Executive Summary: Key Legal and Evidentiary Issues

• A default judgment was retracted after the Superior Court found the defendants were prevented from defending themselves by surprise and error.
   
• Bailiff service records were challenged as inaccurate, but the court found the evidence insufficient to declare them false.
   
• Communications between the parties during settlement negotiations left the defendants unaware that a default inscription would be filed.
   
• Discontinuance rules under article 177 C.C.P. barred the special clerk from rendering a default judgment once the filing deadline had lapsed.
   
• Evidentiary conflicts over unpaid amounts and mitigation of damages raised a genuine dispute over the quantum owed.
   
• Ultimately, the court set aside the earlier default judgment, the related seizure, and the legal hypothec, with costs against the plaintiffs.
   

Facts of the case

Mitsubishi HC Capital Canada Crédit-Bail, Inc. and Mitsubishi HC Capital Canada Inc. sued 9272-5233 Québec Inc., Gouravjit Singh, and 6202098 Canada Ltée on July 26, 2024, seeking $453,510.67 in damages for breach of a lease-financing (crédit-bail) contract. The deadline for filing a request for a hearing and judgment date expired on February 7, 2025, with no valid extension sought. On December 18, 2025, the plaintiffs filed an inscription for default judgment for failure to answer, and on February 4, 2026, Special Clerk Caroline Pelletier rendered a default judgment. The defendants applied on or about April 15, 2026 to have that judgment retracted, with the hearing set for August 24, 2026.

Policy terms and contractual clauses at issue

The dispute centred on the lease-financing contract underlying the plaintiffs' claim. The defendants argued the plaintiffs had waived existing contractual defaults and had failed to mitigate damages by not repossessing three trailers still in the defendants' possession — a step that would have reduced the alleged debt. They also disputed the accuracy of the amount claimed, contending that payments made after the proceedings were filed had not been credited. Separately, article 20 of the Code of Civil Procedure, which imposes a duty of cooperation between parties, and articles 346 and 347 C.C.P., governing retraction applications and their deadlines, framed the procedural analysis. Article 177 C.C.P., concerning deemed discontinuance, proved central to the court's reasoning on the default inscription's validity.

Reasoning and analysis

The court applied the three-part test for retraction: timely filing, proof that the party was prevented from defending by fraud, surprise, or another sufficient cause, and a sustainable defence. The first condition was uncontested. On service, the court rejected Gouravjit Singh's claim that he never received the proceedings, finding his account unreasonable given exhibits P-19 and P-20, which showed he was aware of the litigation; the accompanying application to have the bailiff's minutes declared false was dismissed for want of convincing evidence. On the negotiations, however, the court found the parties' email exchanges, including Exhibit R-12, showed genuine confusion — the plaintiffs had warned that proceedings would resume absent payment, but never notified the defendants before filing the default inscription, despite more than 17 months having passed since the originating application. This supported a finding of surprise and error. The court also found that the special clerk lacked authority to render the default judgment, since more than ten months had elapsed after the filing deadline expired without a valid extension request, and relied on the Court of Appeal's recent guidance in Bordeleau v. Lavoie, 2026 QCCA 973, on the effect of deemed discontinuance under article 177 C.C.P. The court further found the evidence disclosed a real dispute over the amounts owed.

Ruling and overall outcome

The Superior Court granted the defendants' application, retracting the default judgment rendered on February 4, 2026, annulling that judgment, and declaring null both the pre-judgment seizure and the related notice of legal hypothec dated March 9, 2026. The application to have the bailiff's service minutes declared false was dismissed. Costs were awarded against the plaintiffs, Mitsubishi HC Capital Canada Crédit-Bail, Inc. and Mitsubishi HC Capital Canada Inc., though the decision does not state a specific monetary amount for those costs.