|
Civil Litigation - Default - Setting Aside (2). McIlwain v. Len’s Cove Marina Ltd.
In McIlwain v. Len’s Cove Marina Ltd. (Ont CA, 2025) the Ontario Court of Appeal allowed an appeal, this from "an order refusing to set aside a default judgment":The Motion Judge’s Decision
[6] In his reasons for dismissing the motion, the motion judge considered the relevant factors in a R. 19.08(1) motion, citing to this court’s decision in Intact Insurance Company v. Kisel, 2015 ONCA 205, 125 O.R. (3d) 365, which in turn relied on the leading case of Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561. The Mountain View factors were set out in Intact Insurance, at para. 14, as:(a) whether the motion was brought promptly after the defendant learned of the default judgment;
(b) whether the defendant has a plausible excuse or explanation for the default;
(c) whether the defendant has an arguable defence on the merits;
(d) the potential prejudice to the defendant should the motion be dismissed, and the potential prejudice to the plaintiff should the motion be allowed; and
(e) the effect of any order the court might make on the overall integrity of the administration of justice. ....
Discussion
[12] A decision whether or not to set aside a default judgment is discretionary and will attract deference on appeal. It will not be interfered with absent an error in law or principle, a palpable and overriding error of fact, or unless it is so clearly wrong as to amount to an injustice: Mountain View, at para. 55.
[13] We agree with the Marina that there were reversible errors in this case.
[14] We begin by observing that the motion judge erred in his articulation of the test on a r. 19.08(1) motion. The central issue is whether the interests of justice favour granting the order: Mountain View, at para. 47. While the motion judge correctly identified the relevant factors, he went on to observe that “all factors are to be given equal consideration and weight, without one being more decisive than the others”. At the conclusion of his reasons, he confirmed that he had weighed each factor equally. Whether to set aside a default judgment is an exercise in discretion that is informed by the relevant factors and does not require that each factor be weighed equally. Justice Gillese stated in Mountain View, at paras. 50 and 51: “[The] 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. 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” (emphasis added). The weight to be given to a specific Mountain View factor in determining whether it is just to set aside a default judgment will depend on the circumstances of the particular case.
[15] In this case, there are two factors that weigh most heavily in favour of setting aside the default judgment. Both were the source of additional errors on the part of the motion judge.
[16] The motion judge’s central error, in our view, was in relation to the third Mountain View factor. To put forward an arguable defence on the merits, a defendant need not show that the defence will inevitably succeed, but only that it has an “air of reality”: Mountain View, at para. 51. It is not the role of the motion judge to make findings of fact and to assess the merits of the defence: Zeifman Partners Inc. v. Aiello, 2020 ONCA 33, 442 D.L.R. (4th) 299, at para. 34. See also Mountain View, at paras. 61-63.
[17] In considering whether the Marina had an arguable defence, the motion judge made the same error as the court in Zeifman Partners. Although the motion judge observed at paras. 67 and 69 of his reasons that whether the boat was repairable would be something to be determined on a full evidentiary record, he went on to review the evidence, and then made findings of fact, in particular finding that the damage to the boat was not cosmetic and that the boat may not have even been repairable. He concluded that this was the only proposed defence having potential merit, but that it was not supported by the evidence on the motion. In drawing this conclusion the motion judge weighed the evidence of the parties with respect to the extent of the alleged problems with the boat.
[18] We also disagree with the motion judge’s wholesale rejection of any defence based on the NauticStar warranty (whether it was the warranty Mr. McIlwain attached to his affidavit, or the version tendered by the Marina). The motion judge concluded that reliance on the warranty was not a viable defence because Mr. McIlwain was suing the Marina for the return of monies he paid for a materially deficient boat, and he was not suing NauticStar. The action claims damages for the sale of a defective boat; as such, the existence of a manufacturer’s warranty (including its requirement for the return of the boat to the Marina) and the parties’ dealings with NauticStar both before and after the commencement of the action may well be relevant to the Marina’s liability and Mr. McIlwain’s damages, whether or not NauticStar is a party to the action.
