ED&F Man Liquid Products Ltd. v Patel & Anor

A defendant seeking to set aside a regular default judgment must show a realistic, rather than fanciful, prospect of successfully defending the claim. The defence must be better than merely arguable and carry some degree of conviction. This is substantively the same threshold as that governing summary judgment, although the burden falls on different parties.

The court must not conduct a mini-trial, but it may analyse factual assertions and assess them against contemporary documents. Informed admissions of liability and payments on account may demonstrate that a belated defence lacks real substance.

ED&F Man Liquid Products Ltd. v Patel & Anor obtained default judgments against two defendants alleged to be partners liable for the unpaid balance on two alcohol shipments. HHJ Dean QC set aside the judgment against the second defendant but refused relief to the first defendant because his proposed defence was contradicted by repeated written admissions and payments on account.

The first defendant appealed. He maintained that the supplies remained subject to a joint venture under which payment depended on receipts from onward sales. The central questions were the meaning of a real prospect of successfully defending a claim under CPR 13.3(1)(a), whether the judge had impermissibly conducted a mini-trial, and whether an unnecessary observation about possible dishonesty supplied another good reason to set aside the judgment.

Potter LJ delivered the leading judgment. Peter Gibson LJ agreed without qualification.

1. The appeal was dismissed unanimously. The substantive threshold under CPR 13.3(1)(a) was materially the same as that under CPR 24.2. A real prospect was a realistic, rather than fanciful, prospect. The defence had to be better than merely arguable and carry some degree of conviction. The approaches in Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc [1986] 2 Lloyd's Rep 221 and Swain v Hillman [2001] 1 All ER 91 were consistent.
2. The principal difference between the provisions concerned the burden. Under CPR 24.2 the claimant had to establish that the defendant had no real prospect of success. Under CPR 13.3(1), the defendant had to show good reason to deprive the claimant of a regularly obtained judgment.
3. The court could not conduct a mini-trial where material factual disputes existed. It nevertheless had to analyse the evidence and was not required to accept every factual assertion. Assertions lacking substance, particularly when contradicted by contemporary documents, could be disposed of at an early stage. That approach was consistent with Three Rivers DC v Bank of England (No.3) [2001] UKHL/16.
4. The judge was entitled to consider the case as a whole. The first defendant was an experienced businessman who had repeatedly and unambiguously acknowledged the debt, including after threats of legal proceedings, and had made payments on account. His explanation for those admissions lacked substance. The judge's error concerning the timing of the request for confirmation to the claimant's auditors was immaterial in light of the other admissions. The proposed joint venture defence therefore had no real prospect of success.
5. The judge's observation that the defence was almost certainly dishonest was unnecessary and unfortunate, but it was not a finding of fraud or dishonesty concerning the transactions. As no related trial against the second defendant would proceed, the observation created no practical prejudice amounting to another good reason under CPR 13.3(1)(b). The first defendant was ordered to pay agreed costs of £15,000.

1. Court of Appeal (Civil Division): In ED&F Man Liquid Products Ltd. v Patel & Anor [2003] EWCA Civ 472, the court unanimously dismissed the first defendant's appeal.
2. Permission to appeal: After permission had been refused on paper, Rix LJ granted permission following an oral application.
3. High Court: HHJ Dean QC, sitting as a High Court judge, refused to set aside the default judgment against the first defendant. He set aside the judgment against the second defendant.