Do you need to know how to set aside a default judgment?
If a default judgment has been entered against you, then it is vital that you act quickly and seek an order from the Court that the default judgment be set aside.
If you do not set aside the default judgment, then the plaintiff / creditor can obtain an enforcement warrant from the Court, such as a warrant for seizure and sale of your real property.
Further, if they meet the minimum requirements, the plaintiff / creditor can seek to issue a bankruptcy notice thereby starting the bankruptcy process, or issue a creditor’s statutory demand, thereby starting the winding up process.
If you are thinking about setting aside a default judgment then you must persuade the Court of a number of things.
This article will explain how to set aside a default judgment in Queensland.
If you need to set aside a default judgment then you must act quickly
OR CALL: 1300 545 133 FOR A PHONE CONSULTATION
What Is a Default Judgement?
A Queensland Court registrar will enter judgment in default (default judgment) if the defendant has not filed a notice of intention to defend and defence.
Once served with a claim and statement of claim, a defendant has 28 days to file the notice of intention to defend and defence.
If they do not, then the plaintiff can apply to the Court registrar for judgment for the full amount of the claim, interest, and legal costs.
Setting Aside a Default Judgment
The first thing that a defendant with a default judgment must do is to ascertain if the default judgment is regularly entered, or irregularly entered.
Irregularly Entered Judgment
If the judgment is irregularly entered, then the defendant is entitled to have the judgment set aside without proving any merits of the case.
In Anlaby v Praetorius [1888] UKLawRpKQB 55 in which Fry LJ, referring to a default judgment entered prematurely and irregularly, said:
In such a case the right of the defendant to have the judgment set aside is plain and clear. The Court acts upon an obligation; the order to set aside the judgment is made ex debito justitiae, and there are good grounds why that should be so, because the entry of judgment is a serious matter, leading to the issue of execution.
An irregularly entered judgment most commonly results from anomalies with the service of the claim and statement of claim.
This is the likely reason that the majority of defendants do not file a defence, because they have not been served with the process.
A default judgment can also be irregular because of a failure to comply with the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”).
In Cusack v De Angelis [2007] QCA 313, Muir JA said:
It has been long accepted that a defendant is entitled to have an irregularly entered judgment set aside as of right, subject to the exercise of a power of amendment and the futility of interfering with the judgment. Such judgments are the product of the exercise of administrative acts performed without legal authority. Irregularity, as that term is used in relation to default judgments, normally results from a failure to comply with the rules of court relating to the entering of default judgments.
Non-compliance with the UCPR, an abuse of process, the incorrect claimed amount, and substantial defects in the pleading, can all make a judgment irregular.
In Green v Tri-Barfen Pty Ltd [2006] QDC 160, Alan Wilson SC, DCJ said:
Default judgments, regular or irregular, may be set aside under r 290 but different tests apply. When, as here, the judgment is irregular, even a technical breach of the rules may lead to it being set aside.
So, first try to establish if the default judgment was entered irregularly, or ex debito justitiae (of or by reason of an obligation of justice : as a matter of right).
It is still common to have a regularly entered judgment set aside.
Regularly Entered Judgment
Rule 290 of the UCPR allows the Court to exercise its discretion to set aside a regularly entered default judgment.
Rule 290 says:
The court may set aside or amend a judgment by default under this division, and any enforcement of it, on terms, including terms about costs and the giving of security, the court considers appropriate.
There are a number of factors that the Court considers when exercising this discretion.
In Unique Product Marketing Pty Ltd v Bortek Sales Pty Ltd [2000] QDC 314 Shanahan DCJ set-down some principles in relation to setting aside a regularly entered default judgment.
They include:
- Whether there is a good reason why the defendant failed to file a defence;
- Whether there has been any delay by the defendant in bringing the application;
- The defendant’s conduct in the action before and after judgment;
- The defendant’s good faith;
- Whether the defendant has raised a prima facie defence on the merits; and
- Whether the plaintiff would be irreparably prejudiced if the judgment is set aside which cannot be adequately compensated by a suitable award of costs.
This article will look at some of these points in relation to getting a regularly entered default judgment set aside.
However, these points are to be taken together, and although they are to be given cumulative weight, some of the points are given more weight than others.
Prima Facie Defence on the Merits
The most important item on the list is that the defendant has a prima facie defence on the merits.
Prima facie means “at first look” or “on the face of it”.
