Simon's Megalomaniacal Legal Resources

Small Claims Court (Ontario) Legal Guide
(20 June 2021)

Chapter 9 - Default by Defendant

1. Overview
   
2. Noting in Default
   (a) Overview
   (b) Procedure
   (c) Procedural Consequences of Noting in Default
   . No Further Steps by Defendant
   . No Consent Required for Steps by Other Parties
   . No Further Notice and Service to Defendant; Exceptions
   
3. Default Judgment
   (a) Overview
   (b) Clerk's Default Judgment for Liquidated Damages
   . Overview
   . Debt
   . Liquidated Damages
   . Interest
   . Procedure
   (c) Procedures for Damages Assessment
   . Overview
   . Written Motion for Damages Assessment
   . Damages Assessment Hearing
   (d) Default in Defence of Defendant's Claim
   
4. Motion to Set Aside Default Proceedings
   (a) Overview
   (b) The Legal Test
   (c) Procedural Considerations
   
5. Default Proceedings on Non-Attendence of a Party at Trial
   
6. Persons under Disability
   
7. Distinguish "Proposal for Payment" Default Procedures

________________________________________

Note:
The name of this chapter has been changed from "Default Proceedings" to "Default by Defendant". Traditionally, the term "default proceedings" as used in civil procedure only referred to default by a defendant. However amendments to the Small Claims Court rules (effective 01 July 2006 and since modified) [Reg 78/06] have created new default rules for when plaintiffs fail to promptly prosecute an action [for these see Ch.11, s.4(g)].

1. Overview

Default procedures against a defendant (by Claim or - to a lesser extent -defendant's Claim) are available when no (or only a partial) Defence is filed within the 20-day time limit (see Ch.8 "Pleadings") or when a court strikes out all or part of a Defence (see Ch.11 "Pre-trial Proceedings"). These procedures usually involve two stages: "noting in default" and "default judgment".

Note that where a partial Defence is filed, default proceedings may be brought with respect to the undefended portions of a Claim [R11.01(1)].

Once default procedures are commenced the goal is to obtain rapid judgment for "debt or liquidated demand in money" - these are amounts easily quantified by receipts or simple calculation. The remaining damages, if any, may then be dealt with by way of written motion for judgment or a damages assessment.


2. Noting in Default

(a) Overview

The first step in default procedure is "noting in default". This is a simple step whose real purpose is to cause the court clerk to review the file and take formal notice that the defendant has missed the deadline for filing a Defence, thus facilitating further default procedures.

It is usually a good idea to give the other side a bit more than the 20 days time limit (for filing a Defence) before noting the defendant in default. It is common for pleadings to be filed somewhat late, and for courts forgive this as long as the party was not acting in bad faith or extremely neglectful. You might even consider writing the other side a letter (copying the court clerk) consenting to a slight (and specific) time extension for the filing of the Defence. If this is missed however you should go ahead with noting in default. Such an reasonable approach shows good faith behaviour on your part (which judges like to see) and weakens any eventual argument by the defendant that they "did not get" the Claim.

Note that where a defendant is a "person under disability" [ie. a minor (under 18 years old), mentally incapable, or an "absentee": see Ch.4 "Parties: Persons Under Disability"] then they may not be "noted in default" without the court's permission [R11.01(2)].

(b) Procedure

The requirements for triggering a "noting in default" differ depending on whether the defendants were served within or outside of the court's territorial division (see Ch.3, s.6 "Jurisdiction: Geographical Jurisdiction of Venue" for lists of territorial divisions and local courts).

If the Claim (or Defendant's Claim) was served on at the defendant in question (ie. the defaulting defendant) within the territorial jurisdiction of the court, then the plaintiff need only file a 'Request to Clerk' to note the defendant in default, which may be made in Form 9B [R11.01(1)]. The original affidavit of service proves that service to that defendant was made within Ontario.

If however, all of the defendents were served outside of the court's territorial division the court will want proof that it has proper geographical jurisdiction over the case (see again Ch.3 "Jurisdiction: Geographical Jurisdiction or Venue"). This is typically done by filing an additional Form 11A: Affidavit for Jurisdiction (formerly known as an "affidavit of proper forum") [R11.01(3)].

