APPLICATION TO SET ASIDE JUDGMENT MADE LATE IN THE DAY: APPEAL AGAINST REFUSAL TO SET JUDGMENT ASIDE ALLOWED

In Priestley -v- Dunbar [2015] EWHC 987 (Ch) H.H.Judge Behrens (sitting as a judge of the High Court) overturned an earlier decision refusing to set judgment aside on the grounds of delay.

THE CASE

The claimant had obtained default judgment in a claim for professional negligence. Judgment was obtained in November 2013, the application to set aside judgment was not made until the 25th March 2014. An earlier order had stated that any application to set judgment aside should be made “as soon as possible”.

KEY POINTS

  • The District Judge made the decision after Mitchell but before Denton.
  • The District Judge was entitled, indeed right, to find that the application to set judgment aside had not been made promptly and it was a serious and significant breach.
  • However considering “all the circumstances of the case” the delay was not great in the context of the litigation; the trial date remained the same and it was appropriate to set judgment aside imposing certain conditions.

THE JUDGMENT OF THE DISTRICT JUDGE

The District Judge refused the application

  1. He noted that promptness is an important but not the only factor. The authorities showed that each case depended on its own facts. He noted that cases had to be dealt with justly and that there had been no breach of a rule or a practice direction or an order. He pointed out that the overriding objective required cases to be dealt with “expeditiously and fairly”. Lack of promptness meant that work had been done towards the damage trial which may or may not be needed. If judgment is to be set aside and there is to be a trial on liability the proceedings will be considerably set back.
  2. In the result he decided to refuse the application due to lack of promptness.”

THE JUDGMENT OF JUDGE BEHRENS

Judge Behrens considered the question of promptness and reviewed the relevant case law.

  1. stion of promptness:

1. Promptness only relates to the period relating to the application to set aside the judgment. This is clear from the wording of CPR 13.3(2) and is confirmed in paragraph 30 of the judgment of Males J in Newland Shipping v Toba Trading [2014] EWHC 1986. However, as Males J pointed out “promptness” needs to be assessed in context. Furthermore delay prior to the entry of judgment can be taken into account as part of the general discretion to set aside a judgment.

2. Some guidance on the question of promptness can be obtained from paragraph 45 of the judgment of Simon Brown LJ in Regency Rolls v Carnall [2000] EWCA Civ 379 in the context of an application under CPR 39 to set aside a judgment where a party did not attend the trial:

“At first blush it might be thought that any inappropriate delay whatever on the part of an applicant would require that he be found not to have acted promptly. Yet such a construction would carry with it the Draconian consequence that, even if he had a good, perhaps compelling, reason for not having attended the trial, and a reasonable – perhaps, indeed, excellent – prospect of success at trial, the court would still be bound to refuse him a fresh trial. I would accordingly construe “promptly” here to require, not that an applicant has been guilty of no needless delay whatever, but rather that he has acted with all reasonable celerity in the circumstances. That said, I too would regard the appellant here as having failed even in that obligation. 30 days was altogether too long a delay before making this Part 39 application. Having regard to the long, and generally unsatisfactory, history of the proceedings to that point, the application plainly could, and in my judgment reasonably should, have been issued well before it was.”

3. Further guidance in the context of an application under CPR 13.3 can be obtained from paragraph 22 of the judgment of Moore-Bick LJ in Standard Bank v Agrinvest [2010] EWCA Civ 1400;

“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, as the judge recognised in paragraph 27 of his judgment, and 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.”

