LAST FLIGHT OF THE EAGLE: NEW PRINCIPLES GOVERNING THE SETTING ASIDE OF JUDGMENTS IN DEFAULT

• Published date: 01 December 2009
• Citation: (2009) 21 SAcLJ 161
• Author: Jeffrey PINSLER SC LLB (Liverpool), LLM (Cambridge), LLD (Liverpool); Barrister (Middle Temple), Advocate & Solicitor (Singapore); Professor, Faculty of Law, National University of Singapore.
• Date: 01 December 2009

In one of the most important judgments on civil procedure in recent years, the Court of Appeal in Mercurine Pte Ltd v Canberra Development Pte Ltd1 substantially revised the approach of the court towards applications to set aside regular and irregular judgments in default of appearance. This article examines these developments and considers their likely impact on civil litigation.

I. Introduction

1 A fundamental feature of civil litigation is its progression towards final resolution either by eventual settlement or adjudication at trial. Litigants are constantly faced with the option of responding to each other’s steps in the action or facing sanctions so that the proceedings are not stultified and an impasse is avoided. The default judgment is a primary mechanism in this respect as it compels the defendant to respond to the plaintiff’s claim by way of appearance and defence,2 and avoids wastage of the court’s and the parties’ resources by bringing uncontested proceedings to a conclusion. The default judgment, as the terminology suggests, is not a judgment on the merits but an administrative act effected by the submission of documents to a court when certain procedural conditions have been satisfied.3 As a judgment has been entered against the defendant, the case on liability terminates unless he makes a successful application to set it aside.

2 This article is concerned with the principles governing an application to set aside a judgment in default. A variety of questions arise in this difficult area of procedural law. For example, should a distinction be made between regular and irregular judgments (irregular in the sense that the plaintiff has failed to comply with a rule of procedure or committed some other impropriety in entering his judgment)? With regard to a regular judgment, how strong a case must the defendant present in order to succeed in his application? Must the defendant satisfactorily explain his failure to enter an appearance in time? To what extent should the court take into account the defendant’s delay in making an application to set aside the default judgment? As for an irregular judgment in default, does the defendant have an automatic right to set it aside on the basis that it was entered prematurely or for an excessive amount or because of some other error? Does the defendant need to show that he has a meritorious case? If so, is the merits test for setting aside a regular judgment different to that pertaining to an irregular judgment? How significant is the conduct of the parties in respect of an application to set aside an irregular judgment? Does the incidence of the burden of proof on certain issues vary according to whether the application is to set aside a regular or irregular judgment?

3 Many of these questions were addressed by the Court of Appeal in Mercurine Pte Ltd v Canberra Development Pte Ltd (“Mercurine”),4 which has substantially revised the court’s approach to applications to set aside both regular and irregular judgments. The case5 involved claims by the plaintiff landlord for rental arrears and possession of the premises which had been leased to the defendant. The defendant failed to enter an appearance and a judgment was entered in default of appearance. The defendant applied to set aside the judgment more than 15 months later. The judgment was irregular because it had been entered for an excessive sum (in respect of the rental arrears) and the plaintiff had failed to produce a certificate required by O 13 r 4(1) (in respect of the claim for possession). Other related issues between the parties concerning settlement of the dispute and declarations relating to the lease were the subject of separate suits.6

II. General rule governing applications to set aside a judgment in default

4 The questions posed in para 2 of this article raise a variety of complex issues which go to the heart of procedural philosophy.

Order 13 r 8 and O 19 r 9, which concern applications to set aside a judgment in default of appearance and defence respectively, are identical:

The Court may, on such terms as it thinks just, set aside or vary any judgment entered in pursuance of this Order.

