SETTING ASIDE DEFAULT JUDGMENT: THE NEED FOR PROMPTNESS AND THE RELEVANCE OF THE DENTON CRITERIA
In Core-Export Spa -v- Yang Ming Marine Transportation Corp  EWHC 425 (Comm) HHJ Pelling QC (sitting as a High Court Judge) refused an application to set aside a default judgment. The defendant had an arguable defence, however its history of delay prior to issue, the absence of any good reason for the failure to respond to proceedings, coupled with the delay in making the application, weighed against setting aside the regular judgment. The judgment also emphasises the need to be “prompt” when making an application to set aside judgment. In this case a delay of 23 days was found not to be prompt.
“In the circumstances, the existence of a realistically arguable defence is clearly outweighed by the history of delay, inaction, and non-engagement that is regrettably a feature of the way in which this litigation has been conducted and the pre-litigation interchanges as well.”
The claimant issued proceedings against two defendants on a cargo claim with a value of about £25,000. The second defendant did not file an acknowledgement of service. The claimant entered judgment in default and informed the second defendant of this on the 30th September 2019. The second defendant made an application to set aside that judgment on the 23rd October 2019.
THE TEST TO BE APPLIED
Applications to set aside judgment are dealt with under CPR 13.3 and with a consideration of the Denton principles.
“The applicable principles are not in serious dispute. Under CPR 13.3, the defendant applying to set aside the judgment must show that it has a real prospect of successfully defending the claim and in deciding whether to set aside the judgment, the court must have regard to whether the person seeking to set aside the
judgment made the application to do so promptly.
2 It is common ground between the parties that the application engages the Denton three stage process, which involves the court deciding (a) whether the failure which gave rise to the judgment was serious or significant, (b) whether there was a good reason for the default or failure and (c) whether, in all the circumstances of the case, the default judgment ought to be set aside. The defendant maintains that it has a real prospect of defending the claim because
it is plain, or at least realistically arguable, that the second defendant was not the correct defendant and because, it has a real prospect of defending the claim on its merits. “
PROMPTNESS IN THE CURRENT CASE
The judge found that there were issues that could give rise to an arguable defence. However he went on to consider the question of promptness. There had been a history of the second defendant failing to reply to correspondence prior to issue.
“It is next necessary to consider whether the application to set aside has been made promptly. In my judgment, this issue and the further issues concerning the correct application of the Denton criteria create significant issues in the way of the second defendant. In my judgment, in deciding whether the application has been made promptly, it is necessary to view the speed with which the application has been made in the context of what has gone before. What may be prompt where there is no history of earlier delay may not be so if there has been such delay – see Regency Rolls Limited & Anor v Carnall  WLUK  EWHC 1223 (TCC) at .
9 The delay between the second defendant being notified of the judgment on 30 September 2019 and the application that I am now considering being issued on 23 October 2019 was 23 days. That of itself is not prompt. The only explanation offered is that there was a need to investigate the claim. The background to this is instructive. The claim was first presented to the defendants as long ago as 30 January 2019. Unless the claim was simply ignored from that point until judgment was entered, the second defendant had the opportunity to investigate what on any view is an apparently straight forward claim for 9 months.
10 There were repeated chasing emails through March and all the way to mid-June 2019 with no response being received from either defendant. A request to extend the limitation period was ignored and it was ignored when it was repeated after solicitors became involved and was ignored until 2 August 2019 when the defendants, or at least the first defendant on behalf of the defendants, declined to extend limitation. This led to the issue of the claim form on 5 August 2019. It was sent to the defendants informally but was ignored by the defendants until, in the end, the claim was served on 28 August 2019. The claim continued to be ignored, it is regrettable to say, and ultimately it was that which led to the default judgment. Delay of this sort is frequently encountered in low value cargo claims, perhaps in the hope by the defendant that if it is ignored it will not be pressed particularly as costs increase. This is conduct that ought to be discouraged.”
The judge found that, against that background, the application to set aside judgment had not been made promptly.
THE DENTON TEST (1): THE SERIOUSNESS OF THE DEFAULT
The judge went on to consider the Denton criteria. He found that this was a serious default.
“I now turn to the Denton criteria. It is obvious, in my judgment, that the failure to acknowledge service was, in the circumstances, both serious and significant and the delay in issuing the application equally so. The failure to acknowledge service was serious in itself because both the Commercial Court and the Circuit Commercial Court Guides require that acknowledgement of service be filed in all cases and in all circumstances. It was all the more serious and significant in the circumstances of this case given what had happened prior to the issue of proceedings and thereafter as described in the quoted parts of the witness statement referred to earlier.”
(2) THE REASON FOR THE DEFAULT
The judge was not impressed with the second defendant’s explanation for the default.