Defendants may face an uphill struggle to correct their default

FXF v English Karate Federation Ltd [2023] EWCA Civ 891

The Court of Appeal had to determine the question of whether the three stage test in Denton v TH White Ltd (“Denton”) should be applied by the court when it is considering an application to set aside a default judgment under CPR Part 13.3.

Facts

The claimant brought a claim for damages resulting from alleged sexual abuse by her karate coach over a prolonged period of time. Proceedings were issued and an extension of time for the second defendant’s defence was agreed. The claimant, in the absence of a defence being served, applied and secured a default judgment on 22 September 2020. On 17 November 2020 the second defendant issued an application to set aside the judgment.

First Instance

The second defendant’s application came before Master Thornett who set aside the judgment applying the criteria in CPR Part 13.3, namely the merits and delay in applying to set aside. In relation to Denton, the Master held that “the criteria of Denton are qualified because of necessary incorporation into the context and the express criteria under CPR 13.3: in particular, the criterion of “real prospects of successfully defending the claim””.

Appeal

The claimant appealed on the grounds that the Master had failed to apply the Denton criteria whilst exercising his discretion. The claimant argued that the Master ought to have applied the three questions from Denton when considering the application to set aside judgment as it was, in essence, an application for relief from sanctions. The claimant sought to rely on the decision in Gentry v Miller [2016] 1 WLR 2696.

The second defendant argued that an application to set aside did not require a consideration of Denton as CPR Part 13.3 was a stand-alone mechanism. Reliance was placed on Regione Piemonte v Dexia Crediop SpA [2014] EWCA Civ 1298, arguing that Denton did not apply to applications to set aside as the court’ discretion arose from the overriding objective.

Court of Appeal decision

The Court of Appeal held that the Master at first instance had applied the Denton criteria when considering the second defendant’s application to set aside the judgment. The Master had been correct to set the default judgment aside. Further, Sir Geoffrey Vos MR in giving the leading judgment made it clear that the Denton criteria does apply to applications to set aside judgment, stating “For the reasons I have given, this court is now clearly stating that the Denton tests apply in their full rigour to applications to set aside default judgments”.

The Court of Appeal also found the earlier decisions in Regione Piemonte and Gentry supported the applicability of the Denton criteria when considering an application to set aside.

Comment

This case has unequivocally ended a period of uncertainty around the applicability of the Denton criteria and whether it ought to be applied in applications seeking to set aside judgment. As a result it is now clear that where a defendant (or their insurers) fail to action proceedings once served in a timely manner and fail to lodge a defence on time, they could face an uphill struggle to persuade the court to set it aside. Not only will a defendant have to show that they have real prospects of successfully defending a claim on the merits, but, as a result of this ruling, they will also need to satisfy the full rigour of the Denton criteria.

The Court of Appeal expressly stated that whilst the court must consider the factors in CPR 13.3(1(a)-(b)), it must then consider the Denton criteria when exercising its discretion in such applications.

Any applications to set aside judgment must now be made with the Denton criteria in mind. Caution must also be exercised given the clear message contained in this judgment that non-compliance with the Civil Procedure Rules will not be welcomed by the courts. 

It is, therefore, more important than ever that defendants ensure that proceedings are actioned as soon as they are served, by liaising with their insurers and legal advisers as appropriate. Indeed given the risks around delay, the benefits of nominating solicitors to accept service of proceedings on a defendant’s behalf are now clearer than ever.