Court File and Parties

COURT FILE NO.: DC-07-00000383-0000 DATE: 20080603

SUPERIOR COURT OF JUSTICE – ONTARIO (DIVISIONAL COURT)

RE: Select acoustic supply inc., Plaintiff/ respondent v. The college of physicians and surgeons of ontario, harbridge & cross limited, universal intereiors inc., jacques corbeil and steven thibault, defendants/appellants

BEFORE: Jennings, Lederman and Low JJ.

COUNSEL: Stephany Mandin, for the the Defendant Steven Thibault, Appellant Frederick Matthews, for the Plaintiff, Respondent

HEARD AT TORONTO: May 5, 2008

Endorsement

[1] This is an appeal from the order of Master Polika dated July 19, 2007 in which the appellant Thibault's motion to set aside the default judgment against him was dismissed. The appellant Thibault is one of the defendants in this construction lien action.

[2] The order was final and the standard of review is correctness.

[3] The Statement of Claim was issued on November 18, 2005 under the Construction Lien Act, R.S.O. 1990, C.30. The action as against the appellant Thibault is based on an alleged guarantee of the obligations owed by the corporate defendant Universal Interiors Inc. to the plaintiff.

[4] Service was effected by sending a copy of the claim, on January 10, 2006, by registered mail to the appellant. The claim was sent to the appellant at 21 Winchester Road, North York, Ontario. This was the address shown for him in the corporation profile report for the corporate defendant Universal which the plaintiff's solicitors obtained from the Ministry of Consumer and Business Services at or just before the date of service. The claim was also sent to him at the address of the defendant Universal of which the appellant was one of the two principals at the time of execution of the alleged guarantee.

[5] The master held that there was not proper service under either section 87 of the Construction Lien Act or under the Rules but he appears to have been satisfied that notice of the claim likely did come to Thibault's attention. Although no formal motion was made under Rule 16.08 to validate service and notwithstanding the master's comment as to lack of compliance with the method of service, we find an order validating service to have been unnecessary as we find that the plaintiff complied with section 87 of the CLA. The statement of claim was sent by registered mail to the last address for the appellant in the possession of the plaintiff at the time of mailing. In our view, this was in compliance with the Act. This is therefore not a case of failure to comply with the method of service provided by the Rules or with an alternative method of service permitted by statute and accordingly, the appellant is not entitled to have the default judgment set aside as of right as a nullity as described in Royal Trust Corp. of Canada v. Dunn (1991), 6 O.R. (3d) 468.

[6] In exercising his discretion whether or not to set aside the judgment, the master properly considered the three–pronged test required to be met by the appellant if the default judgment is to be set aside.

[7] The party seeking to set aside a default judgment must set out the circumstances under which the default occurred and give a plausible explanation for the default; he must move to set aside the judgment as soon as possible after he becomes aware of it; and he must set forth facts to support the conclusion that there is at least an arguable defence on the merits.

[8] The master was of the view that the appellant had not met any one of the three tests.

[9] With respect to the question of the delay in bringing the motion, it is common ground that the appellant first learned of the judgment in July, 2006. The appellant did not launch his motion until March 30, 2007, some eight months later. It appears from the correspondence adduced in evidence that the parties were debating the likely outcome of a motion to set aside the judgment by way of letters between counsel. This appears to have continued until November, 2006. The further and significant delay to March 30, 2007, which is the date of the appellant's notice of motion, is unexplained. In the circumstances, it can hardly be said that the appellant moved as soon as possible and to the contrary, there appears to be no satisfactory explanation for the long delay.

[10] With respect to the question of whether the appellant has shown a plausible explanation for the default, the master is, in our view, required to consider and weigh the evidence as to its plausibility. Whether an explanation is plausible or not is somewhat elastic. Given the evidence before the master as to the relationship between the appellant and the Raimundos and the evidence as to the appellant's mailing address as opposed to his cottage address, we are not able to say that the master was clearly wrong in coming to the conclusion that the explanation proffered by the appellant was not plausible.