5 The rule7 does not distinguish between the principles governing the setting aside of regular and irregular judgments although, as will be seen, there are important conceptual differences justifying specific approaches. The phraseology of this rule suggests that a court should set aside a default judgment if it is able to impose terms which would compensate or take into account any losses or harm suffered by the plaintiff (particularly the costs which he incurred in entering the default judgment and in resisting the application to set it aside). A more restrictive rule would, it is submitted, have decoupled the primary element (“may … set aside”) from the incidental phrase (“on such terms as it thinks just”) and have repositioned the words so that the terms of the order to set aside, being subsidiary to the decision to set aside, would have been placed at the end of the sentence. It is also interesting that justice (“just”) is only expressed in the context of the terms. Although the rule does not expressly state that the decision to set aside must be “just”, this is clearly implied by the word “may”, which requires the court to consider whether setting aside the judgment would be in the interest of justice. Prima facie, it would be in the interest of justice to set aside the judgment (which has been obtained by default and not given on the merits), if the defendant has some basis for defending the claim against him, and the court is able to impose terms which sufficiently take into account the loss or harm suffered by the plaintiff.8 This interpretation is consistent with the judicial culture at the time of the introduction of the rule in England. In Cropper v Smith,9 Bowen LJ considered it to be “a well-established principle that the object of the courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights”. This approach was echoed by Lord Atkin in Evans v Bartlam (“Evans”)10 in the specific context of a judgment in default of appearance:

The principle obviously is that unless and until the Court has pronounced a judgment upon the merits or by consent, it is to have the power to revoke the expression of its coercive power where that

has only been obtained by a failure to follow any of the rules of procedure.11

6 Although Evans was decided 72 years ago, it has been regularly cited as a leading case on the standard of merits which the defendant is required to meet in order to succeed in his application to set aside a regular default judgment. However, a discordant interpretation of the House of Lords’ pronouncements in Evans by the Court of Appeal in Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc12(“The Saudi Eagle”) in 1986 had the effect of requiring the defendant to satisfy an inappropriately strict standard in order to succeed on his application to set aside the default judgment. Unfortunately, The Saudi Eagle test was applied by the Singapore courts without objective consideration in 1992 and continued to govern proceedings here for a period of 16 years until it was recently abandoned by the Court of Appeal in Mercurine. These developments will be examined with a view to determining the criteria which now govern the defendant’s application to set aside.

III. Development of the merits test for setting aside a regular judgment in default

7 In Evans, Lord Atkin, Lord Russell and Lord Wright used different phrases to describe the nature of the case which the applicant must put forward in order for the court to set aside a regular default judgment. Nevertheless, a close examination of their respective speeches reveals a clear principle: if the defendant can raise a defence or an issue in contention which would affect adjudication on the merits at trial, it would be just (subject to other considerations)13 to set aside the judgment. Lord Atkin stated that the applicant “must produce to the court evidence that he has a prima facie defence”. Lord Russell considered that the court must determine “whether any useful purpose could be served by setting aside the judgment, and obviously no useful purpose would be served if there were no possible defence to the action”. His Lordship also pointed out that the applicant would ordinarily need to show “how it came about that [he] found himself bound by a judgment regularly obtained, to which he could have set up some serious defence”.14 The words “serious defence” (which are consistent with Lord Atkin’s expression, “prima facie defence”) mean that it must not be a fanciful defence or a facade but a case which raises a real issue or valid basis of contention which affects the merits. If the applicant has a valid basis on which to challenge the plaintiff’s claim,15 the obvious

purpose of setting aside the judgment would be to ensure that there is proper adjudication on the merits at trial. As Lord Wright said: “The primary consideration is whether [the applicant] has merits to which the court should pay heed; if merits are shown the court will not prima facie desire to let a judgment pass on which there has been no proper adjudication.”16 His Lordship’s conclusion on the facts of the case is telling: “[The applicant] clearly shows an issue which the court should try.”17 Nowhere in any of these pronouncements is there any indication that the applicant must establish that he is likely to succeed in challenging the plaintiff’s claim or that his case has a particular degree of force over and above an arguable case on the merits. It is sufficient that the applicant raises one or more issues of contention which justify a trial on the merits. The question is whether the case should be tried, not whether the...