Ontario Superior Court: Tirecraft v Mann Tire Default Judgment Set Aside

• Justice Spencer Nicholson of the Ontario Superior Court set aside a default judgment against Mann Tire Ltd. and its principal in a case initiated by Tirecraft Ontario Inc.
• The default judgment, totaling over $573,000, was found to grossly exceed the initial claim of approximately $281,800.
• A key reason for setting aside the judgment was a flawed order removing defence counsel, which provided a plausible excuse for the defendants' non-participation.
• The court also considered Mr. Mann's son's explanation of caring for an ill father as a factor in the defendants' absence from proceedings.
• The ruling emphasized that hearing the case on its merits, despite delays, better served the interests of justice, with the defendants ordered to pay costs thrown away.

This ruling underscores the critical need for lawyers to ensure procedural correctness, especially when obtaining orders for removal of counsel, as flaws can be grounds for setting aside default judgments.

Justice Spencer Nicholson of the Ontario Superior Court recently addressed a significant procedural matter in the case of Tirecraft Ontario Inc. v. Mann Tire Ltd., 2026 ONSC 4678, by setting aside a default judgment that had been entered against Mann Tire Ltd. and its principal. The litigation originated from a statement of claim filed on January 7, 2020, by Tirecraft Ontario Inc., alleging that Mann Tire Ltd. had failed to remit payment for tires that were purchased and delivered. The plaintiffs initially sought approximately $281,800 from Mann Tire, with an equivalent sum claimed from the principal based on a promissory note.

In response, Mann Tire and its principal submitted a statement of defence and counterclaim on March 2, 2020. The discovery process then unfolded over an extended period. Plaintiffs provided their sworn affidavit of documents on August 31, 2021, leading to an order mandating the defendants to deliver their own affidavit by December 16, 2021, and to complete discovery examinations by March 11, 2022. The defendants eventually provided their sworn affidavit in July 2022, and discovery examinations proceeded for the principal on July 12, 2022, for Mr. Mann's son, Manny, as a representative of Mann Tire, in October 2022, and for Ayr Tire's principal on October 17, 2022.

A pivotal development occurred on June 2, 2023, when Justice Dube granted defence counsel's application to be removed as solicitors of record. Subsequently, on September 1, 2023, Justice McArthur heard the plaintiffs' motion to strike the statement of defence and dismiss the counterclaim. This ultimately led to the registrar signing a default judgment on October 19, 2023, for a sum of $573,819.79, alongside pre-judgment interest calculated at 24 percent annually, and the corresponding noting in default. The defendants, having retained new legal representation in October 2024, moved to set aside this default judgment on February 5, 2025.

A key element in the court's decision to set aside the default judgment was the acknowledgment of deficiencies in the order that removed the defence counsel from the record. This procedural misstep created a plausible explanation for the defendants' subsequent failure to actively participate in the plaintiffs' motion to strike their defence and counterclaim. The court recognized that the breakdown in legal representation, stemming from a flawed order, significantly impacted the defendants' ability to engage with the ongoing legal proceedings.

Further contributing to the defendants' non-participation was the personal circumstance of the principal's son, who stated he was unable to dedicate attention to the litigation during early to mid-2023 due to his father's severe illness, which required frequent hospitalizations. This health crisis, combined with the procedural irregularity surrounding the removal of counsel, presented a compelling narrative for the defendants' absence during critical stages of the case. The Superior Court considered these factors as a legitimate excuse for their non-engagement, underscoring the importance of understanding the context surrounding a party's default.

In its decision to set aside the default judgment, the Ontario Superior Court weighed several critical factors, ultimately concluding that hearing the case on its merits would best serve the interests of justice. A primary concern for the court was the substantial disparity between the amount awarded in the default judgment—over $573,000—and the initial claim of approximately $281,800. The court explicitly noted that the judgment appeared to grossly exceed the sums originally claimed and pleaded by the plaintiffs, a factor that heavily supported the decision to set aside the default judgment.

The court also determined that maintaining the default judgment would inflict greater harm on the administration of justice than the potential award to the plaintiffs. It highlighted that the defendants had actively participated in the discovery process before the relationship with their previous counsel deteriorated, and before the flawed order removing counsel was issued. While acknowledging the defendants' delay in filing the motion to set aside the default judgment, the court found that this delay did not outweigh the other compelling factors, especially given the reasonable efforts made by the defendants' new legal firm in fact-finding. As a condition, the court deemed it appropriate for the defendants to cover the costs thrown away due to the delay, ensuring that the plaintiffs are compensated for expenses incurred as a result of the procedural issues. This ruling underscores the critical need for lawyers to ensure procedural correctness, especially when obtaining orders for removal of counsel, as flaws can be grounds for setting aside default judgments.

This ruling underscores the critical need for lawyers to ensure procedural correctness, especially when obtaining orders for removal of counsel, as flaws can be grounds for setting aside default judgments. It also highlights the court's willingness to prioritize hearing cases on their merits, even after significant delay, particularly when default judgments appear grossly disproportionate or are based on procedural irregularities.

Source: Original reporting via Canadian Lawyer