Gentry v Miller: Denton Applies Even Where Fraud Is Alleged; Such Allegations Do Not of Themselves Outweigh Procedural Default

14 Mar, 2016

Does an allegation of fraud against a claimant weigh against a strict application of the Denton principles? In Gentry v Miller and UK Insurance Ltd [2016] EWCA Civ 141, the Court of Appeal made clear that Denton applies in the usual way. The fact fraud is being alleged will not in itself cancel out procedural default which is not otherwise excusable.

The Claim

Gentry's claim, which included a claim for personal injuries, arose out of a road traffic accident in March 2013. Liability was admitted by Miller's insurer within the relevant pre-action protocol. No offer was forthcoming, in spite of various letters on behalf of Gentry. Ultimately, proceedings were issued in July 2013 and default judgment entered in August 2013. The insurer paid a voluntary interim payment later the same month and made another pursuant to a court order in September 2013.

In October 2013, Gentry was awarded over £75,000 at an assessment of damages hearing. Neither defendant attended (albeit notice was sent only to Miller). The figure included significant repair and credit hire elements. In November 2013, the insurer applied to set aside the judgment alleging, inter alia, that Gentry and Miller were acquaintances and the claim was fraudulent.

The Relevant Rules

It was common ground that rule 13.3 applied to the setting aside of the judgment and rule 39.3(3) and (5) applied because the insurer had not attended the trial. The insurer was entitled under rule 40.9 to make its application because, whilst it was not a party, it was directly affected by the judgment.

First Instance and First Appeal

The District Judge noted the Mitchell jurisprudence, particularly Durrant v Chief Constable of Avon and Somerset Constabulary [2014] EWCA Civ 14 (on "the need to comply with the rules") and Hussain v Sarkar [2010] EWCA Civ 301 (on the court not using procedural failure as a reason to deny a trial of fraud). Denton had not yet been reported. He considered the insurer’s defaults and the windfall which Gentry may obtain. He concluded that "claims of alleged fraud are the one type of claim which should now be exempt from the strictures of the current CPR rules and the views of the Court of Appeal in Mitchell and other recent cases".

On appeal, the Recorder made reference to Miller's failure to co-operate with the insurer and decided that the latter had acted promptly once it had the relevant information. He held that the District Judge’s decision was within the ambit of his discretion.

Second Appeal

Gentry appealed to the Court of Appeal.

Vos L.J. noted that the three-stage Denton test applies to applications under rule 13.3 (Regione Piemonte v Dexia Crediop SpA [2014] EWCA Civ 1298) and held that it also applies to applications under rule 39.3. Regarding the first stage of Denton, the breach in question was the failure to serve an acknowledgment of service. The promptness question in rule 13.3(2) would also feature within the third stage of Denton.

The Court recognised the tension between "the finality of litigation set against the desirability of allowing the allegation of fraud to be tried out".

It was not disputed that the insurer had a real prospect of successfully defending the claim. The Court did not consider that the insurer had made its application promptly: it was insufficient to say it had not been a party - it knew about the claim, was directly affected by it and could have conducted Miller’s defence "at any stage". The failure to file an acknowledgement of service was serious or significant (Denton stage one), there was "some reasonable excuse or explanation" but not a complete one (Denton stage two) and in all the circumstances of the case (including the two named factors) pointed against allowing the insurer’s application (Denton stage three).

In respect of the application under rule 39.3, the Court noted the insurer's four-month delay between finding out about the judgment for damages and making its application, on top of a background of other defaults and delays. Therefore, whilst the insurer may have shown a good reason for not attending the trial (rule 39.3(5)), it had not acted promptly; therefore the application failed. The Court indicated that if there was a need to continue to a Denton analysis the insurer would probably have failed to satisfy that as well.

Outcome

Gentry’s appeal to the Court of Appeal was allowed.

The Court noted that the outcome "may seem a harsh decision", but concluded by remarking that "Mitchell and Denton represented a turning point in the need for litigation to be undertaken efficiently and at proportionate cost, and for the rules and orders of the court to be obeyed. Professional litigants are particularly qualified to respect this change and must do so." It was for the insurer to protect its own interests and in this case it had many opportunities to do so. The months of delay were inexcusable and the insurer was required to "face the consequences of its own actions". (It was noted, however, that the insurer had the option of bringing a new fraud action against Gentry.)

 

Contact us

For more information please call our clerks on
020 7832 0500 or Email »

Follow us

twitter   linkedin   rss

Subscribe to our updates

Subscribe email

Search