Setting Aside a Default Judgment – Restoring the Status Quo

A default judgment is where the court issues a judgment against a Defendant without hearing the merits of the claim.

A Claimant can apply for a default judgment where the Defendant fails to file a defence within 14 days (or 28 days if an acknowledgment of service has been filed).

Once a default judgment has been obtained, the Claimant can take enforcement action to recover the judgment sum by various methods such as instructing bailiffs, placing a charge over the Defendant’s property or applying for an attachment of earnings order. Furthermore, the default judgment is likely to detrimentally affect the Defendant’s credit rating.

There is a process to remove the default judgment, which is known as a set-aside application. In this article, an overview will be provided as to the mechanics of this process.

Application to set aside a Default Judgment

An application to set aside a default judgment is made using the Court Form N244 (application notice), which is available from the court’s website.

There is a court fee payable of £255.00, unless both parties consent to the application where the court fee is reduced to £100.00.

There are two routes by which a judgment can be set aside. First, where the judgment has been wrongly entered, the court must set aside the judgment under Rule 13.2 of the Civil Procedure Rules. The second route is where the court has discretion to set aside the judgment under Rule 13.3 of the Civil Procedure Rules even if it was not wrongly entered, providing certain criteria have been satisfied.

The Mandatory Route for a Default Judgment

If the Claimant makes an application for a default judgment on the basis that no acknowledgment of service or defence has been filed within the requisite time periods and this is wrong, the court must set aside the default judgment. This is the case even if there is no defence on the merits.

The Discretionary Route for a Default Judgment

Most default judgments do not fall into the above category and therefore the court may exercise its discretion to set aside the default judgment in the following circumstances:

• 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.

To expand, there has been judicial interpretation of the phrase ‘real prospect of successfully defending the claim’ and it is a relatively low threshold to pass. The Defendant must show more than an arguable defence and the defence cannot be false, fanciful or imaginary.

Even if the Defendant does not have a defence with a real prospect of success, the court may exercise its discretion and set aside the judgment if there is a good reason to do so. A good reason may be the seriousness of the claim or the fact the documents had not been received within the deadlines.

In exercising its discretion, the court will take into account how promptly the application was made. Delay can mean the court decides not to exercise its discretion in favour of the Defendant and it is vital a Defendant acts promptly.

Further considerations for Default Judgments

Costs are an important consideration. At a set aside hearing, the court may order the Defendant to pay costs even if it successfully gets the judgment set aside. However, the Claimant may be ordered to pay the Defendant’s costs, especially if it was unreasonable in defending the application.

It is often prudent to see if it is possible for the parties to deal with matters by consent, rather than a contested hearing.

Assuming the judge grants an order to set aside a default judgment, this will not be the end of the matter for the Defendant and it is likely directions will be given for the claim to progress to trial. If the judge refuses to grant an order to set aside the judgment, it is likely the Claimant will be able to enforce the judgment.

It is very important to obtain legal advice promptly if you have received a default judgment or are on the receiving end of an application to set aside a default judgment which you have obtained.

Paul Davis is an Associate Solicitor at BHW Solicitors in Leicester and regularly writes and advises on all aspects of debt recovery and commercial litigation. Paul can be contacted on 0116 281 6231 or email paul.davis@bhwsolicitors.com.