Not So Fast, Default Judgment!

Author: Mike Brown |

Not So Fast, Default Judgment!.jpg

­Issued a statement of claim? Served the claim in accordance with the Rules? No defence delivered within the time limit and now you want to move to note the defendants in default and obtain default judgment? Not so fast! In Akhtar v. Taha Development, 2024 ONSC 746, the court outlines the various factors it considers when deciding whether to grant default judgment against defendants who have been noted in default.

The Lowdown:

In this case, the plaintiffs issued a statement of claim with respect to construction work that was supposed to be performed by the defendants. The plaintiffs served their claim on the defendants in accordance with the Rules. But despite being properly served, some of the defendants, Taha Development Group Inc., Omre Taha, and April Taha (the “Taha Defendants”), failed to deliver a defence within the prescribed time limit. The plaintiffs therefore noted the Taha Defendants in default and brought a motion for default judgment, which, after several adjournments to allow the Taha Defendants to bring their own motion to set aside their noting in default, was finally heard on January 11, 2024.

In her endorsement, Justice Sheard outlined the several factors she relied on in making her decision not to grant default judgment and setting aside the noting in default of the Taha Defendants.

The Factors:

1.) Length of Delay

The plaintiffs argued that the Taha Defendants delayed for 47 days before finally bringing a motion to set aside their noting in default. While the plaintiffs argued that this was a substantial amount of time for the Taha Defendants to have been noted in default, Justice Sheard found it to be “a relativity short period of delay, which should be given very little weight on this motion.”

Point: Taha Defendants

2.) Reason for the Taha Defendants’ Delay

The Taha Defendants argued that the reason they waited 47 days to retain counsel was because they needed time to gather enough money to hire a lawyer in the first place.

Based on the evidence brought forth on the motion, Justice Sheard found their claim of financial hardship believable.

Point: Taha Defendants

3.) Lack of Communication from the Taha Defendants

Notwithstanding their reason for delay, the plaintiffs argued that the Taha Defendants should have at least contacted them once they were served with the claim to ask for an extension to deliver a defence, particularly if they knew they were not going to retain counsel immediately.

Justice Sheard admitted that argument might have some merit, but the plaintiffs did not show that they would have granted such an extension if one had been made.

Point: Taha Defendants

4.) The Taha Defendants’ Behaviour

The plaintiffs also argued that default judgment should be granted because of the “unscrupulous” manner in which the Taha Defendants behaved during their business dealings, which included changing the contract price after it was signed; asking the plaintiffs to make payments in cash, and asking payments to be made to specific individuals instead of the company that they had retained to complete the work, among other things.

From the evidence brought forth on the motion, Justice Sheard could not make the finding that the Taha Defendants had acted improperly and instead thought such a claim would be better resolved on a full record at trial.

Point: Taha Defendants

5.) Hearsay Evidence

The plaintiffs further argued that the evidence the Taha Defendants put forth on the motion, namely the April Taha Affidavit, was largely hearsay and therefore should carry no weight. However, Justice Sheard found that even though it was not explicitly stated in the April Taha Affidavit, it was clear from its context that everything she stated was based on information provided to her by Omre Taha, who was knowledgeable on the matters at issue, and therefore should be binding on the Taha Defendants collectively.

Point: Taha Defendants

6.) Complexity of the Claim

Finally, Justice Sheard found that on its face, the statement of claim was relativity complex and therefore the balance of prejudice between the parties weighed “heavily in favour of the Taha Defendants” should they not be allowed to defend the claim. She also found the $187,982.68 that the plaintiffs were claiming for default judgment to be not an “insignificant amount”.

Further, in their motion material, the Taha Defendants included a proposed statement of defence that they intended to file with the court should their noting in default be set aside. After reviewing the draft defence, Justice Sheard believed that the Taha Defendants “may have an arguable defence on the merits.”

Point: Taha Defendants

Based on the above factors, Justice Sheard ordered that the noting in default of the Taha Defendants be set aside and that default judgment not be granted to the plaintiffs. Justice Sheard further dismissed the plaintiffs’ request that the Taha Defendants pay $77,000 into court as security for costs in the event the noting of default was set aside. However, costs in the amount of $12,400 (together with the $600 awarded at an earlier November 30, 2023 motion) was awarded to the plaintiffs. Justice Sheard also ordered the Taha Defendants to serve their statement of defence within 10 days of her endorsement.

Key Takeaways:

The success of your motion for default judgment is dependent on several factors. The complexity of the case, the amount of the judgment sought, and how much notice you give the other side regarding your intentions to move for default judgment, all play a significant role in determining whether your motion for default judgment will be successful or not.