In the Queensland Court of Appeal in Cook v D A Manufacturing Co P/L & Anor [2004] QCA 52 said:
In order to succeed on this application, the first defendant must satisfy the Court first that it has given a satisfactory explanation for its failure to appear in the proceeding; secondly, that there has been no unreasonable delay by it in making this application; and thirdly, that it has a prima facie defence on the merits of the claim on which the judgment is founded.
They then went on to say:
The Courts, however, have laid down for themselves rules to guide them in the normal exercise of their discretion. One is that where the judgment was obtained regularly there must be an affidavit of merits, meaning that the applicant must produce to the Court evidence that he has a prima facie defence.
McPherson J in National Mutual Life Association of Australasia Limited v. Oasis Developments Pty Ltd [1983] 2 Qd R 441 noted at 449:
It is not often that a defendant who has an apparently good ground of defence would be refused the opportunity of defending … the issue whether the applicant defendant had a prima facie case on the merits “is the most cogent”.
In ATS P/L v Roberts [2007] QMC 4 the Court said:
To have judgement set aside, the defendant must establish that it has a prima facie defence on the merits to the claim on which the judgment was founded.
The Court in Byron v Southern Star Group Pty Ltd t/as KGC Magnetic Tapes (1995) 123 FLR 352 said:
Frequently, persons have been let in to defend who have had little or no explanation for their delay but who have shown reasonable grounds of defence … a person who has an arguable defence and wishes to have it determined on the merits, will be heard by the court before judgment.
The cases seem to say that in the interest of justice, a Court may set aside a default judgment if the applicant can provide the Court with a reasonable defence.
Whether there has been any Delay by the Defendant in Bringing the Application
The application to set aside the default judgment must be brought as soon as practicable by the defendant.
A defendant cannot be aware of the judgment and not take steps to set it aside. Although, it may not be fatal to the application.
There could be any number of reasons for delay. In Rochfort & Anor v Habashy & Anor [2005] QCA 197, an explanation for delay was:
Mr Habashy did provide an explanation for that six months delay in his oral submission, which was that it had resulted from a combination of his ignorance of the law and of time provisions, his chronic ill health, his financial problems which resulted in an inability to pay for lawyers, and the fact of his brother’s death which had left him unable to focus on his and his wife’s immediate affairs. He described having suffered from a hip condition for a number of years, and having been on a sickness benefit since 1992.
The Court did not agree that this was sufficient.
In Aboyne Pty Ltd v Dixon Homes Pty Ltd [1980] Qd R 142, Kelly J said:
Whilst there has certainly been some delay in bringing this application I do not consider that in the circumstances it is such as to preclude the defendant from obtaining the relief which it seeks if it is otherwise entitled to that relief.
The important factor to consider when thinking about whether there has been any delay, is whether the plaintiff would have suffered any prejudice as a result of the delay.
In Atwood v Chichester [1878] UKLawRpKQB 4, the Court said:
[a]s the plaintiff has suffered no substantial wrong by the delay, the defendant ought to be at liberty to appear and defend.
This is where we rely on the next factor of Unique Product Marketing.
Whether the Plaintiff would be Irreparably Prejudiced if the Judgment is Set-Aside
In National Australia Bank v Singh [1995] 1 Qd R 377 the Court said:
The court will not often refuse the opportunity of defending to a defendant who has an apparently good ground of defence when no irreparable prejudice would be done to the plaintiff …
In Deputy Commissioner Of Taxation – Elizabeth Street v Statham [2015] QDC 129 the Court said:
[i]t was claimed by the plaintiff that money was owing, in fact, she [defendant] had paid more than what was claimed by the plaintiff during the relevant period, therefore the debt is in its entirety validly and clearly disputed … There will be no prejudice to the plaintiff by my setting aside the judgment.
In this case the Court determined, on the evidence, in relation to setting aside default judgment, that there was clearly a dispute as to the quantum of the debt, and as such, money had been paid to the Plaintiff.
There was no prejudice to the Plaintiff to hear the defence on the merits and so the Court made an order setting aside the default judgment and ordering the respondent to pay the costs of the applicant of the application on the standard basis.
In Darling Downs Aviation Pty Ltd & Anor v Shaw & Ors [2013] QDC 300 the Court said:
The plaintiffs have not alleged any prejudice, other than the cost of prosecuting their claim on liability, if the judgment is set aside. The claim is for damages which will need to be assessed. The costs thrown away by setting aside judgment would be minimal and can be compensated in part by a costs order.
