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Forgetting to Defend a Law Suit, Setting Aside the Default Judgment

I love this saying…“you can’t change the past but you can ruin the present by worrying about the future”. It applies to so many of us. Some of us become paralyzed over a mistake, a lapse in judgment, an event. The paralysis then creates an avoidance to do what you otherwise know you have/should be doing and voila, you bury your head in the sand wishing it all will go away.

In litigation, unfortunately, nothing “just goes away”. The process is governed by time limits. Generally speaking a defendant has 20 days to respond to a claim. Once served, if he/she does nothing then time keeps on ticking and “worrying about the future” just ruined your present. How you say? Well, when we finally take our head out of the sand and take a deep breath to hire a lawyer on that lets say, 31st day, we find that the plaintiff has already obtained a judgment against us and is now seeking to enforce it.

Your present is ruined right? Well, not always. The Ontario Rules of Civil Procedure provide for a mechanism that allows you to “set aside” that default judgment. The problem is you have to establish 3 things…that is, up until a Court of Appeal decision released in April of this year. More on that below; you didn’t think I would give you the whole answer so soon did you?

Rule 19.08 of the Ontario Rules of Civil Procedure allows you to set aside a default judgment if:

a. you act as soon as possible once you find out about the default judgment (and believe me, you will)

b. explain the reason you didn’t defend in time;

c. have a defence that is with merit (legally speaking and not according to your mom and dad).

Let’s call these three things the “elements”

Now these elements were a must. Generally the court would give weight to one factor more than the next but really a defendant had to at least had to provide some evidence on each of the elements.

On April 2, 2007 the Ontario Court of Appeal rendered a decision in Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd et al (2007) ONCA 333. In that decision the lower court refused to set aside a default judgment because the plaintiff failed to adequately explain all of the elements. The Court of Appeal rejected the notion that a defendant must provide evidence in respect of each of the elements. Rather, the Court of Appeal took a more liberal and common sense approach. It decided that in order to set aside a default judgment a court should consider whether “the interests of justice favour an order setting aside the default judgment”. To do this, the court will look at whether there is more potential prejudice to the defendant or plaintiff in deciding whether to set aside the default judgment. The court will also consider how the potential order will “affect the overall integrity of the administration of justice.” Really, the court is trying to put in legalese the following. Let’s look at all the factors and let’s try and to do the right thing so the parties can have their day in court. Really, isn’t that what we really want?

So, does that mean you don’t have to worry if you are served with a claim? Absolutely not! If you are served go see your lawyer immediately…pronto…like now! What this decision does mean however, is that if you do take your head out of the sand to find that you have a judgment against you may still get your day in court.