Arguable Defence Still Matters in Default Cases

Background

In June of 2018, Ashley Steinkey was injured when a wind-tossed patio umbrella struck her on a patio. She filed a claim against various defendants in May of 2020, including Starbucks Coffee Canada Inc. (“Starbucks”).

By December of 2022, more than two years after having been served with the claim, Starbucks had still not a filed a Statement of Defence. As a result, Starbucks was noted in default pursuant to Rule 3.36¹ of the Alberta Rules of Court.

In January of 2024, Starbucks applied to have the noting in default under Rule 9.15² of the Alberta Rules of Court, and in June of 2025, Applications Judge Summers declined to set aside the noting in default.

Decision

Earlier this year, Justice Michael Lema upheld the lower court decision, and in doing so highlighted the conflicting approaches which the Alberta Court of Appeal has recently taken with respect to the applicable test for setting aside a noting in default under Rule 9.15.

Specifically, Justice Lema noted two lines of authority in terms or whether or not an “arguable defence” is a pre-requisite to setting aside a noting in default.

1. The Fort McKay lines of cases³ which decided that “having an arguable defence is effectively mandatory” to set aside a noting in default and provided for the following three part test:
   1. an arguable defence;
   2. … the defendant did not intend to allow the judgment to go by default and offers some reasonable excuse for the default such as illness or a solicitor’s inadvertence; and,
   3. … once the noting in default came to the defendant’s attention, they promptly applied to set it aside.

There is a discretion involved; as R. 9.15(3)(a) states, the Court can open up a noting in default “on any terms the Court considers just”.

2. The more recent Liberty Mortgage decision, where the Court of Appeal commented that Courts will “rarely require a defendant who has been noted in default to show an arguable defence on the merits, but a court may require that where there has been a significant delay.” In Liberty Mortgage, Justice Slatter indicated that the test to set aside a noting in default was set out in Al-Ghamdi v Alberta para 11:

In circumstances where the defendant was properly noted in default, but in the circumstances it is fair and just to allow that defendant an opportunity to defend the claim on the merits. [emphasis added]

However, on the particular facts of the case, Justice Lema found that he did not have to choose between the two tests and explain his choice. He concluded that Starbucks had failed to meet either the Liberty Mortgage “fair and just test” or the Fort McKay tri-partite test, and as such, dismissed Starbucks’ appeal.

Takeaway

Noting in defaults frequently occur on claims where insurance coverage is involved, often due to insureds not understanding the Alberta Rules of Court and being unfamiliar with the deadline to file a Statement of Defence (or failing to advise their insurer when they have been served with a lawsuit).

Insurers seeking to have a noting in default set aside should expect that lower courts in Alberta will continue to grapple with the conflicting lines of Court of Appeal authority identified by Justice Lema. In fact, Justice Angotti has commented on the Steinkey decision on two separate occasions.

Practically speaking, the existence of an “arguable defence” is likely to remain an important, if not essential, factor in applications to set aside noting in defaults.

In deciding whether or not to apply for an application to set aside a noting in default, insurers should always consider whether an insured has an arguable defence which it can demonstrate is “triable through its proposed pleadings or evidence”.

If you have questions about this decision or how it may affect your approach to default situations, contact Jonathon Austin in Edmonton, Jane Freeman in Calgary or any member of our Insurance Group for assistance.

¹ 3.36(1)  Subject to subrule (2) and Part 11, Division 8, if a defendant does not file a statement of defence or demand for notice, or if the defendant’s statement of defence is struck out, the plaintiff may, on filing an affidavit of service of the statement of claim,