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If you need help regarding business debt or applications to set aside default judgment, contact our team of dispute resolution solicitors:
What is a default judgment, and when can it be entered?
A default judgment is where the court issues a judgment against a defendant without the merits of the claim being heard and without the defendant having responded to the claim.
A claimant can apply for a default judgment when the defendant fails to file an acknowledgement of service or when an acknowledgement of service has been filed, but the defendant then fails to file a defence.
Once a default judgment has been obtained, the claimant can use various enforcement actions to recover the judgment sum or business debt from the defendant.
For example, the claimant can instruct bailiffs to seize goods up to the value of the judgment debt, serve a statutory demand as a pre-cursor to commencing winding up or bankruptcy proceedings or obtain a charging order over any property that the defendant owns.
What should I do if a default judgment has been entered against my business?
If, as a defendant, you consider that default judgment has been entered wrongly against you, or you have failed to respond to the claim and now wish to defend the claim, you must act promptly and apply to the court to set aside the default judgment.
The steps you will need to take as a matter of urgency are:
- Identify what has happened – did you not receive the claim form or particulars of the claim, or did you receive them and not take any action? If the latter, you will need to be able to provide reasons to support why the judgment should be set aside.
- Collect evidence – did you respond to the claim form within the allotted time stated? Was there a delay in your response, and if so, why?
- Your position regarding the claim – do you accept or dispute the claim? Do you admit any part of the claim? If you dispute the claim, what are your reasons for this?
- Take legal advice from a solicitor – a solicitor will be able to assist you with making an application to set aside a judgment if this is appropriate and will be able to advise you on the prospects of successfully doing so. A solicitor will also be able to advise you on the prospects of your defence being successful.
Reasons for setting aside the default judgment
The court must set aside the default judgment in the following circumstances:
- The defendant filed an acknowledgement of service within the time specified.
- The defendant applied for summary judgment before the default judgment was entered.
- If before default judgment was entered, the defendant filed and served upon the claimant an admission of liability to pay all the money claimed.
- The whole of the claim was satisfied before default judgment was entered.
A court may set aside the default judgment if the defendant can show that it has reasonable prospects of successfully defending the claim or it appears to the court that there is a good reason why the judgment should be set aside or that the defendant should be allowed to defend the claim.
The process of setting aside a default judgment
To set aside the default judgment, the defendant or its legal representatives must make an application to the court and pay the appropriate court fee unless exempt from paying the court fee.
The application should be made to the same court that entered the default judgment.
The application must provide the court with all of the evidence that the defendant relies upon in support of the application to set aside the default judgment.
The evidence required will depend on the reason(s) why the defendant is asking for judgment to be set aside.
If appropriate, the evidence must explain why an acknowledgement of service or defence was not filed with the court in time.
The evidence must also provide information on the steps the defendant has taken since discovering default judgment has been entered.
Before making any application to the court, it is best to try and agree with the claimant and its legal representatives that the default judgment should be set aside.
However, if the claimant will not agree to the same, the application to set aside the default judgment should be made immediately.
Once the court has issued the application, the court will send the parties a notice of hearing. At this hearing, the court will decide whether or not the default judgment should be set aside.
What happens if the court sets aside the default judgment?
If the default judgment is set aside, the claimant will lose its right to enforce the judgment, and the claim will proceed as a defended claim (i.e. as if the default judgment had never been entered).
The court will provide directions for the parties to progress the claim to trial. If you are successful in your application to set default judgment aside, you may also be entitled to claim the costs of the application from the claimant.
What happens if default judgment is not set aside?
If the default judgment is not set aside at the hearing, then the claimant can proceed with the enforcement of the judgment.
You may also have to pay the claimant’s costs relating to the application to set aside the default judgment.
You should obtain legal advice if this situation arises regarding your options in the future.