Mar 19, 2014

Summary of 1280055 Alberta Ltd. v. Zaghloul

1280055 Alberta Ltd. v. Zaghloul, 2012 ABQB 10 (CanLII)
The Defendant brought an Application to set aside Default Judgment on a Promissory Note and a Noting in Default in a fraudulent conveyances Action. Master Hanebury held that Rule 9.15(3) has the same effect as former Rule 158 and is to be applied in the same fashion. Specifically, when determining whether to set aside Default Judgment, the Court has the discretion to decide in accordance with what is fair. Three factors are relevant to this assessment: whether the Applicant has a defence on the merits, whether the Applicant acted promptly to set aside the Judgment, and whether the Applicant deliberately chose not to file a Defence. All three elements of the test should be met before Default Judgment is set aside.
In determining the existence of a defence on the merits, Master Hanebury held that an allegation of a defence is insufficient. Rather, the Court must evaluate whether an arguable defence exists or whether the Defendant is trying to delay or defeat a valid claim. Master Hanebury held that the Defendant had not raised an arguable defence to the Claim against him relating to the Promissory Note and, as such, the Default Judgment would stand.
In the fraudulent conveyances Action, the Defendant was found to have an arguable defence, because there was a lack of clarity in the law on this issue. Further, the delay between when the Defendant learned of the Claim and when he brought the Application to set aside Default Judgment was insufficient to deny his Application. On the third element of the test, whether the Applicant deliberately chose not to file a Defence, the general rule is that if a Defendant deliberately allows a Judgment to go by default, he is not allowed to set it aside. The Plaintiff had obtained a Substitutional Service Order which allowed the Defendant to be served via Facebook. Although the Defendant admitted that he had seen the Facebook messages, he claimed that he refused to open them because they were not from anyone he knew personally and he was concerned about computer viruses. Master Hanebury held that although it was clear that the Facebook messages contained legal documents, the circumstances were insufficient to find that the Defendant deliberately let the Judgment go by default. As such, Master Hanebury set aside the Default Judgment in the fraudulent conveyances Action.