If you have been served with a default judgment for the first time, you may be feeling confused and overwhelmed. You may have questions about what it means, what your responsibilities are, and the potential consequences of not responding. Importantly, you should understand what default judgments are, as they can have major negative consequences on your financial situation and reputation. This article will define a default judgment and explain what to do if one is made against you.
What Does ‘Default Judgment’ Mean?
A default judgment is a judgment made by a court without a court hearing. This typically happens when referred to as Party B fails to respond to Party A’s claim document (statement of claim) against them. In this scenario, the court makes its decision based on the information presented in the statement of claim and other relevant documents without the need for formal court proceedings.
Default judgments typically happen in debt recovery cases where Party B does not:
- pay the money claimed by Party A;
- file a defence (or respond) to the Statement of Claim filed by Party A within the time provided; or
- respond to the statement of claim filed by Party A at all.
What Can Happen if a Default Judgment is Made Against You?
If you, in the position of Party B, receive a statement of claim, you must deal with it as soon as possible. You can do this by:
- paying the debt for debt recovery claims;
- negotiating with the other party; or
- filing a defence.
You will usually have 28 days from the date you receive the statement of claim to file a defence.
Reading the statement of claim carefully and identifying any timeframes you have to meet is also important. This can include dates by which you must file a response or a defence or dates you must attend court.
If you do not respond to the statement of claim, then the court may issue a default judgment in favour of Party A. A default judgment usually becomes enforceable 28 days after the court makes it. Furthermore, in most Australian states, the other party can enforce the default judgment for 12 years from the date on which the default judgment becomes enforceable. Exceptions to this are South Australia and Victoria, where the period is 15 years instead.
Enforcement Action
If you are served with a default judgment because you did not respond to a statement of claim, the other party can legally start an action to enforce the judgment against you. This is known as ‘enforcement action’.
Enforcement actions can include orders that:
- require an authority called the sheriff to seize and sell your personal property and/or house;
- require your bank to take money out of your bank account or your employer to take money out of your wages; or
- declare you bankrupt, making an order to dissolve your company.
It is important to note that a judgment is legally binding and enforceable, which means that you will be obligated to comply with the judgment’s terms. This sometimes includes paying the other party’s legal costs and interest on top of the judgment debt.
Continue reading this article below the formWhat Steps Can I Take?
If there is a default judgment against you, the first step is to consider whether you can have the default judgment cancelled, or set aside. This could be possible if you have a defence to the claim or you were not served correctly. In some cases, the other party may be open to this option, but it could come with certain conditions or terms that need to be mutually agreed upon. These could include:
- satisfying the judgment debt;
- paying some of their legal costs; or
- any other condition considered necessary.
If the other party does not agree to this, you can file an application with the court to try to set aside the default judgment. This is sometimes known as a notice of motion. However, making an application with the court can be an expensive and time-consuming process. Therefore, you should only file this application if you have a legitimate and compelling reason to do so. If you do have valid grounds for setting aside a default judgment, it is essential to be prompt and make an application as soon as possible.
How Do I Set Aside a Default Judgment With the Court?
To apply to set aside a default judgment in NSW, you must file the application with the court. This is together with an affidavit (statement) explaining, among other things:
- the reason why you did not respond to the statement of claim in time;
- that you have a genuine and apparent defence to the other party’s claim; and
- the reason why you would like the default judgement to be ‘set aside’.
Your affidavit should also attach a copy of your draft defence to the statement of claim. This helps the court to see that you have a genuine and apparent defence. You should always make sure you have the required court documents. If you need legal assistance, speak to a disputes lawyer and they can help ensure you are on the correct path to resolving the dispute.
What Happens at the Hearing?
After the other party has had an opportunity to respond to your application and provide its evidence, the court will set the matter down for a hearing. At the hearing, the court will hear arguments from each party supporting their case and then decide whether or not to set aside the default judgment.
If you are successful, then the court will allow you the opportunity to file your defence or response to the statement of claim. After this, the matter will proceed to a full hearing.
If you fail, the default judgment will stand, and you will need to take steps to satisfy the judgment. The court might also order that you pay the other party’s legal costs incurred in responding to your application.
Whether you’re a small business owner or the Chief Financial Officer of an ASX-listed company, one fact remains: your customers need to pay you.
This manual aims to help business owners, financial controllers and credit managers best manage and recover their debt.
Key Takeaways
A default judgment occurs when the courts make a decision without an actual hearing. Being served a default judgment is a very serious matter and can have negative financial and reputational consequences. Therefore, you must act quickly once you find out about any default judgment made against you. For example, you may aim to set it aside through informal negotiations with the other party or by filing an application with the court to set it aside. Importantly, the specific rules and procedures for default judgments may vary among Australian states and territories, so it is essential to consult the relevant jurisdiction’s court rules and seek legal advice if you find yourself in this situation.
If you would like assistance regarding default judgments, our experienced litigation lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
You will usually have 28 days after you receive the statement of claim to file a defence.
If you are not successful, the default judgment will stand, and you will need to take steps to satisfy it. This could include paying the money claimed or doing something required by the judgment. You may also need to pay the other party’s legal costs.
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