Default judgments – Why a trial on the merits can be more beneficial
A decision of the English High Court released last week deals with the important issue of default judgments and specifically how enforcing a default judgment in other jurisdictions can be difficult if the judgment is not on the merits. The decision will be of interest to both offshore and onshore practitioners.
In Eurasia Sports Ltd, Tsai & Others, the claimant, an online betting operation catering for wealthy gamblers placing large wagers, sought a reasoned judgment from the High Court rather than a default judgment in order to assist later enforcement of the judgment abroad. The Court was satisfied that the claimant had proved that the sums claimed were due. Therefore, it would have been seemingly straight-forward for the claimant to obtain default judgment in the normal manner without the need for a trial. However, the claimant instead made the tactical decision to seek a reasoned judgment. In short, possessing a reasoned judgment from the English High Court which considered all the relevant issues would be far more useful to the claimant when it came to convincing a foreign court of the strength of that judgment in comparison to holding a bare default judgment.
Counsel for the claimant referred the Judge to a line of cases including Habib Bank Ltd v Central Bank of Sudan where Field J confirmed the Court’s power to order a trial on the merits even where the defendant had failed to acknowledge service so that the plaintiff could obtain a more enforceable judgment.
The Court noted its responsibility to take “special care” to ensure that the process is fair and that the interests of the absent defendant are properly safeguarded. In this matter, the Court viewed the defendants as “well-informed and sophisticated”. While none appeared at the trial (a “strategic decision” in the Court’s view), most of them had been legally represented at some stage of the proceedings and had been served with the key evidence.
The decision illustrates the nuances which can exist even where a claimant is entitled to a default judgment. The need to enforce a judgment in a foreign jurisdiction may mean that seeking a reasoned judgment from the Court is a necessary and important additional step to strengthen the claimant’s hand.