Test to Set-Aside a Default Judgement

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Date Retrieved:	2024-11-24
CLNP Page ID:	1869
Page Categories:	[Rule 11 - Default Proceedings (SCSM Rules)]
Citation:	Test to Set-Aside a Default Judgement, CLNP 1869, <https://rvt.link/4g>, retrieved on 2024-11-24
Editor:	Sharvey
Last Updated:	2023/02/21

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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.

Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194 (CanLII)

[47] The court's ultimate task on a motion to set aside a default judgment is to determine whether the interests of justice favour granting the order. The approach to be taken to this determination has been considered numerous times by this court. The following draws heavily on the summary of the principles in those cases by Perell J. in Watkins v. Sosnowski, [2012] O.J. No. 2971, 2012 ONSC 3836 (S.C.J.), at paras. 19-20 and 23-24.

[48] The court must consider the following three factors:

(a) whether the motion was brought promptly after the defendant learned of the default judgment; [page568]

(b) whether there is a plausible excuse or explanation for the defendant's default in complying with the Rules; and

(c) whether the facts establish that the defendant has an arguable defence on the merits.

[49] To this list, I would add the following two factors the court should have regard to, as set out in Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. (2007), 87 O.R. (3d) 479, [2007] O.J. No. 1685, 2007 ONCA 333, at para. 2:

(d) "the potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent should the motion be allowed"; and

(e) "the effect of any order the motion judge may make on the overall integrity of the administration of justice."

[50] These factors are not to be treated as rigid rules; the court must consider the particular circumstances of each case to decide whether it is just to relieve the defendant from the consequences of his or her default.

[51] For instance, 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. In showing a defence on the merits, the defendant need not show that the defence will inevitably succeed. The defendant must show that his or her defence has an air of reality.

[52] The motion judge considered the relevant factors. In respect of the first and second factors, he found "inexplicable delay" on the part of the respondent. He also found that the delay had caused prejudice to the appellant.

[53] However, the motion judge was satisfied that the respondent had raised an arguable defence in respect of the interest rate that applied to the principal debt. There was evidence before him, including evidence led by the appellant, which called into question whether the respondent had agreed to pay interest at the rate of 24 per cent per annum.

...

[55] A motion judge's decision to set aside a default judgment is a discretionary one that will attract deference on appeal. It should not be interfered with absent an error in law or principle, a palpable and overriding error of fact, or unless the decision is so clearly wrong as to amount to an injustice: HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp., [2008] O.J. No. 5345, 2008 ONCA 894, 245 O.A.C. 47, at para. 22.

[56] I see no such error and the decision is not clearly wrong. Accordingly, I would dismiss this ground of appeal.

4. Rule 19.08 -- setting aside or varying a default judgment

Ur-Rahman v. Mahatoo, 2016 ONCA 555 (CanLII)

[1] The appellants appeal from the order of Dow J. of the Superior Court of Justice, dated January 11, 2016, dismissing their motion for an order setting aside the default judgment of Herman J. of the Superior Court, dated April 29, 2005, and the damages judgment of Firestone J. of the Superior Court, dated May 2, 2014, and associated relief.

[2] This action arose from a slip and fall incident at the appellants’ property in Toronto on January 29, 2003, approximately 13 years ago, when the respondent, allegedly one of several tenants then living at the appellants’ property, fell on the appellants’ icy driveway while walking toward his car. On September 25, 2003, he sued the appellants in negligence, seeking damages for injuries sustained by him in the fall. The appellants were noted in default on April 29, 2005 and the respondent obtained a default judgment for damages on May 2, 2014.

[3] The appellants claim that they first learned of the default judgment, indeed of the respondent’s entire action, in mid-May 2015, when they received notice from the Sheriff’s office that a judgment against them was to be enforced against their property. They then sought legal advice and, in June 2015, moved for relief in the Superior Court, as described above, to permit them to defend the action on the merits.

[4] Before this court, the appellants acknowledge that the motion judge correctly identified the factors governing the determination whether to set aside a default judgment. However, they argue that he erred in his application of those factors by misapprehending the evidence relating to each.

[5] Specifically, the appellants submit that the motion judge erred by holding that: i) they did not act promptly after learning of the default judgment; ii) they did not have a plausible excuse or explanation for their default in complying with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194; iii) they failed to raise a meritorious defence; and iv) granting the motion would offend the overall integrity of the administration of justice.

[6] We are not persuaded by these submissions. We see no reversible error in the motion judge’s discretionary decision refusing to set aside the default judgment or in his application of the governing test to the facts of this case. To the contrary, we agree with his ruling and his reasoning in support of it.