  1. In the light of a number of first instance decisions it was common ground before me that an application to set aside a default judgment is an application for relief against sanctions to which CPR 3.9(1) applies. As is well known CPR Rule 3.9 was amended as part of the Jackson reforms and falls to be applied in accordance with guidance set out in Mitchell v Newsgroup Newspapers Ltd [2014] 1 WLR 795 and Denton and Others v T H White Limited (De Laval Limited Part 20 Defendant) [2014] 1 WLR 3926.
  2. In Altomart v Salford Estates (No.2) Limited [2014] EWCA Civ 1408 Moore-Bick LJ usefully summarised the principles in Mitchell and Denton in the following terms at paragraphs 19 and 20:

“More recently the rigour of the decision in Mitchell has been tempered by the decision in Denton. In that case the court recognised thatMitchell had been the subject of criticism and, while holding that the guidance it provided remained substantially sound, sought to explain in rather more detail how it should be interpreted and applied. In doing so it identified three stages of enquiry: (i) identifying and assessing the seriousness and significance of the default which engages Rule 3.9; (ii) identifying its cause; and (iii) evaluating all the circumstances of the case including those specifically mentioned” [i.e. the need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance with the Rules]”

  1. The date of DJ Giles’s decision (29th April 2014) was after the decision in Mitchell and before the decision in Denton. Mr Bacon submitted that DJ Giles was over influenced by the rigorous approach advocated in Mitchell                                                                                                                                                                                                                       38.In paragraph 9 of his judgment in Newland Males J drew attention to the power to impose conditions when granting relief and to the extreme nature of the sanction in refusing to set aside a judgment

    “In addition to this general guidance which applies to relief against sanctions for any kind of failure to comply with rules or court orders, CPR 13.3 cross-refers to CPR 3.1(3), thereby drawing attention to the court’s power to attach conditions to any order which it may make to set aside a judgment. That indicates, to my mind, that when considering the exercise of discretion under CPR 13.3, the court should bear in mind that the entry of a default judgment may operate as an extreme sanction and that justice may be done by making the setting aside of such a judgment subject to conditions, for example as to the provision of security for some or all of the claim. That may represent a more proportionate sanction, requiring a defendant who has hitherto ignored the proceedings to demonstrate his commitment to them by, as it were, putting some of his money where his mouth is. But as ever, what is appropriate will always depend on the particular circumstances of the case.”

    In paragraph 9 of his judgment in Newland Males J drew attention to the power to impose conditions when granting relief and to the extreme nature of the sanction in refusing to set aside a judgment:

APPEALS FROM DISTRICT JUDGES

It was common ground that the appeal from the District Judge was a “true appeal”  and was subject to

“…the well-known principles set out in the judgment of Lord Woolf MR in Phonographic Performance Ltd v AEI Rediffusion Music Ltd [1999] 1 W.L.R. 1507 at 1523C-D:

“Before the court can interfere it must be shown that the judge has either erred in principle in his approach or has left out of account, or has taken into account, some feature that he should, or should not, have considered, or that his decision is wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale.”

