The Applicants (the “Chois”) applied to set aside an Order obtained by the Respondents (the “Kims”) in February of 2017, pursuant to Rule 9.15. The Order at issue awarded Judgment to the Respondents, plus interest and solicitor and own client Costs, and certain other relief relating to the Chois’ rights as shareholders and directors of a corporation.

Michalyshyn J. considered the test for setting aside a Default Judgment pursuant to Rule 9.15(1), which requires the Court to ask three questions: (a) is there an arguable defence; (b) did the Applicant not intend to allow the Judgment to go by default, and can the Applicant provide a reasonable excuse for the default; and (c) did the Applicant move promptly to set the Default Judgment aside when it came to his or her attention.  Further, pursuant to Rule 9.15(3), the Court retains residual discretion to grant the relief, even if the test is not met, if fairness requires it.

Michalyshyn J. assessed the evidence and determined that the Chois had established a reasonably meritorious defence, had not intended the Judgment to go by default, and had moved promptly to set aside the Default Judgment when they became aware of it. The real question was whether their excuses for the default - that they could not remember being advised by their lawyers that they had agreed to the Application date, and that Mr. Choi had been ill - were reasonable. His Lordship noted that the burden was on the Chois to demonstrate that they had a reasonable excuse for failing to oppose the Application, and held that they had failed to do so. They “knew or ought to have known” about the Application and did nothing to respond to it, and the Kims had also “made valid points […] regarding the Chois’ apparent disregard for the proceedings”.

Nevertheless, Michalyshyn J. was persuaded that given the circumstances of the case, “fairness dictate[d] that notwithstanding the absence of a reasonable excuse, the Chois should have an opportunity to advance their possibly reasonably meritorious defence.” His Lordship also set aside certain relief that was granted in the Order, because it had not been sought in the Kims’ original Application.

Finally, Michalyshyn J. ordered that “the Chois’ ability to advance their defence will be conditional on the payment forthwith of [C]osts to the Kims”. His Lordship asked the parties to provide further submissions as to the scale of Costs, but warned that His Lordship would not order solicitor-client Costs or Security for Costs. Rather, His Lordship would be prepared to award Costs in accordance with Column 4 of Schedule C or enhanced Costs.