Executive Summary: Key Legal and Evidentiary Issues

• Whether the court should exercise its discretion under rule 19.03(1) to set aside the noting in default against Gatestone despite its failure to deliver a defence within the r. 18.01(a) timeline.
• The significance of a defendant’s mistaken belief about the service date and subsequent prompt steps to investigate and defend as justification for procedural delay.
• The extent to which a self-represented plaintiff must comply with evidentiary rules, including the need for affidavit evidence rather than unsworn oral submissions on prejudice.
• The balancing of prejudice between allowing a defended trial on the merits and binding a collection agency to deemed admissions and potentially substantial untested damages exceeding $1.75 million.
• How the complexity and high value of multi-tort claims (negligence, defamation, privacy and credit-related torts) favour setting aside default to ensure adjudication on the merits.
• The limited role of an arguable defence where the delay is short, but the presence of a draft defence and documentary support still reinforces the decision to lift the default.

Background and parties

The proceeding arises from allegedly erroneous and duplicative entries on the credit reports of the plaintiff, Carson Frankum. He sued a number of credit reporting and collection entities, including Financial Debt Recovery Limited, Equifax Canada, Gatestone & Co., C3 Canada Corporation, A-1 Credit Recovery & Collection Services Inc., TransUnion of Canada Inc. and Debt Control Agency Inc. His core allegation against Gatestone is that it falsely reported an approximately $28,000 debt as owed by him, which he says was a wrongful collection item appearing on his credit history. Gatestone is a collection agency that was retained by the Ontario Ministry of Finance to collect a student loan debt which, on its instructions, it understood to be valid and owing.

Commencement of the action and the noting in default

Mr. Frankum issued his Statement of Claim on July 16, 2025 and served Gatestone on July 18, 2025 by leaving a copy with a receptionist at Gatestone’s office. Under rule 18.01(a) of the Ontario Rules of Civil Procedure, Gatestone had 20 days from service to deliver a Notice of Intent to Defend or a Statement of Defence. It did not do so within that time. On August 7, 2025, the plaintiff requisitioned that Gatestone be noted in default, and on August 18, 2025 the registrar formally noted Gatestone in default. At that point, as a matter of procedure, Gatestone was exposed to the consequences of rule 19.02(1)(a), under which a defendant noted in default is deemed to admit all facts properly pleaded in the claim and can no longer contest liability on a default judgment motion.

Gatestone’s understanding of service and its steps to defend

The evidence explaining Gatestone’s delay came from an affidavit sworn by Alexander Wilson, Gatestone’s Vice-President of Legal. The Claim was scanned into Gatestone’s system with a timestamp of August 4, 2025, and Mr. Wilson mistakenly assumed that this was the date of actual service. Operating under this misapprehension, Gatestone engaged counsel on August 5, 2025, immediately began to investigate the allegations and proceeded on the basis that its defence was due on August 24, 2025. In the interim, Gatestone’s internal investigation confirmed that the referenced debt related to a student loan placed with it for collection by the Ministry of Finance and that, according to the Ministry, the debt remained outstanding. Gatestone then instructed counsel to serve a Notice of Intent to Defend, which was emailed to Mr. Frankum on August 22, 2025—within 20 days of what it believed to be the service date.

Communications between the parties after default

The parties’ correspondence clarified the true chronology and crystallised their positions. On August 25, 2025, Gatestone’s counsel advised the plaintiff that the debt was outstanding, that Gatestone had not itself reported the debt to credit bureaus, and that if he did not discontinue his claim against Gatestone, the company would defend and seek costs. In response that same day, Mr. Frankum stated that Gatestone had pursued the wrong person, that the collection item was false, and that he would not release Gatestone until the item was removed from his credit report. He further advised that Gatestone had already been noted in default on August 18, 2025 and that he did not consent to the filing of any Statement of Defence, attaching the requisition and Affidavit of Service confirming service on July 18, 2025. Through this exchange, Gatestone and its counsel learned that their assumed service date was wrong. On August 29, 2025, Gatestone’s counsel advised that Gatestone had always intended to defend if the action was not withdrawn, that the delay flowed from the mistaken service date, and sought the plaintiff’s consent to set aside the noting in default and to a timetable for delivering the defence. The plaintiff refused, insisting Gatestone would have to bring a motion.

Nature and scope of the plaintiff’s claim

Although the motion did not determine the merits of the underlying causes of action, the court considered the scope and seriousness of the Claim in evaluating whether the default should stand. Mr. Frankum claims at least $1,750,000 in general damages against all defendants, plus unspecified special damages, and further seeks punitive, exemplary and aggravated damages. He also asks for a mandatory order requiring the defendants to correct and remove the impugned entries from his credit reports. Substantively, he pleads a broad array of heads of liability, including negligence, defamation, breach of statutory duty, “intrusion upon financial integrity,” intrusion upon seclusion, emotional distress, reputational damage, loss of financial investment opportunities, loss of access to credit and financial products, and “financial defamation.” The court characterised the monetary value as high and the case as moderately complex, particularly because of its mix of tort, credit-reporting and collection issues. There was no discussion in the decision of any specific insurance or credit policy wording or contractual clauses; the focus remained on civil procedure and the nature of the debt-collection and credit-reporting allegations.

Evidentiary shortcomings of the plaintiff’s opposition

For this motion, Mr. Frankum, who is a licensed paralegal and represented himself, did not file an affidavit in response to Gatestone’s motion to set aside the noting in default. Instead, he indicated he was relying on his existing default-judgment materials—namely, the Statement of Claim, the requisition to note Gatestone in default, a draft judgment, the Affidavit of Service of the Claim, and a brief factum. At the hearing, he made oral submissions that the false credit information had severely affected his ability to obtain credit products and to move forward with his life, and that setting aside the default would mean years of further delay before the credit issue was addressed. However, the associate justice emphasised that evidence on motions must ordinarily be given by affidavit under rule 39.01. Adjudicative facts—those concerning the immediate parties—must be proved by sworn evidence or be the subject of proper judicial notice, not simply unsworn argument. Because Mr. Frankum provided no affidavit and no supporting documentation regarding the alleged prejudice from continued credit problems, the court refused to admit his oral submissions as evidence on the prejudice issue. The court went further, noting that even if his oral statements were treated as evidence, it would give them little or no weight because they were not offered by way of affidavit, Gatestone had no opportunity to cross-examine him, and there was no supporting documentary proof.

Legal framework for setting aside a noting in default

The court began its analysis with the applicable procedural rules and appellate guidance. Under rule 19.03(1), the court “may” set aside a noting in default “on such terms as are just.” This provision is interpreted against a backdrop of strong judicial preference for deciding civil actions on their merits and construing rules in a way that gets parties to the real issues, so long as there is no non-compensable prejudice to either side. The decision cites authorities such as Gauthier v. Malik, Kyles v. MBNA Mastercard Canada, Intact Insurance Company v. Kisel and the Court of Appeal’s reasoning in Franchetti v. Huggins. From those cases, the court distilled a non-exhaustive list of factors: the parties’ behaviour; length and reasons for delay; the complexity and value of the claim; prejudice to any party relying on the default; the balance of prejudice between the parties; and whether the defendant appears to have an arguable defence. The authorities also emphasise that courts rarely demand a detailed showing of merits unless there has been a significant delay; where delay is modest, the existence of a plausible defence is generally sufficient.

Assessment of delay, conduct and prejudice

Applying these principles, the court found that both parties had behaved appropriately, albeit with different focuses. The plaintiff complied with the Rules by requisitioning the noting in default on the 21st day after service, having heard nothing from Gatestone or its lawyers. Gatestone, in turn, acted reasonably once the Claim came to Mr. Wilson’s attention: it retained counsel the following day, undertook its factual investigation promptly and served a Notice of Intent to Defend within 20 days of the (incorrectly) assumed service date. Once the mistake in service date was revealed on August 25, 2025, Gatestone moved quickly to engage with the plaintiff and to seek to regularise its procedural position. The court concluded that the delay between actual service and the later steps was not lengthy and, critically, was explicable. On the question of prejudice, the court contrasted the positions of the two sides. If default were not set aside, Gatestone would be deemed to admit all factual allegations in a claim seeking over $1.75 million in damages and broad injunctive relief, and it would be unable to contest liability or quantum on a default-judgment motion. That would expose the company to a very significant monetary risk without a hearing on the merits. By contrast, the plaintiff’s claimed prejudice rested entirely on unproven assertions about credit denials and delays in life plans, without sworn evidence or corroborating documents. The associate justice held that the prejudice to Gatestone if the default remained far outweighed any prejudice to the plaintiff from allowing the case to proceed in the ordinary way.

Consideration of Gatestone’s arguable defence

Although the court did not require a robust merits showing because the delay was relatively short, it nonetheless reviewed Gatestone’s draft Statement of Defence. In that draft, Gatestone pleads that it was retained by the Ministry of Finance to collect a student loan, that the Ministry furnished documentation confirming the existence and amount of the debt and the identity of the debtor, and that Gatestone reasonably relied on this information when attempting collection and providing information to credit reporting agencies on the Ministry’s behalf. On this record, the court was satisfied that Gatestone had at least an arguable defence on the merits, reinforcing the policy preference for hearing the dispute through normal pleadings and, if necessary, trial processes rather than by default.

Outcome and implications

In the result, the court exercised its discretion under rule 19.03(1) to set aside the noting in default of Gatestone. It did so after weighing all of the relevant factors, with particular emphasis on the strong preference for resolving disputes on their merits where fairness permits, the modest length and reasonable explanation for the delay, the very high value and moderate complexity of the plaintiff’s claims, and the marked imbalance of prejudice if Gatestone were bound by deemed admissions in a multi-million-dollar case. The court did not decide liability or any of the pleaded torts, nor did it grant any of the plaintiff’s requested remedies concerning the alleged false credit reporting; those questions remain for another day. On this motion, Gatestone & Co. was the successful party, having obtained an order lifting the default and permitting it to file a defence. No damages or specific costs figure were awarded in the decision; the court instead directed the parties to attempt to agree on costs for this motion (and a related motion by C3 Canada) or, failing agreement, to address costs through further oral or written submissions on specified dates. As a result, the total monetary award or costs in favour of Gatestone, if any, cannot be determined from this decision alone.