THE DECISION OF THE JUDGE: OVERTURNING THE DECISION OF THE DISTRICT JUDGE AND SETTING ASIDE JUDGMENT

  1. I have considerable sympathy with the position that DJ Giles found himself on 29th April 2014. As Miss Smith QC pointed he was sitting late and was doing his best to help the parties by giving his judgment at the time. Furthermore he was making his decision at a time when the robustness of approach advocated in Mitchell must have been at the forefront of many district judges’ minds. With the benefit of hindsight I think it would have been better if he had reserved judgment following the submissions and handed down judgment at a later date. That would have enabled him to consider in considerably more detail the issues that were involved in the exercise of his discretion.
  2. In my view it was open to DJ Giles to find that the application to set aside the judgment had not been made promptly. He was in my view entitled to find that Mr Mason had not acted with all reasonable celerity in the circumstances. As Miss Smith QC pointed out the application was not made until 17 weeks after Mr Mason learned about the judgment on 26th November 2013 and 11 weeks after the order of 7th January 2014 when DJ Giles specified that the application should be issued “as soon as possible”. No doubt he was bound to take into account the difficulties faced by Mr Mason as set out in the letter of 6th January 2014 and in his witness statement. However it is plain from paragraph 15 of the judgment that DJ Giles had these factors well in mind. As Miss Smith QC pointed out he was also entitled to have in mind the time estimate given by Mr Mason in the penultimate paragraph of his letter of 6th January 2014 in which he estimated that the application could be made two or three weeks after the file had been retrieved from storage. In my view DJ Giles was fully justified in holding that the delay of 11 weeks from the 7th January 2014 was not “prompt”. I would have made the same finding.
  3. Contrary to the submission of Miss Smith QC I do think that it was necessary for DJ Giles to have determined when in his view the application ought to have been made. It seems to me that it is necessary to know the extent of the delay in order to apply the three stage test advocated by the Court of Appeal in Denton. How can he determine whether the breach is serious or significant without knowing its extent? However in the light of DJ Giles’s view (which in my view is not open to challenge) that the application should have been made some weeks earlier he was in my view entitled to consider (even though he did not express it) that the breach was significant and serious.
  4. He was also entitled to take the view (indeed it is in my view inherent in his decision) that that there was no good reason for the lack of promptness. However it also seems to me to be inherent in the decision (in particular paragraph 15 and his view that the application should have been made “several weeks” before) that he accepted that part of the period between the signing of the judgment and the making of the application was in all the circumstances reasonable.
  5. My concern about this case is that there is nothing in the judgment to suggest that DJ Giles evaluated all the circumstances of the case (including those specifically mentioned in CPR 3.9) and, with respect, it appears to me that his evaluation of the circumstances mentioned in paragraph 20 of the judgment was flawed.
  6. Nowhere in the judgment does DJ Giles mention the fact that this is a claim for in excess of £80,000 (possibly as much as £300,000) against a small accountancy firm and that the effect of a judgment on liability is accordingly a serious matter. Nowhere does he consider whether a more appropriate sanction for the default would have been an order setting aside the judgment on terms. Whilst it is true that Mr Mason did not provide a substantive reply to the pre-action protocol letter he did acknowledge receipt. Furthermore there was a delay of some 19 months between the preliminary notice and the pre-action protocol letter and a further 9 months before the proceedings were served. Thus, this is not a case that has been progressed urgently on behalf of Dr Priestley. Furthermore whilst there is no dispute that the service of the proceedings was regular there is equally no challenge to Mr Mason’s evidence that he was unaware of the proceedings before 26th November 2014.
  7. In paragraph 20 of his judgment DJ Giles refers specifically to two matters – work which may not be needed in relation to the quantum trial and the putting back of the proceedings.

Wasted Work

  1. It is to be noted that DJ Giles did not identify what work had been wasted. Indeed he makes no specific finding that any work has been wasted because he used the word “may“. Much of the work that has been carried out will be needed in any event because it is not suggested that this case would be suitable for a split trial. In the course of her submissions Miss Smith QC suggested that work was wasted because the witness statements were prepared without sight of the defence. However it has to be remembered that the witness statements were on the question of quantum and it is not clear how far the defence would have assisted in relation to quantum.
  2. It is, in my view, important to have in mind the timetable set by DJ Giles in his order of 7th January 2014. It would no doubt have been possible for DJ Giles to have provided a specific date for the application to set aside the judgment and to have provided for some sort of stay if such an application was made until it was determined. He did not do so. Instead he provided for the preparation for the quantum trial to continue giving specific dates for disclosure and the exchange of witness statements. To my mind an order of this sort made it extremely likely that some work would be wasted in the event that the judgment was set aside. It certainly did not mean that the wasted work was caused by any lack of promptness. In my view it was not sufficient for DJ Giles simply to say that work may have been wasted. In my view he needed to identify the work he had in mind before he utilised it as part of the discretion to refuse to set aside the judgment.
  3. There is no doubt that some additional costs have been incurred after 7th January 2014 in that Mr Mason did not comply with DJ Giles’s timetable in relation to disclosure. This resulted in an application for an “unless” order. However disclosure on liability and quantum was given on 25th March 2014 and thus this failure could not possibly justify the refusal to set aside the judgment.

