COURT FILE NO.: 229/09
DATE: 20091020
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
IRVING GARTEN
Plaintiff
(Respondent)
- and -
ANNE KRUK
Defendant
(Appellant)
Robert A. Watson, for the Plaintiff (Respondent)
Alfred J. Esterbauer, for the Defendant (Appellant)
HEARD at Toronto: October 20, 2009
JANET WILSON J.: (Orally)
The Appeal
[1] This appeal raises issues in a motion to set aside the noting of default when the actions of counsel for both parties are to blame.
[2] The appeal from the order of Master Dash dated April 30, 2009, refusing to set aside the noting in default of the defendant pursuant to rule 19.03(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, is granted.
Standard of Review
[3] The standard of review of a final order of a Master is stipulated in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 and Zeitoun v. Economical Insurance Group (2009), 2009 ONCA 415, 307 D.L.R. (4th) 218) (Ont. C.A.). Findings of fact should not be reversed on appeal unless the lower court made a palpable and overriding error in the assessment of facts or in the application of the facts to the law. For questions of law, the standard is correctness.
Background and the effect of the order made
[4] The defendant is an 86 year-old woman who entered into an unsolicited real estate transaction for the sale of her home without legal representation or an agent acting on her behalf. The plaintiff knocked on the door of her home with a signed Agreement of Purchase and Sale in hand. The result of the Master’s order is to preclude the defendant from defending the plaintiff’s claim for specific performance for the sale of her home.
[5] The allegations outlined in the proposed statement of defence raise issues of undue influence, duress and intimidation, and further alleges that the plaintiff had limitations with respect to the comprehension of the document in question.
[6] The Agreement of Purchase and Sale was signed on August 18, 2007. On August 21, 2007, a lawyer on behalf of the defendant advised in writing that the defendant contested the validity of the Agreement of Purchase and Sale, and asserted that the agreement was not binding due to the circumstances at the time it was entered into.
[7] The plaintiff moved before Master Clark to obtain a certificate of pending litigation when the statement of claim was issued in September 2007. Mr. Salsberg was retained on behalf of the defendant to defend the motion. That motion to obtain a certificate of pending litigation did not proceed, although an interim order was made preventing the defendant from selling her home.
[8] After the initial appearance, nothing happened on the file, apart from a letter written by counsel to the defendant in November 2007 enclosing the order of Master Clark.
[9] Counsel for the plaintiff took steps to have the defendant noted in default by the Registrar, some six months after the initial court appearance. No demand was made by counsel for the plaintiff requiring a statement of defence to be filed within a certain number of days. No notice was provided to counsel for the defendant that noting in default was contemplated.
The Issue
[10] The defendant’s motion to set aside the noting of default was refused. The defendant argues that on any reasonable assessment of the factual matrix in this case, the order requested by the defendant should have been granted.
[11] I agree.
[12] Respectfully, in my view, the Master erred in his general approach to the motion. It appears that he did not apply the overriding principle that the court should exercise its discretion to provide a just result for the party and that matters should be dealt with on their merits. To ignore this overriding principle was incorrect.
[13] Although he cited the correct principles, the Master approached the issues in a highly technical and compartmentalized fashion in his consideration of the factors relevant to a rule 19.03(1) motion. I conclude that there were specific palpable and overriding errors within the meaning of Housen, supra, with respect to some of his findings of fact.
[14] As well, the Master’s order reinforces sharp practice.
The factors to consider in a rule 19.03(1) motion
[15] Rule 19.03(1) provides that “the noting of default may be set aside by the court on such terms as are just.”
[16] The Master notes, correctly, that motions to set aside a noting of default are generally granted in the usual case. The Courts should strive to grant reasonable accommodations and allow disputes to be resolved on their merits. Matters should not be determined based upon a technical default.
[17] The factors to be considered by the court on a motion to set aside a noting of default were outlined in Metropolitan Toronto Condominium Corporation No. 706 v. Bardmore Development Ltd. (1991), 1991 7095 (ON CA), 3 O.R. (3d) 278 (C.A.). At para. 18, Mckinlay J. states:
- Rule 19.03 provides that a noting in default “may be set aside by the court on such terms as are just” …. it is the context and factual situation in which the discretion arises which should determine its application. Such factors as the behavior of the plaintiff and of the defendant, the length of the defendant’s delay, the reasons for the delay, and the complexity and value of the claim involved are all relevant factors to be taken into consideration. However, I consider that it would only be in extreme situations that a trial judge would exercise his discretion to require an affidavit as to the merits of the defence on a motion to set aside a noting in default.
[18] These principles have been applied and refined over the years in the case law. What Mckinlay J. outlined were factors to consider in the factual matrix, not rigid requirements.
[19] I turn to consider the reasons of the Master.
