Understanding and Setting Aside Default Judgments in NSW: A Broad Guide

Default judgment is when the court enters a judgment in favour of a party (typically, a plaintiff) as a result of the other party’s (typically, a defendant) failure to respond to legal proceedings or meet court deadlines. If default judgment is entered against a defendant for a sum of money, the plaintiff becomes the ‘judgment creditor’ and the defendant becomes the ‘judgment debtor’. Having a default judgment against you can have negative consequences. However, there are circumstances in which default judgments can be set aside. In this article, we will provide you with a guide on setting aside default judgments in NSW.

What are the Consequences of Default Judgment?

If default judgment is into entered against you, the judgment creditor might take enforcement action to recover the amount that the Court has ordered that you are liable to pay. This may result in (without limitation) your assets being seized and sold or your wages being garnished and paid to the judgment creditor.

The judgment can also negatively impact your credit rating, affecting your ability to obtain loans.

Further, you may become liable to pay additional costs if a judgment debtor has to take enforcement action against you.

Applying to Aside Default Judgments

Courts are often readily willing to set aside default judgments. This is because default judgment is an administrative form of judgment as opposed to a judgment based on the merits of a legal argument.

However, to set aside judgment an applicant will have to satisfy the Court that the following elements are present:

1. There was a reasonable explanation for not responding to the legal proceedings (or otherwise meeting the relevant Court deadline).
2. There was no unreasonable delay in applying to set aside the default judgment.

That, on the face of it, there is an arguable defence to the plaintiff’s claim. This does not require a full explanation of the defence, or even that there is a strong defence. There simply needs to be a potential to defend the matter. It is a low threshold to meet.

It is not uncommon for parties to ignore default judgment in the hope that the matter will go away. As above, this can have negative consequences that can be avoided by making an application to set aside default judgment.