Coombs et al. v. Curran et al. [Indexed as: Coombs v. Curran]

100 O.R. (3d) 554

2010 ONSC 1312

Ontario Superior Court of Justice, Divisional Court,

J.W. Quinn J.

March 2, 2010

Civil procedure -- Default judgment -- Setting aside -- Motion judge on unsuccessful motion to set aside default judgment stating that defendant was required to show that there was "meritorious" defence -- Motion judge misstating test for setting aside default judgment -- "Meritorious" setting higher threshold than "arguable" -- Motion judge also erring in rejecting defendant's explanations for default on basis of customary practice -- Defendant's appeal allowed and default judgment set aside.

The plaintiff brought an action in Small Claims Court for damages arising out of a motor vehicle accident and obtained a default judgment. The defendant moved to set aside the default judgment. Evidence on the motion was given by way of affidavits sworn by the defendant and the plaintiff's agent. The defendant stated that her vehicle was rear-ended by the plaintiff's in a parking lot, that the accident was caused entirely by the plaintiff's negligence, that she did not believe that the statement of claim was ever placed in her mailbox and that she retained counsel to set aside the default judgment as soon as she became aware of it. The motion was dismissed. The defendant appealed.

Held, the appeal should be allowed.

The motion judge erred in rejecting the defendant's explanation for the default on the basis of the customary practice of the court. In the circumstances, customary practice should not have outweighed the defendant's affidavit evidence. If the explanation for the default were accepted, the motion was brought in a timely manner. The motion judge misstated the test for setting aside a default judgment when he held that the defendant was required to show that there was a "meritorious" defence on the merits. "Meritorious" sets a higher threshold than "arguable". It could not be said that the motion judge would have reached the same conclusion using the lower threshold.

APPEAL from the decision dismissing motion to set aside a default judgment. [page555]

Cases referred to Hill v. Forbes, [2007] O.J. No. 2360, 2007 ONCA 443, 225 O.A.C. 74, 158 A.C.W.S. (3d) 725; HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp., [2008] O.J. No. 5345, 2008 ONCA 894, 245 O.A.C. 47; Morgan v. Toronto (City) Police Services Board, 2003 14993 (ON CA), [2003] O.J. No. 1106, 169 O.A.C. 390, 34 C.P.C. (5th) 46, 121 A.C.W.S. (3d) 433 (C.A.)

Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 18(3) [as am.], 20(1) [as am.], 21(2)(b), 31 [as am.], (a) [as am.] Insurance Act, R.S.O. 1990, c. I.8

Frederick Caplan, for defendant/appellant. The plaintiffs/respondents neither appearing nor represented.

Endorsement of J.W. QUINN J.:

I Introduction

[1] The defendant/appellant, Valerie G. Biela, also known as Valerie Gill ("Biela"), appeals the decision of a Small Claims Court judge dismissing a motion in which she sought to set aside a default judgment obtained by the plaintiffs/ respondents. The other defendant, Douglas Kenneth Curran, has passed away in circumstances unrelated to this matter (and no steps have been taken to regularize the title of proceedings).

[2] As this is an appeal from a final order of a Small Claims Court, it was heard by me sitting as a judge of the Divisional Court. [^1]

[3] The central issue on the appeal is whether the correct test was used by the Small Claims Court motion judge in declining to set aside the default judgment.

II Overview

[4] The plaintiffs issued a claim in the Small Claims Court of the Superior Court of Justice arising out of a 2007 motor vehicle accident. They alleged that their vehicle [^2] was struck by a motor vehicle owned by the deceased defendant and operated by Biela. The accident occurred in a commercial parking lot in the City of St. Catharines. [^3]

[5] Default judgment was obtained on July 30, 2008, in the amount of the claim, which was for property damage, for the [page556] expense of renting a replacement vehicle while the damage was being repaired and for costs.

[6] In March of 2009, Biela moved in Small Claims Court to set aside the default judgment. The motion was dismissed and this appeal is taken from that dismissal.

III Motion to Set Aside the Default Judgment

Evidence on the motion

[7] On the Small Claims Court motion to set aside the default judgment, evidence was given by way of two affidavits, with exhibits.

[8] Biela delivered an affidavit in which she offers her version of how the accident happened:

7. When the accident occurred the vehicle that I was driving was not in motion. It was rear-ended by the vehicle of the plaintiff who had just pulled out of a parking spot. The accident occurred entirely as a result of the negligence and inattentiveness of the plaintiff.

