Default judgment set aside where claim served at closed offices during Covid-19 lockdown

The High Court has set aside default judgment obtained against a defendant Council where the claim form and particulars were posted to its offices shortly after the start of the Covid-19 lockdown: Stanley v London Borough of Tower Hamlets [2020] EWHC 1622 (QB).

While the court in this case was satisfied that the defendant had a real prospect of successfully defending the claim, it would in any event have found that there was good reason to set aside the judgment. This was on the basis that it was not fair or reasonable for the claimant’s solicitor to have served the claim by post without taking steps to check that it would come to the defendant’s attention.

Unusually for a case of setting aside default judgment, the defendant was awarded its costs of the application (see this post on the Civil Litigation Brief blog).

The decision suggests that the court may not look kindly on parties who enter default judgment following service on empty (or nearly empty) offices during the disruption resulting from the Covid-19 pandemic. Each case will however turn on its facts, and businesses would be well advised to ensure they have procedures in place throughout any period of office closure to monitor incoming post for important documents, including court proceedings.

Background

Factual background

The claimant complained to the Council after it disclosed her GP records to various individuals without her consent. The Council acknowledged that there had been a data protection breach and apologised to the claimant.

In December 2019 the claimant brought the present proceedings seeking damages of up to £10,000 for “psychological distress, stress, inconvenience and financial loss” resulting from the breach. The claimant's solicitor contacted the Council in February 2020 to ask if they would accept service of proceedings by email and was told service had to be by post.

The claimant’s solicitor posted the claim form and particulars of claim on 25 March. The Council's acknowledgement of service was due on 9 April, but was not filed on that date. On 15 April, the claimant’s solicitor applied for judgment in default, which was granted on 17 April.

The Council applied to set aside judgment in default and for relief from sanctions. The Council’s evidence in support of the application explained that it had shut its offices on 23 March, when the country was put into lockdown due to the Covid-19 pandemic, with staff working from home after that date. A “skeleton staff” had continued to work at the Council’s offices but they were not familiar with court proceedings and the relevant legal team within the Council's legal services department had not received the papers. The Council was not aware judgment in default had been entered until 28 April.

Relevant court rules

CPR 13.3(1) provides that the court may set aside or vary a default judgment 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 for doing so. In considering an application under CPR 13, the court must have regard to whether it was made promptly.

CPR 3.9 provides that, on an application for relief from any sanction imposed for a failure to comply with a rule, practice direction or court order, the court will consider all the circumstances of the case, so as to enable it to deal justly with the application, including the need: (a) for litigation to be conducted efficiently and at proportionate cost; and (b) to enforce compliance with rules, practice directions and orders.

CPR PD 51ZA provides that, in so far as compatible with the proper administration of justice, the court will take into account the impact of the Covid-19 pandemic when considering applications for the extension of time for compliance with directions, the adjournment of hearings, and applications for relief from sanctions.

Decision

The court (Knowles J) granted the application to set aside judgment in default.

As for the test to be applied, Knowles J held that (applying previous authority) he first had to decide whether one or both limbs in CPR 13.3(1) were satisfied. If so, he then had to exercise his discretion regarding whether to set aside default judgment in accordance with the principles which apply to an application for relief from sanctions under CPR 3.9, as established in the Mitchell/Denton authorities (considered here). Under that approach, the court must consider: (i) the seriousness and significance of the default; (ii) the reason for it; and (iii) all the circumstances of the case, considering in particular factors (a) and (b) set out in CPR r 3.9.

In the present case, Knowles J was satisfied that the Council had a real prospect of successfully defending the claim. The first limb of CPR 13.3(1) was therefore made out.

But even if that was wrong, there was a good reason to set aside the default judgment for the purposes of the second limb of CPR 13.3(1) – namely the “unprecedented national health emergency” which was unfolding at the time the claim documents were posted to the Council. It was not fair or reasonable for the claimant’s solicitor to have posted the documents when he knew or should have known the Council’s offices were shut due to the national emergency and the Council was highly unlikely to be in a position to respond.

This was not excused by the fact the claimant’s solicitor was told in mid-February that service had to be by post. The world had “shifted on its axis” on 23 March and it was incumbent on him as a responsible solicitor and an officer of the court to contact the Council to acknowledge that the situation had changed, and to discuss how proceedings could best and most effectively be served.

Applying the three stage Mitchell/Denton test, there had been a serious and significant default by the Council in its failure to serve an acknowledgement of service and a defence. However, the circumstances which led to the default were unique and, overall, relief should be granted having regard to the second and third stages of the test and to CPR PD 51ZA. The reason for the Council's default was the Covid-19 crisis, and the claimant’s solicitor was at fault for not checking whether service by post was still possible and feasible. The Council had acted promptly to instruct solicitors once it became aware of the claim, and the application to set aside default judgment was made promptly thereafter.

Overall, Knowles J was satisfied that the interests of justice required judgment in default to be set aside.