant (defendant A) does not preclude another defendant in the same proceedings (defendant B) from advancing, by way of defence to a claim against it (defendant B), a case which is inconsistent with the default judgment which has been obtained (against defendant A.
SHOULD THE DEFAULT JUDGMENT BE SET ASIDE AFTER SEVERAL MONTHS DELAY?
The judge went on to consider whether the default judgment in question should be set aside. The judge concluded that, even though there had been a delay of three months, he would have set the judgment aside.
THE JUDGMENT ON THE ISSUE OF “PROMPTNESS”
There is a detailed discussion of the relevance of test of “promptness” in the context of setting aside default judgments.
- Mr Woolgar submitted that the Fifth Defendant’s application should be refused on the basis that it had not been made sufficiently promptly. Mr Woolgar relied on CPR 13.3(2) and explained that the requirement to make the application “promptly” means “with alacrity” and “with all reasonable celerity in the circumstances”: see Regency Rolls Ltd v Carnall  EWCA Civ 397 per Arden LJ; Khan v Edgbaston Holdings  EWHC 2444 (QB) per HHJ Coulson QC (as he then was); and, more recently, Intesa Sanpaolo SpA v Regione Piemonte  EWHC 1994 (Comm) per Eder J at . Mr Woolgar furthermore submitted that an application to set aside a default judgment must be considered in the light of the Overriding Objective, which requires the Court to ensure that every case is dealt with so far as practicable both expeditiously and fairly: see CPR 1.1(2)(d). The Overriding Objective also requires, Mr Woolgar pointed out, that the Court should seek to enforce compliance with rules, practice directions and orders: see CPR 1.1(2)(f).
- Mr Woolgar’s position was that the relevant period of delay should be regarded as having started on 4 September 2013, and not any later. Accordingly, Mr Woolgar invited me to treat the Fifth Defendant’s application as having been made more than 8 months after the time when it should have been made. Mr Woolgar submitted that such a delay is, as he described it, “simply too great”, as the Fifth Defendant ought to have appreciated much sooner than it apparently did that it should apply to set aside the default judgment. The reason for the delay, Mr Woolgar submitted, is that the Fifth Defendant made a tactical decision not to apply to set aside the default judgment, but instead to seek to avoid its consequences by advancing the contention that the default judgment obtained against the First Defendant is not binding on it. Mr Woolgar submitted that the Fifth Defendant should have appreciated the good sense of making the application and should have made it immediately when given notice of the default judgment. Even if the Fifth Defendant was entitled to have some time to consider its position, Mr Woolgar submitted that the Claimant had made it perfectly plain what his intentions were and how he intended to deploy the default judgment in his claim against the Fifth Defendant by the time that the CMC took place before Master Yoxall on 28 October 2013. Mr Woolgar suggested that the Fifth Defendant had, as he put it, “ample cause to reflect again” about how to proceed given that, at the hearing on 28 October 2013, Master Yoxall directed that the Fifth Defendant should, within 3 weeks, give notice “as to whether or not it intends to take part in the action against the First Defendant and, if it does, it shall specify in respect of what issues it wishes to be heard”.
- Mr Woolgar submitted that the Fifth Defendant is to be regarded as having essentially made a tactical decision that it need not be concerned with the default judgment. This was despite the fact that Hewitsons asked Fenchurch, on 14 November 2013, to confirm, on behalf of the Claimant, that the Fifth Defendant’s defence had not “been prejudiced in any way by the default judgment entered against” the First Defendant, only to be told by Fenchurch, on 25 November 2013, that the Claimant was neither obliged nor willing to give that confirmation. Mr Woolgar’s position was that the Fifth Defendant, acting reasonably, should have made a setting aside application at that juncture, and not waited for another 6 months or so as, in fact, the Fifth Defendant chose to do. Mr Woolgar went on to submit that the fact that the Fifth Defendant had made a tactical decision not to apply is further borne out by the Fifth Defendant’s failure to make an application even after Master Yoxall had queried whether that was what it should be doing at the hearing which took place on 17 January 2014. Mr Woolgar then made the point that, even after service of the Amended Particulars of Claim and after Fenchurch’s letter dated 19 March 2014, still the Fifth Defendant chose to wait until 7 May 2014, between 3 and roughly 2 months later, before making an application to set aside. This, Mr Woolgar submitted, was all just too late: it had long been apparent, Mr Woolgar observed, that the Claimant regarded the default judgment obtained against the First Defendant as, as he put it in his oral submissions, “something the Claimant could use against the Fifth Defendant”: Mr Woolgar made the point that the“tune has not changed”, although he was prepared to agree with me that the lyrics had done (a point which Mr Burroughs emphasised when addressing this issue in reply). There was, in these circumstances, Mr Woolgar submitted, no justification for delaying since parties are expected, in what Mr Woolgar described as the “climate of the times”, to proceed with all due speed.
