Apollo Ventures Co Ltd v Manchanda & Ors

On an application under CPR 13.3 to set aside default judgment, a defendant must show either a realistic prospect of successfully defending the claim or some other good reason for setting judgment aside. The court applies the summary-judgment approach, but must avoid a mini-trial and should consider evidence reasonably expected to become available at trial. Where material factual disputes, foreign-law issues and serious allegations require fuller investigation, judgment should ordinarily be set aside. In receipt-based constructive-trust claims, knowledge that money came from a loan, or knowledge of a disputed claim, is insufficient. The relevant question is whether the defendant knew that the assets were traceable to a breach of trust or fiduciary duty, or later unconscionably retained them with that knowledge.

The claimant, a Thai company, obtained seven judgments in default against members of the Manchanda family and two companies. The claims concerned alleged fraud, misfeasance, unlawful means conspiracy, unconscionable receipt and constructive trusteeship arising from loans entered into in Thailand.

The defendants applied under CPR 13.3 to set aside the judgments. They relied on an agreement that default judgment would not be sought, challenged the amount of the judgments, and argued that they had realistic prospects of defending the claims. The applications raised disputed facts, questions of Thai law, the effect of payments made from the loan proceeds and the significance of related Thai proceedings.

1. Applications allowed. The judgments in default against all the defendants were set aside under CPR 13.3(1)(a) and CPR 13.3(1)(b).
2. The correspondence between the parties created an agreement or understanding that the claimant would not apply for default judgment after 4 August 2016. The agreement was not unlimited, since the claimant could have ended it by giving reasonable notice. Seven days would have been reasonable. The claimant had not done so and it was therefore inappropriate to request default judgment.
3. The applicable test under CPR 13.3 was materially the same as the summary-judgment test. The defendant had to show a realistic, rather than fanciful, prospect of success. The court was not to conduct a mini-trial, but could reject assertions with no real substance. It had to consider evidence reasonably expected to be available at trial and should hesitate before deciding finally where fuller investigation might alter the evidence or outcome.
4. The Other Defendants had realistic prospects of defending the unlawful-means conspiracy claims. The allegations were general, the evidence was disputed and the truth could not be determined without a trial.
5. In the receipt-based claims, knowledge that funds came from loans, or knowledge of allegations concerning the funds, did not establish liability as a constructive trustee. Liability required knowledge that the assets were traceable to a breach of trust or fiduciary duty, or later knowledge followed by unconscionable retention of the assets or their traceable proceeds. The nature and extent of each defendant’s knowledge required trial.
6. The judgments also exceeded the amount of the loans. The defendants had reasonable prospects of showing that the claimant could not recover the full judgment sums against each of them, because liability might be limited to monies received and profits derived from them.
7. Although the First Defendant faced serious allegations and had a more difficult defence, disputed facts, Thai-law issues, the significance of pending foreign proceedings, the amounts at stake and the desirability of hearing the connected claims together supplied both realistic prospects and other good reasons for setting judgment aside.