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, we 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.
Unfamiliar with the complexities of default judgment? For a general overview, please see our article: What is a default judgment: an overview.
- What are the regulations when setting aside a default judgment?
- Can the court set aside a default judgment of its own accord?
- What if a defendant responds quickly in applying to set aside a default judgment?
- Scenarios in which a default judgment must be set aside as wrongly entered
- Scenarios in which a default judgment may be set aside under CPR 13.3
- What about cases where a claim form has been served, but is never actually received?
- Who bears the costs of a successful application to set aside a judgment?
- What’s the application procedure for setting aside a default judgment?
- 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 are the regulations when setting aside a default judgment?
The primary rules that you need to be aware of concerning applications to set aside default judgments are contained within the Civil Procedural Rules - CPR 13.2 and CPR 13.3. These rules can be summarised as follows:
- 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?
Expanding further upon CPR 13.3, 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 responds quickly in applying to set aside a default judgment?
If you are a claimant who has made an application for default judgment, then it’s advisable to 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 adverse cost consequences.
Scenarios in which a default judgment must be set aside 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.
A note on acknowledgment of service
From the paragraph above, you will have ascertained that whether or not an acknowledgment of service has been filed can play a crucial role in determining if a default judgment is to be set aside. The CPR makes it clear that it 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.
Failure to file a defence
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
As will become apparent when we take a look at what the CPR say about when the court has a discretion to set aside a default judgment, delay is a significant factor. However, when delay is a reason in the context of a mandatory set aside, it bears no relevance and a defendant will not be prevented from having such a judgment set aside.
Scenarios in which a default judgment may be set aside under CPR 13.3
Generally speaking, 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 broadly defined as:
- The nature of the defence.
- Whether there has been any delay in relation to the application to set aside (this is a crucial factor that has become increasingly relevant in recent years. If you are a defendant faced with a default judgment that you feel was granted in error, it is imperative 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 if the default judgment is set aside.
As with all litigation proceedings overseen by the court, the overriding objective is of paramount importance. 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, 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 that discretion if it sees fit to do so on a case-by-case basis.
What about cases where a claim form has been 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 do not have a right to have the judgment set aside 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 permitted to defend the claim. You may wish to seek legal support from an experienced dispute resolution solicitor to help you build an argument in this regard.
Who bears the costs of a successful application to set aside a judgment?
The claimant will usually bear 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 at the discretion of the judge.
What’s the application procedure for setting aside a default judgment?
The table below sets out the key stages of an application to set aside a default judgment:
|Application Notice||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.|
|Supporting Evidence||The evidence ought to establish the factual basis 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/affidavit).|
|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.|
|Hearing||The application will usually be heard by a master or a district judge, with both parties or their lawyers present.|
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.
If you are still unsure of your options or if your circumstances fall outside the scope of the scenarios discussed in this guide, it’s important that you get the right help as soon as possible. If you would like to discuss your options further, our specialist team of business dispute solicitors are on hand to provide guidance and support at any stage of the process.