Setting Aside a Default Judgement

From Riverview Legal Group

Overview of the Legal Requirements for Setting Aside a Default Judgement

The Test to Set-Aside a Default Judgement

O. Reg. 258/98: RULES OF THE SMALL CLAIMS COURT

11.06 The court may set aside the noting in default or default judgment against a party and any step that has been taken to enforce the judgment, on such terms as are just, if the party makes a motion to set aside and the court is satisfied that,

(a) the party has a meritorious defence and a reasonable explanation for the default; and
(b) the motion is made as soon as is reasonably possible in all the circumstances. O. Reg. 78/06, s. 24.

Adam Macarthur Electrical Contracting Ltd. v Lamb Development Corporation, 2017 CanLII 37773 (ON SCSM)

11. The test for setting aside a default judgment in Small Claims Court is set out in Rule 11.06, as follows:

11.06 The court may set aside the noting in default or default judgment against a party and any step that has been taken to enforce the judgment, on such terms as are just, if the party makes a motion to set aside and the court is satisfied that,
(a) the party has a meritorious defence and a reasonable explanation for the default; and
(b) the motion is made as soon as is reasonably possible in all the circumstances.

Meritorious defence

Adam Macarthur Electrical Contracting Ltd. v Lamb Development Corporation, 2017 CanLII 37773 (ON SCSM)

20. At the hearing, neither party presented case law as to the interpretation of the meaning of “meritorious defence.” In Shamar, supra, I stated: 

On at least a simple reading of the claim and defence together, the defence appears to me to be reasonably coherent and plausible….

21. I accept that the plaintiff here may have a strong case such that the defence (in particular, that the wrong entity is being sued) will not prevail at trial. But I respectfully do not see that a judge on a motion to set aside a default is called upon in effect to determine whether the defence will prevail at trial: the test must be less onerous than that. See Heasman v Mac’s Convenience Store Inc., 2015 ONSC 2290 (CanLII), (2015) O.J. No. 1746, 252 A.C.W.S. (3d) 576 (Div. Ct.).

22. As in Shamar, supra, I have read the draft defence along with the claim and the affidavit material, and in that context the defence appears to me to be reasonably coherent and plausible. I would therefore find that the test of “meritorious defence” is met.

Hiley v. Hill, 2018 ONSC 5315 (CanLII)

[11] In the majority of cases, the most important factor on a typical motion will be the requirement to establish that the moving defendant has “a meritorious defence”. Morgan v. Toronto (Municipality) Police Services Board, 2003 CarswellOnt 1105 (Ont. C.A.) at paras. 25-26. If the record makes clear that the defendant has no defence, there is little point in setting aside the default judgment as the net effect of doing so may simply be to increase the defendant’s liability by exposing him or her to the risk of a representation fee at trial. However, if there is a meritorious defence, the system favours a determination on the merits so both parties have a full opportunity to present their respective sides of the story.

[12] A “meritorious defence” means an arguable defence. It does not require the moving defendant to establish that the defence is likely to succeed at trial. (Coombs v. Curran, 2010 ONSC 1312 (Ont. Div. Ct.) (CanLII)

Reasonable explanation for the default

Adam Macarthur Electrical Contracting Ltd. v Lamb Development Corporation, 2017 CanLII 37773 (ON SCSM)

23. In this case, the plaintiff chose to use what it apparently thought was an alternative to personal service for service of a claim provided by the Rules, i.e., registered mail. Personal service is of course a preferred method of service of a claim, so that disputes as to whether service was effected are less likely to arise.

24. The motions judge is often in a difficult position trying to sort out competing affidavit evidence, such as that set out above on this question. Fortunately, the Rule does not require me to make a finding of fact as to what actually happened concerning service (see Heasman, supra), but only that there is “a reasonable explanation for the default.” I would so find here. In any event, since that service was irregular, I would not go further in parsing what happened, and would find that there is an explanation for the default.

Motion made as soon as reasonably possible

Adam Macarthur Electrical Contracting Ltd. v Lamb Development Corporation, 2017 CanLII 37773 (ON SCSM)

25. As noted, I invited the parties to make post-hearing submissions, in particular on the issue of whether the motion had been brought “as soon as is reasonably possible in all the circumstances.”

26. Neither party provided cases applying the applicable Small Claims Court rule, Rule 11.06.

27. Defendant’s counsel did provide cases applying the analogous Superior Court rule, which is worded more broadly. Rule 19.08(1) of the Rules of Civil Procedure reads simply: 

19.08 (1) A judgment against a defendant who has been noted in default…may be set aside or varied by the court on such terms as are just.

