January 24, 2022
Ontario’s legal system strongly favours having disputes resolved on their merits, not as a result of technical rules. For that reason, our courts are given wide powers to excuse non-compliance with the rules.
This includes the power to set aside a default judgment and allowing the defendant to file their response to the claim, and proceed to defend.
Default judgment may be obtained by a plaintiff on filing proof of service if the defendant does not file a statement of defence or at least a Notice of Intent to Defend on time, as required by the Rules of Civil Procedure. If the amount of damages needs to be set by a judge, there is a similar process, called noting in default, which leads to proof of damages without further notice to the defendant, and then judgment.
But there are many reasons why you might miss the filing deadline – maybe you were sick; maybe you had a hard time finding a suitable lawyer; maybe you just forgot or miscalculated the date. Or maybe you have no good defence, and only decide to defend to stall collection efforts. The last one is clearly NOT a good reason to allow default to be “set aside”. But how do courts sort out the other situations?
The Ontario Court of Appeal has set out five factors to be considered by a judge to as a guide for sorting out the good from the bad excuses:
- whether the motion was brought promptly after the defendant learned of the default judgment;
- whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules;
- whether the facts establish that the defendant has an arguable defence on the merits.
- 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
- the effect of any order the court might make on the overall integrity of the administration of justice.
These factors are not rigid rules – the court must consider the particular situation and the facts of each case. For example, a strong defence may lead to setting aside the default even if the other factors are less strong – remember, we want to decide cases on the merits. On the other hand, if your defence is weak, the judge will look more thoroughly at the other factors.
Much of the debate on motions to set aside is about whether the defence is “arguable”. What the Court of Appeal expects there is simply “an air of reality”, not that it will inevitably succeed. A lot of Plaintiffs, having done every thing by the rules, just want their money and do not stop to appreciate this distinction. That leads to a lot of contested motions to set aside default judgments where the judge easily finds in favour of the Defendant.
Why is this important to know? Because the general practice is that part of the price of setting aside default judgment is that the defendant must pay costs for not only the motion to set aside, but the Plaintiff’s “costs thrown away” in having obtained the default judgment in the first place. Except if the Plaintiff opposes a motion that should obviously succeed, the Plaintiff may pay costs caused by their unreasonable position.
For example, it is always a bad idea to refuse consent to set aside if you are a Plaintiff who signed default the first possible day. It is worse if you knew the defendant planned to defend – if for instance, they had asked for a short extension. As noted above, there are lots of reasons for delay. For instance, judges in Thunder Bay realize that it might be harder to find the correct lawyer here than in Toronto. Travel distances in Northern Ontario may make meeting with your lawyer slower – though electronic communications are great, sometimes you need to get together in person.
Usually as part of setting aside default, the judge will impose terms that try to ensure that the defendant does not get an opportunity to delay proceedings. Typically, the longer the delay in bringing the motion, the harsher the terms imposed. This part of the motion is where Plaintiffs often should focus their energy.
Avoiding harsh terms and conditions is just one reason to move promptly to set aside default. Despite the interest in deciding cases on the merits, the first two factors listed above both encourage promptness in proceeding, and this is also an issue considered again when a judge looks at the potential for prejudice.
Not every default judgment will be set aside on a motion. There are situations where, after examining the facts and the five factors, the motions judge will decide that re-opening the case would be unfair, or an abuse of process. A recent notable decision that went that way involved a defamation claim against an anonymous internet poster who tried to ignore the proceedings and forced the Plaintiff to spend tens of thousands of dollars uncovering their identity. The judge decided that allowing default to be set aside “creates all the wrong incentives to anonymous postings and ignoring proceedings.”
Because the decision to set aside or not is discretionary, an appeal court will very seldom overrule a motions judge, so it is important to get it right on the first try.
Whether you are the defendant seeking the indulgence, or the plaintiff who just wants to get paid, the subtleties of the process are a good reason to hire a lawyer from Weilers LLP, who knows the “unwritten rules” of how to get on the right side of a judge’s discretion, as well as those set out in writing, and adds local knowledge.