[19] In our view the Marina’s draft statement of defence and the evidence on the motion disclose an arguable defence in respect of both the nature and extent of the deficiencies in the boat and whether they were properly covered by and could be addressed in accordance with the manufacturer’s warranty, rather than treating the boat as worthless – the approach taken in the motion for default judgment that resulted in the judgment at issue.
[20] We are also of the view that the motion judge erred in his approach to the evidence with respect to the second Mountain View factor by failing to consider and to give effect to the whole of the evidence when he concluded that the Marina had not provided a plausible explanation for its failure to defend the action.
[21] Although the motion judge accepted that Mr. Horsfall was preoccupied by various concerns in August and September 2023, he stated at para. 48 that specific evidence relevant to the remainder of the calendar year 2023 was absent, and at para. 55 that “there was no reason provided as to why [Mr. Horsfall] thought he could simply ignore the Statement of Claim for the remainder of 2023.”
[22] In fact, Mr. Horsfall did provide a reason for not defending the claim, which confirmed he had not simply ignored the statement of claim. The evidence that was put forward, and that the motion judge reviewed, showed that, on August 17 and 18, 2023, a few days after the statement of claim was served, Mr. Horsfall had an email exchange with Jack Kowalczyk, a representative of NauticStar. After Mr. Horsfall sent Mr. Kowalczyk what was likely a copy of the statement of claim, Mr. Kowalczyk replied on August 18, and advised that he would consult with others to “develop a plan of action to settle this outside of court.” Later that day, Mr. Kowalczyk advised that they would be taking the boat back to the factory to replace the damaged hull on January 22, 2024, so the boat would be repaired and ready to go for “next spring”. Mr. Kowalczyk agreed to Mr. Horsfall’s suggestion that NauticStar contact the customer, and at their request Mr. Horsfall provided Mr. McIlwain’s email address and phone number. Mr. Horsfall deposed that from September to December 2023, he had been “in frequent communication with NauticStar representatives about the ongoing warranty issue” with the boat and that he was “under the impression that a solution was forthcoming”.
[23] Absent documentary evidence to support Mr. Horsfall’s evidence, the motion judge was not persuaded that the communications from September to December 2023 had occurred, and consequently he held that the appellant had not provided a plausible explanation or reason for failing to file a statement of defence in the time leading up to the default judgment.
[24] In our view, in addressing the second Mountain View factor the motion judge focussed on deficiencies in the Marina’s evidence and conduct, without considering the whole of the evidence. First, Mr. Horsfall’s evidence to explain why he believed that the matter was being addressed by NauticStar was uncontradicted: Mr. Horsfall was not cross-examined on his affidavit (there were in fact no cross-examinations on the motion), and Mr. McIlwain’s affidavit did not deny that NauticStar contacted him or otherwise address Mr. Horsfall’s evidence about NauticStar’s intended plan to settle the action out of court. Second, the evidence (including the account provided in Mr. McIlwain’s affidavit) confirmed that the action was started after months of dealings between the parties, in which NauticStar, as the manufacturer of the allegedly defective boat, was involved. In these circumstances it would not have been surprising for NauticStar to have been part of a solution once legal proceedings were commenced. Third, neither Mr. McIlwain nor his counsel contacted Mr. Horsfall before noting the Marina in default or obtaining a default judgment. While not required by the Rules, it is “by far the better practice” to serve default judgment motion materials on a defendant: Elekta Ltd. v. Rodkin, 2012 ONSC 2062, at para. 10.
[25] Although it may have been better for Mr. Horsfall to have included in his affidavit additional evidence of his communications with NauticStar, or to have reached out to Mr. McIlwain to confirm that no defence was required, the question is whether the Marina offered a plausible explanation or excuse for not having defended the action before it was noted in default and default judgment was obtained. In our view, considering the circumstances of the particular case, the Marina provided a plausible explanation for not defending the action: the belief, rightly or wrongly, that NauticStar was undertaking a plan of action directly with Mr. McIlwain to settle the claim. The plan outlined in the August 18 email was specific – to take the boat back to the factory, and to replace the hull of the boat on a specific date.
