If a defendant to a claim in civil proceedings fails to file an acknowledgement of service or a defence (whichever if applicable) by the required deadline, then default judgment can be entered against them. However, in some circumstances the court can set aside (cancel) or vary a default judgment.
The grounds for setting aside a default judgment
There are mandatory and discretionary grounds on which the court has the power to set aside a default judgment.
Under Rule 13.2 of the Civil Procedure Rules 1998, the court must set aside a default judgment that was wrongly entered before the defendant’s deadline for filing an acknowledgement of service or a defence expired. The court is also obliged to set aside a default judgment entered after the claim had been paid in full.
Under Rule 13.3(1), the court can use its discretion to set aside or vary a default judgment if the applicant can show that:
- he (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
o the judgment should be set aside or varied; or
o the defendant should be allowed to defend the claim.
Although in theory the applicant only has to satisfy one of the grounds set out above, there is more chance of the judge exercising his discretion if the applicant can show that he has a defence with a real prospect of success at trial. It is also important for the defendant to make his application for default judgment to be set aside as soon as he becomes aware of the judgment, as the promptness of his application will be taken into account by the court. Any application must be submitted with supporting evidence.
Following an application to set aside a default judgment, the court may:
- set aside the default judgment;
- refuse the application; or
- make a conditional order.
With regard to a conditional order (when it appears to the court possible that a defence may succeed but improbable that it will do so, or if the application was made very late), the defendant will usually have to pay the amount of the claim (or as much as he can reasonably afford) into court within a set timescale, otherwise the default judgment will remain.
Once the court has determined the application, a costs order will be made and will vary depending on the outcome of the application. If the default judgment is set aside in accordance with Rule 13.2 (on a mandatory ground) then the fault will have been the claimant’s, who will consequently be ordered to pay the defendant’s costs.
If the application is granted on the ground that there was a good reason for the default, then the party that loses the subsequent case will usually pay the costs of the application (known as ‘costs in the case’).
If the application is granted on the ground that there is a defence with a real prospect of success at trial, the defendant normally has to pay the claimant’s costs. Similarly, the defendant will normally have to pay the claimant’s costs if a conditional order is made.