Executive Summary: Key Legal and Evidentiary Issues

• Plaintiff improperly invoked default procedures despite having been served with a statement of defence and knowing the defendants were represented by counsel.
• The court scrutinized counsel conduct and “sharp practice” in using technical non-filing of a defence (by defendants’ lawyer) to obtain default judgment.
• Sparse, largely hearsay affidavit evidence from the defence side raised concerns about evidentiary sufficiency but was weighed against the unusual procedural history.
• Application of the Mountain View factors focused on promptness, explanation for default, arguable defence, prejudice, and integrity of the administration of justice.
• The judge found a real factual dispute over whether the funds were a loan or payment of a family debt, giving the defence an “air of reality.”
• Prejudice and broader justice considerations favoured setting aside both the noting in default and default judgment, restoring the matter to be heard on its merits.

Facts of the case

The dispute arises out of a financial transaction within a family context. The plaintiff, Kamalpreet Virk, commenced an action on April 5, 2024, in the Ontario Superior Court of Justice, claiming damages for breach of contract, fraudulent misrepresentation, and negligent misrepresentation. The claim alleges that the defendants, Kargune Singh Sihota (also known as or referred to as Hargune Sihota) and Parampreet (Pam) Sihota, received funds in the nature of a loan and failed to repay the amount. The defendants contest this characterization, asserting that the money was not an enforceable loan but relates instead to the settlement of an outstanding family debt. The dispute is therefore not only commercial but also deeply intertwined with family relationships.

After the statement of claim was issued, the plaintiff served it by substituted service on August 8, 2024. On October 11, 2024, the defendants’ then-counsel, Mandeep (Jag) Brar of JB Legal, served a statement of defence on the plaintiff. This defence squarely denied the core allegations of the claim, challenged the nature of the alleged loan, and took the position that at least one of the defendants, Mr. Sihota, should not be a party. On October 21, 2024, the plaintiff served a reply to the defence, confirming that both sides were actively engaged in the litigation on the merits at that point.

A procedural problem then arose. On November 1, 2024, counsel for the plaintiff wrote to Mr. Brar pointing out that the statement of defence had been served but not filed with the court. The letter stated that unless the issue was fixed, the plaintiff would note the defendants in default. Later that day, Mr. Brar replied, acknowledging that he would look into the filing issue and emphasizing two points: that the statement of defence had been served and that obtaining default judgment in such circumstances could be considered “sharp practice” under the Rules of Professional Conduct. Despite this warning, the plaintiff’s counsel contacted the court office on November 5 and 8, 2024, confirmed that no defence had been filed, and on November 8, 2024, requested that the defendants be noted in default.

On November 15, 2024, the plaintiff’s lawyer advised Mr. Brar that the defendants had been noted in default and that the plaintiff would pursue default judgment. The evidence before the court suggests that Mr. Brar did not respond to this communication and took no further visible steps to protect his clients’ position. On November 29, 2024, the plaintiff brought a motion for default judgment under Rule 19.05 of the Rules of Civil Procedure. The motion record included the very statement of defence that had been served but not filed, as well as the plaintiff’s reply. Initially returnable December 17, 2024, the motion was adjourned to permit the plaintiff to provide additional evidence concerning punitive damages.

On April 8, 2025, default judgment was granted in favour of the plaintiff in the amount of $90,000, consisting of $70,000 as the alleged loan principal and $20,000 in punitive damages, together with full indemnity costs of $28,234.26 and pre- and post-judgment interest. This brought the principal monetary total under the default judgment to $118,234.26, excluding interest. The plaintiff’s counsel wrote directly to the defendants on April 10, 2025, enclosing the order and requisition and demanding payment of the ordered amounts by April 23, 2025, failing which enforcement would follow.

Shortly before the payment deadline, on April 22, 2025, defendant Kargune (Hargune) Sihota emailed the plaintiff’s lawyer, attaching draft motion materials seeking to set aside the default judgment. The plaintiff’s lawyer replied on April 24, 2025, advising that the plaintiff would oppose the motion, seek costs, and continue with enforcement efforts. That same day, a new lawyer, Piera Segreto, contacted plaintiff’s counsel to confirm she had been approached to bring a motion to set aside the default judgment and requested copies of the pleadings and non-privileged documents to properly assess the file. The plaintiff’s lawyer refused to provide these documents and reiterated an intention to oppose the motion while pursuing collection.