- Mr Woolgar’s reference to the “climate of the times” was a reference to the Jackson reforms and the approach adopted in Mitchell v News Group Newspapers Limited  EWCA Civ 1537. After the hearing, it came to my attention that just the week before, on 9 May 2014, Burton J had handed down judgment in Mid-East Sales Limited v United Engineering and Trading Company (PVT) & another EWHC 1457 (Comm). In this judgment, Burton J considered the impact of the Mitchell case on applications under CPR 13.3. In the circumstances, I thought it appropriate to draw the attention of the parties to the Mid-East Sales case (as well as to a judgment which I myself handed down on 16 May 2014 and in which I referred, with approval, to the Mid-East Sales case: Pamela June Dalton v Gough Cooper & Company Limited  EWHC 1556 (QB)), and invite further submissions.
- In the Mid-East Sales case, Burton J considered a number of authorities on the issue of delay, both in the setting aside of default judgment context and in a wider context (including, most notably, the Mitchell case): see paragraphs  to . These authorities included a recent decision, Samara v MBI Partners UK Ltd  EWHC 563 (QB), a case in which Silber J decided that a 20 month delay meant that the setting aside application failed, the judge, after considering the Mitchell case, concluding that “the new regime has universal application to all rules in the CPR . . . it is based on and underpinned by the changes to the overriding objectives which apply to all parts of the CPR“(see paragraph ). He went on, in paragraph , to say this:
“It is very clear that in the new regime, the need for promptness has even greater significance than it had previously and that relief will be granted much more sparingly than hitherto.”
“It seems to me clear that, although applications under CPR 13.3 do fall to be considered by reference to the new approach, there needs to be, and here I differ from Silber J, a somewhat different approach from that in relation to a case, as in Mitchell, falling within CPR 3.8. A sanction set out by the Rule itself for breach may be said to be pre-estimated as the appropriate course, absent good reason. But a sanction imposed pursuant to CPR 3.9, or an application by reference to CPR 3.9 and 13.3, may allow different or wider considerations to be taken into account, or more than trivial delays to be addressed … .”
Burton J then went on to set aside the default judgment which had been obtained in the case before him, explaining that the delay concerned was 5½ months, that the applicant had “arguable defences, such as to more than satisfy the first condition in CPR 13.3(1)”, and that there was “in this case the important issue of allowing the claim of immunity to be resolved” (the applicant being the Islamic Republic of Pakistan).
- I agree with Burton J about this. The view I take (consistent with the approach which I myself adopted in the Dalton case: see paragraph ) is that the Mitchell approach to procedural requirements should be taken into account, but that the Court should (as expressly contemplated by CPR 13.3(2)) “have regard” to the promptness of the application to set aside and not regard itself as obliged to treat the lack of promptness as being necessarily fatal to the application. That said, I agree with Mr Woolgar (in his supplemental skeleton argument addressing the Mid-East Sales case) that there is, in the context of an application under CPR 13.3, particular emphasis given to the need for promptness. This is confirmed by what was stated by Moore-Bick LJ in Standard Bank Plc v Agrinvest International Inc  2 CLC 886 at paragraph  (a passage set out in the Mid-East Sales case at paragraph [45(viii)]):
“The Civil Procedure Rules were intended to introduce a new era in civil litigation, in which both the parties and the courts were expected to pay more attention to promoting efficiency and avoiding delay. The overriding objective expressly recognised for the first time the importance of ensuring that cases are dealt with expeditiously and fairly and it is in that context that one finds for the first time in rule 13.3(2) an explicit requirement for the court to have regard on an application of this kind to whether the application was made promptly. No other factor is specifically identified for consideration, which suggests that promptness now carries much greater weight than before. It is not a condition that must be satisfied before the court can grant relief, because other factors may carry sufficient weight to persuade the court that relief should be granted, even though the application was not made promptly. The strength of the defence may well be one. However, promptness will always be a factor of considerable significance … if there has been a marked failure to make the application promptly, the court may well be justified in refusing relief, notwithstanding the possibility that the defendant might succeed at trial.”
