Clarifying Relief from Sanctions under Denton for Unless Orders and the Limits of the Co-Defendant Principle in Default Judgment Relief

Introduction

Leadingway Consultants Ltd v Saab & Anor ([2025] EWCA Civ 582) is a landmark Court of Appeal decision addressing two interconnected areas of civil procedure: the grant of relief from sanctions for failure to comply with an “unless” order under the Denton framework, and the approach to setting aside default judgments where co-defendant proceedings are ongoing. The parties are:

Claimant: Leadingway Consultants Ltd (“the Claimant”), which advanced €35 million to Saab Financial (Bermuda) Ltd.
First Defendant: Mr. Michel Saab, co-owner of the company and alleged promisor under oral and written side agreements.
Second Defendant: Son of the late Mr. Fadi Michel Saab, joined as personal representative of his father’s estate.

The core issues on appeal were:

Whether the Court of Appeal should overturn the grant of relief from sanctions to the second defendant for missing the 21-day deadline in an unless order (Foxton J, 29 November 2023).
Whether the Court should reverse the first defendant’s restored permission to challenge jurisdiction and defend, after default judgment was set aside under CPR 13.3.

Summary of the Judgment

By a majority, the Court of Appeal dismissed the Claimant’s appeal against relief from sanctions to the second defendant but allowed the Claimant’s appeal against setting aside default judgment for the first defendant. The court reaffirmed that:

Relief from sanctions under an unless order must be approached via the three-stage Denton test, with proper focus on the specific default, its cause, and overall justice.
A short, inadvertent one-day delay by solicitors in filing a Part 11 challenge—and partly caused by an imprecise order form—can justify relief even under an unless order.
The “co-defendant principle” does not dilute the strict promptness requirement for setting aside default judgments under CPR 13.3; Hussain v Birmingham City Council is a narrow exception, not a blanket rule.

Analysis

Precedents Cited

The court relied on and distinguished several leading authorities:

Denton and others v TH White Ltd [2014] EWCA Civ 906: Established the three-stage test for relief from sanctions (seriousness of breach, reason for non-compliance, and all the circumstances).
Mitchell v News Group Newspapers Ltd [2013] EWCA Civ 1537: Held that inadvertent mistakes by lawyers are not a “good reason” in stage two, absent triviality.
Marcan Shipping (London) Ltd v Kefalas [2007] EWCA Civ 463: Emphasised proportionality when making unless orders, though the Court here did not re-open proportionality as such.
Trading in Compliance Ltd v Dewse [2001] C P Rep 46: Confirmed that competent conduct by lawyers is imputed to the client but may be mitigated by broader circumstances.
Hussain v Birmingham City Council [2005] EWCA Civ 1570: Recognised that lack of finality where co-defendant issues remain can reduce the weight of promptness, but is fact-sensitive and not a general rule.
Standard Bank plc v Agrinvest International Inc [2010] EWCA Civ: Under CPR 13, promptness in seeking to set aside default judgments carries substantial weight.

Legal Reasoning

1. Relief from Sanctions (Second Defendant)
Applying Denton, Moylan LJ identified:

Seriousness of non-compliance: Although any breach of an unless order is serious by definition, the actual delay (one day) caused no disruption.
Reason for breach: An innocent counting error by solicitors, compounded by the order’s failure to state a precise calendar date per PD 40 para 8.2.
All circumstances: Balanced the need for efficient litigation against the triviality of the breach and the solicitors’ genuine mistake. The court placed particular weight on the short length of delay and the drafting defect in the unless order.

The court rejected the Claimant’s submission that proportionality and post-Denton compliance culture should have led to refusal. It also found no error in relying on stage three factors such as the order’s formulation.

2. Setting Aside Default Judgment (First Defendant)
Under CPR 13.3, the court first confirmed the first defendant had real prospects of defence; the Claimant did not dispute this. The sole identified statutory consideration was promptness. The first defendant waited 16 months without justification—a delay of significant weight. The Judge had nonetheless taken into account:

The continuing pursuit of the claim against the second defendant, which meant no conclusive “finality”.
The overarching interest in having disputes decided on the merits.

The Court of Appeal held that, outside the narrow facts of Hussain (where trial of the same issues against other defendants was guaranteed), the co-defendant argument could not outweigh the statutory insistence on promptness. Allowing the first defendant’s appeal would undermine the certainty of default judgments.

Impact

This decision clarifies two critical points:

Even strict “unless” orders can yield to relief from sanctions where the breach is of trivial duration, genuinely inadvertent, and partly attributable to the order’s drafting. Courts should apply Denton rigorously but fairly.
The notion that co-defendant proceedings dilute the need for prompt applications to set aside default judgments is limited. Promptness remains paramount under CPR 13, except in rare scenarios like Hussain.

Future litigants must ensure precise compliance with order formats and deadlines; and a defendant who allows a default judgment to stand for months risks losing an application to set it aside.

Complex Concepts Simplified

Unless Order: A court direction stating that if a party fails to comply by a deadline, specified sanctions automatically apply (e.g., striking out defences).
Denton Test: A three-stage approach for relief from sanctions—(1) assess seriousness of breach, (2) examine reason for non-compliance, (3) consider all the circumstances to ensure justice.
Default Judgment: Judgment entered against a party who fails to acknowledge service or defend a claim within the prescribed time.
CPR 13.3 Promptness: The Civil Procedure Rules require any application to set aside default judgment to be made promptly, making delay a critical factor.
Co-Defendant Principle: A limited concept that the weight of promptness may be reduced if the same issues are still to be tried against other parties—but not a free-standing right to relief.

Conclusion

Leadingway Consultants Ltd v Saab & Anor firmly establishes that relief from sanctions under an unless order remains available in appropriate circumstances—specifically trivial, inadvertent breaches, even of strict orders—so long as courts apply the Denton framework faithfully and consider any contributing drafting defects. Conversely, the decision curtails any expansive “co-defendant principle” in default-judgment relief: promptness under CPR 13.3 is the dominant consideration. This ruling will guide litigants and practitioners in managing deadlines, drafting orders, and evaluating the prospects of relief from sanctions or default judgments in multi-party litigation.