DEFAULT JUDGMENT SET ASIDE, RELIEF FROM SANCTIONS GRANTED: ACTION THEN STRUCK OUT: REMEMBERING THE BASIC OBLIGATION TO FILE A DEFENCE – ON TIME

In Workman v Deansgate 123 LLP [2019] EWHC 360 (QB) Mr Justice William Davis allowed an application to set aside a default judgment and relief from sanctions.  The most surprising procedural aspect of this case is the defendant’s failure to file a defence in time. There is no real explanation for this (apart from human error).  It is an important reminder to defendant’s that having a plan to apply to strike out or for summary judgment can lead to a litigator overlooking the basic task of filing a defence.

“Deansgate also conceded that there was no good reason for the failure to serve the defence by 17 August 2018. I consider that this concession was properly made.”

THE CLAIM

The defendant lawyers had represented the claimant in a trial where he was found guilty of murder. His subsequent appeal (where he had different representation) was dismissed.  The defendant lawyers had earlier sued the claimant for outstanding costs of the criminal trial. His counterclaim in that action floundered because he did not pay a fee in relation to the counterclaim and the defendant obtained summary judgment.

THE JUDGMENT IN DEFAULT

In this action the claimant claimed damages in negligence for the defendant’s negligence in representing him at the criminal trial.  An extension of time was agreed for filing the defence. The defendant did not file a defence and judgment in default was entered.

SETTING ASIDE JUDGMENT AND THE JUDGMENT IN DEFAULT

Setting aside the judgment in default

1. 1. Pursuant to Part 13.3 of the CPR Deansgate seek to set aside the judgment in default of defence of which they had notice on 18 October 2018. They have to show that they have a real prospect of successfully defending the claim. That is not in issue. On behalf of Mr Workman it is expressly conceded that there is such a prospect. I also “must have regard” to whether the application to set aside was made “promptly”.

   2. The term “promptly” has been the subject of detailed consideration in the context of Part 39 i.e. where an application is made to set aside an order made after a party has failed to appear at a hearing or trial. In Regency Rolls v Carnall [2000] EWCA Civ 379 Simon Brown LJ (as he then was) concluded that, for a party to act promptly, they needed to exercise “all reasonable celerity in the circumstances”. This was to be contrasted with the concept of “no needless delay whatever” which Simon Brown LJ concluded would be too high a threshold. In Bank of Scotland v Pereira [2011] EWCA Civ 241 Lord Neuberger MR emphasised that what constituted promptness in any particular case was highly fact-sensitive.

   3. In Part 39 promptness is a requirement which must be satisfied before relief can be granted. The same does not apply in Part 13. As was made clear in Standard Bank v Agrinvest International [2010] EWCA Civ 1400 it is nonetheless a factor of considerable significance.

   4. I am satisfied that, subject to the requirements of Part 3.9 of the CPR, it is appropriate to grant the application to set aside the judgment in default of defence. It was in the circumstances of this case made promptly. Clearly it could have been sooner but that is not the test. I take into account the fact that no significant steps had been taken in the proceedings between the entry of judgment in default and the application to set aside, the fact that the judgment was entered against a background of continued discussion between the parties in which the position of Deansgate was made perfectly clear and the fact that there is genuine merit in Deansgate’s case. They have more than “a real prospect” of successfully defending the claim.

Relief from sanctions

1. The terms of Part 3.9 of the CPR require consideration of the need for litigation to be conducted efficiently and at proportionate cost. On behalf of Mr Workman it is argued that Deansgate’s failure has meant that this litigation cannot be conducted either efficiently or proportionately in terms of cost. That argument cannot be tenable. If the judgment is allowed to stand there will have to be a full trial of the issue of quantum. This will permit Deansgate to argue that any negligence on their part caused at most nominal damage. That much is conceded by Mr Workman. Such a trial would require full consideration of the course of the criminal proceedings and the effect, if any, of a failure to obtain biomechanical evidence. All of this would take place against a backdrop of a claim in negligence which it is said has no prospect of success and is an abuse of process. Refusing relief from sanction would not lead to the litigation being conducted efficiently and at proportionate cost: rather the reverse.

