It can be unnerving to receive court documents informing you that a default judgment has been granted against you personally, or against your business. In this guide, our business dispute solicitors will take a high level look at some of the circumstances in which this situation may arise, what factors the court will consider and the procedure for setting aside a default judgment.
- What is a default judgment?
- What are the consequences of a default judgment?
- What are the relevant Civil Procedure Rules (CPR) for an application to set aside a default judgment?
- Can the court set aside a default judgment of its own accord?
- What if a defendant reacts quickly in applying to set aside a default judgment?
- Upon what mandatory grounds must the court set aside a default judgment as wrongly entered?
- Upon what discretionary grounds may the court set aside a default judgment?
- How long do you have to get a default judgment set aside?
- What about cases where a claim form has been deemed served, but is never actually received?
- Who bears the costs of a successful application to set aside a judgment?
- What’s the procedure for applying to have a default judgment set aside?
- How long does it take to have a judgment set aside?
- What happens after default judgment is set aside?
- What if the court does not grant a defendant’s application to set default judgment aside?
What is a default judgment?
A default judgment is made when a party has not filed a defence or acknowledged service of county court proceedings within the time limits set by the Civil Procedure Rules (CPR).
What are the consequences of a default judgment?
If a default judgment is not paid within one month of the date of the order, details of the county court judgment (CCJ) will be entered on the Register of Judgments, Orders and Fines for six years. If you pay the full amount within one month, write to the court to let them know and provide proof of payment to the individual or business you owed money to, the judgment will then be removed from the register.
If you pay the amount owing under the judgment after one month, you can still follow the same steps as above and the judgment will then be marked as ‘satisfied’ in the register. Anyone searching the register within the six-year timeframe will still see the judgment, but will also see that you’ve paid it.
What are the relevant Civil Procedure Rules (CPR) for an application to set aside a default judgment?
- The court must allow an application to set aside a default judgment if it has been 'wrongly entered' (CPR 13.2), and
- In other circumstances, the court has discretion to, and may, set aside a default judgment (CPR 13.3).
Can the court set aside a default judgment of its own accord?
The rules also give the court the power to set aside a judgment of its own accord if a judge is satisfied that the default judgment in question is null and void, after they have heard from both you and your opponent.
What if a defendant reacts quickly in applying to set aside a default judgment?
If you are a claimant who has made an application for default judgment, then you should think carefully about how you react if your opponent moves quickly in objecting to the judgment. In this instance, it would be wise to consider giving consent before any application to set aside made by the defendant is heard by the court, so as to avoid any cost consequences.
Upon what mandatory grounds must the court set aside a default judgment as wrongly entered?
As mentioned above, the court is obliged to set aside a judgment in default where it has been 'wrongly entered'. Importantly, this is the case even where, on the merits, there is no defence.
You can find the circumstances in which the court must set aside a default judgment in CPR 13.2. These include the following:
- Where default judgment was entered on the grounds of failure to acknowledge service, but the defendant did in fact acknowledge service within the time limits stipulated by the CPR.
- In cases where default judgment was entered on the grounds of failure to file and serve a defence, but the defendant did in fact file and serve a defence within the requisite time limits.
Filing of an acknowledgment of service
As set out above, whether or not an acknowledgment of service has been filed plays a important role in deciding whether a default judgment should be set aside. The CPR make clear that a default judgment must be set aside by the court if any of the below scenarios apply, so, if you are a claimant who has had a default judgment granted in your favour on the basis of a failure to file an acknowledgment of service by the other side, it’s vital to be mindful of the fact that the court will set that judgment aside if your opponent (the defendant) did any of the following:
- Filed an acknowledgment of service within the time limits set out in the CPR
- Applied for summary judgment before the default judgment was entered
- Filed or served an admission to pay all of the money you have claimed (in the case of a money claim), together with a request for time to pay, prior to default judgment being entered
- Satisfied the whole of your claim before judgment was entered
If a defence was filed
If you managed to obtain a default judgment on the basis that you believed that the other side failed to file a defence again, the court must set that judgment aside if any of the same criteria as set out in the paragraph immediately above are applicable to your case.
The effect of a delay where the mandatory set aside circumstances apply
Delay is a significant factor. However, when delay is a reason in the context of a mandatory set aside, it has no relevance and a defendant will not be prevented from having such a judgment set aside.
Upon what discretionary grounds may the court set aside a default judgment?
