Messer Griesheim GmbH v Goyal MG Gases Pvt Ltd

The court may set aside a default judgment on a claimant’s application where the claimant has a good claim and leaving the judgment in place would effectively deprive it of that claim. The doctrine of merger exists to prevent double recovery and promote finality; it should not be used to make an ineffective judgment defeat the underlying cause of action. The court must balance any injustice to the defendant against the injustice to the claimant. Where the defendant knew the claim was being pursued and cannot show real prejudice, setting aside may be appropriate. Summary judgment may then be entered where the proposed defences have no real prospect of success.

The claimant had obtained judgment in default after the defendant failed to acknowledge service of a claim for sums paid under a guarantee of the defendant’s bank loan. The claimant applied to set aside the default judgment because it believed that a judgment on the merits would be enforceable in India, whereas the default judgment was not.

The defendant maintained that it had possible contractual or representational defences and that the claim had merged in the default judgment. It argued that the judgment should remain undisturbed, even though it could not be enforced in India. The court therefore considered whether the alleged defences disclosed a real prospect of success, whether there was good reason to set aside the judgment, and whether summary judgment should follow.

1. Default judgment set aside. Under Civil Procedure Rules 1998, CPR 31.3, the power to set aside a default judgment is not confined to applications by defendants. It may be exercised on a claimant’s application where there is some other good reason why the judgment should be set aside. The authorities Society of Lloyd’s v Monaghan and Hewson [2003] EWHC 2576 and C Inc Plc v L [2001] 2 Lloyd’s Rep 459 supported that conclusion.
2. The alleged June 1997 non-recourse agreement, September 2001 Agreement and December 2002 Agreement were not made. They were unsupported by contemporaneous documents, inconsistent with the parties’ commercial arrangements and contradicted by the documentary evidence. They therefore disclosed no real prospect of a successful defence.
3. The doctrine of merger should not operate to deprive a claimant of a good cause of action merely because an ineffective default judgment has been entered. Its underlying purposes are to prevent double recovery and multiplicity of proceedings and to promote finality, while enabling enforcement of the established claim.
4. The relevant discretion required the court to weigh injustice to the defendant against injustice to the claimant. The defendant had known that the claim was asserted and pursued, and was not entitled both to ignore the judgment and rely on it as discharging the underlying liability. Setting aside caused no relevant injustice to the defendant.
5. Summary judgment was granted under CPR 24.2. The defendant had no real prospect of successfully defending the claim, and no issue was raised as to the amount due. The precise judgment sum, interest and recoverable legal fees were to be addressed if not agreed.