Court Sets Aside Default Judgment Due to Irregular Entry: Key Procedural Issues Explored

Citation: [2023] EWHC 3306 (Comm)
Judgment on

Introduction

In the recent case of Magdalena Gallani (Deceased) & Anor v Juan Sartori & Ors [2023] EWHC 3306 (Comm), the High Court grapples with several procedural issues stemming from an application to set aside a default judgment. This judgement is enlightening for legal professionals as it touches upon topics including relief from sanction, extension of time for filing acknowledgements of service, the irregular entry of default judgment, and the measures available when a litigant passes away mid-proceeding. The case delineates the principles relating to judgment entry, the significance of timing in procedural compliance, and the court’s discretion in granting relief.

Key Facts

The claim involved alleged misrepresentations leading to a financial loss for the claimants, who invested in a company based on promises of returns. Following the non-response to the claim from the first defendant, Sartori, the claimants sought and obtained default judgment after the time for filing an acknowledgment of service had expired. Sartori subsequently sought to set aside the default judgment, on grounds including the irregular entry of judgment, as the acknowledgment was filed on the same day the default judgment was ordered. The case was further complicated by the passing away of the first claimant, Ms. Galliani, and subsequent legal procedural issues that arose from her death with respect to legitimate representation in the proceedings.

Misrepresentation and Fraudulent Inducement

The claim rests on alleged misrepresentations, which required the defendants to believe them to be true upon making them or have reasonable grounds for the belief, as cited in Brown v Raphael [1958] Ch. 636.

Default Judgment and Irregular Entry

The judgment explores the interface of CPR rules 12.3 and 13.12, discussing the meaning of “entry of judgment”. As per Cunico Resources NV v Daskalakis [2018] EWHC 3382 (Comm), judgment is barred if an acknowledgment is filed at any point before judgment entry, a principle enshrined post-amendment of CPR rule 12.3.

Appointment of a Litigation Friend or Representative for Deceased Litigants

CPR rules 21.2 and 19.12 were examined to address the authority of actions taken after a claimant’s incapacitation and subsequent death. The principle, consistent with Amirtharaja v White [2020] EWHC 1507 (Ch), is that co-claimants can sustain an application for default judgment in such cases.

Relief from Sanctions

Application of the three-stage test for relief from sanctions per Denton v TH White Ltd [2014] EWCA Civ 906. This test scrutinizes the seriousness of the failure, the reason for default, and the circumstances overall, as well as the need for litigation to be conducted efficiently, at proportionate cost, and enforcing compliance with rules, practice directions, and orders.

Real Prospect of Successfully Defending the Claim

The court referred to the principle in ED & F Man Liquid Products v Patel [2003] EWCA Civ 472, that a defence requires more than a fanciful chance of success but also does not need to be conclusive.

Outcomes

  1. The default judgment against Mr. Sartori was set aside due to irregular entry, as the acknowledgment of service was filed before the judgment was entered.
  2. The court also recognized that Mr. Sartori had a real prospect of successfully defending the claim based on the merits of the case.
  3. The decision remained unaffected by the application to vary HH Judge Pelling KC’s earlier order regarding the representation of Ms. Galliani’s estate.
  4. Finally, the court concluded the delay in filing an acknowledgment of service did not result in significant prejudice to the claimants, reinforcing the conclusion that the default judgment should be set aside.

Conclusion

The High Court’s judgment in Magdalena Gallani (Deceased) & Anor v Juan Sartori & Ors provides an extensive examination of various procedural complexities and reinforces the importance of procedural compliance in seeking relief from sanctions and setting aside default judgments. It underscores the court’s inherent desire to ensure that justice is administered fairly, even when procedural irregularities emerge. This case underscores that, in English law, even a default judgment may not be the final word where there has been an irregularity or where a real prospect of a successful defence is identified.