The High Court gave guidance on the procedure for setting aside default judgment last week in Gilbert & BG Projects v Broadoak Private Finance [2024] EWHC 2046 (Comm).  Andrew Hochhauser KC, sitting as a Deputy High Court Judge, confirmed that a draft Defence should be filed well in advance of the hearing.  He did so in a costs judgment following his recent decision in Gilbert & BG Projects v Broadoak Private Finance (unreported, 28 June 2024) to affirm a substantial default judgment in part, rejecting an application by the Defendant to set it aside completely (the “Set-Aside Application”).

The substantive proceedings concerned claims for repayment of various loans made by the Claimants to the Defendant for onward lending to a third party.  The Claimants accepted that the defence to repayment of certain loans should be allowed to go to trial.  However, they maintained that the Default Judgment should be preserved in relation to four loans, with a cumulative value of approximately 58% by value of the Default Judgment (the “Opposed Loans”).

It was common ground that in relation to most of the loans, the Defendant was only obliged to repay the Claimants when its onward loan to the third party had been repaid.  The draft Defence contended that the Defendant had not yet been sufficiently repaid, and also raised a set-off defence, making allegations of breach of duty against the First Claimant (who was a director of the Defendant although he had been prevented from participating in its management by the other director.)  The Judge held that the proposed defence to the Opposed Loans, and the entirety of the set-off defence, were so weak that they had no real prospect of success.  He permitted an amendment to the Draft Defence in relation to one of the Opposed Loans, allowing this to go to trial, but rejected the Set-Aside Application in relation to all three others.  As a result, approximately 50% by value of the Default Judgment was affirmed in favour of the Claimants.

The follow-on judgment in Gilbert [2024] EWHC 2046 (Comm) arose from the Defendant’s unusual decision not to file a draft Defence with the Set-Aside Application.  Instead, the Defendant indicated that it intended to file a draft Defence, but refused to agree to any deadline at all for doing so.  Contrary to CPR 59PD 9.1, the Defendant maintained that it was entitled to file the draft Defence at any time until two days before the hearing of the Set-Aside Application.  The Claimants had therefore applied for directions to set a deadline for the filing of any draft Defence (the “Directions Application”).  The Defendant had contended that the Court lacked jurisdiction to make such an Order.

On 25 April 2024, HH Judge Pelling KC made a directions order materially in the terms sought by the Claimants.  He confirmed that the rules in the CPR and Practice Directions governing the filing and service of evidence for applications also apply to applications to set aside default judgment, and that a party which seeks to rely on a draft Defence in such an application should file and serve that document at the point of issuing the set-aside application.  In Gilbert [2024] EWHC 2046 (Comm), on the costs of the Directions Application, the Defendant contended that it had nevertheless been the successful party – and so entitled to their costs – because that Order had not included a provision debarring the Defendant from relying on any draft Defence filed after the deadline, which had been sought by the Claimants.  By his approved judgment dated 1 August 2024, Andrew Hochhauser KC, rejected the Defendant’s arguments and awarded costs in favour of the Claimants, stating that:

“In my judgment the Claimants are the successful party. It is clear that a draft Defence should have been served for the Claimants’ consideration well before the hearing. The only way in which that was obtained was by making the Directions Application. As it was, a substantial part of draft Defence failed and one aspect on which the Defendant succeeded at the hearing… was not even pleaded… the Defendant’s position was that it could wait until two days before the hearing to serve it, which was clearly unreasonable.”

Max Marenbon and Ryan Tang represented the successful Claimants in Gilbert & BG Projects v Broadoak Private Finance [2024] EWHC 2046 (Comm), instructed by Marc Keidan, Ben Rutledge and Alex Boardman of Keidan Harrison LLP.

Max Marenbon was sole counsel for the Claimants in the Set-Aside Application.

Ryan Tang was sole counsel for the Claimants in the Directions Application.

Click here to view the judgment in Gilbert & BG Projects v Broadoak Private Finance [2024] EWHC 2046 (Comm) (Costs) and here to view the judgment in the Set-Aside Application.