Ignore Court Judgments At Your Peril

It has been widely reported in the press that a default judgment for £535 has been entered and registered against Boris Johnson. On application by Mr Johnson’s lawyers that judgment has now been set aside and the claim struck out.

In this article Richard Payne considers the default judgment process in more detail.

WHAT IS A DEFAULT JUDGMENT

A claimant can ask the court to enter default judgment for the full amount claimed, payable in full and forthwith, if the defendant to a simple debt claim fails to file a defence within the required period. The period for filing a defence depends on several factors.

Time starts to run from the date of deemed service of the particulars of claim. In simple debt claims the claim form is often endorsed with brief particulars of claim. A defendant must file its defence and any counterclaim, within 14 days of the date of deemed service of the particulars of claim but if it files an acknowledgment of service within 14 days of deemed service stating its intention to file a defence, the period for filing the defence is extended to 28 days from the date of deemed service of the particulars of claim.

Longer periods apply if the proceedings are served on defendants based outside the jurisdiction i.e. outside England & Wales. An extension of time may be granted if there are reasonable grounds for seeking one.

If a defendant makes an application before its defence is due to be filed, for the claim to be struck out/summary judgment, for example on the basis that the claim has no real prospect of success, a defence need not be filed until that application has been determined.

A default judgment is a “rubber stamping” exercise by the court. There is no judicial determination by the court on the merits of the claim.

WHAT ARE THE CONSEQUENCES OF A DEFAULT JUDGMENT

Unless the judgment is satisfied in full within one month of it been entered, it will be registered with Registry Trust Ltd (more commonly known as the Register of County Court Judgments which is a misnomer as judgments obtained in the High Court are now also registered). It will remain on the Register for 6 years unless set aside (see below). If the judgment is paid after one month the defendant can ask for it to be marked “satisfied” but it will still remain on the Register, albeit marked “satisfied” for 6 years.

Registered judgments are a matter of public record and can (and most likely will) affect the defendants “credit score”, i.e. ability to obtain credit in the future. A judgment, even one marked “satisfied”, can cause reputational damage and may cause suppliers and/or customers to terminate contracts.

Further, upon the making of a default judgment the creditor can immediately take steps to enforce it unless enforcement is stayed (prevented) by the court. To obtain a stay an application should be made to the court immediately unless the creditor is willing to agree to a stay. If a stay is granted it will usually be on terms, i.e. upon payment by instalments or pending the determination of an application to set aside the judgment.

A creditor who has obtained a default judgment may take one or more of the following steps to enforce it:

• Instruct the bailiff\High Court Enforcement Office (HCEO).
• Apply for a charge over the defendant’s property.
• Apply for an order for payments to be deducted from the defendant’s earnings (in the case of a defendant who is an individual and in full time paid employment).
• Apply for a Third Party Debt Order i.e. an order that a third party, such as a bank, which is indebted to the defendant, pays the creditor direct in order to satisfy or part satisfy the judgment.

A creditor may also make an application to the court to order the defendant to give information as to its assets and means.

Further a creditor may take insolvency proceedings against the defendant (subject to any restrictions currently imposed by the Corporate Insolvency & Governance Act in the wake of the pandemic). It should be noted that a creditor can commence insolvency proceedings without first obtaining a judgment.

WHAT STEPS CAN A DEFENDANT TAKE TO HAVE A DEFAULT JUDGMENT REMOVED

If the debt is disputed or the judgment was entered due to a procedural error that defendant can make an application to the court to set it aside. If successful it will be removed completely from the Register i.e. as though it never existed although the process can take several weeks if not months [although in the case involving the Prime Minister there are exceptions!]

The court must set aside the judgment in the case of a procedural error. The court may, as opposed to must, set aside or vary the judgment if the defendant has a real prospect of successfully defending the claim, or the court is satisfied that there is some other good reason why the judgment should be set aside or varied, or some other good reason why the defendant should be allowed to defend the claim.

One of the key factors that the court will take into account is whether the application to set aside the judgment was made promptly. When deciding whether the application was made promptly the court will first need to determine when the defendant first became aware of the judgment. In some cases that might not be until enforcement action has been taken, for example following action taken by the bailiff or HCEO. In one of the leading authorities (Regency Rolls Ltd & Anor v Carnall) the court described a delay of 30 day as “altogether too long” and refused the application. Ultimately it is a matter for the court’s discretion which it will exercise having regard to all the circumstances. The defendant should also provide an explanation to the court why it did not respond the claim form/particulars of claim.

In the first instance the defendant should write to the claimant or its solicitors inviting it to consent to the judgment been set aside obviously giving reasons. This may save costs and the court’s time. However, in the absence of an immediate response the defendant should waste no time in applying to the court to set aside the judgment.

A claimant may be prepared to consent to an order that a judgment be set aside even if there is no dispute, upon full payment and in order to assist the defendant but there is no guarantee.

Finally it should also be noted that even if a judgment is set aside, either by consent or order of the court, it does not bring the action to an end. The underlying claim, and indeed any counterclaim which may be allowed to proceed, will still need to be determined by the court in the absence of agreement between the parties.

Richard Payne is a Senior Associate in the Commercial Dispute Resolution team.