The recent case of Wards Solicitors v Hendawi has revisited the common issue of setting aside a default judgment. The matter was heard by HHJ Paul Matthews at the Bristol District Registry.
Details of the case
In December 2005, Wards Solicitors, the claimants, mistakenly paid the sum of £177,000 to Mr Hendawi, the defendant. Wards Solicitors wrote to Mr Hendawi and explained that payment had been made by mistake and he repaid the sum of £143,975. This left a shortfall of £33,025.
The claimant wrote to the defendant on 16 January 2006 demanding repayment of the outstanding sum. The claimant received no response and accordingly issued a claim. The claim was served by the court on 30 December 2006 to the claimant’s address. The claimant and the court both used the same address for the defendant, which had had been the residence of the defendant at the time of the mistaken transfer.
It transpired that the defendant had left that address in or around December 2006, and the papers were returned to the court and then on to the claimant on 2 January 2007. However, by this date, the claimant had made its request for a judgment in default in the usual way. The judgment was granted.
Nothing further happened for ten years. On 4 August 2017, the claimant issued a statutory demand in relation to the outstanding monies. Again, this was served at the address that had been the defendant’s residence at the time of the mistaken transfer. That demand was not satisfied and on 24 October 2017, the claimant presented a petition for the defendant’s bankruptcy. Permission for alternative service was given by email.
Before the bankruptcy hearing, the defendant issued an application notice to set aside the original judgment.
HHJ Matthews heard the case at Bristol District Registry of the High Court. He had to decide whether the defendant had sufficient grounds under CPR 13 to convince the court that the judgement should be set aside. HHJ Nicholls gave clear guidance as to the issues which had to be considered. At paragraph 20 of his judgment, he states:
“1. Is there a real prospect of the Defendant succeeding in defending this claim if the default judgment is set aside?
2. As part of the first issue, the Claimant has made a number of allegations that the Defendant has acted in bad faith. Do these affect the question whether there is a real prospect of success for the Defendant?
3. If there is no real prospect of the Defendant succeeding in defending, is there some other good reason to set aside the judgment? If so, should the Court take into account the circumstances in which the claim form came to be served on the Defendant at an address at which he was not then resident.
4. In relation to the same question there is the question of the Claimant’s delay in enforcing the judgment itself.
5. Finally there is the question of the possible delay by the Defendant in applying to set aside the judgment once he became aware of it.”
HHJ Matthews considered each point in turn. Some of the issues raised are of interest to practitioners.
Any other good reason
HHJ Matthews decided on the evidence before him that the defendant did not have a real prospect of successfully defending the claim, but went on to look at whether there was any other good reason why the judgment should be set aside.
At paragraph 39 he stated:
“First, I remind myself that the test is not whether there is any other compelling reason (in relation to summary judgment) but whether there is any other good reason. In the present case the claim form and particulars of claim were sent by post to the Defendant’s former address and then returned undelivered to the Court. The evidence, which I accept and on which basis I proceed, is that the Defendant was unaware of both the claim form and the judgment until August 2017. The question is whether this is a sufficient basis by itself for holding that there is a good reason for setting aside the judgment”.
He then went on to discuss Godwin v Swindon Borough Council, which decided that although the fact that a defendant never received the claim form was a relevant factor in deciding whether as a matter of discretion to set aside a default judgment, on its own it was not enough.
HHJ Matthews stated that in the current case, as there was no arguable defence, he had to decide whether there was any other good reason why the judgment should be set aside. He went on to state that:
“… if the Defendant had known about the claim and the judgment earlier than August 2017 he would have had more warning of the possibility of the threat of a bankruptcy, but in my judgment that is not enough… I am afraid that this looks very much as though the Defendant is simply trying to frustrate the enforcement of the judgment entered against him.”
He therefore ordered that there was no other good reason to set aside the default judgment, and that simply not having received the claim form was not sufficient reason in itself to set aside the default judgment.
Promptness
The other issue that may be of interest to practitioners is the issue of promptness. Under CPR 13.3(2), a defendant has to act promptly when applying to set aside a judgment.
In this case, Mr Hendawi stated that he knew about the judgment on 4 August 2017. He applied to set it aside on 29 March 2018; a delay of around nine months.
HHJ Matthews quoted Regency Rolls Limited v Carmel, where a period of 30 days was not prompt for the purposes of CPR 13.3(2), and Hart Investments v Fiddler, where 59 days was at the “outer edge” of what was acceptable.
HHJ Matthews commented that nine months was far too long to be considered “prompt” under CPR 13 and furthermore, there was no explanation as to why the delay had occurred. The defendant’s application was dismissed.
