SUPERIOR COURT OF JUSTICE - ONTARIO

Parties

RE: CARSON FRANKUM, Plaintiff

AND:

FINANCIAL DEBT RECOVERY LIMITED, EQUIFAX CANADA CO., GATESTONE & CO., C3 CANADA CORPORATION, A-1 CREDIT RECOVERY & COLLECTION SERVICES INC., TRANSUNION OF CANADA INC. and DEBT CONTROL AGENCY INC., Defendants

Before

BEFORE: Associate Justice Mak

Counsel

COUNSEL: Carson Frankum, acting in person

Amelia McLeod, for the Defendant Gatestone & Co.

Mathew Glowacki, for the Defendant A-1 Recovery & Collection Services Inc. o/a C3 Canada, incorrectly named as two separate Defendants "C3 Canada and A-1 Credit Recovery & Collection Services Inc."

No one else appearing for the remaining Defendants

Heard

HEARD: January 2, 2026, by videoconference

Reasons For Decision

[ 1 ] This action arises from allegedly erroneous and duplicative items on credit reports of the plaintiff, Carson Frankum.

[ 2 ] The Statement of Claim, issued on July 16, 2025 (the "Claim"), was served on the defendant Gatestone & Co. ("Gatestone"). The Claim's allegations against Gatestone state Gatestone falsely reported an approximately $28,000 debt owed by Mr. Frankum.

[ 3 ] Gatestone did not serve a Notice of Intent to Defend or a Statement of Defence within the 20 days prescribed by r. 18.01 (a) of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 (the " Rules "). As a result, Gatestone was noted in default.

[ 4 ] Gatestone brings this motion to set aside the noting in default. Mr. Frankum opposes.

[ 5 ] The issue before the Court is as follows: Should the Court set aside the noting in default of Gatestone?

[ 6 ] Although Gatestone did not comply with r. 18.01 (a), the Rules allow a party to bring a motion to set aside a noting in default where a defence is not filed on time. Rule 19.03(1) of the Rules states: "The noting of default may be set aside by the court on such terms as are just." The threshold for setting aside a noting in default is low: Gauthier v. Malik , 2025 ONSC 5332 at para. 16 , citing Kyles v. M.B.N.A. Mastercard Canada , 2017 ONSC 5037 , at para. 9 .

[ 7 ] The Court should consider "the strong preference for deciding civil actions on their merits, the desire to construe rules and procedural orders non-technically and in a way that gets the parties to the real merits, and whether there is non-compensable prejudice to either party": Franchetti v. Huggins , 2022 ONCA 111 (" Franchetti ") at para. 8 .

[ 8 ] When exercising its discretion to set aside a noting of default, a court should assess the context and factual situation, which includes an assessment of the following non-exhaustive factors: the parties' behaviour; the length of the defendant's delay; the reasons for the delay; the complexity and value of the claim; whether setting aside the noting of default would prejudice a party relying on it; the balance of prejudice as between the parties; and whether the defendant has an arguable defence on the merits. However, a court will rarely require a defendant who has been noted in default to show an arguable defence on the merits, unless it is a case involving a significant delay: Intact Insurance Company v. Kisel , 2015 ONCA 205 at para. 13 ( "Intact Insurance Company "); Franchetti at paras. 9 and 10 .

[ 9 ] Mr. Frankum, who advised the Court that he is a paralegal, did not swear an affidavit to oppose the relief sought by Gatestone in its motion. He advised the Court that for this motion, he was relying only upon his motion materials for default judgment against Gatestone, which consists of the following: the Claim, the Requisition to note Gatestone in default dated August 7, 2025, a draft Judgment, the Affidavit of Service confirming service of the Claim on Gatestone, and a brief Factum.

[ 10 ] Alexander Wilson, Vice President of Legal for Gatestone, swore an affidavit in support of this motion. He was not cross-examined on his affidavit. His evidence is uncontroverted.

[ 11 ] Below is the relevant chronology of events, based upon my review of the parties' motion materials:

(a) On July 18, 2025, Mahmood Chaudry served Gatestone with the Claim by leaving a copy with an office receptionist at Gatestone's place of business.

(b) On or about August 4, 2025, the Statement of Claim first came to Mr. Wilson's attention when he was provided with a scanned copy bearing the timestamp "08/04/2025". Based on this timestamp, he believed Gatestone had been served with the document on August 4, 2025.

(c) On August 5, 2025, Gatestone engaged counsel regarding the Statement of Claim and began to investigate the allegations contained within the document. Both Gatestone and its counsel proceeded on the understanding that the Claim had been served on August 4, 2025 and that the deadline for delivery of Gatestone's defence was August 24, 2025.

(d) On August 7, 2025, Mr. Frankum required the registrar to note Gatestone in default.

