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Setting Aside a Default Judgement

In Queensland, there are certain time frames which must be adhered to when a court proceeding is served on an entity or individual. Failure to file a Notice of Intention to Defend and Defence can result in the court awarding a default judgment. In many circumstances, a default judgment can be set aside in order to give a defendant the opportunity to be heard.

What is a Default Judgement?

A default judgement is an order made by the court when no defence is filed. The judgment is the same as a normal court judgment that would be awarded after a trial, except, it is susceptible to an application to be set aside.

If a default judgment is set aside, it basically means that it no longer exists, and cannot be enforceable.

Like any court judgment, default judgments can be enforced in various ways, including to:

Bankrupt an individual (if $5,000 or more);
Support a statutory demand against a company (if $2,000 or more); or
Commence enforcement proceeding including seizing and selling property and garnishing wages etc. (regardless of the amount).

Default judgements can also be damaging to an individual or a business as they may be listed as defaults on credit ratings.

Courts in Queensland have the discretion to set aside a default judgement, predominantly where the defendant has a genuine defence to a claim but did not file it within 28 days (or at all) or if the judgment is ‘irregular’.

Setting aside a Default Judgment

In Queensland, where a judgment has been obtained in default of filing of a Notice of Intention to Defend and Defence it may be possible to set aside the judgment on two main grounds:

If the judgment has been obtained irregularly, the defendant will be entitled to have the judgment set aside without showing any merits (for example, service was ineffective); and
Where the judgment has been regularly obtained the judgment might be set aside in the discretion of the court (usually when there is a defence).

The Judgement was obtained Irregularly

The Uniform Civil Procedure Rules 1999 (Qld) (the UCPR) provide rules for the service of court documents in civil matters conducted in Queensland Courts. These rules also provide how litigants are to proceed through the litigation process, for example, a plaintiff has to wait more than 28 days from the date of service before filing an application for default judgment.

If the court’s rules are not met the judgment is irregular and can be set aside.

Examples of irregularly obtained default judgements include:

A judgment signed on the basis of improper service of the originating process;
A judgment signed too soon;
A judgment for too much (though this may be corrected);
A judgment for a liquidated sum which was not in law liquidated; or
A judgment signed in breach of good faith.

The two main argument are improper service, or the date of service.

If a judgment is obtained irregularly, the usual order is that the default judgment be set aside. This is partly because irregular judgments are the product of the exercise of administrative acts ‘performed without legal authority’.

Discretion of the Court

The court also retains the power to set aside default judgements in certain circumstances and on such terms as it thinks fit. This is based on common law and rule 290 of the UCPR.

Unlike default judgments obtained irregularly, in order to succeed in persuading a Magistrate or Judge to set aside a default judgment, an applicant should do their best to satisfy the following:

Give a satisfactory explanation for the failure to appear;
Establish no unreasonable delay in making the application; and
Demonstrate a prima facie defence on the merits.

Note: ‘prima facie’ is Latin for ‘at first sight’. To have a prima facie defence means to have some argument that might have merit. It doesn’t have to have a 50/50 shot at winning, it just has to be an argument that cannot quickly and easily be dismissed. Think of it this way. A reasonably complex trial may go for 5 days. An application to set aside a default judgement may go for 20 minutes. A Magistrate or Judge does not have time to properly assess a defence, as long as there is something of substance.

Although the discretion is ‘unconditional’, the courts have laid down for themselves rules to guide them in the normal exercise of their discretion. The most cogent of the three matters is whether there is a prima facie defence.

Failure to Appear and Delay

Failure to appear and delay have some overlap. A failure to appear has been further described as a “failure to appear in the plaintiff’s action”. In any matter where a default judgment has been awarded, there will have been a “failure to appear in the plaintiff’s action” caused by not filing a Notice of Intention to Defend and Defence. Additionally, there will always be a delay; whether a day, a month or a year regarding making an application to set aside a default judgment.

It is not often that a defendant who has an apparently good ground of defence would be refused the opportunity of defending, even though a lengthy interval of time had elapsed, provided that there is no irreparable prejudice done to the Plaintiff.

Further, a satisfactory explanation for a failure to appear will be usually be satisfied “unless the failure to appear was in contumelious disregard of the process of the court”.

The court has accepted the following arguments (not all arguments listed):

being ill despite more than 2 months elapsing;
being unrepresented, absent due to work commitments and incorrectly calculating the date required for the documents to be filed;
not knowing about the Claim and Statement of Claim until after the default judgment was entered; and
filing a Notice of Conditional Notice of Intention to Defendant, not knowing the procedural rules, and allowing the Conditional Notice to lapse.

The court has not accepted the following arguments (not all arguments listed):

Failing to act for over seven months and not having a prima facie defence;
Failing to act for over twelve months and not having a prima facie defence; and
Failing to act for 6 weeks, receiving an extension, and then failing to meet that extension because of an inability to pay lawyers.

