DENTON PRINCIPLES APPLY TO APPLICATIONS TO SET ASIDE DEFAULT JUDGMENTS: COURT OF APPEAL DECISION TODAY

In FXF v English Karate Federation Ltd & Anor [2023] EWCA Civ 891 the Court of Appeal stated, categorically, that the Denton principles must be considered where a defendant applies to set aside a default judgment.  Firstly there was binding authority on the issue; secondly the cases where Denton had been held not to apply were due to an “unduly academic approach” by the courts.

“… the IKA should regard itself as extremely fortunate that its solicitors’ serious delay has not, in the result, led to judgment against it without consideration of the merits of its case. In future, parties would be well advised to make absolutely sure that they comply with the rules in the CPR. They may expect no indulgence from the court if they do not.”

THE CASE

The claimant brings an action for alleged sexual abuse by  her karate coach.  It is alleged that the second defendant, the Ishinryu Karate Assocation,  is vicariously liable for those actions. An extension of time to file a defence was agreed. The second defendant did not file a defence.  A default judgment was obtained in September 2022. In November 2020 the second defendant applied to set aside the default judgment.

The Master set aside the judgment.   The claimant appealed. The issue was remitted directly to the Court of Appeal.

THE COURT OF APPEAL DECISION

One primary issue in the Court of Appeal was whether the Denton principles applied to an application to set aside a default judgment. The Court of Appeal was categoric in its decision that Denton does apply to applications to set aside a default judgment. However it found that the Master had, in fact, applied the Denton principles, albeit in abbreviated form.  The appeal was dismissed.

THE JUDGMENT

The Master of the Rolls considered the different contentions in detail.  He found that the Denton principles did apply. However the Master had applied them when setting aside judgment.

Discussion of the law

1. 1. I hope that I have now dealt with all the truly relevant authorities. I have done so at some length, because they show a difference of approach that requires resolution by this court. As Birss LJ explained in argument, there are really three categories of case: (i) cases where the rule or order expressly provides for the sanction that will apply on non-compliance (e.g. failure to file witness statements on time), (ii) cases where the rule does not expressly state the sanction which applies for non-compliance, but permission of the court is needed to proceed (e.g. failure to file a notice of appeal on time), and (iii) cases where a further step is taken in consequence of the non-compliance, such as the entry of a default judgment (as in this case) or the striking out of a claim for non-attendance at trial.

1. 1. The law as stated in Denton applies directly to the first category of case. Sayers, Altomart and Hysaj make clear that, despite Matthews, applications for extensions of time to file a notice of appeal (an instance of so-called “implied sanctions”) should be approached in the same way as applications for relief from sanctions and should attract the same rigorous approach. This case does not raise the question of the second category of case and “implied sanctions” more generally and I propose to say no more about it.

1. 1. This case falls squarely into Birss LJ’s third category, and I shall, therefore, concentrate on that category, and particularly on applications to set aside default judgments.

1. 1. In reality, the area of dispute between the parties is rather narrower than might at first appear. The IKA does not submit that the matters reflected generally in the Denton tests are not relevant to an application to set aside a default judgment. It accepts they may be. The IKA argues instead that there is a general discretion in the court imported by the words “the court may” at the start of CPR Part 13.3, and that that discretion must be exercised at large taking into account all the requirements of the overriding objective. The IKA relies strongly on Christopher Clarke LJ’s single sentence at [40] in Piemonte where he said that “the court’s discretion [under CPR Part 13.3] is to be exercised in the light of all the circumstances and the overriding objective”. The IKA baulks only at the application of the full rigour of the Denton tests suggesting that they are inappropriate to CPR Part 13.3.

1. 1. In my judgment, the Denton tests do, as I have said, apply to applications to set aside default judgments under CPR Part 13.3. There are a number of reasons for this.

1. 1. First, just as Moore-Bick LJ held analogously in Hysaj, it is now far too late to depart from the position enunciated clearly by the Court of Appeal in Hussain, Piemonte, Gentry, and Family Channel. Piemonte was a default judgment case and decided expressly that the Denton tests applied. The words at [40] in Piemonte that I have just mentioned did not detract from that decision. “All the circumstances” and the overriding objective are directly relevant at the third stage of the Denton analysis.

1. 1. Secondly, Matthews was not a case about setting aside a default judgment. Rule 26.7 of the Trinidad and Tobago CPR is in a different form from our CPR Part 3.9, in that it provides that the court may “grant relief only if it is satisfied” of three prescriptive matters: (a) the failure to comply was not intentional, (b) there is a good explanation for the breach, and (c) the party in default has generally complied with all other relevant rules, practice directions, orders and directions. Lord Dyson’s reasoning that I have summarised at [32(ix)] above drew attention to the difference between these conditions and the requirements of rule 13.3. It may be, as Lord Dyson said in Matthews, and Moore-Bick LJ accepted in Hysaj, that the reasoning on rules 26.6(2) and 26.7 of Trinidad and Tobago’s CPR applied “with equal cogency to CPR 3.8 and 3.9”. To spell it out, rule 26.7(2) and CPR Part 3.9 provide expressly that “where a party has failed to comply with” rules or court orders, “any sanction for non-compliance imposed by the rule or the court order has effect” unless relief from the sanction is obtained. This formulation contemplates the sanction in question being imposed by the same rule or court order with which the party has failed to comply. In the case of a default judgment, the “sanction” is imposed by a subsequent court order made when the default judgment is obtained. Like Moore-Bick LJ, however, I do not think that this logic is conclusive. CPR Part 3.9 was amended for the reasons and in the manner explained in Denton and Mitchell. It was intended to send a general signal to the legal community that there would be a “tougher, more robust approach to rule-compliance and relief from sanctions” in support of the revised overriding objective. This was the origin of the Denton tests deriving, as they do, from the express words of CPR Part 3.9. Accordingly, I do not think that this court would now be justified in preferring the reasoning in Matthews to that, taken together, in the 6 forceful decisions of this court in Hussain, Mitchell, Denton, Piemonte, Gentry, and Family Channel.

