The Local Court of NSW is inundated with motions to set aside default judgments from defendants often claiming that service was not effected, or that first time the judgment was brought to their attention was when the plaintiff sought to enforce the judgment. When presented with a motion to set aside a default judgment, a plaintiff is often required to consider, whether it is more cost effective to consent to the default judgment being set aside (usually with their costs paid) or whether there is a strategic benefit to oppose the motion. This article seeks to set out the usual matters that a plaintiff ought to consider before taking either of those options, in light of the legal principles that govern setting aside default judgments.

The Legal Principles

The Uniform Civil Procedure Rules at r 36.16(2)(a), provides that a Court may set aside a judgment entered if the judgment or order is a default judgment other than a default judgment given in open Court. In order for the Court to exercise the discretionary power provided in R 36.16, a defendant is required to persuade the Court in relation two essential matters:

  1. whether the Defendant has an arguable defence on the merits; and
  2. whether the Defendant has an adequate explanation for the delay in filing a defence.[1]

The existence of a bona fide ground of defence, and an adequate explanation for the failure and delay to defend the proceedings are the most relevant matters to consider, although there may be other matters, such as whether the plaintiff would suffer any prejudice if the default judgment was set aside.[2] The existence of a defence on the merits will often outweigh all other considerations, so as to allow the party procedural fairness in having their matter assessed on the merits of their case. Ultimately, after a proper assessment of all the relevant circumstances, a Court will be required to do justice between the parties.[3]

Consent to the motion

A cost conscious plaintiff might consider allowing the default judgment to be set aside, and allow a defence to be filed, in exchange for the payment of the costs thrown away (the costs incurred in obtaining the default judgment), without contesting the motion. This would essentially save the plaintiff/respondent the further expense of preparing and contesting the matter at the interlocutory stage, but instead agreeing to a quantum of costs to be paid. This would be an appropriate course to take in circumstances whereby there is a properly drafted and annexed defence to the notice of motion and on the face of sworn facts would give rise to a defence, noting that the court does not at an interlocutory level seek to try the matter as if it were a full blown hearing, but simply assess whether a triable issue has been disclosed.

Oppose the motion

It might nonetheless still be beneficial for a plaintiff to elect to oppose the matter at the interlocutory stage, noting that the plaintiff will be entitled to the costs thrown away and potentially costs of the hearing of the motion even if the defendant is successful. If the Plaintiff forms the view that the affidavit in support and the draft defence, do not satisfactory disclose a defence or explain the delay, the benefits of opposing the motion would outweigh consenting to the motion and allowing the matter to re-open. Opposing the motion and putting the defendant to proof, may give the plaintiff a tactical advantage, notwithstanding the threshold in satisfying that there is a triable issue at the motion stage is a lower bar than establishing a defence at a hearing. The defendant would still be required to put forward relevant and not just scant material to establish the existence of a defence,[4] the defendant would be revealing its position to the plaintiff, whilst the plaintiff would have an opportunity to finalise the proceeding at the interlocutory stage.

In matters that relate to statutory provisions, payment of strata levies, written contractual agreements or finance agreements, whereby the matters are somewhat clearer on their face, it may be beneficial for the plaintiff to oppose the motion, noting the limited costs consequences.

For further information or should you require any assistance, please contact John Fairgray (Partner), Luis Ormazabal (Senior Associate) or Andi Warda (Solicitor)