Test to Set-Aside a Default Judgement

Caselaw.Ninja, Riverview Group Publishing 2021 ©
Date Retrieved:	2024-11-26
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 2024-11-26
Editor:	Sharvey
Last Updated:	2023/02/20

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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.

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.

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

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)