(e) On August 18, 2025, the registrar noted Gatestone in default.

(f) On or about August 20, 2025, Gatestone completed its investigation, during which it confirmed the debt referenced at paragraph 16 of the Claim was owing for a student loan referred to Gatesone for collection by the Ministry of Finance. Gatestone contacted the Ministry, and confirmed the debt was outstanding.

(g) Gatestone instructed its counsel to deliver a Notice of Intent to Defend, which was served on Mr. Frankum on August 22, 2025 by email correspondence.

(h) On August 25, 2025, Gatestone's counsel sent email correspondence to Mr. Frankum stating the nature of the debt and that the debt was outstanding. Gatestone stated it was not responsible for reporting the debt to credit bureaus. Counsel for Gatestone stated if Mr. Frankum failed or refused to discontinue the action as against Gatestone, it would defend the action and seek legal costs from him.

(i) On August 25, 2025, by email correspondence, Mr. Frankum advised counsel for Gatestone that they had identified the wrong individual regarding this debt and this was a false collection item. Mr. Frankum stated he would not release Gatestone from the action until this item was removed from his credit report. Mr. Frankum also advised that Gatestone had been noted in default on August 18, 2025 and he did not consent to Gatestone filing a Statement of Defence. He attached a copy of the requisition, together with an Affidavit of Service that indicated Gatestone had been served with the Claim on July 18, 2025 by leaving a copy with a receptionist at Gatestone's office.

(j) From Mr. Frankum's email, Gatestone and its counsel learned the Claim had been served on July 18, 2025, and not on August 4, 2025.

(k) On August 29, 2025, Gatestone's counsel sent email correspondence to Mr. Frankum stating Gatestone's intention has been to defend the Claim if it was not withdrawn, and the delay in filing a defence was due to the mistaken belief as described above in paragraph 11(j). Gatestone's counsel advised that Gatestone intended to bring a motion to set aside the noting in default, and was prepared to agree to a timeline for the prompt delivery of its Statement of Defence. Gatestone's counsel requested Mr. Frankum's consent to set aside the noting in default.

(l) On August 29, 2025, Mr. Frankum sent email correspondence to counsel for Gatestone advising he would not consent to Gatestone filing a Statement of Defence. Mr. Frankum stated if counsel for Gatestone did not agree to remove the item from his credit report until the conclusion of this action, counsel for Gatestone would be required to bring a motion to set aside the noting in default.

[ 12 ] The Court has considered the parties' materials and submissions, including additional correspondence Gatestone's counsel filed with the registrar during the motion hearing, and the non-exhaustive factors in Intact Insurance Company and Franchetti . Below are the Court's findings.

[ 13 ] The parties behaved appropriately. Mr. Frankum complied with the Rules by requiring the registrar to note Gatestone in default on the 21 st day after service of the Claim. He had not heard from Gatestone or its counsel when he prepared his requisition. Gatestone received the Claim on July 18, 2025. For reasons unknown to the Court, the Claim was scanned into Gatestone's system over two weeks later, on August 4, 2025. However, Gatestone engaged its counsel one day after Mr. Wilson believed Gatestone was served, investigated the allegations in the Claim and served a Notice of Intent to Defend on Mr. Frankum within the 20 days Mr. Wilson believed Gatestone had been served with the Claim. When Gatestone's counsel discovered the error in the service date, he immediately contacted Mr. Frankum in an attempt to reach an Order on consent to set aside the noting in default.

[ 14 ] Regarding the length of the delay, this period was not long. The Claim was served on July 18, 2025 and the registrar noted Gatestone in default on August 18, 2025. On August 22, 2025, Gatestone served a Notice of Intent to Defend without knowing it had been noted in default. On August 25, 2025, upon learning about the noting in default, Gatestone's counsel began communicating with Mr. Frankum on this issue.

[ 15 ] Mr. Wilson's affidavit explains the reason for the delay. On August 4, 2025, Gatestone erred when Mr. Wilson assumed the timestamp on the Claim was the date of service of the Claim. Despite not realizing this mistake until August 25, 2025, during this period Gatestone moved quickly to conduct investigations and serve a Notice of Intent to Defend. After discovering this mistake, Gatestone immediately engaged in discussions with Mr. Frankum to set aside the noting in default from August 25 to 29, 2025.

[ 16 ] At the motion hearing, counsel for Gatestone gave the registrar email correspondence indicating that on October 8, 2025, Gatestone's counsel requested a short motion date from the Newmarket Court for this motion. While Gatestone did not explain what occurred between August 29 and October 8, 2025, this period between the parties' last documented communication with each other and the seeking of this motion date was not long.