(c) Procedural Consequences of Noting in Default

In addition to the primary consequence of facilitating default judgment (see section below), there are several procedural consequences of a defendant being noted in default. These apply to both defendants from a Claim and from a Defendant's Claim (see Ch.8 "Pleadings").

. No Further Steps by Defendant

If a defendant is noted in default then they need the court's permission - or the plaintiff's consent- before they can file a Defence or take any other step in a proceeding - except of course to make a motion to set aside the noting in default, default judgment or enforcement proceedings (see "Motion to Set Aside Default Proceedings", below [R11.05(1)].

. No Consent Required for Steps by Other Parties

Once a defendant has been noted in default, other parties may take any steps in the action that would otherwise require the defendant's consent, without such consent[R11.05(2)].

There are a broad range of procedural steps that may be taken (normally) with the consent of other parties (see Ch.11 "Motions and Procedural Changes: Procedural Changes on Consent").

. No Further Notice and Service to Defendant; Exceptions

A further consequence of noting the defendant in default is that - until the default is set aside - the defendant is not entitled to any further service of documents or notice of any steps in the proceeding [R11.05(3)], except:

• service of any default judgment (see below);
  
  
• amendment to a Claim or a Defence (see Ch.8 "Pleadings");
  
  This makes sense as otherwise an unscrupulous plaintiff could amend the pleadings to increase damages without justification.
  
  
• motion after judgment (see Ch.12 "Motions and Procedural Changes");
  
  
• post-judgment enforcement proceedings against them under R20 (see Ch.16 "Collection").

3. Default Judgment

(a) Overview

When a defendant to a Claim is "noted in default" (see section above) this triggers the plaintiff's right to expedited judgment procedures. The principle underlying this right is that the failure to defend a proceeding justifies a presumption that the facts alleged in the Claim are true and may be acted on by the court.

These procedures fall into two categories, each dealing with two different types of damages that might have been claimed in the case (these are explained below).

The first of these procedures is default judgment for "liquidated damages", which is done over-the-counter with the clerk. The second is a motion for default judgment on 'general damages', which may be decided by way of written motion, or by way of an "assessment hearing" (to assess general damages).

(b) Clerk's Default Judgment for Liquidated Damages

. Overview

Once the Defendant is noted in default, the plaintiff may require the clerk to sign "Default Judgment" for any part of the Claim which is for "debt or liquidated demand in money, including interest if claimed" [R11.02(1)].

Form 11B: Default Judgment
. Debt

A "debt", typically, is an amount owed by reason of an contract or agreement between the parties, and fixed in amount by that contract or agreement. Typical debts include loan repayments, NSF cheques, accounts payable and bills for services or goods rendered. If the amount can be shown with certainty in a document, or requires nothing more than a little arithmetic, then it is likely a debt.

. Liquidated Damages

The term "liquidated damages" is generally taken to mean clearly ascertainable damages such as loan debt or out-of-pocket expenses, for which documentation plainly stating the amounts are (ideally) available for filing with the court. The term does not include other (unliquidated) damages claims for such things as business loss, property damage, or personal injury - which require the involvement of a judge to (what else?) exercise judgment in determining the amount of damages (for a more detailed discussion of these issues see Ch.8: "Pleadings".)

In Capital One Bank v Matovska et al (Ont Div Ct, 2007) the court - in allowing contractual contingency charges against defaulting defendants as liquidated damages - applied the following meaning to that term:

In Holden Day Wilson v. Ashton, reflex, (1993) 14 O.R. (3d) 306, this Court held that a solicitor's account, where the quantum owing on the account can be ascertained from the contract itself or by calculation or fixed by a scale of charges agreed upon in the contract or by it, is a liquidated demand for money in respect of which a plaintiff is entitled to default judgment from the clerk of the Small Claims Court?: See also Cantalia Sod Co. v. Patrick Harrison Co., [1968] 1 O.R. 169 (H.C.J.): the test of a liquidated demand is whether the amount to which amount the plaintiff is entitled (if he is entitled to anything) can be ascertained from the contract itself or by calculation or fixed by a scale of charges agreed upon by the contractor implied by it: page 171.

In the case of Capital One v. Toogood (Div Ct, 2013) the court again cited Holden Day Wilson on the criteria for findings damages to be liquidated, as follows:

[18] In Holden Day Wilson v. Ashton 1993 CanLII 8513 (ON SC), [1993] O.J. No. 1195, White J. for the Divisional Court undertook a lengthy review of the meaning of “liquidated demand”. On behalf of the court, White J. concluded that the caselaw and secondary sources confirmed that whether a claim could be identified as liquidated would depend on the answers to several questions:

(a) Is it ascertainable by calculation or by referring to a fixed scale of charges?;
(b) Can the calculation be made by reference to the agreement between the parties itself, or at least implied by the agreement?;
(c) Was the price or method of calculation of the price agreed upon by the parties?;
(d) Has the defendant obliged himself/herself to pay a specific sum of money?; and
(e) Was a reasonable estimated cost established by the parties?

. Interest

The calculation of interest is explained in Ch.13 "Trial: Interest".

. Procedure

The plaintiff should complete a draft Form 11B: Default Judgment and take it to the court clerk's office. If the form and the supporting evidence is acceptable the clerk will sign it, giving it full legal effect as a judgment.

The plaintiff should be prepared to convince the court clerk that they are entitled to this over-the-counter default judgment by two things: clear pleadings and documentary evidence.

The first of these requires that the pleadings clearly identify those parts of the Claim which are for "debt or liquidated damages" as discussed above. The possibility of default judgment for debt and liquidated damages [R11.02(1)] should be kept clearly in mind when drafting the Claim (see Ch.8 "Pleadings").

Secondly, you should be prepared to show the court clerk (and file copies if requested) documents such as contracts and receipts justifying your entitlement. Some of these may already be in the court file (contracts should have been attached to the Claim).

If the Claim does not allege these items in at least the amount sought in the default judgment, or if the court clerk has any significant doubt as to the validity of the amounts, then over-the-counter default judgment will be denied and must be raised later in a motion to the court for default judgment (see "Procedures for Damages Assessment", below). This may be combined with any motion for default judgment on general damages, or separately in a similar motion.

Once signed, the default judgment will be served on all parties, including the defendant in default ("all parties named in the claim") [R11.05(3); R11.02(3)], by the clerk by mail or email [R8.01(4)](see Ch.6 "Service of Documents").

(c) Procedures for Damages Assessment

. Overview

This section explains the default judgment procedures for damages which are not alleged to be debt or liquidated damages (for definitions see above).

Firstly however note that in cases involving multiple defendants (ie. more than one), the plaintiff may not seek a damages assessment if even one defendant has filed a Defence. Such cases must proceed to settlement conferences and trial, if necessary [R11.03(7)].

These remaining damages can roughly be described as "general damages" (see Ch.8, s.2(n): "Pleadings: Principles of Pleading: Pleadings Damages"), which includes damages for 'pain and suffering' and any other intangible or inherently difficult-to-quantify form of damage (thus the requirement for "assessment").

Note:
It is plain that the default judgment rules are designed to distinguish debt and liquidated damages on the one hand, from general damages on the other - and to channel them to the two separate procedures (clerk's default judgment and damages assessment) [R11.03(1)]. However when the clerk is unwilling to grant debt or liquidated damage claims by way of the over-the-counter default procedures described above, the clerk may refer them to the court to be assessed along with general damages.

The damages assessment procedure can start in either of two ways, at the option of the plaintiff - either by written motion or by (oral) hearing [R11.03(2)]. That said, it is plainly the goal of the new (Reg 78/06 rules, effective 01 July 2006) to have most such matters start by the written motion procedure. However if - in the written motion procedure - the "judge ... finds the plaintiff's affidavit evidence inadequate or unsatisfactory" the court may either order that [R11.03(3)]:

• a further affidavit be provided; or
  
  
• as assessment hearing be held.

One thing common to both these procedures is that there is no burden on the plaintiff to prove the defendant's liability for the claim, only the amount and types of the damages claimed [R11.03(5)]. However that does not mean that the claimant can disregard the law of the claim, as the court must be satisfied that the claim has a valid legal claim: Stamm Investments v Hobbs (Div Ct, 2016) [paras 20-21].

. Written Motion for Damages Assessment

The written motion procedure is the same as used in any motion (see Ch.12 "Motions and Procedural Changes") and should "set() out the reasons why the motion should be granted and attach() any relevant documents" [R11.03(2)(a)].

