HOW TO CLEAR A JUDGEMENT WHEN YOU HAVE NEVER SEEN THE PAPERS?
We recently acted for successful tenants against their management company in a dispute arising from payment of service charges for the removal of unsafe cladding. Regretfully, the management company succeeded in obtaining Judgement in Default having served their papers at the wrong address. This was subsequently set-aside by court order and the managers required to pay the tenants costs.
This article looks at 'Judgement in Default', when the courts may enter it, how it applies when papers are served at the wrong address and the legal test for having it set-aside i.e. removed from the register. It does not consider scenarios where service may need to take effect outside the jurisdiction of England & Wales.
JUDGEMENT IN DEFAULT
Upon service of the Claimant's Particulars of Claim, the Defendant has 14 days in which to lodge an Acknowledgement of Service. Thereafter, the time for service of a Defence is extended to 28 days from service of the Particulars. The time limit for the latter can be extended with the agreement of the parties or pursuant to a court order but the time for filing an Acknowledgement of Service cannot. Should the Defendant fail to acknowledge service or enter a Defence within the time specified time limits, the Claimant may ask the court to enter Judgement in Default.
Judgement in Default is an administrative act whereby upon receipt of either a request or an application from the Claimant, the court will enter judgement without a trial. The logic is simply, that a Claimant should not be required to incur the legal costs of going to trial, where the Defendant is not disputing the claim.
While Judgement in Default is an administrative act, it is not automatic and so the importance of making the request or application promptly, cannot be understated.
REQUEST OR AN APPLICATION?
The rules governing the exercise of the courts powers are contained in CPR r.12.4(1). This states that the Claimant may make a request for Judgement in Default where the claim is for:
(a) - A specified sum of money.
(b) - An amount of money i.e. damages to be decided by the court .
(c) - Delivery up of goods where the Claim Form gives the Defendant.
(d) - Any combination of these remedies.
In all other cases including where the Claimant wishes fixed costs to be set-aside, the Claimant must make a formal application for Judgement in Default. The practical distinctions between the two, are:
The Claimant does not need to notify the Defendant that a request has been made. However, a formal application will require service of the notice.
There is no fee payable for making a request while an application will incur a court fee.
To add to the confusion, Claimants should be aware that there are separate forms for making a request. These are:
When the amount of money owed is to be decided by the court - Form N205B or Form N227.
For anything else such as for delivery or goods or a specified amount - Form N205A or Form N225.
Should you fill out the wrong form, the courts may just ignore you and in the event that the Defendant corrects its error and lodges the correct papers before Judgement is entered, you will have missed your opportunity.
SETTING ASIDE JUDGEMENT IN DEFAULT
The general rule pursuant to Tanir v Tanir is that should Judgement has been entered 'wrongly', then the courts must set it aside even if the Defence has no merits whatsoever.
CPR r.13.2 sets out the circumstances where Judgement in Default will be considered to have been entered 'wrongly'. These unsurprisingly include when the Defendant did in fact enter either its Acknowledgement of Service or Defence within the time limits sets out by the CPR. However, it also includes when prior to Judgement being entered:
The Defendant applies for Summary Judgement before Judgement in Default was entered (CPR r.13.2(1) and CPR r.12.3(3)(a)).
The Defendant filed an admission of liability and requested time to pay (CPR r.13.2(a) and CPR r.12.3(3)(c)).
The whole claim was satisfied i.e. paid in full or goods delivered (CPR r.13.2(c) and CPR r.12.3(3)(b).
Your Solicitor Ticked the wrong box! - In Northern Rock (Asset Management) plc -v- Chancellors Associates Ltd, the acknowledgment of service stated the Defendant admitted the claim and the court drew up a judgement accordingly. Having considered the facts of the case, Akenhead J stated that at first instance the court should have set it aside.
In the above instances, the Defendant has an automatic right for judgement to be set-aside regardless of the underlying merits of the case. In all other circumstances, the court may set-aside judgement only if there is a 'good reason'.
There is no legal definition as to what would constitute some other 'good reason' and decisions on these issues are fact specific. For example, in;
Tibbs -v- Tibbs: The fact that the Claim Form contained a demonstrably wrong figure was reason enough for Judgement to be set-aside. But in;
Berezovsky -v- Russian Television and Radio Broadcasting Co: the fact that the dispute contained allegations of fraud which, although serious, did not in itself constitute a good reason for setting aside judgement.
Ultimately to show a 'good reason', the Defendant will need to show that the underlying merits of their Defence have at least a prospect of success, that they acted promptly and there would be no untoward prejudice to the Claimant should the judgement be set-aside.
WRONG ADDRESS!
A common scenario where Judgement in Default has been entered is when the Claimant has served the papers at the wrong address and judgement has entered for lack of a response. This can happen either through an innocent mistake e.g. the Claimant served at the last known address with the Defendant having moved, or an unethical Claimant has deliberately used an incorrect address to secure a judgement an put financial pressure on its intended victim.
