Default judgment is a mainstay of civil litigation across Canada. If a defendant is served with a claim but does not file a defence, the claimant may have the defendant noted in default and may even seek default judgment. Once noted in default or once default judgment is granted, the defendant’s only recourse is to move to have the noting in default or the default judgment set aside: see 10720143 Canada Corp. v. 2698874 Ontario Inc., 2023 ONCA 463. 

Recently, in Zbitnew Estate v. Park, 2024 SKCA 4, the Saskatchewan Court of Appeal was asked to determine whether this relief – moving to set aside a default judgment – is available to an estate. The deceased in this case had been sued while she was still alive, after an offer to purchase a parcel of land fell through and she refused to return the would-be purchasers’ deposit. The lawsuit alleged that the deceased breached her obligations under the contract for purchase and sale of the land. Because the deceased never filed a defence, default judgment was issued against her in December of 2012. Almost a decade later, in May of 2022, she passed away. 

The executors of the estate moved, unsuccessfully, to set aside the default judgment after they learned of its existence. The lower court held that the right to apply to set aside the default judgment did not survive after the defendant passed away, as a personal action dies with a litigant at common law. The court also considered the application of Saskatchewan’s Survival of Actions Act and concluded that the legislation did not “preserve a right for the executors of [the] Estate to bring a procedural application to set aside the judgment”.

On appeal, however, the Chambers judge’s decision was overturned on multiple grounds, with the Saskatchewan Court of Appeal ultimately holding that the estate should have been permitted to proceed with the application to set aside the default judgment and argue it on its merits. 

Justice Tholl began his analysis by confirming that claims grounded in debt and contract, like the claim issued against the deceased, are not extinguished by death under the common law, and went on to note that the Survival of Actions Act does not “disrupt or qualify the long-standing common law principle that a claim for breach of contract survived both for and against an estate.”  

Next, Justice Tholl considered whether the executors were barred from taking procedural steps in the litigation, and found that “there are no impediments, at common law or pursuant to statute, that would prevent an estate from availing itself of the procedural tools available to any other litigant”.   

The issue of whether a default judgment can be set aside after the defendant has passed away has been touched on by the Ontario Court of Appeal, but only indirectly. In Schill & Beninger Plumbing & Heating Ltd. v. Gallagher Estate, 2001 CanLII 24134, the Court of Appeal confirmed that a default judgment could be set aside after the defendants had passed away; however, the judgment was set aside in that case for an unrelated reason – the registrar did not have jurisdiction to sign the default judgment in the first place.

While it appears that an estate trustee in Ontario can move to set aside a default judgment on behalf of an estate, before seeking such relief the trustee ought to bear in mind how difficult it may be to satisfy the legal test. In Ontario, the test for setting aside a default judgment wasset out in Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, and requires the court to consider:

1. i.  Whether the motion was brought promptly after the defendant learned of the default judgment;
2. ii. Whether there is a plausible excuse or explanation for the defendant’s default in complying with the Rules;
3. iii.  Whether the facts establish that the defendant has an arguable defence on the merits;
4. iv.  The potential prejudice to the moving party should the motion be dismissed, and the potential prejudice to the respondent should the motion be allowed; and
5. v.  The effect of any order the court might make on the overall integrity of the administration of justice.

If a default judgment was issued years prior to the death of the deceased, applying to set aside the judgment could prove to be an uphill battle, particularly if there is no evidence to corroborate that the deceased was unaware of the judgment or there is no plausible excuse or explanation for the deceased’s failure to comply with the Rules.

Thank you for reading, and have a great day! 

Ian.