You’ve issued a statement of claim within the required time limit against a defendant. They fail to deliver a defence. That might appear to be justification for the defendant to be noted in default and for you to quickly obtain a default judgment against them.
However, a recent ruling from the Superior Court of Ontario questions the strategy of a fast-pull on the trigger. Other factors can be considered by the court.
The plaintiff Akhtar was seeking judgment of $187,982.68 against Taha Development Group Inc. concerning work to be undertaken on property in Mississauga, Ont. Akhtar filed their claim within the required time limit. Taha failed to deliver their defense and never contacted Akhtar requesting any extension. Akhtar then sought a default judgment.
As Edward Lynde, partner with Fasken Martineau DuMoulin LLP, and law student Jessy Oduro-Kwachie summarized for the Daily Commercial News, “The defendants were in default for 47 days before obtaining legal counsel and requesting the noting in default be set aside, claiming they have a valid defense.”
Akhtar also alleged Taha had, “conducted business in an unscrupulous manner, intended to confuse and deceive customers and creditors.”
This included requests for cash payments to individuals and not the corporation and changing the contract price after signing. Akhtar also claimed evidence presented in Taha’s motion was hearsay and should carry no weight.
As a fall-back should their default judgment request be denied, Akhtar asked Taha be ordered to pay $77,000 into court as security.
Matters did not go well for Akhtar.
First, Justice Liza Sheard believed Akhtar’s statement of claim to be “relatively complex” and the $187,982.68 sought “not an insignificant amount.”
She concluded that 47 days was, “a relatively short period of delay, which should be given very little weight on this motion.”
This led Justice Sheard to further conclude that, “based on the statement of defence put forth, I am satisfied that the Taha Defendants may have an arguable defence on the merits.”
Justice Sheard also accepted Taha’s explanation that their delay in filing a defence was due both to the time required to retain counsel and financial hardship.
In fact, based on the evidence given to her by Taha, Justice Sheard believed, “the financial viability of the Taha defendants is questionable.” For that reason, she rejected Akhtar’s request to order Taha to pay $77,000 as security.
“If this court were to order the Taha defendants pay $77,000 into court to the credit of this action as a term of setting aside the noting in default, the plaintiffs would be immunized, in part, from any potential risk that any judgment they obtained will be uncollectible. However, the rules do not contemplate the making of such an order as against defendants, nor, in my view, would such an order be in keeping with the objectives of the rules.”
Justice Sheard added an order for a security payment from Taha “would operate as a complete bar to the Taha defendants, who would be unlikely to be able to raise sufficient funds.”
Although the ruling left Akhtar with the unenviable prospect of potentially being left empty-handed, Justice Sheard did order Taha to pay $13,000 costs to Akhtar within 30 days, and to issue their full statement of defence within 10 days of the court’s endorsement.
“This case demonstrates the court’s commitment to ensuring a fair and just resolution of disputes by considering the merits of the case rather than being bound by strict procedural rules,” said Oduro-Kwachie.
“The court’s decision to set aside the noting in default in this particular case highlights the importance of balancing the parties’ interests and the need to avoid unfair prejudice when making such determinations.”
Lynde concurred.
“The court did a fine job at balancing law and equity with procedure itself being deprioritized and the merits being the paramount consideration for the ultimate disposition of the motion. Merits are justice, procedure remains the path there.”
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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