[26] As for the other Mountain View factors, it appears that the motion judge’s conclusions about relative prejudice to the parties and the effect on the overall integrity of the administration of justice, and his resulting view that the fourth and fifth factors favoured Mr. McIlwain, were informed by the errors we have identified. The motion judge faulted the Marina for having a clear intention to ignore the claim and the litigation process (which in our view is not supported by the evidence), identifying as prejudice to Mr. McIlwain the resulting wasted time and delay. He also concluded that, because the Marina’s conduct was unreasonable, further delay in the process by setting aside the default judgment would do nothing to preserve the overall integrity of the administration of justice. Consistent with the view that there was no arguable defence to the action, the motion judge did not weigh in the balance the prejudice to the Marina if it was unable to challenge the significant default judgment, nor did he consider the value to the administration of justice in having actions determined on their merits.
[27] The most compelling factors in this case are the presence of an arguable defence on the merits, and the Marina’s plausible explanation for not having defended the action. The litigation was commenced in the context of a dispute between the parties about the nature and extent of the problems with the boat, and whether it was repairable under warranty. This is not a case of a defendant deliberately causing delay by refusing to respond to legal proceedings or seeking to avoid the enforcement of a judgment by advancing a weak or spurious defence. Rather, the Marina believed that NauticStar was responding with a solution pursuant to its warranty, and when it learned of the judgment, the Marina sought to advance a defence, which at this stage is arguable.
[28] In our view it is in the interests of justice to have this action determined on its merits. Considering all of the circumstances, we allow the appeal and set aside the default judgment and noting in default. . Ezomo v. Afriyie
In Ezomo v. Afriyie (Ont CA, 2025) the Ontario Court of Appeal dismissed an appeal, this from an earlier dismissal of a motion to set aside a default judgment:[8] As the appellant fairly acknowledges, the motion judge correctly adverted to the following criteria from Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, at paras. 48-49, in determining whether to set aside the default judgment:(a) whether the motion was brought promptly after the defendant learned of the default judgment;
(b) whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules;
(c) whether the facts establish that the defendant has an arguable defence on the merits;
(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. [9] These are not water-tight criteria. The overarching consideration is whether the interests of justice warrants setting aside the default judgment: Mountain View Farms Ltd., at paras. 47, 50. . Add-Vance Service Centre Ltd. v. Triloq Corp. ['appeal' of default judgment is premature]
In Add-Vance Service Centre Ltd. v. Triloq Corp. (Ont CA, 2024) the Ontario Court of Appeal quashed an appeal, here of a default judgment on the prematurity grounds that it was not a final order - since a motion to set aside was available and more efficient:[1] This is a motion to quash the notice of appeal of Edgar Bray, which was initially served on the respondents/moving parties, Add-Vance Service Centre Ltd. (“Add-Vance”) and Abdalrahman Alhazmy, filed on June 6, 2024.
[2] The motion is unopposed. We granted the motion at the hearing for reasons to follow. These are our reasons.
....
[4] The moving parties argue that no appeal lies to this court from a decision on default judgment because it is not a final order of a judge of the Superior Court of Justice under s. 6(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43.
[5] As this court has observed, default judgments are not uncommon and a motion to set aside a default judgment under r. 19.08 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, provides “an efficient and relatively inexpensive means by which a party can challenge a default judgment”: 10720143 Canada Corp. v. 2698874 Ontario Inc., 2023 ONCA 463, at para. 16. Such motions are often successful.
[6] The interlocutory nature of a default judgment has been confirmed by this court on many occasions: 10720143 Canada Corp v. 2698874 Ontario Inc., at paras. 16-18. See also, for example, National Bank of Canada v. Royal Bank of Canada (1999), 1999 CanLII 3733 (ON CA), 44 O.R. (3d) 533 (C.A.); Hans v. Mohammadi (2005), 2005 CanLII 21090 (ON CA), 198 O.A.C. 374 (Ont. C.A.), at para. 11; Siivonen v. Halow (2002), 2002 CanLII 41790 (ON CA), 59 O.R. (3d) 211 (Ont. C.A.), at paras. 6-7; Laurentian Bank of Canada v. Goldshmidt, 2013 ONCA 122, at para. 4; Pasquale Doldo (Canadian Construction and Trucking) v. 1497601 Ontario Limited (Weston Gate Gardens), 2014 ONCA 73, 42 C.L.R. (4th) 7, at para. 4.
[7] Therefore, the motion to quash must be granted. . Protrans Personnel Services Inc. v. Stevens Resource Group – USA Inc.
In Protrans Personnel Services Inc. v. Stevens Resource Group – USA Inc. (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal against a refusal to set aside a noting in default:[9] The motion judge dismissed the motion. He wrote thorough reasons (76 paragraphs). He explicitly applied a leading case dealing with setting aside a noting in default, Nobosoft Corporation v. No Borders, Inc., 2007 ONCA 444, wherein this court said, at para. 3:[T]he full context and factual matrix in which the court is requested to exercise its remedial discretion to set aside a noting in default are controlling factors. In particular ... such factors as the behaviour of the plaintiff and of the defendant, the length of the defendant’s delay in seeking to respond to the plaintiff’s claim, the reasons for the delay and the complexity and value of the claim involved, are all relevant matters to be taken into consideration. [10] The motion judge was aware of, and explicitly acknowledged, the main factor that favoured the appellants in its motion below: “This is not a typical case of setting aside a noting in default. This one is highly unusual given the unusually short time ... .”
[11] However, the motion judge felt that this factor was offset by a constellation of other factors:… the many repeated deadlines (set by the Defendant’s counsel) for filing the Defence which remained unmet and then added to that by the Defendants choosing to terminate counsel’s retainer at these numerous delays and then taking two months to retain new counsel to deal with the problem.
Surely, the Plaintiff cannot wait forever for the Defence. There are Rules to be complied with. At some point the Plaintiff is entitled to say “enough” ... . [12] The motion judge made a comprehensive and careful analysis of all the relevant facts. He applied the relevant law to those facts. We see no basis for concluding that he erred in his analysis or conclusion. . Storoszko & Associates v. 1489767 Ontario Limited [dismissal of set aside judgment]
In Storoszko & Associates v. 1489767 Ontario Limited (Ont CA, 2024) the Court of Appeal considered an appellate motion to dismiss an appeal, such appeal being brought against dismissed R59.06 [really R19.08] set aside motion, which was in turn moved to vary a (default) mortgage action.
Here the court dismisses the respondent's position that the underlying R59.06 set aside motion [really, under R19.08] was interlocutory (thus the Court of Appeal was the correct court):[2] The moving party on the motion before us, Storoszko, argues that this court lacks jurisdiction to hear Mr. Hughes’ appeal because the order under appeal is interlocutory: Gallen v. Sutherland, 2023 ONCA 170, at para. 5; Elguindy v. Elguindy, 2021 ONCA 768, at para. 4. If the order is interlocutory, then any appeal is to the Divisional Court with leave of that court under s. 19 of the Courts of Justice Act, R.S.O. 1990, c. C.43.
[3] Although Mr. Hughes brought the motion to vary the original judgment under r. 59.06, we agree with his counsel that the motion judge dealt with it as a motion to vary the judgment under r. 19.08 [SS: 'Setting Aside Default Judgment'], which expressly permits a motion to vary a default judgment. While the motion judge mistakenly referred to r. 19.02 in his reasons, his analysis in substance reflects the proper approach under r. 19.08. The factors the motion judge listed and applied were the factors that this court has set out for the determination of whether a default judgment should be set aside or varied under r. 19.08: Mountain View v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, at paras. 47-49.
[4] The dismissal of a motion to vary a final judgment is axiomatically itself a final judgment. Therefore, the appeal lies to this court. The motion to quash is dismissed. . Fasullo v. Fiorini
In Fasullo v. Fiorini (Div Court, 2023) the Divisional Court considered a set aside of a default judgment:[4] 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: Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, at para. 55.
....
The motion judge’s ruling
[16] In dismissing the appellant’s motion to set aside the default order, the motion judge considered each of the relevant factors as set out in Mountain View:(i) Whether the moving party moved promptly after learning of the default judgment;
(ii) Whether the moving party has a plausible explanation for the failure to respond and comply with the Rules;
(iii) Whether the facts establish that the moving party had an arguable case on the merits;
(iv) What is the potential prejudice to the moving party if the default order is not set aside, and what is the potential prejudice to the other party if the order is set aside; and
(v) What is the effect of the order made by the court on the overall integrity of the administration of justice. . Trayanov v. Icetrading Inc.
In Trayanov v. Icetrading Inc. (Ont CA, 2023) the Court of Appeal considers the test for setting aside a noting in default:(2) The test for setting aside a noting in default
[16] Rule 1.04(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides that the rules are to be constructed liberally in order to “secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” Further, in regard to a failure to comply with the rules, r. 2.01(1)(a) provides that a court “may grant all necessary … relief, on such terms as are just, to secure the just determination of the real matters in dispute”.
[17] Rule 18 obliges a defendant to deliver a statement of defence within a prescribed period of time (between 20 and 60 days, depending on where the defendant is served), from the date of service of the statement of claim. Under r. 19.01, the plaintiff may have the defendant noted in default if the defendant fails to respond within the applicable timeline.
[18] The consequences of a defendant being noted in default are significant. Rule 19.02(1)(a) of the Rules of Civil Procedure provides that 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)(b) prohibits a defendant once noted in default from delivering a statement of defence or taking any other step in the action, other than a motion to set aside the noting in default or a default judgment, except with leave of the court or the consent of the plaintiff.
[19] Rule 19.03(1) provides that a noting in default may be set aside by the court “on such terms as are just.” As this court stated in Franchetti, at para. 8, there are several guiding principles that are relevant to that determination, including “the strong preference for deciding civil actions on their merits, the desire to construe rules and procedural orders non-technically and in a way that gets the parties to the real merits, and whether there is non-compensable prejudice to either party.” See also H.B. Fuller Company v. Rogers, 2015 ONCA 173, 386 D.L.R. (4th) 262, at paras. 25-29. And, as this court has stated, “the full context and factual matrix in which the court is requested to exercise its remedial discretion to set aside a noting in default are the controlling factors”: Metropolitan Toronto Condominium Corp. No. 706 v. Bardmore Developments Ltd. (1991), 1991 CanLII 7095 (ON CA), 3 O.R. (3d) 278 (C.A.), at pp. 284-285; see also Nobosoft Corporation v. No Borders Inc., 2007 ONCA 444, 225 O.A.C. 36, at para. 3.
[20] In particular, the following factors are relevant in considering whether a noting in default should be set aside: (1) the parties’ behaviour; (2) the length of the defendant’s delay; (3) the reasons for the defendant’s delay; (4) the complexity and value of the claim; (5) whether setting aside the noting in default would prejudice a party relying on it; (6) the balance of prejudice as between the parties; and (7) whether the defendant has an arguable defence on the merits. These factors are not exhaustive and are not to be applied as rigid rules: Franchetti, at paras. 8, 10; Kisel, at paras. 13-14; Nobosoft, at para. 3; Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, at paras. 48-51.
...
[24] First, the motion judge failed to consider the balance of prejudice, which looks to the potential prejudice to the moving party should the motion be dismissed and balances that against the potential prejudice to the respondent should the motion be allowed: see e.g., Mountain View, at para. 49; Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd., 2007 ONCA 333, 87 O.R. (3d) 479, at paras. 2, 6. Contrary to the motion judge’s assertion, the fact that the respondents would suffer no prejudice was a relevant factor that should have been balanced against the prejudice to the appellants.
....
