Redbourn Group Ltd – v- Fairgate Development Ltd [2017] EWHC 1223 (TCC)

As part of our regular review of the Civil Procedure Rules (CPR), Martha Lewis, pupil barrister at Invictus Chambers, examines the High Court’s recent judgment concerning applications to set aside default judgments under CPR 13.3.

In Redbourn Group Ltd v Fairgate Development Ltd, the High Court refused the Defendant’s application to set aside default judgment. The Judgment provides a useful overview of the principles a court will consider when hearing applications under CPR 13.3.

The Facts of the Case

Fairgate Development Ltd (“FDL”) appointed Redbourn Group Ltd (“RGL”) to act as development and project manager of a proposed development site at 390-406 Wembley High Road. After the contractual relationship came to an end, RGL brought proceedings against FDL for sums due under the contract and damages for wrongful repudiation.

The dates on which the parties took particular steps in the legal proceedings are particularly significant to the High Court’s Judgment-

  • 24 February 2016: FDL send RGL a letter raising their first complaints about RGL’s works.
  • 6 May 2016: RGL’s solicitors send a detailed letter of claim to FDL identifying specific sums due under the contract and noting that a future claim would be made for damages for wrongful repudiation of the contract.
  • 17 May 2016: FDL’s solicitors send a brief response.
  • July 2016: RGL’s solicitors send further letters to FDL, setting out particulars of the fee claim, details of the damages claim and a full response to FDL’s allegations of breach by RGL.
  • 28 September 2016: a fuller response is provided by FDL in which they indicate they are still assessing FDL’s alleged losses.
  • 16 November 2016: RGL serve draft particulars of claim (“POC”) on FDL.
  • 1 December 2016: FDL’s solicitors reply saying they are taking instructions.
  • 23 December 2016: hearing nothing further, RGL issue proceedings (making the deadline for service of the defence 25 January 2017).
  • 20 January 2017: FDL seek to agree an extension of the deadline for the defence of 28 days (to 1 February 2017).
  • 24 January 2017: RGL refuse to agree the 28 day extension but offer an extension of 7 days, to which FDL do not respond.
  • 1 February 2017: FDL’s solicitors apply for an extension of the deadline for the defence to 22 February 2017.
  • 13 February 2017: RGL’s solicitors write to FDL’s solicitors warning them they need to be proactive with fixing a hearing date.
  • 23 February 2017: No defence having been filed, RGL apply for default judgment.
  • 9 March 2017: Default judgment is entered.
  • 14 March 2017: FDL apply to set aside default judgment.
  • 11 May 2017: FDL purport to file a defence and counterclaim.
  • 15 May 2017: FDL’s solicitor files a second, more detailed statement in support of the application.

The applicable principles

The High Court confirmed that the relevant test for setting aside default judgment (obtained after a failure to file a defence) is that set out at CPR 13.3-

13.3 (1) In any other case, the court may set aside or vary a judgment entered under Part 12 if—

(a)  the defendant has a real prospect of successfully defending the claim; or

(b)  it appears to the court that there is some other good reason why—

(i)   the judgment should be set aside or varied; or

(ii)  the defendant should be allowed to defend the claim.

(2) In considering whether to set aside or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.

The Court also stressed however that CPR 3.9, which makes provision for relief from sanctions, is also relevant in an application to set aside default judgment, which is itself a sanction. In this regard, the Judge followed the Court of Appeal’s recent judgment in Gentry v Miller [2016] 1 WLR 2696, in which Vos LJ said-

“24 The first questions that arise… in dealing with an application to set aside a judgment under CPR Part 13.3 are the express requirements of that rule, namely whether the defendant has a real prospect of successfully defending the claim or whether there is some other reason why the judgment should be set aside, taking into account whether the person seeking to set aside the judgment made an application to do so promptly. Since the application is one for relief from sanctions, the Denton tests then come into play…

CPR 3.9 of course provides as follows-

3.9 (1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need—

(a)  for litigation to be conducted efficiently and at proportionate cost; and

(b)  to enforce compliance with rules, practice directions and orders.

Denton v TH White Ltd [2014] 1 WLR 3926 is the leading case on CPR 3.9 and sets out the 3-stage test mentioned by Vos LJ above, namely:

  1. Identification and assessment of the seriousness and significance of the breach;
  2. Identification of the reason for the breach; and
  3. Consideration of all the circumstances of the case, in particular: a) the need for litigation to be conducted efficiently and at proportionate costs and b) the need to enforce compliance with rules, practice directions and orders.

The Court considered first the test at CPR 13.3 and then went on to consider that at CPR 3.9.

The application of the test at CPR 13.3

Realistic prospect of success

The case law in regard to this test is well known; the same test applies as when seeking summary judgment: the Defendant must show he has a “realistic” prospect of success, meaning that the Defence must be shown to “carry some degree of conviction” and be “better than merely arguable”: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472. The prospect of success must be “realistic” as opposed to “fanciful”: Swain v Hillman [2001] 1 All ER 91.

In an application to set aside default judgment, Coulson MJ confirmed that a court should not embark on a “mini-trial” but at the same time, it should test the Defendant’s assertions to see if they have any real substance or are contradicted by the documentation. The court must also consider whether the opportunity to submit further evidence and/or documents would make any difference.

