Executive Summary: Key Legal and Evidentiary Issues

• Default judgment was declared irregular due to non-compliant service of the Amended Claim under Rule 16.03(5).

• Rudensky was served at a Burlington address not proven to be his place of residence, invalidating substituted service.

• The court held that a defendant not properly served is not in default under Rule 18.01(a) and thus cannot be noted in default.

• Rule 16.08 discretion to validate service was declined due to lack of evidence the claim came to Rudensky’s notice pre-default.

• Prior authority (Royal Trust and Redabe) was upheld, allowing irregularly obtained default judgments to be set aside as of right.

• As a result, both the default judgment and the noting in default against Rudensky were set aside by court order.

Facts and procedural history

In Anson Advisors Inc. et al v. Doxtator et al, the plaintiffs—Anson Advisors Inc., Anson Funds Management LP, Anson Investments Master Fund LP, and Moez Kassam—brought a defamation action naming Andrew Rudensky as a defendant through a Fresh As Amended Statement of Claim filed on May 27, 2022. On August 23, 2022, Rudensky was noted in default, and on October 4, 2023, Justice Osborne granted default judgment against him in the amount of $450,000 for general damages for defamation. The judgment specified that it was without prejudice to the plaintiffs’ right to seek further relief.

Rudensky appeared in person at the hearing of the plaintiffs’ motion for default judgment on January 25, 2023, requesting an adjournment to retain counsel. Justice Osborne denied the request and proceeded with the hearing unopposed, affirming that Rudensky could later move to set aside any judgment rendered.

Challenge to service and evidence presented

Rudensky subsequently moved to set aside both the default judgment and the noting in default, arguing improper service. The plaintiffs had relied on substituted service under Rule 16.03(5), claiming service was made at 4328 Club View Drive, Burlington, Ontario—residence of Rudensky’s mother-in-law and her husband.

In support of his motion, Rudensky filed affidavits from himself, Karen Ann Cluhane (his mother-in-law), and Bruce Chapman (her husband), all asserting that Rudensky never resided at the Burlington property. Chapman stated that although he accepted an envelope for Rudensky on July 22, 2022, he was not asked if Rudensky lived there. Rudensky also attested that he had moved to Naples, Florida in the spring of 2022, and used the Burlington address only for the land transfer document when he sold his Oakville home, due to lacking an Ontario address.

Court’s legal analysis and application

Justice Cavanagh held that proper service was not effected. Under Rule 16.03(5), substituted service requires delivery to the defendant’s place of residence. The court accepted the affidavits from Rudensky, Cluhane, and Chapman as credible and unchallenged on cross-examination, concluding that the Burlington address was not Rudensky’s residence.

The court referenced Royal Trust Corp. v. Dunn and confirmed it remains good law, allowing default judgments obtained without proper service to be set aside as of right. The judge declined to exercise discretion under Rule 16.08 to validate service, distinguishing this case from McCann v. Yalda and Royal Bank of Canada v. HCB Thickson Ltd., as the facts did not support that Rudensky had notice of the Amended Claim before default.

Since the Amended Claim was not served properly, the time limit under Rule 18.01(a) to deliver a defence never began to run, and Rudensky was not legally in default. The judgment and noting of default were thus declared irregularly obtained.

Outcome

Justice Cavanagh concluded that the general rule from Royal Trust and Redabe should apply. The default judgment and the noting in default against Rudensky were set aside by court order dated January 19, 2024. Directions for written submissions on costs were provided if the parties could not resolve the issue.