With the exception of debt and liquidated damage matters which the clerk declined to deal with in the over-the-counter procedures (above), the damages being assessed in this motion are inherently difficult to calculate just through use of arithmetic. Therefore the written argument and supporting evidence should not primarily be an exercise in arithmetic. It is primarily an exercise in convincing the court as the seriousness of the injury that the plaintiff has suffered. The court will be interested to know such things as the plaintiff's estimation of their monthly business loss (and the evidence that grounds that estimate) - and similar things - but the primary focus is on the loss, inconvenience, pain and suffering and other harm caused to the plaintiff. Each situation is different and unique.

It is the same sort of exercise that the plaintiff should have undertaken at the beginning of the case when they drafted their damage pleadings in the Claim. Like all argument advancing damage claims, it must be grounded in the specific damage items set out in the Claim. Similarly, arguing for punitive damages at a damages assessment - when they are not claimed in the Claim (they can only be argued if the Claim is amended to add them) - will likely only annoy the court.

Any order made by the court stemming from a written motion for damages assessment will be served by the court clerk to the moving party IF the party provides the court with a stamped, self-addressed envelope [R11.03(6); R8.01(5)].

. Damages Assessment Hearing

If the plaintiff opts for a hearing in the first instance (ie. rather than the written motion), there is no requirement to make a formal "motion". The assessment hearing can be arranged by filing a Request to Clerk' for an assessment hearing [R11.03(2)(b)]:

Form 9B: Request to Clerk
Of course, if the court orders an assessment hearing for matters remaining or 'transferred' from a written motion, an "assessment hearing" will be arranged by the court clerk.

The clerk will then fix a date for the hearing and send notice to the plaintiff [R11.03(4)].

While - technically - an assessment hearing proceeds as a trial [R11.03(4)], it is in fact much different. As mentioned above, there is no burden on the plaintiff to prove the defendant's liability for the wrongs alleged - only the amount (and types) of the damages claimed [R11.03(5)].

However, given that liability is assumed as proven in the trial of an undefended action, it can be surprisingly difficult to decide what evidence to call on a damages assessment.

Sometimes all that is required is putting the lost profit estimates into evidence, and other times it can involve detailed explanations of how a physical injury effected the plaintiff's life, and to show photographs of injuries incurred. If your claim relates to intentional party behaviour (eg. punitive damages) you may want the court to see the demeanour and presentation a witness (or yourself) in-person as they give testimony. . There are no hard and fast rules here - judges will vary in their expectations. It is best to be over-prepared in case you get a finicky judge - but don't be surprised if the issue is handled very quickly and roughly.

Any order made by the court stemming from a written motion for damages assessment will be served by the court clerk on the plaintiff by mail or email [R8.01(5), R11.03(6)]. If the plaintiff wishes for service by mail they shall provides the court with a stamped, self-addressed envelope with the notice of motion and supporting affidavit [R8.01(5.1)].

(d) Default in Defence of Defendant's Claim

A defendant by way of Defendant's Claim is someone named in a new claim filed by a defendant. This can be the plaintiff, a co-defendant or a new third party. While they may still be noted in default, and the other "procedural consequences" of being noted in default apply against them, "judgment may be obtained against the party [ie. the defendant by way of Defendant's Claim] only at trial or on motion" [R11.04].

Note 1:
This rule is quite ambiguous due to the last phrase "or on motion". Does this simply prohibit over-the-counter clerks's default procedures? Does it prohibit the opting directly for a damages assessment hearing (which is NOT initiated by motion)? Indeed, does it allow any default proceedings relating to Defendant's Claims?

While as a practical matter many such situations will be wrapped into settlement or trial of the main action, such ambiguity is frustrating (due - unless I'm missing something - to poor drafting). If the situation arise, inquire of the local court as to their interpretation of the rule and availability of default proceedings in such cases.

Note 2:
While generally a party "noted in default" is subject to the "procedural consequences" noted above, application of these consequences to default by the defendant by way of Defendant's Claim is obviously questionable where these parties are otherwise still active in the litigation. A Defendant in such a situation should seriously consider whether the strict application of these default rules is worthwhile, as it may meet with judicial disapproval later on. Such considerations would not however apply to default by an entirely new party to the litigation (what used to be called a "third party claim").

4. Motion to Set Aside Default Proceedings

(a) Overview

A party may make a motion to set aside the following procedures against them [R11.06]:

• being noted in default;
  
  
• default judgment;
  
  
• any collection steps (see Ch.15 "Collection").

