Magdalena Gallani (Deceased) & Anor v Juan Sartori & Ors

Default judgment is irregularly entered where an acknowledgment of service giving notice of an intention to defend has been filed before the judgment is perfected by drawing up and sealing the order, even if the court has already decided to grant judgment in default.

Where default judgment has been regularly entered, the court may set it aside under CPR rule 13.3 if the defendant has a real prospect of successfully defending the claim or there is some other good reason. Promptness remains relevant. A short delay caused by difficulty obtaining representation, with little prejudice and little impact on the proceedings, may justify relief from sanctions. A defence based on lack of belief in forward-looking representations, limitation, disputed oral statements and causation may meet the real-prospect threshold.

The claimants alleged that Juan Sartori and others induced investments in a Peruvian hydropower company through fraudulent and negligent misrepresentations and unlawful means conspiracy. Mr Sartori was personally served with the claim form but failed to file an acknowledgment of service within time. The court decided to enter default judgment on the same day that Mr Sartori’s acknowledgment of service was filed, although the order was drawn up and sealed the following day.

Mr Sartori applied for relief from sanction, an extension of time and an order setting aside the default judgment. The principal issues were whether the judgment had been irregularly entered and, if not, whether the requirements of CPR rule 13.3 and the principles governing relief from sanctions were satisfied.

1. Irregular entry. CPR rule 12.3(1)(a), as amended by the Civil Procedure (Amendment) Rules 2020, requires that the defendant has not filed an acknowledgment of service at the date judgment is entered. The relevant date is when judgment is perfected by drawing up and sealing the order, not merely when the court decides to grant it. The acknowledgment had been filed before sealing, so the conditions for default judgment were not satisfied. The judgment was therefore irregular and had to be set aside.
2. Regular judgment, alternatively. If the judgment had been regularly entered, Mr Sartori would nevertheless have satisfied CPR rule 13.3. The pleaded defences collectively raised real, rather than fanciful, prospects of success. The forward-looking statements required consideration of whether they were believed to be true or supported by reasonable grounds. The alleged oral representations raised factual issues requiring oral evidence and cross-examination. Limitation also required disclosure and witness evidence, including consideration of what the claimants could have discovered with reasonable diligence under section 32 of the Limitation Act 1980. The alleged later misrepresentations raised a real issue as to whether the claimants knew the shares had significant value before sale and whether any loss was caused by reliance.
3. Promptness and sanctions. The application was made 13 days after the default judgment came to Mr Sartori’s attention and was prompt. Applying the approach in Denton v TH White Limited, the failure was not serious, there was an explanation arising from difficulty obtaining representation, and the delay caused little prejudice. Default judgment would have been disproportionate. Relief from sanctions would therefore have been granted in any event.
4. The default judgment against Mr Sartori was set aside. No order was made on the application to vary the order of HH Judge Pelling KC. Further consequential matters, including whether an extension or relief order was necessary, were left for further submissions or agreement.