Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. et al. [Indexed as: Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd.]

87 O.R. (3d) 479

Court of Appeal for Ontario,

O'Connor A.C.J.O., Doherty and Gillese JJ.A.

May 2, 2007

Civil procedure -- Default judgment -- Setting aside --Motion judge erring in dismissing motion to set aside default judgment solely on basis that defendants had not adequately fleshed out defence in affidavit filed on motion -- Affidavit sufficient to put detailed defence set out in statement of defence "in play" on motion -- Motion judge also erring in failing to consider potential prejudice to parties.

The defendants appealed an order dismissing their motion to set aside a default judgment.

Held, the appeal should be allowed.

The motion judge erred in dismissing the motion solely on the basis that the defendants had not adequately fleshed out a defence in the affidavit filed on the motion. The affidavit, while perhaps deficient, was sufficient to put the detailed defence set out in the statement of defence "in play" on the motion. The motion judge also failed to consider the potential prejudice to the parties.

APPEAL from the order of Browne J. of the Superior Court of Justice, dismissing a motion to set aside default judgment.

David B. Williams, for appellants. Thomas Delorey, for respondent.

[1] Endorsement by THE COURT (orally): -- The motion judge erred in treating the principles identified in the case law governing the exercise of discretion on a motion to set aside a default judgment as rigid preconditions to the exercise of that discretion, such that the failure to satisfy any one of those supposed preconditions necessitated the dismissal of the motion to set aside the default judgment.

[2] On a motion to set aside a default judgment, the motion judge will be guided by the principles identified in the authorities. The motion judge must, however, ultimately determine whether the interests of justice favour an order setting aside the default judgment. In doing so, the motion judge will have regard to the potential prejudice to the moving party should the motion be dismissed, the potential prejudice to the respondent should the motion be allowed, and the effect of any order the motion judge may make on the overall integrity of the administration of justice.

[3] On this motion, the motion judge found that the appellant had moved expeditiously to set aside the default judgment. The motion judge also concluded that the appellants' default was adequately [page480] explained and attributable to miscommunication with counsel. The motion judge further concluded, however, that the appellants had not adequately fleshed out a defence in the affidavit filed on the motion and that for this reason and this reason alone, the motion must be dismissed.

[4] We think the affidavit of the appellants, while perhaps deficient, was sufficient to put the detailed defence set out in the statement of defence "in play" on the motion to set aside the default judgment. We cannot agree that there was nothing before the motion judge suggesting that the appellants had an arguable defence. The statement of defence had been served and filed in a timely fashion and contained detailed and full defences to the claims. The motion judge erred in these circumstances in discounting entirely the defence alleged in the statement of defence.

[5] The motion judge also failed to consider the potential prejudice to the parties. There was no prejudice to the respondent that could not be compensated for by appropriate terms had the motion judge allowed the motion and set aside the default judgment. The prejudice to the appellants flowing from refusing the motion is obvious. They were denied any opportunity to present a defence on the merits.

[6] Having regard to the totality of the circumstances, and particularly the balance of prejudice described above, we are satisfied that the motion judge in an appropriate exercise of his discretion should have allowed the appellants an opportunity to defend on the merits. The respondent should recover in full its costs thrown away as a result of the appellants' default.

[7] We would allow the appeal, quash the order dismissing the motion to set aside the default judgment, set aside the default judgment and direct that the matter proceed.

Appeal allowed.