IF THE DEFENCE IS FILED LATE THE CLAIMANT IS STILL ENTITLED TO DEFAULT JUDGMENT: TWO POINTS TO WATCH

NB THIS DECISION HAS SINCE BEEN OVERTURNED BY A CHANGE IN THE RULES, SEE THE POST HERE.

The decision of Deputy Master Pickering in Billington -v- Davies [2016] EWHC 1919 (Ch) illustrates two important principles that are often overlooked.

1. A claimant that has applied for default judgment in default of defence is still entitled to default judgment even if the defence is filed between the date of the application and the date of the hearing.
2. An application for an extension of time for filing a defence is dealt with on the basis of CPR 3.9 and Denton principles.

THE CASE

The claimant brought an action for £1,652.320 alleging that money he had placed with the defendants had been misappropriated and that he had been the victim of fraud. The First Defendant filed an acknowledgment of service. The defence was due on the 4th January 2016. No defence was served and, on the 11th April 2016, the claimant issued an application for judgment in default of filing a defence.

The defendant filed a defence the day before hearing was due to be heard.  The Defendant also made an application for an extension of time to file the Defence.

THE FIRST ISSUE: WAS THE CLAIMANT ENTITLED TO DEFAULT JUDGMENT NOW A DEFENCE HAD BEEN FILED?

The defendant argued that the claimant was not entitled to default judgment once a defence had been filed. This argument was rejected by the Deputy Master:

“11. Put simply, the First Defendant argues that on a literal reading of CPR 12.3(2) by filing and serving his Defence – albeit out of time – it follows that the pre-condition in CPR 12.3(2)(a) is no longer met and that as a result default judgment can no longer be sought. In other words, so the First Defendant argues, an application for judgment in default of a Defence will automatically be defeated whenever a defendant files a Defence – however late. In support of this argument, reliance is placed on Coll v Tattum (2002) 99(3) LSG 26 in which Neuberger J observed that the provisions of the CPR on this point were “not entirely clear” and that “the footnotes to the Rules appear to point in different directions”.

12. I reject this argument. In my judgment, the reference to “a defence” in CPR 12.3(2)(a) must be a reference to a Defence which has either been served within the time permitted by the Rules or in respect of which an extension of time has been granted. Where a Defence is served late, unless and until an extension has been granted, a document purporting to be a Defence is not in fact a Defence for the purposes of CPR 12.3(2)(a). To this extent, the note at 15.4.2 of the 2016 edition of the White Book is, in my judgment, wrong.”

THE SECOND ISSUE: THE PRINCIPLES TO BE APPLIED ON THE DEFENDANT’S EXTENSION OF TIME

The Deputy Master found that the principles to be applied

“Quite properly, however, Counsel for the First Defendant also referred me to the more 6 recent decision of the Court of Appeal in R (On the application of Hysaj) v Secretary of State for the Home Department [2015] 1 WLR 2472. In that case, Moore-Bick J carried out a thorough review of the authorities including Sayers, the cases that followed and supported Sayers and then, most recently, Matthews. Counsel for the appellant invited the Court of Appeal to find that Sayers “had been misunderstood and misapplied”1 and that the approach adopted in Matthews was to be preferred. At [36], however, MooreBick J held:

“36. I confess to finding that submission attractive, but having re-examined the authorities I am not persuaded that that course is open to us. As the authorities demonstrate, for the past twelve years it has been consistently understood that in Sayers v Clarke Walker this court deliberately equated applications for extensions of time for filing a notice of appeal with applications for relief from sanctions because in its view the implied sanction of the loss of the right to pursue an appeal meant that the two were analogous. Following the decision in Mitchell the courts have continued to proceed on the basis that applications for extensions of time for filing a notice of appeal should be approached in the same way as applications for relief from sanctions under CPR 3.9 and should attract the same rigorous approach… Whatever one may think of the doctrine of implied sanctions, therefore, particularly in the light of the views expressed by the Privy Council in Matthews , I think that the approach to be taken to applications of the kind now under consideration is now too well established to be overturned. It follows that in my view the principles to be derived from Mitchell and Denton do apply to these applications.”

