Introduction
25 Canada Square Chambers Barrister Member Chris McGeever previously wrote an article dated 1 June 2022 which considered whether applications to set aside default judgment were also applications for relief from sanctions, to which the Denton principles applied. At the time of that article, there were divergent first-instance decisions at High Court level in which this procedural question was answered differently. The Court of Appeal has now confirmed unequivocally that applications under CPR r.13.3 are indeed applications for relief from sanctions. The recent case of FXF v English Karate Federation Ltd & Anor [2023] EWCA Civ 891 affirms the previous dicta from that Court, at [23-24] of Gentry v Miller & Anor [2016] EWCA Civ 141 thereby eliminating any doubt that applications under r.13.3 also engage the 3-stage Denton tests too.
The Judgment in FXF v English Karate Federation Ltd & Another
Sir Geoffrey Vos MR gave the leading judgment of the Court, with which Lady Justice Nicola Davies and Lord Justice Birss agreed. Birss LJ at [76] added:
"...an application to set aside a default judgment under r13.3 is an application for relief from sanction to which r3.9 also applies. Therefore the right approach to deciding these applications is the one described by the Master of the Rolls above, applying Denton once the two specific matters in r13.3 have been considered"
As previously set out in the June 2022 article, the Court of Appeal has, as expected, confirmed that the Denton principles come into play once the specific test set out in r.13.3 has been considered. The r.13.3 test involves consideration of 2 factors, namely the merits and the promptness of the application. If the Court concludes that there is a real prospect of a successful defence or some other good reason to set aside, and that the application was made promptly, there is a discretion to set aside a default judgment. That discretion is to be exercised with express regard to the Denton tests - at [66] Sir Geoffrey Vos MR outlined how the first 2 of the Denton tests focus on the delay in compliance with the requirement from r.15.2 to file a defence (although in several cases a defence may not have been filed even by the time of an application under r.13.3), and the third Denton test, "brings into consideration all the circumstances of the case including the two critically important stated factors." He then stated that paragraph [34] of Denton bore repeating, and did so.
For reference, the "two critically important stated factors" are those from r.3.9(1):
(a) for litigation to be conducted efficiently and at proportionate cost; and
(b) to enforce compliance with rules, practice directions and orders.
At [68] of the judgment in FXF the Master of the Rolls held that the approaches of the Judges in Cunico and PXC were "unduly academic", and he overruled the latter at [72] whilst stating that the dicta in the former are no longer to be relied upon. He stated that those cases had taken an "unduly nit-picking approach to what has been deliberately intended to change the culture of civil litigation". In addressing reasoning within the previous decisions as to whether a default judgment entered under r.15.3 and r.12.3 was indeed a sanction "imposed for any failure to comply with any rule", he held that this was "obviously" so. This is because it would not have been granted had (on these facts) a defence been filed in accordance with the mandatory requirement in r.15.2. [In other cases, judgment in default may be entered under r.12.3(1) where neither an acknowledgment of service nor a defence has been filed.]
Further, at [67] and [68], he made the following very clear statements to litigants and their legal representatives, regarding compliance with rules and Court Orders:
At [67] - "[...] 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."
At [68] - "[...] Parties to civil proceedings and their solicitors need fully to understand that flouting rules and court orders will simply not be tolerated."
The outcome of the appeal
The appeal of the erstwhile judgment creditor (the Claimant) against the High Court Master's decision to set aside the default judgment against the 2nd Defendant was dismissed, on the basis that:
- the Master at first instance had understood the correct position at law, that the Denton tests applied;
- he had applied them (albeit in a perfunctory manner) - the Court stating at [73] that he "did not do so as expressly as he would preferably have done"; and
- the conclusion that the default judgment should be set aside was sound, and one with which the Master of the Rolls concurred.
Conclusion/Comment
In sum, any applicant seeking to set aside a default judgment must, in order to succeed, address not only the merits and promptness of their application, but also the 3-stage Denton tests as well. Within the third stage of Denton, consideration of all the circumstances will include emphasis on the critically important factors of (1) the need to conduct litigation efficiently and at proportionate cost, as well as (2) the need to enforce compliance with rules, practice directions and court orders. Via repetition and explicit emphasis, the Court of Appeal has made it crystal-clear to litigants and their solicitors, that non-compliance is not to be treated lightly, and that its effect not only on the instant litigation but on other litigation - as encompassed within the overriding objective at r.1.1(2)(e) - is a relevant factor in deciding whether or not to grant any application to set aside a default judgment under r.13.3.
This update was composed by 25 Canada Square Chambers Member Chris McGeever.