Executive Summary: Key Legal and Evidentiary Issues

• Proper service of the set-aside application by ordinary mail to the address for service was sufficient; actual notice to 1163499 B.C. Ltd. was not legally required.

• The court confirmed it had jurisdiction to hear an appeal from a chambers order made in the plaintiff’s absence, even though no reconsideration application was brought in the Supreme Court.

• Discretion to refuse to hear such an appeal exists, but the court chose to hear this one given the importance of clarifying the test for setting aside default judgments after damages are assessed.

• The applicable standard to set aside a default judgment, even after a damages assessment, is the Miracle Feeds test under Rule 3-8(11), not the stricter “miscarriage of justice” inherent-jurisdiction standard.

• Although the chambers judge misunderstood a minor timing detail regarding when the defendant learned of the default judgment, the error was not “palpable and overriding” and did not justify appellate intervention.

• The appeal was dismissed, leaving the defendant, Dong Sheng Yao, free to defend the claim on the merits and the plaintiff, 1163499 B.C. Ltd., without the $150,000 default judgment it had previously obtained.

Facts and background of the dispute

1163499 B.C. Ltd. filed a notice of civil claim in August 2022 against Dong Sheng Yao, alleging that in early 2022 it agreed to invest in an opportunity proposed by Mr. Yao and a second individual, Ms. Zhang. The company claimed it paid a total of $150,000: two cash payments of $50,000 to Mr. Yao in February and March 2022, and a further $100,000 by bank transfer to Mr. Yao and Ms. Zhang a few days later. It pleaded that these payments were induced by fraudulent misrepresentations and formed part of a civil conspiracy.

Mr. Yao did not file a response to civil claim after being personally served with the notice of civil claim in August 2022. He later swore an affidavit describing himself as a feng shui consultant from China with limited English, explaining that he had been drawn into helping mediate an investment dispute between Ms. Zhang and Mr. Li (a principal of 1163499 B.C. Ltd.), rather than being a beneficiary of the funds. He expressly denied ever receiving any funds from the plaintiff, Mr. Li or Ms. Zhang, or profiting from the transactions, and attached documents that appeared to support his account and contradict parts of the plaintiff’s pleading.

Because no response was filed, 1163499 B.C. Ltd. obtained default judgment for “damages to be assessed” on December 7, 2023. The company then applied to have damages assessed and, at a February 28, 2025 hearing, obtained an order assessing damages at $150,000 against Mr. Yao. At that point, the plaintiff stood as a judgment creditor by way of default, without any trial on the merits.

Procedural history and the set aside application

Once the notice of application for the damages assessment was mailed by registered mail to the address for service, Mr. Yao received it, consulted lawyers in Toronto, and quickly travelled to Vancouver for the February 28 hearing. He attended with an interpreter, and counsel later retained on his behalf then brought a formal application to set aside both the default judgment and the damages assessment.

The set aside application was served on 1163499 B.C. Ltd. by ordinary mail at the address for service listed in the notice of civil claim. No lawyer had filed a notice of appointment for the plaintiff, and although counsel had appeared earlier at the damages assessment, opposing counsel overlooked that fact when preparing the new application. The plaintiff did not attend the chambers hearing on May 28, 2025. Relying on Rule 22-1(2), the Supreme Court proceeded in the plaintiff’s absence and granted an order setting aside both the default judgment and the $150,000 damages assessment (the Set Aside Order).

Instead of asking the Supreme Court to reconsider the Set Aside Order under Rule 22-1(3), 1163499 B.C. Ltd. chose to appeal directly to the Court of Appeal. On appeal, it argued that it had not received actual notice of the set aside application, that the wrong legal test was applied to set aside the judgment after damages had been assessed, and that applying the correct test would necessarily lead to restoration of the $150,000 judgment.

Key procedural and evidentiary issues before the court

The first major issue was whether the Set Aside Order could be appealed at all without first attempting reconsideration in the Supreme Court. The court held that the order was an appealable “order” under the Court of Appeal Act because it directly determined whether the plaintiff remained a judgment creditor or had to prove its claim at trial. The availability or use of a reconsideration procedure in the Supreme Court did not remove the statutory right of appeal.

The court then considered whether it should decline to hear the appeal in favour of forcing the plaintiff back to a reconsideration application, recognizing that reconsideration often produces a fuller factual record and is procedurally more efficient. Nonetheless, given the broader importance of clarifying the legal test for setting aside default judgments after damages have been assessed, and because both parties had argued the appeal on the merits, the court chose to exercise its discretion to hear and decide the appeal.

On service and notice, the court rejected the plaintiff’s argument that the Set Aside Order must be overturned because the plaintiff allegedly never received the mailed application. The court emphasized that the Supreme Court Civil Rules allow ordinary service by mail to the address for service provided by a party, and that the rules balance a respondent’s need for notice against the applicant’s need to move matters forward. Proper service in accordance with the rules is sufficient; actual receipt of the documents is not required. The court also reviewed the sparse record of what occurred before the chambers judge and held that, on the information properly before the judge, it was open to proceed in the plaintiff’s absence under Rule 22-1(2).

The applicable legal test: Miracle Feeds and post-assessment default judgments

The central legal issue concerned what test applies when a defendant seeks to set aside a default judgment after damages have already been assessed. The plaintiff argued that cases such as Bains, Bassi and National Home Warranty meant that Rule 3-8(11) could no longer be used once damages had been assessed, leaving only the court’s inherent jurisdiction to intervene in extreme cases of “shocking and unconscionable” unfairness.

The court rejected that line of authority and reaffirmed that Rule 3-8(11) allows the court to “set aside or vary any judgment granted under this rule”, including both default judgments for damages to be assessed and subsequent damages assessments made under Rule 3-8(12) or (13). As a result, the same familiar Miracle Feeds test continues to govern applications to set aside default judgments, whether brought before or after a damages assessment.

Under that test, the court considers whether the defendant’s default was wilful, whether the application to set aside the judgment was brought as soon as reasonably possible (or with a satisfactory explanation for any delay), and whether there is a meritorious defence or at least a defence worthy of investigation. These are flexible factors guiding the overarching question of whether it is in the interests of justice to set aside the default, rather than rigid cumulative requirements. The court concluded that earlier decisions that had limited the rule’s reach after assessment, and thereby forced applicants into the much stricter inherent-jurisdiction standard, should no longer be followed on this point.

Application of the Miracle Feeds test and appellate outcome

Turning to the particular facts, the court accepted that the chambers judge had applied the Miracle Feeds framework, even though no cases were cited in the brief oral reasons. The plaintiff did not dispute that Mr. Yao’s affidavit disclosed at least a defence worthy of investigation, nor did it argue that his original default in failing to respond to the civil claim was wilful. Its challenge focused on the timing element, asserting that the delay between the February 28, 2025 damages assessment and the May 7, 2025 set aside application was inconsistent with the requirement of promptness in Miracle Feeds and related authorities.

The court acknowledged that the chambers judge made a factual mistake about the exact date Mr. Yao received the registered letter and learned of the default situation. However, the error was minor in scope and effect—a difference of only several days—against the broader context in which Mr. Yao acted quickly to consult counsel, travel, attend the damages hearing, and then instruct new counsel to prepare the set aside application over a period of about two months. Given his language limitations, the procedural complexity, and the steps he took once he understood the position he was in, the court found no palpable and overriding error in the chambers judge’s assessment that the timing and explanation for delay were adequate under the Miracle Feeds test.

In the result, the court held that service of the set aside application was legally sufficient, the chambers judge was entitled to proceed in the plaintiff’s absence, the Miracle Feeds test applied even though damages had already been assessed, and the test was properly, if imperfectly, applied to the evidence. The appeal was therefore dismissed. The successful party on appeal was the respondent, Dong Sheng Yao, and the previous $150,000 default judgment and damages assessment in favour of 1163499 B.C. Ltd. remained set aside, with no new damages amount ordered in anyone’s favour at this appellate stage.