The Plaintiff brought a Claim against a number of Defendants, alleging that they were involved in obtaining over 60 fraudulent mortgages on which the Plaintiff suffered losses in excess of $8.7 million. The Plaintiff took a number of steps to attach some of the Defendants’ properties in Lebanon, which had allegedly been purchased with the fraudulent mortgage funds. The Plaintiff succeeded in obtaining a “Precautionary Attachment” against nine properties in Lebanon. Those Defendants hired Lebanese counsel to challenge the Precautionary Attachment, but the challenge was not successful.

The Defendants were served with the Statement of Claim by way of Substitutional Service. The Defendants failed to file a Statement of Defence and Default Judgment was entered. The Defendants subsequently brought an Application to have Default Judgment set aside, arguing that they were not aware of the Plaintiff’s Claim until after Default Judgment had been entered.

Hawco J. held that in an Application to set aside a Default Judgment pursuant to Rule 9.15(3), the Court considers whether there was an adequate explanation as to why the Statement of Defence was not delivered, whether there was any delay in applying to set aside the Default Judgment, whether there was a satisfactory explanation for any delay, and whether the material disclosed a meritorious defence or triable issue. However, Hawco J. held that these requirements should not be applied rigidly, but with an eye to fairness.

Hawco J. held that documents filed by the parties, including by the Defendants, suggested that the Defendants were aware of the Statement of Claim and the specific allegations against them earlier than they suggested. The Defendants were aware of the Statement of Claim shortly after it was filed, and delayed taking any steps for five months without a satisfactory explanation. Moreover, the Defendants took no steps to set aside the Default Judgment for a month after it was obtained. In this context, Hawco J. held that the Defendants did not meet any of the criteria that must be proven to set aside a Default Judgment pursuant to Rule 9.15(3).

Hawco J. further held that the conduct of the Defendants did not suggest an effort to act in good faith. Rather, the Defendants appeared to have ignored what had occurred in Alberta and attempted to seek protection through the judicial system in Lebanon. When they failed, they redirected their efforts to Alberta. Hawco J. held that if the Defendants could demonstrate good faith by proffering an irrevocable letter of credit in the amount of $700,000.00 within one month of the date of his Decision, the Default Judgments would be set aside and the Defendants would have leave to file a Statement of Defence. However, if the Defendants failed to do so, their Application would be dismissed without further notice.