Setting aside default judgments and costs certificates

For many years, the principles on which a judgment or default costs certificate would be set aside, were relatively straightforward. If a judgment or costs certificate was regular, in that it had been obtained in compliance with the rules, and due to the fault or omission of the defendant or paying party, the court would set aside the judgment or costs certificate, if the party in default could show reasonable celerity in making their application and something to argue about on the merits. In 99% of cases, the court would award costs against the party in default: in recognition that the claimant or receiving party was being deprived of a regular judgment, and the court was exercising the prerogative of mercy. Applications to set aside thus created an opportunity to hold on to what had been won, and the opportunity to earn a few hundred quid in costs. Irregular judgments or costs certificates, were of course liable to be set aside as of right.

Within the last couple of years, however, the reformulated rule 3.9 and overriding objective, together with the Mitchell line of authority, have meant resisting applications to set aside regular judgments or costs certificates are now thwart with peril. One District Judge observed to me, that given that the parties can and are encouraged, to agree extensions of time of up to 28 days, if an application to set aside is made within 28 days it is made promptly, and should be consented to. Otherwise, the holder of the judgment is likely to be made to pay the costs.

The source of this attitude is readily to hand. In Denton the Court of Appeal made these observations:

  1. Justifiable concern has been expressed by the legal profession about the satellite litigation and the non-cooperation between lawyers that Mitchell has generated. We believe that this has been caused by a failure to apply Mitchell correctly and in the manner now more fully explained above.

The Court of Appeal went on:

  1. Litigation cannot be conducted efficiently and at proportionate cost without (a) fostering a culture of compliance with rules, practice directions and court orders, and (b) cooperation between the parties and their lawyers. This applies as much to litigation undertaken by litigants in person as it does to others. This was part of the foundation of the Jackson report. Nor should it be overlooked that CPR rule 1.3 provides that “the parties are required to help the court to further the overriding objective”. Parties who opportunistically and unreasonably oppose applications for relief from sanctions take up court time and act in breach of this obligation.
  2. We think we should make it plain that it is wholly inappropriate for litigants or their lawyers to take advantage of mistakes made by opposing parties in the hope that relief from sanctions will be denied and that they will obtain a windfall strike out or other litigation advantage. In a case where (a) the failure can be seen to be neither serious nor significant, (b) where a good reason is demonstrated, or (c) where it is otherwise obvious that relief from sanctions is appropriate, parties should agree that relief from sanctions be granted without the need for further costs to be expended in satellite litigation. The parties should in any event be ready to agree limited but reasonable extensions of time up to 28 days as envisaged by the new rule 3.8(4).
  3. It should be very much the exceptional case where a contested application for relief from sanctions is necessary. This is for two reasons: first because compliance should become the norm, rather than the exception as it was in the past, and secondly, because the parties should work together to make sure that, in all but the most serious cases, satellite litigation is avoided even where a breach has occurred.
  4. The court will be more ready in the future to penalise opportunism. The duty of care owed by a legal representative to his client takes account of the fact that litigants are required to help the court to further the overriding objective. Representatives should bear this important obligation to the court in mind when considering whether to advise their clients to adopt an uncooperative attitude in unreasonably refusing to agree extensions of time and in unreasonably opposing applications for relief from sanctions. It is as unacceptable for a party to try to take advantage of a minor inadvertent error, as it is for rules, orders and practice directions to be breached in the first place. Heavy costs sanctions should, therefore, be imposed on parties who behave unreasonably in refusing to agree extensions of time or unreasonably oppose applications for relief from sanctions. An order to pay the costs of the application under rule 3.9 may not always be sufficient. The court can, in an appropriate case, also record in its order that the opposition to the relief application was unreasonable conduct to be taken into account under CPR rule 44.11 when costs are dealt with at the end of the case. If the offending party ultimately wins, the court may make a substantial reduction in its costs recovery on grounds of conduct under rule 44.11. If the offending party ultimately loses, then its conduct may be a good reason to order it to pay indemnity costs. Such an order would free the winning party from the operation of CPR rule 3.18 in relation to its costs budget.

These paragraphs are a powerful weapon in the hands of the party seeking to set aside a regular judgment or costs certificate: they indicate that refusal to consent may have costs consequences going far beyond the instant application and indeed allow defendants and paying parties, to springboard a counter attack, by asking a judge to record unreasonable conduct in the order, and gaining a substantial costs windfall, later in the case.

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