- I might add that, in his oral submissions (confirmed by his supplemental skeleton), Mr Woolgar conceded that there was an additional reason why, in the present case, the Fifth Defendant’s setting aside application does not require the court to consider the provisions of CPR 3.9. He submitted that it might be said, on a broad reading of CPR 3.9, that the rule is engaged in the present case since the default judgment obtained against the First Defendant is a “sanction imposed for a failure to comply with [a] rule” and, although that sanction was imposed against the First Defendant for its failure to file an acknowledgment of service, that sanction has had the further consequence of prohibiting the Fifth Defendant from running the defence which it wishes to advance, and the Fifth Defendant wishes to obtain “relief” from that prohibition by applying to have the default judgment set aside, realistically CPR 3.9 has no application where the Fifth Defendant is not the party which was in default. As Mr Woolgar acknowledged, and as Mr Burroughs emphasised in his own supplemental skeleton argument, it was the First Defendant which failed to acknowledge service in time, so allowing the Claimant to obtain the default judgement which it did. The Fifth Defendant knew nothing about the First Defendant’s failure, and no sanction has been imposed on the Fifth Defendant. It would, therefore, be wrong, in these circumstances to apply CPR 3.9 in the present case (even if the approach adopted by Silber J in the Samara case were to be preferred to that of Burton J in the Mid-East Sales case), whether directly or by analogy (on the basis that, were the First Defendant making the application to set aside the default judgment, CPR 3.9 were to apply). I agree with this analysis. Accordingly, even had I been minded, as a matter of principle, to prefer Silber J’s approach over that of Burton J in the present case, I am clear that it would not have been appropriate, in any event, to follow the former approach in the present case.
- I see considerable force in the suggestion that the Fifth Defendant’s application has not been made with sufficient promptness, depending on whether the relevant delay is taken as having started on 4 September 2013 (when Fenchurch sent Hewitsons a copy of the default judgment) or on 28 October 2013 (the hearing which took place before Master Yoxall) or on 25 November 2013 (when Fenchurch declined to confirm that the Fifth Defendant’s defence had not “been prejudiced in any way by the default judgment entered against” the First Defendant) or on 17 January 2014 (the further hearing which took place before Master Yoxall) or on 7 February 2014 (when the Claimant served his Amended Particulars of Claim) or on 19 March 2014 (when Fenchurch first raised the inconsistency of judgments issue) – a range from approximately 8 months to approximately 7 weeks. I consider, however, that the most appropriate starting point to take is 7 February 2014, when the Claimant served his Amended Particulars of Claim and thereby formally committed himself to a case in which he sought to establish liability on the Fifth Defendant’s part based on the default judgment which had been obtained against the First Defendant. I approach the current application on the basis, therefore, that the relevant delay is 3 months because it was 3 months after 7 February 2024 that the Fifth Defendant issued the application notice.
- This may well be generous to the Fifth Defendant because the Claimant had indicated to the Fifth Defendant, in Fenchurch’s letter dated 28 October 2013, that his intention was, in due course, to amend. Indeed, in his witness statement in the lead-up to the hearing on 17 January 2014, Mr Biggin stated that the Claimant had taken the position that “under section 39 … the Fifth Defendant is strictly liable for the acts and defaults of the First Defendant”, but that Fifth Defendant’s position was “that it can rely on any defence which would have been available to the First Defendant”. The Fifth Defendant, therefore, knew, at that stage, that the Claimant was taking the position that the default judgment entitled him to obtain judgment against the Fifth Defendant. Indeed, at the hearing on 17 January 2014 Master Yoxall expressly queried why the Fifth Defendant was not making such an application. As a result, it seems to me that it would not have been unfair to have taken 17 January 2014 (admittedly only three weeks before my preferred date) as the starting point.
- I also bear in mind that, although it was only on 19 March 2014 that the Claimant made it clear that he was advancing the argument that the Fifth Defendant could not run a case which was inconsistent with the default judgment, nevertheless from the outset, even when Fenchurch were (wrongly) contending that the default judgment could be enforced directly against the Fifth Defendant, the Claimant was saying that he could rely on the default judgment as against the Fifth Defendant. The tune was, therefore, much the same throughout, even though the lyrics underwent change. In my view, however, it was when the Claimant served his Amended Particulars of Claim formally setting out his case that the default judgment obtained against the First Defendant is binding on the Fifth Defendant, and that the Fifth Defendant is, accordingly, liable under Section 39(3) of FSMA, that the Fifth Defendant ought to have made the application. Until that stage the Claimant’s position had merely been stated in correspondence and not entirely clearly.