Enforcement steps then proceeded. On May 5, 2025, the plaintiff issued writs of seizure and sale in both Windsor and Brampton, filing them with the respective Sheriffs’ Offices (Windsor on May 5 and Brampton on May 16, 2025). Defendant Kargune Sihota formally retained Ms. Segreto on June 23, 2025. On July 7, 2025, the defendants brought a motion to set aside both the noting in default and the default judgment. It is that motion that came before Justice Horvat, with counsel Eric Florjancic appearing for the plaintiff and Ms. Segreto for the defendants.

Legal framework and procedural context

The case centres on the use and limits of the default process under Rule 19 of the Rules of Civil Procedure. Rules 19.03(1) and 19.08(1) give the court discretion to set aside a noting in default and a default judgment “on such terms as are just.” In exercising this discretion, the court must look at the specific factual context, including party conduct, delay, the complexity and value of the claim, and the overarching goals of fairness and integrity in the administration of justice.

Ontario appellate jurisprudence has long cautioned that default proceedings should not be weaponized for tactical advantage where a defendant is clearly defending on the merits. The court relied on decisions such as Intact Insurance Company v. Kisel and Nobosoft Corp. v. No Borders Inc. to underline that the court should consider the “context and factual situation,” including the behaviour of the parties, reasons for delay, and the nature of the claim. The court also cited Strathmillan Financial Limited v. Teti, where Myers J. strongly criticized the misuse of Rule 19 default procedures in circumstances where the plaintiff knew the defendants were in fact defending the action.

In addition, the court emphasized the ethical and professional obligations of counsel under Rule 7.2-2 of the Rules of Professional Conduct, which requires lawyers to avoid sharp practice and not to act without fair warning on slips or irregularities that do not go to the merits or involve sacrificing a client’s rights. Here, the plaintiff’s counsel knew a defence had been served and that the defendants were represented, yet proceeded to note the defendants in default solely because defence counsel had not filed the defence with the court.

For setting aside the default judgment, the court applied the factors in Mountain View Farms Ltd. v. McQueen, refined by later cases such as Intact and Zeifman Partners Inc. v. Aiello. The relevant non-exhaustive considerations are: whether the motion was brought promptly after learning of the default judgment; whether there is a plausible explanation for the default; whether the defendant has an arguable defence on the merits; the potential prejudice to each side; and the effect of the decision on the overall integrity of the administration of justice.

Evidence before the court

The defendants’ motion material was notably thin. The central affidavit was sworn by a paralegal in Ms. Segreto’s office, rather than by either defendant or by prior counsel Mr. Brar. It contained significant hearsay and little direct evidence of what, precisely, occurred between November 2024 and April 2025 as between the defendants and Mr. Brar. One exhibit showed an email in which Mr. Brar appeared to charge his client a filing fee for the statement of defence as a disbursement, implying that filing had been contemplated or promised. But beyond that, there was no sworn evidence from either Mr. Brar or the defendants explaining why the statement of defence was never actually filed, nor what communication or misunderstandings led to the procedural failure.

Ordinarily, courts expect a defendant moving to set aside a default judgment to file a detailed affidavit addressing each of the Mountain View factors: when the default was discovered, why the default occurred, what the defence is on the merits (with concrete supporting facts), and what prejudice will result if the judgment stands or is set aside. Justice Horvat commented that, in a typical case, the evidentiary record presented would be insufficient. However, this was not a typical case because the defendants had clearly served their statement of defence and had been defending the matter on the merits before the plaintiff took default steps. That unusual background significantly influenced the court’s approach to the evidentiary shortcomings.

On the plaintiff’s side, an affidavit from her father, Jasbir Singh Sandhu, was filed. He is the father of both the plaintiff and one of the defendants, and the grandfather of the other defendant. His evidence focused on the underlying merits—whether the money at issue was properly characterized as a loan. The court noted that it was not its role, on a motion to set aside default judgment, to make definitive findings of fact on the merits or to resolve conflicting evidence about the nature of the transaction. Instead, the threshold question was whether the defendants had an arguable defence with an “air of reality,” not whether their version would ultimately be accepted at trial.

