What is a judgment in default?
A judgment in default is a Court judgment issued against a defendant following a request by the claimant in circumstances in which the defendant has failed to file an acknowledgment of service or a defence within the required time limits in Court proceedings. It has the same potential consequences as a normal Court judgment in terms of the various ways it can be enforced and can have severe effects on the defendant’s credit rating, leading in some cases to insolvency proceedings.
Any defendant who finds themselves in this situation can make an application to “set aside” the default judgment against them under part 13 of the Civil Procedure Rules. Some of the relevant rules and issues are discussed below.
Circumstances in which the Courts “must” set judgment aside
The Courts “must” set judgment aside where (amongst other reasons) the defendant has in fact filed an acknowledgment of service or a defence (and can prove it) but for whatever reason it has been missed. The Courts will even do this where the documents are filed late (i.e. after the deadline) but before the Court has had the chance to issue judgment – the rules were amended on 6 April 2020 in order to clarify this point (Claimants should take note of this given the urgency it imposes in making the request for default judgment).
Other cases in which the Courts “must” set judgment include where the defendant has applied to have the claimant’s case struck out, has paid the judgment or has admitted liability and requested time to pay.
Circumstances in which the Courts “may” set aside judgment
The Courts “may” set judgment aside in two further cases (meaning they will exercise their discretion in deciding whether to do so), as set out below. In both of these cases, applications are required to be made “promptly” (promptness usually being measured from the point the defendant becomes aware of the default judgment).
Real prospect of successfully defending the claim
A default judgment “may” be set aside if a defendant can show that it has a “real prospect of successfully defending the claim”. In other words, the Court will not set judgment aside simply because it has been asked to do so – the defendant needs to show that it may actually be able to win at trial; otherwise, it makes sense for the judgment to stand given there is unlikely to be a different outcome if the proceedings are allowed to continue.
What is required to meet this criteria will always vary according to the facts of each case but it should be said that it is not quite the same as having to fully defend the claim at trial. Whilst a defendant should set out its defence in its application evidence, it does not need to fully particularise the defence in the same way it would in a set of pleadings – the threshold is slightly lower and it just needs to do enough to show a “real prospect” of success. This does not mean to say that a defendant should not draft full particulars – they may wish to do so in an effort to state their case as strongly as possible and perhaps negotiate a full settlement of the proceedings. This approach should be adopted cautiously though given that if a defendant does draft full particulars, it has effectively committed to a position in how to argue its defence.
“Some other good reason”
A default judgment may also be set aside if the claimant can show that, “there is some other good reason why… (i) the judgment should be set aside or varied; or (ii) the defendant should be allowed to defend the claim”. What constitutes “some other good reason” will again vary from case to case. There is no prescribed list of reasons and the Courts will look at the circumstances and context of each particular case, even where that context is highly unusual or even novel.
For example, in the recent case of MS v A local authority  EWHC 1622 (QB), the High Court was willing to set aside judgment where the claimant had sent the claim form to the physical address of the defendant but the defendant had not received the papers (leading to default judgment being issued) because the UK government had imposed a “lockdown” on 23 March 2020 as a result of the Covid-19 pandemic. The proceedings had been sent out on 25 March 2020, at which point the offices were unoccupied except for a ”skeleton staff”. The defendant had actually asked (in February 2020) that service be effected by post but this before the “lockdown” started.
The Court was happy to find that the “some other good reason” test had been met, stating, “The world shifted on its axis on 23 March 2020 and it was incumbent on [the claimant’s solicitor] as a responsible solicitor and an officer of the court to contact the Council to acknowledge that the situation had changed, and to discuss how proceedings could best and most effectively be served”. Arguments by the claimant that the defendant, “should have had a system in place so that the proceedings served by Mr McConville were dealt with timeously” were not enough to persuade the Court to the contrary.
Although making an application to set aside judgment may be a daunting prospect to begin with, it is reasonably common for claimants to consent to such applications where they can see that a defendant has a strong case. Indeed, a claimant will sometimes be wise to concede given that, under the usual rules, they will have to pay the defendant’s costs in full if the application goes to a hearing and the defendant succeeds in getting judgment set aside. Simply making the application can lead to discussions along these lines and may even prompt negotiations over settlement of the claim itself at an early stage, the parties having already hashed out their arguments to a substantial extent – this can be advantageous to all given the costs that can be saved in not having to deal with full proceedings. Costs in litigation can escalate quickly and if an application to set aside judgment helps to reduce the differences between the parties, this should be taken advantage of to the extent possible.
Because a failure to act promptly can be fatal to an application to set aside default judgment, any defendant subject to a default judgment should seek urgent legal advice. There are also other issues to be aware of. For example, when making an application to set aside judgment, there is also a need to make a separate application for relief from sanctions at the same time. These matters are beyond the scope of this article but legal advice on them can be provided.
For further information on applications to set aside judgment, please contact Tom Leach.