In this case the judge assessed that there would be no prejudice that could not be compensated with an award of costs. Therefore, in this case the application was granted and the judgment obtained by default was set aside.
Examples of Irreparable Prejudice
Examples where the Courts have decided that the Plaintiff would be prejudiced include a matter where the Plaintiff was very sick, legislative requirements would be impossible to comply with; availability of witnesses might prove a difficulty so long after an event; the statutory limitation period is close to expiring; and the potential respondent corporation is no longer registered.
Costs in Applications to Set Aside Default Judgment
The general rule in litigation is that costs follow the event. The successful party to an application pays the unsuccessful party’s costs.
There are a number of discretionary factors that can persuade the Court to depart from that general rule.
In Oshlack v Richmond River Council [1998] HCA 11, the High Court said:
No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.
In Arian v Nguyen [2001] NSWCA 5, Ip J said:
It is rare for a successful party who is guilty of misconduct in the litigation to be ordered to pay the unsuccessful opponent’s costs where the misconduct does not lengthen the proceedings unnecessarily, cause unnecessary issues to be canvassed or otherwise cause the costs of the litigation to be increased. Indeed, the court’s entitlement to depart from the usual order that costs follow the event has sometimes been said, in effect, to be subject to the qualification that the misconduct in question occasioned unnecessary litigation and expense.
Unless the above applies, in general, if the judgment was irregularly entered, then the plaintiff will be ordered to pay the defendant’s costs of the application if the judgment is set aside.
If the judgment was regularly entered, then the defendant may be ordered to pay the plaintiff’s costs of the application if the judgment is set aside.
If the judgment was regularly or regularly entered, then the defendant may pay the plaintiff’s costs of the application if the application is dismissed.
Further, if regularly entered, the Court will usually order that the defendant pay the plaintiffs costs thrown away. Costs thrown away are defined in Law of Costs, fourth edition by G E Dal Pont as:
Those costs incurred by a party that are wasted as a result of the other party’s actions (such as not filing a defence). Any work performed that can ultimately be used or forms part of the greater substantive proceedings commenced by claim, is not wasted.
This can include damages hearings, and the costs of any enforcement action.
What if the Judgement Is Being Enforced?
If the plaintiff obtains default judgment then it can start enforcement proceedings to try to get the money from the defendant.
This can include:
- Various enforcement warrants, redirection of earnings or seizure and sale of property
- Taking steps to bankrupt the defendant or wind up the defendant company.
If this is the case, then the application to set aside the default judgment should also include an order that the enforcement of that judgment be stayed.
How to Set Aside a Default Judgment
Following how the Courts have determined this issue, it appears that the Courts will allow a defence to be brought, even if there is not a satisfactory reason for the delay, provided that the defence is a reasonable prima facie defence.
On balance, a court will weigh up the factors mentioned above amongst others and make a decision.
Is there a reasonable reason for the delay? If not, is there a prima facie defence on the merits? If so, will the setting aside of the default judgment cause irreparable prejudice to the Plaintiff?
It is clear applying the principles in Cook v D A Manufacturing Co that a Court has a very wide discretion in deciding if it will uphold an application and set aside a default judgment.
To make the application to Court, you will need:
- the original + two copies of Form 9 – Application
- the original + two copies of Form 46 – Affidavit
Visit the Courts website for more information.
The Form 9 Application
The application is the document which clearly states the orders that the applicant wants the Court to make in the application.
The application can be something like the following:
- Pursuant to Rule 290 of the Uniform Civil Procedure Rules 1999 the default judgment awarded on [DATE] be set aside.
- The Respondent pay the costs of the Applicant of the application on the standard basis.
The Form 46 Affidavit
The affidavit should include all the evidence that you intend to rely on in the application.
The evidence will need to support the elements above contained in this article, but particularly the following:
- A satisfactory explanation for the failure to file a defence.
- A reason for the delay in making the application (if any).
- A prima facie defence.
Best practice is to draw a draft defence and add it to the affidavit as an annexure.
If you need to set aside a default judgment then you must act quickly
OR CALL: 1300 545 133 FOR A PHONE CONSULTATION
Wayne Davis, LLB, GDLP – Commercial litigation solicitor and legal practice director at Stonegate Legal Pty Ltd. Stonegate Legal focus on commercial litigation, debt disputes, the enforcement of money orders, and insolvency. Committee member of the Sunshine Coast Law Association.
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