Losing Doesn't Always Mean Losing
In civil litigation, when a defendant fails to file a statement of defence within the legally required time limit, the plaintiff's lawyer may, under the rules, apply to have the defendant noted in default. The next step in the legal process is to bring a motion for default judgment.
Because the defendant has failed to file a defence, the court, with only one side appearing to make submissions, will render judgment directly as a matter of law. In other words, the allegations and damages claimed in the plaintiff's statement of claim will be accepted by the court in full, without being challenged.
As for why a defendant might fail to file a defence, there are, of course, countless possible reasons. However, a default judgment is not necessarily the end of the road. In a recent motion decision, O'Donnell v. York Condominium Corporation 82, 2026 ONSC 2503 (CanLII), the judge reaffirmed the factors the court considers when deciding whether to set aside a default judgment.
In this case, the plaintiff served the statement of claim on the defendant on October 29, 2024. Under Ontario's Rules of Civil Procedure, the defendant was required to file a statement of defence within 20 days of receiving the claim. Because the defendant failed to comply with this requirement, the plaintiff applied to have the defendant noted in default in early December of that same year. About a month later, a lawyer representing the defendant contacted the plaintiff's lawyer, indicating that he was in the process of being formally retained, that the defendant intended to defend the claim, and that he needed time to review the file. The defendant's lawyer also raised the possibility of a settlement, in order to avoid unnecessary litigation costs.
That same day, the plaintiff's lawyer replied, informing him that the defendant had already been noted in default. The defendant's lawyer then asked the plaintiff to consent to allow him to file a statement of defence, noting that having to bring a motion to set aside the noting in default would delay the progress of the case. About two weeks later, the plaintiff's lawyer indicated agreement to set aside the noting in default, on the condition that the defendant pay $1,431.22 as costs thrown away. However, the defendant's lawyer never responded to that email.
On April 1, 2025, the plaintiff brought a motion for default judgment without notifying the defendant. This motion was initially rejected, because the total invoice amount listed in the statement of claim did not match the judgment amount being sought. The plaintiff subsequently filed a supplementary affidavit on May 16, 2025 explaining the discrepancy, and ultimately obtained judgment on June 12, 2025, in the amount of $115,370.33, plus pre-judgment interest and costs.
However, in seeking judgment, the plaintiff had in fact failed to disclose an important fact to the judge — namely, that the defendant had already retained counsel, and that the two sides' lawyers had been negotiating over setting aside the noting in default, having reached agreement in principle, with only the question of costs left unresolved. In addition, the plaintiff never served a copy of the judgment on the defendant, meaning the defendant did not learn of the judgment's existence until November 7, 2025, when it received a garnishment notice.
The defendant then brought a motion to set aside the default judgment. Applying the relevant case law, the court considered a number of factors, including:
Whether the defendant moved promptly after learning of the default judgment;
Whether there was a reasonable explanation for the defendant's failure to file a defence in time;
Whether the defendant has a specific, arguable defence on the merits;
The prejudice that setting aside, or upholding, the default judgment would cause to each party; and
The overall impact on the administration of justice.
That said, not all of these factors need to be satisfied — and among them, "whether there is an arguable defence" is particularly important.
In this case, the defendant, upon learning of the default judgment, immediately retained counsel and attempted to negotiate with the plaintiff, and, when that failed, promptly brought its motion — demonstrating that it had acted in a timely manner. As for the reason for its delay in filing a defence, the court found this was not due to any indifference toward the litigation, but rather because its lawyer had failed to respond to the plaintiff's conditional email, compounded by internal governance issues within the condominium corporation that had caused decision-making delays.
On the merits of its defence, the defendant argued that the plaintiff had overstated the invoice amount by approximately 40%. The court found this response had a reasonable factual basis, sufficient to constitute an "arguable defence." If the court did not set aside the judgment, the defendant would lose the opportunity to prove its position; conversely, setting aside the judgment would only cause the plaintiff procedural delay.
The court further emphasized that the justice system should prioritize having cases decided on their merits, rather than allowing a party to win purely through a procedural shortfall. This is especially so where both sides already have legal representation and had been communicating about the procedure — in such circumstances, the default process should not be used as a strategic tool. As a matter of practice, the court also noted that, where a lawyer already knows the opposing party is represented, obtaining a default judgment without notice should generally be avoided.
In this case, the plaintiff's lawyer already knew that the defendant had legal representation, and that the two sides' lawyers had discussed the conditions for setting aside the noting in default. In such circumstances, if the plaintiff wished to pursue default judgment, it ought first to have confirmed with the other side whether the delay was due to oversight or a deliberate decision to abandon the defence, and to have given clear warning. Furthermore, on a without-notice motion, the moving party has an obligation to make full and honest disclosure of all material facts. The plaintiff's failure to disclose the communications and preliminary agreement between the two sides' lawyers breached this obligation, and was sufficient, on its own, to justify setting aside the judgment.
Based on the factors above, the court found that setting aside the default judgment was consistent with the principles of fairness and justice under the rules.
In summary, while default judgment is a valid procedural tool, it is not necessarily the final word on a case. Courts place greater weight on whether a matter can be fairly decided on its merits, rather than resolving it purely on a technical misstep. Where a defendant can offer a reasonable explanation and demonstrate an arguable defence, courts tend to give it the opportunity to be heard. This case is a reminder to all parties that litigation strategy should be grounded in fairness and professionalism, rather than exploiting procedural advantage.