England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LEEDS DISTRICT REGISTRY

		The Court House Oxford Row Leeds LS1 3BG
		30 April 2015

Judge Behrens:

1. Introduction

1. This is an appeal by Dunbar & Co ("Dunbar") against the decision of DJ Giles dated 29^th April 2014 in which he dismissed Dunbar's application to set aside a default judgment on liability in a professional negligence action which had been entered on 22^nd November 2013.
2. Although DJ Giles found that that there were seriously triable issues on the question of liability his principal reason for refusing to set aside the judgment was the lack of promptness by Dunbar in making the application to set aside the judgment which (in DJ Giles's view) meant that work had been done towards the damages trial that might or might not now be needed and that the proceedings would be considerably put back.
3. On behalf of Dunbar it is argued that DJ Giles erred in refusing to set aside the judgment. He was wrong to find the application was not made promptly. He was wrong to attach so much weight to the question of promptness; he was wrong in his assessment of the work done towards the quantum trial.
4. On behalf of Dr Priestley it is argued that the refusal to set aside the judgment was a matter for the discretion of DJ Giles. None of those grounds for setting aside a discretion apply to this case. It follows that this Court is not entitled to substitute its own decision for that of DJ Giles.
5. I granted permission on the papers on 27^th May 2014. In granting permission I observed:

"The case brings into sharp focus the question of how far lack of promptness should prevent a Defendant with an arguable defence on liability from succeeding in an application to set aside a default judgment and how far it is open to an appellate court to interfere."

2. The Nature of the Claim.

6. The allegations in the Particulars of Claim may be summarised:

1. Dr Priestley is a clinical neuropsychologist with a practice in England and France now resident in France. Dunbar is a firm of accountants which was retained by Dr Priestley between 1977 and 2010. Its retainer included an obligation to advise Dr Priestley if there were any more tax efficient ways of running his business and if so to implement them on instruction.

2. In each year between October 2003 and 2008 Mr Mason (of Dunbar) advised Dr Priestley that it would not be worthwhile to incorporate his business or to pay Mr Henderson his civil partner and practice manager a salary.

3. Between 2008 and 2010 Dr Priestley ended Dunbar's retainer as a result of penalty notices and correspondence received from HMRC. In June 2010 Dr Priestley appointed a new accountant SCB who advised him to incorporate his business and pay Mr Henderson for the role he undertook as Practice Manager.

4. Dunbar had failed to file Dr Priestley's tax return for 2007/2008 and 2008/2009 and had not advised Dr Priestley of his likely liability for these years. It did not respond to letters from SCB. Dr Priestley had no means of paying the tax liability and eventually accepted an offer for a house in France (which had been valued at €700,000) for €377,500.

5. The allegations of negligence include:

1. Failure to advise Dr Priestley to incorporate his business

2. Failure to advise Dr Priestley to treat Mr Henderson as an employee

3. Failure to advise over National Insurance

4. Failure to submit the 2007/2008, 2008/2009 and 2009/2010 tax returns on time so as to avoid a financial penalty and interest. Failure to advise on the likely liability for those three last tax years.

5. Failure to provide information sought by HMRC thereby rendering Dr Priestley liable to a penalty.

6. The losses claimed as a result of the negligence include the loss on the sale of the French property.

3. The Draft Defence

7. No defence has, of course been filed. However in the course of this application a draft Defence dated 25^th March 2014 has been prepared. The allegations may also be summarised:

1. It is accepted that Dr Priestley is a clinical neuropsychologist with a practice in England. It is admitted that Dunbar is a firm of accountants who acted for Dr Priestley. It is denied that Dunbar ever held itself out as having any expertise on French accountancy. Dr Priestley was advised to seek the advice of a French accountant. There is a dispute as to what Mr Mason was told about the role of Mr Henderson.

2. It is admitted that there was a retainer from 1995 to 2008. There is a dispute about the express terms of the retainer. Reference is made to the express terms of an engagement letter dated 4^th December 2006. It is denied that Dunbar was instructed to prepare the returns for the years ending April 2008, 2009 and 2010. In any event Dr Priestley failed to provide adequate information for the returns to be completed

3. It is admitted that the retainer was terminated in June 2010 and that both Dr Priestley and Dunbar received communications from HMRC. Any failure to provide information to HMRC was caused by Dr Priestley's failure to provide the relevant information to Dunbar timeously.

