BARRIE COURT FILE NO.: CV-11-1248
DATE: 20130626
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: CENTRAL PAINTING INC. carrying on business as ROLL-ON PAINTING and INDUSTRIAL FLOOR SYSTEMS CORP., Plaintiff
AND:
TDCI BRACEBRIDGE INC, Defendant
BEFORE: THE HON. MADAM JUSTICE M.P. EBERHARD
COUNSEL:
S. Fairley, Counsel for the Plaintiff
T. Rocca, Counsel for the Defendant
HEARD: June 25, 2013
ENDORSEMENT
[1] This motion was succinct and well argued.
[2] The Defendant moves for an order setting aside Default Judgment against TDCI and allowing TDCI to file a Statement of Defence and Counterclaim; or in the alternative an order staying the execution of the default judgment pending the final determination of the Defendant’s Counterclaim;
[3] The Plaintiff argues that the tests for setting aside default judgment have not been met and if the Counterclaim is to proceed that the Plaintiff’s judgement should be paid out to the extent of the funds in trust which represent the judgment and costs on the day it was paid into trust to lift a writ filed against the Defendant’s property and allow the refinancing of that property.
[4] On that same day it was agreed that the delay to be assessed in relation to the test to set aside default judgment does not include time from that date to this motion since current counsel for the Defendant, Gowlings, Lafleur Henderson LLP has acted expeditiously and bears no responsibility for any delay before their involvement.
[5] There is no dispute about the contract giving rise to the Plaintiff’s entitlement nor that the work was done. The defence on the merits that is argued, both to meet the test to set aside or the test to stay enforcement, is entirely that there are deficiencies which form the basis of the counterclaim.
[6] I find the following time line relevant to my decision:
• September 26, 2011 Mr. Figueira for Defendant acknowledges in writing the invoices “will be paid” and “there were no deficiencies and or outstanding issues. TDCI apologizes for the inconvenience and delay”. Mr. Figueira asserts he was under duress but I cite this not for the content but the time.
• November 17, 2011 Plaintiff writes pay or we’ll sue
• Statement of Claim December 15, 2011, served January 5, 2012 on office manager
• Defendant engaged lawyer Salsberg
• January 23, 2012 Salsberg phoned and Plaintiff’s counsel Fairley sent second copy of Statement of Claim
• Statement of Defence due January 25, 2012
• Plaintiff follow up February 8, 2012
• Plaintiff follow up February 29, 2012 urged plead or discuss resolution
• Plaintiff follow up March 1, 2012 – warned default if no Statement of Defence by March 8
• No indication from Salsberg he was ill or and mention of any deficiencies, defence or counterclaim until a draft Statement of Defence from Gowlings in August 2012
• Plaintiff warns March 13, 2012 we are proceeding
• Default judgment March 21, 2012
[7] The Defendant alleges that deficiencies were coming to light in December 2011, January and February 2012.
[8] Mr. Figueira deposes:
As I recall, the claim was served in December of 2011 at the TDCI location at 345 Ecclestone Drive in Bracebridge, but only came to my attention in January of 2012. At the time TDCI was served, the company was in the process of a refinancing. As such, I forwarded the claim to Mr. Salsberg and asked that he try to get an extension of time for filing a defence. Mr. Salsberg advised me that he would coordinate with Plaintiffs’ counsel in order to obtain an extension of time to file a defence. Mr. Salsberg later informed me that had obtained an extension to February 11,2012.
TDCI at all times believed that an extension of time had been granted. Mr. Salsberg and I agreed to schedule a meeting to go over the facts for a defence. I attempted to contact Mr. Salsberg in early February 2012 to schedule the meeting and proceed with drafting a defence.
Unfortunately, Mr. Salsberg fell ill during the month of February 2012 and I was out of the country for the majority of March 2012. As a result, proper attention was not given to this file and a defence was not drafted in time. By the time Mr. Salsberg had recovered in late March, the Plaintiffs had already obtained a default judgment. A copy of the default judgment dated March 21, 2012 is attached as Exhibit “B” to my First Affidavit.
[9] There is no evidence that Mr. Figueira ever met with Salsberg nor instructed him that there were deficiencies. Nor is there evidence from Salsberg that he was ill nor reason given why there was no handling of correspondence for him in the context of a legal practice.
[10] The only correspondence at any time before the Plaintiff’s writ resulted in the successful steps in the enforcement of the judgement was to seek extension or thereafter to assert that the Plaintiff would be cut out by secured creditors. While this sort of threat may be generously characterized as settlement negotiation, it is cited only because nowhere in the period after judgment but before enforcement did Salsberg ever mention deficiencies.
[11] I find that at the time when the Statement of Defence was due there is no evidence to support a defence. The first suggestions that there may be deficiencies had begun to surface, but there is no evidence the Defendant conveyed that to their counsel Salsberg and positive evidence that Salsberg never raised deficiencies before or after default judgment though there was correspondence on the file concerning extension and concession.
[12] I find the evidence inconsistent with an intention to defend at the time when a defence was due.
[13] I find that the Plaintiff, while moving the claim forward, was neither impatient nor sharp in practice. Ample warning was given.
