Setting aside a default judgment - are you in trouble?

What is a default judgment?

A default judgment is a judgment that has been obtained by a claimant by default, as the defendant has failed to respond to the claim put to them. As the defendant has not responded, the judgment is granted without the court considering any evidence or submissions.

It is common in money claims for a claimant to obtain a default county court judgment against a defendant who has failed to either pay the debt or file an admission or defence within the prescribed court rule deadlines (usually within 14 days, or 28 days if an acknowledgment of service has been filed).

A default judgment can be obtained by a claimant without a court hearing and without any further notice being given to the debtor. It provides for payment of the sum claimed (together with interest and costs) forthwith. This means that a claimant can take immediate steps to enforce it  - for example, by way of instructing the high court enforcement officer or county court bailiff (depending upon the value of the default judgment), placing a charge over the debtor’s property or, in some cases, even issuing insolvency proceedings.

Despite this, it may be that a debtor has a potential defence to the claim and would, had the time limits been complied with, have been able to enter a defence to the claim. The court rules do therefore permit a debtor to make an application to set aside a default judgment.  In this article, we look at matters which the court considers when deciding whether to set aside the judgment.

Is the judgment an irregular judgment?

The court must set aside a default judgment if it has been “wrongly entered” (an irregular judgment), even if there is no defence on merits. For example, where the debtor has in fact replied to the proceedings, but the claimant has indicated that no response has been received.

Is the judgment a regular judgment?

If the judgment has been validly entered, then the court may set aside or vary a default judgment at its discretion if:

• the defendant has a real prospect of successfully defending the claim; or
• it appears to the court that there is some other good reason why the judgment should be set aside or varied, or the defendant should be allowed to defend the claim.

When considering such an application, the court will also have regard to whether or not the defendant’s application was made promptly. The court may not set aside a default judgment even if the debtor has a real prospect of successfully defending the claim, if the application has not been made expeditiously.

What happens if a default judgment is set aside?

If a default judgment is set aside, the claimant will lose its right to enforce it and the claim will proceed as a defended claim, with the court giving directions for the claim to progress to trial. Inevitably, this means more time, money, and resources must be invested in order to conclude the claim. A claimant should also be wary of unreasonably refusing to consent to an application to set aside judgment. The court retains a wide discretion in relation to costs and if it considers the claimant should have consented to the application there is a real risk that the court will make an adverse order for costs in the defendant’s favour. In other cases, however, and depending upon the grounds for which the application is being made, the claimant may well be successful in insisting that the defendant should pay its costs of and incidental to the application, even in cases where it agrees that the judgment should be set aside (save where it is an irregular judgment).

Conclusion

Considering any application to set aside a default judgment can be quite complex, often necessitating an attendance at a court hearing. If you are served with such an application, it is therefore important that you seek legal advice promptly to ensure that the application is dealt with in a timely manner and in the most appropriate way.

The specialists in Boyes Turner’s Dispute Resolution group deal with such applications on a regular basis. They will be able to guide you through the process, provide you with advice on the merits of the defendant’s application, and on the most appropriate next steps.