Thiscompany v Welsh: An application to set aside Judgment

In this article, we continue the theme of discussing recent High Court rulings on an application seeking the set aside of a County Court Judgment entered in default.  

However, unlike our earlier article, ‘The Good and the Bad in an Application to set aside a Judgment‘ where we considered a recent High Court decision to wholly dismiss the Defendant’s application to set aside Judgment, in this article, we dissect the case of Thiscompany Ltd & Ors v Welsh & Ors [2024] EWHC 2159 (Comm), where the High Court ruled in favour of the Defendant and ordered the set aside of Judgment.  

Background 

Without intending to narrate in detail the background to Thiscompany, this claim concerned a claim for damages and other relief against four Defendants.  

In brief, the Claimants’ solicitors proceeded to serve their amended Claim Form (absent of any Particulars of Claim) upon the Defendants’ solicitors. In response, the Defendants filed their Acknowledgement of Service to the claim albeit out of time, indicating their intent to wholly defend the claim.  

Thereafter, after some 39 days since service of its claim, the Claimants served upon the Defendants its Particulars of Claim. The Defendants’ solicitors were not, however, of the view that the Particulars of Claim had been served in time, and thus rendered the Particulars of Claim invalid. Although, despite such contention from the Defendants’ solicitors, the Claimants’ solicitors failed to substantively explain, nor refer to any authority, to support their position that the Particulars of Claim remained valid and deemed served.   

It leads from the above that, on the face of it, the Defendants willingly opted to not serve a Defence. In the absence of a Defence, the Claimants would go on to successfully enter Judgment in default against the Defendants save the Third Defendant (hereinafter referred to as the “Welsh Defendants”, similarly as the High Court did so in its judgment).  

Application  

Within 7 days of Judgment being entered in default against the Welsh Defendants, they proceeded to file their application to set aside the Judgment entered in default.  

From the outset, the Welsh Defendants accepted that the mandatory grounds to having Judgment set aside found under CPR 13.2 did not apply here, as in hindsight they conceded that, as a result of different limits being applied in the Circuit Commercial Court, the Particulars of Claim had been served in time.  

Instead, the Welsh Defendants sought out to rely upon CPR 13.3 and, in particular, that they have a real prospect of defending the claim. In turn, the Welsh Defendants’ position was that they should be afforded the opportunity to file a Defence, in so far as that they had enclosed its proposed Defence to the claim in support of their application.  

For the avoidance of doubt, the Claimants opposed the Welsh Defendants’ application. Whilst the Claimants explicitly accepted that the proposed Defence disclosed a real prospect of defending the claim, their opposition to the application was largely on the basis that (inter alia) the proposed Defence was unsatisfactory in various ways and, in any event, the Welsh Defendants should not be granted relief from sanction when considering all circumstances.  

At this juncture, we recall our previous article, ‘Is the recent decision on the set aside of Judgment a welcomed ‘relief’?‘ whereby we discussed FXF v English Karate Federation Ltd [2023] EWCA Civ 891 and the now apparent need to also apply for relief from sanction when seeking the set aside of Judgment entered in default.

Decision 

In coming to its decision, the High Court acknowledged that the Claimants had already explicitly accepted that the Welsh Defendants had a real prospect of defending the claim. Therefore, the High Court, at its earliest opportunity in doing so, confirmed that it was satisfied that the Welsh Defendants had met the discretionary threshold under CPR 13.3, before turning to the question of ‘promptness’ and, more substantively, applying the Denton test when considering the Welsh Defendants’ application for relief from sanction.  

The latter, in applying the Denton test, would prove to be the largest of hurdles for the Welsh Defendants in convincing the Court to set aside Judgment.  

Indeed, the High Court also swiftly found in favour of the Welsh Defendants in acknowledging that their application to set aside Judgment was made within 7 days of Judgment in default being entered and, in any event, ‘prompt’.  

Turning to whether the Welsh Defendants should be granted relief from sanction, and in turn applying the Denton test, by way of reminder, the High Court considered the following questions: –  

1. Is the breach serious and significant?  
2. Was there some good reason as to why the breach occurred? and  
3. In all the circumstances of the case, would it be fair/just to grant relief?  

Firstly, the High Court found that the Welsh Defendants’ failure to timely file a Defence to the claim was, by definition, both ‘serious’ and ‘significant’, irrespective of any delay in the service of a claim. Indeed, the High Court goes on to recite that: – 

Notwithstanding, this objection would however later not prove fatal to the Welsh Defendants’ application.  

When applying the second limb of the Denton criterion, the High Court too found that there was no good reason for the Welsh Defendants failing to file a Defence. The Welsh Defendants had described the Claimants’ conduct thus far as procedural games and opportunistic. The reason for the Welsh Defendants not filing the Defence was because, at the time, they had (mis)understood that the Claimants’ Particulars of Claim had been served out of time, and therefore wanted to establish that, before proceeding to defend the claim.  

However, despite the Claimants’ solicitors not previously explaining its reasoning as to why the Particulars of Claim remained valid, the High Court found that the Claimants were under no duty to provide such explanation and/or advice to the Welsh Defendants. In particular, the High Court recited that: –  

Overall, the High Court was not satisfied that there was good reason for the Welsh Defendants’ failure to file a Defence.  

Third and lastly, the High Court considered all circumstances to determine whether it would be just to grant relief to the Welsh Defendants. In favour of the Welsh Defendants, the High Court acknowledged their general cooperation in dealing with the dispute and that, should relief not be granted, they would have lost their opportunity to defend a claim (of which is, as accepted by the Claimants, a defensible claim). 

On the other hand, the High Court appreciated that, in these particular circumstances, whilst the Claimants’ request for default Judgment should have been made on prior notice to the Welsh Defendants, no such notice was given and, for one reason or another, the Court proceeded to order that Judgment be entered in default. On balance, the High Court recognised that should notice had been circulated, the default Judgment would probably not have been entered.  

Against the above, the High Court did not consider the Claimants’ opposition to the grant of relief from sanction to carry substantial weight, as opposed to the argument of serving the interests of justice and the overriding objective of the CPR. 

The High Court ultimately found in favour of the Welsh Defendants and ordered that the Judgment entered in default be set aside. 

Comments 

The decision in Thiscompany closely follows that of in Tradin, and both serve as stark reminders of the manifold hurdles to overcome in order to persuade the Court to set aside a Judgment entered in default. 

Here, in Thiscompany, the fact that the Welsh Defendants had acted swiftly within a week of Judgment being entered proved helpful to its application for the set aside. Moreover, the Welsh Defendants’ preparation of a proposed Defence to the claim also helped the High Court find in their favour.  

Thiscompany ruling is however interesting in that whilst the High Court was not entirely with the Welsh Defendants’ when applying the Denton test, the High Court still considered, when applying the final Denton criterion, that it would be unjust not to afford the Welsh Defendants the opportunity to defend the claim. 

Further, by reminding parties that they are under no obligation to help one another in litigation, the Thiscompany judgment emphasises the importance for parties on either end of a dispute/application to be sure on their own respective position and legal standing at all stages of litigation. Here, this suggests that the innocence of a party failing to comply with relevant procedure because of an opposing party not explaining its own potential breach will not necessarily be excused. Thus, parties are encouraged to avoid playing procedural games simply to take an advantage over the other.  

Overall, the High Court decision in Thiscompany highlights the importance for parties to take legal advice at the early stages of considering an application or a defence to an application seeking the set aside of a Judgment.  

How can Ellis Jones help?

Please contact our Dispute Resolution team on 01202 525333 or by emailing resolution@ellisjones.co.uk if you have any queries relating to this article.