The recent case of Shandong Chenming Paper Holding Ltd v Saga Forest Carriers considered the circumstances in which a defendant is entitled to set aside a default judgment entered against him.
A dispute arose between the claimants and defendants concerning the loading, handling, custody, care and discharge of a cargo of eucalyptus kraft pulp carried onboard the second defendants’ ship (which was chartered to the first defendant, who was also the carrier under the bills of lading) in June 2006. The claim form was issued on 20 June 2007 and served on the defendants in Norway on 20 October 2007. According to the Civil Procedure Rules (CPR), an acknowledgment of service ought to have been filed by the defendants no later than 12 November 2007. No acknowledgment of service was filed and default judgment was entered in favour of the claimants on 3 December 2007. On 23 January 2008 the defendants applied, pursuant to CPR 13.3, to have the default judgment set aside.
CPR 13.3 provides that the court has the power to set aside a default judgment if the defendant has a real prospect of successfully defending the claim. The defendants argued that they had a real prospect of successfully defending the claim both on the merits and on the basis of a time bar.
On the facts of the case, the court held that the defendants had a real prospect of establishing a time bar defence - it was strongly arguable that the relevant port authority had been appointed by the claimants, as their agent, to take delivery of the cargo on their behalf. As the cargo was in the control and custody of the port authority from 19 June 2006 but the claim form had not been served until 20 June 2007, it followed that the defendants had a real prospect of defending the claim on the basis of time bar. That being the case, the court did not feel it necessary to consider the merits of the case.
The remaining issue was whether the defendants’ application to set aside the default judgment was, in accordance with CPR 13.3(2), made promptly. The Court found that it was, allowing for the interruption of the Christmas and New Year holidays, the instruction of solicitors and the fact that there was inevitably some ‘toing and froing’ between the defendants and their P&I Clubs. The court also pointed out that, even if it had concluded that the defendants’ application was not made promptly, it would not have exercised its discretion adversely to the defendants because (1) the delay in making the application was not extreme (2) it had caused no substantial prejudice to the claimants and (3) the claimants had not brought the proceedings with expedition either.
As the defendants had a real prospect of successfully defending the claim and had applied promptly, the court set aside the default judgment.
The case demonstrates the flexibility and willingness of the English court to make allowance for certain causes of delay on the part of the defendant (national holidays, instruction of solicitors etc.) and also to take into account any delay on the claimant’s part when deciding whether to set aside a default judgment.
With thanks to Laura Alston of Hill Taylor Dickinson for preparing this article.
