Ras Al Khaimah Investment Authority v Farhad Azima & Ors

For a non-money claim, default judgment is not automatic merely because the procedural conditions are satisfied. The court must scrutinise whether judgment would be unjust, including material that could justify setting it aside and the effect on persons directly affected by the proposed judgment.

Persons who are parties to the wider proceedings, although not defendants to the particular claim, may oppose default judgment where the judgment would materially affect their pleaded defences or interests. Serious allegations that an earlier judgment was procured by fraud require particular caution before being determined by default.

By contrast, a defence may be struck out for serious and contumacious non-compliance with disclosure orders. Consequential default judgment may then be entered where the claimant is entitled to it and no opposing party establishes a sufficient reason against that course.

The proceedings contained two counterclaims by Farhad Azima against Ras Al Khaimah Investment Authority (RAKIA): a Hacking Counterclaim and a Set Aside Counterclaim seeking to set aside earlier judgments for fraud. RAKIA had ceased participating in the proceedings and had filed no defence to the Set Aside Counterclaim. It had also failed to comply with orders for extended disclosure in the Hacking Counterclaim.

Azima applied for default judgment on both counterclaims. Dechert LLP and David Neil Gerrard, although not defendants to the Set Aside Counterclaim, opposed default judgment and sought to set aside any judgment, relying on the effect on their pleaded defences to the Hacking Counterclaim and their challenges to the Set Aside Counterclaim. The issues were whether default judgment should be entered on the Set Aside Counterclaim and whether RAKIA’s defence to the Hacking Counterclaim should be struck out for disclosure breaches.

1. Set Aside Counterclaim. The conditions for default judgment were satisfied because RAKIA had not filed a defence within time. However, under CPR 12.12 and the approach in Lux Locations Ltd v Yida Zhang [2023] UKPC 3, the court retained discretion not to grant judgment where material before it would justify setting the judgment aside or where granting it would be unjust.
2. Dechert and Mr Gerrard had standing. They were parties to the proceedings and had pleaded substantive defences relevant to the Set Aside Counterclaim. In any event, they were directly affected within CPR 40.9 because default judgment could deprive them of relying on the earlier fraud findings in the Hacking Counterclaim and of contesting materiality.
3. The directly affected test was applied flexibly. Latif v Imaan Inc [2007] EWHC 3179 (Ch) was explained as recognising that a potential inconsistency between a default judgment and another party’s existing litigation could constitute direct effect. Abdelmamoud v The Egyptian Association in Great Britain Ltd [2018] Bus LR 1354 supported the requirement that the person affected must be able to defend the claim on the defendant’s behalf or advance a defence of their own.
4. There was a serious issue to be tried concerning the Additional Defendants’ estoppel, abuse of process and collateral-attack arguments. Their pleaded defences to materiality were also properly arguable. The risk of unfairness to them clearly outweighed any prejudice to Azima from proceeding to trial. The application for default judgment on the Set Aside Counterclaim was therefore dismissed.
5. Hacking Counterclaim. RAKIA’s failure to provide extended disclosure, despite orders and a final deadline, was serious and contumacious. Its conduct showed an intention to disregard court-imposed duties. The defence was struck out under CPR 3.4(2)(c), reinforced by the overriding objective in CPR 1.1(2)(f). An unless order would serve no useful purpose.
6. Following striking out, Azima was entitled to judgment in default under CPR 3.4(3), CPR 12.3(1) and Practice Direction 3A, paragraph 4.2. Judgment was entered against RAKIA, with indemnity costs, interest and an interim payment on account of costs.

The judgment records that the Hacking Counterclaim had previously been tried in the High Court, with the decision remitted for retrial by the Court of Appeal. The Set Aside Counterclaim had been permitted by the High Court, and an appeal by additional defendants concerning that permission was dismissed. Those earlier decisions formed part of the same litigation and are not separately treated as cited authorities here.