ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: CV-05-0761-SR
DATE: 20130307

BETWEEN:

MOUNTAIN VIEW FARMS LTD.
Plaintiff

– and –

GEORGE McQUEEN, also known as GEORGE D. McQUEEN also known as GEORGE DONALD McQUEEN
Defendant

M.A. Cummings, for the Plaintiff

V. L. Vandergust, for the Defendant

HEARD: March 6, 2013

ENDORSEMENT

Stong J.

[1] A motion is brought for an order; setting aside the default judgment dated August 25, 2005 and noting the pleadings closed; granting the Defendant leave to serve and file a Statement of Defence within 20 days of the date of this Order; directing the Sheriff of the County of Simcoe to lift/withdraw the Writs of Seizure and Sale on file as against the Defendant; costs of this motion on a substantial basis; a determination of a lower and just rate of interest due to the Plaintiff.

[2] During submissions made on this motion on behalf of the Defendant, it was conceded that the amount of principle owing to the Plaintiff and upon which the judgment was obtained on August 25, 2005 was not in issue, but that the only issue before this court is with respect the rate of interest being charged pursuant to that judgment and that in all other aspects the default judgment stands. The Defendant therefore seeks an order setting aside the default judgment in relation to the rate of interest charged therein and seeks an order setting the rate of interest to be paid upon outstanding principal at 5% which is an amount that is 1% more than the average of the quarterly CJA rates from the date of the Statement of Claim plus costs.

[3] This application is brought pursuant to Rule 19.08 of the Rules of Civil Procedure R.R.O. 1990, Reg 194.

[4] The discretionary decision whether to set aside a default judgment pursuant to rule 19.08 is governed by the following three-part test:

(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. (See HSBC Securities (Canada) Inc. v. Firestar Capital Management Corp 2008 ONCA 894, 245 O.A.C 47 at para. 21)

[5] The Statement of Claim was issued on July 18, 2005. It was served on George McQueen, aka George D. McQueen aka George Donald McQueen (hereinafter referred to as “McQueen Senior”) on August 2, 2005 by Bob Goncz, process server who swore the Affidavit of Service and who subsequently died in 2011. Although McQueen Senior claims that he does not remember the Statement of Claim being served on him because he did not live at the address at which service was made, in cross examination on his affidavit on these proceedings he did admit that the address was his son’s address, that he frequented the address and that he often had meals there. Bob Goncz swore in his affidavit of service that McQueen Senior had personally identified himself to the process server at the time of the service.

[6] The action in the Statement of Claim relates to work performed in the years 1999, 2000, 2001, 2002, 2003, and 2004. The Defendant is an elderly farmer born in 1926. He was sued for crop services by the Plaintiff Corporation which is operated by his neighbours, Roger and Bill McLeod. On February 1, 2002 the Plaintiff issued an invoice to McQueen Senior for the total sum of $28,273.68 which represented work performed for the period 1999 to 2001. On December 29, 2003 another invoice was issued by the Plaintiff to McQueen Senior for the total sum of $39,685.52 which included the previous outstanding account. On June 6, 2005 another account was issued to McQueen Senior for the total sum of $49,862.82 which included the amount outstanding from the invoice that had been issued on December 29, 2003. At that time McQueen Senior signed the invoice confirming the amount outstanding which invoice contained the amount and terms of interest that would accrue to the outstanding amount. Previous invoices submitted to McQueen Senior on February 1, 2002 and December 29, 2003, although not signed by him also indicated the amount and terms of interest that would accrue to the outstanding amount owing to the Plaintiff.

[7] It is important to note that the parties were neighbouring farmers for years trading equipment and services in the past. In cross examination on their affidavits in these proceedings, both Roger and Bill McLeod admitted that they had not charged interest on monies owing for services rendered in years prior to 2005. Invoices attached to the affidavit of Bill McLeod covering a 5 year period beginning with the February 1, 2002 invoice for baling hay in 1999, 2000 and 2001 did not show interest being charged. An invoice rendered in December 2003 for snow blowing and hay baling shows a credit of $10,000.00 being paid and a balance of $39,685.52 being carried forward to a further invoice for swath and bale work for 2004 and 2003 but no charges over the years were listed for interest.

[8] In cross examination on his affidavit, Roger McLeod was asked at Question 158:

Q: “And it’s up to you whether you decide to charge interest or not, and if somebody is a neighbour and they’re trying to pay you don’t charge, is that right?

A: That’s correct.”

