25th May 2012
The applicant (H) applied to set aside a default judgment that had been entered against him in favour of the respondents, his former company (C) and its liquidator.
H had been C's sole director and shareholder. Following liquidation, C's liquidator had filed the instant claim against him alleging that he had breached his duties as a director and had engaged in VAT fraud. H failed to defend and C and the liquidator obtained a default judgment. H conceded that he did not have a real prospect of successfully defending the claim which could justify setting aside the default judgment under CPR r.13.3(1)(a).
H argued that the judgment should be set aside under r.13.3(1)(b) because: (1) a spreadsheet created by Her Majesty's Revenue and Customs regarding the management of C's finances did not show what C and the liquidator claimed it did; (2) he should be entitled to deny allegations of dishonesty under oath from the witness box.
(1) H's submission that the spreadsheet should be interpreted in a certain way required expert evidence on the relationship between the spreadsheet's 18 columns. The submissions of counsel regarding the meaning of the spreadsheet were no substitute for expert evidence, and even if they were, they did not undermine other elements of C's case. (2) It was accepted that at a trial where a defendant gave evidence, allegations of dishonesty would have to be put to him. However, a defendant was not necessarily required to give evidence, and there would not be a trial in a case where there had been a judgment prior to trial. The suggestion that there had to be a trial in the event of serious allegations was contrary to r.13.3(1), which recognised the court's discretion, and r.12.2 and r.12.3, which did not except serious cases from default judgments. The wording of r.13.3(1)(b) was that there might be some good reason to set aside a default judgment other than a real prospect of successfully defending against the claim. However, the reason had to be good. A claimant should not be denied the benefit of his or her judgment on a whim. There had to be a useful purpose of setting aside the judgment. H was in effect saying that he might be able to successfully defend the claim if he had more time to examine the documents and give evidence from the witness box. That was fanciful. Moreover, his challenge to the spreadsheet did not begin to throw doubt on many of the aspects of the claim against him. So not only was there not presently a real prospect of successfully defending the claim, but there was also no likelihood that, if the application were acceded to, H would ever be able to demonstrate a real prospect of success. There was no good reason to set aside the default judgment.
A default judgment would not be set aside under CPR r.13.3(1)(b) where there was no useful purpose to doing so and there was no likelihood that the defendant would ever be able to demonstrate a real prospect of successfully defending the claim.