28. In Mountain View Farms Ltd. v McQueen, 2014 ONCA 194 (CanLII), (2014) O.J. No. 1197, the motion to set aside default judgment was not brought until over six years after the date of the judgment. Although it is not clear from the decision on what date the judgment had come to the attention of the defendant, it was clearly at least over a year before the motion. In the decision of the Court of Appeal, Gillese J.A. set out five “factors” that had been developed in the case law for the court to consider in the application of Rule 19.08, including three that are substantially similar to what is set out in Rule 11.06 of the Small Claims Court. She wrote, at para. 51, “…the presence of an arguable defence on the merits may justify the court exercising its discretion to set aside the default judgment, even if the other factors are unsatisfied in whole or in part.”

Special Circumstances

Judgment Obtained by Default and Not in Accordance With the Rules

Adam Macarthur Electrical Contracting Ltd. v Lamb Development Corporation, 2017 CanLII 37773 (ON SCSM)

17. At the hearing, I referred to my decision in Shamar Maintenance Inc. v Bank and Cooper Property Ltd., 2015 CanLII 62396, (2015) O.J. No. 5174 (ON SCSM) which also concerned a judgment obtained by default and not in accordance with the Rules. In that decision, there is reference to the decision of Deputy Judge Winny in Action Auto Leasing & Gallery Inc. v Charles Boulding and Nancy Ferreira, (2009) O.J. No. 1768, 88 C.P.C. (6th) 91 (ON SCSM) at paras 5ff, in which he wrote as follows: 

Because of the concern for natural justice, the common law has developed a special rule applicable to motions to set aside default judgments that have been irregularly obtained. An irregularly-obtained judgment is one obtained without compliance with applicable procedural rules, such as the rules for service of the originating process.

Some of the recent Ontario authorities for the proposition that an irregularly-obtained default judgement must be set aside automatically, or as of right, without terms, are Royal Trust Corp. of Canada v. Dunn (1991), 1991 CanLII 7227 (ON SC), 6 O.R. (3d) 468 (Gen. Div.), and Benlolo v. Barzakay (2003), 2003 CanLII 13836 (ON SCDC), 169 O.A.C. 39 (Div. Ct.). In such cases there is no requirement on the moving party to show, as there is in cases of regularly-obtained judgments, that he or she has an arguable defence on its merits. That is because irregularly-obtained judgements must be set aside ex debito justitiae (for the sake of justice).

There are many other authorities supporting these principles, which in my view apply in the Small Claims Court. ...

In cases of irregularly-obtained default judgements, in my view the common law rules embodied in the line of cases mentioned above should be reconciled with SCCR 11.06 by applying SCCR 2.02. That is, where the ex debito justitiae rule applies, it become necessary in the interests of justice to dispense with the requirement for the moving party to comply with any or all the components of SCCR 11.06.

In the case at bar, the defendants deny receipt of the Plaintiff’s Claim and say they only learned of this lawsuit after garnishments were effected in last March 2009.

The plaintiff cannot discharge its onus to prove valid service. If the requirements of SCCR 8.03(7) and (8) are not satisfied, then the default judgment is irregularly-obtained and must be set aside as of right.

In addition, I am satisfied that this motion was brought as soon as reasonably possible. I find it unnecessary to determine whether the defendants have an arguable defence on the merits. The default judgment will be set aside.

As I have indicated above, my view of the law is that compliance, or what some might call strict compliance, with the procedural rules is required where plaintiffs rely on service by mail rather than personal service.

18. But notably, in this decision the court still considered whether the motion was brought as soon as reasonably possible.

19. Assuming without deciding that it is necessary to do so, I will proceed to apply all the tests in Rule 11.06, particularly since the parties fully argued them.

Setting Aside, a Setting Aside Default Judgement Order

The core issue in the situation below is when a Deputy Judge grants and order setting aside a default judgement can a different judge set-aside the order of the first Deputy Judge.

Khan v Quintanilla, 2018 CanLII 82872 (ON SCSM)

As mentioned above,the plaintiff in his motion is seeking that the "setting aside default judgement" order made by Deputy Judge Bobesich be set aside. The plaintiff chose not to appeal the order of DJ Bobesich and he provides no case law or authorities to support the relief in the Small Claims Court.

I have reviewed the Small Claims Court Rules and Icould not find any rule that will allow me to set aside the order made by another deputy judge in regards to setting aside the default. So answer to the first legal issue is "NO". Ido not have jurisdiction to set aside an order made by a fellow deputy judge .

Other Cases to Consider

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