Superior Court sets aside default judgment in litigation that progressed to discovery examinations

In a statement of claim dated Jan. 7, 2020, the plaintiffs in Tirecraft Ontario Inc. v. Mann Tire Ltd., 2026 ONSC 4678, alleged that Mann Tire Ltd. failed to pay for the tires purchased and delivered. 

The plaintiffs claimed around $281,800 from Mann Tire and the same amount from its principal under a promissory note. 

The defendants, Mann Tire and its principal, delivered a statement of defence and counterclaim on Mar. 2, 2020. According to the counterclaim: 

• Mann Tire would pay a non-party company up front to buy tires from Michelin 
• The non-party would order tires via the plaintiffs, who would receive the tires and reimburse Mann Tire for acquiring the tires at a discount 
• The plaintiff could not otherwise obtain the tires at that discount 
• The plaintiff failed to pay about $200,000 for tires acquired under this arrangement 
• Plaintiff Ayr Tire Inc. failed to reimburse Mann Tire an additional $70,000–$140,000, pursuant to an agreement to split the rebate 

Delay during discovery process

On Aug. 31, 2021, the plaintiffs provided a sworn copy of their affidavit of documents. After unsuccessful attempts to schedule discovery examinations with defence counsel, the plaintiffs moved to compel the defendants to follow a discovery plan. 

Thus, an order required the defendants to deliver their affidavit of documents by Dec. 16, 2021, and scheduled discovery examinations by Mar. 11, 2022. In July 2022, the defendants delivered their sworn affidavit of documents. 

Discovery examinations took place on July 12, 2022, for the principal; in October 2022 for the plaintiff’s son, a Mann Tire employee involved in the issues leading to the litigation; and on Oct. 17, 2022, for Ayr Tire’s principal. 

According to the principal’s son, he could not pay attention to the proceedings while caring for his father, who was in and out of the hospital from early to mid-2023 due to illness. 

On June 2, 2023, Justice Dube granted defence counsel’s motion for their removal as solicitor of record. Later, the Superior Court acknowledged deficiencies in the order removing defence counsel. 

The plaintiffs filed a motion to strike the statement of defence and to dismiss the counterclaim, heard by Justice McArthur on Sept. 1, 2023. 

Default judgment

The registrar signed an Oct. 19, 2023, default judgment for $573,819.79, plus pre-judgment interest at 24 percent per year, as well as the consequent noting in default. 

On Feb. 5, 2025, the defendants moved to set aside the default judgment. According to the principal’s son: 

• He learned about the default judgment only in July 2024 
• He contacted his former lawyer, who sought another retainer because they were no longer representing the defendants 
• He parted ways with his previous counsel because he believed they overbilled Mann Tire and rarely gave updates 

In October 2024, the defendants retained their current law firm. 

Superior Court sets aside default judgment

The Superior Court set aside the default judgment and the corresponding noting in default, lifted certain writs filed, and revived the statement of defence and counterclaim. 

Upon considering the relevant factors, the court held that hearing the case on its merits would serve the interests of justice. The court found it appropriate for the defendants to pay for the costs thrown away. 

Defence on the merits

According to the Superior Court, this factor heavily supported setting aside the default judgment because the amount seemed to grossly exceed the amount the plaintiffs claimed. 

Plausible excuse

The Superior Court saw a plausible explanation for the defendants’ failure to participate in the plaintiffs’ motion to strike, given the principal’s health concerns and the flaws in the order removing defence counsel from the record. 

Integrity of administration of justice

The Superior Court ruled that maintaining the default judgment would result in harm to the administration of justice that exceeded the potential award to the plaintiffs. 

The court noted that the defendants participated in the discovery process before the breakdown of their relationship with counsel, who failed to draft the appropriate order removing them from the record. 

Delay isn’t so inordinate

The Superior Court acknowledged the defendants’ delay in filing the motion to set aside the default judgment.

However, the court determined that the delay did not overpower the other factors that favoured setting aside the default judgment. 

The court recognized the defendants’ new firm made reasonable efforts at fact-finding – in an attempt to figure out how a claim that had progressed to discovery examinations had ended up with a default judgment – before bringing the present motion. 

Possible prejudice to parties

The Superior Court found that the prejudice factor counted against the defendants, who did not readily abide by the discovery process despite initial efforts to mount a defence with significant expenses. 

More Superior Court cases on discovery

Here are some other recent Ontario Superior Court decisions that touched upon discovery. 

In a COVID-19 class action, the Superior Court issued a June 5 decision finding that the interpretation and application of the period open for discovery questions should be in the context of “the COVID outbreak that actually came to be.”

On Apr. 24, the Superior Court allowed a defendant to amend his statement of defence, given that he dropped what could be described as “bombshell evidence” in his sworn testimony at a discovery examination, which surprised all parties. 

Enjoy this story? Read the latest Ontario law news on the main page!