Court of Appeal Ruling – Key Lessons from a Recent Commercial Dispute
14/05/2025
Case Background
The claimant entered into two written placement agreements in 2012 and 2014, lending a total of €35 million to Saab Financial (Bermuda) Ltd, a company owned and controlled by two brothers, collectively referred to as the Saab brothers. Following the company’s liquidation in 2017, as ordered by the Supreme Court of Bermuda, the claimant alleges that the Saab brothers personally agreed—both orally and in writing—to repay the outstanding sum in full by 1 September 2019, in exchange for the claimant refraining from asserting creditor status in the liquidation proceedings.
The claimant fulfilled its obligation by not pursuing the liquidation claim; however, the Saab brothers failed to make the required payment by the agreed date, or at any subsequent time. Consequently, the claimant initiated legal proceedings to claim damages for breach of the alleged agreement, naming one of the Saab brothers as the first defendant and the son of the deceased brother as the second defendant, the latter representing his late father’s estate.
Procedural History
The proceedings encountered significant procedural challenges.
The first defendant was personally served with the claim documents in Cyprus on 24 March 2022. Having failed to file an acknowledgment of service or defence by the deadline of 25 April 2022, a default judgment in the amount of €45 million was entered against him on 4 August 2022.
Serving the second defendant proved more complex, requiring three extensions of the claim form’s validity and multiple unsuccessful attempts at service by a court-registered bailiff in Cyprus. Ultimately, an order for alternative service was granted, and the second defendant was deemed served on 30 August 2023, via transmission of documents through LinkedIn and Facebook, as well as delivery to a partner at a law firm in Nicosia that had represented the defendants in related Cypriot proceedings.
On 18 September 2023, the second defendant filed an acknowledgment of service, indicating an intention to challenge the court’s jurisdiction. He was required to submit an application to this effect by 16 October 2023. Following requests for extensions, which were granted until 13 November 2023, the claimant agreed to a further extension on the condition that failure to file the jurisdiction challenge within 21 days would result in the second defendant being barred from both contesting jurisdiction and defending the claim. This condition was formalised in an Unless Order issued by Mr Justice Foxton on 29 November 2023.
The second defendant failed to meet the 20 December 2023 deadline stipulated in the Unless Order, filing his application one day late on 21 December 2023 due to an error by his solicitors, who miscalculated the deadline by referencing the date of the court seal rather than the order itself. Following this, the claimant applied for a default judgment against the second defendant.
On 17 June 2024, Mr Justice Knowles of the Commercial Court issued two significant rulings:
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The second defendant was granted relief from the sanctions imposed by the Unless Order, permitting him to challenge jurisdiction and defend the claim.
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The default judgment against the first defendant was set aside, allowing him an opportunity to contest jurisdiction and defend the claim, despite a delay of 16 months in responding to the judgment.
Dissatisfied with these decisions, the claimant appealed to the Court of Appeal.
Court of Appeal Judgment
The Court of Appeal, comprising Lord Justices Phillips, Moylan, and Bean, heard the appeal on 5 March 2025 and delivered its judgment on 9 May 2025.
Relief from Sanctions for the Second Defendant
The Court of Appeal upheld the lower court’s decision to grant relief to the second defendant. Although the breach of the Unless Order was deemed serious, the delay was minimal—one day—and resulted from an inadvertent error by the defendant’s solicitors. The court noted that the Unless Order failed to specify the exact deadline date, a requirement under CPR PD40 para 8.2, which contributed to the misunderstanding. Given the brevity of the delay and its limited impact on the proceedings, the court found it just to allow the second defendant to proceed with his defence. The claimant’s appeal on this issue was dismissed.
Setting Aside the Default Judgment Against the First Defendant
In contrast, the Court of Appeal overturned the decision to set aside the default judgment against the first defendant. The first defendant had delayed 16 months in applying to set aside the judgment, despite being served and aware of the proceedings. He cited other litigation commitments in Cyprus and personal responsibilities as reasons for the delay, but the court found these explanations insufficient. Under CPR 13.3, promptness in applying to set aside a default judgment is a critical factor, and the court determined that a 16-month delay, without a valid justification, was excessive. The lower court had reasoned that the ongoing proceedings against the second defendant justified setting aside the judgment, but the Court of Appeal rejected this, clarifying that the continuation of a claim against a co-defendant does not automatically warrant relief from a default judgment. Consequently, the appeal on this point was allowed, and the €45 million default judgment against the first defendant was reinstated.
Key Takeaways
This case provides several important lessons for parties engaged in legal proceedings:
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Adherence to Deadlines: Compliance with court deadlines is essential, particularly with Unless Orders, which carry significant consequences for non-compliance. However, minor breaches due to genuine errors may be excused, especially if the order lacks clarity. Parties should ensure deadlines are meticulously observed and seek legal advice to mitigate risks.
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Prompt Action on Default Judgments: A default judgment must be challenged promptly. A delay of 16 months, as seen with the first defendant, is unlikely to be excused without a compelling reason, even if related proceedings against other parties are ongoing.
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Engagement with Legal Proceedings: Ignoring court documents, as the first defendant did, is not a viable defence. Parties must respond promptly to legal claims, regardless of other commitments.
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Clarity in Court Orders: The ambiguity in the Unless Order underscores the importance of ensuring court orders specify exact dates to avoid misunderstandings that can lead to procedural disputes.
How We Can Assist
At Myton Law, we specialise in managing complex commercial disputes, offering expert guidance on debt recovery, procedural compliance, and litigation strategy. Whether you are pursuing a claim or defending against one, our team is equipped to help you navigate the legal system, meet critical deadlines, and safeguard your interests.
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