How Can Defendants Set Aside A Default Judgment?

Summary

• A default judgment is an automatic court decision made when a defendant fails to respond to a claim within the required timeframes, and it can be set aside on mandatory or discretionary grounds under Part 13 of the Civil Procedure Rules.
• Businesses facing a default judgment must act promptly, gather supporting evidence, and submit Form N244 to the court to have any prospect of success.
• If a default judgment is not set aside, it can be enforced against the business, potentially resulting in debt recovery action or damage to credit rating.
• This article is a plain-English guide to default judgments for business owners operating in Australia, explaining the grounds and process for setting aside a default judgment.
• The article was prepared by LegalVision, a commercial law firm that specialises in advising clients on disputes and litigation matters.

Tips for Businesses

Act immediately upon discovering a default judgment – delays weaken your application. Notify the claimant of your intention to apply and seek their consent where possible. Prepare clear evidence explaining your failure to respond and demonstrating a real prospect of defending the claim. Submit Form N244 promptly with all supporting documentation attached.

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On this page

• What is a Default Judgment?
• Grounds for Setting Aside a Default Judgment
• How Can Defendants Set Aside a Default Judgment?
• Tips for Setting Aside a Default Judgment
• Key Takeaways
• Frequently Asked Questions

If your business is facing a default judgment, you may wonder whether you can set it aside. A default judgment is when the courts make an automatic decision about a claim because the defendant has failed to respond within the allocated timeframes. If you receive a default judgment, you must act promptly. This article explains what a default judgment is and how you can set aside a default judgment. 

What is a Default Judgment?

A default judgment is when the courts make an automatic decision about a claim because the party defending a claim has failed to file:

• an acknowledgement of service of the claim; or 
• a defence of the claim within the timeframes set out in the Civil Procedure Rules. 

As a result, the court will not hear any evidence or arguments from the defendant. Commonly, claimants obtain a default judgment for debt claims against a defendant. This means you should:

• comply with the judgment by paying the sum demanded; or 
• apply to vary the judgment’s terms if you cannot afford to pay. 

Alternatively, if you disagree with the default judgment and wish to have it reversed, you can apply to set it aside. 

Grounds for Setting Aside a Default Judgment

Mandatory Grounds

According to Part 13 of the Civil Procedure Rules, the court must set aside a default judgment if any of the following conditions are met:

• the defendant filed an acknowledgement of service within the prescribed timeframe;
  
• the defendant has an outstanding application that has not been addressed, specifically:
  • an application to strike out the claimant’s statement of case under rule 3.4; or
  • an application for summary judgment under Part 24;
    
• the defendant has fully satisfied the claim, including any costs, for which the claimant was seeking judgment (but the judgment was entered regardless); or
  
• in cases where the claimant sought judgment on a monetary claim, the:
  • defendant admitted liability for the full amount claimed; 
  • defendant requested time to pay; but
  • judgment was entered despite this admission and request.

Discretionary Grounds

Part 13 also outlines circumstances where the court has discretion to set aside a default judgment:

1. the defendant demonstrates a real prospect of successfully defending the claim; and
2. the court determines there is another good reason to set aside the judgment, or allow the defendant to defend the claim.

How Can Defendants Set Aside a Default Judgment?

Several key issues must be considered when applying to set aside a default judgment below:

1. Gather Evidence

Consider your reasons for the application and gather any relevant evidence. For example, you should collate evidence to show why you did not respond to the claim within the required time limits. It is also advisable to let the claimant know you will be making your application and seek their consent to set aside the default judgment. This could make the process faster and reduce costs.

2. Apply to the Court 

You must then submit an application form (Form N244) to the court, along with the required fee. Your application will need to state the grounds for applying for a default judgment. You will need to attach a draft order to your application. You will also need to include supporting evidence to justify setting aside the judgment. 

For example, your reason for the application might be:

• you did not receive the claim form; 
• the claimant applied for the judgment too early; or
• you believe you have a real prospect of defending the claim.  

The court will confirm receipt of your application and usually schedule a hearing. 

3. Send Your Application Form to the Claimant 

You should then submit your application to the claimant (or their legal team) as soon as possible and within the prescribed timeframes. This is usually at least three days before the court is to deal with the application.

4. Hearing

A hearing judge will then consider your application. Both parties, or their legal representatives, will attend the hearing. The judge will hear the arguments and decide whether to set aside the default judgment. The claimant might oppose your application and make its arguments as to why the default judgment should remain in place. 

If the court agrees to set aside the default judgment, the judgment will be cancelled. The claimant will not be able to enforce it, and the claim will proceed as usual. However, if the court does not set the default judgment aside, the claimant will be able to enforce it, and you will need to comply with it. 

Tips for Setting Aside a Default Judgment

Applying to set aside a default judgment can be a complicated and stressful process for defendants. If you are a defendant, you should consider the following:

How to Manage a Business Dispute

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Key Takeaways

Applying to set aside a default judgment is a complicated process. Several steps must be followed, and preparing your arguments and evidence is crucial. The court will only set aside a default judgment in specific and very limited circumstances. If you are unsure about any aspects of the application process, you should seek urgent legal advice on the process and your options. 

If you need legal advice on setting aside a default judgment, our experienced disputes lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions