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Civil Litigation - Default Judgment - Consequences

. Caplan v. Atas [see the main link for numbered case cites]

In Caplan v. Atas (Sup Ct, 2021) the Superior Court finds a new tort, that of 'internet harassment'. In this quote the court briefly addresses the law of default judgment:
(b) Default Judgment Principles

[112] A defendant who has been noted in default is deemed to admit the truth of all allegations of fact made in the statement of claim: Rule 19.02(1). A defendant who has been noted in default is not entitled to notice of any step in the action and need not be served with any document in the action, except where the court orders otherwise: Rule 19.02(3).

[113] Where a defendant has been noted in default, the plaintiff may move before a judge for judgment against the defendant on the statement of claim in respect to any claim for which default judgment has not been signed: Rule 19.05(1). Such a motion for judgment shall be supported by evidence given by affidavit if the claim is for unliquidated damages: Rule 19.05(2).

[114] A plaintiff is not entitled to judgment on a motion for judgment merely because the facts alleged in the statement of claim are deemed to be admitted, unless the facts entitle the plaintiff to judgment: Rule 19.06.
. Paul’s Transport Inc. v. Immediate Logistics Limited

In Paul’s Transport Inc. v. Immediate Logistics Limited (Ont CA, 2022) the Court of Appeal considered a precedent [Umlauf] on how much of the pleadings a court can deem as proven when a default judgment is entered:
(3) Is Umlauf good law?

[73] The appellants’ Umlauf argument flows from the following paragraphs in the Claim:
27. The plaintiff pleads that it was an implied term of the Agreement that the amount due and payable to the plaintiff is subject to an interest rate of 2% per month as explicitly stated on each invoice.

28. The plaintiff accordingly states that it is entitled to pre‑judgment interest of 2% per month on the outstanding Invoices calculated from the due date of each invoice.
[74] The appellants say that the motion judge on the Second Motion treated those paragraphs as deemed admissions of the applicable interest rate under r. 19.02 after they had been noted in default. They contend that was an error because it involved implying a term in the agreement between the parties, which is a conclusion of mixed fact and law, and such conclusions cannot form the basis of deemed admissions. They acknowledge that Umlauf stands for the proposition that not only are the facts pleaded in a statement of claim to be taken as true but so too are the conclusions of law pleaded in it (the “Umlauf Proposition”). However, they say that the Umlauf Proposition is incompatible with Segraves (otherwise Fralick) v. Fralick, 1951 CanLII 97 (ON CA), [1951] O.R. 871 (C.A.), in which this court held that although facts are deemed admitted on default, the court must nevertheless determine whether the plaintiff is entitled to judgment as a matter of law. They also point to cases such as Salimijazi v. Pakjou (2009), 2009 CanLII 17354 (ON SC), 58 B.L.R. 4th 113 (Ont. S.C.), and Nikore v. Jarmain Investment Management Inc. (2009), 2009 CanLII 46655 (ON SC), 97 O.R. (3d) 132 (S.C.), which depart from the Umlauf Proposition.[2] They invite this court to follow the Segraves, Salimijazi, and Nikore approach instead of the Umlauf Proposition.
[75] Paul’s Transport submits that the principles raised in these cases are irrelevant because the impugned admissions are purely factual in nature. They say that the allegation in paragraph 27 of the Claim is one of fact and that paragraph 28 is simply the legal conclusion that flows from the factual allegation in paragraph 27.

[76] I do not accept Paul’s Transport’s submission. Paragraph 27 of the Claim pleads that interest at the rate of 2% per month was an “implied term” of the agreement between the parties. Whether to imply a term in a contract is a question of mixed fact and law: Energy Fundamentals Group Inc. v. Veresen Inc., 2015 ONCA 514, 388 D.L.R. (4th) 672, at para. 29. Thus, whether a term can be implied into the contractual arrangement between the parties is not purely a question of fact.

[77] Accordingly, I return to the question of whether the Umlauf Proposition is good law. In my view, it is not, and the approach articulated in Segraves, Salimijazi, and Nikore should be followed. Conclusions of law, and of mixed law and fact, are not to be deemed admitted under r. 19.02(1) where a defendant has been noted in default. If the facts pleaded do not support the conclusion of law pleaded, the motion judge may decline to grant judgment despite the failure of the defendant to defend the action: Salimijazi, at para. 19. The motion judge is entitled to scrutinize both the deemed admissions in the pleading and any evidence tendered by the plaintiff to see whether the plaintiff is entitled to judgment: Salimijazi, at para. 28.

[78] This approach is compatible with a plain and harmonious reading of rr. 19.02(1)(a) and 19.06, whereas the Umlauf Proposition is not.

[79] For ease of reference, I reproduce those provisions here:
19.02 (1) A defendant who has been noted in default,

(a) is deemed to admit the truth of all allegations of fact made in the statement of claim[.]

19.06 A plaintiff is not entitled to judgment on a motion for judgment or at trial merely because the facts alleged in the statement of claim are deemed to be admitted, unless the facts entitle the plaintiff to judgment. [Emphasis added.]
[80] On a plain reading of r. 19.02(1)(a), it applies to allegations of fact made in the statement of claim, not to conclusions of law or mixed law and fact. Rule 19.02(1)(a) does not deem everything in a statement of claim admitted, only allegations of fact. Rule 19.06 provides that a plaintiff is not entitled to judgment merely because the “facts alleged in the statement of claim” are deemed to be admitted. Again, there is no reference to conclusions of law or mixed law and fact. And, significantly, under r. 19.06, judgment is not to be granted unless the facts deemed to be admitted “entitle the plaintiff to judgment”. Giving effect to the two rules harmoniously requires distinguishing between allegations of fact and conclusions of law. The court must determine whether the deemed factual admissions in the pleading and any evidence tendered by the plaintiff entitle the plaintiff to judgment.

[81] Accordingly, I accept the appellants’ argument that the pleadings alone in paragraphs 27 and 28 of the Claim are not sufficient to warrant the Interest Order. However, as I have explained, the Interest Order was based on factual findings of the motion judge in the Second Motion and not on paragraphs 27 and 28 alone.


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