Acting Promptly When Setting Aside Default Judgment
The requirement to act promptly when applying to set aside a default judgment
The impact of a default judgment can be serious and steps should be taken to prevent matters from getting to such a severe stage. If a default judgment is entered against a Defendant, then this can negatively impact the Defendant’s credit rating for up to 6 years. This means that a Defendant will find it hard to apply for credit or a mortgage. Additionally, certain employers in certain careers may prohibit their employees from getting into financial difficulty, so it can impact a Defendant’s work life too. If a Defendant has a default judgment entered against them, then certain steps must be taken promptly, as confirmed in the recent case of Mountain Ash Portfolio Ltd v Vasilyev  EWHC 1853 (Comm) “Mountain Ash”.
Setting aside a default judgment- mandatory route
A Claimant can enter default judgment, if a Defendant does not take steps to adequately respond to a claim. Once a default judgment is entered, the Court has power under CPR 13 to set it aside, if a Defendant brings an appropriate application to do so. There are mandatory grounds for setting aside a default judgment, which are detailed in CPR 13.2, for a Claimant’s failure to comply with aspects of CPR 12. The mandatory grounds concern whether or not a Defendant responded (or applied to strike the claim out/apply for summary judgment) to a claim within the relevant time limits, or where a claim was satisfied in full prior to judgment being entered. If the mandatory grounds are satisfied, then a Court must allow the Defendant’s application to succeed. Therefore, the mandatory route is only really used where there has been a procedural error on entering default judgment. However, where the above-mentioned mandatory grounds do not apply, then a Defendant is at the mercy of Court’s discretion, under CPR 13.3.
Setting aside a default judgment- discretionary route
When a Court decides whether or not to exercise discretion under CPR 13.3, it must consider factors such as:
- Whether the Defendant has a real prospect of successfully defending the claim, or
- If there is some other good reason to set default judgment aside, or the Defendant should be allowed to defend the claim, and
- Whether the Defendant acted promptly in bringing their application to set aside the default judgment.
The case of Mountain Ash had a close look at point 3 above, which is fully detailed in CPR 13.3(2). In this case, the Defendant sought to apply to set aside the default judgment, nearly 5 months after the default judgment had been entered. Therefore, when presented with the basic facts, the application was not exactly brought promptly. The Mountain Ash case serves as a useful reminder that promptness should be measured from the date the Defendant learns of the default judgment, so there is room for arguments about how/when the proceedings and judgment were brought to the Defendant’s attention. The Mountain Ash case further reinforces this by stating that there are “no hard and fast rules or even indicative tariffs in play” when assessing whether an application has been brought promptly. Therefore, each application must be decided on its own set of facts, but it is up to the Defendant to explain any delay within their application.
In the Mountain Ash case, it was determined by the Judge that the Defendant had found out about the default judgment on 19 October 2020 and instructed solicitors immediately. Therefore, the Judge commented that a delay until 5 February 2021 to bring the application to set aside the default judgment was “startling”. The Defendant attempted to justify the delay by stating that he was ill for most of November 2020 and that his Solicitors had to conduct investigations prior to issuing the application to set aside the default judgment.
The Court reluctantly set aside the default judgment, but only after imposing various conditions, which included payment of the Claimant’s costs for various steps taken in the litigation so far.
Obviously, it is best to respond to a claim properly, and prior to default judgment being entered. However, if a Defendant is confronted with a default judgment, then they must act quickly upon being made aware of the default judgment. If there are any delays in bringing an application to set aside a default judgment, then these must be fully evidence with appropriate documents. For example, if a Defendant was ill, then relevant medical notes should be sought and should accompany the Defendant’s application in the form of a witness statement. Without such evidence, then a Defendant runs the risk of the default judgment remaining against their name, which can have a severe financial impact.
Our Dispute Resolution experts will be able to address any concerns you have about the principles, procedure and issues on setting aside a default judgment and will assist and guide you through the entire legal process. Call us for free today on 0808 252 5231 or get in touch online.