Court of Appeal decides that an application to set aside default judgment is an application for relief from sanction to which Denton applies.
Katie Ayres discusses the recent Court of Appeal decision in FXF v (1) English Karate Federation Ltd, (2) Ishinryu Karate Association, in which she acted for the successful Respondent. The judgment clarifies the test under CPR 13.3 to set aside default judgment.
Nit-picking: To find fault or point out minor faults in a fussy or pedantic way.
Yesterday, the Court of Appeal handed down its judgment in an important procedural appeal in the case of FXF v (1) English Karate Federation Ltd, (2) Ishinryu Karate Association, in which Katie Ayres acted for the successful Respondent. The issues before the Court of Appeal were: (i) what test the Master had applied and whether his discretion was reasonably exercised; and (ii) whether, in general, the Denton test applies to an application to set aside default judgment under CPR 13.3. During the course of the 78-paragraph judgment, the Master of the Rolls was critical of two first instance judges for being ‘unduly nit-picking’ for their attempt to carry out a careful analysis of the Civil Procedure Rules [68]. The judgment is likely to be somewhat dispiriting for judges undertaking the unenviable task of interpreting the rules and doing their best to do so.
The claim is brought by a successful karate athlete in relation to allegations of sexual abuse by her karate coach. The Respondent is said to have been vicariously liable for the abuse, albeit the Court of Appeal has recognised, like Master Thornett before it, the ‘tenuous connection’ between the Respondent and the Claimant’s karate coach expressing doubts about the strength of the case on vicarious liability.
After a series of stays agreed between the Appellant and Respondent in light of a lack of pre-action correspondence, the latter failed to file its defence on time and the former filed for and obtained default judgment on 22 September 2020. The Respondent applied to set the default judgment aside under CPR 13.3 on 17 November 2020 (having become aware of the default judgment on 23 October 2020). Master Thornett acceded to this application, whilst noting that he was unimpressed with the Respondent’s conduct which had been inexplicably tardy and merited a penalty in costs.
The Appeal
The Appellant appealed on the basis that the Master had erred in law by failing to apply the Denton test to the exercise of his discretion and, if he had done so, the only conclusion to which he could have come would be to decline to set the judgment aside. The Court of Appeal found that the Master did not err in law and agreed that he had exercised his discretion correctly when deciding to set the judgment aside.
Part of the argument focused on whether, as a general proposition, default judgment was a sanction and, in order to set it aside, a party has to apply for relief under the now well-known Denton test. When granting permission to appeal, the Court identified a potential conflict of authority on this issue and expressly noted the first instance decision of Judge Dias in PXC v AB College and anor [2022] EWHC 3571 (KB) in which David Platt KC appeared.
The Appellant argued, in accordance with the approach taken in Gentry v Miller [2016] EWCA Civ 141 (albeit on an agreed basis) that there are two tests that must be met: first, the CPR 13.3 ‘gateway conditions’ must be satisfied and second the Denton test is applied. The Respondent argued that CPR 13.3 is its own test that is subject to a discretion informed by the overriding objective within which ‘promptness’ (13.3(2)) is a mandatory consideration and the Denton factors are (in many cases) likely to be highly relevant. As the Master of the Rolls noted, the difference between the parties’ respective positions on the law was ‘narrower’ than it might first appear.
The Master of the Rolls gave the leading judgment with which Nicola Davies and Birss LJJ agreed. The Court, conscious of the conflicting authorities on the issue, gave a resounding confirmation that “the Denton tests apply in their full rigour to applications to set aside default judgments” and endorsed the two-stage approach taken in Gentry. The Court also expressly overruled the decision in PXC and clarified that the earlier dicta in the case of Cunico Resources NV v. Daskalakis [2018] EWHC 3382 (Comm) is no longer to be relied on.
However, the Court agreed with the Respondent that, whichever way you sliced the Master’s discretion (Denton as part of the overriding objective, or the overriding objective as part of Denton), it was plainly reasonable and ought not to be disturbed. The Master of the Rolls went further than merely confirming that the Master’s discretion was within reasonable bounds, but he in fact agreed with the conclusion that he came to when exercising his own discretion afresh.
Implications and Comment
Whilst the clarity that this judgment provides is welcome and finally puts to bed an issue that had been causing significant uncertainty, the judgment engages little with the carefully reasoned judgments of PXC and Cunico, and instead criticised them as ‘nit-picking’ and ‘unduly academic’ (an approach, it might be said, identical to that taken by Lord Dyson (a leading player in Denton himself) in the Privy Council case of The Attorney General for Trinidad and Tobago v Matthews [2011] UKPC 38, yet the Court stopped short of criticising him in such stark terms). It somewhat begs the question of how the Civil Procedure Rules are to be approached when questions of interpretation arise if not by a detailed and academically rigorous approach to what the rules themselves say.
It also expands the reach of the Denton test right across the CPR, to applications which do not include a ‘sanction’ as defined by CPR 3.8 (that is, express or, arguably, implied sanctions – although the Court expressly dodged the knotty question of implied sanctions in its entirety at [60], perhaps saving that battle for another day), but where in general terms a party is asking to be excused for any procedural misstep that has (either automatically or not) resulted in some sort of adverse consequence. What, for example, of applications for permission to serve a late Reply or to make a late amendment that could have been made earlier, does the Denton test need to be satisfied here too?
Given the Court of Appeal was at pains to re-stress the importance of the message of the ‘new’ robust approach to civil procedure that Denton ushered in, parties would be well advised to consider responses to Denton arguments ahead of applications where it might be relevant (and indeed, better still, don’t miss the deadline in the first place). However, this judgment should be limited in its reach to default judgment applications and parties should not be too keen to peremptorily offer up Denton arguments in circumstances where the test might not need to be met in order to prevent the further proliferation of the test (which, lest we forget, does not in fact appear anywhere within the rules themselves) to absolutely every application under the CPR.
Finally, the judgment also puts litigants in person (a growing category within the civil justice system and perhaps, one might think, especially vulnerable to the imposition of a default judgment) in a particularly difficult position when interpreting the rules which, on their face contain one express test to be met but in fact by stealth contains two.
Katie Ayres was instructed by Richard Kirby (Keoghs)
