Executive Summary: Key Legal and Evidentiary Issues

• The defendants brought an application under Rule 3-8(11) of the Supreme Court Civil Rules to set aside a default judgment entered against them on September 11, 2025.

• The court applied the discretionary factors from Williams v. British Columbia (Ministry of Public Safety and Solicitor General), 2025 BCSC 1272, focusing on blameworthiness in failing to defend and the existence of a defence worthy of investigation.

• The plaintiff conceded that one defendant, Xiaoying Chen, was never served despite an affidavit of personal service stating otherwise, and also conceded that factors (b) and (d) of the test were satisfied.

• Evidence showed that defendants Yirui Sun and Na Zhang were served by alternative service via email, claimed they did not receive, look at, or understand the notice of civil claim, and are immigrants to Canada whose first language is not English.

• The court found no deliberate decision by the defendants not to defend and was satisfied that there were several defences worthy of investigation, including that the plaintiff may have breached the sub-franchise agreement by suddenly withdrawing from the business venture.

• The court set aside the default judgments against all defendants, ordered the cancellation of specific land title charges, and directed that, despite this success, defendants Yirui Sun and Na Zhang pay the costs of the application to the plaintiff because they were less than diligent in responding to the notice of civil claim.

Facts and outcome of the case

Facts of the case
The plaintiff, 1194432 B.C. Ltd., brought a civil action against the defendants, Gram Canada Investment Ltd., Yu Du, Xiaoying Chen, Yirui Sun, and Na Zhang, arising from a business relationship involving a sub-franchise agreement. The defendants are not sophisticated business people and are immigrants to Canada whose first language is not English. A default judgment was entered against the defendants on September 11, 2025, after they failed to file a response to the plaintiff's civil claim. The action involves a significant amount of money, and following the default judgment, land title charges were registered against two strata properties owned by some of the defendants. The defendants claimed that the judgments against them would cause them to lose their homes. The defendants asserted that they have defences to the plaintiff's claim, including that it was actually the plaintiff who breached the sub-franchise agreement by suddenly withdrawing from the business venture.

The application to set aside default judgment
The defendants applied under Rule 3-8(11) of the Supreme Court Civil Rules to set aside the default judgment. The application was heard in chambers in Vancouver, British Columbia, on November 6–7, 2025, and oral reasons for judgment were given on November 28, 2025. The court applied the legal test from Williams v. British Columbia (Ministry of Public Safety and Solicitor General), 2025 BCSC 1272, which sets out four guiding factors: (a) whether the applicant wilfully or deliberately failed to file a defence; (b) whether the application to set aside was brought as soon as reasonably possible after learning of the default judgment, or whether any delay was explained; (c) whether the applicant has a meritorious defence or at least one worthy of investigation; and (d) whether these elements are established through affidavit material. The court emphasized that these factors are not mandatory or exhaustive and that the interests of justice and the emphasis in Rule 1-3(2) on the just, speedy, and inexpensive determination of proceedings on their merits govern the exercise of discretion. The plaintiff conceded that factors (b) and (d) were satisfied, leaving factors (a) and (c) in issue.

Service and blameworthiness
On the question of service, the plaintiff conceded that defendant Xiaoying Chen was never served, even though there was an affidavit of personal service stating the contrary, because she was out of town at the time the process server claimed to have served her. The evidence showed that defendants Yirui Sun and Na Zhang were served by alternative service via email. They claimed that they did not receive the notice of civil claim, or if they did, they did not look at it or understand it. The court observed that the defendants are not sophisticated business people, that they are immigrants to Canada, and that English is not their first language. The evidence also showed that as soon as they became aware of the default action, they moved quickly, retained counsel within days, and had the application filed promptly. In light of these facts, the court concluded that it was unable to find that there was a deliberate decision not to defend the action and that the required "blameworthy" failure to file a defence was not made out.

Defences worthy of investigation
In addressing whether the defendants had a meritorious defence or at least one worthy of investigation, the court referred to Forgotten Treasures International Inc. v. Lloyd's Underwriters, 2020 BCCA 341, and noted that a chambers judge need not engage in a "searching, extended, or detailed weighing of the evidence." The court emphasized that the threshold implied by the phrase "worthy of investigation" is not onerous and that the overarching aim is to do justice between the parties. The court was satisfied that there were several defences worthy of investigation, including an argument that it was actually the plaintiff who breached the sub-franchise agreement by suddenly withdrawing from the business venture.

Interests of justice and the ruling
In its analysis, the court considered the broader consequences of leaving the default judgment in place. The court observed that the action involves a significant amount of money and that judgments against the defendants would cause them to lose their homes. Weighing all of the circumstances, the court concluded that the interests of justice required that the default judgments against the defendants be set aside so that the claim could be determined on its merits. The court ordered that the default judgment against all of the defendants, namely Gram Canada Investment Ltd., Xiaoying Chen, Yirui Sun, and Na Zhang, be set aside. The defendants were granted leave to file a response to the plaintiff's amended notice of civil claim dated March 7, 2024, and a counterclaim, within 14 days of the order. The Registrar of Land Titles was directed to cancel registered charge CB2343326 on PID 028-777-093, Strata Lot 87, District Lot 440 Group 2, New Westminster District, Strata Plan 4210, and to cancel registered charge CB2343326 on PID 026-581-086, Strata Lot 68 Section 18 Block 3 North range 6 West, New Westminster District, Strata Plan BCS1023. Although the defendants succeeded in having the default judgments set aside and the charges cancelled, the court ordered that, because they were less than diligent in responding to the notice of civil claim, defendants Yirui Sun and Na Zhang must pay the costs of the application to the plaintiff. The defendants were the successful party on the application, but no specific monetary amount of costs was stated in the decision.