[9] Biela's explanation for not defending the claim (which was allegedly served upon her by ordinary mail) is as follows:

6. . . . in March of 2008, I lived at 10-130 St. Augustine Avenue [a townhouse complex], St. Catharines, Ontario . . . . . . . . . . .
7. I took in mail every day . . . and I frankly do not believe that the statement of claim was ever placed in the mailbox.
8. . . . I was not aware of a . . . claim being issued in this matter until I received a letter from the Ministry of Transportation dated February 6, 2009, which is attached hereto as Schedule "A", stating that they have received a judgment concerning a motor vehicle accident and that I must arrange for payment of same. [^4]
9. Upon receipt of the letter from the Ministry, I immediately sought legal advice from [counsel], who conducted a search at the Small Claims Court office to determine how the judgment was obtained.

[10] On behalf of the plaintiffs, an affidavit was sworn by Sergio Montis, described as "agent" for the plaintiffs. On the issue of service of the claim, he deposes:

2. The plaintiffs' claim was served in accordance with the rules of the court and the envelope containing same was properly mailed to the defendant, Valerie Biela at 10-130 St. Augustine Avenue . . . The claim was never returned to us in the mail. [page557]

[11] Regarding the accident, his affidavit continues:

3. . . . Contrary to the defendant's allegation that the vehicle she was driving was "rear-ended" she in fact was backing her vehicle out of a parking place and struck the left side of the plaintiff's vehicle . . . . . . . . . . .
4. . . . Attached . . . are the repair accounts which clearly show the damages to the left side of the [plaintiffs'] vehicle.

[12] This affidavit also appended, as an exhibit, a copy of the motor vehicle accident report prepared by a police officer. The report seems to indicate that the operator of the plaintiffs' vehicle was "driving properly" and that Biela "failed to yield right- of-way".

IV Grounds for Appeal

[13] The notice of appeal lists two grounds for the appeal: (1) the motion judge "specifically in his judgment alluded to facts that were not in evidence and . . . based his judgment on facts that were not in evidence"; (2) the motion judge "made credibility findings on the basis of affidavit material rather than accept the affidavit and allow for a trial of the action".

[14] A ground not mentioned in the notice of appeal, but argued by Mr. Caplan, counsel for the appellant, is that the motion judge misstated the test for setting aside a default judgment.

V Discussion

The three-part test

[15] The three-part test for setting aside a default judgment is oft-stated. Most recently, in HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp., [2008] O.J. No. 5345, 2008 ONCA 894, at para. 21, citing Morgan v. Toronto (City) Police Services Board, 2003 14993 (ON CA), [2003] O.J. No. 1106, 34 C.P.C. (5th) 46 (C.A.), at para. 19, the Court of Appeal described the test in these words: (a) Whether the motion was brought without delay after the defendant learned of the default judgment; (b) Whether the circumstances giving rise to the default were adequately explained; and (c) Whether the defendant has an arguable defence on the merits.

[16] Setting aside a default judgment is the exercise of a discretionary judicial power. [page558]

Deference to motion judge

[17] "The motion judge is entitled to considerable deference in the exercise of his discretion. His decision should not be set aside absent an error in law or principle, a palpable and overriding error of fact, or unless the decision is so clearly wrong as to amount to an injustice": see HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp., supra, at para. 22, citing Hill v. Forbes, 2007 ONCA 443, [2007] O.J. No. 2360, 225 O.A.C. 74 (C.A.), at para. 4.

Causation

[18] The motion judge formed a view as to the cause of the motor vehicle accident.

[19] He referred to the motor vehicle accident report, even though the investigating officer did not attend at the scene of the accident. It was conceded by counsel for the plaintiffs in the course of the motion that "when the accident occurred, [the drivers] got out, they viewed the damage, they exchanged information and, at that point, they left . . . both parties did leave the scene of the accident".

[20] One of the plaintiffs contacted the police later that day and the officer who completed the motor vehicle accident report did so without speaking to Biela. No charges were laid.

[21] The motion judge also relied upon photographs of the damage to the plaintiffs' motor vehicle, commented on the location of the damage ("on the side and not the rear") [^5] and used this evidence when assessing the issue of causation and the explanation for the accident contained in Biela's affidavit.

[22] Biela deposed it was her vehicle that was "rear-ended". Damage to the left side of the plaintiffs' vehicle is not necessarily inconsistent with the accident as described by Biela.