Intent to Defend
[20] The Master concluded that the defendant did not demonstrate an intent to defend. Respectfully, the Master did not consider the letter written by a lawyer three days after the Agreement of Purchase and Sale was signed contesting the validity of the sale. The defendant immediately retained counsel. The fact that the defendant was before him and is here today speaks volumes of the defendant’s desire and intent to defend the claim.
Explanation for Default
[21] The Master was critical of the conduct of Mr. Salsberg, counsel for the defendant. Clearly the conduct of Mr. Salsberg and his office merit criticism. However, the defendant should not be punished for the errors of her counsel. Mr. Salsberg filed a lengthy affidavit dealing with the issues relevant to the Rule 19.03 motion. He states specifically in his affidavit that the reason for failing to file a defence was as outlined in paragraph 16 of the reasons of the Master:
“Due to inadvertence on the part of my office, the delivery of a Statement of Defence was not diarized, and the matter was inadvertently overlooked.”
[22] The Master did not accept the sworn statement of a solicitor and conducted his own analysis with respect to credibility. I note that the solicitor was not cross-examined on his affidavit. There was no other evidence as to why a defence was not filed.
[23] In my view, the Master erred in his assessment of these facts and embarked into an analysis of other factors that may or may not have had relevance. This was a palpable and overriding error.
Failure to Warn
[24] The reasons of the Master do not consider the questionable conduct of plaintiff’s counsel. Counsel failed to advise either verbally or in writing the defence counsel of his intent to note the defendant in default if the statement of defence was not filed.
[25] The plaintiff’s counsel then waited six months after noting the defendant in default before notifying counsel for the defendant that his client had been noted in default.
[26] In my view, the principles enunciated by Nordheimer J. in Xpress View Inc. v. Daco Manufacturing Ltd. (2002), 36 C.C.E.L. (3d) 78 (Ont. S.C.) apply:
- The costs thrown away were incurred as a result of the plaintiff taking advantage of a slip by the defendant’s solicitors. This is a practice that is happening with altogether too much frequency. Indeed, this is the second time in a week that I have been faced with such a situation and it is one which I believe should stop. Counsel have obligations to deal with each other fairly and not to take advantage of missteps by opposing counsel. This requirement is reflected in the Rules of Professional Conduct, rule 14 of which, commentary 4, states, in part:
“The lawyer should avoid sharp practice, and should not take advantage of or act without fair warning upon slips, irregularities or mistakes on the part of other lawyers not going to the merits or involving the sacrifice of the client’s rights.”
(Emphasis added)
- The requirement of integrity is also reflected in the case law. As Rose J. said more than 100 years ago in Re Backhouse v. Bright (1889), 13 P.R. 117 (Ont. H.C.J.):
“To build up a client’s case on slips of an opponent, is not the duty of a professional man.”
[27] The comments of Rose J. one hundred years later still apply, although the duty now applies to both men and women in the practice of law.
[28] In the case before Nordheimer J., he noted that there was no follow-up letter or telephone call made to advise counsel that the defence was not received. He observes:
- Plaintiff’s counsel ought to have realized the potential for a slip or error and should, in my view, have had further contact with the defendant’s solicitor before taking default steps.
[29] I agree with the analysis of Nordheimer, J.. These principles apply squarely to the facts of this case. Counsel for the plaintiff had a professional duty to advise opposing counsel before taking steps to note the defendant in default. This obligation is evident, particularly in the facts of this case. The effect of the Master’s order reinforces what is sharp practice. This is a palpable overriding error.
[30] The Master correctly concluded that there was no real issue with respect to any delays after the noting of default was discovered. The Master also correctly concludes that there is no issue with respect to prejudice on the part of the plaintiff as a result of setting aside the noting of default, since the very extensive delays are a clear responsibility of the plaintiff.
[31] The plaintiff’s counsel suggests that the defendant may have been lying in ambush and was in essence treating the Agreement of Purchase and Sale as an option to sell her home in a changing real estate market. This suggestion more aptly applies to the conduct of the plaintiff.
[32] For these reasons, the appeal is allowed. The noting of default of the defendant’s claim is set aside. The statement of defence shall be served and filed within 15 days.
[33] The plaintiff’s action shall not be struck as failing to set this matter down for trial in accordance with my order containing my fiat.
Costs
[34] In the circumstances, there shall be no order as to costs.
JANET WILSON J.
Date of Reasons for Judgment: October 20, 2009
Date of Release: October 23, 2009
COURT FILE NO.: 229/09
DATE: 20091020
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
IRVING GARTEN
Plaintiff
(Respondent)
- and -
ANNE KRUK
Defendant
(Appellant)
ORAL REASONS FOR JUDGMENT
JANET WILSON J.
Date of Reasons for Judgment: October 20, 2009
Date of Release: October 23, 2009