Setting aside default judgment: some hints for defendants and for claimants

mark_henley_ By Mark Henley

The following hints may be useful for both sides in these important applications. 

The Rules

The court has a discretion to set aside valid judgments in default, pursuant to CPR 13.3:

  1. 3(1) … The court may set aside or vary judgment….if –

(a) the defendant has a real prospect of successfully defending the claim; or

(b) it appears to the court that there is some other good reason why:

(i) the judgement should be set aside or varied; or

(ii of the defendant should be allowed to defend the claim.

(2) In considering whether to set aside of area judgement… the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.

An application to set aside judgement in default is not an application for relief from sanctions under CPR 3.9: although the new approach to relief from sanctions post-Denton will probably provide a more favourable general environment for defendants asking the court to exercise its discretion to set aside judgement in default.

Promptness: not a “knockout blow”

The promptness of the application is an important matter, to which the court must have regard: but a prompt application is not a precondition which must be met before the court can exercise its discretion.

For example, HHJ Mackie QC in the QBD in Barons Bridging Finance PLC v Nnadiekwe (September 6, 2012, unrep, referred to in the 2014 White Book notes at 13.3.3) exercised discretion to set aside judgement in default made years earlier where justice still required this.

This makes an application to set aside judgement in default crucially different from an application by a party failing to attend a final hearing to set aside a judgement made in his absence: for which CPR 39.3 (3) provides that judgement is to be set aside only if the applicant acted promptly on finding out that the order had been made.

Hints for defendants’ solicitors

These are important, urgent, and often difficult and stressful applications,  particularly when only partial instructions are given, following a series of errors by a lay defendant or insurer: but the following hints may help.

  1. Do act promptly. Stop the clock on the issue of delay by making an application as soon as possible. Do the best you can with the instructions you have: draft an application as soon as possible on the basis of the available evidence (if necessary without waiting for the fullest possible instructions), and make a supplementary statement if anything helpful emerges later.
  2. Try to obtain the claimant’s consent – quickly. Give the other side an outline of a Defence with real prospect of success, and request immediate written consent to setting aside (to limit the length and costs of the witness statement in support of the application): but chase a prompt response, and do not let the hope of obtaining consent add to your delay in applying to the court.
  3. Make sure you know that default judgement has been entered (and where and when). Initial instructions are often partial, and for example may only hint in correspondence at the existence of a default judgement: but a telephone call direct to the court staff will usually clarify the details (or as a last resort a copy of the judgement can be sought from the claimant’s solicitors).
  4. Draft a proper witness statement in support. A judge being offered apologies and asked to exercise discretion will be particularly critical/demanding.
  5. Remember that “a real prospect of successfully defending the claim” is a relatively low hurdle, which will be met by a genuine relevant factual dispute.
  6. “Promptness” is a flexible concept. What constitutes promptness will be judged by the court on the basis of all the facts of the case: for example in Hart Investments v Fidler [2006] EWHC 2857 (in the 2014 White Book notes at 13.3.3) HH Judge Coulson held that a delay 59 days in making the application to set aside judgement in default was “very much the outer limit of what could possibly be acceptable”.
  7. But, if necessary, grovel. If it cannot be argued that the application has been made promptly, then do not attempt to do so. Give appropriate apologies to the court, both for any delay by yourself as a solicitor and/or on behalf of your lay client, or instructing insurer, for their failures and/or delay.
  8. Appeal to the court’s discretion. Remember that the court retains a discretion to grant an application, even when it is not prompt. Stress the unfairness of the defendant being unable to pursue a defence which does have a real prospect of success, and emphasise any argument you may have as to public policy (for example if you act for an insurer alleging fraud in a road traffic claim), constituting “some other good reason” why the application should be granted, under CPR 13.3(b), above.

Hints for claimants’ solicitors

These are applications for which, for a change, the boot is on the claimant’s foot, and there is often a good prospect of recovering costs, even if the application is successful: but they do need to be approached realistically.

  1. Consider whether to consent to the application. If the application has obviously been made promptly, and if there is a Defence with a real prospect of success, it is usually sensible to consent to the application (preferably subject to a modest order for costs in the claimant’s favour for the time necessary to consider it). Before you spend time drafting a statement opposing the application, decide whether there are good prospects of recovering the costs of doing so (which there may well be if the application is not prompt, even if it seems probable that the court will exercise its discretion in favour of the application).
  2. Remember that time runs from when the defendant was served: and not from when solicitors were instructed. Even if solicitors acted promptly once instructed, if they were not instructed promptly then the application is still not prompt.
  3. Point out the full extent of notice of the claim which the defendant had before service, and between service and making the application. For example, in a road traffic claim, attach the CNF and relevant correspondence.
  4. Point out any errors in the defendant’s statement. Defendants’ solicitors drafting a statement in a hurry on the basis of limited instructions may well make assertions which you, with the benefit of a full file, can prove to be wrong.
  5. Check whether directions have already been given, and whether the defendant is already subject to any sanctions for breach.
  6. Point out any delay in trial or waste of court time resulting from delay in making the application.
  7. Raise proportionality arguments if the claim is a modest one.

An example

Some of these issues are well illustrated by a hearing on 22.7.14 in the Willesden County Court before District Judge Kumrai in which I represented the claimant in opposing an application to set aside judgement in default.

The claimant alleged he was a passenger in a car struck by one of the defendant buses: and the defendant bus company always alleged that there were no passengers in the car.

The claimant obtained judgement in default on 29.1.14, on the failure of the defendant’s “in-house” claims handlers to acknowledge service.

The defendant’s solicitor’s witness statement dated 11.6.14 attached witness statements from the bus driver and from an apparently independent witness stating that the driver was the only person in the car, and asserted that the defendant was unaware that any claim had been issued until it received correspondence dated 23.3.14 from the claimant’s solicitors, and that solicitors had not gone on the record until 4.6.14.

The claimant’s solicitors produced a statement proving service of the Particulars of Claim, and of the judgement in default, and of numerous other items of correspondence referring to the judgement and to subsequent directions, long before the letter of 23.3.14.

The District Judge found that the defendant had notice of the judgement by 3.2.14 at the latest, and that there was “a marked failure to act promptly” in making the application: but nevertheless exercised his discretion to set aside judgement in default, on the basis that it would be a grave injustice if the defendant were prevented from defending a claim which it may be able to prove was deceitful and fraudulent.

Mark Henley

13th August 2014


One comment

  1. […] My colleague Mark Henley writes on Tips for Setting Aside Judgments. […]

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