Setting Aside a Judgment: The Complete Guide for Companies and Businesses Wanting to Get Back in the Game

Receiving notification of a judgment entered against your business can feel like the end of the road. The initial feeling is one of absolute finality—as if the game is over and you have lost. However, in legal reality, not every judgment is the final word. Setting aside a judgment is a strategic move that allows you, under the right circumstances, to reopen a case that has already been decided and reverse the outcome.

This is an exceptional tool designed for situations where one party did not defend themselves at all, or where serious defects were discovered in the proceeding itself. Its purpose is to ensure that justice is done and that irreversible injustice is not caused to those who did not have their “day in court,” particularly regarding judgments granted in default of defense.

What Does a Judgment Against You Mean?

Indeed, the Israeli legal system sanctifies the principle of “Finality of Proceedings” (Res Judicata). This principle is essential to create certainty and stability, preventing cases from dragging on forever. Yet, the system understands that there are exceptional situations where rigid adherence to this principle would cause a miscarriage of justice.

Why Does the Option to Cancel Exist?

The logic behind the option to set aside a judgment is simple: the aspiration for true justice. The court wishes to decide a dispute on its merits after hearing both sides. Therefore, when a judgment is given ex parte (in the presence of one side only), and specifically “in the absence of defense,” the door to canceling it is more open.

This is the classic scenario: A company is sued, but for some reason fails to file a statement of defense on time. The reasons can be varied:

• Technical Failure: The statement of claim simply did not reach the correct address.

• Human Error: The document arrived at the office but was lost or not handled on time.

• Internal Mishap: Lack of coordination between different departments in the company.

In such cases, the court may understand that the failure to defend did not stem from disrespect, but from an omission with a logical explanation. This is exactly where a real opportunity opens to submit a reasoned application to set aside the judgment and turn back the clock.

Note: Setting aside a judgment is a relatively rare move reserved for special cases. Analysis of judicial decisions shows that only about 2% of requests to set aside default judgments are actually accepted. The main reason for rejection is the applicant’s failure to prove that their omission was justified and that they have a genuine prospect of defense.

The Critical Importance of Rapid Action

A final judgment has potentially devastating consequences for a business: foreclosure of bank accounts, seizure of property, and severe operational restrictions. From the moment you learn of the judgment—time is working against you. Filing a request for cancellation must be done quickly and professionally, strictly adhering to the statutory schedules. Correct navigation of the procedure, accompanied by strategic legal counsel, can make the difference between irreversible damage and getting the case back on track.

What are the Grounds for Setting Aside a Judgment?

To ask the court to set aside a judgment, it is not enough to feel that an injustice was done. The legal system demands a solid legal basis, specific “grounds” recognized by law. Without such grounds, your request will almost certainly be rejected. You must convince the court that a fundamental malfunction occurred justifying the reopening of the case.

1. The Main Ground: Default Judgment (Discretionary Cancellation)

This is the most common scenario in the business world. A company is sued, but due to a mishap, wrong address, or human error, it does not file a defense. The plaintiff then obtains a judgment in default.

However, Regulation 131 of the Civil Procedure Regulations (2018) empowers the court to cancel such a decision. When examining the request, the court will ask two key questions:

1. Why did it happen? (The reason for the default): You must provide a logical and honest explanation. Did the claim never reach you? Did a new employee receive the mail and not understand its significance? The court does not expect perfection, but it wants to see that this was not a willful disregard of the proceeding.

2. Do you have a case? (Prospects of defense): The court will not waste its time on idle hearings. You must show, even briefly, that you have genuine defense arguments worthy of discussion.

Generally, courts prefer to decide a dispute on its merits rather than locking the door on a defendant who has a good explanation and a worthy defense. If you can substantiate these two elements, your chances of success increase significantly.

Example: A start-up is sued by a service provider. The statement of claim is sent to their old offices, even though an address update was made with the Registrar of Companies six months earlier. The company is unaware of the lawsuit, and a default judgment is entered. In this case, the company can apply for cancellation, presenting the Registrar’s printout as proof of the delivery failure (reason for default) and detailing why the alleged debt is incorrect (prospects of defense).

