GHAOUI GROUP LLC v GLOBAL HEALTH IMPORTS CORPORATION

The Court considered an Application to set aside a Default Judgment and Partial Default Judgment (together, the "Judgments") that were granted ex parte under Rule 3.37 after the Defendants had been noted in default.

The Court confirmed the established test for setting aside a Default Judgment as follows:

(a)                (a) whether the applicant had an arguable defence;

(b)               (b) whether the default was not deliberate and there was some excuse for the default; and

(c)                (c) whether the applicant moved promptly after learning of the judgment.

The Court cited case law for the principle that despite the test being “prescriptive”, the decision to set aside a Default Judgment is discretionary and grounded in fairness.

Justice Smart found the test was met in relation to most portions of the Judgments. The Defendants had arguable defences, the default occurred inadvertently when the Statement of Claim was delivered to a "junk" email folder, and the Defendants had moved promptly to bring the Application once aware of the Judgments.

Justice Smart also acknowledged two other factors that supported the Court's exercise of discretion to set aside the Judgments. First, although Rule 3.37(1) allows a Plaintiff to apply for Default Judgment without notice, the present Application may have been one where it was appropriate to hear submissions from the Defendants. Reading Rule 3.37(1) together with Rule 3.37(3) (which lists what a Court may do on such an Application), Justice Smart held that the Court implicitly retains discretion to require notice where claims are unliquidated or there are material issues which could potentially be disputed.

Second, in their Application for the Judgments, the Plaintiff's counsel had not brought any possible defences to the Court's attention. Further, the Plaintiff's pleadings were fundamentally defective. Justice Smart stressed that on ex parte applications, counsel owes a duty to disclose all material facts. A failure to meet this duty may in itself justify setting aside a Judgment.

However, Justice Smart declined to set aside the Judgments as against one of the Defendants with respect to an aspect of the claim that was straightforward and undisputed. The Court therefore partially set aside the Judgments.