[9] Roger McLeod on behalf of the Plaintiff admitted in cross examination on his affidavit that the Defendant was asked to sign the bill in 2005 because if the Defendant dropped dead they didn’t want to have to deal with his son as to the account. Obviously the Plaintiff did not enjoy the same copasetic relationship with the new owner as it had with McQueen Senior.

[10] McQueen Senior was sued on the acknowledgement that he had signed in December 2003. Since 2005, as deposed in his affidavit on these proceedings, Bill McLeod on behalf of the Plaintiff states that McQueen Senior has confirmed to him that he had to “get the bill paid up” and at every opportunity that they spoke together with respect the outstanding account, McQueen Senior always assured that Mountainview would be paid in full.

[11] No notice of intent to defend or Statement of Defence was served by McQueen Senior so he was noted in default and default judgment was signed against him on August 25, 2005. On November 10, 2005 a Writ of Seizure and Sale was issued by the Court, and on November 14, 2005 it was filed with the Sheriff of the County of Simcoe.

[12] Three of the properties owned by McQueen Senior were transferred to his son, George McQueen Jr. and all three were subject to the Writ of Seizure and Sale by Mountain View Farms. The transfers are each stamped subject to the executions and the transfers each indicate that Brian McLellan, the solicitor for both the transferor, McQueen Senior and the transferee, George McQueen Jr. had authority to sign and register the documents on their behalf. The inescapable conclusion is that at least by that date, June 10, 2010, both McQueen Senior and McQueen Jr. were both aware of the Writ of execution on file.

[13] In May 2011 McQueen Jr. wanted to refinance his property and he needed confirmation that he was not the same person as his father for the purposes of refinancing. On May 25, 2011 a letter sent to solicitor Brian McLellan confirmed that McQueen whose birth date is August 24, 1958 is not the McQueen, both of whom have the same first names, outlined in execution number 050001939 and whose birth date is January 6, 1926.

[14] On May 19, 2011 by inter office email in the office of the solicitors for the Plaintiff it was confirmed as follows in the affidavit of Brenda Ellis on these proceedings:

One of GVD’s clients (Mountainview Farms Ltd.) has a writ of execution against a George McQueen with a face amount in excess of $50,000.00. The writ was issued in 2005. At the time the writ was issued the debtor George McQueen was the registered owner of three of four properties in Simcoe County. Three of the four properties owned by the debtor George McQueen have since been transferred to the debtor’s son, who is also named George McQueen. The registered transfers indicate that such transfers are subject to the writ, if enforceable. …. Our client’s writ expires in November (we will be renewing it)

[15] On November 9, 2011 the Writ of Seizure and Sale was renewed for a further period of six (6) years.

[16] No explanation by way of meeting his onus on this motion has been offered by the Defendant for why steps were not taken before 2010 relating to the execution or payment of the outstanding debt, nor has there been any explanation offered why steps were not taken after 2010 and before 2012 or why the properties were transferred subject to the execution and no steps taken to set aside the default judgment if there was an issue with it. Attempts on this application to offer a reason for the Defendant’s inaction are couched in terms of his age and his forgetfulness arising therefrom. However it is important to note that in terms of McQueen Senior’s incapacity or incompetence he was still driving after he turned 80 and had to qualify each year; more poignantly perhaps is the fact that he transferred title to properties in June 2010 without the necessity of a power of attorney to effect the transfers. Nor is any medical evidence offered indicating incapacity in 2005 or 2011. On the contrary, Ted Lacey in his affidavit on these proceedings, sworn June 14, 2012, deposes that McQueen Senior was still actively engaged in his farming operation in 2005 and “his mind and judgment all seemed quite sound”.

[17] The potential for prejudice by one of the parties to litigation, attributable to the delay of another party, is to be considered and figures seriously into the mix of considerations that bear upon this court in the exercise of its discretion. In this case there would be real prejudice if the judgment were to be set aside. Since judgment was obtained there has been a conveyance of at least three (3) properties. The process server, Bob Goncz has died. Many of the original invoices have been destroyed and McQueen Senior’s competence is now an issue.

[18] Notwithstanding the existence of prejudice if the default judgment were to be set aside, and the lack of explanation for delay in seeking to have the judgment set aside, one must look at the relationship that had existed between the parties in the preceding years.

[19] There is no evidence of any agreement to pay interest at 24% per annum beyond the stamp at the bottom of the June 6, 2005 bill which bears McQueen Senior’s signature. The best evidence offered on that issue is that of Roger McLeod who testified in cross examination on his affidavit that McQueen Senior was asked to sign that bill because the Plaintiff was worried that the Defendant might drop dead and so when the bill was presented to him and he was asked to sign it, McQueen Senior said, “Okay, I’ll sign the damned thing”.

