De Ferranti & Anor v Execuzen Ltd

A default judgment obtained without the required application notice is not automatically void or set aside as of right under the Civil Procedure Rules. The court must apply CPR 13.3, considering whether the defendant has a real prospect of successfully defending the claim, another good reason for relief, and promptness.

Failure to serve the application notice can make an order irregular, but CPR 23.10(2)'s seven-day limit applies where the order has been served. Once service is retrospectively dispensed with, the application falls under CPR 13.3. After a properly notified trial in a party's absence, CPR 39.3(5) requires promptness, a good reason for non-attendance and a reasonable prospect of success. The appeals were dismissed because those requirements were unmet and no credible defence existed.

Execuzen claimed that Sophie de Ferranti, its former managing director, diverted a UBS business opportunity to Valens Goldberg Limited and misused confidential information. The defendants did not acknowledge service. Mr Justice Ramsey entered default judgment on liability on 14 December 2010 without notice of the claimant's application, and Judge Mitchell later assessed damages at £716,316.51 after the defendants failed to attend the quantum trial.

Mr Justice Haddon-Cave refused applications to set aside the default judgment, the retrospective dispensation of service and the damages order. He did not expressly address whether the defendants had a real prospect of defending the claim. The Court of Appeal had to decide whether the procedural irregularity and absence from the quantum hearing required relief, and whether the appeal should proceed in the defendants' absence.

Sir John Chadwick gave the judgment of the court. Lord Justice Ryder and Sir Bernard Rix agreed.

1. The court proceeded in the defendants' absence. They knew of the hearing, supplied no current medical evidence supporting their adjournment request, and had repeatedly failed to attend hearings. There was no reason to think that an adjournment would serve a useful purpose.
2. Part 12 of the Civil Procedure Rules governed default judgment. The conditions for judgment in default of acknowledgment of service were satisfied, so CPR 13.2 did not require the judgment to be set aside. Because the claim included delivery up of confidential documents, CPR 12.4(2) required an application under Part 23.
3. The failure to serve the application notice made the judgment irregular but did not invalidate it. Under CPR 23.10(2), the defendants had seven days after service of the order to apply to set it aside or vary it. Nelson v Clearsprings (Management) Ltd [2006] EWCA Civ 1252; [2007] 1 WLR 962 established that CPR 39.3(5) did not govern an application concerning an unserved judgment. It did not remove the separate time limit in CPR 23.10(2).
4. Once service had been retrospectively dispensed with, CPR 23.10 ceased to be applicable. The application therefore fell to be decided under CPR 13.3. The judge below had erred by failing to ask whether there was a real prospect of successfully defending the claim or another good reason for relief, followed by the discretionary question of promptness. The Court of Appeal nevertheless made its own assessment and found no credible defence, no other good reason, and extraordinary unexplained delay. The refusal to set aside the default judgment was therefore upheld.
5. For the quantum order, CPR 39.3(5) required all three conditions: prompt action, a good reason for non-attendance and a reasonable prospect of success. The defendants had proper notice, had not acted promptly and had no credible reason for failing to attend. It was unnecessary to consider the third condition. There was consequently no basis for setting aside the damages award or staying enforcement.

The appeals were dismissed.

• Court of Appeal (Civil Division) — On 10 June 2013, the court dismissed the appeals from the orders of Mr Justice Haddon-Cave: [2013] EWCA Civ 592.
• Court of Appeal (Civil Division) — Lord Justice Toulson granted permission to appeal from the refusal to set aside the default judgment and the damages award: [2012] EWCA Civ 1808.
• High Court — Mr Justice Haddon-Cave dismissed the applications to set aside the default judgment, the retrospective dispensation of service and the damages order.
• High Court — Mr Justice Ramsey entered default judgment on liability; Judge Mitchell subsequently assessed damages after the defendants failed to attend the quantum trial.