[28] Third, the motion judge did not consider whether the appellants had an arguable defence on the merits. While on a motion to set aside a noting in default it is typically not required that a defendant demonstrate an arguable defence, where a defence is put forward, as in this case, it is a relevant factor that should be considered: Nobosoft, at para. 5; Franchetti, at paras. 8, 10, and 14. A review of the statement of claim, the statement of defence and counterclaim, and the parties’ Agreement, as well as the evidence put forward on the motion, suggests that the appellants have not only an arguable defence to the Action, but also an arguable counterclaim. . Paul’s Transport Inc. v. Immediate Logistics Limited
In Paul’s Transport Inc. v. Immediate Logistics Limited (Ont CA, 2022) the Court of Appeal cited a test for setting aside a default judgment:[53] The appellants submit that, on the Third Motion, the Motion Judge failed to apply the legal test for setting aside default judgment set out in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, and, instead, treated the Third Motion as an appeal. They contend that the Motion Judge did not address the ultimate question on a motion to set aside a default judgment, which is “to determine whether the interests of justice favour granting the order” (Mountain View, at para. 47), or consider the factors set out in Mountain View, at paras. 48‑49:(a) whether the motion was brought promptly after the defendant learned of the default judgment;
(b) whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules;
(c) whether the facts establish that the defendant has an arguable defence on the merits;
(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. . Leaf Homes Limited v. Khan
In Leaf Homes Limited v. Khan (Ont CA, 2022) the Court of Appeal considered the law of setting aside a default judgment:[94] Because a motion judge’s decision to set aside a default judgment is a discretionary one, it attracts deference on appeal. The decision 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: Mountain View, at para. 55; HSBC Securities (Canada) Inc. v. Firestar Capital Management Corporation, 2008 ONCA 894, 245 O.A.C. 47, at para. 22, leave to appeal refused, [2009] S.C.C.A. No. 81.
[95] As the motion judge correctly noted, the test for setting aside a default judgment requires the court to consider the following five factors:(a) whether the motion to set aside the default judgment was brought promptly after the [appellants] learned of it;
(b) whether there is a plausible excuse or explanation for the [appellants’] default in complying with the Rules;
(c) whether the facts establish that the [appellants] have an arguable defence on the merits;
(d) the potential prejudice to the [appellants] 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 court might make on the overall integrity of the administration of justice. [96] Two other principles enunciated in Mountain View are also relevant to the proper consideration and disposition of a motion to set aside a default judgment. First, 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: at para. 47. Second, 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: at para. 51. To show a defence on the merits, the appellants need not show that the defence will inevitably succeed but only that it has an “air of reality”: at para. 51.
....
[118] First, the motion judge accepted that the respondent would suffer because it would incur further costs. That is an error in principle. For the purposes of this factor, prejudice is something that is not compensable in costs: Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd., 2007 ONCA 333, 87 O.R. (3d) 479, at para. 5; Techlantic v. Modellista, 2021 ONSC 746, at para. 66. It is self-evident that a claim of incurring further costs is one that is compensable by a costs order.
[119] Second, the motion judge accepted the respondent’s bald assertion that witnesses’ memories would have faded by the passage of time. This, too, is an error in principle. Prejudice must be real and not merely speculative: Dentons Canada LLP v. Khan, 2021 ONSC 5261, at para. 32. There is nothing in the record to support the statement that the passage of time had led to problems with witnesses’ memories. There must be something more than a bald assertion that witnesses’ memories will have faded: Ross v. Filip, 2021 ONSC 1496, at para. 108.
5. The effect on the overall integrity of the administration of justice
[120] This factor required the motion judge to consider the global effect of the other factors. Because the motion judge erred in her assessment of the other factors, her decision on this matter warrants no deference.
[121] This factor also reminds us of the court’s ultimate task on a motion to set aside a default judgment: to determine whether the interests of justice favour granting the order: Mountain View, at para. 47. When the factors are considered as a whole, in my view, the integrity of the administration of justice strongly favours setting aside the default judgment. The appellants offer an arguable defence to the Statement of Claim and a compelling reason for judicial examination of the respondent’s actions, both at the time the Agreement was signed and in its sale of the Property at a significantly discounted price. A consideration of the prejudice that each of the parties will suffer reinforces the conclusion that the overall integrity of the administration of justice requires that the default judgment be set aside and the appellants permitted to file their statement of defence and counterclaim. . Fisher v. Soroka
In Fisher v. Soroka (Ont CA, 2022) the Court of Appeal considered delay as it feeds in the tests for both setting aside default judgment, and relief from forfeiture:[4] The appellant’s first submission is that the motion judge applied the wrong legal analysis to the extent he used the test for setting aside a default judgment, rather than the analysis for granting relief against forfeiture. We disagree. The motion judge considered the legal analyses applicable to both setting aside a default judgment and granting relief against forfeiture. He cited leading authorities of this court regarding both issues. Both tests were relevant in the circumstances.