4. The allegations of negligence are denied. It is alleged that Dunbar complied with its retainer. It is denied that Dr Priestley ever asked for advice over incorporation or over Mr Henderson's salary. It is further denied that Dunbar gave any advice on these topics. It is denied that Dunbar failed to prepare the 2007/2008 tax return. It was not instructed to prepare subsequent returns. It responded to requests from HMRC when it had received instructions from Dr Priestley.

5. Causation and loss are in issue. There are allegations of contributory negligence.

4. History

8. In the light of the basis of the decision it is necessary to set out the history of the proceedings. There is a relatively detailed chronology exhibited to the witness statement of Wendy Greenwood dated 28^th February 2014. The history prior to the judgment is summarised in the following table:

Date	Event
15/6/2011	Preliminary Notice of Claim sent to Dunbar
13/7/2011	Acknowledgment of Notice received by Irwin Mitchell
23/1/2013	Letter of Claim sent to Dunbar
29/5/2013	Mr Mason notified Irwin Mitchell that he had been on holiday and was informing his insurers of the Letter of Claim.
4/6/2013	Issue of Claim Form
1/10/2013	Service of Claim Form, Particulars of Claim
18/10/2013	Application for judgment in default of Acknowledgment of Service
22/11/2013	Judgment on liability in default entered in favour of Dr Priestley granted by DJ Goldberg. The matter was listed for a CMC on 7th January 2014
26/11/2013	Service of judgment on Dr Priestley

9. On 6^th January 2014 Mr Mason wrote a 5 page letter to the Court. In the letter he informed the Court that he had reported the matter to his professional indemnity insurers and Fisher Meredith, his solicitor. Under the heading background he set out in summary form the defence on the merits. Under the heading chronology he asserted that neither he nor his partner had received the court papers. When he was served with the judgment he notified Irwin Mitchell that he had not received the Court papers. His solicitor was on holiday between 6^th December 2013 and 2^nd January 2014 but he was able to discuss the matter with Mr Mason on 24^th December 2013. On that day his solicitor wrote to Irwin Mitchell requesting that they consent to the judgment being set aside. Irwin Mitchell refused to consent to the set aside or to the adjournment of the hearing on 7^th January 2014. The letter went on to point out that his 97 year old godmother had been hospitalised and that he was unable to attend the hearing. The letter went on to make the point that he intended to make the application to set aside the judgment and that he would be giving appropriate instructions to his solicitors in the next few days as and when the file had been retrieved from storage. He estimated it would then take 2 to 3 weeks for the application to be settled and a hearing requested.
10. The application duly came before DJ Giles on 7^th January 2014. It was attended by Irwin Mitchell on behalf of Dr Priestley. There was no attendance on behalf of Dunbar. DJ Giles assigned the case to himself for case management, made directions for disclosure (11^th and 25^th February 2014) and witness statements (25^th March 2014). He directed a further CMC on 14^th April 2014 and directed the parties to file the draft directions and a case summary (9^th April 2014). Paragraph 6 of the order reads:

"Any application by the Defendant to set aside the Judgment must be filed in Court as soon as possible. It may not await the further CMC."

