• Arida Lawyers

When is a Default Judgment listed against a debtor?

Updated: May 19

When an individual/organisation ('Party A') provides goods, services or money to a third party ('Party B') and Party B fails to make payment as per the agreed terms, it may amount to a breach of contract allowing Party A to commence legal proceedings.


Similarly, should Party B cause damage or injury to Party A, Party A has a cause of action in tort and can commence legal proceedings against Party B. In this instance, compensation can be claimed to return Party A to the position they would have been in had Party B's negligence never occurred.


Legal proceedings are commenced by way of preparing a Statement of Claim ('SOC'), which particularises:

  1. The amount Party A claims from Party B.

  2. The particulars of breach of contract and/or breach of negligence.

  3. The interest accrued per the Court rates from the date payment fell due or from the date the injury or damage occurred.

  4. The legal costs incurred by Party A in preparing and filing the SOC, as well as the service fees associated with serving the SOC at the individuals residential address, personally serving the individual, or serving the SOC at the companies registered address.

Once the SOC is served per the Uniform Civil Procedure Rules (NSW) 2005 ('UCPR'), Party B has 28 days from the date of service to:

  1. Respond to the SOC;

  2. Make a payment of the amount claimed in the SOC;

  3. File a Notice of Appearance; or

  4. Make an application for the Default Judgment to be set aside.

Should Party B not respond to the SOC within 28 days, Party A can make an ex parte application to the Court by way of a motion for the Default Judgment to be listed against Party B.


What is a default judgment


A Default Judgment is a Court order that legally binds the Debtor to pay a specified sum to the Creditor.


The Default Judgment is listed against the Debtor for 12 years from the Default Judgment date, allowing the Creditor to commence enforcement proceedings to recover the judgment debt.


Some of the enforcement proceedings that can be commenced are:

  1. Examination of the Debtor to identify their assets and liabilities

  2. Bank and wage garnishees

  3. Writ for the levy of property (both real and personal assets)

  4. The bankruptcy of an individual

  5. Winding up a company

The Default Judgment also causes the Debtors difficulty in obtaining finance, loans and entering into residential leases as Equifax will list the Default Judgment against the Debtor. As a result, organisations seeking to provide finance, loans, or lease goods to the Debtor will typically conduct an Equifax search and not give the sought finance or lease as the Debtor's credit rating would be reduced, and the Debtor would be considered high risk.


Due to the Debtor's barriers to obtaining the finance, loan, or lease, it is common for the Debtor to contact the Creditor to remove the Default Judgment and notify Equifax urgently. The Debtor may have the following responses in this instance:

  1. To pay the total Default Judgment amount, plus the accrued interest and additional enforcement costs; or

  2. Contact the Creditor or their representatives to prepare consent orders to set aside the Default Judgment; or

  3. To make an application to the Court to have the Default Judgment set aside.

How is a Default Judgment set aside


Once the Debtor becomes aware of the Default Judgment, the Debtor can contact the Creditor, or their representatives and request consent orders are entered to have the Default Judgment set aside. This will typically involve the Debtor paying the Creditors legal costs associated with filing and setting aside the Default Judgment and any enforcement proceedings carried out by the Creditor to recover the judgment debt.


In the instance the Creditor is not agreeable to setting aside the Default Judgment, the Debtor may file a motion to the Court to have the Default Judgment set aside per rule 36.15 of the UCPR.


The Debtor can set aside the Default Judgment on the following basis:

  1. The Default Judgment was made irregularly, illegally or against good faith; or

  2. The SOC was not served on the Debtor in accordance with UCPR; or

  3. The Debtor has a reasonable excuse for not filing a defence within the notice period; or

  4. The Debtor has a reasonable basis for defending the claim.

In the instance the setting aside of the Default Judgment was unreasonably refused by the Creditor before the Court hearing the motion, the Debtor may seek to recover their legal costs for being represented at the hearing for the motion.


Alternatively, the Creditor can recover their legal costs in defending the motion in the instance they are successful. Being successful does not necessarily mean that the Default Judgment has not been set aside. Instead, it means the Debtor could not provide sufficient reasoning to the Court about why the defence was not filed within the prescribed notice period under the UCPR.


At Arida Lawyers, our experienced team can:

  1. Commence legal proceedings by preparing and serving SOC

  2. Making an application to the Court for the Default Judgment to be entered against the Debtor in the instance the Debtor does not make a payment or provide a response or file a Defence.

We can also assist Debtors by:

  1. Providing advice on their prospects of making an application by way of motion to set aside the Default Judgment

  2. Providing clear advice on their prospects of defending the proceedings

  3. Preparing a Defence in the instance the Default Judgment is successfully set aside

  4. Defending the proceedings brought by the Creditor at Court

The Arida Lawyers team can also assist with contract law, consumer law, and building and construction law. Contact us today on 1300 146 390 or email info@aridalawyers.com to arrange a free consultation.


Joseph Arida

Principal Lawyer



This article provides general information relevant to our expert services. It is not legal advice and should not be relied upon as such. If you are seeking legal advice, you should contact us for a free initial consultation.

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