THE DEFAULT JUDGMENT
The High Court of Justice (Business and Property Courts in Manchester) (the “Court”) heard a case in which Praetura Asset Finance Limited (the “Claimant”) sought to recover approximately £1,500,000.00 (One Million Five Hundred Thousand Pounds) from Derek Thomas Hood (the “Defendant”) in terms of an unregulated hire purchase agreement which involved a Jaguar motor car (the “Agreement”). The Claimant’s claim form and particulars of claim were duly served on the Defendant in January 2019. The Defendant duly filed an acknowledgement of service which indicated the intention to defend the claim, however no defence was filed and served thereafter. As such, the Claimant was awarded a judgment in default for an amount of £1,580,345.41(One Million Five Hundred and Eighty Thousand, Three Hundred and Forty-Five Pounds and Forty-One Pence) (the “Default Judgment”).
In July 2019, the Defendant issued an application to the Court to set aside the Default Judgment on the basis that the Defendant and his solicitors had not, at the time, appreciated that the particulars of claim had been served and were therefore, unaware that the defence was due to be filed and served.
THE HIGH COURT HELD
In its consideration, the Court held that it may set aside or vary a default judgment if: a. the defendant has a real prospect of success; or
b. it appears to the court that there is some or other good reason why-
i. the judgment should be set aside or varied; or
ii. the defendant should be allowed to defend the claim.
The Court held further that in considering whether a default judgment be set aside or varied, the court must have regard to “whether the person seeking to set aside the judgment made an application to do so promptly.”
The Defendant’s position was that the Default Judgment had been wrongly entered because no particulars of claim had been served and therefore, there was no default in failing to serve and file a defence. This was however, proven to be incorrect. It was accepted by both the Claimant and the Defendant that a particulars of claim had in fact been served and the Defendant accepted that failure to serve and file a defence in time did in fact constitute a serious default which was not trivial in nature. The Defendant then submitted that although the defence had not been served and filed timeously, there was good reason as the Defendant and his solicitors were under the impression that no particulars of claim had been served.
The Court held that there was no good reason to think that no particulars of claim had been served. It was clear that the Claimant had sent the particulars of claim to the Defendant’s solicitors by way of email attachment which constituted sufficient service. As such, the Court held that there was no reasonable excuse for the solicitors’ failure to open the email attachment. Moreover, the claim form expressly stated that the particulars of claim was attached thereto.
The Court found further that the Default Judgment was communicated to the Defendant’s solicitors in April 2019. The Court informed the solicitors that in order to overturn the Default Judgment, they were required to have brought an application within a reasonable amount of time to set aside such judgment. Notwithstanding the aforementioned, the application was submitted to the Court in mid-June 2019. In this respect, the Court held that the application was not made promptly.
The Defendant raised a number of defences to the claim but there was only one that had a real prospect of success. This was the defence of estoppel. Specifically, the common law estoppel by representation where, by words or conduct, there has been a representation of an existing fact which is intended to be acted upon to the prejudice of the party to whom the representation was made. The Defendant held that the Claimant represented that there was only £1,340,000.00 (One Million Three Hundred and Forty Thousand Pounds) due and owing in respect of the Jaguar motor car pursuant to the Agreement. Based on this representation, the Defendant found a buyer at that price level. However, had he known that the amount due and owing was higher than what he anticipated it to be, he would have found an alternative buyer who would have paid the full outstanding amount, thus eliminating the need for the ensuing legal proceedings.
The Court accepted that the defence of estoppel had a real prospect of success but it had to weigh this against the fact that the application to set aside the Default Judgement had not been made promptly. In consideration of the above, the Court determined that an arguable defence to a substantial part of the claim existed and the Court thus held that such defence should be allowed to be asserted. The Court accordingly accepted the application and set aside the Default Judgment.
This case indicates that the courts will not easily condone serious procedural breaches of the law in relation to serving and filing of a defence timeously. Further, the courts will consider specific factors in determining whether to set aside or vary a default judgment when necessary, despite a serious procedural breach.
Written by Michal Asoulin and Angela Paschalides