11. As Mr Bacon points out this is not an "unless" order. Furthermore it does not provide a date by which the application has to be made. The expression "as soon as possible" is vague.
12. On 28^th February 2014 Irwin Mitchell made two applications against Dunbar. The first was for an "unless" order in relation to disclosure. The second was for an interim payment of £82,324 in respect of damages (being the alleged quantifiable loss of Dr Priestley) and £98,311 in respect of costs. The application made clear that Dr Priestley's loss was said to be more than £82,234.
13. The application was supported by a witness statement from Ms Greenwood, an associate solicitor from Irwin Mitchell. In the witness statement she points out that Dunbar has not complied with the disclosure obligations in the order of 7^th January 2014. She also points out, apart from one email from Fisher Meredith, Irwin Mitchell has had no communication from Dunbar or Fisher Meredith after Mr Mason's letter of 6^th January 2014.
14. On 12^th March 2014 DJ Giles considered the application on the papers and listed it together with the further CMC on 29^th April 2014 with a time estimate of 1½ hours. The order was sealed and sent out on 22^nd March 2014.
15. On 21^st March 2014 Irwin Mitchell filed two witness statements in relation to the trial on quantum – one from Dr Priestley and the other from Elliot Cohen.
16. On 25^th March 2014 (some 11 weeks after the order of DJ Giles) Mr Mason on behalf of Dunbar made an application to set aside the judgment in accordance with CPR 13.3. The application was supported with a lengthy witness statement from Mr Mason. In the witness statement he dealt with both the merits and the reasons for delay. The reasons for the delay largely mirror the reasons given in the letter of 6^th January 2014. However he also added that he has been carrying out charity work and that he has had difficulty with his professional negligence cover. As at the time of the witness statement no insurer had accepted responsibility for the claim or had authorised the instruction of solicitors. He pointed out that he had had to borrow money to instruct solicitors to act for him. He dealt with the merits of the claim in considerable detail between paragraphs 11 and 65 of the witness statement. In the light of DJ Giles's conclusions on the merits and my summary of the draft Defence it is not necessary to refer to them in detail.
17. He concluded by making the point that Dunbar is a small firm of accountants whose express terms clarify the services it provides. The service required by Dr Priestley related to the preparation and submission of a limited number of tax and VAT returns. The witness statement incorporated the draft Defence to which reference has already been made.
18. On 8^th April 2014 Dunbar's application was listed on 29^th April 2014. On 18^th April 2014 Dr Priestley filed a witness statement in response to Mr Mason's witness statement. He dealt with the merits of the claim in paragraphs 3 to 10 of the statement. In so doing he plainly put in issue the nature and extent of the retainer between himself and Dunbar. There are also disputes relating to the advice in relation to Mr Henderson.
19. He dealt with the question of delay in paragraphs 11 to 17 of his statement. He pointed out that the proceedings were regularly served in accordance with the rules. He pointed out that Dunbar has other employees (he referred to Mr Rob Long) who could have dealt with the correspondence. He made the point that Mr Mason should have retrieved the file from storage in 2011 when he was notified of the claim or in 2013 when the pre-action protocol letter was sent. He suggested that the illness to his godmother and difficulties with his insurers do not obviate the need to comply with the rules. He reminded the court that it took 2 months to make the application to set aside the judgment after the order of DJ Giles.
20. Mr Henderson also filed a witness statement on 18^th April 2014 in which he asserted that on a number of occasions he asked Mr Mason whether Dr Priestley should pay him a salary to reduce his tax liability. He accordingly asserted that there was no reasonable prospect of defending the claim.
21. On 24^th April 2014 Mr Mason filed a further witness statement. The witness statement dealt with 3 matters – (i) Dunbar's application to set aside the judgment, (ii) Dr Priestley's applications for an unless order and interim payments and (iii) an application made by Dr Priestley on 8^th April 2014 for relief from sanctions in relation to the service of a Notice of Funding. In relation to the set aside application the witness statement goes into considerable further detail over the merits and it is not necessary for me to set it out in this judgment.
22. All of the applications came before DJ Giles on 29^th April 2014. However he only dealt with the application to set aside the default judgment. As already noted the application was refused.

5. Judgment of DJ Giles

23. There is a transcript of the hearing before DJ Giles and copies of the skeleton arguments that were before him are available. Unfortunately, however there is no transcript of his judgment. The tape was either switched off or malfunctioned. However there is an agreed note of his judgment (save for paragraph 17) which has been submitted to DJ Giles for his approval.
24. The judgment was relatively short. In paragraph 1 DJ Giles explained that this was because "we have run out of time" and that accordingly it would only deal with "the main points".
25. In paragraphs 3 and 4 DJ Giles gave a very brief summary of the nature of the claim. He describes it as being in relation to advice which "either ought to have been given or was specifically requested was not given or given incorrectly, with the result that Claimant suffered financial loss". It is to be noted that he gave no indication as to the amount of the loss claimed.
26. In paragraphs 5 to 8 he asked whether the defence had a real prospect of success. In paragraph 5 he recognised that there were issues as to the scope of the retainer. After commenting on arguments as to probability he found in paragraph 7 that there was no absence of reality in the defence. He further said that the issues of fact showed that there was a good reason why the matter ought to go to trial.
27. Paragraphs 9 to 21 come under the general heading "Discretion". In paragraph 9 DJ Giles directed himself that he had a discretion whether to set aside the default judgment. He noted that he was required to consider whether the application was brought "promptly" but that he had to consider that in the light of the proceedings as a whole.
28. In paragraphs 10 to 15 he summarised the history of the proceedings. Paragraphs 10 and 11 dealt with the history to the date of the default judgment. In paragraph 12 he noted that Mr Mason was aware of the judgment from 26^th November 2013. In paragraphs 13 and 14 he dealt with the hearing on 7^th January 2014. He was aware that Dunbar wished to make an application to set aside the judgment but considered that the action needed to be got on with.
29. He acknowledged that the order did not specify the time within which the application had to be made and speculated (in paragraph 15) that this was because of the difficulties referred to in Mr Mason's letter of 6^th January 2014. He referred specifically to the matters referred to in the letter.
30. In paragraphs 16 and 17 he pointed out that the application was not made until 25^th March 2014 and held that this was not prompt. In his view the application should have been made "some weeks before".
31. In paragraphs 18 to 20 he dealt with the question of discretion. He noted that promptness is an important but not the only factor. The authorities showed that each case depended on its own facts. He noted that cases had to be dealt with justly and that there had been no breach of a rule or a practice direction or an order. He pointed out that the overriding objective required cases to be dealt with "expeditiously and fairly". Lack of promptness meant that work had been done towards the damage trial which may or may not be needed. If judgment is to be set aside and there is to be a trial on liability the proceedings will be considerably set back.
32. In the result he decided to refuse the application due to lack of promptness.

