Fridays with Rogers Partners

August 06, 2021

At our weekly meeting, Michael Kryworuk discussed the recent Superior Court decision in Dentons Canada LLP v. Khan, 2021 ONSC 5261. This decision concerns a motion by the Defendant, Mr Khan as a self-represented litigant, to set aside both a noting in default and default judgement obtained against him by the Plaintiff, Dentons Canada LLP, over an underlying claim of unpaid legal fees.

History of the Litigation

In May 2019, the Plaintiff issued and served its statement of claim. However, the Defendant incorrectly recorded the date of service. The Plaintiff then had the Defendant noted in default for the Defendant’s failure to file a statement of defence within the requisite time.

When the Defendant learned of his being noted in default, he contacted the Plaintiff to explain his inadvertence and request that the noting in default be lifted so that he could file a statement of defence.

After a few failed communication exchanges and further delays due to the COVID–19 Pandemic, the Plaintiffs sought and were granted default judgement order against the Defendant in January 2021 in the amount of $210,802.40.

In March of 2021, the Defendant advised the Plaintiff that he would be moving to set aside the note in default and default judgments.

The Defendants’ Position on the Motion

At the motion hearing, the Defendant argued that the noting in default and default judgements should be set aside pursuant to Rules 19.08(1) and (3) of the Rules of Civil Procedure.

The Legal Test:

When determining whether to set aside a default judgement, the court will consider five major factors that arise from the case law (Intact v Kisel, 2015 ONCA 205 and Mountain View Farms Ltd v McQueen 2014 ONCA 194).

These factors include:

  1. Whether the motion was brought promptly after the defendant learned of the default judgment;
  2. Whether the defendant has a plausible excuse or explanation for the default;
  3. Whether the defendant has an arguable defence on the merits;
  4. The potential prejudice to the defendant should the motion be dismissed, and the potential prejudice to the plaintiff 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.

Analysis:

In the present case, Justice Doi was satisfied that the Defendant had moved promptly following the default judgment, that there were arguable defences available to the Defendant to advance at trial, and that no party would be prejudiced should the matter be allowed to proceed to trial.

While the Judge found that at times the Defendants excuses and explanations for not bringing his statement of defence earlier were unreasonable, Justice Doi stated that

I am satisfied that much of his default may be attributed to a combination of inadvertence and his unfamiliarity with court procedures.

In considering the effect of denying the Defendant’s motion, Justice Doi noted the substantial amount of the award for default judgement and held that:

allowing a sizeable judgment to stand due to oversights or inadvertent missteps would not serve the interests of justice

Furthermore, His Honour chastised the Plaintiffs for failing to give the Defendant prior notice of its noting in default motion and its failure to consent to the late filing, stating these actions were  

inconsonant with the guidance in the Rules of Professional Conduct of the Law Society of Ontario (“RPC”) and the Principles of Civility and Professionalism published by the Advocates’ Society (“Principles”).

Subsection 7.2-2 of the RPC requires a lawyer to not take advantage of slips, irregularities or mistakes without fair warning.

Rule 56 of the Principles states that advocates should not cause a default or dismissal to be entered without notice.

Decision

Considering all of these factors, Justice Doi found in favour of the Defendant, Mr Khan, and the noting in default and default judgments were both set aside.

Takeaway

This decision demonstrates that while parties may succeed in obtaining default judgements against parties who fail to answer a statement of claim in the required time, default judgements can be set aside if parties can offer plausible explanations or excuses for the failure.

Furthermore, the size of the default judgement award and a parties’ accordance with the Rules of Professional Conduct may also impact the decision whether the default judgement will be set aside.