[5] In any event, a significant factor in both tests is whether the motion was brought promptly and the moving party’s explanation for the delay: Winters v. Hunking, 2017 ONCA 909, at paras. 12-14; Intact Insurance Co. v. Kisel, 2015 ONCA 205, 125 O.R. (3d) 365, at paras. 12-14; and Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, at paras. 47-50. We see no palpable and overriding error in the findings of the motion judge on the record before him that the motions to set aside were not made with reasonable promptness, and that the appellant’s explanation for the delay was neither plausible nor credible. . Snell v. SUGI Financial Services Inc.
In Snell v. SUGI Financial Services Inc. (Div Ct, 2022) the Divisional Court found a misapplication of the legal test for setting aside a default judgment, but - on exercising their CJA 134(1)(a) powers - dismissed the appeal regardless:[2] The Master correctly set out the test to be applied on a motion to set aside a default judgment, citing Peterbilt of Ontario Inc. v. 156627 Ontario Ltd. (2007), 2007 ONCA 333 (CanLII), 87 OR (3d) 479 (CA) and HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp., 2008 ONCA 894, and applying the framework used by D.M. Brown J. (as he then was) in Hanratty v. Woods, 2009 CanLII 43649 (Ont. SCJ):(a) did the moving parties move forthwith to set aside the default judgment when it came to their attention?
(b) is there a valid explanation from the moving parties for their default?
(c) have the moving parties shown a triable defence to the claims?
(d) do the interests of justice favour setting aside the default judgment?
This is the correct test to apply, and the appellant does not take issue with it. . Franchetti v. Huggins
In Franchetti v. Huggins (Ont CA, 2022) the Court of Appeal set out law regarding setting aside a noting in default:The Governing Principles: Setting Aside a Noting of Default
[6] The Rules of Civil Procedure, R.R.O. 1990, Reg. 194 are meant to be taken seriously by plaintiffs and defendants. Under r. 1.04(1), the rules are to be “liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” Further, with respect to a failure to comply with the rules, the court, under r. 2.01(1)(a) “may grant all necessary…relief, on such terms as are just, to secure the just determination of the real matters in dispute”.
[7] Rules 18.01 and 18.02 oblige a defendant to respond with a statement of defence within 20-30 days of the date the defendant is served with the statement of claim. The consequences of failing to respond can be dire. Under r. 19.01, the claimant may have the defendant noted in default. A defendant noted in default under r. 19.02(1) “is deemed to admit the truth of all allegations of fact made under the statement of claim” and may not otherwise participate in the action, other than by bringing a motion to set aside the noting of default. The next dire consequence is that after noting the defendant in default, in certain circumstances the plaintiff may move for default judgment under r. 19.04.
[8] Under r. 19.03, a defendant noted in default may move to have the noting of default set aside, and this may be ordered “on such terms as are just.” In the context of an action that had been dismissed for delay, Weiler J.A. discussed several guiding principles that are also relevant to setting aside a noting of default: H.B. Fuller Company v. Rogers, 2015 ONCA 173, 386 D.L.R. (4th) 262, at paras. 25-29. These include the strong preference for deciding civil actions on their merits, the desire to construe rules and procedural orders non-technically and in a way that gets the parties to the real merits, and whether there is non-compensable prejudice to either party.
[9] There are many cases discussing the criteria for setting aside a noting of default. See particularly Laskin J.A.’s detailed exposition in Kisel, at para. 13. To summarize the jurisprudence, the following factors have been found to be relevant in considering whether a noting of default should be set aside:(1) The parties’ behaviour;
(2) The length of the defendant’s delay;
(3) The reasons for the delay;
(4) The complexity and value of the claim;
(5) Whether setting aside the noting of default would prejudice a party relying on it;
(6) The balance of prejudice as between the parties; and
(7) Whether the defendant has an arguable defence on the merits. [10] These factors are not exhaustive nor are they to be applied as rigid rules. An arguable defence on the merits may justify the court in exercising its discretion to set aside a default judgment, and for that purpose it is sufficient for the defence to have an “air of reality”: Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, at para. 51. However, perhaps because requests to set aside noting in default usually occur early in the litigation process, unlike this case, courts will rarely require a defendant who has been noted in default to show an arguable defence on the merits. In a case such as this one involving a significant delay, the moving party is required to show an arguable case on the merits.
|