[7] The motion judge expressly referred to this court’s decision in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, and the factors identified in that case, at paras. 47-51, as governing whether to set aside a default judgment. He considered the relevant factors in light of the evidence in this case and held:

(a) it was “very likely” that the respondent’s numerous attempts at service of the statement of claim and various court documents on the appellants resulted in one or both of the appellants learning of the action prior to 2015;

(b) there was evidence of repeated efforts by the appellants to evade service over several years;

(c) although the appellants admitted that they had learned in early December 2014 of a court proceeding involving them, and that they had attended at the Superior Court in relation to that proceeding, they made no inquiries regarding the nature or status of the proceeding, and took no other steps in that regard, for more than six months;

(d) the appellants advanced no plausible explanation for their lengthy default in engaging with the litigation;

(e) the appellants’ claim that the respondent was never a tenant at their property was contradicted by independent records indicating that the respondent, at the relevant times, had both credit rating records and a driver’s licence history associated with the appellants’ address;

(f) similarily, the appellants’ assertion that the respondent never fell on their property was directly contradicted by independent documentary evidence of an emergency response to the respondent’s accident at the appellants’ property and his transport to hospital on the day in question. It was also inconsistent with the appellants’ draft pleading, in which they alleged, in the alternative, contributory negligence by the respondent; and

(g) several judges or judicial officers had attempted over many years to ensure that the fact and status of the respondent’s action was brought to the appellants’ attention. Despite these efforts, the appellants took no steps to acknowledge or respond to the action against them until confronted with enforcement measures.

[8] These findings were amply supported by the evidentiary record. They overwhelmingly established unacceptable and inadequately explained delay by the appellants, a sustained pattern by them of attempting to frustrate the normal litigation process by evading service, and a proposed defence to the action of dubious merit. In these circumstances, we endorse the motion judge’s conclusion that the overall interests of justice compelled the dismissal of the appellants’ motion.

[9] The appeal is dismissed. The respondent is entitled to his costs of the appeal and the earlier stay motion, fixed in the agreed total amount of $15,000, inclusive of disbursements and HST.

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.

...

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.

...

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.”

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)

Thompson v Hergott, 2015 CanLII 31293 (ON SCSM)

34. In the Small Claims Court it has become almost customary for a defendant making a motion such as this to include a detailed draft Defence in its materials. That sets out the defences it intends to pursue and avoids some pitfalls. There is no draft Defence in this case.

35. The only intended defences set out in the case at bar are neatly set out in part of paragraph No. 6 of Ms. Hergott’s affidavit. After conceding the plaintiff sustained an injury she deposes “…..we do dispute the quantum of damages and the severity of the injury as well as we [sic] want to raise the defences of contributory negligence and voluntary assumption of risk.” No supporting evidence is set out, leaving only what some might regard as bald assertions for the court to consider when determining whether the defendants have a “meritorious defence”.

36. The proposed defences are not defences that could lead to a dismissal of the plaintiff’s claim as distinct from leading to reducing the damages awarded at the assessment of damages. At the assessment of damages the presiding deputy judge allowed, among other damages, $4,158.67 for current and future dental work.

...

46. In HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp. 2008 CarswellOnt 7956, 2008 ONCA 894, 245 O.A.C. 47, 174 A.C.W.S. (3d) 666 the Ontario Court of Appeal dismissed an appeal from a Motions Judge who dismissed a set-aside motion for a host of reasons. The appeal court found the Motions Judge was correct in dismissing it, inter alia because he found the defendant’s affidavit was devoid of evidence supporting the affiant’s key assertion.

47. The case of Hanratty v. Woods 2009 CarswellOnt 4879, 179 A.C.W.S. (3D) 792 (OSCJ) involves a motion similar to the one now before the bar but under Rule 19.08 of the Rules of Civil Procedure. It was unsuccessful. Beginning at paragraph No. 11 Justice D.M. Brown discussed what must be established to succeed on the condition of merit. He wrote “the better practice is for the moving party to attach a draft statement of defence to his affidavit. This enables the court to better understand the proposed defence and also signals to the court the defendant’s intentions are serious.” He dismissed the defendant’s affidavit as inconsistent and unclear with “bald assertions [that] do not satisfy the onus on a defendant to present a triable, or arguable, defence.”