6. The law

Setting Aside

33. The power to set aside a regular default judgment is contained in CPR13.3 which provides:

"(1) In any other case, the court may set aside^(GL) or vary a judgment entered under Part 12 if—

(a) the defendant has a real prospect of successfully defending the claim; or

(b) it appears to the court that there is some other good reason why—

(i) the judgment should be set aside or varied; or

(ii) the defendant should be allowed to defend the claim.

(2) In considering whether to set aside^(GL) or vary a judgment entered under Part 12, the matters to which the court must have regard include whether the person seeking to set aside the judgment made an application to do so promptly.

(Rule 3.1(3) provides that the court may attach conditions when it makes an order.)"

34. A number of points can be made about the question of promptness:

1. Promptness only relates to the period relating to the application to set aside the judgment. This is clear from the wording of CPR 13.3(2) and is confirmed in paragraph 30 of the judgment of Males J in Newland Shipping v Toba Trading [2014] EWHC 1986. However, as Males J pointed out "promptness" needs to be assessed in context. Furthermore delay prior to the entry of judgment can be taken into account as part of the general discretion to set aside a judgment.

2. Some guidance on the question of promptness can be obtained from paragraph 45 of the judgment of Simon Brown LJ in Regency Rolls v Carnall [2000] EWCA Civ 379 in the context of an application under CPR 39 to set aside a judgment where a party did not attend the trial:

"At first blush it might be thought that any inappropriate delay whatever on the part of an applicant would require that he be found not to have acted promptly. Yet such a construction would carry with it the Draconian consequence that, even if he had a good, perhaps compelling, reason for not having attended the trial, and a reasonable - perhaps, indeed, excellent - prospect of success at trial, the court would still be bound to refuse him a fresh trial. I would accordingly construe "promptly" here to require, not that an applicant has been guilty of no needless delay whatever, but rather that he has acted with all reasonable celerity in the circumstances. That said, I too would regard the appellant here as having failed even in that obligation. 30 days was altogether too long a delay before making this Part 39 application. Having regard to the long, and generally unsatisfactory, history of the proceedings to that point, the application plainly could, and in my judgment reasonably should, have been issued well before it was."

3. Further guidance in the context of an application under CPR 13.3 can be obtained from paragraph 22 of the judgment of Moore-Bick LJ in Standard Bank v Agrinvest [2010] EWCA Civ 1400;

"The Civil Procedure Rules were intended to introduce a new era in civil litigation, in which both the parties and the courts were expected to pay more attention to promoting efficiency and avoiding delay. The overriding objective expressly recognised for the first time the importance of ensuring that cases are dealt with expeditiously and fairly and it is in that context that one finds for the first time in rule 13.3(2) an explicit requirement for the court to have regard on an application of this kind to whether the application was made promptly. No other factor is specifically identified for consideration, which suggests that promptness now carries much greater weight than before. It is not a condition that must be satisfied before the court can grant relief, because other factors may carry sufficient weight to persuade the court that relief should be granted, even though the application was not made promptly. The strength of the defence may well be one. However, promptness will always be a factor of considerable significance, as the judge recognised in paragraph 27 of his judgment, and if there has been a marked failure to make the application promptly, the court may well be justified in refusing relief, notwithstanding the possibility that the defendant might succeed at trial."

