Kung Fu Nights

October has arrived. A season of mists and mellow fruitfulness with cool mornings and misty starts.

I am however, currently at home, recovering from minor surgery on my foot, having had the misjudgment to drop a windsurfing board upon it in Rhodes last month. A lesson learned. The burned hand, or in this case, broken foot teaches best. In the intervening months since my summer began I have allowed this blog to languish, whilst my attentions have been elsewhere. But the pace of work is quickening and this period until Christmas, is always one of the busiest of the year.

Many years ago, I won a case in the Court of Appeal called Gentry v Miller and UK Insurance [2016] EWCA Civ 141 which at the time I thought of in my mind, as a decision in sequence to Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537 and Denton v TH White Ltd [2014] EWCA Civ 1298. The context of the case was an application to set aside a default judgment in a road traffic accident claim, where at a subsequent disposal hearing judgment had been entered for £75,089, principally damages for credit hire charges. A District Judge later set aside the judgment, so that the case could be defended. The Claimant appealed to the Circuit Judge but lost and then appealed again to the Court of Appeal.

The insurance company wished to challenge the case by alleging fraud: so the issue the Court of Appeal had to grapple with was how the Court of Appeal should approach the grant of relief from sanction in a case where the defaulting party had delayed in applying for relief, but had some evidence that enabled it to allege that the claim was a fraudulent one. The Court of Appeal readily accepted that the Denton principles applied to such an application. Lord Justice Vos (as he then was) accepted that the Denton principles were relevant and in allowing the claimant’s appeal stated:

42. I should not leave this aspect of the case without commenting on what may seem a harsh decision. In my judgment, Mitchell and Denton represented a turning point in the need for litigation to be undertaken efficiently and at proportionate cost, and for the rules and orders of the court to be obeyed.  Professional litigants are particularly qualified to respect this change and must do so.  Allegations of fraud may in some cases excuse an insurer from taking steps to protect itself, but here this insurer missed every opportunity to do so.  It admitted liability before satisfying itself that the claim was genuine, perhaps because it mistakenly thought the claim was a small one.   That does not excuse the months of delay that then followed.  The insurer must in these circumstances face the consequences of its own actions.

The effect of the judgment was significant. The District Bench started taking a much tougher line over applications seeking to set aside judgment, and I believe that over the next few years many millions of pounds of hire charges, were recovered on a default basis, due to the failure of insurance companies to get their processes in order to avoid default judgments from being entered. But the law does not stand still. In a number of cases there were stirrings and mutterings, suggestive that the notion that an application to set aside judgment was also an application for relief from sanction was conceptual nonsense.

In the case of FXF v English Karate Federation [2023] EWCA Civ 891 once again the Court of Appeal grappled with this question and in a decisive judgment, quashed these heresies and declared that the Court of Appeal’s approach in Gentry was to prevail. Sensibly the Master of the Rolls, adopted and approved the reasoning of Lord Justice Vos in the earlier case.

64. First, just as Moore-Bick LJ held analogously in Hysaj, it is now far too late to depart from the position enunciated clearly by the Court of Appeal in Hussain, Piemonte, Gentry, and Family Channel. Piemonte was a default judgment case and decided expressly that the Denton tests applied. The words at [40] in Piemonte that I have just mentioned did not detract from that decision. “All the circumstances” and the overriding objective are directly relevant at the third stage of the Denton analysis.

65. Secondly, Matthews was not a case about setting aside a default judgment. Rule 26.7 of the Trinidad and Tobago CPR is in a different form from our CPR Part 3.9, in that it provides that the court may “grant relief only if it is satisfied” of three prescriptive matters: (a) the failure to comply was not intentional, (b) there is a good explanation for the breach, and (c) the party in default has generally complied with all other relevant rules, practice directions, orders and directions. Lord Dyson’s reasoning that I have summarised at [32(ix)] above drew attention to the difference between these conditions and the requirements of rule 13.3. It may be, as Lord Dyson said in Matthews, and Moore-Bick LJ accepted in Hysaj, that the reasoning on rules 26.6(2) and 26.7 of Trinidad and Tobago’s CPR applied “with equal cogency to CPR 3.8 and 3.9”. To spell it out, rule 26.7(2) and CPR Part 3.9 provide expressly that “where a party has failed to comply with” rules or court orders, “any sanction for non-compliance imposed by the rule or the court order has effect” unless relief from the sanction is obtained. This formulation contemplates the sanction in question being imposed by the same rule or court order with which the party has failed to comply. In the case of a default judgment, the “sanction” is imposed by a subsequent court order made when the default judgment is obtained. Like Moore-Bick LJ, however, I do not think that this logic is conclusive. CPR Part 3.9 was amended for the reasons and in the manner explained in Denton and Mitchell. It was intended to send a general signal to the legal community that there would be a “tougher, more robust approach to rule-compliance and relief from sanctions” in support of the revised overriding objective. This was the origin of the Denton tests deriving, as they do, from the express words of CPR Part 3.9. Accordingly, I do not think that this court would now be justified in preferring the reasoning in Matthews to that, taken together, in the 6 forceful decisions of this court in Hussain, Mitchell, Denton, Piemonte, Gentry, and Family Channel.

66. Thirdly, the Denton tests are actually peculiarly appropriate to the exercise of the discretion required once the two specific matters mentioned in CPR Part 13.3 (merits and delay in making the application to set aside) have been considered. The first two tests focus attention on the delay in complying with the requirements of CPR Part 15.2, which provides that “[a] defendant who wishes to defend all or part of a claim must file a defence”, and the third test brings into consideration all the circumstances of the case including the two critically important stated factors. What we said at [34] in Denton bears repetition:

Factor (a) makes it clear that the court must consider the effect of the breach in every case. If the breach has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost, that will be a factor weighing in favour of refusing relief. Factor (b) emphasises the importance of complying with rules, practice directions and orders. This aspect received insufficient attention in the past. The court must always bear in mind the need for compliance with rules, practice directions and orders, because the old lax culture of non-compliance is no longer tolerated.

67. Fourthly, as I indicated at [51] above, Gentry actually provides an example of how the exercise under CPR Part 13.3 and the application of the Denton tests ought to be undertaken. The merits are dealt with first at [28]. Next, the delay in making the application to set aside is dealt with at [29]-[35]. I turned then to consider the Denton tests, dealing with the pre-judgment delay and the excuses for it at [36], and “all the circumstances of the case, so as to enable [the court] to deal justly with the application, including [factors (a) and (b)]” at [37]. In some – perhaps many – cases, additional factors included in the overriding objective (or even other relevant factors) will need to be considered at this stage when the court is exercising its discretion. The relevant factors are not closed. What is critical, however, I can repeat once again for yet further emphasis, is the need to focus on whether the breach has prevented the court or the parties from conducting the litigation (or other litigation) efficiently and at proportionate cost, and the need to enforce compliance with rules and orders.

68. My fifth reason must be stated without it being meant to be unduly critical. The judges in Cunico and PXC seem to me to have adopted an unduly academic approach to the problem with which they were faced. The default judgment entered under CPR Parts 15.3 and 12.3 is obviously a sanction “imposed for any failure to comply with any rule”, in the sense that it would not have been granted if the defendant had filed its defence in compliance with the mandatory provisions of CPR Part 15.2. These decisions took an unduly nit-picking approach to what has been deliberately intended to change the culture of civil litigation. Parties to civil proceedings and their solicitors need fully to understand that flouting rules and court orders will simply not be tolerated.

Thus the full rigour of the Gentry approach will apply and compensating parties must be mindful, of the need to act promptly when a default judgment is entered, or better yet, avoid it being entered in the first place.

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