[11] The appellant argues that the master exceeded his jurisdiction when he weighed the evidence going to the merits of the defence and that the order should therefore be set aside on that basis alone.

[12] The claim is on a guarantee of the indebtedness of the corporate defendant Universal Interiors Canada Inc., an entity of which the appellant had been a majority shareholder, officer and director. The appellant's proposed defences were that he was not responsible under the alleged guarantee because he had withdrawn from participation in the corporation and had transferred his 51% of the common shares to another individual prior to the date of the claim, because there was an error in the amount claimed as the outstanding balance of unpaid invoices, and because he did not sign the guarantee.

[13] The first ground of defence has no merit in law. Mere alienation of shares in the corporation and resignation of his positions as officer and director do not determine the effectiveness of the appellant's guarantee if he gave one. The appellant challenged the quantum alleged to be owing on unpaid invoices by setting out in his affidavit the particulars of several payment cheques that were not referred to in the statement of claim. In Mr. Mayhew's affidavit in response, a complete running account was put in evidence which demonstrated that the appellant's contention that there were unaccounted for payments was incorrect. There was, however, an acknowledged arithmetic error which the master corrected by amending the default judgment down to $58,235.85 from $62,451.60. Of the appellant's denial that he signed the guarantee, the master considered the evidence and stated"I find his defence that he never signed the credit agreement to be completely devoid of reality. Mr. Thibault's statements are self serving and contradictory. I find that the alleged defence relating to the signing of the credit agreement to be devoid of any merit."

[14] Assuming that the examination of this third prong of the three part test is the same as that on a summary judgment motion, we are not satisfied that the master erred in law by engaging in some weighing of the evidence to determine whether there was a genuine issue that ought to go to trial. While Aguonie v. Galion Solid Waste Material Inc. (1998), 38 O.R. 161 (C.A.) and Dawson v. Rexcraft Storage Warehouse Inc., (1998), 164 D.L.R.(4th) 267 (C.A.) have not been expressly overruled as to the function of the motions judge on a summary judgment motion, recent decisions of the Court of Appeal do suggest that the court is stepping back from a rigid application of the principle that the motions judge is not to weigh or assess the credibility of the parties' positions and of their evidence (see Baldwin v. Daubney, [2006] O.J. No. 3824(C.A.) and Goldman v. Devine 2007 ONCA 301, [2007] O.J. No. 1491 where the claim was summarily dismissed after the motions judge considered the evidence adduced by the plaintiffs and found it lacking an air of reality in the absence of production of corroborating documents said by plaintiffs to exist).

[15] Even if the master was incorrect in his approach to the third prong of the test, and if he weighed the evidence where he ought not to have done so, or if he erroneously omitted to consider the evidence of the accountant, we are of the view that the result would not have been affected given the master's findings with respect to the lack of plausible explanation for the default, which was supportable on the evidence, and the failure to move as soon as possible to set aside the order.

[16] Quite apart from the application of the three-pronged test for setting aside a default judgment, there was an issue raised on the appeal as to whether the claim on the guarantee was properly joined in this Construction Lien action. The matter appears to have been first raised by the master and the parties were given an adjournment to marshal arguments thereon. The issue was dealt with at paragraphs 5 to 9 of the master's reasons. We are of the view that the master was correct in concluding that joinder was proper. The supply of materials to Universal was pursuant to a credit agreement; the credit agreement was a sub-contract. The guarantees of the appellant and Corbeil were an integral part of and a condition of the plaintiff entering into the credit agreement with Universal. We are not satisfied that the master erred in law on this point.

[17] The appeal is therefore dismissed.

[18] If the parties are not able to agree as to costs, submissions may be made in writing by the respondent within 10 days following release of these reasons and by the appellant within 10 days thereafter.

Low J.

Jennings J.

Lederman J.

DATE: June 3, 2008