35. In the light of a number of first instance decisions it was common ground before me that an application to set aside a default judgment is an application for relief against sanctions to which CPR 3.9(1) applies. As is well known CPR Rule 3.9 was amended as part of the Jackson reforms and falls to be applied in accordance with guidance set out in Mitchell v Newsgroup Newspapers Ltd [2014] 1 WLR 795 and Denton and Others v T H White Limited (De Laval Limited Part 20 Defendant) [2014] 1 WLR 3926.
36. In Altomart v Salford Estates (No.2) Limited [2014] EWCA Civ 1408 Moore-Bick LJ usefully summarised the principles in Mitchell and Denton in the following terms at paragraphs 19 and 20:

"More recently the rigour of the decision in Mitchell has been tempered by the decision in Denton. In that case the court recognised that Mitchell had been the subject of criticism and, while holding that the guidance it provided remained substantially sound, sought to explain in rather more detail how it should be interpreted and applied. In doing so it identified three stages of enquiry: (i) identifying and assessing the seriousness and significance of the default which engages Rule 3.9; (ii) identifying its cause; and (iii) evaluating all the circumstances of the case including those specifically mentioned" [i.e. the need for litigation to be conducted efficiently and at proportionate cost and the need to enforce compliance with the Rules]"

37. The date of DJ Giles's decision (29^th April 2014) was after the decision in Mitchell and before the decision in Denton. Mr Bacon submitted that DJ Giles was over influenced by the rigorous approach advocated in Mitchell.
38. In paragraph 9 of his judgment in Newland Males J drew attention to the power to impose conditions when granting relief and to the extreme nature of the sanction in refusing to set aside a judgment:

"In addition to this general guidance which applies to relief against sanctions for any kind of failure to comply with rules or court orders, CPR 13.3 cross-refers to CPR 3.1(3), thereby drawing attention to the court's power to attach conditions to any order which it may make to set aside a judgment. That 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, for example as to the provision of security for some or all of the claim. That may represent a more proportionate sanction, requiring a defendant who has hitherto ignored the proceedings to demonstrate his commitment to them by, as it were, putting some of his money where his mouth is. But as ever, what is appropriate will always depend on the particular circumstances of the case."

Appeals from District Judges

39. It is common ground between the parties that this is a true appeal Miss Smith QC accordingly referred me to the well-known principles set out in the judgment of Lord Woolf MR in Phonographic Performance Ltd v AEI Rediffusion Music Ltd [1999] 1 WLR 1507 at 1523C-D:

"Before the court can interfere it must be shown that the judge has either erred in principle in his approach or has left out of account, or has taken into account, some feature that he should, or should not, have considered, or that his decision is wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale."

40. Miss Smith QC warned me against a too critical approach to DJ Giles's judgment by reference to a passage from the speech of Lord Hoffman in Piglowska v. Piglowska [1999] 1 WLR 1360 at 1372 F – H:

"The exigencies of daily court room life are such that reasons for judgment will always be capable of having been better expressed. This is particularly true of an unreserved judgment such as the judge gave in this case but also of a reserved judgment based upon notes, such as was given by the district judge. These reasons should be read on the assumption that, unless he has demonstrated the contrary, the judge knew how he should perform his functions and which matters he should take into account. This is particularly true when the matters in question are so well known as those specified in section 25(2). An appellate court should resist the temptation to subvert the principle that they should not substitute their own discretion for that of the judge by a narrow textual analysis which enables them to claim that he misdirected himself."

41. Miss Smith QC referred me to a well-known and often cited dictum of Griffiths LJ in Eagil Trust Co Limited v Pigott-Brown [1985] 3 All ER 119, at p. 122:

"I cannot stress too strongly that there is no duty on a judge, in giving his reasons, to deal with every argument presented by counsel in support of his case. It is sufficient if what he says shows the parties and, if need be, the Court of Appeal the basis upon which he has acted…"

42. She submitted that both of these passages were particularly apposite on the facts of this case. It was an "ex tempore" judgment. The case had overrun and as DJ Giles noted: "we have more than run out of time".