Key legal and evidentiary issues addressed

The first key issue was whether it was proper for the plaintiff to note the defendants in default at all after having been served with their statement of defence and having responded with a reply. Justice Horvat held that it was not. The plaintiff knew that the defendants were actively defending the claim and that they were represented by counsel. The only problem was a filing irregularity attributable to defence counsel’s failure to file the defence with the court. Given that the default process should not be used tactically and that counsel are expected to avoid sharp practice, the court concluded that the noting in default never should have occurred in these circumstances.

The second issue was whether the defendants had met the criteria for setting aside the default judgment. On the first two Mountain View factors—promptness and explanation for default—the court found the evidentiary record lacking. There was no direct evidence explaining the period of inactivity between November 2024 and April 2025 or clarifying precisely when and how the defendants learned of the default judgment. Nonetheless, the court noted that the defendants had not deliberately ignored the litigation; they had served a defence and were not guilty of deliberate inattention or refusal to participate in the proceedings.

On the third factor—the existence of an arguable defence—the court concluded that there was a genuine dispute about the nature of the funds: whether they were advanced as a loan (as the plaintiff claimed) or as a payment towards a family debt (as the defendants maintained). The served statement of defence denied the plaintiff’s allegations and challenged both liability and parties. This was sufficient to satisfy the “air of reality” or plausibility standard, especially at this preliminary procedural stage, even without extensive supporting affidavits from the defendants themselves.

The fourth factor, prejudice, required the court to weigh harm to each side. The plaintiff argued she would be prejudiced by losing a judgment obtained “in good faith” and by the possibility that the defendants might render themselves judgment-proof if default judgment were set aside. The court found no evidentiary basis for the latter concern and emphasized that the plaintiff had effectively capitalized on a technical irregularity. The plaintiff had moved very quickly—within seven days of discovering the failure to file the defence—to note the defendants in default. Although she was legally entitled to do so, this speed, in the face of a known and served defence and ongoing representation, weighed against allowing the default judgment to stand. On the other hand, the defendants faced a large financial judgment (damages and punitive damages) and substantial costs for a debt they dispute even exists, and would be deprived of any opportunity to have their defence heard on the merits.

The fifth factor looked to the integrity of the administration of justice. Justice Horvat held that it would undermine that integrity to reward a party for using Rule 19 to obtain a default judgment against defendants who had in fact served a defence and were represented by counsel. The court reiterated that, where it can be done fairly, disputes should be resolved on their merits rather than through procedural traps.

Outcome of the motion and consequences

Justice Horvat concluded that the defendants never should have been noted in default, given that they had served a statement of defence and were clearly defending the claim. The noting in default was therefore set aside under Rule 19.03(1). Further, applying the Mountain View framework in light of the unusual procedural posture and the overarching concern for fairness, the court also set aside the default judgment under Rule 19.08(1). The prior judgment in favour of the plaintiff—$70,000 for the loan amount, $20,000 in punitive damages, and $28,234.26 in full indemnity costs, plus pre- and post-judgment interest—was vacated. The defendants were granted leave to file their statement of defence with the court within 30 days, thereby restoring the case to the normal litigation track for determination on the merits.

On costs of the motion, the court drew again on the principle that the Rules should not reward litigants for taking advantage of counsel’s slips or inadvertence. Citing Duninger Corporation v. Montour and Strathmillan Financial Limited v. Teti, Justice Horvat stressed that parties who adopt unreasonable or tactical positions in reliance on technical missteps should anticipate adverse costs consequences. In this case, the plaintiff’s insistence on using the non-filing of the defence to secure and enforce a substantial default judgment, despite knowing a defence had been served and counsel was active, was found to be such conduct. Accordingly, the defendants were awarded their costs of the motion. However, the court did not fix a specific quantum in the endorsement; instead, it set a timetable for brief written costs submissions should the parties be unable to agree on the amount.

In summary, the successful party on the motion was the defendants, Kargune (Hargune) Singh Sihota and Parampreet (Pam) Sihota. The earlier default judgment in favour of the plaintiff, totalling $118,234.26 plus pre- and post-judgment interest, was fully set aside and therefore no longer constitutes a monetary award in the plaintiff’s favour. The only monetary consequence flowing from this decision is that the defendants are entitled to their costs of the motion, but the specific amount of those costs has not yet been determined and is left either to agreement of the parties or to a subsequent costs ruling.