ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO: CV-06-308610-00
DATE: 20130118
B E T W E E N:
Stoughton Trailers Canada Corp.
Plaintiff
- and -
James Expedite Transport Inc., York Region Courier Service Ltd., Jet Express Canada (2000) Inc., and Jim Raso also known as Gennaro Raso
Defendants/Moving Parties
Justin M. Jakubiak,
for Plaintiff/Responding Party
Luigi Ciotoli,
for the Defendants/Moving Parties James Expedite Transportation Inc. and Raso
HEARD: November 7, 2012
GOLDSTEIN J.:
[1] The Defendant James Expedite (“Expedite”) leased two trailers from the Plaintiff Stoughton Trailers Canada Corp. (“Stoughton”). Expedite defaulted on a lease payment. Stoughton sought to re-possess the trailers and, after protracted proceedings, did so. Stoughton sued not only Expedite but also James Raso (“Raso”), the owner and directing mind of Expedite. The Defendants were noted in default and a partial default judgment was obtained against them. The Defendants say that it was because of the negligence of their former solicitor.
[2] The litigation has become protracted because of the struggles of the Defendants to set aside that original default judgment. There have been long periods of inactivity, which the Defendants say was due to financial difficulties. There has been a trip to the Court of Appeal, followed by more inactivity.
[3] Notwithstanding the delay, which has not been due to any fault on behalf of the Plaintiff, the default judgment should be set aside, on conditions. I do so primarily for the reason that the allegations in the Statement of Claim against Raso are questionable, at best.
FACTS
[4] Expedite leased the trailers from Stoughton and defaulted on a payment. The default was relatively minor, amounting to only $722.81 although when all costs, including repossession costs are factored in, Stoughton claims $44,594.78 from the Defendants.
[5] In March 2006 Stoughton obtained an order for possession of the trailers and issued a Notice of Action. A Statement of Claim followed in April 2006. Raso was named as a defendant although he was not a party to the lease or a guarantor. The Defendants were noted in default on July 5 2006 and judgment obtained on August 10 2006. In October 2006 the Defendants retained counsel in order to have the default judgment and the noting in default set aside. A draft motion was served in November 23 2006 but the actual motion was not served until February 2007.
[6] The Defendants say that their former solicitor negligently failed to respond promptly and properly to the default proceedings.
[7] As the trailers were not returned, Stoughton sought contempt orders and obtained them in March and August 2007, along with costs totalling $17,427.14. These costs had to be paid by December 31 2007 but the Defendants were not able to do so until January 23 2008. The Defendants say that they were unable to satisfy the costs order due to financial difficulties. In March 2008 Allen J. dismissed a request by the Defendants to extend the deadline for payment of the costs award so that the motion could proceed. The Defendants appealed the decision to the Court of Appeal, which allowed the appeal in November 2008 and directed that there be a new date for hearing. The order was taken out in March 2009.
[8] Eventually the trailers were returned.
[9] In its endorsement, the Court of Appeal commented that “there were reasonable grounds for questioning the correctness of the default judgment, especially as against the individual defendant.” Indeed, although Raso is mentioned in the Statement of Claim, the Plaintiffs do not state that he was in default of any obligations to them.
[10] Almost two years after the Court of Appeal order as taken out the Defendants’ new lawyer took steps to bring on the motion to set aside the default judgment. The Defendants state that financial difficulties prevented them from moving ahead with the motion until then. Mr. Ciotoli indicated that as Expedite does not operate anymore, the motion is primarily about the default judgment against Raso. Mr. Jakubiak agreed with that statement.
ANALYSIS
[11] The test for setting aside a default judgment is set out in the Court of Appeal’s decision in HSBC Securities Canada Inc. v. Firestar Capital Management Corp., 2008 ONCA 894, [2008] O.J. No. 5345 (C.A.):
(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 also: Akagi v. Synergy Group (2000) Inc. et. al., 2010 ONSC 4836 (Sup.Ct.); Morgan v. Toronto Police Services Board, 2003 14993 (ON CA), [2003] 34 C.P.C. (5th) 46 (Ont.C.A.).
[12] A judge is not to apply the test rigidly as if each element of the test is a precondition that must be satisfied: Peterbilt of Ontario Inc. v. 1565627 Ontario Ltd. et al. (2007), 2007 ONCA 333, 87 O.R. (3d) 479 (C.A.). In Laredo Construction Inc. v. Sinnadurai, 2005 46934 (ON CA), [2005] O.J. No. 5429, 78 O.R. (3d) 321 (C.A.) Labrosse J.A. stated:
[25] This court has stated that the factors governing the setting aside of a default judgment are not to be applied rigidly. See Chitel v. Rothbart, [1988] O.J. No. 1197, 29 C.P.C. (2d) 136 (C.A.). There have been cases where the explanation for the default has been given less weight because the defence had merit. See: 441612 Ontario Ltd. v. Albert, [1995] O.J. No. 271, 36 C.P.C. (3d) 198 (Gen. Div.), at para. 48 and D.R. McKay Financial Group, Inc. v. Klad Enterprises Ltd., 2004 93175 (ON SC), [2004] O.J. No. 4288, 193 O.A.C. 281 (S.C.J.). However, this does not mean that the second part of the test is to be ignored because of an arguable defence. Otherwise, why have it?
[26] It is interesting to note, on this issue, the recent decision in Janssen-Ortho Inc. v. Novopharm Ltd., 2005 SCC 33, [2005] 1 S.C.R. 776, [2005] S.C.J. No. 64, where LeBel J. refused an application to extend the time of an application for leave to appeal to the Supreme Court of Canada. He stated at p. 778 S.C.R., para. 4:
Time limits should mean something. Valid reasons should be given to explain the delay. Our Court must be flexible and fair. Fairness is owed not only to applicants but also to respondents who may very well be significantly inconvenienced by undue or unexplained delays.