7. Submissions

Mr Bacon's submissions

43. I have already set out a number of the submissions made by Mr Bacon and Miss Smith QC and shall not repeat them. Mr Bacon made a number of detailed submissions on the merits of the defence. These are contained in paragraphs 10 to 39 of his skeleton argument. However as there is no challenge to DJ Giles' finding that the defence has a real prospect of success I do not need to set these out in detail. In the course of her submissions Miss Smith QC was concerned that Mr Bacon was seeking to persuade me to make an adverse credibility finding against Dr Priestley in the light of what is said to be a "knowingly untrue email sent to HMRC". As I indicated during the course of the hearing I am not in a position to make any finding on this or the likely outcome of the trial.
44. Like DJ Giles I am satisfied that the proposed defence is not shadowy and is realistically arguable. The outcome of the trial would depend on the trial judge's assessment of the conflicting oral evidence assisted by such contemporaneous documents as exist.
45. Mr Bacon submitted that DJ Giles erred in placing too much weight on the question of whether the application was made promptly and further erred on the question of delay. In the light of the fact that the application was in fact made before the CMC listed for 14^th April 2014 and no specific time was mentioned in the order of 7^th January 2014 the decision to refuse to set the judgment aside was wrong.
46. Mr Bacon submitted that DJ Giles attached too much weight to the question of promptness in the light of the clear defence on the merits and in failing to explain why the lack of promptness should lead to the refusal to set aside the judgment.
47. Mr Bacon submitted that DJ Giles erred in his assessment of the impact on the quantum trial. The fact that the directions on the quantum trial had kicked in was an inevitable consequence of the order of 7^th January 2014. He was wrong to suggest that there was any significant delay to the trial on liability. He failed to analyse at all what its actual effect would have been. The reality is that there would be little, if any impact given that a draft defence had been filed and the Defendant had provided a list of documents on both liability and quantum on 25^th March 2014.
48. Mr Bacon submitted that DJ Giles failed to take into account the amounts at stake, the seriousness of the judgment being allowed to stand on the assessment of damages.
49. Mr Bacon also relied on the fact that since the hearing before DJ Giles Mr Henderson has himself issued proceedings covering at least in part some of the issues that are raised in Dr Priestley's claim. If the judgment is allowed to stand there is a risk of inconsistent judgments.
50. Finally Mr Bacon submitted that relief should have been granted if the Denton principles are applied.

Miss Smith QC's submissions

51. The general thrust of Miss Smith QC's submissions was that DJ Giles correctly applied the principles set out in CPR 13.3 and in those circumstances an appellate court should not interfere with his discretion.
52. She pointed out that DJ Giles made a balanced assessment of the merits and concluded that the issues of fact show that there is a good reason for the matter to go to trial.
53. Miss Smith QC pointed out that DJ Giles correctly then considered the question of discretion and in particular whether the application was made promptly. She submits that the decision that the application was not made "promptly" was not wrong and that this court should not interfere with that assessment.
54. She submitted that DJ Giles was justified in taking the view he did over the assessment of the quantum hearing. She set this out in detail in paragraph 18 of her skeleton argument. Amongst other points she relied on the failure to comply with the timetable in the directions hearing and the costs that were wasted. She submitted that DJ Giles was entitled to conclude that the proceedings had been "considerably put back"
55. Miss Smith QC submitted that DJ Giles's reasons were sufficient. She drew my attention to the authorities I have already mentioned. She pointed out that it was late in the day. The case had overrun and DJ Giles was doing his best to assist the parties. Dunbar (and an appellate Court) knows quite well why it lost. It lost because it did not make the application promptly. DJ Giles was under no obligation to say when he thought the application should have been made. In any event DJ Giles has clarified the position by saying that it should have been made some weeks earlier even if (as to which he is not sure) he did not use those words^[1].
56. Miss Smith QC made a number of submissions about the effect of the judgment on liability. She pointed out that issues of causation and quantum remained open. She acknowledged that all of the allegations of breach pleaded in paragraph 27 of the Particulars of Claim would be deemed to be established. There was some debate on whether it was open to Dunbar to raise points relating to exclusion clauses and the Limitation Acts. As I understood her final position she conceded that it would be open to Dunbar to seek to rely on the exclusion clause but not on the Limitation Acts. However neither of these points was fully debated and it would not in my view be fair to hold Dr Priestley to those submissions.
57. Miss Smith QC pointed out that Mr Henderson had not issued proceedings at the time the matter was before DJ Giles. There was no question of res judicata because the judgment was a default judgment obtained by the Claimant and the risk of inconsistent decisions was not one that was of any great significance.

