Executive Summary: Key Legal and evidentiary issues

• Specific Engineering Solutions Ltd. applied to set aside a default judgment obtained by 4 Noses Brewing Company, LLC in a breach of contract dispute over defective lagering tanks.

• Admissibility of Mr. Stobbs' second affidavit was contested by the plaintiff as improperly filed and lacking personal knowledge, but the Court admitted it as probative and relevant.

• Whether the defendant's failure to file a response to the claim was wilful or deliberate was central to the first prong of the Miracle Feeds test.

• The defendant raised multiple defences including limited warranty exclusions, the alleged invalidity of a subsequent 2024 Agreement, and a statutory limitation period argument.

• Conflicting affidavit evidence from both parties created disputed facts regarding warranty terms, authority of the defendant's general manager, and acknowledgment of defects.

• The Court applied the Miracle Feeds test holistically, focusing on the overarching interests of justice rather than a rigid checklist approach.

The purchase agreement and the defective lagering tanks

In March 2021, 4 Noses Brewing Company, LLC ("4 Noses") and Specific Engineering Solutions Ltd. ("Specific Engineering") entered into a purchase agreement in connection with lagering tanks. The agreement included a limited warranty providing that the equipment was free from defects in material or workmanship under normal use and service. The warranty was valid for the longer of one year from the date of installation or one year and six months from the date of manufacture, and in the event of product failure, the defendant's obligation was limited to repairing or replacing the product.

Subsequently, 4 Noses discovered that the lagering tanks were defective. Despite the plaintiff's attempt at repairs, in accordance with the advice from the defendant, the defects rendered the lagering tanks unusable. In July 2022, the plaintiff advised Specific Engineering that the lagering tanks were defective and provided evidence of the defects. Over the course of 2023 and 2024, Specific Engineering attempted to resolve the issues with the lagering tanks without repairing and replacing them. The issues remained unresolved.

The 2024 Agreement and subsequent repudiation

In November 2024, the parties entered into an agreement (the "2024 Agreement") wherein Specific Engineering agreed to build new lagering tanks for 4 Noses and to cover certain associated costs. The defendant's general manager, John Leask, entered into the 2024 Agreement on behalf of the defendant. Subsequently, the defendant informed the plaintiff that the new lagering tanks would be delivered on or around May 2025. However, in May 2025, the defendant's representatives advised the plaintiff that there was a change in Specific Engineering's management and that they were unsure as to the delivery date for the new lagering tanks. In June 2025, the defendant indicated an intention to repudiate the 2024 Agreement when the defendant's sole director, Kosi Stobbs, informed the plaintiff that while the new tanks had been built, the defendant would not be paying for shipping or rigging costs, contrary to the 2024 Agreement. The plaintiff's counsel accepted the repudiation of the Agreement on behalf of 4 Noses as of December 9, 2025.

The notice of civil claim and default judgment

4 Noses filed its notice of civil claim on December 10, 2025, alleging breach of both the Agreement and the 2024 Agreement. After an unsuccessful attempt to personally serve Mr. Stobbs at his former address, the plaintiff sent the notice of civil claim by registered mail to the defendant's registered and records office at the law offices of Harper Grey in Vancouver on January 7, 2026. However, it appears that counsel at Harper Grey did not send the notice of civil claim to the defendant until February 2, 2026. Mr. Stobbs deposed that he was not aware of the notice of civil claim until then, when he received it via email from counsel at Harper Grey. A default judgment was obtained by 4 Noses on February 9, 2026, and entered on March 10, 2026. On March 9, 2026, Mr. Stobbs retained present counsel of record. When he received a copy of the default judgment on March 11, 2026, he promptly instructed counsel to apply to set aside the default judgment and notified the plaintiff on March 12, 2026, of his intention to bring the application.

The defendant's proposed response and defences

In its proposed response to civil claim, Specific Engineering raised several defences. The defendant asserted that in its general practice, a standard sales order is issued when the defendant and a customer enter into an agreement for the purchase of equipment, forming the contract between the parties. In January 2021, the defendant issued a standard sales order to the plaintiff that included the purchase of two lagering tanks. The Sales Order included a limited warranty with specific exclusions from liability and provided that the warranty was only valid for a period of one year from the date of installation, but not longer than one year and six months from the date of manufacture, whichever period was longer. The date of manufacture was August 2021, and based on that date, the limited warranty expired as of February 2023. The defendant argued that many of the defects complained of were either excluded from the warranty or fell outside the warranty period. Regarding the 2024 Agreement, the defendant contended that the limited warranty neither assumes nor authorizes any other person to assume on behalf of the defendant any other obligation or liability in connection with the sale or use of the products or equipment contained in the Sales Order. Specific Engineering further asserted that Mr. Leask did not have the authority to enter into a subsequent contract on behalf of the defendant that contradicted the standard terms of the Sales Order and the limited warranty therein. In the alternative, the defendant characterized the correspondence between Mr. Leask and the plaintiff as merely an agreement to agree and not binding on the defendant.

The admissibility dispute over affidavit evidence

A preliminary issue arose regarding the admissibility of Mr. Stobbs' second affidavit dated March 26, 2026, which the plaintiff challenged as not a proper responding affidavit under Rule 8-1(13) and because the plaintiff did not have an opportunity to respond to it. The plaintiff also objected on the basis that the events described therein occurred when Mr. Stobbs was not a director of Specific Engineering during the period of October 31, 2024, to May 30, 2025, and therefore did not have personal knowledge of those events. The defendant conceded the affidavit was filed late but submitted that it was probative, directly relevant to the issues before the Court, and that its admission would not prejudice the plaintiff. The Court admitted the affidavit under Rule 8-1(14), finding it advanced the truth-seeking interests of the administration of justice and caused low prejudice to the plaintiff, who was also given the opportunity to file a responding affidavit. Tommy Bibliowicz, an owner and director of 4 Noses, filed a responding affidavit dated April 6, 2026, disputing much of the evidence, including asserting that the Sales Order was merely a "quote" and not a binding sales order, that the terms of the limited warranty were never agreed to or brought to his attention by any representative of the defendant, and that on various occasions the defendant's representatives acknowledged liability and fault for the defective lagering tanks.

The Court's application of the Miracle Feeds test and the ruling

The Court applied the four-factor Miracle Feeds test holistically to determine whether the default judgment should be set aside. On the first factor, Justice Laurie found that the evidence fell short of establishing that the defendant's failure to file a response to civil claim was wilful or deliberate, noting the unclear cause of the nearly one-month delay between service and receipt, and Mr. Stobbs' deposition that he intended to defend the claim on behalf of the defendant. On the second factor, the plaintiff conceded, and the Court agreed, that the defendant brought the application as soon as reasonably possible. On the third factor, the Court found the defendant had demonstrated a defence at least worthy of investigation, based on the alleged terms of the limited warranty, the alleged invalidity of the 2024 Agreement, and the alleged application of the two-year limitation period pursuant to the Limitation Act, S.B.C. 2012, c.13. The Court noted it was not its function at this point to resolve factual disputes or make factual findings, and that the burden on the defendant was low. Considering the factors holistically and recognizing that the overarching aim is the interests of justice, the Court concluded that it would be appropriate to exercise its discretion to set aside the default judgment. The application to set aside the default judgment entered on March 10, 2026, was granted in favour of Specific Engineering Solutions Ltd., which was permitted to file its response to civil claim with leave to amend to add the limitation defence. No specific monetary amount was determined at this stage, as the decision concerned only the procedural question of setting aside the default judgment. Costs of the application were ordered to be in the cause.