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Default - Setting Aside (2)

. 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.


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