A decision which appears to have gone under the radar at the Chancery Division recently is that of Ian Billington v Davies  EWHC 1919 (CH). This could be because it is a decision of a Deputy Master, though is still technically binding on a Judge sitting in the County Court.
The brief facts of the case are that the Claimant, pursuing the Defendants in an action to recover sums he felt had been defrauded of, issued proceedings. An acknowledgment of service was served but a Defence was not filed or served. The reason that the Defence was not filed was apparently down to a lack of funding and partly due to ongoing without prejudice negotiations.
Around three months after the Defence was due, the Claimant issued an application for judgment in default of filing a Defence. The day before the application was due to be heard, the Defendant filed and served a Defence, closely followed by a witness statement setting out the reasons for the delay. The hearing did not go ahead but, in the meantime, the Defendant was directed to issue an application for an extension of time for service of the Defence. That application came before Deputy Master Pickering.
The rules provide that
Judgment in default of defence may be obtained only (a) where an acknowledgment of service has been filed but a defence has not been filed…and…the relevant time for doing so has expired.’ [CPR 12.3(2)(a)]
It has traditionally been understood and argued, as it was in this case, that on a literal reading of the rule, by filing and serving a defence, even out of time, it follows that the pre-condition in 12.3(2)(a) is no longer met and that, as a result, default judgment can no longer be sought. That is to say, that an application for judgment in default of a Defence will automatically be defeated whenever a defendant files a Defence, however late.
Deputy Master Pickering rejected that argument. The reference to “a defence” 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).
In dealing with the Defendant’s application for an extension of time, Deputy Master Pickering had regard to the “implied sanction” doctrine from Sayers v Clarke Walker  1 WLR 3095. He also had regard to R (On the application of Hysaj) v Secretary of State for the Home Department  1 WLR 2472. 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. Consequently, the principles from Denton and Mitchell apply to applications for extension of time.
Deputy Master Pickering found that the breach was serious or significant. The proffered reasons for the breach (lack of funding and ongoing without prejudice negotiations) were, as you might expect, given short, sharp thrift. The Defendant was unable to persuade the Deputy Master to grant relief by reference to “all the circumstances of the case” either.
Deputy Master Pickering ruled that he could take into account the merits of the underlying claim – but only where it is clear that that claim is very strong or very weak – and only where such analysis can be carried out without embarking on a mini-trial (something which could not be done in this case).
Discretion to extend time for the filing and service of the Defence was therefore refused.
The implications of this decision are clear:
It is worth remembering that all of the above will apply to defences to counterclaims too. Indeed, I used this authority, and the rules it espouses, to good effect in the County Court recently. The Claimant had not filed a defence to the counterclaim and so a request for default judgment was filed. The very next day the Defendant filed and served its [purported] Defence. The Defendant did not make an application for an extension of time and/or for relief from sanction. At trial, the District Judge took very little time in agreeing that, under the circumstances, the Defendant was entitled to default judgment on the counterclaim. Luckily for the Claimant, his claim had already been settled and it was only the counterclaim left extant before the court. Otherwise, default judgment on the counterclaim would almost certainly have operated so as to defeat the claim (see Goldcrest Distribution Limited v Charles Joseph McCole & Otrs  EWHC 1571 (Ch)).
Bernard Pressman / 26th Oct 2016
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