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The Court’s patience was tested but relief was granted.

An application for relief from sanctions was made but wasn’t requested at the hearing – the Court’s patience was tested but relief was granted. Bailey v Bijlani & MBNA [2022] EWHC 2821 (KB) – Master Stevens

The Claimant obtained a Default Judgement, the First Defendant having failed to file a Defence. The First Defendant made an application to set aside the Default Judgement but arrived late for the Hearing, had been unrepresented and a number of key documents were missing which the Court considered necessary to review before making their decision. The Hearing was adjourned and an Unless Order was made that the First Defendant serve copies of her Defence by a certain date.

The First Defendant however failed to comply with the Unless Order having only served a draft witness statement without the required exhibits. Subsequently a fresh application to set aside Judgement and for relief of sanctions was made. However, at the start of the restored Hearing of the First Application, no initial submissions for relief from sanction (the basis of the Second Application) were made by her counsel in relation to the non-compliance with the Unless Order, counsel advising that he had not received instructions to do so. Furthermore, counsel’s Skeleton Argument erroneously submitted that the Unless Order had indeed been complied with. After an adjournment the Application was made and allowed. Master Steven’s concluded that it was necessary though for the First Defendant to apply for relief.

The Law –

Pursuant to CPR 13.3 the Court may set aside a Default Judgement under CPR 12.3(2) 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) the Defendant should be allowed to defend the claim.

The Court also must have regard to the promptness with which an Application to set aside is made. The notes in the White Book at CPR 13.3.1, the Court’s discretion should be exercised in accordance with the Overriding Objective, namely that the Court is to deal with the case justly and at a proportionate cost which includes, so far as is practicable: –

(a) ensuring that the parties are on an equal footing and can participate fully in proceedings, and that parties and witnesses can give their best evidence;

(b) saving expense

(c) dealing with the case in ways which are proportionate-

(i) to the amount of money involved;

(ii) to the importance of the case;

(iii) to the complexity of the issues; and

(iv) to the financial position of each party;

(d) ensuring that it is dealt with expeditiously and fairly;

(e) allotting to it an appropriate share of the court’s resources, while taking into account the need to allot resources to other cases; and

(f) enforcing compliance with rules, practice directions and orders.

It should be noted that the test on setting aside a Default Judgment under CPR 13.3 is that the burden rests upon the Defendant to satisfy the Court that there is a “good reason” why a judgement regularly obtained should be set aside. It is of course incumbent on the parties to litigation to act promptly in applying to set aside a Default Judgment – errors or omissions on the part of their legal representatives for failing to file a Defence on time would not amount to a “good reason”.

Nevertheless, the Court’s inherent discretionary power is to avoid injustice so that Default Judgement is not intended to be a punishment but furthering the Overriding Objective (CPR 1) . The Court will not deprive a Claimant of a regular Judgement lightly. The erring party is strongly encouraged to be prompt when asking the Court to exercise their discretion however what constitutes promptness will vary from case to case on the facts.

The Court considered the case of Hussain v Birmingham City Council & Ors [2005] EWCA Civ 1570, where the Court of Appeal stressed that CPR 3.9 is also relevant on any application to set aside a default judgment. They highlighted the following factors to be considered:

(a) the interests of the administration of justice;

(b) whether the failure to comply was intentional;

(c) whether there is a good explanation for the failure;

(d) the extent to which the party in default has complied with other rules, practice directions, court orders and any relevant pre-action protocol;

(e) whether the failure to comply was caused by the party or his legal representative;

(f) whether the trial date or the likely date can still be met if relief is granted;

(g) the effect which the failure to comply had on each party; and

(h) the effect which the granting of relief would have on each party.”

The exercise of the Court’s discretion –

In the exercise of its discretion the Court had regard to the following factors:

1. Whether there was a real prospect of success or some other “good reason” to set aside the Default Judgment – whilst Master Stevens considered that the First Defendant’s prospects of success were borderline, the Court won’t conduct a mini-trial trial in advance. The benefit of the Default Judgement to the Claimant would be very limited whilst the prejudice to the Defendant of having a Default Judgment imposed would be significant.
2. Avoidance of injustice – There were serious conflicts of evidence revealed by the draft Defence and it would be unfair for those not to be tested in Court.
3. Saving expense pursuant to the Overriding Objective (CPR 1).
4. Compliance with rules & delay – whilst the Defence was a key piece of the litigation and it could not be said that the First Defendant’s failure was not both “serious and significant”, the First Defendant had been let down by her legal representatives, and although the errors or omissions on the part of legal representatives would not amount to a “good reason”, for not filing a Defence on time there was an “explanation” which may be sufficient in the circumstances even if it doesn’t amount to a “good reason”. The delay itself was modest, and the First Defendant had demonstrated increasing efforts to get her Defence finalised.

Master Steven’s noted that the breach had been a serious one, and the repeated errors of the First Defendant had “sorely tested” the Court’s patience and for future warning expressed his thoughts as follows; “I have clearly set out that laxity in progression of the Defence will not be tolerated under the court’s case management powers, but the exercise of the court’s discretion when considering setting aside a default judgment is not to be directed towards punishment of a party for anything that has gone before”. Nevertheless, Master Stevens concluded that it would be unjust to disallow the First Defendant the opportunity on the facts of the case to make her final submissions to set aside the Default Judgement.

The Judgment makes clear that whilst there is a clear obligation to comply with deadlines, the Court will exercise its discretion, but the outcome of such a case is fact specific. The case helpfully provides a good example of judicial reasoning and the factors that will be considered by the Court when exercising this discretion.

How can PIC help?

Whether such an application is granted depends on the facts of the case. If you require advice regarding the merits of an application our advocates will be happy to provide their expert advice.

Ashley Squires, Costs Consultant

04.05.2023