The High Court refused to exercise its discretion to set aside a default judgment after it held that the Denton principles applied.
Summary
The High Court held that an application to set aside a judgment under CPR 13.3 amounted to an application for relief from sanctions under CPR 3.9, so the principles established by the Court of Appeal in Denton applied.
The judgment followed precedent set by previous Court of Appeal decisions in Regione Piemonte v Dexia Crediop Spa [2014] EWCA Civ 1298 and Gentry v Miller [2016] EWCA Civ 141.
Background
The claimant, Ince Gordon Dadds (IGD), a firm of solicitors, obtained a default judgment for unpaid legal costs against the defendant, Mellitah Oil and Gas BV (MOG). MOG had failed to file an acknowledgment of service or defence in time and default judgment was entered against them on 25 January 2021.
On 17 March 2021, MOG made an application to the court under the discretionary grounds CPR 13.3 to set aside the default judgment.
The application was brought under the sole ground of CPR 13.3(1)(a), on the basis that MOG had a “real prospect of successfully defending the claim” because
the invoiced amounts were disputed; and
there were allegations of professional negligence, and a counterclaim would be made against IGD
At the hearing, the defendant submitted that there was “some other good reason” (under CPR 13.3(1)(b)) why the judgment should be set aside due to aggressive conduct by the claimant.
The court's decision
The court held that the defendant had no real prospect of defending the claim, considering their delay in challenging the disputed invoices for the legal costs, and its failure to provide clear counterclaims. The judge concluded that MOG’s defences were “either shadowy/flimsy or have no real prospect of success”, but overall, there was a “very thin basis” on which the defence might succeed.
The court rejected the submission that there was some other good reason for the judgment to be set aside as it was accepted that IGD followed the Pre-action Protocol for Debt Claims.
The judge concluded that the application had been made sufficiently promptly considering the steps taken by MOG prior to the application to set aside the judgment.
The judge held that the principles laid down in Denton and other v TH White Ltd and another [2014] EWCA Civ 906 applied when considering whether the court should exercise its discretion to set aside the default judgment.
To apply the test set out in Denton, the court must consider:
whether the breach was significant
if the breach was significant, whether there is a good reason for it
Finally, if the conclusions so far have not resolved the matter in the applicant’s favour, the court must consider all the circumstances to enable it to deal justly with the application, including the need:
for litigation to be conducted efficiently and at proportionate cost, and
to enforce compliance with the rules, directions, and orders
In applying the Denton principles, the judge reviewed MOG’s conduct throughout the dispute, up to the date the application to set aside came before the court.
In considering all the circumstances of the case, the court refused to exercise its discretion under CPR 13.3.
Comments
This is an important decision for defendants who wish to apply to set aside a default judgment on discretionary grounds.
Once the court is satisfied the grounds under CPR 13.3 are made out, it can consider the Denton principles. This means the application must contain information to allow the court to decide how serious the breach was, whether there was a good reason for it, and, ultimately, all the circumstances of the case.
The case serves as a reminder that defendants must show a good prospect of successfully defending a claim before a court will exercise its discretion to set aside a judgment.
Read more about how to apply to set aside a default judgment on Shelter Legal.