[ 17 ] With respect to the complexity and value of the claim, the value of the claim is high. Mr. Frankum claims a total of $1,7500,000 in general damages as against the defendants, along with unspecified amounts for special damages, unspecified amounts for punitive, exemplary and aggravated damages, and an Order requiring the defendants to correct and remove these items from his credit reports. The claim is moderately complex as Mr. Frankum claims damages for negligence, defamation, breach of statutory duty, intrusion upon financial integrity, intrusion upon seclusion, emotional distress, reputational damage, loss of financial investment opportunities, loss of access to credit and financial products, and financial defamation.

[ 18 ] Mr. Frankum gave oral submissions to the Court relevant to the issue of whether setting aside the noting in default would prejudice him. He stated that due to the false credit information on his credit report, he is being denied access to credit which profoundly affects his quality of life and his ability to obtain products such as loans and credit cards, which require credit checks. Mr. Frankum stated if the Court sets aside the noting in default against Gatestone, his credit issue would not be dealt with for years. He stated there was no proof, including documentary evidence, of him owing this debt.

[ 19 ] Rule 39.01 states: "Evidence on a motion or application may be given by affidavit unless a statute or these rules provide otherwise." Adjudicative facts are those that concern the immediate parties: Public School Boards' Assn. of Alberta v. Alberta (Attorney General) , 1999 640 (SCC) , [1999] 3 SCR 845 at para. 2 . On motions and applications, generally speaking, matters of adjudicative fact are either proven by affidavit or by judicial notice: Doucet v. The Royal Winnipeg Ballet (The Royal Winnipeg Ballet School) , 2018 ONSC 2028 at para. 14 .

[ 20 ] Mr. Frankum did not provide an affidavit in support of his submissions. His motion record for default judgment against Gatestone, which Mr. Frankum stated he was relying upon for this motion, also did not contain any other documents that supported his submissions. Therefore, the Court does not admit Mr. Frankum's submissions as evidence on the issue of whether setting aside the noting in default would prejudice him.

[ 21 ] Even if the Court were to admit Mr. Frankum's submissions as evidence on this issue, the Court would give little to no weight to his statements for the following reasons: (1) the statements were not provided by way of affidavit, and therefore Gatestone had no opportunity to cross-examine Mr. Frankum on them; and (2) Mr. Frankum did not provide any documentation to support his statements.

[ 22 ] Mr. Frankum submitted the prejudice on his ability to move forward with his life outweighs the prejudice to Gatestone that would arise if the Court dismisses Gatestone's motion. As stated above in paragraph 20, the Court does not admit Mr. Frankum's submissions as evidence on the issue of whether setting aside the noting in default would prejudice him. Even if the Court were to admit his submissions as evidence on this issue, the Court would give little to no weight to his statements, as explained above in paragraph 21.

[ 23 ] In considering the prejudice to both parties, the Court finds the prejudice to Gatestone in not setting aside the noting in default will be greater than the prejudice to Mr. Frankum. If the noting in default is not set aside, as per r. 19.02(1)(a), Gatestone will be deemed to have admitted the truth of all allegations of fact made in the Claim. On a motion for default judgment, Gatestone will be unable to contest liability and damages, and may be held liable to pay a significant amount of damages.

[ 24 ] I am not persuaded the merits of a defence should be given much weight on this motion because the delay was not significant. However, in considering this factor, I find Gatestone has an arguable defence on the merits. Its motion materials include a draft Statement of Defence. In this draft, Gatestone states it was retained to collect a debt for the Ministry. The Ministry gave documentation to Gatestone to substantiate the debt's existence, the balance owing and the identity of the debtor. Based on this information, Gatestone started efforts to collect this debt, and states it undertook reasonable steps to confirm the accuracy of the information it gave to the credit reporting agencies on the Ministry's behalf.

[ 25 ] The Court has the discretion to set aside a noting in default: Intact Insurance Company at para. 13 . In considering the totality of the circumstances, the Court exercises its discretion and sets aside the noting in default of Gatestone under r. 19.03(1) . The Court has arrived at this outcome after considering all of the factors, with emphasis on the following: the strong preference to see that issues between litigants are resolved on their merits whenever that can be done with fairness to the parties; the length of the delay; the reasons for delay; the value of the claim; and the balance of prejudice as between the two parties.

Costs

[ 26 ] If Mr. Frankum, Gatestone and A-1 Recovery & Collection Services Inc. o/a C3 Canada ("C3 Canada") cannot agree to the disposition of the costs of the motion and for C3 Canada's motion which resolved at the motion hearing, they may make oral submissions on costs to the Court on March 6, 2026, as per my endorsement dated January 5, 2026.

[ 27 ] Mr. Frankum, Gatestone and C3 Canada may also provide written costs submissions to the Court on or before March 5, 2026, which amends the previous date as stated in paragraph 7 of my endorsement dated January 5, 2026.

Associate Justice Mak

Date: February 24, 2025