Avanesov v Shymkentpivo

On an application under CPR Rule 13.3, a defendant must show a defence with a realistic, rather than fanciful, prospect of success. The court should avoid conducting a mini-trial, while still analysing evidence which is clearly contradicted or lacks substance.

Promptness is a factor of considerable significance. It is assessed by reference to both the length of delay and its reasons, and is not a purely binary question. An application may be refused despite a realistic defence where the defendant deliberately ignores the proceedings or breaches the court’s timetable. The discretion must also be exercised consistently with the requirements of CPR Rule 3.9 and the efficient and proportionate conduct of litigation.

Too Shymkentpivo applied to set aside a default judgment for approximately US$3.8 million and a subsequent judgment assessing damages at approximately US$7.5 million. The judgments arose from unpaid sums under two share purchase agreements concerning indirect interests in an Uzbek bank.

The defendant contended that the agreements were made on the basis that it would acquire a controlling majority stake, whereas the claimant knew that an imminent share issue would dilute the stake. It relied on possible contractual, misrepresentation and mistake defences. The application also raised the effect of substantial delay, the failure to acknowledge service, and the defendant’s failure to participate in the assessment hearing.

1. Real prospect of success. The test under CPR Rule 13.3 was the same as the summary judgment test, although the burden of proof was reversed. The defence had to be realistic and carry some degree of conviction, rather than being merely arguable or fanciful.
2. The court should not conduct a mini-trial. It was nevertheless entitled to analyse witness evidence and contemporaneous documents where factual assertions appeared to have no real substance. It should also consider evidence reasonably expected to be available at trial. The numerous disputes concerning the negotiations and subsequent events could not fairly be resolved on this application.
3. Taking the defendant’s evidence at its credible highest, there was a realistic prospect of establishing that the claimant represented that a controlling 51 per cent voting stake was being sold, knew of the imminent dilution, and deliberately failed to disclose it. Those facts could support contractual defences, misrepresentation, or mistake. Silence could, in the circumstances, amount to an implied representation.
4. Promptness and relief from sanctions. Under CPR Rule 13.3(2), promptness was assessed by the length of delay and its explanation. The inquiry was not binary: the court had to consider how prompt the application was and what weight the delay deserved. An application under Rule 13.3 was also an application for relief from sanctions under CPR Rule 3.9(1), requiring the three-stage approach in Mitchell v Newsgroup Newspapers Ltd and Denton and Others v T H White Limited.
5. The first application followed an eight-month delay and the second followed a delay of about one month to six weeks. The defendant had deliberately ignored the proceedings, the 21-day timetable, and the damages hearing. The need for efficient litigation and compliance with court orders strongly outweighed the existence of a realistic defence. The application was dismissed.

First-instance decision. No appellate history was stated in the judgment.