Facts
The Claimants issued a claim for breach of directors’ duties, or negligence, and breach of an employment contract, or unjust enrichment. The First, Second and Fourth Defendants (“the Defendants”) did not serve a defence. The Claimants made an application, without notice, for default judgment, without a hearing.
Default judgment was entered on the same day for damages and costs to be determined with liberty to apply to vary or set aside, no later than seven days after service, because it was entered without a hearing.
The Defendants applied to set aside judgment on the basis that they had a real prospect of successfully defending the claim, their application was prompt, within the seven-day period, and default judgment was improperly obtained because it was without notice.
Law
It is a “threshold requirement” that there is a real prospect of successfully defending the claim, or there is some other good reason why the judgment should be set aside or varied or the defendant should be allowed to defend.
It is of “considerable significance” whether the application is prompt.
An application to set aside or vary a regular judgment is an application for relief from sanctions.
First, the merits of the defence, and any delay in making the application, will be considered. If there is a real prospect of successfully defending, whether to grant the application is discretionary.
Secondly, the three-stage Denton test is engaged: assess the seriousness and significance of the breach; consider why the default occurred; and evaluate all the circumstances, including by giving particular weight to the need for litigation to be conducted efficiently and at proportionate cost, and to enforce compliance with rules, practice directions and orders.
Discussion
First, the threshold requirement was met: the defence had a real prospect of success. A matter of considerable significance weighed in favour of the application: it was prompt.
Secondly, failing to file a defence “is by definition serious or significant” and “one party’s slowness does not relieve the other of its obligation to comply with Rules of Court”.
There was no good reason for the breach, which was was based on a failure to appreciate the time limits, and no extension of time was sought.
The Claimants informed the Defendants of the date that the defence was due. The Defendants asked for an explanation. The Claimants did not respond.
“Certainly, the request was legitimate. But it was not unreasonable not to respond to it. Nor did they encourage [the Defendants] in [their] error, or do anything to mislead [them] into thinking that they agreed, whether expressly or by silence. That being the case, it is just as wrong to describe them as having played procedural games”.
Although lack of honesty and poor conduct “are in principle capable of being relevant to the grant or refusal of relief”, they did not “carry any substantial weight” on the instant facts.
It carries “some weight” that: the application was prompt; no harm was done by virtue of the acknowledgement of service being late; the Defendants had generally been cooperative and engaged; and, if relief was refused, the opportunity to defend what the Claimants knew from pre-action correspondence was a defensible claim would be lost.
“Notice ought to have been given, unless the court dispensed with it, which it did not explicitly do. Nonetheless, the court was evidently content to make the order knowing that notice of the application had not been given. I cannot accept, therefore, the contention that it ought not to have been entered without notice having been given.”
Disposal
Judgment ought to be set aside.
“Nothing else would serve the interests of justice and the overriding objective.”
Written by Dominic Bright.