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Set aside of default judgments
PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution
Irish rules on service of proceedings mandate specific steps to be taken to formally serve proceedings on defendants. In the ordinary course, once proceedings are issued, the plaintiff must seek to serve the defendant pursuant to these rules and the defendant must then take steps on foot of service. However, in certain instances it may be impossible to effect service by availing of the ordinary methods, in which case it is possible to apply to the court to sanction service by a substitute means. A recent case(1) has considered such substituted service and offers useful guidance where the defendant seeks to have the substituted service and any default judgment obtained on foot of it set aside.
The defendant sought to set aside a €7 million judgment granted against him in default of appearance. In essence, he claimed that he had not received the summary summons after it had been served by ordinary pre-paid post pursuant to an order for substituted service. That order permitted the plaintiff to serve the defendant by ordinary pre-paid post at an address in County Meath. At no point after service of the summons were the documents returned to the plaintiff's solicitors. The defendant claimed that he became aware of the judgment (and service) only when enforcement steps were pursued by the plaintiff.
Although the plaintiff's position was that it had served the proceedings precisely in accordance with the order for substituted service it had obtained, the defendant also sought to set aside that order on the basis that the information as to the residence of the defendant was incorrect. The defendant claimed that:
- the address in question was not his residence:
- he did not reside there and never had; and
- he did not own the house there and never had.
As part of the enforcement steps, the plaintiff's solicitors delivered papers regarding discovery and an examination of the defendant to the address in question, which were returned along with a cover letter from the occupant (the defendant's brother-in-law) stating that the defendant did not live there and did not receive the letters which had been sent there. On foot of that, the plaintiff's solicitor brought this to the attention of the court and sought an alternative method to serve the defendant.
As part of its steps regarding enforcement, the plaintiff had also secured a garnishee order requiring a judgment debtor of the defendant to pay the moneys due to the plaintiff. Solicitors had acted for the defendant in respect of the proceedings against the judgment debtor and, ultimately, the court directed that substituted service could be effected on the solicitors' firm which had represented the defendant in those other proceedings. The solicitors' firm raised various queries regarding the basis on which substituted service was effected on the defendant through that firm and subsequently returned all of the papers to the plaintiff's solicitors, saying that they had no instructions in the matter. However, it was eventually instructed in relation to the matter and brought applications to set aside the substituted service order pursuant to which the originating summons was served and to set aside the judgment.
The court noted, in respect of the application to set aside service of the summons, that success in that application would involve, as a corollary of improper service, the judgment being set aside. It also noted that the application to set aside the judgment would need to be considered separately, even if it found service to have been validly effected.
On the substituted service order, the court referred to corporate documentation which showed that the defendant had used the address in respect of which the substituted service order was made for business purposes for some time. The court felt, in that context, that there must have been some arrangement in place for the bringing to the attention of the defendant any post received. It also observed that the defendant's sister and brother-in-law (who occupied the premises) had sworn no affidavits to counter such a conclusion. The court also explored other facts which leaned in favour of the conclusion reached that there was no proper basis for setting aside the order for substituted service.On the application to set aside the judgment, the court noted that the irregularity relied on by an applicant to set aside a judgment must be specified. If the court is satisfied that there is an irregularity in the manner in which judgment has been obtained, then judgment will be set aside. There is no requirement for the applicant to demonstrate that there is an arguable basis to resist the plaintiff's claim. The court further noted that irregularity as the principal requirement for a successful application is derived from voluminous and long-standing authority and referred to Crane & Son v Wallis(2) in support of that proposition. The court held that in circumstances where there is no basis to set aside the order for substituted service, and service in compliance with that order has been proven, there is no irregularity in terms of how the judgment was obtained.
The court then cited Farden v Richter(3) to the effect that, where a judgment is regular, "it is an inflexible rule that the judgment cannot be set aside without an affidavit by the defendant suggesting that he had a defence to the plaintiff's claim". The court observed that the defendant had not set out in affidavit any defence to the plaintiff's claim. While it accepted the defendant's proposition that a person should not be obliged to disclose his or her defence where he or she has not been served, in this case the defendant had been served in accordance with an order for substituted service. In bringing this application, the court felt that the defendant could not have assumed that it would succeed in establishing that the judgment was irregularly obtained, and should have been aware that "he would be required to set forth an arguable defence to the claim before the judgment was set aside. He has not done so". Although it was accepted that Farden does not rule out the possibility that there may be exceptional circumstances where the otherwise inflexible rule would be an obstacle to a defendant, there were no such circumstances in this case. Accordingly, the court refused to set aside the default judgment.
Although the decision does not represent any novel statement of law, it is a useful restatement of the principles applicable to the setting aside of an order made permitting substituted service and default judgment. Irish courts will typically make substituted service orders based on relevant information regarding how an alternative service might be practically effective; and it is in rare cases that applications to set the service aside are made, and rarer still that the applications succeed. Although the courts are keen to ensure that litigants have their day in court by permitting trial of the underlying action, particularly where a defence is contended to exist, there must be limits on the willingness to set aside default judgments. As is clear from this decision, the courts are not prepared to set default judgments aside without the defendant making out a case that it is appropriate to do so by reference to an arguable defence where the defendant has failed to establish that there is an irregularity as to how the default judgment has been obtained.
For further information please contact Gearoid Carey at Matheson by telephone (+353 1 232 2000), fax (+353 1 232 3333) or email email@example.com
(1) Danske Bank v Meagher  IEHC 496.
(2)  2 IR 411.
(3) (1889) 23 QBD.
This article first appeared in the ILO Litigation newsletter in January 2014.