SUPERIOR COURT OF JUSTICE – ONTARIO

COURT FILE NO.: 12-53276

MOTION HEARD: 2013/01/22

In the matter of the Construction Lien Act, R.S.O. 1990, C. C.30

RE: WILLIAM HANNAH HEATING AND COOLING INC., Plaintiff

AND:

The Estate of ELSIE ANN EVANS, et. al., Defendants

BEFORE: Master MacLeod

COUNSEL:
D. Lynne Watt, for the defendants, moving parties

Paul Jakubiak, for the plaintiff, responding party

HEARD: January 22^nd, 2013

REASONS FOR DECISION

[1] This is a lien proceeding for an amount that would otherwise be well within the jurisdiction of the Small Claims Court. The motion before the court is to set aside a default judgment.

[2] Because the proceeding is governed by the Act the Rules of Civil Procedure apply to the extent they are not inconsistent with the Act. The court must therefore look both to the statutory provisions and to the rules.

[3] If leave is required to bring this motion under s. 67 (2) of the Act it readily meets the test of a necessary step if the defendant can show that refusing to set aside the default judgment is unjust. The test for setting aside a default judgment includes the usual test under the rules. That is the moving party must show the motion was brought promptly, that there is a reasonable explanation for the failure to defend, and there exists a genuine defence. The latter should be set out in a proposed statement of defence compliant with subrules 25.06 and 25.07. But in a lien action the defendant must also meet the test for setting aside the noting of default under s. 54 of the Act. That requires the court to be satisfied that the proposed defence is supported by actual evidence. See Metaldoor Hardware & Installations Ltd. v. York Region District School Board 2012 ONSC 3067 (S.C.J.)

[4] It is conceded that the motion was brought promptly. The matter then falls to be determined on the merits of the defence and the reasonableness of the failure to defend. As always the court must also consider whether granting the order results in prejudice that cannot be remedied in costs.

[5] I am satisfied that broadly speaking there is a defence to the action. The claim is for work done on the defendant’s property. The defence is that the work was incomplete and deficient. There is evidence that the defendants were required to retain other contractors to complete the work and to remedy deficiencies. The damages claimed in setoff and counterclaim exceed the amount claimed by the plaintiff. I do not accept that the defendants in a claim of less than $10,000.00 must adduce expert evidence as part of a breach of contract defence. There is evidence to show that there are genuine questions of fact which may be a defence to some or all of the claim.

[6] There is little prejudice to the plaintiff in setting aside the judgment because the full amount of the lien plus 25% for security for costs has been paid into court. Any prejudice arises from delay in receiving payment and that is the same prejudice that would have existed had the matter been defended. It is not additional prejudice occasioned by setting aside the default judgment.

[7] The principal question therefore is the explanation for the failure to defend. Ordinarily I would have no hesitation in setting aside the default judgment obtained without notice to opposing counsel when settlement discussions were underway. To note the other party in default and to obtain default judgment without warning is a violation of inter alia number 19 of the Principles of Civility for Advocates promulgated by the Advocates Society and approved by both the court and the Law Society.

[8] The only factor that gives the court any pause in this case is the behaviour of the defendants leading up to the signing of default judgment. It is true that counsel for the plaintiff knew that the defendants were represented by counsel. It is also true that counsel for the parties had been involved in settlement discussions over several months and counsel for the plaintiff knew the defendants would assert deficiencies and incomplete work as a defence.

[9] There were however certain actions by the defendants – or their personal representatives - that were completely unreasonable. Firstly, notwithstanding that they knew about the claim for lien and the court action they refused to permit their counsel to admit service. They went further and actually made it difficult to effect personal service. This resulted in a motion for substituted service and an order validating service. The defendants knew such an order was made and they knew the motion record asserted evasion of service. They did not immediately advise their counsel they had been served.

[10] Although he knew that two of the defendants were deceased, counsel for the defendants did not disclose this until May of 2012. The plaintiffs then had to obtain orders to continue. It is also true that counsel for the defendants then requested there be no steps taken to note his clients in default without notice and indicated he anticipated delivering a defence the following week. He did not however deliver a defence and no explanation for this was provided nor was any further request for indulgence sent. This took place in May. It was subsequent to this that the plaintiff obtained the order for substituted service on the defendant Graham. This substituted service was not brought to the attention of counsel for a considerable period of time.

[11] It is therefore understandable that the plaintiffs would be frustrated by delay and angry with the defendants and that they might have instructed their counsel to give no more indulgences and to get on with the litigation. It would have been a simple matter for Mr. Dunlap then to advise Mr. McKenna that he was so instructed and to demand an immediate defence. This is what should have occurred. Simply proceeding to obtain default judgment without notice and then refusing to consent to the filing of the defence inevitably and obviously would lead to this motion and to more delay.

[12] I am satisfied that there was always an intent to defend and that this was known to the plaintiff. Under the circumstances the default judgment will be set aside as will the noting of default and the defendants will have 15 days to file their defence.

[13] I am not however prepared to condone the actions of the defendants in refusing to facilitate service of a claim which had quite clearly already come to their attention or to condone the failure of their counsel to defend the action when he had stated he would do so. Accordingly notwithstanding the success on the motion, the defendants will not have costs of this motion. The costs incurred in the motions for substituted service and other steps complained of by the plaintiff will be recoverable in the cause presumably. As the motion was resisted unsuccessfully there will be no costs to the plaintiff either.

[14] In summary the motion is granted and there will be no order as to costs.

Master MacLeod

Date: January 22^nd, 2013