Setting Aside a Default Judgment in a Contract Claim

When a claimant obtains a default judgment in a contract dispute in the courts of England and Wales, this means the court has decided in the claimant's favour because the defendant failed to respond within the required time limits. A default judgment can have significant consequences for a defendant, including enforcement actions and entries on public registers such as the Register of Judgments, Orders and Fines. However, there are established legal procedures that allow a defendant to apply to set aside a default judgment and have the case reheard on its merits.

This article explains what a default judgment is, the legal basis for setting one aside, the procedural steps involved, key considerations for timing and evidence, and common questions that arise.

What Is a Default Judgment?

A default judgment is a court order entered when a defendant:

• Fails to file an acknowledgment of service or a defence within the deadlines set by the Civil Procedure Rules (CPR);
• Does not respond to a money claim or other remedy sought by a claimant.

Default judgment means the court does not consider the merits of the contract dispute but assumes liability in favour of the claimant because of non‑response. This can result in an order to pay money, damages, or other relief claimed.

Why Set Aside a Default Judgment?

A defendant may want to set aside a default judgment where:

• They did not receive the claim or its supporting documents;
• There was an administrative or postal error;
• They had a legitimate defence that was not filed in time;
• There are other good reasons why the judgment should not stand.

The process ensures that disputes are decided on their merits where appropriate and where fairness demands it.

Legal Framework: Civil Procedure Rules Part 13

The procedure for setting aside or varying a default judgment is set out in Part 13 of the Civil Procedure Rules (CPR). This sets out two main grounds on which an application can succeed:

Mandatory Grounds (CPR 13.2)

The court must set aside a default judgment where it was wrongly entered. This can include situations where:

• The judgment was entered before the deadline to file a defence or acknowledgment of service had expired;
• The defendant did file an acknowledgment of service or defence in time, but the court erroneously proceeded;
• The defendant had satisfied the entire claim before the judgment was entered;
• The claim form was not properly served on the defendant.

In these circumstances, the judgment is considered irregular, and the court has no discretion but to set it aside.

Discretionary Grounds (CPR 13.3)

The court may set aside or vary a default judgment where:

• The defendant has a real prospect of successfully defending the claim; or
• There is some other good reason why the judgment should be set aside, or the defendant should be allowed to defend the claim.

When deciding a discretionary application, the court will also consider whether the application was made promptly after the defendant became aware of the judgment.

How to Apply to Set Aside a Default Judgment

To apply to set aside a default judgment, the defendant must follow these procedural steps:

1. File an Application Notice (Form N244)

• The defendant submits Form N244 (Application Notice) to the court that issued the default judgment.
• This form sets out the order sought - namely, that the default judgment be set aside under CPR Part 13 - and the grounds for the application.

2. Supporting Evidence

• The application must be supported by evidence, usually in the form of a witness statement.
• The witness statement should explain:
  • Why the defendant did not respond to the claim in time;
  • When and how the defendant became aware of the judgment;
  • The defence to the contract claim (or other good reasons for setting aside).
• A draft defence is often included to demonstrate a real prospect of success.

3. Court Fee and Service

• A court fee is payable when submitting the application. In certain circumstances, fee remission may be available if the applicant cannot afford the fee.
• The application and supporting evidence must also be served on the claimant, giving them an opportunity to respond.

4. Court Hearing

• The court usually lists a hearing where both parties can make oral submissions.
• The judge will consider the evidence, including prospects of defence and reasons for delay or non‑response, before deciding whether to set aside the default judgment.

Timing and Promptness

Although the CPR do not define a specific deadline for “prompt” applications, courts interpret promptness contextually. Prompt application should follow as soon as reasonably possible after the defendant becomes aware of the judgment. Significant delay without good reason can weigh against the application.

What Happens if the Default Judgment Is Set Aside?

If the court grants the application:

• The default judgment is treated as if it never existed;
• The claim is reinstated, and the defendant must file a defence within any deadline set by the court;
• The claimant and defendant may receive directions on case progression, including allocation to the relevant track (small claims, fast track, or multi‑track).

Keep in mind that setting aside the judgment does not cancel the underlying claim - it simply allows the dispute to be decided on its merits.

Common Scenarios and Examples

Late or Non‑Receipt of Claim

If a defendant did not receive the claim form because it was sent to an old address or lost in post, the court may consider this a good reason to set aside the judgment, even if a real prospect of defence is not established. Prompt action and credible evidence are essential.

Mistaken Default

Where a defendant filed a defence or acknowledgment of service but the court mistakenly proceeded to default judgment, the court must set aside the judgment under CPR 13.2.

Risks and Considerations

• Costs: If an application for setting aside is unsuccessful, the court may order the defendant to pay the claimant's costs, particularly if the defendant failed to comply with procedural rules.
• Enforcement Actions: If enforcement action has begun (such as bailiff involvement or third‑party debt orders), additional applications may be needed to stay enforcement while the set‑aside application is considered.
• Credit Records: Default judgments can be recorded on public registers and affect credit ratings. Setting aside a judgment can lead to its removal, but this depends on timing and whether the judgment was satisfied.

Common Questions from our Readers

Do I automatically succeed if I have a defence?

Not necessarily. For discretionary set‑aside, the court must be satisfied there is a real prospect of successfully defending the claim or another good reason for setting aside the judgment.

Can I set aside a default judgment if I knew about it late?

Yes, but the application must still be made promptly once you become aware. Delay without good reason can reduce the likelihood of success.

Does setting aside erase the judgment completely?

If granted, the default judgment is treated as if it had not been entered. The underlying claim then proceeds normally.

Final Thoughts

A default judgment in a contract claim can significantly impact a defendant, but the Civil Procedure Rules provide mechanisms to set aside such judgments. Whether on mandatory grounds - where a judgment was wrongly entered - or on discretionary grounds based on defence prospects or other good reasons, defendants should act promptly and support their application with clear evidence. Successfully setting aside a default judgment allows the dispute to be decided on its merits and avoids the adverse legal and financial effects of an unchallenged default order.