This is a claim brought in the Chancery Division in the High Court, concerning a dispute on alleged professional negligence by the former chief financial officer of the claimant.
A default judgment was made against the defendant. The default judgment only covered liability, with causation and quantum being held over to a later date.
Notably, the defendant applied promptly to set aside the default judgment, supported by a 25-page witness statement, although no draft defence.
Some six months later, and only a week before the hearing, the defendant served another witness statement with a draft defence.
The Double Hurdles: CPR13 and the Denton criteria
Master Kaye who heard the case made such summary and remind litigators shall pay attention when making application to set aside default judgement, namely, they must meet both tests set out in CRP13 and requirements from Denton (Denton v White  EWCA Civ 906).
In the Judgement , Master Kaye elaborated on the legal principles concerned.
The Defendant therefore first needs to overcome the threshold test set out in CPR 13.3(1)(a) and (b), that there is a real prospect of successfully defending the claim or there is some other good reason why a judgment, validly obtained, should be set aside. Further pursuant to CPR 13.3.2 the Court must have regard to whether the application was made promptly.
The Judge dealt with Promptness and Prospect of Défense Succeeding in depth relating to this test.
Master Kaye then went on in his judgement in regard to the second ‘hurdle’:
An application to set aside default judgment is recognised to be an application for relief from sanctions (Regione Piemonte v Dexia Crediop SpA  EWCA 1298) and so also engages the three-stage test in Denton v TH White Ltd  1 WLR 3926 (“Denton”).
The principle was applied as in Gentry v Miller  EWCA Civ 141, which sets out how the relief from sanctions test in applications to set aside default judgment.
Master Kaye considered the 3 stage test in depth and applied in turns, namely, Serious and Significant; Reason and All the Circumstances.
Subsequently, the Judge found on the facts that:
- there were serious issues to be tried on liability, and that the defendant had a potential defence with real prospects of success.
- the defendant’s application had been prompt, although he criticised the defendant had delayed progress of the case more generally.
- relief from sanctions threshold considered. The failure to serve a defence on time was a serious and significant failure.
Nevertheless, Master Kaye made a conditional order (on the condition that the Defendant to repay loan admitted) to set aside the default judgment as the quantum was considerable and the case was complex. Interestingly, the judgment sets out how such conditions may be used as a case management tool.
The Judge indeed made his observation that in regard to the two hurdles in applications to set aside default judgement, there are examples of an applicant succeeding on the first but failing on the second.
The CRP13 test and the Denton criteria are not unfamiliar to the practitioners. The significance of this case was not in new application of the tested criteria, but in the clear implication demonstrated as a reminder to parties in such proceedings not to overlook the double hurdles in future applications.
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