In these cases, the first notice a Defendant will receive is when their credit rating is suddenly reduced to 'High Risk' after the unsatisfied CCJ is entered onto the register of judgements. Unless the Defendant wishes to accept the judgement, it is imperative an application under CPR Part 13(1) be made to set Judgement aside. This requires the Defendant to prove:
(a) The Defendant has a real prospect of successfully defending the claim; or
(b) It appears to the court that there is some other good reason why -
(i) The Judgement should be set-aside or varied; or
(ii) The Defendant should be allowed to defend the claim.
Furthermore, CPR r.13(3(2) requires the court "in considering whether to set aside or vary judgement entered under Part 12, the matters to which the court must have regard include whether the person seeking to set-aside the judgement made the application to do so promptly."
There is no legal definition as to what constitutes 'promptly' but we would suggest any application that does not take place within 1 month of first receiving notice of the judgement, is unlikely to be granted.
RELIEF FROM SANCTIONS
Since Regione Piemonte -v- Dexia Crediop SpA an application to set-aside Judgement in Default has been considered as an application for relief from sanctions and so engages the 3-Stage test as set out in Denton -v- TH White Ltd [2014]. That is. before granting relief the court must:
Identify the seriousness and significance of the non-compliance.
Consider why the breach occurred?
Evaluate all circumstances of the case.
The requirement for the application of the Denton Criteria, has recently been confirmed by the Court of Appeal in FXF -v- English Karate Federation Ltd & Anor.
However, there there remains an apparent problem when considering an application to set-aside in cases of Defective Service as:
YOU MUST ACKNOWLEDGE SERVICE TO DENY BEING SERVED! WAIT, WHAT?!
Frustratingly, where the Defendant has supplied the Claimant with an address for service but the Claimant has served at some other and obtained a judgement without the Defendant ever having seen the papers, the Defendant's argument to set judgement aside is one of 'defective service'. This is a challenge to the jurisdiction of the court which conversely, CPR r.11(2) requires the Defendant to file an acknowledgement of service, before pleading that they were never served the papers!
Fortunately, the Senior Courts have long since picked up on this apparent contradiction and the case that a Defendant should rely upon is Shiblaq -v- Sadikoglu. In that case, Colman J rejected the argument that such an application had to be made under CPR Part 11:
"such a judgement would clearly be irregular for the reason that it would be obtained where there had been no relevant "default" ... If he was under no such duty [to file an acknowledgement of service] the omission cannot be sensible described as a default which would entitle the Claimants to Judgement."
Thankfully, this obvious logic is still considered good law and was followed in YA II PN Ltd -v- Frontea Resources Corporation [2021] where Mr Justice Buther ruled:
"I accept, that, as was deciding Shiblaq -v- Sadikoglu [2004] EWHC 1890 (Comm), [2005] 2 CLC 380, first Judgement paragraphs 20-24, if there was no valid service, there will have been no obligation on the defendant to serve an Acknowledgement of Service and no default service in failing to do so and a judgement in default entered in such circumstances must be set aside, subject to the possible effect of an order retrospectively validating such service."
SUMMARY
In summary:
If a Claimant has not received either an Acknowledgement of Service or a Defence within the specified time limit, it may request or apply for Judgement in Default.
If a Defendant has filed an acknowledgement of service or a defence within the specified time limits you have an automatic right to have judgement set-aside. The same applies if you have either paid the claim prior to judgement, admitted liability prior to judgement but requested time to pay or requested summary judgement.
For all other cases, the Defendant must show that there is a 'good reason' for Judgement to be set-aside which will invariably include that the Defence has a reasonable prospect of success, that it acted promptly in making the application and there would be no undue prejudice.
When applying to set-aside Judgement in Default, the Defendant should address the Denton Criteria as such an application it is considered an application for relief.
If you have been served papers at the wrong address, having previously supplied an address for service, there is no need to comply with the requirements of Part 11 and file an Acknowledgement of Service to contest the courts jurisdiction. The standard test to set aside applies.
CASE SUCCESS:
We are pleased to report that in our index matter, the Claimant management company eventually admitted that they were in error and not only agreed to set-aside the Judgement but also to pay >£1800 in legal costs to the Defendants.
The timing of their defective service was suspicious as they had corresponded with our office but then prior to October 2022, served on the tenants directly and then secretly requested Judgement in Default just prior to Christmas despite being advised of their error.
This put serious financial pressure on our clients and we are pleased to report that somewhat ironically, the management company subsequently failed to acknowledge the Counterclaim and all tenants succeeded in recovering their loss with the additional costs and without the need for trial.
Citations:
The full case citations of the cases referred to in this article are as by order of appearance:
Tanir -v- Tanir [2015] EWHC 3363 (QB)
Northern Rock (Asset Management) plc -v- Chancellors Associates Ltd [2011] EWHC 3229 (TCC)
Tibbs -v- Tibbs [2021] EWHC 3113 (Ch)
Berezovsky -v- Russian Television and Radio Broadcasting Co [2009] EWHC 1733 (QB)
Regione Piemonte -v- Dexia Crediop SpA [2014] EWCA 1298
Denton -v- TH White Ltd [2014] WLR 3926
FXF -v- English Karate Federation Ltd & Anor [2023] EWCA Civ 891
Shiblaq -v- Sadikoglu [2004] EWHC 1890 (Comm), [2005] 2 CLC 380
YA II PN Ltd -v- Frontea Resources Corporation [2021] EWHC 1380 (Comm), para 14
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