In 2114223 Alberta Ltd v Lougheed, 2026 ABKB 78 (Mah), the Alberta Court of King’s Bench overturned a finding of long delay because a step had occurred after the relevant 3 year gap. The Court also set aside a default judgment despite that the statement of defence had previously been struck.
This case is important because it illustrates the complexity of the Alberta Rules of Court and the Court’s tendency to apply those rules as fairly as possible in the given circumstances.
Facts
The following were the pertinent facts and procedural history summarized by the Alberta Court of King’s Bench:
- 2114223 Alberta (“211”) was the defendant Lougheed’s former employer. In 2012, 211 had sued Lougheed as a former key employee in their insurance brokerage, alleging breach of an employment contract and breach of fiduciary duty when he switched brokerages and some clients came with him
- Lougheed was questioned for discovery in 2015 and responded to undertakings the next year
- In 2020, 211 wanted to question Lougheed again. It used a Notice of Appointment for questioning. He did not attend
- 211 filed an application seeking a declaration of contempt and striking out the Statement of Defence. They attempted to serve him but were unsuccessful. A process server posted them on the front door in 2021. He did not attend the hearing and his Statement of Defence was struck out on March 1, 2021
- On October 3, 2024, 211 applied for Default Judgment against Lougheed under rule 3.37 without notice. It was granted
- Lougheed learned about the judgment in 2025 and brought an application to vacate the default judgment, and to dismiss 211’s original claim against him as a result of long delay (i.e. over 3 years between struck defence and default judgment)
- Lougheed was initially successful in front of an application’s judge. That was appealed to a Justice, which is the decision summarized here
Analysis / Conclusion
Justice Mah overturned the Application Judge’s decision regarding the Rule 4.33 dismissal for long delay. Although 3 years had passed between steps, the 4.33 application was not brought until after the default judgment, which was a fresh “significant advance” in the action. Justice Mah explained that 4.33 applications run from the last significant advance in the action, which was only a bit over a year prior. The Court acknowledged the operation of the rule was a bit quirky:
[15] […] 211 benefits from a rather fortuitous combination of circumstances: first, the method of calculating the time period under Rule 4.33 as set out in caselaw, and second, that Rule 3.37 allows the Default Judgment application to be made without notice to anyone. (Had notice been given, Mr. Lougheed could have brought his long delay application in response.)
[16] The last significant advance was not the granting of the March 1, 2021 Striking Out Order. Rather, it was the securing of Default Judgment on October 16, 2024. The AJ overlooked the Default Judgment occurrence. Three years have not yet elapsed between the last uncontroversial significant litigation event and the bringing of the Rule 4.33 application. Given the caselaw regarding how the time period is calculated, I feel that I have no alternative but to allow the appeal with regard to the long delay issue.
The Court then considered whether 211’s default judgment ought to have been set aside by the Applications Judge.
The Court noted that the general test for setting aside default judgment under Rule 9.15(3) is (a) Does the applicant have an arguable defence? (2) Did they not deliberately let the judgment go by default, and have they some excuse for the default? (3) After learning of the default judgment, did they move promptly to open it up?
The Court noted that despite the general test, judicial discretion of fairness remained a factor:
[28] I conclude from all of the foregoing that Rule 9.15(3) remains inherently discretionary and does not mandate a particular result. I must have regard to the three-part test, which is now prescribed as a framework, but the decision must still reflect fundamental fairness given the facts and circumstances of the case.
The Court went on to find that prior to having his defence struck out, Lougheed had an arguable defence. And after having it struck out, he still had defences around the legal conclusions to be reached from the admitted facts and quantum of damages. He also did not have notice of the default judgment application, and had moved to have it set aside once he was aware of it. Accordingly, he had met the 3-part test.
The Court also considered whether it would be fair to set aside default judgment in the circumstances, and found that it was, because: (1) the fact that the default judgment was obtained without notice had operated to prevent Lougheed from bringing a cross-application to dismiss for long-delay, and (2) the striking out order in this case was effectively a contempt order, but he had never actually been found in contempt.
The Court declined to consider whether the striking out order could be challenged by Lougheed at this point in time, but provided him 45 days to try if he wished. The Court ordered that at the conclusion of that 45 days, 211 was at liberty to pursue another application for default judgment.
My Take
The Rules of Court are often complicated, especially in practice.
This case is a good illustration of the tendency of the Courts to interpret the Rules in a manner that avoids the procedural unfairness that might otherwise sometimes result.
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