High Court grants relief despite “deliberate and non-trivial” breach

High Court: conditions imposed

A High Court judge has granted relief from sanctions despite finding that the non-compliance was non-trivial and deliberate, and that there was some delay in lodging the application for relief – using instead powers to impose conditions on the order.

The parties in Newland Shipping and Forwarding Ltd v Toba Trading & Ors [2014] EWHC 1986 (Comm) agreed to press ahead to the ruling even though the Court of Appeal is currently considering whether to issue fresh guidance on Mitchell, which has led to other cases being stayed in anticipation.

The application from one of the defendants was to set aside a default judgment, which followed his deliberate failure to acknowledge service. Mr Justice Males said it had been established at first instance, and was common ground between the parties, that this was an application for relief from sanctions.

He noted that CPR 13.3 on setting aside a judgment cross-refers to CPR 3.1(3), “thereby drawing attention to the court’s powers to attach conditions on any order which it may make to set aside a judgment”.

He continued: “This indicates, to my mind, that when considering the exercise of discretion under CPR 13.3, the court should bear in mind that the entry of a default judgment may operate as an extreme sanction and that justice may be done by making the setting aside of such a judgment subject to conditions… That may represent a more proportionate sanction.”

As well as the other failings, Males J said the prospect of the defendant being able to defend the claim was “borderline” so far as liability was concerned.

However, he said the claim involved serious allegations of dishonesty, meaning that “to maintain the judgment in default deprives him of any prospect of vindicating his defence and clearing his name, and importantly the judgment may well be for an excessive sum to which the claimant is not fully entitled”.

The judge noted that setting the judgment aside would have no real adverse impact on the overall progress of the action.

Males J ruled that in all the circumstances, it was a case where the “usual expectation” that the sanction would apply – as stated by the Court of Appeal in Mitchell – was not appropriate.

Instead he made a conditional order requiring a $4.75m payment into court within 28 days, and the payment of an outstanding costs order as well as the costs of the application within 21 days, failing which the default judgment would stand.

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