Application to set aside only part of a default judgment resulted in variation of the original order.
Summary
The court considered an application to set aside a default judgment under both CPR 13.2 (mandatory set aside based on irregular service) and CPR 13.3 (discretionary set aside based on having a real prospect of successfully defending the claim) and how to treat a set aside application where only part of the claim is being defended.
Background
Marla International Ltd (Marla) contracted Ready4s Ltd (Ready4s) to design a bespoke accounting software package. Marla later made a claim against Ready4s based on breach of contract and misrepresentation. The claim was not defended initially, and judgment was awarded in default.
Ready4s later applied to set aside application under CPR 13.2 (based on irregular service) and CPR 13.3 (based on a fundamental disagreement over the nature of the development).
The court dismissed the CPR 13.2 mandatory set aside argument, as service had been effective. Instead, the focus turned to the CPR 13.3 discretionary set aside argument, where Ready4s set out seven separate points to show that they had a real prospect of successfully defending part of the claim and asked that the whole claim be set aside.
The court’s decision
The court held that the CPR 13.3 set aside process is not ‘all or nothing’ (as Marla had argued). Equally, where only parts of a claim are defended, it would not be appropriate to set aside the entire claim (as Ready4s had argued) because this would be a misuse of court time under CPR 1.4.
The court disregarded the requests of both parties, and instead varied the judgment to allow Ready4s to defend the parts of the claim to which it had a meritorious defence, while leaving the parts of the claim that were not defended. Notably, Ready4s was not allowed to challenge costs associated with the default judgment. Neither party was granted permission to appeal the decision.
Comments
This decision holds particular importance for clients looking to defend only part of a default judgment.
As the judgment was varied rather than set aside, it remained on the Register of Judgments, Orders and Fines. This could have an impact on clients partially defending a claim for the purpose of having it removed from the register (by way of it being set aside).
Additionally, where a judgment is varied on the basis of a partial set aside, costs associated with the default judgment might remain unchallengeable. This will be a consideration for clients considering set asides based on partial defences as a means of reducing costs associated with default judgments.