A default judgment can be obtained when a defendant fails to respond to a claim issued against them within the specified time. A default judgment can then be entered without the court considering the merits of the case. Businesses or individuals can find that a default judgment has been entered and not know what options are available, and so this article sets out the steps that can be taken.
Having a default judgment against an individual or a company can have severe adverse effects on credit ratings. In certain circumstances, a party can ask the court to exercise its discretion and set aside the default judgment.
Default judgment
To be successful in an application to set aside judgment, there are certain conditions that need to be met. The relevant rules can be found in Part 13 of the Civil Procedure Rules 1998 (CPR).
Grounds to set aside a default judgment
Pursuant to Part 13, there are mandatory grounds when a court must set aside a default judgment which has been wrongly entered. These are as follows:
- Judgment was entered in default of an acknowledgment of service or defence, but the defendant did file an acknowledgment of service or a defence.
- The whole of the claim was satisfied (i.e. paid) before judgment was entered.
- Setting aside a default judgment requires careful consideration of the grounds and procedural requirements set out by the CPR. In addition to the mandatory grounds set out above, the court has a discretionary power pursuant to Part 13 of CPR to set aside or vary a default judgment in other circumstances. The first steps are to identify whether there are grounds to set aside a default judgment.
- If the defendant has failed to file an acknowledgment of service or defence in time, the defendant will need to provide an adequate explanation for their failure.
- If the defendant was not properly served with the claim form and so was unaware of the proceedings, they may seek to set aside the default judgment on the grounds of irregular service. It is worth noting that service at the registered office of a company is valid service. It is therefore very important to ensure that Companies House is updated if a registered office changes, and that the recipient of post at the registered office knows the importance of forwarding on court paperwork immediately to the appropriate person.
The court may set aside a default judgment if the judge is satisfied that:
- The defendant has demonstrated that they have a real prospect of successfully defending the claim. It is important that the defendant provides details of the defence to the claim with the application, ideally in the form of a draft defence.
- The defendant can show some other good reason why the judgment should be set aside.
If one of these conditions is met, the court will then need to be satisfied that the application by the defendant has been made promptly. It is therefore imperative to seek legal advice quickly should you be in a position where a default judgment has been entered against you, to avoid any delays in making an application.
Other considerations
The court may decide that one party is to pay the costs of the application to set aside. The costs risk therefore needs to be factored into any decision about whether to make an application.
A defendant can invite a claimant to consent to an order setting aside judgment. If the claimant refuses and the court sets aside the judgment, this may be a factor that the court takes into account when awarding costs.
If a default judgment has been entered in the County Court, and it is paid within one month, the judgment can be removed from the Register of Judgments. If it is paid after one month, then it can be marked as satisfied. Defendants in these circumstances can apply for a certificate of cancellation or a certification of satisfaction if needed.
What happens next?
If judgment is set aside, then the claim proceeds as a defended claim and the court will give directions for the next steps to be taken. If the judgment is not set aside, then the claimant can take any further steps needed to enforce the judgment.
Conclusion
Often individuals or companies do not realise the impact having a default judgment entered against them can have on their credit rating. Part 13 CPR enables parties to be given an opportunity to defend their position. However, to be successful in an application, defendants need to pay careful attention to the procedures, and act quickly to maximise the opportunity of persuading the court to set the judgment aside.
If you require further information on making an application to set aside judgment or opposing an application to set aside judgment, our Dispute Resolution team can help, simply contact our team.