If the mandatory set aside grounds don’t apply to your case, the court has a discretion to invoke its powers under CPR 13.3 to set aside (or vary the terms of) a default judgment. The criteria for this are as follows:
- 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.
In terms of the additional guidance the court will turn to when deciding whether to exercise its discretion, this has been derived from a variety of case law decisions and as such, considerations can be defined as:
- The nature of the defence
- Whether there has been any delay in the application to set aside (this is a crucial factor that has become increasingly relevant in recent years; as such, if you are a defendant faced with a default judgment that you feel was granted in error, it is important that you apply to have it set aside as soon as possible. Failing to act promptly can prove fatal to your prospects of success)
- Whether the claimant (you if you are the party who has had a default judgment granted in your favour) is likely to suffer any prejudice, in the event that the default judgment is set aside.
As with all litigation proceedings overseen by the court, the objective is very important. In other words, the court has to bear in mind the duty to manage cases justly and at proportionate cost.
It’s worth highlighting here that there may be a crossover with the court’s powers to grant relief from sanctions, but this is beyond the scope of this note and therefore it is always advisable to seek legal support if your situation falls within the discretionary remit of the court.
Which party has to prove that there is a real prospect of successfully defending the claim?
The burden of proof is on the defendant to demonstrate that there is a good reason why the claimant’s regularly obtained judgment should be set aside.
What does 'real prospect of success' actually mean?
Following on from the paragraph above, and if you are a defendant who wants to try and persuade the court that a default judgment should be set aside as a matter for the court’s discretion, then you will need to persuade the court that:
- You have more than just an arguable defence
- You have some chance of successfully defending the claim
- That chance, or prospect, must be better than merely arguable – which links with the first principle above (i.e., it must not be a false, fanciful or imaginary notion)
What does 'some other good reason' mean?
This criteria has historically been a broad alternative ground to furnish the court with the discretion to set a judgment aside. Accordingly, the court will exercise this discretion if it sees fit to do so on a case-by-case basis.
How long do you have to get a default judgment set aside?
This depends. In circumstances where the court has to set aside the default judgment on one of the mandatory grounds set out above, there is no time limit for you to make an application to have the judgment set aside. If the application will be based upon one of the discretionary grounds, there is no definitive time scale in which you must act but it’s very important to know that the court will consider whether you made the application promptly in deciding whether to set the judgment aside. Case law in this area indicates that the court views ‘promptly’ as acting with all reasonable speed in the circumstances.
What about cases where a claim form has been deemed served, but is never actually received?
If this situation applies to you, it has been held that CPR 13.3 is the relevant rule that applies – so if you are a defendant, you are not entitled to have the judgment set aside as of right because the discretionary rules will be invoked by the court. This means that you will need to persuade the court that you have either a real prospect of successfully defending the claim, or there is some other good reason why the judgment should be set aside/you should be allowed to defend the claim. You may wish to seek legal support from an experienced business disputes solicitor to help you build a case.
Who bears the costs of a successful application to set aside a judgment?
The claimant will usually be responsible for paying the costs of a successful application to set aside judgment under the mandatory grounds (CPR 13.2).
If the application is made under the discretionary grounds (CPR 13.3), costs are decided by the judge.
What’s the procedure for applying to have a default judgment set aside?
The table below sets out the key stages of an application to set aside a default judgment:
|Use Form N244 to make the application, and pay the relevant fee (check Form EX50 for the most up to date details of the fee). You should state the grounds for applying to set aside and whether the application is made under CPR 13.2 or 13.3, or both. A draft of the order requested should be attached. One of our business dispute solicitors can help you for a small fee.
|The evidence should explain the reasons for the application; for example, the claimant entered judgment prematurely or an explanation as to why there was a delay in seeking to have default judgment set aside. This should be put in Part C of the form (if brief), or in a witness statement.
|Notice of application
|The application notice, draft order and evidence in support must be served on the claimant at least three clear days before the court is due to deal with the application.
|The application will usually be heard by a master or a district judge, with both parties or their lawyers present.
How long does it take to have a judgment set aside?
The length of time it takes to have a judgment set aside will depend on the speed of the court’s administrative processes in taking the steps outlined in the table above and the time it takes for the matter to be listed for a hearing will vary between individual county courts.
What happens after default judgment is set aside?
If, as a defendant, you are successful in your application, it’s likely that the court file for the case will be referred to a judge who will then give directions for case management, including allocation to a track.
What if the court does not grant a defendant’s application to set default judgment aside?
In this instance, a claimant will be able to proceed with enforcement of the judgment.