Denton principles do apply to applications to set aside default judgment

This case review was co-authored by Sophie Drinkwater, Litigation Assistant, Birmingham.

The Court of Appeal has confirmed that the three stage test set out in Denton v TH White Ltd [2014] (Denton) applies in applications to set aside default judgments.

Background

The claimant sought damages for personal injury for alleged serious sexual abuse by her karate coach between 2008 and 2014.

 After an order for alternative service of the proceedings had been made, the parties agreed extensions of time for the filing of the second defendant’s (IKA's) defence. When time ran out, no defence was filed and the claimant requested and, on 22 September 2020, obtained default judgment under CPR Part 12.4.

On 17 November 2020, the IKA issued an application to set aside the default judgment under CPR Part 13.3.

Initial decision

The application was heard on 2 December 2021. The master asked why the application had been made so late, to which the IKA stated that it had been dealing with insurance issues, investigating liability, and that there had been difficulties in communicating instructions from Thailand where it was based.

The master held that, under CPR 13.3:

• IKA had a real prospect of successfully defending the vicarious liability claim; and
• The set aside application had not been made promptly and there was no good reason for the delay.

The judge said that the criteria in Denton were qualified by the express criteria under CPR 13.3, particularly the IKA’s prospect of success. He found that the unexplained delay did not eclipse the merits of the proposed defence and granted the application.

Appeal

The claimant appealed on the grounds that, following Gentry v Miller [2016] (Gentry), the IKA’s application should be treated as an application for relief from sanctions, and that after consideration of the express requirements of CPR 13.3, the Denton tests should have come into play, but the master had failed to apply them.

The IKA argued that Gentry was not binding authority because the parties in that case had expressly agreed that the Denton tests were applicable and that an application to set aside a default judgment was not an application for relief. While the Denton tests might apply, the court's discretion under CPR 13.3 was broad and unconstrained.

The appeal was dismissed.

The Court of Appeal confirmed that the test in Denton did apply to applications to overturn default judgment, and that the circumstances of a case and the overriding objective were directly relevant at the third stage of the Denton analysis.

The master had not gone through the Denton tests in detail, but he had stated that permeated every action relating to a breach of rules, that while CPR 13.3 had its own self-contained rules, that did not mitigate Denton.

He correctly stated that the reason for default was central and relevant, and that he had to have regard to merits and the reasonable prospect of defence. The IKA had a real prospect of successfully defending the claim, and while it had not applied to set aside promptly, that had not inconvenienced other court users.

The unexplained delay did not eclipse the merits of the proposed defence. The delay in filing the defence had been serious and significant and not adequately explained. The three-stage Denton test allowed the court to consider the justice of the case.

While the delay militated against setting aside the judgment, the IKA’s unusual situation and its somewhat tenuous connection to the tortfeasor reinforced the fact that it seemed to have a real case on the merits that deserved to be tried.

Comment

This Court of Appeal decision overruled that of PXC v AB College [2022] which had held that the approach to relief from sanctions did not apply to applications to set aside judgment under CPR 13.3.

The Denton test will be rigorously applied in applications to set aside default judgment. The Court of Appeal was thorough in its judgment in addressing authorities that were contrary to this view.

This addition of the Denton test means that as well as the need to demonstrate the defence’s merits and prospects of success, the defendant must also focus and attempt to explain the reasons for non-compliance leading to the default judgment and act promptly in applying for relief.

The bigger picture for defendants, their insurers and brokers is putting in place processes to limit the prospects of judgment being entered in default in the first place. This will include educating the defendant on the need act promptly in actioning court proceedings, clear lines of communication through the defendant/broker/insurer chain, and ideally nominating solicitors to accept service of proceedings via the DCP or other means.