[20] In cross examination on his affidavit, Bill McLeod testified in relation to the charging of interest that the Plaintiff was not charging any interest because the Defendant was their neighbour and they trusted him. They had done his work for two decades and not charged him any interest.

[21] Apart from the invoice of June 6, 2005 which is relied upon as indicative of McQueen Senior’s acknowledgement, confirmation and acceptance of the interest rate stamped thereon, there is evidence that the parties had never charged or been charged interest on overdue accounts. The Defendant argues that in the absence of a written or expressed agreement on interest, the mere inclusion of an interest provision in an invoice for services rendered does not obligate the purchaser to pay interest unless he or she has agreed to pay the same. Hence he is not liable to pay interest at the rate of 24% per year, and further submits that the most the Plaintiff is entitled to is interest at the rate prescribed by the CJA or perhaps, one percent more.

[22] I am unable to say on the evidence before me on this motion that the Defendant agreed to pay the interest at the point of contract formation with respect to each invoice upon which the stamped interest rate appears. More importantly however, is the fact that the Plaintiff never intended to charge interest if the Defendant “had paid that day” (See Q: 125 of Bill McLeod’s transcript) and did not try to collect the interest. “Until they gave it to the lawyer, they never billed him (McQueen) for interest”. (See Q: 93 of Roger McLeod’s transcript).

[23] There was no expressed or implicit agreement to pay interest, but there was an implicit understanding of cooperation established and relied upon by the parties over the years as they assisted one another working their neighbouring farms. While there is no evidence that the Plaintiff ever made or communicated a decision to the Defendant not to charge interest, which would have been a waiver, there is no basis for saying that the entitlement to interest was somehow implicit. If anything, the working relationship between the parties over the years demonstrates that interest rates were not a part of their ongoing contractual associations or understandings.

[24] In my view there has to be an expressed or implicit agreement to pay interest, for the Defendant to be liable for a contractual rate of interest. Not only do the rules remind this court that its determination must be one that is just, it is also fundamental to the determination that this is a court of equity.

[25] Although a motion to set aside a judgment is a matter of discretion, that discretion is exercisable upon a consideration of the following factors:

(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. (See HSBC Securities (Canada) Inc. supra.)

[26] Clearly there has been an inexplicable delay in bringing this motion subsequent to the default judgment being obtained. Perhaps the Plaintiff is correct in suggesting that McQueen Jr., the new owner, had hoped the Writ of Seizure would not have been renewed upon its expiration after six years, although one must keep in mind that the judgment would not suffer the same fate.

[27] However the matter does not end there since in the circumstances of this case no prejudice will have been caused to the Plaintiff which cannot be compensated in costs.

[28] I am satisfied that the Defendant has an arguable defence on the merits of the claim for an interest rate of 24% per annum for which he did not contract nor of which did he expect based on the long term and accustomed working relationship between the parties. It is an interest rate which cannot withstand the circumstances that existed between the parties.

[29] For reasons stated above, notwithstanding the apparent acknowledgement of the debt including the interest to be charged signed by the Defendant and the fact that the Plaintiff sued on the acknowledgement not simply the invoices rendered, I am not satisfied that the Defendant even impliedly agreed to pay the 24% interest rate and so in the circumstances of this case is not bound to pay it.

[30] In these circumstances, it would be inappropriate to have interest accrue at the rate claimed by the Plaintiff. Certainly however, reasonable parties to a commercial transaction would expect that monies left unpaid would attract interest as some rate. In the absence of any evidence before me to establish the credit costs of the Plaintiff or the rate of return it might reasonably have expected for investment of the amount of the unpaid accounts, interest on the unpaid accounts, including prejudgment interest, should properly be charged at the rate prescribed by the Courts of Justice Act, plus the 1% submitted by concession of the Defendant, from August 25, 2005.

[31] Therefore, the default judgment obtained on August 25, 2005 is varied only insofar at the rate of interest it bears, which rate of interest is hereby varied to 5% per year. In all other aspects the judgment of August 25, 2005 remains in full force and effect.

[32] The prejudice pertaining to and caused to the Plaintiff as a result in the delay of bringing this motion can be compensated for in costs.

[33] The parties have until March 22/13 to submit the costs in writing to this court.

STONG J.

Released: March 7, 2013