Executive Summary: Key Legal and Evidentiary Issues

• Whether the motion judge erred in her approach to a motion for default judgment after the respondent was noted in default.
• Under Rule 19.02(1) of the Rules of Civil Procedure, a defendant noted in default is deemed to admit the truth of all allegations of fact in the statement of claim.
• Rule 19.06 provides that deemed admissions entitle a plaintiff to judgment only if the facts alleged entitle the plaintiff to judgment.
• The deemed facts, read on a balance of probabilities with reasonable inferences, established a valid claim under the Sale of Goods Act, RSO 1990, c. S.1, that the vehicle was not of merchantable quality or safe when sold.
• Rescission of the sales contract was the appropriate remedy, with the effective date fixed at May 31, 2022.
• Damages could not be fixed on appeal because the motion judge made no findings on quantum, requiring a reference to an Associate Justice.

Facts of the case

On May 9, 2022, the appellant, Ali Ali, attended the respondent dealership, Ontario Motor Sales Chevrolet Cadillac, to purchase a vehicle. After a test drive, he purchased a 2017 Cadillac XTS, which he was told would be certified, would include a warranty, and would come with four free oil changes. He took delivery on May 16, 2022. The very next day, he experienced severe vibrations when braking and reported the problem to the respondent. On May 20, 2022, he noticed multiple malfunctions in the vehicle's touchscreen, which he also reported. Before his earliest available service appointment on June 9, 2022, he discovered a further issue: the alignment was "off" and the vehicle pulled to the left. Sometime between May 25 and June 3, 2022, the appellant spoke with the sales manager, questioned how the vehicle had been certified given the problems, and demanded a refund or exchange; the sales manager said they should wait for the service department to look at the vehicle. After brake repair work on June 9th, a loud screeching noise emerged when braking. On June 14th, the dealership recommended replacing the brake pads at a cost to the appellant of $543.36, which he protested since the vehicle was within 29 days of purchase. The respondent's Service Manager advised him to keep driving and apply the brakes firmly to heat the pads; following that advice resulted in three warning lights illuminating on the dashboard. On July 5th, the appellant asked by email to return the vehicle, and the respondent offered instead to exchange it for a vehicle of lower cost. On July 12th, the respondent reported that the left front reluctor ring was broken and needed a new hub/bearing, but did not fix these issues, later advising the appellant would have to pay for repairs because he had put 5,000 km on the vehicle. The respondent maintained the vehicle "followed government guidelines" when certified and characterized the issues as "wear and tear." The safety inspection report provided to the appellant was so blurry as to be illegible, and no clearer copy was provided. On OMVIC's advice, the appellant had a safety inspection performed at another dealership, which the vehicle failed. On August 12th, the vehicle developed a further problem of turning off while being driven, and the appellant claimed he had been unable to use it since. The appellant noted the respondent in default and moved for default judgment before Christie J., who dismissed the claim (2025 ONSC 1529). He then appealed to the Divisional Court, where the respondent did not appear and remained in default.

Statutory provisions and contractual terms at issue

The appellant framed his claim in the statement of claim as one for "breach of contract" and "false advertising." Because he was self-represented and pleadings are to be given a "large and liberal" reading, the Divisional Court treated the claim as an obvious one under the Sale of Goods Act, RSO 1990, c. S.1, together with a claim that the respondent's certification falsely declared the vehicle sound and certifiable. The motion judge had addressed the claim that the respondent violated section 15 of the Sale of Goods Act by selling a vehicle that was not of merchantable quality or fit for use. Two procedural rules were central: Rule 19.02(1), under which a defendant noted in default is deemed to admit the truth of all allegations of fact in the statement of claim and may not deliver a defence or take other steps without leave or consent; and Rule 19.06, which provides that a plaintiff is not entitled to judgment merely because the alleged facts are deemed admitted, unless those facts entitle the plaintiff to judgment.

The court's reasoning and analysis

The Divisional Court (D.L. Corbett, Cullin and Brownstone JJ.) held that the motion judge erred in her approach to default proceedings. The court emphasized that this was neither a criminal trial requiring proof beyond a reasonable doubt nor an undefended trial requiring the plaintiff to prove his allegations; it was a civil case to be decided on facts deemed true, including reasonable inferences drawn from those facts on a balance of probabilities. On the deemed facts, the vehicle had a major brake issue identified the day after the appellant took possession, and the compelling inference was that the problem existed at the time of delivery — there was no reasonable basis for attributing it to "wear and tear." The legion of problems arising shortly afterwards supported the inference that these problems, or many of them, existed and should have been discovered on a competent safety inspection. These facts supported the conclusions that the vehicle was not safe when sold, was not of merchantable quality, and that the appellant was entitled to rescind the sale contract, which he tried to do. In the court's view, a probing analysis of the merits was unnecessary on the default judgment motion; the only issue should have been fixing the amount payable to the appellant. Since the motion judge made no findings on damages and the record was insufficient for the appellate court to fix an amount, the court noted the appellant had incurred repair expenses and continuing carrying costs, while also receiving some value from possession of the vehicle, which had been driven at least 8,000 km since acquisition. The court fixed the date of rescission at May 31, 2022, being the first time on the deemed facts that the appellant asked the respondent to take the vehicle back.

Ruling and overall outcome

The appeal was allowed, the motion judge's decision was quashed, and default judgment was entered for the appellant, Ali Ali, making him the successful party. Rather than fixing a dollar figure, the Divisional Court directed a reference to an Associate Justice to determine the amount owed by the respondent on the basis of rescission of the sales contract effective May 31, 2022 — crediting the appellant for the purchase price including carrying costs and reasonable costs of maintaining, repairing, or assessing the vehicle, less the vehicle's value at assessment (or any arm's-length sale proceeds) and any value the appellant obtained from his use of it, subject to proper adjustments. Costs of the action, including the assessment, are in the discretion of the Associate Justice, and the reference report will be confirmed automatically under the Rules since the respondent remains in default. The reference is to be held before Associate Justice Mak on September 11, 2026, or as the Associate Justice may direct. Accordingly, no exact monetary amount can be determined from this decision; the total award remains to be fixed at the damages assessment.