[23] The motion judge based his decision regarding causation on the photographs of the plaintiffs' motor vehicle and on the motor vehicle accident report (unsworn and relying on information received from only one side of this case). There was no affidavit from the operator of the plaintiffs' motor vehicle or photographs, or a description, of the location of the damage to Biela's vehicle. [page559]

Explanation for default and for delay

[24] In his oral reasons, the motion judge did not accept Biela's explanation for the default:

. . . the defendant brought the motion within about a week of receiving the letter from the Ministry of Transportation and over eight months since the date of the judgment. She denies receiving both the claim, which was mailed to her, and the notice of the judgment, also mailed to her.

. . . I find that . . . it was more probable, than not, that either the claim or the notice of judgment would have come to the defendant's attention in 2008.

She only sought to set aside this judgment after receiving the letter from the Ministry of Transportation that her licence would be suspended in 15 days, if she had not made some arrangements to pay the judgment.

[25] During the submissions of counsel on the motion (both sides were legally represented), the motion judge, when hearing that Biela was alleging she had not received the claim, interjected: "Normally, the judgment is also sent out by the court." Based upon the passage just quoted from the oral reasons, it would appear that the motion judge found as a fact that the judgment was sent to Biela by the court. There was no evidence for that finding. Customary practice (as opposed to actual practice) should not, in the circumstances, outweigh the affidavit evidence of Biela.

[26] If the explanation for the default were to be accepted, the motion was brought in a timely manner.

Did judge assess credibility?

[27] The motion judge made findings of credibility, as I have set out above. He is entitled to do so after taking the permissible "good hard look" so frequently mentioned in the reported cases. But it is to be noted again that the only first-hand evidence on the issue of causation came from Biela (the responding affidavit having been sworn by the plaintiffs' agent) and that the motion judge misapprehended the property damage evidence.

Did motion judge misstate test?

[28] In stating the test to set aside a default judgment, the motion judge said that, in addition to giving "a reasonable explanation for the default" and bringing the motion "as soon as reasonably possible", Biela also "must show that there is a meritorious defence". Mr. Caplan submits that "meritorious defence" is not the same as "arguable defence". [page560]

[29] While acknowledging that a dictionary sometimes is the last resort of the baffled judge, I find it to be a necessary tool in this instance.

[30] The New Shorter Oxford English Dictionary (Oxford: Clarenden Press, 1993) defines "meritorious" as "entitling a person to reward; well-deserving, meriting commendation, having merit". The word "merit" means "the quality of deserving well or of being entitled to reward or gratitude; excellence, worth".

[31] "Arguable" is defined as "able to be argued, debatable, open to disagreement".

[32] In my opinion"meritorious" represents a higher threshold than "arguable".

[33] A court is a world of words, and is subject to the polar pull of precision and precedent. It cannot be ascertained whether the motion judge regarded "meritorious" to be synonymous with "arguable". As the terms have different meanings, it cannot be said that the proper test was applied. Accordingly, an error in law was made. This court should not speculate on whether the motion judge would have reached the same conclusion using the lower threshold.

VI Result

[34] The appeal is allowed and the default judgment in Small Claims Court File No. 19082/08, dated July 30, 2008, is set aside as against Biela. She shall have 30 days from the release of these reasons to file a defence (Form 9A) in the Small Claims Court.

[35] Costs of the appeal have not been sought.

Appeal allowed.

Notes

[^1]: An appeal lies to the Divisional Court from a final order of the Small Claims Court in an action for the payment of money is excess of $500 excluding costs: see s. 31(a) of the Courts of Justice Act, R.S.O. 1990, c. C.43; a proceeding in the Divisional Court may be heard and determined by one judge where the proceeding is an appeal under s. 31: see s. 21(2)(b); every judge of the Superior Court of Justice is also a judge of the Divisional Court: see s. 18(3); and, an appeal to the Divisional Court shall be heard in the region where the hearing that led to the decision appealed from took place, unless the parties agree otherwise or the Chief Justice of the Superior Court of Justice orders otherwise: see s. 20(1).

[^2]: The vehcile was owned by the plaintiff Rennie Coombs and driven by the plaintiff Laura Lambourne.

[^3]: The claim was actually issued by the insurer of Rennie Coombs under the subrogation provisions of the Insurance Act, R.S.O. 1990, c. I.8.

[^4]: The Ministry letter indicated that if the judgment was not paid within 15 days, her license would be suspended.

[^5]: I do not know why the motion judge thought that there should be damage to the rear of the plaintiffs' vehicle in order for its location to be consistent with Beila's evidence of causation.