[13] The Defendants assert that they did all they could to bring the motion on, given their financial situation. They also assert that it is clear that they have an arguable case on the merits, based on the comments of the Court of Appeal.
[14] Stoughton says that it has been relying on a default judgment that was obtained in 2006, almost seven years prior to this motion, and that the Defendants have done little to move the matter along. They say that even if one takes as the starting point the decision of the Court of Appeal, it was more than two years later that the Defendants took steps to bring the motion back on. Stoughton says that the doctrine of laches should be invoked, as the Defendants acquiesced in the default judgment by their actions and failed to prosecute the motion.
[15] Although this is a close call, in my view the default judgment should be set aside.
[16] The default judgment was obtained in August 2006. The Defendants took steps in October 2006 to set it aside. The motion itself was brought in February 2007. I do not regard that initial delay as inordinate. The Defendants blame the negligence of their former solicitor, and there is no evidence to contradict them. After the February 2007 motion materials were served, the Defendants were unable to pursue the motion because of outstanding costs orders. The Defendants say that they were unable to pay the costs because of financial problems. Again, there is evidence to support that position and no evidence to contradict it. The appeal to the Court of Appeal was pursued diligently, but the failure to pursue the motion after Allen J.’s order was set aside raises real concerns.
[17] The period from November 2008 to March 2009 is not inordinate. The delay of almost two years from March 2009 to February 2011 is, in contrast, difficult to accept. That said, the evidence is that the Defendants simply were not in a financial position to pursue their remedy and I have no evidence to the contrary. Where the un-contradicted explanation for the delay is impecuniosity, the Court should be reluctant to be too strict in applying that element of the test.
[18] Were each element of the test to be treated as a precondition that had to be satisfied, I would undoubtedly dismiss the motion. It is clear, however, that the test is to be applied flexibly. I do not wish to over-emphasize any particular factor, but in my view it is important in the circumstances of this case that Raso has an arguable case on the merits (which Mr. Jakubiak very fairly conceded), and that the Defendants were impecunious during much of the litigation. On balance, these factors persuade me that fairness requires the Defendants an opportunity to defend the case.
[19] In making this decision, I am mindful of the comments of Wilkins J. in In Nu-Fish Import-Export Ltd. v. Sunsea Import Export Ltd. 1997 12270 (ON SC), [1997] O.J. No. 3109, 35 O.R. (3d) 153 (Gen.Div):
17 The situation at bar is, as discussed above, most unsatisfactory. If the default judgment provisions in the Rules are to serve any useful purpose default judgments themselves must be respected. Allowing defendants to too easily set them aside will undermine Rule 19. Equally, it is essential to recognize the legitimate interest of the plaintiff in finality. Having obtained default judgment the plaintiff should be permitted to put the matter behind it, proceed with other activities, and not have to worry about maintaining the records and other evidence necessary to prove its case should the defendant ever deign to come to court. The situation at bar is particularly egregious; the plaintiff has had judgment for at least 7 years. The reliance interest embodied in those 7 years warrants considerable protection. Indeed, in almost any other situation than the one at bar I would find that the plaintiff's reliance interest must be paramount.
[20] I accept that Stoughton has suffered real prejudice, which I address below, but it is important to note that Wilkins J. then went on to say:
18 In the case at bar, however, there is a significant spectre that the default judgment is wrong on its face. The defendant has in essence presented a prima facie case that the quantum of the judgment is wrong.
[21] Stoughton also raises the doctrine of laches. I am not satisfied that the evidence supports a finding that the Defendants have acquiesced in the default judgment: Rivergate Properties v. Rural Municipality of West St. Paul, [2005] M.J. No. 285, 19 Man.R. (2d) 149 (C.A.).
[22] The noting in default should also be set aside: Rule 19.08(1). See also Metropolitan Toronto Condominium Corporation No. 706 v. Bardmore Developments Ltd., 1991 7095 (ON CA), [1991] O.J. No. 717 (C.A.).
DISPOSITION
[23] The motion is granted and the default judgment and notice of default is set aside. Ordinarily, costs go to the winner. In this case, the Plaintiff has suffered actual prejudice, has done nothing wrong, and Plaintiff’s counsel has taken reasonable positions throughout the course of the litigation. In my view, the Plaintiff should not suffer the costs consequences of this motion under these particular circumstances.
[24] In its Factum, the Plaintiff asks that if the motion to set aside the default judgment is granted, it be granted leave to amend the statement of claim. I agree that the Plaintiff should be granted leave, if required. The Plaintiff also asks, in its Factum, that all funds ordered returnable, if any, be paid into court. It is unclear to me what funds have been paid by the Defendant to the Plaintiff as a result of this litigation, other than the costs awards. I am not ordering that any funds be returned to the Defendants by the Plaintiff. I leave it to the parties to work out the appropriate order reflecting the terms of this judgment. If the parties are unable to agree on the form and content of a draft order, they may speak to my assistant to arrange a time for an appearance.
GOLDSTEIN, J.
DATE: January 18, 2013
COURT FILE NO: CV-06-308610-00
DATE: 20130118
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Stoughton Trailers Canada Corp.
Plaintiff
- and -
James Expedite Transport Inc., York Region Courier Service Ltd., Jet Express Canada (2000) Inc., and Jim Raso also known as Gennaro Raso
Defendants/Moving Parties
JUDGMENT
GOLDSTEIN J.
Released: January 18, 2013