Court File and Parties

DIVISIONAL COURT FILE NO.: DC605/16 DATE: 20170510

SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT

RE: HS & PARTNERS LLP, CHARTERED ACCOUNTANTS and CHARGER CONSULTING CORPORATION, Plaintiffs/Responding parties AND: MELVYN MERKER and KAREN MERKER, Defendants/ Moving parties

BEFORE: Stewart J.

COUNSEL: Ann A. Hatsios, for the Defendants/Moving Parties Ryan Flewelling, for the Plaintiffs/Responding Parties

HEARD at Toronto: March 28, 2017

Endorsement

[1] The Defendants/Moving parties move for an order setting aside an administrative order granted on February 10, 2017 by the Registrar which dismissed their appeal to the Divisional Court, and for an order extending the deadline for perfecting their appeal.

[2] The Plaintiffs/Responding parties oppose the granting of the orders sought. They argue that the history of these proceedings reveals that the Defendants have delayed the progress of the action since its commencement. They argue that their failure to advance the proposed appeal represents yet another delay tactic. They also maintain that the proposed appeal is utterly without merit in any event.

[3] The underlying action is one that was brought in August 2013, more than three years ago, under the Simplified Procedure rule. It is a straightforward claim for payment of invoices rendered by the Plaintiffs to the Defendants’ corporations for accounting services provided to them, payment of which had been personally guaranteed by the Defendants.

[4] Although the Defendants retained counsel in October 2013, they did not file a Statement of Defence despite numerous warnings to do so or risk being noted in default.

[5] The Defendants finally were noted in default and default judgment was granted on May 12, 2014.

[6] Counsel for the Defendants was permitted to be removed from the record by court order on September 5, 2014.

[7] Garnishment proceedings were commenced by the Plaintiffs to enforce the default judgment. The Defendants then brought a motion to set aside the default judgment.

[8] The motion to set aside the default judgment was initially returnable July 24, 2015. Following several delays, it was eventually heard by Master Muir on November 18, 2016. The Master varied the quantum of the judgment granted against the Defendants and gave them leave to file a Statement of Defence to the remaining claims. Since the Master’s order, no Statement of Defence has been delivered and the Defendants are out of time to do so.

[9] In arriving at his decision, the Master correctly set out the test to be applied on the motion as enunciated by the Ontario Court of Appeal in Intact Insurance Company v. Kisel, 2015 ONCA 205. In applying that test, he found that the Defendants had neither brought their motion promptly nor had they advanced a plausible excuse for the default.

[10] However, the Master did find that two of the defences raised by the Defendants had merit. Specifically, the Master agreed with the Defendants that they could not be held jointly and severally liable for all of the debts owed to the Plaintiffs by the various “Merker Group of Companies.” Their liability, based on guaranty provisions contained in the engagement letters, provided for liability on a corporation by corporation basis.

[11] The Master also found that on the face of certain invoices an arguable limitation defence existed in respect of invoices delivered more than two years before the Statement of Claim was issued.

[12] The Master varied the judgment to assign liability to Melvyn Merker and Karen Merker in accordance with the specific obligations guaranteed and in respect of outstanding invoices rendered within two years of the claim, deducting any invoices falling outside that time period. The Master noted that the Defendants were simply being held to their limited promise of guarantee in respect of which they had advanced no arguable defence.

[13] As to that portion of the claim potentially falling outside the two year limitation period, the Defendants were granted leave to file a Statement of Defence by December 31, 2016. As noted, no such Statement of Defence was ever delivered.

[14] The result of this determination by the Master was the granting of judgment as against Melvyn Merker in the amount of $27,281.00 and as against Karen Merker in the amount of $10,116.00, plus interest on both amounts at the contractually agreed-upon rate of 18% per year from the respective due dates of the various invoices involved.

[15] The Defendants refused to approve the draft judgment provided and raised a dispute as to the arithmetical interest calculations arising out of the decision of the Master.

[16] The Defendants then launched two separate appeals of the order of the Master, one to the Superior Court of Justice and the other to the Divisional Court.

[17] The Defendants’ appeal to the Superior Court of Justice was abandoned.

[18] Notice was delivered to the Defendants that their appeal to the Divisional Court would be dismissed if not perfected promptly, or an order obtained extending the time to do so was not obtained.

[19] The Defendants did nothing. On February 10, 2017, the appeal to the Divisional Court was dismissed by the Registrar for failure to perfect it.

Discussion

[20] The factors to be considered by the Court on a motion to set aside a Registrar’s dismissal of an appeal for delay are: whether the applicant had an intention to appeal within the time for bringing an appeal, the length of the delay (and any explanation for the delay), any prejudice to the respondent caused by the delay, and the justice of the case. This last factor is considered to be the most important and requires a consideration of the merits of the appeal (see: Yue v. Chouzouris, 2014 ONSC 3409 (Div. Ct.)).

[21] The Defendants failed to raise any issue with the contents of the draft order provided by the Plaintiffs for nearly a full month.

[22] The Plaintiffs argue that the Defendants appear to have intentionally allowed the time for perfecting the appeal from the order of the Master to lapse in order to maximize the opportunity for delay afforded by the availability of a possible appeal.

[23] The only explanation provided by the Defendants for the delay is the dispute in respect of the calculation of interest on the judgment. Even if it were to be accepted that this dispute is legitimate, the dispute arose only after the expiration of the perfection of appeal period.

[24] This Simplified Procedure action is now well over three years old. The Plaintiffs submit that the cumulative delay in these proceedings caused by the Defendants’ conduct is contumelious and should be considered as such in deciding this motion. I agree.

[25] At this stage in the proceedings, prejudice to the Plaintiffs from the lengthy delay may be presumed given the lengthy delay caused by the Defendants.

[26] The Defendant Karen Merker passed away during the course of the proceedings. An order to continue the action as against her estate has been granted.

[27] I would observe that the merits of the proposed appeal are extremely weak to the point of being virtually non-existent. Moreover, the sequence of events described by the Plaintiffs bears all the hallmarks of a deliberate and systematic effort by the Defendants to delay execution upon the partial judgment obtained by the Plaintiffs.

[28] The rights of the Plaintiffs to pursue satisfaction of their claims without undue tactical delay must be weighed in this balance. When this and all of the other factors advanced by the parties are considered, I am of the view that the justice of the case requires that the relief now sought by the Defendants should not be granted.

Conclusion

[29] For these reasons, the motions are dismissed.

Costs

[30] The issue of costs was addressed during the course of the hearing. In my view, the Plaintiffs as the successful parties on the motion, should get their costs which I fix at $3000.00, inclusive of disbursements and applicable taxes. That amount shall be payable by the Defendants to the Plaintiffs within 30 days.

Stewart J.

Date: May 10, 2017