8. Discussion

58. I have considerable sympathy with the position that DJ Giles found himself on 29^th April 2014. As Miss Smith QC pointed he was sitting late and was doing his best to help the parties by giving his judgment at the time. Furthermore he was making his decision at a time when the robustness of approach advocated in Mitchell must have been at the forefront of many district judges' minds. With the benefit of hindsight I think it would have been better if he had reserved judgment following the submissions and handed down judgment at a later date. That would have enabled him to consider in considerably more detail the issues that were involved in the exercise of his discretion.
59. In my view it was open to DJ Giles to find that the application to set aside the judgment had not been made promptly. He was in my view entitled to find that Mr Mason had not acted with all reasonable celerity in the circumstances. As Miss Smith QC pointed out the application was not made until 17 weeks after Mr Mason learned about the judgment on 26^th November 2013 and 11 weeks after the order of 7^th January 2014 when DJ Giles specified that the application should be issued "as soon as possible". No doubt he was bound to take into account the difficulties faced by Mr Mason as set out in the letter of 6^th January 2014 and in his witness statement. However it is plain from paragraph 15 of the judgment that DJ Giles had these factors well in mind. As Miss Smith QC pointed out he was also entitled to have in mind the time estimate given by Mr Mason in the penultimate paragraph of his letter of 6^th January 2014 in which he estimated that the application could be made two or three weeks after the file had been retrieved from storage. In my view DJ Giles was fully justified in holding that the delay of 11 weeks from the 7^th January 2014 was not "prompt". I would have made the same finding.
60. Contrary to the submission of Miss Smith QC I do think that it was necessary for DJ Giles to have determined when in his view the application ought to have been made. It seems to me that it is necessary to know the extent of the delay in order to apply the three stage test advocated by the Court of Appeal in Denton. How can he determine whether the breach is serious or significant without knowing its extent? However in the light of DJ Giles's view (which in my view is not open to challenge) that the application should have been made some weeks earlier he was in my view entitled to consider (even though he did not express it) that the breach was significant and serious.
61. He was also entitled to take the view (indeed it is in my view inherent in his decision) that that there was no good reason for the lack of promptness. However it also seems to me to be inherent in the decision (in particular paragraph 15 and his view that the application should have been made "several weeks" before) that he accepted that part of the period between the signing of the judgment and the making of the application was in all the circumstances reasonable.
62. My concern about this case is that there is nothing in the judgment to suggest that DJ Giles evaluated all the circumstances of the case (including those specifically mentioned in CPR 3.9) and, with respect, it appears to me that his evaluation of the circumstances mentioned in paragraph 20 of the judgment was flawed.
63. Nowhere in the judgment does DJ Giles mention the fact that this is a claim for in excess of £80,000 (possibly as much as £300,000) against a small accountancy firm and that the effect of a judgment on liability is accordingly a serious matter. Nowhere does he consider whether a more appropriate sanction for the default would have been an order setting aside the judgment on terms. Whilst it is true that Mr Mason did not provide a substantive reply to the pre-action protocol letter he did acknowledge receipt. Furthermore there was a delay of some 19 months between the preliminary notice and the pre-action protocol letter and a further 9 months before the proceedings were served. Thus, this is not a case that has been progressed urgently on behalf of Dr Priestley. Furthermore whilst there is no dispute that the service of the proceedings was regular there is equally no challenge to Mr Mason's evidence that he was unaware of the proceedings before 26^th November 2014.
64. In paragraph 20 of his judgment DJ Giles refers specifically to two matters – work which may not be needed in relation to the quantum trial and the putting back of the proceedings.

Wasted Work

65. It is to be noted that DJ Giles did not identify what work had been wasted. Indeed he makes no specific finding that any work has been wasted because he used the word "may". Much of the work that has been carried out will be needed in any event because it is not suggested that this case would be suitable for a split trial. In the course of her submissions Miss Smith QC suggested that work was wasted because the witness statements were prepared without sight of the defence. However it has to be remembered that the witness statements were on the question of quantum and it is not clear how far the defence would have assisted in relation to quantum.
66. It is, in my view, important to have in mind the timetable set by DJ Giles in his order of 7^th January 2014. It would no doubt have been possible for DJ Giles to have provided a specific date for the application to set aside the judgment and to have provided for some sort of stay if such an application was made until it was determined. He did not do so. Instead he provided for the preparation for the quantum trial to continue giving specific dates for disclosure and the exchange of witness statements. To my mind an order of this sort made it extremely likely that some work would be wasted in the event that the judgment was set aside. It certainly did not mean that the wasted work was caused by any lack of promptness. In my view it was not sufficient for DJ Giles simply to say that work may have been wasted. In my view he needed to identify the work he had in mind before he utilised it as part of the discretion to refuse to set aside the judgment.
67. There is no doubt that some additional costs have been incurred after 7^th January 2014 in that Mr Mason did not comply with DJ Giles's timetable in relation to disclosure. This resulted in an application for an "unless" order. However disclosure on liability and quantum was given on 25^th March 2014 and thus this failure could not possibly justify the refusal to set aside the judgment.