In National Bank v Singh [1993] QCA 469 (a judgment from Queensland’s highest court), the court went so far as to overturn an earlier decision that dismissed a delay based on an illness (but noting there was a good prima facie defence).

The affidavit before the court was essentially this:

When a receiver was appointed, the defendant was suffering from various medical conditions requiring hospitalisation;
The defendant because extremely stressed as a result of the appointment of the receiver and his action in closing the business and the consequent claims upon him by the plaintiff and the leasing companies and the fact that he had lost his residence at Broadbeach and that his farms were to be sold; and
The defendant became extremely depressed and he believed that the stress and depression from which he was suffering was adversely affecting his health. The defendant therefore tried to avoid thinking about the business and associated problems in an endeavour to recover my health.

Given the above, significant financial stress may be reason enough to provide an excuse for a delay in not filing a defence, on the basis a person has a bona fide, prima facie defence.

Notwithstanding this, a person should not delay in making an application to set aside a default judgment.

Prima Facie Defence

As stated above, a prima facie defence is a defence that is arguable; it is not for the Magistrate or Judge to determine whether you would win or lose at an application to set aside default judgment, it should be sufficient that the Magistrate or Judge is not willing to summarily dismiss the defence.

A prima facie defence may include a breach of contract, but often a prima facie defence can be made out by relying on the Australian Consumer Law (for example, misleading and deceptive conduct, or defective goods or services etc.) or equity – which is derived from fairness.

It is usually preferable to include a defence that requires witnesses to give evidence. For example, if there has been a misrepresentation or misleading and deceptive conduct, a person will have to come to court to say what was said. Assuming what is alleged, if accepted, may be a defence, a Magistrate or a Judge will be unlikely to dismiss an application to set aside a default judgment.

A good litigation lawyer should be able to make out a prima facie defence in most matters.

How to Avoid a Default Judgment

The UCPR provides a person (including an individual or company) 28 days to respond to a Claim and Statement of Claim except in certain circumstances, for example, if the Claim is in the Supreme Court of Queensland and service is outside of Australia, pursuant to Rule 129(3), a person has 42 days to respond.

If a person files a Notice of Intention to Defendant and Defence within 28 days that will avoid default judgment being awarded, even if the defence is weak or non-existent (though, a summary judgment application may dispose of a defence that does not contain a defence or has a weak or flawed defence).

Alternatively, if the amount claimed is only a monetary amount, then a Rule 150(3) notice should be included at the end of the Statement of Claim with the amount required to be paid. If you pay that amount of money, then the claim is satisfied.

If a person does not file a Notice of Intention to Defend and Defence within 28 days of service (or as the case may be), the Plaintiff is entitled to make an application for default judgment. A registrar of the court will usually issue a default judgment thereafter.

Application to Set Aside Default Judgment

If you are unable to avoid a default judgment, to set aside a default judgement an application must be filed. There are specific documents which must be prepared and filed in the court in which the judgement was made. At the time of writing, the correct applications are:

Form 9 – Application; and
Form 46 – Affidavit in Support of the Application.

The Form 9 must clearly (but concisely) state the reasons to have the judgement set aside.

The Form 46 must identify the irregularity on which the application is based and/or, where possible:

Give a satisfactory explanation for the failure to appear;
Give a reason for the delay in making the application; and
Raise a prima facie defence (whether in the affidavit itself, or in a draft defence).

It is usually advisable to include a draft defence written by a lawyer in an affidavit in support of an application to set aside default judgment, unless the defence is so weak that a defendant cannot particularise their defence. Caution arises, however, as if the defendant is unable to make out a prima facie defence the application may be dismissed and the default judgment may stand.

Costs Orders of an Application for Default Judgement

Although in most matters the winner receives a favourable costs order, that is not always the case if a person is successful in setting aside a default judgment based on the court’s discretion (opposed to an irregularity). This is because the person requesting the default judgment to be set aside is seeking an ‘indulgence’ of the court. Costs for legal fees are at the discretion of the court, but usually occur as follows:

Winner	Reason of Irregular Judgment	Reason of Discretion
Applicant (Defendant) Wins	Applicant Receives Costs	Respondent Receives Costs
Respondent (Plaintiff) Wins	Respondent Receives Costs	Respondent Receives Costs

A costs order will usually be made on either a standard basis (some of the legal fees incurred) or an indemnity basis (most of the legal fees incurred). However, a costs order will usually only relate to the application to obtain default judgment and the appearance of the solicitors at the application to hear the matter. The decision to award costs either on the standard basis or the indemnity basis will usually be determined based on the conduct of the parties. It is important to act rationally and appropriately in the attempt to avoid an adverse costs order. Self-represented litigants are not entitled to obtain costs for their time.

Closing Remarks

If you have had a default judgement awarded against you, but you have a valid defence, then you should consider getting the default judgement set aside. It is particularly important to do so sooner rather than later as a judgement is the foundation for a bankruptcy notice, statutory demand and/or enforcement proceedings which can have serious ramifications. Further, a court may not allow you to set aside a default judgment if you delay too long.