In this case, the Judge found that the Defence had no realistic prospect of success. Key factors in convincing the Judge were:

  1. the considerable delays in FDL putting together their Defence and Counterclaim,
  2. the lack of persuasive material put forward by FDL in that time (which suggested if given more time, they wouldn’t be able to provide much more);
  3. the fact that the relevant personnel at FDL involved in the contract were no longer there,
  4. the fact that the Defence and Counterclaim consisted mainly of bare denials and non-admissions.

The Judge went to the substance of FDL’s defence to each of the individual issues raised in the particulars of claim and found there to that there was no realistic prospect of success.

Some other good reason

In considering whether there was “some other good reason” to set aside default judgment, the Judge found that FDL had raised no separate argument under this heading. The only issue raised was whether or not FDL had a realistic prospect of defending the claim, which as above, the Court found there wasn’t.

 Promptness

The High Court’s consideration of the promptness of the application to set aside provides interesting insight into how a Judge will approach this question. Coulson MJ accepted that FDL had acted promptly in bringing their application to set aside judgment, once it had been entered. However, the Judge found that it was “artificial to consider that time period only”. It costs very little to make such an application and the supporting witness statement provided by FDL contained so little detail that if the application to set aside had been heard immediately by the Court, it would have failed. Coulson M J emphasised that, “the real issue [was] whether FDL acted promptly after judgment was entered, up until the hearing on 19 May”. He found they had not.

FDL had asked for an extension to 22 February 2017 to file their Defence and Counterclaim, yet no such document was filed by this time and default judgment was entered. When filing their application to set aside, FDL should have filed the defence and counterclaim therewith but they failed to do so without providing any explanation as to why. The document was only provided some two months later, on 11 May 2017.

The original deadline for the defence was 25 January 2017. If default judgment had been set aside, the Court pointed out that this would allow FDL a 3 and a half month extension of the deadline. Coulson MJ stated that “[n]o such extension would have been granted to them if they had applied for it in the ordinary way”. He emphasised that FDL “[could] not now be in a better position because of their wholesale failure to comply with the CPR.” As above, if the application had been heard at the end of March, it would have failed. FDL were relying on the state of the Court lists to get more documentation in, in particular the second witness statement and the Defence and Counterclaim.

The Judge therefore found that no element of the test under CPR 3.13 had been satisfied and that judgment in default should not be set aside. However, in case he was wrong on either of the two elements in r 13.3, Coulson M J went on to consider the Denton test.

The application of the test at CPR 3.9

Seriousness of failure

 FDL’s failure in allowing default judgment to be entered was found to be serious. The Judge emphasised that they were aware of the Defence deadline of 25 January and that they didn’t seek an extension until 20 January 2017. When they were offered an extension which they considered too short, they didn’t then apply to Court for an extension until 1 February 2017 (after the deadline had expired).

The Judge considered it particularly serious that FDL did not serve a Defence and Counterclaim by the extension deadline which they themselves had asked for (1 February).

Reasons for failure

 The High Court considered that there was no reason put forward for the breach. Neither of the solicitor’s witness statements provided any explanation for the delays in seeking to agree or applying for an extension of the Defence deadline, for the delay in serving the document itself or for the lack of communication with the Claimant. Coulson MJ stressed that, given the seriousness of the breach, the court had to take a particularly adverse view of the failure to give a reason: “It is always incumbent upon a solicitor seeking relief form sanctions to explain why something is late or why a proffered date could not in fact be met.”

I would also draw attention to one of the court’s concluding comment that: “I am particularly struck by the complete absence of any explanation… for any of the relevant delays. Those would separately lead me to exercise my discretion against FDL and refuse to set aside judgment.

 All the circumstances of the case

Finally, the court considered all the circumstances of the case. The Judge mentioned again the delays since the commencement of proceedings and in the application to set aside default judgment. Coulson MJ also considered there had been significant pre-action delays on FDL’s part, most notably in their failure to provide a substantive response to the pre-action letters until September 2016, which itself was lacking in detail.

The Judge also pointed out the absence in the Defence and Counterclaim of any particulars of FDL’s damages claim for repudiation.

In the circumstances, the Judge made an adverse finding to FDL under all three limbs of the Denton test and held that, even if he had been wrong about either of the elements of CPR 13.3, pursuant to Denton, FDL had not made out a case to be granted relief from sanctions and therefore the application to set aside default judgment would still fail.

Conclusion

For any lawyer dealing with an application to set aside default judgment, Redbourn Group Ltd v Fairgate Development Ltd confirms that you should not only be dealing with the test at CPR 13.3 in your application, but also with the test for relief from sanctions at CPR 3.9 and clarified in Denton.

Coulson MJ’s judgment highlights in particular the importance of seeking an extension of the deadline for the Defence before this has expired; if you miss that deadline, of filing an application under CPR 13.3 promptly; of filing and serving your proposed Defence as soon as practicable, and in any event by or at the time you file your application to set aside default judgment; and further, of communicating with the other side when these issues arise.

Martha Lewis