The defendant moved to set aside a judgment granted without notice, which included a declaration under s. 178 of the Bankruptcy and Insolvency Act that the debt survived bankruptcy due to fraud.
The court found that the plaintiff had no right to seek judgment without notice, as the defendant had not been noted in default, and there were significant credibility issues regarding service and the underlying fraud allegation.
The court emphasized that s. 178 declarations should not be made on default judgment motions or without a proper assessment of the fraud claim.
Applying the test for setting aside default judgments, the court found the defendant moved promptly, had a plausible excuse for default (disputed service), and an arguable defence on the merits (credibility issues regarding fraud and limitations).
The judgment was set aside due to non-disclosure, failure to give notice, and improper use of s. 178 BIA.