[14] I find this case is in the category of cases where after the contract is complete and should have been paid problems arise that can form the basis of a claim. This claim can be brought even though payment on the contract is complete. That is how this case should proceed.
[15] The Defendant’s alternative position and the Plaintiff’s position both presume the possibility that the counterclaim could proceed. The difference between them is that the Defendant argues enforcement of the Plaintiff’s judgment should be stayed while the counterclaim proceeds. The Plaintiff argues that the judgment should be paid and the counterclaim proceed in like manner to those cases where problems arise after payment.
[16] I agree with the Plaintiff. The Plaintiff was entitled to judgement as of March 21, 2013. There is no evidence of anyone raising any deficiency as of that time and since the only defence now asserted is the counterclaim, there could have been no defence on the merits at that time.[^1]
[17] There is potential prejudice. The Plaintiff has successfully enforced. Unpredictable priorities were raised by the Defendant at one time.
[18] My findings of fact drive the result. However, I rely on the cases cited by the Plaintiff to support the assertion that where there is a conscious decision not to participate in the litigation a court should not exercise discretion to set aside default judgment, particularly as in Spadafora where :
First, the Defendants made a conscious decision not to participate in the action. Absent special circumstances, I believe that should be a complete bar to this motion in accordance with the decision in Shile… The defendants disregarded the Judgment when it first came to their attention and only acted when it became apparent that it could be enforced. This strongly suggests that the defendants did not move expeditiously to set aside the Judgment as soon as it came to their attention.
[19] Where the Plaintiff has been diligent and fair in process, if the opposing party has issues about whether its counsel failed to serve its interests, there are is another consideration.
[20] The Defendant emphasizes a focus on the rights of the litigants to have issues determined on the merits. Scaini v. Prochnicki, 2007 ONCA 63 Finlay v. Paassen, 2010 ONCA 204.
[21] Laskin, J.A. commented in Findlay:
[31] Finally, although not necessary to my decision, I wish to comment on two other considerations relied on by the motion judge to deny Finlay relief. The motion judge rested his decision principally on the two-year delay in moving against the registrar’s order, but he also referred to the possibility of a negligence claim against Finlay’s law firm and the “expiration of the limitation period”. Neither consideration, in my view, is germane. The motion judge said:
I also think that the Plaintiff is not necessarily out any remedy and LPIC may, indeed, become involved, although I express no opinion, and certainly no opinion as to whose negligence would be involved as I do not know exactly what took place between Mr. Morris and Mr. Ferro.
In sum, two years of delay took place after the expiration of the limitation period. Taking that into account and also the fact that the Defendants have some entitlement to rely on the finality of the registrar’s order, I think the motion cannot succeed.
[32] A judge who refuses to set aside a dismissal order will naturally be concerned that the effect of the refusal will be to deprive an innocent party of its day in court. To protect the claim of the innocent party, the judge will often raise the possibility of a negligence action against the party’s own lawyer. Although perhaps understandable, I do not find this helpful. Speculation about whether a party has a lawsuit against its own lawyer, or the potential success of that lawsuit, should not inform the court’s analysis of whether the registrar’s dismissal order ought to be set aside.
[22] After Findlay, Macpherson, Armstrong and Karakatsanis J.A. endorsed, in Mactiacek v. Ontario Cycling Association, 2011 ONCA 410:
[10] Counsel for the appellants, in his able argument, emphasized that the more significant consideration in the case at bar is that there is no evidence of actual prejudice as found by the motion judge. While this is an important factor, it has to be balanced by a consideration of the finality principle. In our view, the delay in this case and the conduct of counsel tips the balance towards the latter. As Sharpe J.A. found in Giant Tiger “reinstating the action at this point would undermine the finality principle while refusing to reinstate the action does not interfere with the need to ensure adequate remedies.” In respect to the latter comment, we note that the appellants are not left without a remedy as they still have recourse through an action in solicitor’s negligence.
[23] Plaintiff was diligent and fair in process. Until Gowlings entered the picture after enforcement efforts matured there was no mention of a defence in the continuing discussions after judgement. The judgment stands and payment is to be made from funds set aside in trust.
[24] The counterclaim is alive. No limitation period has intervened. It may continue.
[25] As indicated, this motion was ably argued by both counsel. Costs may be addressed if they cannot be settled by written submissions of no more than two pages together with a bill of costs and any offers. Plaintiff to convey submissions to judicial secretary in Barrie by July 19, 2013, the Defendant’s response by August 2, 2013 and reply by August 9, 2013.
EBERHARD J.
Date: June 26, 2013
[^1]: Klein v. Shile (1921) 59 DLR 102 (Sask CA) para 2; CN Railway Company v. Gateway Reload Inc., 2006 37592 (Ont. SC); Luciano v. Spadafora [2004] O.J. No. 4311 at para 13 and 17; Toronto Dominion Bank v. 718699 Ontario Inc. c.o.b. Mr. C. ‘s Donuts and More (1993), 62 O.A.C. 158 (Ont. Div. Ct.) at para 4; Jonathan Wyman v. Infodisc Technology Canada, 2004 43057 (Sup. Ct) at para 15.