Khan v Edgbaston Holdings Ltd

In deciding whether to set aside a regular default judgment under Civil Procedure Rules 1998, the court must consider promptness, whether the defendant has a real prospect of successfully defending the claim, and whether there is some other good reason to grant relief. Promptness requires all reasonable celerity in the circumstances. A defence must be supported by evidence and must be more than fanciful. Delay, the merits, prejudice, the interests of justice and the factors in CPR 3.9 must be assessed together. The size or nature of the claim, or uncertainty about the later assessment of damages, will not ordinarily justify setting aside judgment where the merits and procedural conduct do not support relief.

The claimant brought a claim exceeding £5 million arising from alleged fraudulent and negligent misrepresentations concerning the value and letting status of two properties. Judgment in default was entered against the defendant after it failed to acknowledge service. The defendant later applied under CPR 13.3 to set aside the judgment, relying on delay explanations, a proposed defence concerning the authority of the alleged agent, the nature and size of the claim, and possible difficulties in assessing damages. The claimant opposed the application and sought assessment of damages.

1. The application to set aside judgment was refused. The defendant had not acted promptly. There was almost six months between entry of judgment and the application, with no credible explanation for the successive periods of delay. The court applied the requirement that promptness means acting with all reasonable celerity in the circumstances, as explained in Regency Rolls Ltd v Murat Carnall [2000] EWCA (Civ) 379.
2. The defendant had no real prospect of successfully defending the claim. The proposed case that Mr Ahmed had not attended the relevant meetings did not answer a claim against the company. Mr Wasim was accepted to have acted as the company’s agent, the representations attributed to him were not challenged, and the alleged lack of authority was neither pleaded nor supported by evidence. The evidence concerning the alleged tenancies was also unanswered. A real prospect must be distinguished from a fanciful defence. The court applied the approach in ED&F Man Liquid Products Ltd v Patel [2003] EWCA (Civ) 472.
3. Delay is relevant but is not necessarily decisive. The primary considerations remain the existence of a defence with a real prospect of success, the need to do justice and prejudice to the claimant. The court considered Thorn PLC v Macdonald [1990] CPLR 660 and Hussain v Birmingham City Council [2005] EWCH (Civ) 1570.
4. The size of the claim, the allegation of fraud and possible differences in the measure of damages did not constitute another good reason under CPR 13.3. Damages would be assessed on the tortious basis.
5. The CPR 3.9 checklist reinforced the conclusion. Maintaining the regular judgment served the administration of justice, while setting it aside would cause substantial prejudice and delay to the claimant.