20. In short, therefore, the position as set out in Sayers was confirmed; on an application to extend time the relevant principles are the same as, or analogous to, those to be applied on an application for relief from sanctions.”

THE THIRD ISSUE SHOULD THE DEFENDANT BE GRANTED AN EXTENSION: APPLYING THE DENTON CRITERIA

The Deputy Master considered the three stages of the Denton test

The breach was serious and significant

“It was submitted on behalf of the First Defendant that the breach – the failure to serve a Defence for just over 4 months – was not serious or significant on the basis that no hearing date had been jeopardised. I disagree for 2 reasons. First, the original hearing of the Claimant’s application for default judgment was lost. It is true that Master Bowles recused himself because of his friendship with the First Defendant’s solicitor but even without that factor the hearing could not have been effective on that date because of the very late service of the Defence and the failure, even then, to have issued an application for an extension of time. Second and in any event, I regard the delay of 4 months in filing the Defence, coupled with the failure to issue an application for an extension of time until directed by Master Bowles to do so, as having had a material impact on the efficient progress of this litigation. I therefore find that the First Defendant’s breach or default is indeed sufficiently serious or significant.”

There was no good reason for the delay

The Deputy Master rejected the argument that lack of funding to file a defence represented a good reason. He then considered the argument that there was a good reason because the parties were negotiating:

“28. As for the existence of without prejudice negotiations, I was told that there is no authority on this point. It seems to me, however, that such negotiations also cannot amount to a good reason for delay. If it were otherwise it would mean that a litigant could effectively seek to dis-apply or override the Civil Procedure Rules – and put deadlines or other procedural requirements on hold – merely by entering into without prejudice negotiations. That cannot be right. Similarly, from the non-defaulting party’s point of view, if I were to hold that without prejudice negotiations could amount to a good reason for failing to comply with a deadline, it might discourage that nondefaulting party from entering into such negotiations – which clearly would not be an attractive proposition.

29. Moreover, there is a practical solution. If a party does wish to save money by putting off a procedural requirement pending the outcome of without prejudice negotiations, the parties can (so far as the Rules permit) agree such extensions between themselves or apply to the Court for an appropriate order. It cannot be the case, however, that simply by entering into without prejudice negotiations a party can unilaterally impose what would effectively amount to a stay on the proceedings.

30. I therefore reject the First Defendant’s argument on this point too and find that there has been no good reason for the failure to file and serve a Defence.”

All the circumstances of the case

The Deputy Master held:

1. The  merits of the Defence could only be considered where it was clear that the defence was very weak. He would not embark on a mini-trial.
2. There was no good reason for the delay.
3. There had been a conscious decision on the part of the First Defendant no to comply with the rules.  The First Defendant had taken a conscious decision not to file a defence on the due date.
4. The fact that the claimant was seeking a declaratory judgment was not in itself a good reason which justified an extension of time for filing and serving the defence.

The Deputy Master rejected the defendant’s application for an extension of time.

RELATED POSTS: SETTING ASIDE JUDGMENT

• Delay, discretion and setting aside judgment.
•  Setting aside judgment, Mitchell and Denton: The Court of Appeal’s View.
• Setting aside a default judgment after Mitchell: What is the Appropriate Test?
• Setting judgment aside:Delay and Promptness
• Yet more on setting judgment aside delay and promptness 
• What can the defendant argue after the claimant has judgment? A clinical negligence case
• Denton applies to applications to set aside default judgments
• Setting aside judgment, delay and the Denton criteria: what is the relevant test?
• Delay and setting aside default judgment: bald assertions in an expert’s report.

EXTENSIONS OF TIME

• Denton: extensions of time an costs: opposition to applications is not always unreasonable.