A state of affairs which entitles a financier to take certain action involving giving notice to terminate a facility or accelerating repayment of a loan. This may arise from a breach of the facility, insolvency, failure to meet financial tests or the occurrence of an adverse event. The events giving rise to a default are usually listed at length in a facility agreement and heavily negotiated.

Banking & Finance analysis: Tom Snelling, partner, and Victor Tong, associate, at Freshfields Bruckhaus Deringer, explain an update to the recent High Court’s decision in Cargill International Trading PTE Limited v Uttam Galva Steels Limited concerning default compensation clauses.

A default interest provision is a term of an agreement that provides a contractual sanction against a party failing to pay a sum of money, and is a form of liquidated damages for that non-payment. It is important to ensure that such a term does not constitute a penalty.

Commercial analysis: On 23 October 2025, the High Court handed down judgment in the case of Houssein v London Credit Ltd re-determining whether a contractual term allowing the lender to charge a default interest rate of 4%, compounded monthly under a one-year bridging loan agreement (the Default Rate) constituted an unenforceable penalty. Richard Farnhill, sitting as a Deputy Judge of the Chancery Division, held that the Default Rate was not a penalty and was as a result enforceable, by the lender, London Credit Limited (LCL) following an event of default. Written by Annie Harvey, senior knowledge lawyer at Taylor Wessing.

Judgment on a claim without a trial, where the defendant has failed to file either an acknowledgment of service or a defence.

Dispute Resolution analysis: In Maritime Developments Ltd (‘MDL’) v Hindustan Oil Exploration Company Ltd (‘HOEC’), the High Court considered MDL’s application for judgment in default pursuant to CPR 12.3 in circumstances where MDL were facing severe difficulties trying to serve the Claim Form on the defendant in India pursuant to the Hague Service Convention. The court ultimately found that there was a power, under the Hague Service Convention, to order judgment without a certificate of service being obtained, and that the conditions for exercise of that power were met in these circumstances. Written by Emily Lodge, associate at Quinn Emanuel Urquhart & Sullivan UK LLP.

Dispute Resolution analysis: the High Court has considered the effect of a default judgment before concluding that the defendant was able to raise issues of causation at a subsequent damages assessment, notwithstanding the existence of the default judgment. By reference to the particulars of claim as pleaded, the default judgment had only determined that ‘some damage’ had been caused by the defendant’s admitted breach of duty, therefore, this left open issues of causation as to the individual losses claimed. The judge also concluded that as a result of this and given the absence of any specific CPR requirement that insists a defendant serve a defence, the defendant could not be accused of acting in breach of the CPR by now raising its causation points.

Dispute Resolution analysis: The High Court has granted default judgment on part of a counterclaim against the Ras Al Khaimah Investment Authority (RAKIA) in a long-running set of proceedings, following the decision by the Investment Authority to take no further part in the proceedings. However, following submissions made by additional defendants in the proceedings, another part of the counterclaim will proceed to trial in 2024. Written by Phillip Patterson, barrister, Gatehouse Chambers.

Any debt owed by a third party to a judgment debtor may be diverted by order of the court to be paid to a judgment creditor. Rent can be so diverted (or attached, to use the legal term) but only when it is due to be paid by the tenant to the landlord or their agent. Therefore if the lease provides for a quarterly rent, then the debt will only fall to be paid to the judgment creditor quarterly. The judgment creditor cannot be in any better position than the landlord; so the judgment creditor cannot obtain payment if the landlord could not have obtained

DR analysis: In a recent Commercial Court case, a judge exercised its discretionary power to set aside a default judgment. The decision is of particular interest to practitioners as the court considered the scope of its powers to remedy procedural errors pursuant to CPR 3.10, as well as the relationship between that provision and the court’s powers to set aside contained in CPR 13.2 and CPR 13.3. In this article we consider the court’s decision and highlight the key points for practitioners.

Construction analysis: The court refused to set aside a default judgment. Applying CPR 13.3, it held that the defendant developer had no realistic prospect of defending the claims for unpaid consultant fees and damages for wrongful repudiation of the contract. When considering whether the application to set aside was promptly made, the court considered the whole period from when judgment was entered until the hearing, and held that the application was therefore not prompt. There was no explanation or excuse for the defendant’s delays and it had not made out a case for relief from sanctions under the Denton three stage test (CPR 3.9).

DR analysis: The High Court has endorsed the new regime following CPR reform whereby failures to comply with rules and orders are less likely to be granted relief from the resulting sanctions. The new regime applies to all rules in the CPR, including CPR Part 13 relating to the application to set aside default judgments. This is by virtue of the amended overriding objective that now refers not only to dealing with cases justly but also at proportionate cost. Following a failure to comply, a party must now act promptly in applying for relief. Anything other than trivial delay, in particular where it is unexplained, is likely to mean the application is not allowed.