Court of Appeal reinforces strict procedural compliance in default judgment cases

Court of Appeal reinforces strict procedural compliance in default judgment cases

In Leadingway Consultants Ltd -v- Saab [2025] EWCA Civ 582 applications to the Court of Appeal for permission to appeal were made by two defendants, both of whom were out of time. The High Court had previously granted the First Defendant’s (D1) application to set aside a default judgment entered 16 months earlier, and the Second Defendant’s (D2) application for relief from sanctions following a one-day delay.

In allowing the appeal against D1, the Court of Appeal held that the first instance court had failed to identify a factor which reduced the need for promptness to such an extent that a 16-month delay could be permissible. In dismissing the appeal against D2, the Court held that the judge’s decision to grant relief was well founded. The case serves as a reminder that even minor procedural errors can have significant consequences.

Background facts and procedural history 

Between 2012 and 2014, the claimant lent €35 million to Saab Financial (Bermuda) Ltd, owned by the Saab brothers. In 2017, following the company’s liquidation, the claimant alleged that the Saab brothers agreed to ensure full repayment by 1 September 2019 if the claimant refrained from asserting creditor status. No repayment was made, and the claimant brought a breach of contract claim.

D1 was served with the proceedings in Cyprus but failed to file an acknowledgment of service, resulting in a default judgment of €45 million in August 2022. Service on D2 was more complex, eventually authorised via alternative means in August 2023. D2 filed an acknowledgment and was granted an Unless Order, giving 21 days to apply to challenge jurisdiction. The order, dated 29 November 2023 and sealed on 30 November 2023, required filing by 20 December 2023. D2’s solicitors filed the application one day late, mistakenly calculating the deadline from the date sealed rather than date issued.

D2’s application also included a request from D1 to set aside the default judgment, citing personal and legal pressures at the time of service. After D2 was barred from challenging jurisdiction, he submitted a further application seeking an extension to validate the late filing.

High Court decision

The Judge delivered separate judgments for each defendant, and granted both applications for the following reasons:

D1 – Setting aside Default Judgement 

The Judge relied on CPR 13.3(1) and (2) to provide the conditions where the court may set aside a default judgement before turning to the three principles derived from Denton and others -v- TH White Ltd [2014] EWCA Civ 906, to reach a conclusion:

1. Seriousness of Breach: The delay by the first defendant, being 16 months was serious and significant.

2. Reason for Breach: There was no good reason for this delay.

3. All Circumstances: Despite the seriousness of the delay and the lack of a good reason, the judge noted that D1 had arguable defences to the agreements. The judge also considered how proceedings were ongoing against D2, so the case was not at an end and would be better served by allowing both defendants to defend the claim.

D2 – Granting Relief from Sanctions 

Although not explicitly citing the Denton principles, the judge followed its three-stage test again:

1. Seriousness of Breach: The failure to comply with the Unless Order was treated as serious, despite D2’s failure to comply not having a highly disruptive effect.

2. Reason for Breach: The delay was due to an innocent mistake in calculating the deadline.

3. All Circumstances: While the judge noted limited cooperation from D2 and his reliance on D1, he accepted that the mistake was genuine and concluded that justice required granting relief.

The Court of Appeal decision

D1 – Default Judgement reinstated

Appealing against the set aside of the default judgment, the claimant argued that the judge failed to give sufficient weight to the requirement for promptness under CPR 13.3(2). The Court of Appeal found that the judge had considered the delay within the Denton framework but erred in applying the third stage.

The claimant also challenged the judge’s reliance on ongoing proceedings against D2, suggesting he had misapplied the “co-defendant principle” from Hussain -v- Birmingham City Council [2005]. The Court clarified that Hussain does not establish a general rule that reduces the need for promptness where claims continue against another defendant. In this case, the 16-month delay was too substantial to be justified by D2’s ongoing proceedings.

The Court of Appeal held that although the judge followed the correct principles, the third Denton limb failed. There was no factor sufficiently reducing the need for promptness, and the default judgment against D1 was reinstated.

D2 – Granting Relief from Sanctions

Appealing against the order for relief from sanctions. the claimant argued that the judge had failed to have regard to factors in CPR 3.9(1), which relate to the claimant and argued that the judge failed to consider CPR 3.9(1), which emphasises procedural compliance. The Court of Appeal disagreed, finding that the judge had acknowledged the seriousness of Unless Orders and correctly concluded that the delay was short and caused by a genuine error.

The claimant also contended that the judge placed undue weight on well-intentioned incompetence. The Court of Appeal rejected this, noting that the judge had considered the broader context. Crucially, the Court of Appeal found that the claimant contributed to the confusion by drafting an Unless Order that did not comply with the relevant CPR Practice Direction, which led to uncertainty about the correct deadline.

The Court of Appeal concluded that the judge’s decision to grant relief was well within his discretion, and the appeal was dismissed.

Comment

This case reinforces the importance of procedural discipline in litigation. Applications to set aside default judgments must be made promptly, and affected parties must exercise diligence in complying with court orders. While courts may show leniency for minor breaches caused by genuine error, parties should not rely on discretion alone.

Delivering the lead judgment, Lord Justice Singh observed:

"The administration of justice depends on parties and their legal representatives observing the rules of procedure. Failure to do so places unnecessary strain on court resources and risks undermining the fairness of proceedings.”