Executive Summary: Key Legal and Evidentiary Issues

• Motion to set aside default judgments centered on allegations of improper service and identity fraud

• Defendants claimed they never borrowed money or signed loan documents and that a third party impersonated them

• Evidence included email correspondence, repayment records, and witness testimony undermining the fraudster theory

• Deputy Judge found that service was proper and that the defendants had timely notice of the claims

• Appeal raised procedural errors and challenged the sufficiency of reasons and factual findings

• Divisional Court upheld the trial decision, citing no palpable and overriding errors and dismissing the appeal

Facts of the case

In 2019 and 2020, Auto Focus Canada Inc. advanced approximately $70,000 in four separate loans to Balwinder Singh, with two of those loans listing JBH Xpress Ltd. as a co-borrower. About $30,000 was repaid before the loans fell into default. The plaintiff initiated four Small Claims Court actions in early 2021 to recover the debt. After eight months of failed settlement discussions, default judgments were obtained against the defendants, totaling nearly $115,000, including 34.9% prejudgment interest. Writs of possession were also issued for vehicles pledged as security. Nearly three years later, the defendants moved to set aside the default judgments, alleging they were never served, did not authorize a paralegal to act on their behalf, and had no knowledge of the loan agreements, which they claimed were fraudulent.

Arguments on appeal and procedural history

The defendants argued before the Divisional Court that they had a meritorious defence on the basis of identity fraud, that they were not properly served, and that their motion to set aside the default judgments should have been granted as of right. They also sought to introduce fresh evidence and raised, for the first time, an argument that the interest rate violated criminal provisions of the Criminal Code. The court ruled that the new evidence was inadmissible and that the criminal interest issue was improperly raised for the first time on appeal.

Service and evidence assessment

Deputy Judge Dycha had previously found that Balwinder Singh was served personally with the claims at his home on January 19, 2021. The court accepted evidence from multiple sources, including the plaintiff’s employee who served the documents, email correspondence between the defendants and the plaintiff’s paralegal, and evidence of retained legal representation by Francisco Gomez. These materials contradicted the defendants’ claim of ignorance and supported the conclusion that they had actual notice of the proceedings. Moreover, documentation showed that Balwinder Singh’s son, Jad Singh, who was linked to JBH Xpress, was involved in negotiating settlements on the defendants’ behalf.

Analysis of the alleged meritorious defence

The defendants asserted that they had never signed loan documents or authorized the use of their personal information, pointing to inconsistencies in the service affidavits and presenting evidence that Singh was allegedly out of town when key documents were signed. However, the Deputy Judge rejected this “fraudster theory,” citing its implausibility, the lack of police reports or fraud complaints, and extensive communications and repayments that aligned with legitimate borrowing activity. The Divisional Court agreed that although there were minor factual discrepancies in the motion judge’s reasons, such as the misinterpretation of a bank letter and a driver’s log, these did not amount to overriding errors. The court emphasized that the Deputy Judge had a full evidentiary record and made reasonable findings.

Conclusion

The Divisional Court held that the Deputy Judge applied the correct legal principles and exercised his discretion appropriately in denying the motion to set aside the default judgments. The defendants failed to act promptly, had no compelling explanation for their delay, and failed to demonstrate a meritorious defence. Accordingly, the appeal was dismissed, and the plaintiff was invited to submit costs submissions in accordance with the court’s practice direction.