- I should explain that I do not consider it matters that, in paragraph 26 of the Amended Particulars of Claim, the Claimant advanced various arguments which, ultimately, were not pursued before me, and that the lyrics underwent further change the following month when, in Fenchurch’s 19 March 2014 letter, the inconsistency of judgments point was raised. What matters, as I see it, is that, in the Amended Particulars of Claim, the Claimant clearly and formally stated that the default judgment was binding on the Fifth Defendant for the purposes of his claim under Section 39(3) of FSMA. That remained the Claimant’s position right up until 7 May 2014, when the Fifth Defendant issued its application. In the circumstances, I consider that, as at 7 February 2014 or soon afterwards, the Fifth Defendant ought to have taken steps to have the default judgment set aside and ought not to have waited for another three months before making its application.
- Mr Burroughs submitted, in his supplemental skeleton argument addressing the Mid-East Sales case, that a three month period of delay compared favourably with the 5½ month period in the Mid-East Sales case, a case in which Burton J was prepared to set aside the default judgment. He submitted that, weighing what he described as the strength of the grounds to set aside the default judgment against the delay, and the reasons for that delay, the present case is one in which the default judgment should be set aside. However, as Eder J observed in the Intesa Sanpaolo case, at paragraph , “each case must ultimately turn on its own facts”. Indeed, in the Khan case, to which Eder J referred in the immediately preceding paragraph and which Mr Woolgar cited to me), HHJ Coulson QC suggested that a delay of 59 days was “very much at the outer limit of what could possibly be acceptable”. I am not, therefore, particularly impressed by the comparison with the length of delay in the Mid-East Sales case which Mr Burroughs sought to draw.
- In the present case, it seems to me that Mr Woolgar is right when he says that the Fifth Defendant made what was essentially a tactical decision not to apply sooner than it did – given my 7 February 2014 starting point, soon after that date. There was, after all, no reason why the application could not have been made without prejudice to the Fifth Defendant’s primary position that the default judgment had no effect on its ability to defend the claim brought against it by the Claimant. Having initially taken a point that the Claimant had made a fatal election which precluded him from pursuing his claim against the Fifth Defendant, the Fifth Defendant thereafter (including after 7 February 2014) essentially decided, until late in the day, to put all its eggs in the basket of the question of principle (which, in the event, I have determined in its favour) and its case that the default judgment obtained by the Claimant against the First Defendant did not relieve the Claimant from the obligation to make good his case against the Fifth Defendant. As I see it, in adopting this stance, the Fifth Defendant, in effect, took the risk that the Court might later conclude that a setting aside application had not been made sufficiently promptly. That is a risk which the Fifth Defendant freely took.
- Nevertheless, even taking this into account and having particular regard to the need for promptness in the context of setting aside applications (as made clear by CPR 13.3(2) itself and as made clear by Moore-Bick LJ in the Standard Bank case), I have concluded that, had I reached a different conclusion in relation to the question of principle and decided that the default judgment obtained against the First Defendant did preclude the Fifth Defendant from contending that the First Defendant did not act in breach of contract or negligently, I would have exercised my discretion to set aside the default judgment obtained against the First Defendant notwithstanding the three month delay which I consider there has been. I say this for a simple reason: I consider that the injustice which the Fifth Defendant would suffer were it to find itself bound by the default judgment would substantially outweigh the Fifth Defendant’s lack of promptness and the essentially tactical reason why an application to set aside was not made earlier than it was. In my judgment, it would be wholly unfair if the Fifth Defendant were unable to advance a case that the First Defendant was not negligent or in breach of contract because of a default judgment which, it must be remembered, was obtained through no fault of the Fifth Defendant. The Fifth Defendant was, on the present hypothesis, mistaken as to the effect of the default judgment and so as to the need to make an application. However, as demonstrated by the conclusion which I have, in fact, reached on the question of principle, the approach adopted by the Fifth Defendant in relation to that issue can hardly be described as untenable. Weighing these considerations in the balance, and bearing in mind the lack of prejudice suffered by the Claimant (in particular, Mr Burroughs’ point that nothing has happened in the proceedings since 7 February 2014, other than service of the Amended Defence and issue of the setting aside application itself) and the Claimant’s express acceptance that there is “some other good reason” why the default judgment should be set aside, had I decided the question of principle differently, I am clear that I would nevertheless have acceded to the Fifth Defendant’s application and set aside the default judgment.
CONCLUSION: LACK OF PROMPTNESS IS NOT NECESSARILY FATAL TO AN APPLICATION TO HAVE JUDGMENT SET ASIDE
At a time when judges are stating that a delay of one day (sometimes delays of minutes) are not trivial it appears that a different principles apply to applications to have judgment set aside.
- Delays of many months are not fatal to an application, even when that delay is deliberate and part of a strategic decision.
- The court “has regard” to the lack of promptness, however this, in itself is not necessarily fatal to an application to set aside judgment.