Set-Aside Default Judgement (ROCP)

R.R.O. 1990, Reg. 194: RULES OF CIVIL PROCEDURE

38.11 (1) A party or other person who is affected by a judgment on an application made without notice or who fails to appear at the hearing of an application through accident, mistake or insufficient notice may move to set aside or vary the judgment, by a notice of motion that is served forthwith after the judgment comes to the person’s attention and names the first available hearing date that is at least three days after service of the notice of motion. R.R.O. 1990, Reg. 194, r. 38.11 (1); O. Reg. 132/04, s. 10; O. Reg. 55/12, s. 3.

(2) A motion under subrule (1) may be made,

(a) at any place, to the judge who granted the judgment;

(b) at a place determined in accordance with rule 37.03 (place of hearing of motions), to any other judge;

(c) to the Divisional Court, in the case of a judgment of that court. R.R.O. 1990, Reg. 194, r. 38.11 (2).

(3) On a motion under subrule (1), the judgment may be set aside or varied on such terms as are just. R.R.O. 1990, Reg. 194, r. 38.11 (3).

Fresh Network v. Alessandro, 2004 CanLII 30078 (ON SC)

[14] The sole question raised by the motion at hand is whether the judgment is properly to be set aside against Joe because of a “mistake” within the meaning of Rule 38.11(1).

[15] It is apparent that Joe’s “mistake” was to rely upon Domenic’s assertion that Joe was “out of the picture” and their view that the new Form #1 filed October 3, 2003 was a full and conclusive defence for Joe. This was a conclusion as to the effect of the new Form #1. However, at the least, any person acting responsibly in his own self-interest would conclude that it would be wise to attend at the hearing to give evidence as to who had actual control of Farmers at the relevant times and that the new Form #1 was truthful in its assertion as to the July 1, 2003 date in the change of directors.

[16] As I have said, Spence J. had before him the new Form #1. Spence J. seems to have implicitly made the finding that a new Form #1 does not impact to absolve a director/officer, as named by the pre-existing corporate profile in the public record of the Ministry, from liability to a third party under the relevant statutes until a new Form #1 is recorded (or at least filed) with the Ministry. Joe’s mistake was to believe he would be “out of the picture” simply because of the new Form #1.

[17] In my view, there was not a “mistake” within the meaning of Rule 38.11(1). Joe made an error of judgment in believing he was “out of the picture.” There was no mistake as to time or place of the hearing. Joe intentionally chose not to attend and, at best, relied upon his own opinion and his brother’s lay opinion, as to their legal position. They assumed the risk of non-attendance at the hearing. Joe chose not to attend the hearing because of his belief as to the legal significance and impact of the new Form #1 and that Domenic’s and his view would accord with the trial judge’s view and findings.

[18] In my view, a defendant cannot intentionally ignore a trial when he should reasonably know he is clearly at risk of being held liable and then claim a “mistake” within the meaning of Rule 38.11(1) upon being found liable to the opposing party. There is a paucity of case law in respect of Rule 38.11(1), specifically regarding the meaning of “mistake.” See generally Ewert v. Chapnick (1995), 37 C.P.C. (3d) 76 (Ont. Gen. Div.); Zsoldos v. Ontario Assn. of Architects, [2004] O.J. No. 309 (CA) (QL).

1202600 Ontario Inc. v. Jacob, 2012 ONSC 361 (CanLII)

[70] A motion to set aside is but one step in the process to determine a matter on its merits. If a case obviously lacks merit, it would be contrary to the direction given by rule 1.04(1) to set the judgment aside.

[71] Thresholds, while helpful in some circumstances in eliminating unnecessary procedures and providing predictability to the law, are generally not in harmony with the expansive interpretive approach described by rule 1.04 that focuses on just, final outcomes achieved in a timely way and at the least cost to the parties.

[72] I am not saying that proper notice, which is an important aspect of natural justice, is not a significant factor in determining whether an outcome is just. However, an interpretation of rules 19.08 or 38.11 that is in harmony with rule 1.04(1) should not limit the court to consideration of a single threshold factor concerning the regularity of notice.

[73] If, perhaps, a party is brought into court as a result of irregular service, I see no reason why the court should not take the opportunity, when the parties are before it, with the time and expense that this entails, to take a look - not a hard look - but a very practical look, to see whether there is any merit to the defendant’s case when a plaintiff advances this argument.

[76] It is my view that rule 1.04 directs me to interpret rule 38.11 so as to consider all relevant factors that, on mature reflection, will secure the most just, most expeditious and least expensive determination of this proceeding on its merits. These include:

a. the regularity of the procedures followed to obtain Default Judgment, including whether it is made on notice, or other factors affecting notice;

b. if regularly obtained, an explanation of the circumstances that led to Default Judgment, including accident, mistake or other personal circumstances of the defendant;

c. the timeliness of the procedures to set aside the judgment; and

d. the triable merits of the defence.

[77] The latter three factors have been reformulated somewhat from how they were described in Chitel, supra, to reflect the more recent pronouncement of the Court of Appeal in Morgan v. Toronto (City) Police Services Board, 2003 CanLII 14993 (ON CA), [2003] O.J. No. 1106 at para. 36.

Analysis

a) Failure to Provide Notice or Sufficient Notice

[78] Mr. McCormick submits that he was not provided with notice or sufficient notice of the application leading to the Default Judgment of Sedgwick J. of April 25, 2007.

[79] There seems little doubt that the process followed to obtain default judgment was irregular.

[80] Although not raised in argument, I am of the view that this matter should never have been brought as an application. It is a garden variety debt collection case which is perfectly suited and normally prosecuted by way of an action.

[100] As such, I am not satisfied that the inadequacies of notice are sufficient to conclude that it is in the interests of justice to set aside the judgment on this basis alone, were this the applicable test, which I do not believe to be the case for rule 38.11.

b) An explanation of the circumstances that led to the Default Judgment

[101] As I have found that notice provided to Mr. McCormick was defective, this would explain the circumstances that led to the Default Judgment.

c) Timeliness of the procedures to set aside the Judgment