Putting back the proceedings

  1. DJ Giles did not identify the extent to which the proceedings would be put back. It appears from paragraph 20 of the judgment that he was comparing the time to be taken for a trial on liability against a trial on quantum. If that is the comparison he was making it was in my judgment not the correct comparison. The correct comparison was to compare the progress of the proceedings (i.e. a trial on liability and quantum) if Mr Mason had acted promptly with their actual progress. There is in fact no basis to think that there would be any significant difference in the time to trial. As noted above Mr Mason had included a draft defence on 25th March 2014 and had provided a list of documents. At most the delay was the “some weeks” identified by DJ Giles as the period when the application should have been made. In reality it is unlikely to have made any significant difference as it is unlikely that the contested hearing before DJ Giles would have been heard much earlier than the 29th April 2014.
  2. As noted above this was a case where proceedings were not served for more than 2¼ years after the first notification of claim was made. A delay of “some weeks” has to be seen in that context.
  3. In fact, as Mr Bacon pointed out, the matter goes somewhat further. On the material before DJ Giles there was no basis for him to consider that there would be any delay to the trial. He was presented with 2 draft orders – one with a timetable for a trial on quantum and the other for a trial on liability and quantum. Each gave the same trial window – the beginning of 2015.
  4. In my view DJ Giles was not justified in holding that any significant delay to the trial on liability and quantum was caused by the lack of promptness.

9. Conclusion

  1. I am highly conscious that this is an appeal against the discretionary decision of DJ Giles. I am equally conscious of the warning given by Lord Hoffman in the passage cited above. However for the reasons set out above I am satisfied that DJ Giles did err in the exercise of his discretion. It follows that I can substitute my own discretion.
  2. As set out above I agree with DJ Giles that the application to set aside the judgment was not made promptly. I agree with him that it should have been made some weeks earlier – certainly by 11th February 2014 some 5 weeks after the order of 6th January 2014.
  3. I regard that delay as being significant and certainly not trivial. It follows that I do have to consider all the circumstances of the case including those specifically mentioned in CPR3.9.
  4. I agree with Mr Bacon that an important circumstance is that there is a realistic defence on liability. It is not a shadowy defence. This is a case where the court can form no view as to the outcome of the trial. Other important factors are that the Defendant is a small accountancy firm, that the sums claimed are relatively large. In addition Dr Priestley’s costs are said to be high (in excess of £100,000). Furthermore this is a case where there is a CFA with a 100% success fee which may result in Dunbar having to pay an extra 100% on those costs.
  5. I take into account the need for litigation to be conducted efficiently and the need to enforce compliance with orders. It may be said that the failure to comply with DJ Giles’s timetable in relation to disclosure and witness statements is a breach of such an order. Furthermore the question of promptness is expressly a matter for consideration under CPR 13.3
  6. I am, however required to deal with the matter justly. In my judgment the lack of promptness in all the circumstances of this case would not make it just to dismiss the application. Whilst I accept that some costs may have been wasted as a result of the failure to act promptly I do not think they are likely to be very large – certainly not in relation to the amounts claimed by Dr Priestley. I am not satisfied that any delay to the potential trial date for a trial on liability and quantum is more than 5 weeks. In the context of a case where there was a 2¼ year gap between notification of the claim and the service of proceedings it would in my view be quite disproportionate to refuse to set aside the default judgment on that basis.
  7. I have considered whether to impose conditions when making the order. This is not a matter addressed in either of the parties’ skeleton arguments and is not one on which I have formed a concluded view. This is not the sort of case where a proportion of the amount claimed should be secured because, as I have indicated, this is not a case where the defence can be regarded as shadowy. However it may be right to require payment of a small sum in respect of the costs of entering the judgment and of any wasted costs. Mr Mason will no doubt be aware (or be advised) of the assumptions that the court will make unless there is evidence of any impecuniosity on the part of Dunbar. These are matters that can be debated at any resumed hearing.
  8. In view of the fact that I have found that there was a lack of promptness in bringing the application I provisionally adhere to the view that the costs of the application before DJ Giles should be paid by Dunbar. Different considerations, of course, relate to the costs of the appeal.
  9. This appeal will be allowed.

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