Penta Ultimate Holdings Ltd v Penta Consulting Ltd
| Jurisdiction | England & Wales |
| Judge | Master Kaye |
| Judgment Date | 14 September 2020 |
| Neutral Citation | [2020] EWHC 2400 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2019-001536 |
| Date | 14 September 2020 |
[2020] EWHC 2400 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
7 Rolls Building
Fetter Lane
London, EC4A 1NL
Master Kaye
Case No: BL-2019-001536
and
Neil Hext QC and Mark Cullen (instructed by DaySparkes Limited) for the Claimants
Nikki Singla QC (instructed by Reynolds Porter Chamberlain LLP) for the Defendant
Hearing dates: 8 April 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This was the remote hearing of the Defendant's application issued on 11 October 2019 to set aside Judgment in Default and for Specific Disclosure.
The Claimants' claim was issued on 21 August 2019. It was accompanied by particulars of claim and initial disclosure. The Defendant served an acknowledgment of service indicating an intention to defend part of the claim. He did not file or serve a defence. Default Judgment was entered for an amount to be decided on 24 September 2019.
The application to set aside the Default Judgment was issued on 11 October 2019 and was supported by a twenty-five-page witness statement from the Defendant but did not include a draft defence. A second witness statement dated 2 April 2020 engaged more fully with the proposed defence and exhibited a draft defence. This was nearly 6-months after the application issued in October 2019 and less than a week before the hearing.
The evidence in opposition consists of a witness statement from Paul Clark the CEO and Director of the Second Defendant dated 9 March 2020. His statement runs to forty-four pages and is accompanied by his exhibit of in excess of 380 pages. It was served five months after the application was issued and only a month before the hearing.
In addition to the witness evidence and statements of case both counsel provided me with detailed written skeleton arguments which were supplemented by their oral submissions. I have considered those with care and taken into account all their submissions even if each and every submission is not referred to in this judgment.
Legal Principles
The starting point on an application to set aside a judgment is CPR Part 13. Unless the judgment was wrongly entered such that the court must set it aside CPR13.3 provides a discretion to the court to set aside or vary a judgment in default:
“ 13.3 (1) In any other case, the court may set aside or vary a judgment entered under Part 12 if –
(a) the defendant has a real prospect of successfully defending the claim; or
(b) it appears to the court that there is some other good reason why –
(i) the judgment should be set aside or varied; or
(ii) the defendant should be allowed to defend the claim.
(2) In considering whether to set aside or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.
(Rule 3.1(3) provides that the court may attach conditions when it makes an order)”
The Defendant therefore first needs to overcome the threshold test set out in CPR 13.3(1)(a) and (b), that there is a real prospect of successfully defending the claim or there is some other good reason why a judgment, validly obtained, should be set aside. Further pursuant to CPR 13.3.2 the Court must have regard to whether the application was made promptly.
The test to be applied in respect of CPR13.3(1)(a) is broadly the same as the test for summary judgment save that the burden of proof reverses. Thus, I remind myself that in considering the application for summary judgement the court must consider whether the Defendant has a real prospect as opposed to a fanciful prospect of defending the claim. A realistic defence is one which carries some degree of conviction that is it is more than merely arguable. To reach that conclusion I must not conduct a mini trial. However, that does not mean the court must take at face value without analysis everything the Defendant says. I should take into account not only the evidence actually before me but also evidence that can reasonably be expected to be available at trial.
CPR13.3(1)(b) is a free-standing alternative ground for setting aside default judgment. It has been held to be a broad test, Berezhovsky v Russian Television and Radio Broadcasting Co [2009] EWHC 1733 (QB).
An application to set aside default judgment is recognised to be an application for relief from sanctions ( Regione Piemonte v Dexia Crediop SpA [2014] EWCA 1298) and so also engages the three-stage test in Denton v TH White Ltd [2014] 1 WLR 3926 (“ Denton”).
In Gentry v Miller [2016] EWCA Civ 141 (“ Gentry”), Vos LJ explained how the test in Denton should be applied to an application to set aside or vary a default judgment as follows:
“ 24. The first questions that arise… in dealing with an application to set aside a judgment under CPR r 13.3 are the express requirements of that rule, namely whether the defendant has a real prospect of successfully defending the claim or whether there is some other reason why the judgment should be set aside, taking into account whether the person seeking to set aside the judgment made an application to do so promptly. Since the application is one for relief from sanctions, the tests in Denton's case then come into play. The first test as to whether there was a serious or significant breach applies, not to the delay after the judgment was entered, but to the default in serving an acknowledgment that gave rise to the sanction of a default judgment in the first place. The second and third tests then follow, but the question of promptness in making the application arises both in considering the requirements of CPR r 13.3(2) and in considering all the circumstances under the third stage in Denton's case.”
Therefore, after considering whether the threshold test of CPR 13.3 is met, the Court should consider and apply the three-stage test in Denton in respect of which the factors in CPR 3.9 (1) should be given particular weight.
CPR 3.9 provides:
“(1) On an application for relief from any sanction imposed for a failure to comply with any rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need –
(a) for litigation to be conducted efficiently and at proportionate cost; and
(b) to enforce compliance with rules, practice directions and orders.
(2) An application for relief must be supported by evidence.”
It is at that stage that the court engages in the consideration of the exercise of its discretion. In doing so the court must have regard to the overriding objective and all the circumstances including the need to deal with cases justly and at proportionate cost. This includes considering the prejudice to both the Defendant if judgment is not set aside and the prejudice to the Claimant, who has a validly obtained default judgment if judgment is set aside.
Mr Hext referred me to the recent decision of HHJ Pelling QC (sitting as a Judge of the High Court) in Core Export SpA v Yang Ming Marine Transportation Corp [2020] EWHC 425 (Comm) (“ Core Export”) in which he applied the approach in Gentry. HHJ Pelling QC refused an application to set aside default judgment notwithstanding the fact that the defendant had a real prospect of successfully defending the claim. He found on the facts of that case, that the failure to file an acknowledgment of service was serious and significant, there was no good reason for it and in all the circumstances the existence of a realistically arguable defence was outweighed by the history of delay, inaction and non-engagement.
Gentry sets out the approach to be adopted by the court on an application to set aside Judgment in Default. Core Export is an example of the application of that approach to the facts of a specific case. Each case will turn on its own specific facts. The exercise of the courts' discretion is not confined or limited by fact specific authorities.
The Court may attach conditions if it makes an order setting aside default judgment ( CPR 13.3(1)(3)). The court's discretion on the imposition of conditions derives from its general case management powers. It is broad and would include consideration of factors such as any delay in making the application, the Defendant's conduct, affordability, and the overriding objective.
Mr Hext suggests that in this context the approach of the court in the making of a conditional order under CPR 24 may be influential. Such an order may be made where it appears to the court that, in respect of some defence or issue, it is possible that the defence may succeed but it is improbable that it will do so. A conditional order would normally require the defendant to pay a sum of money into court. (CPR PD 24 paras 4 and 5.2).
I consider the Defendant's application against that legal framework.
Background
The First Claimant (“PUHL”) is a BVI company, which wholly owns the Second Claimant (“PCL”), a company incorporated in England (together “the Claimants”).
The Claimants are an international technical staffing and solutions business, primarily providing recruitment and outsourcing services to the telecoms and information technology (“IT”) marketplaces. Paul Clark is a Director and CEO of PCL. PCL has subsidiaries, branches, partnerships, and commercial agreements in...
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