Set Aside First, Win Second: A Belleville Franchise Rent Dispute

The situation

Tomasz and Kasia had built a multi-location franchise business over a decade, operating five outlets of the same quick-service concept across the region, three of them in Belleville. They leased their premises from a commercial landlord named Jae-won, who owned the plazas where four of the five locations sat. The lease arrangement was standard for a multi-unit tenant: one master agreement covering several units, with base rent, additional rent for common-area maintenance and property taxes, and an acceleration clause that let the landlord demand the balance of the entire remaining term if the tenant fell seriously behind.

Business had been difficult. Two of the five locations were underperforming, and Tomasz and Kasia had fallen behind on rent at those units while staying current everywhere else. They believed they had an informal understanding with Jae-won's property manager to catch up over several months, based on a handful of phone calls and a partial payment the property manager had accepted without objection. Nothing about that understanding was ever put in writing, which would later matter a great deal. They were wrong about how firm that understanding was, and they were about to learn the difference between a landlord who is patient and a landlord who has already instructed a lawyer.

What made the situation harder to see coming was that nothing about the relationship had changed on the surface. The same property manager who had accepted the partial payments kept exchanging routine emails with Tomasz about maintenance requests at the underperforming locations, none of which mentioned a deadline or a threat of legal action. Tomasz and Kasia had no reason to think the file had already moved to a lawyer's desk, and by the time it became clear that it had, the clock on responding to a formal claim was already running.

The problem

A statement of claim arrived at the business's head office address by regular mail, addressed to the corporate entity that held the leases. It named the acceleration clause and claimed the full remaining value of the lease term across all affected units, plus arrears and additional rent — a total of roughly $1,150,000. Under Ontario's civil procedure rules, a defendant who is served with a claim has a strict window to file a statement of defence. If nothing is filed in time, the plaintiff can ask the court to sign default judgment — a judgment entered without a trial or any assessment of the merits, simply because the defendant never answered.

The claim was routed internally to an assistant who was on leave the following week, and it sat unopened past the deadline. By the time Tomasz found it, Jae-won's lawyer had already obtained default judgment for the full amount claimed. The business's bank accounts were still operating normally, but a judgment of that size, left standing, would support garnishment, liens against the business's assets, and a demand for immediate payment that no franchise operation of that size could absorb without real damage.

Tomasz and Kasia came to Treadstone Law with the judgment already entered against them. The first question was not whether the rent dispute had merit — it was whether the judgment could be undone at all.

What we did

1. Moved quickly to preserve the argument that the response was reasonably prompt. Courts set aside default judgments when a defendant has a plausible explanation for missing the deadline, an arguable defence on the merits, and acts without unreasonable delay once they discover the judgment. We filed the motion within days of being retained, before the landlord could argue that Tomasz and Kasia had sat on their hands.
2. Built the evidentiary record for why the deadline was missed. An affidavit from Tomasz set out the internal mail-handling breakdown in plain terms — not as an excuse, but as a factual account of an isolated administrative failure in a business that had otherwise responded to every prior communication from the landlord. Courts are more sympathetic to a specific, verifiable lapse than a vague claim of oversight.
3. Assembled the arguable defence the motion required. A set-aside motion fails if the defendant has no real case to make once the judgment is lifted. We documented the informal repayment arrangement with the property manager, records of partial payments accepted after the alleged default, and evidence that the landlord's own maintenance obligations under the lease had gone unmet at one of the underperforming locations — a potential rent abatement claim that the accelerated judgment amount had never accounted for.
4. Challenged the accelerated damages figure directly. Under Ontario law, an acceleration clause in a commercial lease is generally enforceable as a matter of contract, but the amount claimed still has to reflect what was actually owed and mitigate reasonably — a landlord cannot claim rent for units it re-lets to someone else. We flagged that one of the two struggling locations had already been shown to a prospective replacement tenant, undermining the claim for the full remaining term on that unit.
5. Argued and won the set-aside motion. The motion judge accepted that the missed deadline was an isolated lapse, that Tomasz and Kasia had moved promptly once they learned of the judgment, and that the defence — disputed arrears, an informal payment arrangement, and a maintenance-based abatement claim — was substantial enough to warrant a hearing on the merits. The default judgment was set aside and the case was restored to the normal litigation track.
6. Defended the case through examinations and a pretrial. Setting the judgment aside did not end the dispute — it started it. Over the following year, both sides exchanged financial records, conducted examinations for discovery, and attended a judicial pretrial. We used the maintenance records and the partial-payment history to press for a settlement that reflected the true arrears rather than the inflated accelerated figure.

The outcome

The case settled before trial. Jae-won accepted payment of roughly $190,000, covering the genuine rent and additional-rent arrears across the two underperforming locations plus a portion of the landlord's legal costs, in exchange for releasing the acceleration claim entirely and allowing Tomasz and Kasia to wind down those two leases in an orderly way over several months rather than facing immediate termination. The other three locations, which had never fallen behind, were unaffected throughout.

The difference between the original default judgment and the negotiated settlement was close to $960,000 — the gap between a figure entered by default, with no scrutiny of whether it was actually owed, and a figure tested through discovery and negotiation. Tomasz and Kasia kept their three profitable locations running without interruption, avoided any garnishment or lien against the business, and exited the two weaker leases on terms they controlled rather than terms imposed by a judgment they never had the chance to contest.

The case is a clean illustration of a distinction that matters more than most business owners realize: a default judgment reflects a missed deadline, not a finding that the money is owed. Once it is set aside, the parties are back to square one on the merits — and square one, in this case, was a defensible dispute worth resolving for roughly a sixth of what the judgment had claimed.

What you can learn from this