Denton and default judgment applications

Prior to the recent decision of FXF v (1) English Karate Federation Ltd, (2) Ishinryu Karate Association [2023] EWCA Civ 891, there was procedural uncertainty on the issue of whether the three-stage test of Denton v TH White Ltd [2014] EWCA Civ 906 on relief from sanctions applied to applications to set aside default judgments (CPR Part 13.3). The Court of Appeal in FXF has now confirmed that an application to set aside default judgment is an application for relief from sanction to which the Denton test applies. The decision is of major procedural importance.

Rules and case law

CPR Part 13.3 states that the court may set aside or vary a default judgment 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 reason why: (i) the judgment should be set aside or varied; or (ii) the defendant should be allowed to defend the claim. Part 13.3(2) states the court must have regard to whether the application to set aside was made promptly. CPR Part 3.8 states that a sanction will apply unless the defaulting party obtains relief from the sanction. CPR Part 3.9 states that when the court is considering an application for relief from sanctions it will consider all the circumstances of the case so as to enable it to deal justly with the application, including the need: (i) for litigation to be conducted efficiently and at proportionate cost; and (ii) to enforce compliance with rules, practice directions and orders. When considering whether to grant relief, the court must apply the Denton three-stage test which requires the court to: (i) assess the seriousness and significance of the non-compliance; (ii) consider why the breach occurred; and (iii) evaluate all the circumstances of the case so the application is dealt with fairly.

Background

The claimant sought damages for personal injury for alleged serious sexual abuse by her karate coach, and argued that the second defendant (the IKA) was: (a) vicariously liable for the abuse; and (b) directly liable for failing to discharge its own duty of care towards the claimant. The IKA failed to file a defence on time and the claimant obtained default judgment. The IKA subsequently issued an application to set aside the default judgment. Master Thornett set aside the judgment and held that: (i) the IKA had a real prospect of successfully defending the claimant’s case on vicarious liability; and (ii) the application to set aside had not been made promptly and there was no good reason for the delay. The master said this in relation to Denton: ‘However, I turn to the express primary requirements of 13.3(1). Mr Tahzib [counsel for the claimant] refers appropriately to Denton and its criteria. But the familiar 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 prospect of successfully defending the claim”.’

Parties’ submissions

The claimant appealed on the ground that the master had failed to ‘apply Denton to the exercise of his discretion’, when the Court of Appeal has previously stated in Gentry v Miller [2016] EWCA Civ 141 that ‘[s]ince the application is one for relief from sanctions, the Denton tests then [after consideration of the express requirements of CPR Part 13.3] come into play’. Thus, the claimant argued that had the master properly applied the Denton test, he would have concluded that the default judgment should stand. The IKA submitted that: (i) the application to set aside a default judgment is in a unique procedural category and is not an application for relief from sanctions at all; and (ii) the discretion under CPR Part 13.3 is broad and unconstrained and brings in all the factors under the overriding objective including the ethos of Denton, even though its specific test is not applicable.

Court of Appeal

Giving the leading judgment of the Court of Appeal, master of the rolls Sir Geoffrey Vos held that the Denton test does apply to applications to set aside default judgments because: (i) reference to ‘all the circumstances’ under Part 3.9 and the overriding objective are directly relevant at the third stage of the Denton test; (ii) the Denton test is appropriate to the exercise of the discretion required once the two specific matters mentioned in Part 13.3 (merits and delay in making the application) have been considered; (iii) the decision in Gentry provides an example of how a court should approach Part 13.3 and the application of the Denton test; (iv) it was important for the court to consider (a) whether the default has prevented the court or the parties from conducting the litigation efficiently and at proportionate cost; and (b) the need to enforce compliance with rules and court orders; (v) in authorities such as Cunico Resources NV v Daskalakis [2018] EWHC 3382 (Comm) and PXC v AB College [2022] EWHC 3571 (KB), the judges had taken an ‘unduly academic and nitpicking approach’ to what has been deliberately intended to change the culture of civil litigation. The court stressed the need for parties to civil proceedings and their solicitors to fully understand that ‘flouting rules and court orders will simply not be tolerated’. The Court of Appeal found that the master had correctly applied the Denton test, exercised his discretion and therefore did not err in law.

The issue of whether the Denton three-stage test applied to default judgment applications has been a difficult one which has led to inconsistent authorities and, no doubt, the proliferation of expensive and time-consuming satellite litigation. The Court of Appeal’s review and analysis of the authorities provides important procedural clarification and judicial guidance on the approach the courts should adopt when applying the necessary rules and the Denton test in applications to set aside default judgment.

Masood Ahmed is an associate professor at the University of Leicester and a member of the Law Society’s dispute resolution committee. Lal Akhter is director of Docket Live and an unregistered barrister