Setting aside judgments in default: no time to waste

Updated February 2011

The recent Court of Appeal judgment in the Standard Bank v Agrinvest International case has highlighted the need for defendants to act promptly when applying to set aside judgments in default.

Under Civil Procedure Rules (CPR) Part 13, for a defendant to succeed in setting aside a judgment in default, it must either show that it has a reasonable prospect of defending the claim or establish some other good reason. There is no limit within which an application must be made but rule 13.3 states that the court will consider whether the applicant acted promptly. Following the Court of Appeal's 1999 decision in MacDonald & another v Thorn, the courts have tended to focus on whether the defendant has a reasonable prospect of success and there have been several instances of judgments being set aside despite delay by the defendant.

In his judgment in the Standard Bank v Agrinvest International appeal, Lord Justice Moore-Bick emphasised the importance under the CPR of courts also considering whether a defendant has made its application promptly. Standard Bank entered judgment in default against Agrinvest International in February 2008. The judgment was emailed to the Director of Agrinvest on 20 February 2008 and he acknowledged receipt two days later on 22 February 2008. Agrinvest however waited until March 2009 to apply to have the judgment set aside. Neither the Commercial Court at the first instance or the Court of Appeal accepted Agrinvest's explanation for the lengthy delay in issuing the application to set the judgment aside. Whilst the Court of Appeal held that Agrinvest did not have any reasonable prospect of successfully defending the claim, Lord Justice Moore-Bick went on to state that even if Agrinvest had a real prospect of successfully defending the claim, he would have been "slow to allow" the appeal in the face of the substantial delay on the part of Agrinvest.

Whilst the comments of Lord Justice Moore-Bick in relation to Agrinvest's delays were not binding, it is clear that the courts will give greater consideration in future to any delay on the part of defendants seeking to have judgments in default set aside. This is particularly important for overseas defendants when defending enforcement of English default judgments in their home territory. They should be aware that their best defence remedy may be to apply promptly to the English courts for the judgment to be set aside as soon as they are aware of it.

Judgment creditors can draw some comfort from this hardened stance of the courts. However, it remains the case that enforcement of default judgments overseas, especially outside of Europe, can be met with some resistance by local courts even where service has been effected correctly. If difficulties are anticipated it will often be prudent to take steps to ensure the original proceedings are brought to the actual attention of the defendant, in addition to effecting service under the CPR and in accordance with the provisions of the contract.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2011. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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