Default Judgment Set Aside

In 2545890 Ontario Ltd. v. Cambium Inc., 2021 ONSC 4813, the defendant sought to set aside a noting in default and default judgment.

The action was commenced in August 2019. An insurance adjuster was retained on behalf of the defendant to investigate the claim. In November and December 2019, the plaintiffs’ lawyer sent correspondence by e-mail to the insurance adjuster. One of these letters indicated that the plaintiffs would note the defendant in default if there was no response.

The insurance adjuster did not see this correspondence. As of March 2020, her office was under lockdown and she mistakenly believed that the matter was dormant.

In September 2020, the insurance adjuster received a letter from the plaintiffs’ lawyer enclosing a court order granting default judgment against the defendant. The insurance adjuster contacted the plaintiffs’ lawyer to apologize and to explain the situation. Counsel was appointed for the defendant.

The Court of Appeal, in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, set out the following five factors to consider in determining whether a default judgment should be set aside:

1. whether the motion was brought without delay after the defendant learned of the default judgment;
2. whether there is plausible excuse or explanation for the defendant’s default in complying with the Rules;
3. whether the facts establish that the defendant has an arguable defence on the merits;
4. 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
5. the effect of any order the court might make on the overall integrity of the administration of justice.

Justice de Sa was satisfied that the failure to deliver a statement of defence was not due to the defendant’s own fault. The defendant’s insurance adjuster did not respond to the letters from the plaintiffs’ lawyer due to inadvertence.

The defendant clearly maintained a continuing intention to defend the action. Further, once it became aware of the default judgment, steps were immediately taken to retain counsel and to seek to have the default judgment set aside.

The defendant demonstrated that it has defences to advance at trial. Justice de Sa noted that the defendant is only required to show that the defences have an air of reality.

Moreover, there was no real prejudice to the plaintiffs, other than the inconvenience and costs associated with the delay.

Lastly, the amount of the judgment was substantial, close to $280,000.  Justice de Sa stated that to permit a sizable judgment to stand on the basis of an oversight is not in the interests of justice.

Therefore, the noting in default and the default judgment against the defendant were set aside.