High court decision on default judgment where defence filed late
Smith v BLM [18.07.2019]
This article was originally published in the Journal of Personal Injury Law, Issue 4 2019.
The issues were whether it was open to the court to enter a default judgment under CPR 12.3, where a defence had in fact been filed prior to the judgment, and whether an application to set aside judgment under the court’s discretionary powers, under CPR 13.3, should be treated as an application for relief from sanctions, engaging the criteria set out in CPR 3.9 and Denton v TH White Ltd.
The defendant applied to set aside a judgment in default of defence. The claimant had brought a personal injury claim worth over £3 million. On 30 September 2018, the defendant applied for an extension of time to file its defence. The original time for filing expired on 4 October. On 17 October, the claimant applied for judgment in default of defence. On 26 November, after requesting and receiving the defendant’s Private Room Appointment form (PRA form), court staff issued the defendant’s application for an extension of time and listed a hearing on 15 February 2019. On 28 December 2018, the defendant submitted its defence. The PRA form and defence were not placed on the court file or entered into the court computer. On 2 January 2019, a master directed judgment in default; it was entered on 15 January. On 15 February, the fact that a defence had been filed was entered into the court computer system. The defendant then issued the application to set judgment aside.
The extensive case law on the issue had been considered at length in an obiter decision, Cunico Resources NV v Daskalakis. The analysis in that case was agreed with. However, unlike Cunico here the application for an extension had been made before the request for judgment in default was filed, and the late defence was filed before judgment was actioned by the court.
Cunico had set out two alternative interpretations of CPR 12.3 regarding the court’s powers to enter a default judgment. One was that the court could only grant default judgment where, at the time of its judgment, there was no acknowledgement of service (or defence) and the time for filing it had expired. The second was that the court could grant default judgment so long as at the time of the application for default judgment, there had not been an acknowledgement of service (or defence) and the time for filing it had expired. Part 12.3 stated that a claimant could obtain judgment “only if the defendant has not filed” the defence and the time for doing so had expired.
The judgment in Cunico had not had to decide between these two interpretations. However, the language of CPR 12.3(1) conveyed the first meaning: that the court could not enter judgment if filing had taken place prior to entry of judgment. It was not relevant when the time for filing expired, if the court found that a defence had been filed. A late-filed defence was not, by reason of its lateness alone, to be treated as if not validly filed. A defence under CPR 12.3 did not have to be a timely defence. Default judgment could be a useful device where claims were not disputed, but an overly strict reading which shut out genuinely defended cases simply for lateness of defence would be disproportionate. If a defence was filed prior to the point at which the court came to apply CPR 12.3, the court did not have jurisdiction to enter default judgment.
Disclosure of application
It would not have made any difference if the claimant, as the defendant contended, failed to disclose facts such as the existence of an application to extend time or the fact that a defence had been filed, unless there had been some positive deception.
The court had been unaware of the fact that a defence had been filed but there was, however, no duty on a claimant to constantly monitor the court’s files to ensure that these were up to date. The court system ought to be taken as knowing the state of its own files.
Under CPR 3.10 an error in procedure did not invalidate a procedural step, including filing a defence, unless the court so ordered. If a step was taken late, and a rule did not impose a sanction, it was open to the court to impose such a sanction and then to consider relief, but relief was not required if the rule provided no sanction.
There was no basis for requiring a relief from sanctions application under r.3.9 where there was no provision or order providing for a sanction. The decision in Regione Piemonte v Dexia Crediop SpA,3 which had considered the applicability of Denton under CPR 13.3, meant only that the Denton principles should be considered when exercising the discretion under CPR 13.3 and having regard to “all the circumstances”; it did not require a separate application for relief from sanctions under CPR 3.9.
The application was granted.
This procedural decision is of significance as it has raised issues in relation to the interpretation of CPR 12,13 and 3 and to the application of the Denton case on relief from sanctions. It confirms that where a claimant applies, under CPR 12.3, for judgment in default of defence but where the defendant has filed its defence before the court entered judgment in default, the court no longer has jurisdiction to enter judgment. In doing so, the court confirmed that a late-filed defence was not, for lateness alone, to be considered as not validly filed.
The court also indicated that provided there was no deliberate deception, the claimant was under no obligation to inform the court of the existence of such a defence (or for the application to extend the deadline to submit the defence). Instead, the court made it clear that it was their responsibility to ensure they had their files in order.
Referring to the issue of the applicability of Denton in such circumstances, the court indicated its view that a relief from sanctions application under CPR 3.9 was not required where there was no provision or court order providing for a sanction.
Whilst the judgment could be appealed, there are some practical points worth considering:
- The decision agreed with Cunico in its interpretation of CPR 12.3 that if a defence was filed prior to the point at which the court came to apply default judgment, the court did not have jurisdiction to enter default judgment. Whilst certainly not definitive and with other earlier cases offering different interpretations, it does provide a clear steer as to likely outcomes in similar cases. Until the matter is resolved in a higher court or the rules are changed to show their clear intentions, ambiguity will remain.
- What it does highlight is that both parties must act in haste. This is particularly pertinent to defendants who need to ensure they file their defence as soon as practicable and not wait to hear the outcome of an application to extend the deadline or for an application to set aside a default judgment.
- It is not clear from the judgment as to whether discussions took place between the parties in relation to the request for an extension, but defendants should consider, when appropriate, to negotiate with the claimants to attempt agree to an extension as this could have the potential to avoid unnecessary time and cost.
- Never assume that the court has a record of all the papers filed. Be prepared when attending any applications hearings to provide evidence to support it, along with the knowledge that the other party was, or should have been, aware of such papers.
- Also, never assume that an error in procedure will result in invalidating a step in the proceedings if that particular step provides no such sanction. To invalidate such a step would require a court order. Indeed, this case exemplifies the impact court errors and delays have on the ability of parties to navigate case management and clearly indicates the importance of the need for court modernisation.
Whilst this case seemingly provides an equitable outcome, in that a defendable case is allowed to be defended despite procedural errors, it does beg the question as to how this outcome is potentially in conflict with the aims of the latest round of reforms (Jackson). Such reforms were borne out of a desire to reduce costs (and indirectly time), however, this outcome is somewhat at odds with such aims.
This case confirms that even a late filled defence, which will naturally increase both cost and time, is clearly in the interest of justice. This, therefore, raises complex questions as to the extent to which aims of reducing costs and the interests of justice are in conflict. It does seem that during the “Woolf era”, the priority was very much in the interests of justice (which did on occasion result in disproportionate costs) but in the current “Jackson era” the interests of justice is caveated with “at proportionate costs” and this inevitably has resulted in, on occasion, being at the expense of justice. Perhaps the outcome of this case has in some small way reigned in the extent to which proportionality and strict adherence to the rules hinders justice.
This article was originally published in the Journal of Personal Injury Law, Issue 4 2019.