Setting aside a default judgment

What is a default judgment?

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 $5000 or more);
• support a statutory demand against a company (if $2000 or more); or
• commence enforcement proceedings including seizing and selling property and garnishing wages  (regardless of the amount).

A default judgments can also be damaging to an individual or a business because it may be listed as a default on a credit rating.

Courts in Queensland have the discretion to set aside a default judgment, 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:

1. 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); or
2. Where the judgment has been obtained regularly, the judgment might be set aside at the discretion of the court (usually when there is a defence).

The judgment 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.

An irregularly obtained default judgment includes when the judgment is:

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

The two main arguments 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 an irregular judgment is the product of the exercise of administrative action “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, to succeed in persuading the court to set aside a default judgment, an applicant should do their best to :

1. give a satisfactory explanation for the failure to appear;
2. establish no unreasonable delay in making the application; and
3. 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.

Although the discretion is “unconditional” the courts have formed 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 long time had elapsed, provided that there was 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 arguments such as:

• being ill despite more than two months elapsing;
• being unrepresented, absent due to work commitments and incorrectly calculating the date required for the documents to be filed; and
• not knowing about the claim and statement of claim until after the default judgment was entered.

The court has not accepted arguments such as:

• failing to act for over seven months and not having a prima facie defence;
• failing to act for over 12 months and not having a prima facie defence; and
• failing to act for six 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).

A summary of the defendant’s affidavit:

1. When a receiver was appointed, the defendant was suffering from various medical conditions requiring hospitalisation;
2. 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
3. The defendant became extremely depressed and he believed that the stress and depression was adversely affecting his health. The defendant therefore tried to avoid thinking about the business and associated problems in a bid to recover his 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, 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 apply for a default judgment.

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 judgment set aside.

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

1. give a satisfactory explanation for the failure to appear;
2. give a reason for the delay in making the application; and
3. 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. 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 judgment

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:

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.

How we can help you

If you have had a default judgment made against you it is important to seek immediate legal advice so you can make an urgent application to the court to have the default judgment set aside. If you delay in bringing your application, you may lose the opportunity to plead your case, even if you have a valid defence.

When a default judgment has been made against you, the plaintiff is entitled to commence enforcement proceedings against you if you do not comply with the judgment. This could have serious consequences, particularly if you are not in a position to comply with the judgment order.

Our litigation lawyers are able to help you with any aspect of your default judgment matter – we can help you take immediate court action to protect your rights and limit your liability.

Contact our litigation team at Gibbs Wright Litigation Lawyers for a free and confidential consultation discussing your legal rights and remedies.