1. 1. Thirdly, the Denton tests are actually peculiarly appropriate to the exercise of the discretion required once the two specific matters mentioned in CPR Part 13.3 (merits and delay in making the application to set aside) have been considered. The first two tests focus attention on the delay in complying with the requirements of CPR Part 15.2, which provides that “[a] defendant who wishes to defend all or part of a claim must file a defence”, and the third test brings into consideration all the circumstances of the case including the two critically important stated factors. What we said at [34] in Denton bears repetition:

Factor (a) makes it clear that the court must consider the effect of the breach in every case. If the breach has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost, that will be a factor weighing in favour of refusing relief. Factor (b) emphasises the importance of complying with rules, practice directions and orders. This aspect received insufficient attention in the past. The court must always bear in mind the need for compliance with rules, practice directions and orders, because the old lax culture of non-compliance is no longer tolerated.

1. 1. Fourthly, as I indicated at [51] above, Gentry actually provides an example of how the exercise under CPR Part 13.3 and the application of the Denton tests ought to be undertaken. The merits are dealt with first at [28]. Next, the delay in making the application to set aside is dealt with at [29]-[35]. I turned then to consider the Denton tests, dealing with the pre-judgment delay and the excuses for it at [36], and “all the circumstances of the case, so as to enable [the court] to deal justly with the application, including [factors (a) and (b)]” at [37]. In some – perhaps many – cases, additional factors included in the overriding objective (or even other relevant factors) will need to be considered at this stage when the court is exercising its discretion. The relevant factors are not closed. What is critical, however, I can repeat once again for yet further emphasis, is the need to focus on whether the breach has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost, and the need to enforce compliance with rules and orders.

1. 1. My fifth reason must be stated without it being meant to be unduly critical. The judges in Cunico and PXC seem to me to have adopted an unduly academic approach to the problem with which they were faced. The default judgment entered under CPR Parts 15.3 and 12.3 is obviously a sanction “imposed for any failure to comply with any rule”, in the sense that it would not have been granted if the defendant had filed its defence in compliance with the mandatory provisions of CPR Part 15.2. These decisions took an unduly nit-picking approach to what has been deliberately intended to change the culture of civil litigation. Parties to civil proceedings and their solicitors need fully to understand that flouting rules and court orders will simply not be tolerated.

Discussion of the facts

1. 1. The first question to consider is whether the Master applied the right tests. I think he did. He may not have spent time going through the Denton tests in detail, but he mentioned Denton in his judgment, saying that Denton permeated every action relating to a breach of rules, pointing out correctly that CPR Part 13.3 had its own self-contained rules: “[b]ut that doesn’t mitigate Denton”. He also said correctly that “[t]he reason for default is central and relevant”, and that he had “to have regard to merit and the reasonable prospect of defence”.

1. 1. The Master dealt, as I explained at [23] above, with the merits and with the delay giving rise to the Judgment (relevant to Denton tests 1 and 2) and to the delay in making the application to set aside (relevant under CPR Part 13.3(2)). Accordingly he was, as it seems to me, applying the Denton tests albeit not as formally as might have been desirable. We should bear in mind that this was an ordinary Master’s appointment at which some things can properly be taken for granted when understood by all present. I am sure that nobody expected the Master’s judgment to have been, as it has, the subject of minute analysis by this court. I should say also that, although the Master does not mention his overall discretion or all the circumstances of the case or the need to deal justly with the application or even factors (a) and factor (b), I think that can, perhaps just, be excused when the shorthand of “Denton” has been clearly stated. That said, it would have been preferable if he had gone through the exercise expressly.

1. 1. I am fortified in this conclusion by the fact that, in my judgment, approaching the matter as I did in Gentry, I would have reached the same conclusion. Dealing with the matter briefly: (i) there is and was no doubt in this case that the IKA has a real prospect of successfully defending this claim, (ii) the IKA did not make its application to set aside promptly, but that factor did not inconvenience other court users, and I agree with the Master that the unexplained delay did not, in this particular case, eclipse the merits of the proposed defence, (iii) the delay in filing the defence was obviously serious and significant, (iv) despite counsel for the IKA’s best efforts, the insurance issues and investigation of liability did not provide an adequate explanation for the delay, (v) the stage 3 Denton test allows the court to consider the justice of the case and the effect of the case on other court users, including the need to enforce compliance with the rules; whilst these factors, alongside the unexplained delay militate against setting aside the Judgment, the unusual situation of the IKA itself and its somewhat tenuous connection to the tortfeasor reinforce the fact that the IKA seems to have a real case on the merits that deserves to be tried. This is a very serious claim as I pointed out at the start, and it merits the court’s proper attention.

Conclusions

1. 1. For the reasons I have given, this court is now clearly stating that the Denton tests apply in their full rigour to applications to set aside default judgments. PXC is overruled and the dicta in Cunico are no longer to be relied upon.

1. The appeal will be dismissed on the facts because the Master was applying the right legal tests, even if he did not do so as expressly as he would preferably have done. Moreover, I agree with his conclusion that the default judgment should be set aside. That said, the IKA should regard itself as extremely fortunate that its solicitors’ serious delay has not, in the result, led to judgment against it without consideration of the merits of its case. In future, parties would be well advised to make absolutely sure that they comply with the rules in the CPR. They may expect no indulgence from the court if they do not.