The grounds of such a motion (see Ch.11 "Motions and Procedural Changes") are:

• the party has a meritorious defence;
  
  
• the party has a reasonable explanation of the default;
  
  
• the motion is made promptly in the circumstances.

(b) The Legal Test

In Coombs et al v Curran (Ont Div Ct, 2010), an appeal of a small claims court
order refusing to set aside a default judgment, the Divisional Court approved the following test on such a motion:

[15] The three-part test for setting aside a default judgment is oft-stated. Most recently, in HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp., [2008] O.J. No. 5345 (C.A.), at para. 21, citing Morgan v. Toronto (City) Police Services Board (2003), 34 C.P.C. (5th) 46 (Ont. C.A.), at para. 19, the Court of Appeal described the test in these words:

(a) Whether the motion was brought without delay after the defendant learned of the default judgment;

(b) Whether the circumstances giving rise to the default were adequately explained; and

(c) Whether the defendant has an arguable defence on the merits.

[16] Setting aside a default judgment is the exercise of a discretionary judicial power.

In this case, the Divisional Court found that the motions judge below had both applied a higher standard of 'meritorious' rather than the lower standard of having an 'arguable defence on the merits', and as well had misapprehended the evidence before them on that issue. Accordingly it allowed the appeal.

[SS Note: At the date of the set aside motion being considered in Coombs, the Small Claims Court R11.06 standard was (and remains today) whether the party has a 'meritorious defence'. The corresponding rule in the Superior Court's Rules of Civil Procedure [R19.08] uses neither term, only "on such terms as are just". Most importantly, the Divisional Court in Coombs made no reference to Small Claims Court R11.06, and allowed the issue of the differential standards to be argued even though it was not pled: "[14] A ground not mentioned in the notice of appeal, but argued by .... counsel for the appellant. ... is that the motion judge misstated the test for setting aside a default judgment."]

(c) Procedural Considerations

As noted above, a plaintiff who moves to default proceedings too quickly, or who resists a reasonable set aside request from the party in default, is often wasting their own and the court's time - which may be punished by a negative costs award on the set aside motion. On the other hand, default judgment should be prosecuted promptly if there is good reason (more than speculation) to believe that the defendant will persist in ignoring the proceeding or is actively seeking to conceal assets and income from collection efforts.

Any order to set aside proceedings stemming from the default, should also establish a new date by which the Defence should be filed.

Where such a motion is made after a judgment has been signed (by the court clerk or a judge), the motion materials should be served on all parties - INCLUDING any other parties who have been noted in default [R15.01(6)].

Note:
There are now extensive new (01 July 2006) rules governing setting aside default and collection proceedings "on consent" (see Ch.11, s.11 "Motions and Procedural Changes: Procedural Changes on Consent").

5. Default Proceedings on Non-Attendence of a Party at Trial

There are similar default procedures in place where a plaintiff, a defendant, or both fail to attend at a trial. As might be expected they are similar in nature to pre-trial default procedures and also include dismissal of a Claim where a plaintiff fails to attend.

These procedures are covered in detail in Ch.14 "Trial".


6. Persons under Disability

Recall from Ch.4 "Parties" that a "person under disability" is someone such as a child or mentally-ill person who cannot properly conduct the case for themselves.

Any noting of default, judgment (default or otherwise) or collection proceedings against a person under disability who is not defended by a "litigation guardian" -may be set aside by the court, on such terms as are just [R4.06].

A plaintiff can expect this rule to be liberally applied in favour of a defendant who is a person under disability. Plaintiffs would be wise to ensure they do not proceed to these steps without ensuring that the other side has been given extra consideration and oppourtunity to get their case on track. Evidence of these extra
efforts would be very relevant and likely of great interest to a court considering a motion to set aside under this rule.


7. Distinguish "Proposal for Payment" Default Procedures

In Ch.8: "Pleadings" there are default procedures available when a party has admitted some degree of liability in their Defence, and has made (and subsequently defaulted on) a "Proposal for Payment". These procedures are very similar to and in some cases essentially identical to the ones discussed above.

However, be careful not to confuse those procedures - which are triggered by default in a Proposal for Payment, with the ones discussed in this chapter - which are triggered by partial or complete failure to defend an action.