Iqbal v Dean Manson Solicitors [2011] EWCA Civ 123 (15 February 2011)

A firm of solicitors failed to set aside a default judgment obtained by a former partner. The Court of Appeal held that their significant and unexplained delay in making the application outweighed their arguable defence, clarifying the court's discretion under CPR 13.3.

Facts

The claimant, Mr Zeshan Iqbal, a solicitor, issued a claim against his former firm, Dean Manson Solicitors, for unpaid fees amounting to £52,709.61. The claim was issued in July 2009. The defendant firm failed to file an acknowledgment of service or a defence in time. Consequently, the claimant obtained a default judgment on 17th September 2009. The defendant firm became aware of the judgment by 22nd September 2009 but did not issue an application to set it aside until 23rd February 2010, a delay of five months. The Master refused the application, and this decision was upheld on appeal by a High Court judge. The firm then appealed to the Court of Appeal.

Issues

The central issue was whether the High Court judge erred in exercising his discretion under Civil Procedure Rule (CPR) 13.3(1) to refuse to set aside the default judgment. This required the court to consider the interrelationship between the two main factors under the rule: first, whether the defendant had a ‘real prospect of successfully defending the claim’, and second, the requirement under CPR 13.3(2) that the court ‘must have regard to whether the person seeking to set aside the judgment made an application to do so promptly’.

Judgment

The Court of Appeal unanimously dismissed the appeal. Lord Justice Rix gave the leading judgment.

Reasoning on Promptness

Rix LJ was highly critical of the five-month delay between the defendant firm learning of the judgment and applying to set it aside. He described the delay as ‘very substantial and, in the context of the CPR, inordinate’. The excuses offered by the firm’s principal, including being ‘stunned’ and preoccupied with other matters, were deemed inadequate. The judgment stresses that while promptness is one factor to be weighed, a significant and unexplained delay can be fatal to an application, regardless of the defence’s merits.

In my judgment, the factors mentioned by the judge, culminating in a five month delay between knowledge of the judgment and the issue of the application to set it aside, themselves go a long way to supporting his conclusion that the application should be dismissed, whatever the merits of the defence. If there is a very good reason for a significant delay, it may be possible to overlook the delay, but the worse the delay, the more likely that it will be fatal to the application, whatever the merits of the defence.

Reasoning on Merits of the Defence

The proposed defence rested on an alleged oral agreement that the claimant would only be paid his fees once the firm’s clients had paid. Rix LJ found this defence to be ‘shadowy’ and lacking evidential substance, noting it contradicted the written terms of the claimant’s engagement. He concluded that the defence had no real prospect of success.

I agree, therefore, with the judge below for the reasons that he gave that the defence is shadowy, and for the reasons that I have given in more detail that it has no real prospect of success.

In a concurring judgment, Lord Justice Moore-Bick emphasised the critical importance of promptness, stating that even a meritorious defence may not save an application plagued by inexcusable delay.

For my part I find it difficult to imagine a case in which a delay of that kind, for which there is no good explanation, could be overlooked, even where the defendant was able to show a defence with a real prospect of success.

Implications

The decision in Iqbal v Dean Manson Solicitors provides important guidance on the application of CPR 13.3. It confirms that while the court must conduct a balancing exercise of all relevant factors, the requirement for a prompt application is a paramount consideration. A long and poorly explained delay can, in itself, be a sufficient reason to refuse to set aside a default judgment. The case serves as a stern warning to litigants and their advisors about the necessity of complying with procedural time limits and acting with urgency upon discovering a default judgment, reinforcing the stricter ethos of the Civil Procedure Rules.

Verdict: The appeal was dismissed, with the Court of Appeal upholding the lower court’s decision not to set aside the default judgment against the defendant firm.

Source: Iqbal v Dean Manson Solicitors [2011] EWCA Civ 123 (15 February 2011)