Don’t bury your head in the sand! Dealing with claims and the impact of default judgment

1.8 million claims a year

 The number of County Court claims increased by nearly 300,000 in 2016/2017 to 1,880,781. In the same year more than 110,000 County Court judgments were made with 85% of these being obtained by default judgment. The numbers suggest that if a claim is made against you and it is ignored, default judgment will be obtained against you.

What is default judgment?

Default judgment is one of the quickest methods of obtaining a County Court judgment. It is used where a party does not engage in the litigation process by failing to file an acknowledge of service or a defence within the time limits required. The issue of court proceedings should not (normally) be a surprise as the person bringing the claim is required to set out why they are bringing the claim in an earlier letter (referred to as a letter before action). If this has gone unanswered or the dispute cannot be resolved, a party will apply to the County Court to pursue their claim.

What is the effect of default judgment being obtained?

If ignored, the judgment can lead to the party enforcing it against you to recover money. For example, if they have claimed money is owed for an unpaid invoice and they have obtained default judgment, they can apply for a charging order securing the judgment against the company’s property. If the judgment is significant an Order for Sale could follow with the proceeds of sale of the company property being used to pay off the judgment. Another alternative is to put the company in liquidation as the failure to pay the default judgment demonstrates the company cannot pay its debts when due. The advertisement of a winding up petition can place a company into serious difficulty especially if it leads to a default under any loan facilities with its bank.

What should I do if default judgment has been obtained against me?

Prevention is always better than cure so if you receive documents from a court you should not ignore them and seek legal advice from a solicitor. With your input they can verify whether a valid claim is being pursued. For example have they issued against the correct party? Referred to the right contract? Were the documents sent to the company’s last known address? There may also be valid grounds to challenge any claim brought against the company. For example the invoice was for a much higher sum than agreed or the service provided was inadequate.

If default judgment has been obtained the quicker you react the better. The Court does provide you with an opportunity to set aside the default judgment especially where you have valid reasons for disputing the amount owed and you have acted quickly.

The good news

In 2016/2017 there were 44,326 applications to set aside default judgment and 33,671 County Court judgments were set aside suggesting a party applying to set aside default judgment will be successful. We are currently waiting to read the Government’s response to the Ministry of Justice’s consultation paper on Default County Court Judgments. This may lead to a further opportunity to set aside default judgment especially where an old address has been used.

If you are a company that has received a default judgment, please contact Stephen Rome on 0121 624 4000 or email srome@thursfields.co.uk to see whether Thursfields can assist you in getting it set aside and defend the legal proceedings against you.

Thursfields’ expert Solicitors are available at any of our offices and surrounding areas – Birmingham, Worcester, Kidderminster, Solihull, and Halesowen.