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The Setting Aside of Default Judgments and the Impacts of COVID-19

The Setting Aside of Default Judgments and the Impacts of COVID-19

Recently we have seen a number of enquiries concerning judgments that have been obtained against defendants who were not living at their usual address or as a result of a claim being served on them at an incorrect address. In our latest blog we look at setting aside default judgment and how the process has been affected by COVID 19.

Introduction

A Defendant may be unaware that a claim was issued against them, only later to find a County Court Judgment has been registered against their name. It may be they received the claim but did not reply in time. This type of judgment is called a ‘Default Judgment’ (i.e. that a judgment had been granted against the Defendant as a result of neither a Defence or Acknowledgment of Service being filed on time or at all). Of the 68,000 judgments awarded between April and June 2020, 86% of those judgments were Default Judgments. 

When a Defendant becomes aware that a Default Judgment has been obtained against them, they may be entitled to apply to set aside the Default Judgment. Here is a link to the rules governing this kind of application:- 

https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part13

The court must set aside the Judgement under Rule 13.2 if the claim has not been correctly served, principally because the wrong address has been used to serve the claim form. If the claim form has been served at the last address the claimant could have known after making reasonable enquiry, the Defendant will need to apply under Rule 13.3.  In making this type of application the applicant will need to convince the court about the following issues:

Does the Defendant have a real prospect of successfully defending the claim?

The burden of proof rests on the claimant to establish that there are grounds for its belief that the respondent has no real prospect of success. A real prospect of successfully defending the claim means that any defence must carry some chance of success, cannot be false or imaginary and must be more than merely arguable. In identifying whether any defence meets this threshold the Court will not conduct a ‘mini-trial’ but will also not simply accept issues brought by the application at face value without analysis. 

Is there any other good reason as to why the Default Judgment should be set aside and/or that the Defendant should be allowed to defend the claim?

At this stage, the court may consider the three stage process set out in the case of Denton v TH White Ltd [2014] which involved the court deciding whether (a) the failure which gave rise to the sanction was serious or significant; (b) whether there was a good reason for the default or failure; and (c) whether, in all the circumstances of the case, the sanction should be set aside. As a result, the Court may take into consideration how COVID-19 affected a Defendant’s ability to properly respond to the claim and whether the impact COVID-19 had on the Defendant could be considered a good reason for the earlier default/failure. However, COVID-19 cannot be used as a catch-all excuse and is unlikely to be considered a good reason where, for example the claim has simply not been responded to despite being served correctly. As part of the overall consideration of all the circumstances in the case the Court will include the need to manage the case efficiently, fairly and at a proportionate cost. 

Has the application to set aside the Default Judgment been filed ‘promptly’

The criteria of how ‘prompt’ an application needs to be made is subjective and depends largely on the factual issues of each specific case. In the case of Core-Export Spa -v- Yang Ming Marine Transportation Corp [2020] a High Court judge dismissed an application to set aside on the basis there had been a delay of 23 days from the date the Defendant became aware of the judgment. The judge will consider various factors when deciding whether an application has been made promptly including (a) the period of time form the judgment being issued to the date of the application, (b) whether the original claim had been properly served by the Claimant and (c) whether the Defendant had been given prior notice of the claim and impending judgment. 

Costs

In order to make an application to set aside a default judgment, a Form N244 under CPR Part 23 https://www.justice.gov.uk/courts/procedure-rules/civil/rules/part23 needs to be filed with the Court in which the judgment was made in enclosing written evidence giving reasons why the default judgment should be set aside. The court fee to make this type of application is £255. If you are successful in the application and the default Judgment is set aside you may be entitled to recover your costs in the application (depending on the reason the application is being made and whether the judgment is over £10,000). However, if the Court dismiss the application the Claimant may be entitled to seek an order that you pay their costs in defending the application. It is also possible the application will be successful but the Defendant has to pay the Claimant’s costs. For low value claims the Defendant will have to consider the commercial benefit of setting aside if the costs are close to the judgment amount. 

Conclusion

In deciding your best course of action and the likelihood of successfully defending any claim, the various merits of the claim and costs risks should be discussed with a solicitor who should be able to give you a considered view on what response is best for you commercially and personally.  Each case turns on its particular facts and each judge may have a different view in exercising their discretion. A “one size fits all” approach doesn’t cut the mustard, especially in these unusual and fraught times.

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