BC Court Of Appeal Confirms Tests For Setting Aside Default Judgment And For Special Costs Awards, In Case Where Pleadings Named The Wrong Party

• Published date: 05 November 2021
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: McCarthy Tétrault LLP
• Author: Canadian Appeals Monitor, Daniel Siracusa and Joannie Fu

In Malik v. Eagle Mountain Farms (A Partnership),¹ the British Columbia Court of Appeal (the "BCCA") allowed an appeal to set aside a default judgment, while dismissing a cross-appeal seeking reversal of a special costs award. Malik highlights the importance of ensuring pleadings are accurately drafted, and showcases the principle of deference as to a discretionary award for special costs.

Background

Malik involved a dispute about a loan agreement between Eagle Mountain Farm Ltd. ("Eagle Mountain"), Jasbir Banwait, and Manmohan Heer (Messrs. Banwait and Heer collectively, the "Appellants"), and Raminder Kaur Malik ("Ms. Malik"). Ms. Malik made a personal loan to Eagle Mountain, which the Appellants, as directors for Eagle Mountain, signed as guarantors.²

After Eagle Mountain defaulted on the loan, Ms. Malik filed a Notice of Civil Claim in the British Columbia Supreme Court (the "BCSC") seeking monetary judgment. But critically, Ms. Malik named the wrong defendant: she alleged the loan was taken out by Eagle Mountain Farms (A Partnership), an entity in which the Appellants were also involved (the "Partnership").³ The Appellants did not file a Response to Civil Claim.

Ms. Malik obtained default judgments against the Appellants and the Partnership, and a garnishing order was executed against an account in the Partnership's name.⁴ The Appellants applied in the BCSC for an order setting aside the default judgments and the garnishing order. Ms. Malik consented to having the default judgment against the Partnership set aside, and applied to substitute "Eagle Mountain Farm Ltd." for the Partnership.⁵

The Chambers Judge's Decision

Under Rule 3-8(11) of the Supreme Court Civil Rules, the court has discretion to set aside judgments given in default of a Response to Civil Claim. In considering this issue in Malik, the chambers judge (Armstrong J.) applied the test set out in Miracle Feeds v. D & H Enterprises Ltd.⁶ He concluded the Appellants did not meet the test and dismissed the Ms. Malik's application.⁷ He also dismissed Ms. Malik's application for a retroactive amendment of the pleadings (i.e., nunc pro tunc).⁸

The Appellants sought special costs due to Ms. Malik's error in naming the Partnership as a defendant. Armstrong J. granted it, finding that Ms. Malik's approach to the litigation was "sufficiently cavalier to warrant a rebuke".⁹

The Appeal Decision

The Issues

The BCCA considered whether Armstrong J. erred:

• by failing to consider factors beyond those in...