SETTING ASIDE A DEFAULT JUDGMENT AFTER MITCHELL: WHAT IS THE APPROPRIATE TEST?

Mediatelegal

There has been much discussion of whether the Mitchell principles impact upon an application have a default judgment set aside.  There are some cases that indicate that the amended CPR 3.9 should be taken into account in relation to a delay in applying to set judgment aside.  I am grateful to Richard Wilcock of Palmyra Chambers for sending me a copy of the judgment of HH Judge McIntyre in the case of  Attwell -v- Bain in the Reading County Court.   (The judgment is set out in full below).

THE ISSUES

The defendant was applying to have judgment set aside following a default judgment entered failing a failure to acknowledge service. The district judge refused to set the judgment aside. The defendant appealed (15 days out of time).

THE JUDGE’S FINDINGS

The Judge upheld the decision of the District Judge.  He held that there was a two-fold test in an application to set judgment aside. A judge should look at the rules themselves.

1. Firstly did the defendant have a “real prospect of successfully defending the claim”.

2.  Secondly was the application to set aside the judgment made “promptly”.

On the facts of that case the defendant had established that it had a real prospect of successfully defending the claim. However the application to set judgment set aside was not made promptly.   There was  four week, unexplained, delay.

“11.But even if the DJ had been wrong to find that the application had not been made promptly, it does not follow that she would have been wrong to exercise her discretion against A and refuse the application to set aside. She could have gone on to consider the provisions of Rule 3. In my view, the provisions of CPR 12.3 impose a sanction for failing to file an acknowledgement of service before the relevant time for doing so has expired. It is a sanction to which the provisions of CPR 3.8 and 3.9 apply. The DJ would have been entitled to consider the provisions of CPR 3.9 “including the need – (a) for litigation to be conducted efficiently…” So, in relation to whether or not CPR 3 is engaged when considering an application to set aside a default judgement, I prefer the view of Silber J expressed at paragraphs 36 and 37 of his judgement in Samara to that of Hamblen J said by A to support the contrary view at paragraph 60 of his judgement in the Newland Shipping case (2014) EWHC 210 (Comm). I myself do not read Hamblen J’s view as being contrary to that of Silber J since he simply states that the appropriate procedure for challenging a judgement in default is under CPR 13. He does not state that CPR 3 is not engaged in making such a challenge.

12, It may be rare that a court would find that relief from the sanction imposed by CPR 12.3 should not be granted if the party applying for relief has satisfied the test for setting a judgement in default aside imposed by CPR 13, but in my view a court would have the power to do it under CPR 3.9 and having regard to the new CPR 1.2(f). In the light of the correspondence to which I have already referred the DJ in this case could have found that there was no or no adequate response by A’s insurers to it and that in those circumstances they had not conducted the litigation “efficiently”. If she had done, she would not, in my view, have been wrong.”

THE LATE APPEAL

Finally the judge held that there was no good reason for the appeal being launched 15 days late. Application for permission to appeal out of time was refused.

THE JUDGMENT IN FULL

John Attwell (Appellant/Defendant)

and

Chris Bain (Respondent/Claimant)

 

Judgement

 

