In an unusual turn of events, a recent decision from the Ontario Superior Court of Justice has confirmed that the effects of a judgment may stand, even after the judgment itself is set aside.
In The Toronto Dominion Bank v. Picard, 2020 ONSC 1289, TD Bank sued an individual defendant in July, 2017 for nearly $140,000 in unpaid credit card debt. No Statement of Defence was filed. The bank obtained default judgment and took out a Writ of Seizure and Sale and initiated a seizure of the defendant’s RRSP account.
The defendant brought a motion to set aside the default judgment and the writs of execution. In her motion, she alleged that she was never served with the claim and argued that she had a meritorious defence to the action on the basis that the credit card agreements were with a third-party corporation and not with her personally. The motion was initially commenced on September 27, 2017, but was not heard until February 20, 2020.
The court accepted the defendant’s argument that she was never personally served with the Statement of Claim. As such, the bank was not entitled to note her in default and the default judgment was therefore set aside.
However, it was also held that, despite the judgment being set aside, the writs were permitted to stand. The reason for this was because the court was not persuaded that the defendant had an arguable defence on the merits, nor was her defence tenable at law.
Specifically, the evidence confirmed that the credit cards were in the defendant’s name, as confirmed by the cardholder agreements with the bank. As such, she was responsible for paying the balance owing on the accounts. It was also held that the defendant’s evidence was “very weak”, insofar as she primarily relied on an alleged telephone conversation with an unidentified TD employee as the basis for her defence.
The court conceded that allowing writs of seizure to be maintained in these circumstances “is generally discouraged because the setting aside of the default judgment effectively turns the seizure into execution before judgment”. But in this particular case, the defence was so weak that, the “overall integrity of the administration of justice” required preserving the security pending the outcome of the action on its merits.
Additionally, it was also held that the defendant would not be prejudiced if the writs and the freeze of her RRSP were maintained. It was noted that her RRSP was frozen since September 2017, and her motion was not brought with urgency. Conversely, if the writs were removed, the bank would be prejudiced because it would give the defendant a chance to dissipate her assets.
Accordingly, the consequences of the judgment were permitted to stand, despite the fact that the judgment itself was set aside.
This decision serves as a good cautionary tale for a defendant who has been noted in default. If they do not move quickly to set aside the default, they may still have to reap the consequences of the enforcement actions, especially when the defence itself does not have merit.