Brewin Dolphin Securities Ltd v Kalaji & Anor

A court may set aside a default judgment conditionally where the defendant’s conduct justifies requiring security before granting leave to defend. The condition must not be fixed at a sum which makes defending impossible. A defendant asserting inability to pay bears the evidential burden. That evidence must address not only personal assets, but also whether funds can be raised with assistance from others. The issue should be raised promptly after the condition is imposed. Delay, coupled with incomplete evidence about available resources, may justify refusing to vary the order.

The claimants obtained default judgment for a substantial debt after proceedings and requests for acknowledgement of service were ignored. Judge Kershaw QC set aside the judgment conditionally on payment of £28,000 into court. The applicant later sought variation of that condition and permission to appeal both orders, arguing that he could not raise the required sum. The central issues were whether a conditional order was appropriate and whether the amount made it impossible for him to defend.

Lord Justice Waller refused permission to appeal.

1. The circumstances existing when the conditional order was made justified requiring payment into court. The applicant had not acknowledged service, accepted service and defended the claim, or otherwise responded despite being told that the claimants alleged he was personally liable for the debt. There was no reasonable prospect of persuading the Court of Appeal that a conditional order was inappropriate.
2. The court recognised the governing limitation on such orders. A condition must not make it impossible for a defendant to defend. If a defendant has no assets and no means of raising funds, it would be wrong to require payment of a sum which the defendant has no prospect of finding.
3. The burden lies on a defendant who relies on inability to satisfy the condition to provide evidence of that inability. The evidence must address potential assistance from other persons, and not merely the defendant’s own assets. The court may also consider whether the objection was raised promptly after the condition was imposed.
4. The applicant did not raise inability to pay when the £28,000 condition was made. He sought additional time rather than variation or an appeal, and did not apply to vary the order until 5 April, well out of time for appealing. Although his illness was accepted, no timely effort was made to challenge the condition. His later affidavit dealt only with his own assets and did not address assistance from family members. The evidence therefore did not establish that the sum could not be raised.

The application for permission to appeal was refused.

• Judge Kershaw QC set aside the default judgment on 11 January, conditional upon payment of £28,000 into court.
• Judge Kershaw QC refused on 12 April to vary the conditional order.
• Court of Appeal (Civil Division), in [2002] EWCA Civ 1294, refused permission to appeal.