2. The first matter to be considered by reference to the Denton principles is the seriousness and significance of the breach. This applies not to the delay after judgment was entered or notified to Deansgate but to the default which gave rise to the sanction of a default judgment in the first instance: see Gentry v Miller [2016] EWCA Civ 141. The delay in making the application is something to be considered at the third stage of the Dentonprinciples. Deansgate conceded in their written submissions that the default was serious and significant. I find that this concession was misconceived. The delay between 18 October 2018 when they were first notified of the judgment in default and the making of the application on 14 November 2018 is relevant when assessing the overall circumstances of the case. The breach in this case amounted to the failure to serve a defence in the period 17 August 2018 to 21 August 2018. That cannot be described as serious and significant. The need to consider the second and third stages of the Denton principles arises because of the significant delay following the entry of the judgment by Mr Workman.

3. Deansgate also conceded that there was no good reason for the failure to serve the defence by 17 August 2018. I consider that this concession was properly made. The evidence served on behalf of Deansgate establishes that there were continuing discussions between the two sides. But the terms of the extension granted in July 2018 made the position of Mr Workman clear in respect of these proceedings. He intended to pursue his claim for negligence. There was no reason why the defence in the terms of the draft in due course served with Deansgate’s evidence in November 2018 could not have been served on or before 17 August 2018. It contains nothing which was not known to Deansgate in August 2018. Deansgate had had some four and a half months to prepare the document.

4. The overall circumstances of the case clearly justify relief from sanctions. All that occurred between the entry of the judgment and the application for relief from sanctions was the service by those representing Mr Workman of a costs budget and an agenda for a CCMC in relation to the trial in respect of quantum. That was done after the solicitors had been informed by the solicitors acting for Deansgate that they intended to apply for summary judgment and/or a striking out of the claim. This is not a case in which relief from sanctions will affect the true progress of the proceedings. The only real consequence will be to deprive Mr Workman of a fortuitous windfall. Moreover, it is a case in which there is more than an arguable defence. The proposition that the claim has no foundation at all requires careful consideration, but it has apparent merit. This is of high importance in terms of the overall circumstances of the case.

5. The written submissions on behalf of Mr Workman argue that refusing relief from sanctions will cause no injustice to Deansgate. It is said that I should infer from the lack of explanation for the default that Deansgate knowingly ran the risk of being shut out on the issue of liability notwithstanding the apparent merit of their case. If it were a proper inference that Deansgate had knowingly run the risk, that would provide support for the proposition that no injustice would be caused to Deansgate. It would indicate that this was more than careless oversight of the need actively to engage with Mr Workman in relation to any further extension of time. The written submissions suggest that the lack of any detailed explanation shows a deliberate decision to conceal what is referred to as unattractive behaviour. Had such a decision been made it might have been a just outcome for Deansgate to bear the consequences. I do not accept that the inference proposed on behalf of Mr Workman is a proper one. The proper inference is that the time for the service of the Defence was overlooked and that there is embarrassment in respect of that careless error. I cannot accept that there was some more malign motive. To refuse relief from sanctions would undoubtedly do a considerable injustice to Deansgate. It would do little or nothing to promote efficiency or proportionality in this litigation. I am satisfied that I should grant relief from sanctions. In that event I conclude that the judgment entered on 21 August 2018 should be set aside.

SUMMMARY JUDGMENT AND STRIKING OUT THE ACTION

The judge then struck out the action as a whole.

1. I am satisfied that Mr Workman’s action against Deansgate cannot proceed. It has no real prospect of success so Deansgate is entitled to summary judgment pursuant to Part 24 of the CPR. If I am wrong about that, and in any event, the proceedings brought by Mr Workman are an abuse of process because they constitute a collateral attack on his conviction for murder as affirmed by the Court of Appeal Criminal Division.