Background
Inner Mongolia King Deer Cashmere Company Limited, a Chinese cashmere manufacturer, sued its former UK agent, Haian Ma, over approximately $9.4 million paid by Marks & Spencer and retained by a company controlled by Ma. Ma contended that the parties’ Exclusive Agency Agreement entitled him to commission comprising the difference between King Deer’s price and the price negotiated with Marks & Spencer. He said King Deer repudiated that agreement in 2014 and that his resulting claim for lost commission, estimated at approximately $19 million plus interest, exceeded the retained funds.
After Ma’s application to stay the English proceedings in favour of arbitration was struck out, the court ordered him to serve a defence by 13 May 2024. He did not do so. King Deer later obtained default judgment and continuation of a freezing order at a without-notice hearing, although Ma had by then instructed new solicitors. Those solicitors learned of the judgment on 16 July 2024 and applied to set it aside on 30 July, filing a draft defence and counterclaim. The court determined the set-aside application first and adjourned the parties’ other applications.
The Court’s Holding
The Commercial Court held that the default judgment should be set aside under CPR 13.3. King Deer accepted that Ma had a real prospect of successfully defending the claim. His proposed case included challenges to King Deer’s legal theories, limitation and set-off defences, and a counterclaim based on alleged wrongful termination of the agency relationship.
The relevant period for assessing promptness began when default judgment was entered, not when the defence had originally fallen due. The resulting 18-day interval was short, and the court found that the application had clearly been made promptly. Newly instructed solicitors reasonably needed time to master a complex dispute, assemble the evidence, and prepare the application and defence.
Applying the Denton framework, the court acknowledged Ma’s earlier procedural defaults, the expense and court time associated with his unsuccessful arbitration application, and the importance of compliance with court orders. Those considerations did not outweigh his arguable defence, the prompt application, and the understandable explanation for the short delay. The court declined to resolve contested allegations about Ma’s truthfulness or the medical evidence summarily. It left for further argument any conditions on the set-aside order and the parties’ remaining applications, including matters concerning the freezing orders and costs.
Key Takeaways
- For promptness under CPR 13.3, the relevant period ran from entry of default judgment because no set-aside application could have been made before that judgment existed.
- An accepted real prospect of defending the claim, coupled with an 18-day delay and a reasonable explanation for that delay, justified setting aside the judgment.
- Earlier noncompliance and wasted court resources remained relevant under Denton, but did not justify preventing an arguable, substantial defence from being tried.
Why It Matters
The decision illustrates how CPR 13.3 and the Denton principles operate together. Courts will weigh procedural discipline and the effect of earlier defaults, but strong or genuinely arguable merits and a prompt response to default judgment can carry decisive weight.
The ruling does not decide who is entitled to the disputed funds, whether the agency agreement governed the relationship, or whether Ma’s counterclaim succeeds. It restores the dispute to the defended track, subject to any conditions and further orders made after additional argument.