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Limited basis for setting aside default judgment
PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution
A recent High Court decision,(1) which arose as an appeal from a circuit court ruling, has confirmed that a regular judgment obtained in default of defence should not be set aside in circumstances where the party which obtained that judgment has complied with every procedural rule and extended every professional courtesy to its opponent. The court had to consider whether to set aside a default judgment obtained by the plaintiff where the defendant's insurer, having permitted the default judgment to be obtained, wanted to be given the opportunity of a full hearing of the defence in the proceedings.
The case commenced as circuit court proceedings in which the plaintiff sought damages for injuries he claimed to have suffered on various dates in 2010 and 2011 during the course of his employment with the defendant. Various communications passed between his solicitors and the in-house solicitors at the defendant's insurer, which ultimately entered an appearance in the proceedings on behalf of the defendant in August 2012. In November 2012, and again in January 2013, the plaintiff requested the defence. In circumstances where the delay in delivering the defence constituted a breach of the circuit court rules, the plaintiff issued a motion for judgment in default of defence. The motion was disposed of on a consent basis and, by order of the court, the period for delivery of the defence was extended by three further weeks.
However, the defence was still not forthcoming, even after three separate letters subsequent to that motion date. The plaintiff issued a second motion for judgment in default of defence which was served on the insurer. By that point, the failure to deliver the defence was not only a breach of the circuit court rules, but also a breach of the order made in respect of the prior motion in terms of delivery of the defence.
Notwithstanding that it was accepted that the second motion was served on the insurers, the relevant papers were lost within that organisation. On the return date for the motion, the court was satisfied that the papers had been duly served and ordered that judgment in default of defence be given against the defendant. The defendant's insurer subsequently applied to have the default judgment set aside.
Judge Barrett noted that the jurisdiction to set aside a regular judgment obtained in default of defence derived from Evans v Bartlam, where Lord Atkins observed that:
"Unless and until the court has pronounced a judgment upon the merits or consent, it is to have the power to revoke the expression of its coercive power where that has only been obtained by a failure to follow any of the rules of procedure."(2)
Here, the judge stated that there was no procedural lapse that gave rise to an improper advantage. He then turned to examine a number of Irish authorities which emphasised the need to do justice in exercising its jurisdiction. For example, in Fox v Taher, where there had been a mistake by the defendants, Judge Costello felt that it did not matter very much "whether I come to the view that the judgment was obtained by mistake or by surprise because the court has to do justice in this situation".(3) Barrett also referred to McGuinn v The Commissioner of An Garda Siochana,(4) where Judge Murray also emphasised the need to do justice to the parties on the particular facts of each case, albeit with an acknowledgement that this generally favoured determination of the litigation on the merits. The court also considered Allied Irish Bank plc v Lyons,(5) where a mistake had been made by the defendant's solicitor. There, Judge Peart concluded that the judgment against the defendant client should be set aside rather than let the client pursue a possible remedy against the solicitor.
Judge Barrett identified that he had to consider whether the interests of justice required the default judgment to be set aside on the basis that the defendant should not suffer for its insurer's actions. However, in circumstances where both the defendant and its insurer were sophisticated commercial institutions capable of defending their respective positions, the interests of justice did not favour the setting aside of the default judgment. Therefore, the judge held that the consequences of the insurer's actions or inactions should not be visited on the plaintiff. This was especially so where the plaintiff's solicitors had at all times acted in compliance with the applicable rules of court and principles of professional courtesy. Accordingly, neither the interests of justice nor other special circumstances required the judgment obtained in default of defence to be set aside.
The decision confirms that there is a limited basis for the setting aside of judgments obtained in default of defence. Although such jurisdiction does exist, the court must be satisfied that it would be in the interests of justice to set aside such a judgment. This will necessarily depend on the facts of the case. Where the default judgment has been obtained arising from some action or inaction by the defendant's advisers, the court will need to consider whether to allow the defendant to defend the claim on the merits or to pursue its advisers in respect of the judgment entered against it. It would seem from this case that where the defendant is a commercial entity and the plaintiff is an individual, the latter is likely to be the preference of the court, especially where there has been compliance with all procedural steps.
(1) Monaghan v United Drug plc  IEHC 183.
(2)  AC 473, Page 480.
(3) Unreported, High Court, January 24 1996.
(4)  IESC 33.
(5)  IEHC 129.
This article first appeared in the International Law Office Litigation Newsletter, 13 May 2014.