Executive Summary: Key Legal and Evidentiary Issues

• Appellant sought to vary a 2019 default judgment to add declarations of intentional breach of trust and survival of debt post-bankruptcy.

• Motion judge denied the request, finding insufficient evidence of misconduct that would meet the threshold under section 178(1)(d) of the BIA.

• The Court of Appeal upheld the decision, emphasizing that negligent or incompetent breaches of trust are not enough to survive discharge.

• No explanation was provided for the absence of the requested declarations in the original draft judgment.

• The delay of over four years in seeking to vary the judgment weighed heavily against the appellant.

• Appeal dismissed with $10,000 in costs awarded to the respondents.

Facts and outcome

1461043 Ontario Limited, operating as Nuvo Iron, obtained a default judgment in 2019 against Soldan Fence & Metals (2009) Ltd. and its principal, Tony Vetro, for $150,235.34 in damages plus interest and costs. In its original statement of claim, Nuvo Iron had also requested a declaration that the judgment was based on an intentional breach of trust and should survive the defendants’ bankruptcy under section 178(1)(d) of the Bankruptcy and Insolvency Act. However, the default judgment granted by Justice Pollak included no such declarations.

Following the defendants’ subsequent bankruptcy filings, Nuvo Iron brought a motion in 2024 to vary the default judgment to add the omitted declarations. The motion judge dismissed the request, finding no evidence on the record to support a conclusion that the debt arose from intentional wrongdoing or fraud. The judge concluded that granting the motion would amount to circumventing the bankruptcy discharge regime and undermine the finality of the default judgment.

Nuvo Iron appealed. The Court of Appeal for Ontario, comprised of Justices Gomery, Wilson, and Rahman, dismissed the appeal. The panel agreed with the motion judge’s reasoning and emphasized that intentional misconduct or fraud is required to invoke section 178(1)(d) of the BIA. The court noted that a breach of trust—even if negligent or incompetent—does not meet that standard. The appellant failed to point to any material facts or deemed admissions that would justify the declaratory relief.

The appeal court also highlighted the procedural weakness of the appellant’s position. There was no record showing that Justice Pollak had been asked to make the breach of trust finding in the original motion for default judgment. The appellant's counsel admitted that their office had submitted the draft judgment, which notably did not include the declarations now being sought. Moreover, handwritten revisions by Justice Pollak to the judgment indicated she had reviewed and amended the relief requested but chose not to include the declarations at issue.

The delay in bringing the variation motion—over four years after judgment—further undermined the appellant’s case. The court concluded there was no error in the motion judge’s decision and no legal or factual basis to support the relief sought on appeal.

The appeal was dismissed. Costs of $10,000 were awarded to the respondents, as agreed by the parties. The decision reaffirms that strict standards apply when seeking to vary judgments and when attempting to override the discharge protections of the bankruptcy regime.