Entering Default Judgments
Business Debt Recovery Article #3
This is the third article in a four part series with information about business debt recovery processes and procedures in the Magistrates Court of Victoria. This article provides information regarding entering default judgments or orders in default of defence.
In previous articles we focused on the letter of demand and on commencing legal proceedings. If legal proceedings are commenced against a debtor and if, in the Magistrates Court, a defence is not filed within 21 days after the date of service then an order in default of defence can be usually entered against the debtor.
The process is slightly different in the County Court and in the Supreme Court. In those Courts, the debtor has 10 days from the date of service to file a Notice of Appearance. If this notice is filed the debtor then has a further 30 days to file a Notice of Defence. If a Notice of Appearance is not filed a default judgment can be obtained. If a Notice of Appearance is filed, but if there is no Notice of Defence filed within a further 30 days, a default judgment can be obtained.
It is an important part of the debt recovery process to ensure when entering orders in default of defence and when obtaining default judgments that the proper process is followed depending upon the nature of the claim. This is because, even after an order is entered, the judgment debtor is able to make application to set aside the order.
In applications to set aside orders, which are also known as applications for re-hearing in the Magistrates Court, there is an important distinction between judgments and orders that have been “regularly entered” and those which have been “irregularly entered”.
In deciding upon whether to set aside a regularly entered judgment or order the Court will consider a number of factors including whether there is an arguable defence, the reasons for which a defence was not filed and the reasons for any delay in the making of the application to set the order aside. The defendant against which the judgment was entered will be required to swear an affidavit in relation to these matters.
The Court may exercise its discretion to set aside the judgment, but a tactical advantage will be gained by the plaintiff as the defendant’s affidavit can be relied upon as the proceeding progresses. If the judgment is set aside a defence can then be filed and, as the claim is then disputed, it will become a commercial litigation matter. In addition and even if the Court does set aside the default judgment or order in default of defence, the defendant will usually be required to pay the ‘party / party’ costs of the application to the plaintiff.
The situation is different if a judgment is irregularly entered or if it is entered in bad faith. In those circumstances, the Court may decide that the order is ‘void ab initio’. This essentially means that, regardless of whether there is an arguable defence, the judgment debtor has the right to have the order set aside. The Court takes the view that the judgment suffers from an error or defect to the extent that it should not be on the Court record.
A default judgment may be determined to have been irregularly entered for a number of reasons. It is important to avoid these pitfalls when conducting business debt recovery. A judgment may be irregular if the order is entered for an amount that exceeds the amount claimed in the Statement of Claim, or if it is in reality a claim for damages (as opposed to a liquidated debt) and if an affidavit proving the damages is not filed with the application for default judgment. If an irregularly entered judgment or order in default of defence is set aside then it is usually the plaintiff (or creditor) who will be required to pay the ‘party / party’ costs of the application to the defendant.
A properly entered order in default of defence will then allow the creditor to take recovery action to enforce the judgment debt. The next article in this series will focus on that step of the process.
The pages of this site relevant to this article can be found here:
The other articles now published in this series are:
- The Letter of Demand - CBL Business Debt Recovery Article # 1
- Commencing Legal Proceedings – CBL Business Debt Recovery Article # 2
- Recovering Judgment Debts and Enforcing Monetary Court Orders - CBL Business Debt Recovery Article #4
Please note that the facts and circumstances relevant to every client are different. The above article should not be relied upon as legal advice. Article by Nicholas Corr published 4.6.13. To be notified of new articles: