Executive Summary: Key Legal and Evidentiary Issues

• Defendants Mann Tire Ltd. and Hardeep Singh Mann moved to set aside a default judgment obtained against them for $573,819.79 plus 24% pre-judgment interest.
   
• Central to the motion was an order removing defence counsel that failed to include mandatory language required under Rule 15.04 of the Rules of Civil Procedure.
   
• Health issues affecting Mr. Mann, including a cancer diagnosis and stroke in 2023, factored into the court's assessment of a plausible excuse for the default.
   
• Notably, the default judgment amount was roughly double the $281,798.91 actually claimed in the Statement of Claim.
   
• Applying the test from Mountain View Farms Ltd. v. McQueen, the court weighed promptness, excuse, merits, prejudice, and the integrity of the administration of justice.
   
• Ultimately, the court set aside the default judgment, the noting in default, and the related writs of execution.
   

Facts of the case

Tirecraft Ontario Inc. and Ayr Tire Inc. sued Mann Tire Ltd. and its principal, Hardeep Singh Mann, alleging that Mann Tire ordered and received tires but never paid for them. The claim, valued at approximately $281,800, was also brought against Mr. Mann personally on a promissory note in the same amount. Mann Tire counterclaimed, alleging that under a separate arrangement it fronted money to a non-party company to purchase discounted tires from Michelin, with the Plaintiffs meant to reimburse Mann Tire for the savings. Mann Tire claimed approximately $200,000 remained unpaid under this arrangement, and that Ayr Tire owed a further $70,000 to $140,000 representing an agreed rebate split.

The litigation, commenced by Statement of Claim dated January 7, 2020, was marked by lengthy discovery delays on both sides. Examinations for discovery eventually took place in mid-to-late 2022. In early-to-mid 2023, Mr. Mann became seriously ill with cancer and suffered a stroke; his son Manny, an employee of Mann Tire, deposed that he was consumed with his father's care during this period and unable to attend properly to the litigation. Defendants' counsel then moved to be removed from the record, an order granted by Dube J. on June 2, 2023.

Policy and legislative provisions at issue

Rule 15.04 of the Rules of Civil Procedure governs orders removing a lawyer from the record. Subrule (4)(d) requires that, where the client is a corporation, an order must include the text of subrules (6) and (7), which inform the client of a thirty-day window to retain new counsel or seek leave for a non-lawyer representative, and of the consequences of failing to do so. The removal order in this case omitted this required language. Rule 15.04(5) further requires the removed lawyer to promptly serve and file proof of service of the order on the client and other parties.

Because the order lacked the prescribed language, the Defendants argued they were never properly warned of the consequences of failing to appoint new counsel, namely that their defence and counterclaim could be struck. The Plaintiffs moved on that basis, and their motion was heard by McArthur J. on September 1, 2023, whose endorsement stated only "order signed" by the registrar. Default judgment followed on October 19, 2023, in the amount of $573,819.79 plus 24% per annum pre-judgment interest and costs to be assessed, notwithstanding that the underlying claim was pleaded at $281,798.91 and that the promissory note itself appeared not to provide for pre-judgment interest.

Reasoning and analysis

Justice Nicholson applied the five-factor test from Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194: promptness in bringing the motion, a plausible excuse for the default, an arguable defence on the merits, potential prejudice to each side, and the effect on the integrity of the administration of justice. On promptness, the court accepted that the Defendants only learned of the default judgment in July 2024, when Manny was informed by a bank manager, and found the subsequent steps to retain counsel and investigate the file reasonable, even though the motion itself was not brought with utmost dispatch.

On excuse, the court found the deficient removal order compounded Mr. Mann's health crisis, holding that neither the Plaintiffs nor their counsel were at fault for the drafting error but that the Defendants could not be blamed for it either. Citing Cunningham v. Hutchings, 2018 ONCA 365, the court emphasized the importance of the prescribed language in bringing home to an unrepresented litigant the consequences of inaction. On the merits, the court was troubled that the default judgment exceeded double the amount actually claimed and included interest seemingly unsupported by the promissory note's terms, concluding this gave the proposed defence an air of reality. The court found prejudice favoured the Defendants given the judgment's inflated amount, and that allowing it to stand would harm the integrity of the justice system more than any loss of priority to the Plaintiffs over other creditors.

Ruling and overall outcome

Justice Nicholson ruled in favour of the Defendants, Mann Tire Ltd. and Hardeep Singh Mann, setting aside the default judgment dated October 19, 2023, the noting in default, and the writs of execution filed against them. The Statement of Defence and Counterclaim was revived. No monetary award was made to either party at this stage; instead, the court directed that costs thrown away and the costs of the motion be resolved between the parties, with the Plaintiffs required to identify costs sought by August 21, 2026, and further written submissions due in September 2026 if the issue remains unresolved.