Nestled in amongst the recent updates to the Civil Procedure Rules (CPR) is a significant update to the rules regarding default judgments, specifically the conditions to be satisfied before obtaining such judgment.
What is judgment in default?
It is because of rules set out in CPR 12 that litigators are taught, at the outset of their careers, the importance of filing and serving either an acknowledgment of service or a defence within the relevant time limits after receiving a claim form. CPR 12 provides that a defendant who fails to file an acknowledgement of service or defence to a claim within the time limits provided is at risk of having a default judgment entered against it. This means the judgment is an administrative act rather than following a trial.
In order to do so, however, certain conditions need to be satisfied. These are set out in CPR 12.3(1) and (2) as follows:
(1) The claimant may obtain judgment in default of an acknowledgment of service only if –
(a) the defendant has not filed an acknowledgment of service or a defence to the claim (or any part of the claim); and
(b) the relevant time for doing so has expired.
(2) Judgment in default of defence may be obtained only –
(a) where an acknowledgement of service has been filed but a defence has not been filed;
(b) in a counterclaim made under rule 20.4, where a defence has not been filed,
and, in either case, the relevant time limit for doing so has expired.
What are the changes?
The change to the CPR finally determines the status of an attempt to enter judgment in default where the time for compliance has expired, but the defaulting party (the defendant) belatedly delivers an acknowledgment of service or defence, as the case may be.
CPR 12.3(1) has been amended to allow the filing of an acknowledgment of service or a defence to prevent the entry of judgment in default, where the acknowledgment of service or defence is filed before the judgment is entered.
If judgment in default is entered, it is for the defaulting party to persuade the court to set aside the decision. Time is of the essence, however, as the court will take into account the length of time it has taken the defaulting party to make the application to court. In Core Export v Yang Ming, the defendant made out an arguable case but ultimately failed in its application because it had taken 23 days to make the application to the court.
Why were the changes necessary?
The amendment to the CPR is to provide clarification following varying judicial interpretations of CPR 12.3(1) that default judgment could only be secured if no acknowledgement of service or defence had been filed:
- At the time of entering default judgment.
- At the time of filing the application for default judgment.
- By the deadline for filing the acknowledgement of service or defence.
Recent decisions on this subject had failed to provide much guidance to practitioners. In Clements Smith v Berrymans Lace Mawer Service Company and another, the court held that, owing to the wording of CPR 12.3(1), the court could not enter judgment if filing had taken place before entry of judgment; the expiry date for doing so was irrelevant, if the court found that a defence was filed (albeit nearly three months late in this case).
Meanwhile, in Hanson and others v Carlino and another, the defendant only filed an acknowledgement of service and corresponding application for extension of time for the defence after the application for default judgment had been made. The court directed that judgment in default should be entered.
Whilst the distinction in these cases and their outcomes was the filing (or not) of the defence, Clements Smith and Hanson demonstrated the need for higher authority clarification on this issue, so much so that Clements Smith is due to be heard by the Court of Appeal.
In the face of such uncertainty, when either applying for or contesting an application for default judgment, the change to the rules provides some much needed clarification.
What do these changes mean practically?
The changes, which came into force on 6 April 2020, mean that entering judgment in default will be barred by the filing of an acknowledgment of service or defence, as the case may be, notwithstanding if the filing has been filed out of time. This new amendment to the rule seems to lean in favour of the defaulting party; many claimants will view this as simply granting an unfair (and unwarranted) extension of time for defendants who have not engaged with the claims brought against them.
As noted above, the ongoing dispute regarding the interpretation of the previous iteration of the rule is soon to be heard by the Court of Appeal in Clements Smith. It will be of interest to practitioners to see what guidance the Court of Appeal provides on the new drafting of the rule.
It is important to note that default judgment applies where a defence has not been filed; it is not to be used where the quality of that defence is questionable. Where the defence filed is meaningless or of no substance, the claimant should instead apply for summary judgment or for the defence to be struck out. This means that it is not an escape route for practitioners, when faced with a missed deadline for filing their client’s defence and perhaps an impending application for default judgment, to file a defence of little to no value so that there is at least something on the court record. It goes without saying that the rule underlines the enduring importance of diarising and complying with deadlines.