  1. A appeals against the Order made by DJ Henson on 23 December 13 whereby she refused his application to set aside a judgement in default of acknowledging service which R had entered against him on 13 September 13, the day after the period during which A should have acknowledged service had expired.
  2. Her reasons for having refused to set aside the judgement are succinctly stated in a “draft ruling” the terms of which she approved on 17 March 14. Although approved without amendment, there is one change which both parties agree should be made to the draft to make sense of a part of it. At the end of the first paragraph the word “promptly” should replace the word “properly”. There is no suggestion that A’s insurers acted in any way improperly.
  3. Both parties through their counsel also agree that in dealing with this appeal I should ask myself the following question, namely was the DJ wrong not to set aside the judgement, having regard to the evidence/information she had before her and the relevant provisions of the CPR. If not, the appeal should be dismissed. If, on the other hand, it was, in my judgement wrong in that sense, it should be allowed. The burden of establishing that it was wrong rests upon A. My reason for approaching the hearing in that way is that there may be all manner of criticisms that both parties would wish to make of the draft ruling, but there would be no point, and it would be quite disproportionate to allow the appeal on the ground of some defect in the ruling and then remit the matter back to some other DJ to consider the application again. I therefore allowed both parties to rely upon any argument in support of their respective cases whether or not it was relevant to the ground upon which the DJ gave permission to appeal. What the parties need to know is whether on the evidence/information before the DJ, she was entitled to reach the conclusion she did.
  4. There is no issue as to the evidence/information she had before her. It is all contained in a bundle provided to her for the hearing of A’s application to set the judgement aside. I have the same bundle in the Court file and it is agreed that it contains the evidence/information upon which she reached her decision, having also, no doubt, taken into account the arguments advanced by the parties during the course of the hearing.
  5. In the draft ruling the DJ refers to two rules in the CPR, namely Rule 3 dealing with case management and Rule 13 dealing with applications, such as A’s, to set aside default judgements. Having considered the matter in the way reflected in the draft ruling, she dismissed A’s application but gave him permission to appeal because she considered that the effect of the Jackson reforms was to create “I think, a new point arising out of the change in 3.9 and the interlocking of 3.9 and 13.3.”
  6. She made her ruling on 23 December 13. A’s Notice of Appeal was issued on 28 January 14, some 15 days late. So, A requires and seeks permission to appeal out of time. The Notice contains some “added grounds” of appeal upon which, as I have already indicated, I gave A permission to rely. In support of the appeal, Mr Walsh relied upon his skeleton argument dated 13 January 14 and in opposing it Mr Wilcock relied upon his dated 25 March 14. A filed an Appeal Bundle containing some authorities. R relied upon Samara v MBI & Partners UK Ltd (2014) EWHC 563 (QB), a decision of Silber J. I was referred to some passages in some of the authorities.
  7. In my judgement the proper way for the DJ to have approached A’s application to set aside the default judgement obtained by R was to consider first the provisions of CPR 13 the rule specifically designed to deal with such an application. Does A have “a real prospect of successfully defending the claim”? In my view, if he does, it matters not whether it is in relation to an issue or issues concerning liability or quantum. A argues at some length in his skeleton argument and by reference to his draft defence why he has such a prospect. R says little in his skeleton or submissions why he does not. In my view, the DJ would have been wrong if she had concluded that A did not have such a prospect. It seems to me that on the evidence/information available and having regard to the competing arguments and the draft defence he has established that he would have a real prospect of successfully defending the claim.
  8. The next question to be considered under the provisions of CPR 13 is whether or not A made his application to set aside the judgement “promptly”. The period during which A has to have acted promptly begins when the default judgement is obtained. The first point to consider is when A’s insurers first became or should have become aware that a judgement in default had been entered against A. In this context it is common ground that when the proceedings were issued, they were served directly upon A and they were not served upon his insurers. It is also not in dispute that A failed to notify his insurers that the proceedings had been served upon him.
  9. In considering this issue, I need to refer to some of the evidence in the bundle of documents that was before the DJ. It contained a witness statement from Miss Vizor, an employee of A’s insurers, dated 16 September 13 and a witness statement from Kirsty Hunt an employee of R’s solicitors dated 12 December 13 together with a “Chronology of Case”. Some of the correspondence to which Ms Hunt refers follows her statement. The following letters seem to me to be of particular relevance. The letter dated 26 June 13 (page 50 in the bundle) from R’s hire company to A’s insurers giving them notice under s.151 RTA 1988 of R’s intention to bring proceedings against their insured in respect of the relevant accident. The letter dated 23 July 13 (page 22) from R’s solicitors to A’s insurers notifying them of the fact that on that date documents had been dispatched to the County Court “to issue proceedings against your insured. This letter is notice to you of our client’s intention to issue proceedings under the Road Traffic Act 1988.” And finally, the letter dated 14 August 13 (page 23) from R’s solicitors to A’s insurers notifying them that a judgement had been entered on 13 August 13 against A in respect of R’s claim. In the ordinary course of posting that letter would have been received by A’s insurers on 15 or latest 16 August 13. A’s application to set the judgement aside is dated 16 and date-stamped 18 September 13, some 4 weeks later. There is no explanation from Miss Vizor for that delay. She refers simply to an “administrative error” by A’s representatives Swiftcover Insurance Limited, but it is not clear whether that refers to the failure by A to acknowledge service in time or to the delay in making the application to set the resulting judgement in default aside.
  10. In my view, the DJ could within the reasonable exercise of her discretion have properly come to the conclusion based on that evidence that the application to set aside was not made “promptly”. I base this view upon the facts of the case, the lack of any or any adequate explanation for the delay of 4 weeks before the application was made and the authorities referred to in the notes to CPR 13.3 dealing with the meaning of “promptly” in the Green Book. And, if it was not made promptly, she was entitled to refuse the application, upon a proper construction of the Rule, no matter how real a prospect A had of successfully defending the claim.
  11. But even if the DJ had been wrong to find that the application had not been made promptly, it does not follow that she would have been wrong to exercise her discretion against A and refuse the application to set aside. She could have gone on to consider the provisions of Rule 3. In my view, the provisions of CPR 12.3 impose a sanction for failing to file an acknowledgement of service before the relevant time for doing so has expired. It is a sanction to which the provisions of CPR 3.8 and 3.9 apply. The DJ would have been entitled to consider the provisions of CPR 3.9 “including the need – (a) for litigation to be conducted efficiently…” So, in relation to whether or not CPR 3 is engaged when considering an application to set aside a default judgement, I prefer the view of Silber J expressed at paragraphs 36 and 37 of his judgement in Samara to that of Hamblen J said by A to support the contrary view at paragraph 60 of his judgement in the Newland Shipping case (2014) EWHC 210 (Comm). I myself do not read Hamblen J’s view as being contrary to that of Silber J since he simply states that the appropriate procedure for challenging a judgement in default is under CPR 13. He does not state that CPR 3 is not engaged in making such a challenge.
  12. It may be rare that a court would find that relief from the sanction imposed by CPR 12.3 should not be granted if the party applying for relief has satisfied the test for setting a judgement in default aside imposed by CPR 13, but in my view a court would have the power to do it under CPR 3.9 and having regard to the new CPR 1.2(f). In the light of the correspondence to which I have already referred the DJ in this case could have found that there was no or no adequate response by A’s insurers to it and that in those circumstances they had not conducted the litigation “efficiently”. If she had done, she would not, in my view, have been wrong.
  13. Finally, I can see no reason why A filed his Notice of Appeal 15 days after the time for doing so had expired.
  14. For these reasons, I would dismiss the appeal and, would have refused the application for permission to file the Notice of Appeal out of time.
  15. As to costs, I heard submissions at the conclusion of the hearing. A should pay R’s costs of the appeal summarily assessed in the sum of £2358.84 claimed in the amended schedule of costs. The schedule dated 25 March contained arithmetical errors which have been corrected in the amended schedule dated 26 March 14. I think the costs claimed in that schedule are reasonable.
  16. This judgement was handed down in Court on 4 April 2014. The parties have permission to apply as to the terms of the appropriate Order.

 

 

HHJ McIntyre

4 April 2014.