Ontario Court of Appeal Reaffirms Test for Setting Aside Default Judgement in Family Law
In the recently released decision of Zia v. Ahmad, 2021 ONCA 495 the Ontario Court of Appeal reaffirmed the test to set aside a default judgment obtained in family law cases.
The parties in this matter were married in 2009 and separated in 2015. In 2016, the husband and wife took part in arbitration through the Ahmadiyya Muslim community. On August 13, 2016, the Arbitration resulted in an Award that addressed four issues:
- divorce and habitation rights;
- dower money;
- possession of certain household items; and
- possession of certain jewelry.
On the Award form, the section for spousal support was crossed off with the notation “N/A” and an issue concerning the matrimonial home was not decided. Instead, the form conveyed that the parties “consult court because of the legal implications of subject matter”.
On March 6, 2018, two years after the Arbitration award, the Wife commenced court proceedings, and sought remedies for spousal support and equalization. She served her application and then amended the application in June 2018.
The husband, perhaps under the impression that he did not need to respond because arbitration had already ended the matter, chose to disregard the application. In February 2019, the Wife noted the husband in default and obtained uncontested relief. The husband eventually learned of what had unfolded then brought a motion under r. 25(19) of the Family Law Rules, O. Reg. 114/99 to set aside the default judgment. Rule 25(19) reads as follows:
CHANGING ORDER — FRAUD, MISTAKE, LACK OF NOTICE
(19) The court may, on motion, change an order that,
(a) was obtained by fraud;
(b) contains a mistake;
(c) needs to be changed to deal with a matter that was before the court but that it did not decide;
(d) was made without notice; or
(e) was made with notice, if an affected party was not present when the order was made because the notice was inadequate or the party was unable, for a reason satisfactory to the court, to be present.
The motions judge, the Hon. Justice Cheryl Lafrenière of the Hamilton region,dismissed the Husband’s motion to set aside her default order because he did not adequately explain why he waited more than 18 months after he was served to bring his position to the court, he did not have an arguable case on its merits, he provided no financial disclosure, and he did not come to the court with clean hands. The Husband appealed.
Court of Appeal
Arguing on behalf of the husband, Mr. Gary Joseph, a familiar appellate counsel, argued that the Hon. Justice Lafrenière had erred because:
- she failed to appreciate that the default order was made without jurisdiction since the parties had already engaged in arbitration;
- she failed to appreciate that the Award gave rise to a res judicata defence. (FYI: res judicata means a matter that has already been adjudicated by a court/ arbitrator may not be pursued further by the same parties);
- she should have recognized that the husband was self-represented and allowed him to provide viva voce (oral) evidence at the motion.
As it related to the first argument regarding jurisdiction, the Ontario Court of Appeal made several points.
- Firstly, there was nothing in the evidence to suggest that the husband and wife’s arbitration also covered issues of spousal support and equalization. Frankly, the Award form had a “N/A” for spousal support and redirected issues regarding the matrimonial home to a court.
- Secondly, the “arbitration” that the parties participated in, triggered section 59.2(1)(b) of Family Law Act, R.S.O. 1990, c. F.3, which effectively stands for the principle that for something to be a family arbitration agreement as defined under section 51 of the Family Law Act, it needs be “conducted exclusively in accordance with the law of Ontario or of another Canadian jurisdiction”.
- Thirdly, even if the document was a true “family arbitration agreement”, a court only loses its jurisdiction in such cases if the responding party brings a motion to stay. Here the husband did not bring a motion to stay.
Regarding the husband’s res judicata argument, the Court of Appeal rejected it because the issues dealt with by the arbitration Award and by the court were not the same. The Award did not deal with equalization or support, which was open for the court.
As it related to the husband being self-represented, the Court of Appeal offered little encouragement to the husband. Apparently, the motion judge had considered the fact that the husband was self-represented but was ultimately unconvinced that he satisfied the test under rule 25(19), which requires a consideration of the following factors when facing a motion to set aside a default judgment:
- whether the moving party moved promptly, after learning of the order, to have it set aside;
- whether the moving party has provided an adequate explanation for the failure to respond to the proceeding in accordance with the Family Law Rules;
- whether the moving party has established an arguable case on the merits;
- whether the moving party is acting in good faith and with “clean hands”;
- the prejudice that may be suffered by the moving party if the motion is dismissed and to the responding party if the motion is allowed; and,
- whether, in the final analysis, the interests of justice favour setting aside the judgment.
Here the Husband only satisfied the first factor. In the circumstances, she did not need to hear oral evidence from the husband.
Aside from the test under rule 25(19) being reaffirmed, the key lesson to take away from this case is that faith-based forms of arbitration may not end a matrimonial dispute between couples. Notwithstanding case laws’ repeated encouragement of settlement and use of alternative dispute resolution (and even new requirements being introduced in the Divorce Act), only certain kinds of settlement or conflict resolution are respected – that is processes that operate exclusively within the laws of Ontario or Canada. Faith-based forms of arbitration may not fall within that category.
Another lesson to take away from this case is the importance of having legal counsel when undergoing a matrimonial separation. Too often, people consult the internet and mistakenly believe they know all that is required to effectively advocate for themselves. Nothing could be further from the truth. There are many areas here where counsel could have assisted the husband in protecting himself, or at least protect his expectations.
For instance, with counsel, the husband could have resolved all the issues as opposed to writing “N/A” for spousal support and nothing for equalization. Alternatively, prior to giving the arbitration “Award”, the husband could have asked for releases for equalization and support. For that matter, with counsel he could have responded to the wife’s application and did not need recourse under rule 25(19). But none of that happened, and getting a lawyer by the time he was at the Court of Appeal was too late.
Increasingly, our firm is contacted by self-represented litigants in family law files in the middle of proceedings where harmful or ineffective positions have already been committed to. It is best to avoid such scenarios and to retain counsel early. Those first few steps, which litigants think saves them a few dollars, can have profound impacts on the outcome of the case. It is best to retain counsel early.