Majid Saadati v Seyed Ehsan Dastghaib & Anor

A default judgment must be set aside under Civil Procedure Rules 1998, r 13.2 where the conditions in r 12.3 were not satisfied, including where the claim form was not validly served or no time for filing an acknowledgment of service or defence had begun to run. Retrospective validation of service does not retrospectively create a default or validate an earlier default judgment.

Delay does not displace the mandatory duty in r 13.2. In an exceptional case, abuse of process or estoppel might do so, but mere inactivity or silence is insufficient to establish estoppel by conduct. A case-management decision will be disturbed only where plainly outside the ambit of discretion.

The claimant appealed from an order of Deputy Master Sabic KC dated 20 June 2024. The Deputy Master had set aside a default judgment entered in 2020 in the claimant’s claim for repayment of a US$15 million loan.

The claim form and particulars of claim had not been validly served on either defendant. The defendants had filed acknowledgments of service and challenged jurisdiction, service, strike-out and summary judgment. Their application was dismissed, after which the Master entered judgment in default without providing the further period for acknowledgment of service or directions for a defence required by CPR 11(7).

The appeal concerned case management, the application of CPR 13.2, whether the defendants’ conduct created waiver, estoppel or abuse of process, and an interim payment on account of costs.

1. Permission refused. All five proposed grounds had no real prospect of success.
2. The Deputy Master’s decision to determine the mandatory set-aside applications first was a case-management decision. Such a decision should be disturbed only if plainly wrong and outside the general ambit of discretion. There was no such error. The action or inaction of the defendants’ solicitor was, for these purposes, treated as the action or inaction of the defendants.
3. Under Civil Procedure Rules 1998, rr 12.3 and 13.2, valid service is foundational. Where there has been no valid service, there is no obligation to acknowledge service or serve a defence, and therefore no relevant time limit whose expiry can support default judgment. The default judgment was consequently irregular and had to be set aside.
4. Alternatively, even if service had been valid, dismissal of the jurisdiction application engaged CPR 11(7). The defendants were entitled to file a further acknowledgment of service within 14 days, and no time for serving a defence had been specified. The Master therefore had no basis to enter judgment in default. The same conclusion followed from the unresolved strike-out and summary-judgment applications.
5. There is no time limit on the court’s duty under CPR 13.2, and mere delay cannot defeat it. The court did not finally decide whether abuse of process or estoppel could ever prevent reliance on that duty. On the facts, neither applied. The defendants had not sought the same relief in the later applications, their earlier default was negligent or mistaken rather than contumelious, and silence or inactivity was not positive conduct amounting to an estoppel or unequivocal waiver.
6. The standard seven-day liberty-to-apply provision in the earlier order did not impose a bar on setting aside under CPR 13.2. The order was construed as applying to dismissal of the earlier application, not as overriding the mandatory default-judgment regime.
7. The interim payment on account of costs was an evaluative costs decision. The remaining applications concerned distinct questions and there was no sufficiently certain prospective costs liability capable of providing a good reason against payment.

• High Court (King’s Bench Division): permission to appeal refused on all grounds. The order of Deputy Master Sabic KC dated 20 June 2024 remained in force.
• Deputy Master Sabic KC: the default judgment and costs order were set aside under CPR 13.2; the defendants’ applications were allowed and the claimant’s initial service application was dismissed.