Lariviere v. Clarke, 2005 CanLII 33784 (ON SC)

[9] The process server, Mr. Gordon Smith, swore an Affidavit of Service and the Supplementary Affidavit which confirms the original affidavit. Mr. Smith was not cross-examined on either affidavit. Under oath at the cross-examination of the defendant, Mr. Smith was able to identify the defendant and confirmed that he had served the defendant with the Statement of Claim.

[10] The evidence of the process server stands unchallenged. The defendant is merely making a bald denial that he was not served. The defendant has failed to provide any plausible explanation for why Mr. Smith thinks he served the defendant. The defendant has failed to discharge the onus upon him of rebutting the plaintiff’s evidence of service.

[11] The courts apply a three-part test of motions under Rule 19 to set aside default judgments:

• a plausible explanation for the default;

• having moved as soon as possible after becoming aware of the judgment;

• evidentiary proof of facts presenting an arguable defence on the merits.

[12] The plaintiff submits that it is necessary to satisfy all three components of the test. (Lenskis v. Roncaioli [1992] O.J. No. 1713 (Gen. Div.).

[13] The plaintiff submits that the defendant has no plausible explanation for his default in defending the action after having been served in July 2003. The defendant was served and did nothing until such time as the plaintiff was required to take the extreme measure of moving for contempt and having the defendant arrested. It was only at this time that the defendant realized that the plaintiff was serious about her entitlement to an accounting and was serious about her desire to examine the defendant in aid of execution. It was only at this time that the defendant indicated an interest in moving to set aside the judgment. Accordingly, the plaintiff submits that the defendant fails to satisfy the first two requirements. I agree with the plaintiff’s submissions. The defendant’s only argument was that he had not been served with any documents and I have rejected that position.

[14] This leaves the question of whether the defendant has presented evidence of an arguable defence on the merits. In determining whether there is a defence on the merits, the principles applicable to a motion for summary judgment should be considered: Is there is a genuine issue for trial, does the defence have an air of reality in light of the evidence, and are there real credibility issues relating to important facts? See Hunt v. Bradford, [1994] O.R. No. 1867 (Gen. Div.).

Gill v. Szalay, 2006 CanLII 21064 (ON SC)

[12] This is not a circumstance in which a Defendant, having ignored proceedings against him throughout, surfaces after default proceedings have taken place to suddenly request an opportunity to defend on a spurious basis. It has always been the position of this Defendant that he would defend the action. Due to a number of unfortunate circumstances, he was not present in Court to present his defence on February 23, 2005. In my opinion, the Defendant’s material sets out at least an arguable defence on the merits.

[13] In my view, this is an appropriate case for the relief sought by the Defendant to be granted. There is no prejudice to the Plaintiffs in so doing that cannot be compensated for in costs.

[14] However, I am also of the opinion this is a case in which the order setting aside the default judgment ought to be granted only upon the fulfillment of certain conditions (see: Ben Zvi v. Majestic Marble Imports Ltd., [2003] O.J. No. 3816 (S.C.J.)). As is implicit in the sequence of events outlined above, the Defendant could have taken steps to determine what was happening, either through further and more effective contact with the Trial Scheduling Unit or counsel for the Plaintiffs, but did not do so. After the week of February 21, 2005 was over, he did nothing. As much as the Defendant may have been hoping that the action had simply gone away, I consider that he ought to have been more pro-active in determining the status of the action to which he was a party. Although not all of the fault lies with the Defendant, he must take some considerable responsibility for what occurred.

[15] Accordingly, the default judgment of Low, J. is hereby set aside, on the following conditions:

(a) the full amount of the judgment, together with costs ordered by Low, J., which has been paid by the Defendant and is being held in trust by the solicitor for the Plaintiffs, is to remain in trust pending the new trial of this action on its merits;

(b) a further amount of $5,000.00 shall be paid by the Defendant forthwith to the solicitor for the Plaintiffs to be held in trust pending the new trial, as security for the Plaintiffs’ costs of the new trial; and

(c) the parties shall take immediate steps to schedule the new trial for a convenient early date.

Morgan v. Municipality of Toronto Police Services Board, 2003 CanLII 14993 (ON CA)

[25] I am also satisfied that Mr. Rydygier has a triable defence on the merits. Although counsel has not filed a draft statement of defence, the material before the court, including Mr. Rydygier’s affidavit, discloses a basis upon which a triable defence can be pleaded. It would appear that this case will likely turn on the credibility of Mr. Morgan and Mr. Rydygier. Without offering any comment on the outcome, it is apparent that if Mr. Rydygier’s version of the events of February 18, 1998 is accepted, he is likely to succeed in his defence of the action.