In this article I will, briefly, set out what a default judgment is, when and how it can be obtained and how it can be set aside. I will then set out the principles that the Court should consider when determining costs following the hearing of an application to set aside default judgment.
A default judgment is a judgment entered by way of an administrative act, rather than following a judicial decision on the merits of the case following a trial. Despite this, a default judgment binds a defendant in the same way that a judgment entered after trial does, and it can be enforced in the same ways too. As a result, the provisions of CPR 12 can be very useful for claimants.
When can Default Judgment be obtained?
CPR 12.1 provides that default judgment can be obtained where a defendant:
a) Has failed to file an acknowledgment of service; or
b) Has failed to file a defence.
CPR 12.3(1) provides that default judgment can only be entered after the relevant time for filing an acknowledgment of service or defence to the claim has expired.
It follows, therefore, that default judgment can only be obtained by claimants. Further, it is only applicable where no defence has been entered, and not where a defence has been entered which the claimant takes issue with. In those circumstances, a claimant should consider an application for strike out or summary judgment, rather than default judgment.
CPRs 12.2 and 12.3(3) set out the limited cases in which a claimant may not obtain a default judgment.
How can Default Judgment be obtained?
CPR 12.4 provides the procedure for obtaining default judgment. CPRs 12.4(1) and 12.9(1) provide that in the majority of cases, a claimant may obtain default judgment by simply filing a request using the relevant practice form (the N225, or the N227 where the Court needs to determine the sum involved). In the cases to which CPR 12.4(2) applies, a claimant will have to make an application in accordance with Part 23 if they wish to obtain default judgment.
Paragraph 4.1 of Practice Direction 12 sets out what the Court must be satisfied of, both on a request and on an application, before entering default judgment.
Setting Aside a Default Judgment
Where a defendant has default judgment entered against them they have no right of appeal, but they may apply to have the judgment set aside pursuant to CPR 13. Applications to set aside default judgment are, broadly, split into two categories: those in which the court must set aside default judgment, and those in which the court doesn’t have to, but has a discretion to.
CPR 13.2: Cases where the Court must set aside default judgment
CPR 13.2 provides that the Court must set aside default judgment if the judgment was ‘wrongly entered’. Broadly speaking, this will be the case where default judgment was entered but:
a) The relevant time for filing an acknowledgment of service or defence had not expired; or
b) The defendant had filed an acknowledgment of service or defence; or
c) The defendant had already satisfied the claim; or
d) The defendant had already filed an admission requesting time to satisfy the claim; or
e) The defendant had already applied for strike out or summary judgment.
In these cases, the Court has no discretion and must set aside the default judgment.
CPR 13.3: Cases where the Court may set aside default judgment
In cases to which CPR 13.2 does not apply, a defendant may still apply to have a default judgment set aside. In this instance, the Court will consider whether or not to exercise its discretion in relation to whether: (a) the defendant has a real prospect of successfully defending the claim; or (b) it appears that there is some other good reason why the judgment should be set aside or varied, or why the defendant should be allowed to defend the claim.
This article will go no further on the relevant law which applies to CPR 13.3 as it requires a standalone article to do it justice. CPR 13.3(2) also provides that the Court must also consider the issue of promptness. My colleague, Nicole Jennings, has already explored the principles relevant to the issue of promptness in this article.
If a defendant makes an application to set aside default judgment, then the claimant will consider whether or not to contest it. If the claimant chooses to contest, then it is likely that the Court will list a hearing to determine the defendant’s application.
At the hearing, the parties will deliver submissions in support of their positions. The defendant should ‘go first’ as it is their application, and the claimant will respond. The Court will then make a decision. At the conclusion of the hearing, as with most civil hearings, it is likely that one, or both, of the parties will apply for their costs.
As trite as it may be, the Court retains its general discretion with regards to costs (CPR 44.2). However, the commentary at CPR 70.6.1 provides further guidance as to how the Court should approach the issue of costs following the hearing of an application to set aside [default] judgment.
The starting point will be to consider the outcome of the hearing. If the application was dismissed, and the default judgment was not set aside, then it is likely that the defendant will pay the claimant’s costs (CPR 44.2(2)(a)). If, however, the application was allowed, and the default judgment was set aside, then it is necessary to consider why it was set aside:
– If the Court sets aside the default judgment pursuant to CPR 13.2, because the judgment was ‘wrongly entered’, then the usual order is for the claimant to pay the defendant’s costs (commentary at 70.6.1).
– If the Court sets aside the default judgment pursuant to CPR 13.3, because the Court has exercised its discretion to set aside rather than because the judgment was ‘wrongly entered’, then the usual order is for the defendant to pay the claimant’s costs (see also, the commentary at 70.6.1).
The usual caveats with regards to costs apply. The Court retains the discretion to make a difference order (CPR 44.2(2)(b)). For example, where the default judgment has been set aside and directions are given towards trial, the Court may simply make an order of ‘costs in the case’.
The commentary at CPR 70.6.1 provides food for thought for claimants. This is because where it appears that default judgment has been ‘wrongly entered’ against a defendant, and where the defendant has subsequently applied to set that default judgment aside, then it may be advisable for the claimant to consent to the judgment being set aside rather than allowing the matter to proceed to a hearing. If the claimant chooses not to consent, in those circumstances, and the matter proceeds to a hearing, then the claimant may end up paying the defendant’s costs.
Defendants should also be aware that, unless a default judgment was ‘wrongly entered’, they will likely pay the claimant’s costs of the application. That is even where the application is successful pursuant to CPR 13.3. In circumstances, therefore, where defendants are likely to pay the costs of an application to set aside, defendants should always endeavour to make any application ‘promptly’ as this is likely to be a significant factor that the Court takes into account when determining the extent of costs.
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