KLT Construction Ltd v Swain

On a review of a default judgment for late service of a response, the absence of a good reason for delay is not determinative. The Employment Tribunal must consider all relevant circumstances, including prejudice and the response’s reasonable prospects of success. Under rule 33, consideration of the merits is mandatory because the power to revoke a default judgment depends on there being a reasonable prospect of successfully defending the claim. A failure to address that factor is an error of principle. Where the response has reasonable prospects and the delay results from venial human error, the default judgment may be revoked and the response accepted out of time.

The respondent appealed against a review judgment of Employment Judge Thomas, registered with reasons on 21 July 2009. The Employment Tribunal had upheld a default judgment on liability because no response had been received within 28 days. The respondent relied on an ET3 sent after the deadline and sought relief from the sanction. The claims were for unfair dismissal, wrongful dismissal and unlawful deductions from pay. The central issue was whether the Employment Judge had exercised the rule 33 discretion wrongly by failing to consider relevant matters, particularly the merits of the response.

1. Appeal allowed. The review judgment and the default judgment were set aside. The ET3 was directed to be accepted as validly presented.
2. The absence of a good reason for delay is not determinative under rule 33(6). As explained in Kwik Save Stores Ltd v Swain & Ors [1997] ICR 49, Pendragon v Copus [2005] ICR 1671 and Moroak t/a Blake Envelopes v Cromie [2005] IRLR 535, the Tribunal must consider the other relevant discretionary factors, including the merits and prejudice.
3. The merits are a necessary consideration. Rule 33(5) directs attention to whether the respondent has a reasonable prospect of successfully responding to the claim. The Employment Judge had considered the ET3 but failed to mention or address its reasonable prospects, despite the claimant’s concession that they were reasonable. That omission was an error of principle.
4. The EAT then exercised the discretion itself. The respondent’s evidence showed that the late response resulted from mistakes in transmitting the documents. Those errors were venial human errors. In combination with the reasonable prospect of success, they justified relief from the default judgment.
5. The EAT noted that a review under rule 33 is materially different from a review under rule 34, which follows a full hearing, and relied on Chowles t/a Granary Pine v West [2009] UKEAT0473/08 for the proposition that a rule 33 review is defective without review of the merits.

• Employment Tribunal, Watford: Default judgment entered against the respondent for failure to present a response within 28 days. On review, the application to set aside the judgment was refused; reasons were registered on 21 July 2009.
• Employment Appeal Tribunal: The review judgment and default judgment were set aside, and the ET3 was directed to be accepted as validly presented.