Court of Appeal for Ontario

Date: 2017-04-21 Docket: C62865

Judges: Weiler, Pardu and Roberts JJ.A.

Between

Ken Jackson Construction Limited Plaintiff (Respondent)

and

Geoffrey Macklin, Jeremy Macklin and Macklin Bros. Construction Ltd. (sometimes known as Macklin Bros. Construction, and sometimes known as MBC) Defendants (Appellants)

Counsel

Robert J. Reynolds, for the appellants

Douglas A. Grace and Sha Habi, for the respondent

Heard: April 13, 2017

On appeal from: the order of Justice Gibson of the Superior Court of Justice, dated September 20, 2016

Endorsement

[1] The appellants appeal the dismissal of their motion to set aside the noting in default and default judgment obtained by the respondent. In its action, the respondent sought payment of outstanding invoices for work rendered as the corporate appellant's subcontractor on various construction projects.

[2] We agree that the motion judge erred and that his decision should be set aside, for the following reasons.

[3] Firstly, the Registrar signed judgment against the individual appellants for the amounts of the invoices billed to the corporate appellant. The claims pleaded by the respondent against the individual appellants were for breach of trust and conversion. There was no basis pleaded that would make the individual appellants liable for invoices billed to the corporation. The respondent did not seek to pierce the corporate veil: see Mitchell v. Lewis, 2016 ONCA 903. In any event, personal liability like this would not amount to a "debt or liquidated demand in money" within the judgment signing jurisdiction of the Registrar: see Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 19.04(1).

[4] Secondly, the Registrar had no jurisdiction to grant judgment against the individual appellants on the claim against them for breach of trust and conversion, as this was also not for "a debt or liquidated demand in money."

[5] Specifically, in its statement of claim, the respondent sought unspecified damages for breach of trust and conversion. It did not plead any facts which would have allowed a court to conclude that the appellants had misapplied trust funds or the amount of any wrongful use of trust funds. Moreover, it is clear from the statement of claim that the claim against the individual appellants is merely contingent; it is only in the event that they have failed to retain sufficient trust funds that the claim is made. To that end, the respondent sought an accounting.

[6] Further, the Registrar erred in awarding interest on the judgment against the appellants at the rate of 2 per cent per month when the statement of claim failed to plead the respondent's entitlement to such a rate. There was no basis pleaded in the statement of claim that would allow interest to be awarded at a rate other than in accordance with ss. 128 and 129 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[7] In summary, where, as here, with respect to the liability of the individual appellants and the rate of interest claimed, the statement of claim did not contain the particulars required to sign default judgment for a debt or liquidated demand of money, the default judgment is granted without jurisdiction. The appellants were entitled to have the judgment set aside as of right in the interests of justice. See Schill & Benninger Plumbing and Heating v. Gallagher Estate, [2001] O.J. No. 260 (C.A.), paras. 8-10. The motion judge erred in not doing so.

[8] Where a Registrar has jurisdiction to sign default judgment, a motion judge has discretion to set aside a default judgment after weighing and balancing the following five factors, which were set out in Intact Insurance Co v. Kisel, 2015 ONCA 205, 125 O.R. (3d) 365, at para. 14:

(a) whether the motion was brought promptly after the defendant learned of the default judgment;

(b) whether the defendant has a plausible excuse or explanation for the default;

(c) whether the defendant has an arguable defence on the merits;

(d) the potential prejudice to the defendant should the motion be dismissed, and the potential prejudice to the plaintiff should the motion be allowed; and

(e) the effect of any order the court might make on the overall integrity of the administration of justice.

[9] Here, the Registrar had jurisdiction to sign judgment against the corporate appellant for the amounts invoiced to it by the respondent. Although the motion judge enumerated the five well-known criteria from Kisel, he applied them too rigidly and erred in failing to consider the overarching factor of whether the justice of the case required him to allow the action to be adjudicated on its merits.

[10] The appellants' evidence met the air of reality test and demonstrated an arguable defence on the merits in relation to the issues of whether the respondent's action was statute-barred, whether the rate of interest claimed was sustainable and whether there was any claim for breach of trust against the individual appellants. Further, the respondent filed no evidence that it would suffer any prejudice if the noting in default and default judgment were set aside.

[11] Having regard to the arguable defences on the merits and absence of prejudice, as well as the relatively short delay of about four months between the service of the statement of claim and the appellants' retaining counsel to deal with the claim, together with the appellants' explanation for the delay, the criteria to set aside the noting in default and default judgment are satisfied.

[12] The motion judge erred in principle, and his exercise of discretion refusing to set aside the noting in default and default judgment was unreasonable.

[13] Accordingly, the appeal is allowed. The decision of the motion judge is set aside. The default judgment and the noting in default of the appellants are set aside.

[14] The appellants shall serve and file their statement of defence within thirty days of the release date of these reasons.

[15] With respect to costs, the appellants are entitled to the costs of this appeal which we fix at $8,500.00 inclusive of disbursements and taxes.

[16] Any order for costs on the motion below in favour of the respondents on the appeal is set aside, and in its place will be substituted an order of costs in favour of the appellants in an amount equal to 66% of the costs awarded by the motion judge. This reduced amount is awarded to recognize that the appellants' failure to file a timely defence contributed to the issues giving rise to the appeal.

"K.M. Weiler J.A."

"G. Pardu J.A."

"L.B. Roberts J.A."