Test to Set-Aside a Default Judgement

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Date Retrieved:	2024-05-19
CLNP Page ID:	1869
Page Categories:	[Rule 11 - Default Proceedings (SCSM Rules)]
Citation:	Test to Set-Aside a Default Judgement, CLNP 1869, <6M>, retrieved on 2024-05-19
Editor:	Sharvey
Last Updated:	2022/02/11

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.

...

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)