Putting back the proceedings

68. DJ Giles did not identify the extent to which the proceedings would be put back. It appears from paragraph 20 of the judgment that he was comparing the time to be taken for a trial on liability against a trial on quantum. If that is the comparison he was making it was in my judgment not the correct comparison. The correct comparison was to compare the progress of the proceedings (i.e. a trial on liability and quantum) if Mr Mason had acted promptly with their actual progress. There is in fact no basis to think that there would be any significant difference in the time to trial. As noted above Mr Mason had included a draft defence on 25^th March 2014 and had provided a list of documents. At most the delay was the "some weeks" identified by DJ Giles as the period when the application should have been made. In reality it is unlikely to have made any significant difference as it is unlikely that the contested hearing before DJ Giles would have been heard much earlier than the 29^th April 2014.
69. As noted above this was a case where proceedings were not served for more than 2¼ years after the first notification of claim was made. A delay of "some weeks" has to be seen in that context.
70. In fact, as Mr Bacon pointed out, the matter goes somewhat further. On the material before DJ Giles there was no basis for him to consider that there would be any delay to the trial. He was presented with 2 draft orders – one with a timetable for a trial on quantum and the other for a trial on liability and quantum. Each gave the same trial window – the beginning of 2015.
71. In my view DJ Giles was not justified in holding that any significant delay to the trial on liability and quantum was caused by the lack of promptness.

9. Conclusion

72. I am highly conscious that this is an appeal against the discretionary decision of DJ Giles. I am equally conscious of the warning given by Lord Hoffman in the passage cited above. However for the reasons set out above I am satisfied that DJ Giles did err in the exercise of his discretion. It follows that I can substitute my own discretion.
73. As set out above I agree with DJ Giles that the application to set aside the judgment was not made promptly. I agree with him that it should have been made some weeks earlier – certainly by 11^th February 2014 some 5 weeks after the order of 6^th January 2014.
74. I regard that delay as being significant and certainly not trivial. It follows that I do have to consider all the circumstances of the case including those specifically mentioned in CPR3.9.
75. I agree with Mr Bacon that an important circumstance is that there is a realistic defence on liability. It is not a shadowy defence. This is a case where the court can form no view as to the outcome of the trial. Other important factors are that the Defendant is a small accountancy firm, that the sums claimed are relatively large. In addition Dr Priestley's costs are said to be high (in excess of £100,000). Furthermore this is a case where there is a CFA with a 100% success fee which may result in Dunbar having to pay an extra 100% on those costs.
76. I take into account the need for litigation to be conducted efficiently and the need to enforce compliance with orders. It may be said that the failure to comply with DJ Giles's timetable in relation to disclosure and witness statements is a breach of such an order. Furthermore the question of promptness is expressly a matter for consideration under CPR 13.3
77. I am, however required to deal with the matter justly. In my judgment the lack of promptness in all the circumstances of this case would not make it just to dismiss the application. Whilst I accept that some costs may have been wasted as a result of the failure to act promptly I do not think they are likely to be very large – certainly not in relation to the amounts claimed by Dr Priestley. I am not satisfied that any delay to the potential trial date for a trial on liability and quantum is more than 5 weeks. In the context of a case where there was a 2¼ year gap between notification of the claim and the service of proceedings it would in my view be quite disproportionate to refuse to set aside the default judgment on that basis.
78. I have considered whether to impose conditions when making the order. This is not a matter addressed in either of the parties' skeleton arguments and is not one on which I have formed a concluded view. This is not the sort of case where a proportion of the amount claimed should be secured because, as I have indicated, this is not a case where the defence can be regarded as shadowy. However it may be right to require payment of a small sum in respect of the costs of entering the judgment and of any wasted costs. Mr Mason will no doubt be aware (or be advised) of the assumptions that the court will make unless there is evidence of any impecuniosity on the part of Dunbar. These are matters that can be debated at any resumed hearing.
79. In view of the fact that I have found that there was a lack of promptness in bringing the application I provisionally adhere to the view that the costs of the application before DJ Giles should be paid by Dunbar. Different considerations, of course, relate to the costs of the appeal.
80. This appeal will be allowed.

Note 1   It is in fact quite clear that a judge approving a judgment is not limited to the words he used. He is fully entitled to add to or explain them in the approved version. That is the whole purpose of submitting a draft judgment for approval.    [Back]