2. Defects Going to the Root of the Proceeding (Ex Debito Justitiae)

There are more severe cases where a fundamental defect occurred in the management of the proceeding itself. Such defects can lead to what is known as “Cancellation as a Matter of Right” (or Ex Debito Justitiae)—a situation where the court feels compelled to set aside the judgment to prevent a clear miscarriage of justice. Common grounds include:

• Failure of Service: This is the strongest argument. If you can prove that the statement of claim or summons never reached you legally, the judgment will be set aside almost automatically.

• Lack of Jurisdiction: If the case was managed in the wrong court (e.g., an IP claim filed in Magistrate’s Court instead of District Court).

• Violation of the Right to Plead: Even if you filed a defense, situations may arise where you were not given a fair chance to present your arguments (e.g., a hearing held without you receiving a summons).

3. Rare Cases: Fraud and New Evidence

These are the hardest grounds to prove, relevant mainly where the case was fully managed, but it was later discovered the decision was based on lies or a partial factual picture.

• Fraud: You discover post-factum that the other side actively deceived the court (e.g., presented a forged contract).

• Discovery of New Evidence: Rarely, dramatic evidence is found after the judgment that could not have been obtained earlier. It must be “Gold Evidence”—evidence that would have certainly changed the outcome.

Choosing the Right Path: Cancellation vs. Appeal

You discovered a judgment against you. You understand it might be canceled. Now you face a strategic decision: Which legal path to choose?

Request to Set Aside an Ex Parte Judgment

Relevant when: You did not participate in the proceedings (Default Judgment).

** The Argument:** “We were not given a fair opportunity to present our position.”

Focus: Justifying the default + Prospects of defense.

Timeline: 30 days from the service of the judgment.

Appeal on the Judgment

Relevant when: You participated in the trial, but lost.

The Argument: “We played by the rules, but the Judge made a mistake in the outcome.”

Focus: Errors in legal interpretation, factual determination, or judicial discretion.

Timeline: Generally 60 days from judgment.

Rare Tracks: Civil Retrial and “Perati”

• Civil Retrial: The “Doomsday Weapon,” reserved for extreme cases (proven fraud/fabrication) after a judgment is final.

• “Perati” (I Have Paid): Raised in the Execution Office. You don’t cancel the judgment, but claim you have already paid the debt after the judgment was given, stopping collection.

Comparison of Procedural Tracks

Challenges for International Companies

For a global company, a judgment in Israel is a strategic event. Physical distance and legal culture gaps make every decision critical.

Service of Process – The Achilles’ Heel

To validate an Israeli judgment against a foreign entity, the plaintiff must prove the claim was served according to strict rules (often the Hague Convention). Technical failures here are common and provide grounds for “Cancellation as a Matter of Right”:

• Improper Method: Sending via regular mail instead of the Central Authority.

• Poor Translation: Failure to translate documents into the destination country’s official language.

• Unauthorized Recipient: Delivery to a junior employee unauthorized to accept legal documents.

International Enforcement

Even if the judgment stands in Israel, can it be enforced in your home country? This depends on bilateral treaties. Sometimes, a judgment valid in Israel is a “dead letter” abroad. A strategic analysis must ask: Is it better to fight in Israel, or defend against enforcement at home?

Practical Steps Forward

Success in setting aside a judgment is not about luck; it is about precise strategy.

1. Immediate Action: You have a strict 30-day window from the moment the judgment is served.

2. Documentation: Gather every scrap of evidence explaining why you did not defend yourself.

3. Build the Dual Argument:

   • Why did it happen? (Justify the default).

   • Why does it matter? (Show you have a winning defense).

FAQ

Q: How much time do I have?

A: 30 days from the date the judgment was legally served to you.

Q: Is there a fee?

A: Yes, a court fee is required. It must be paid in full upon filing.

Q: What is the difference between Cancellation “Ex Debito Justitiae” vs. “Discretionary”?

A:

• Ex Debito Justitiae (Right of Justice): A fundamental defect exists (e.g., you were never served). The court must cancel the judgment.

• Discretionary: You were served but failed to act. The court may cancel it if you prove a good excuse and a good defense.

Next Step for You

Are you concerned about a judgment entered against your business, or do you need to verify if your procedural rights were violated? I can help you draft a checklist of required documents to gather immediately for your legal counsel, or simulate a “Strength of Arguments” assessment based on the reasons for your default. Would you like to start with that?

Disclaimer: The information presented in this article is general in nature and does not constitute legal advice or a substitute for individual legal counsel by a qualified attorney. Do not rely on the contents of this article for taking or refraining from legal action.