Penta Ultimate Holdings Ltd & Anor v Storrier

On an application to set aside a valid default judgment, the defendant must first show a real prospect of successfully defending the claim or some other good reason for setting it aside. Promptness is assessed by reference to the default judgment at the threshold stage, but the wider history of delay remains relevant when relief from sanctions and the court’s discretion are considered. The Denton three-stage test applies. A serious breach and absence of a good reason do not necessarily determine the outcome: the court must weigh all the circumstances, including the merits of the proposed defence, prejudice, overlap between liability and causation, access to documents, the overriding objective and proportionality. A broad request for early, search-based disclosure does not become justified merely because initial disclosure is inadequate. Conditions may be imposed where proportionate, including to address an improbable part of a defence.

The defendant, a former director and finance officer of the claimant companies, failed to file a defence after acknowledging service. Judgment in default was entered on liability. He applied promptly to set it aside and sought disclosure, relying on proposed defences concerning accounting errors, alleged unauthorised payments, loans and oral authorisations.

The court considered whether the proposed defence met CPR 13.3, whether the application engaged relief from sanctions, whether there was some other good reason to set aside the judgment, and whether further initial disclosure was required under PD51U.

1. Application granted conditionally. The default judgment on liability was set aside and the defendant was permitted to defend liability as well as causation and loss. The defendant was required to pay into court approximately £51,000, representing the admitted directors’ loan balance.
2. The application was made promptly for CPR 13.3(2), although the late service of the draft defence remained relevant to the later discretionary assessment.
3. The proposed defence satisfied the threshold in CPR 13.3(1)(a). The court must avoid a mini-trial, but must analyse the evidence sufficiently to decide whether the defence is realistic rather than fanciful. Disputes about the defendant’s responsibility for accounting errors, causation, and alleged oral authorisations raised serious issues suitable for trial.
4. The free-standing ground in CPR 13.3(1)(b) is broad but should be applied sparingly. Lack of access to desired documents alone was not a good reason. However, the substantial overlap between liability and the causation and loss trial, together with the imbalance of access to documents, was relevant to the overall discretion and supplied an additional reason on these facts.
5. The failure to file a defence was serious and significant and there was no good reason for the breach. Applying Gentry v Miller and the three-stage approach in Denton v TH White Ltd, the court nevertheless concluded at the third stage that the overall circumstances and overriding objective favoured relief. Refusing relief would cause considerable injustice, while setting aside would not materially disrupt the proceedings.
6. Further initial disclosure was refused. The defendant’s requests were broad and amorphous and did not identify narrow classes of key documents reasonably necessary to understand the claim or formulate the defence. Extended disclosure remained a matter for later case management.
7. The condition was proportionate. The directors’ loan was admitted as repayable, although its timing was disputed, and the defence on that issue was improbable. The payment-in-court condition therefore provided proportionate security and encouraged efficient conduct without stifling the defence.