BARRIE

COURT FILE NO.: 09-1544

DATE: 20130204

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: NICOLE ROY also known as NICOLE TYRER also known as MARIE ROY also known as MARIE TYRER, Plaintiff

AND:

LEE LAPOINTE and 1391061 ONTARIO LTD. operating as CARPINO AUTO SALES and ALLSTATE INSURANCE COMPANY also known as ALLSTATE INSURANCE COMPANY OF CANADA, Defendants

BELAIRDIRECT INSURANCE, Third Party

BEFORE: THE HON. JUSTICE M.P. EBERHARD

COUNSEL:
M. Lemieux, Counsel, for the Plaintiff

M. MacIsaac, Counsel, for the Third Party

HEARD: January 11, 2013

ENDORSEMENT

[1] The statutory third-party, Belairdirect Insurance, moves for an order setting aside the order of Mullins J. dated August 29, 2012; in the alternative a declaration that, despite the order of Mullins J. dated August 28, 2012, Belairdirect shall be permitted to dispute the liability of the defendant Lapointe and the plaintiffs damages if any.

[2] The plaintiff brought a cross-motion for directions as to the effect of a discontinuation against Lapointe, the defendant whose coverage was denied by Belairdirect giving rise to their being added as a statutory third-party.

[3] The matter was first before me on January 2, 2013 when I granted an adjournment, after argument, on the request of counsel for Belairdirect who was ill. The passage of time between January 2 and January 11, 2013 when the motion was actually argued, may have some impact on pleadings time lines. Although I made no decision, I finished the appearance by expecting the parties to come to an understanding such that the passage of time between January 2 and January 11, 2013 was neutral. Although they were less than conciliatory to one another, at my insistence they did arrive at a solution such that neither counsel would be put at a disadvantage in meeting timelines. Their compromise was as follows:

The plaintiff shall have seven days from the date a decision is issued to reply to the pleadings served on January 2, 2013. If the seventh day falls on a holiday the plaintiff shall have until the business day following for any reply. No decision shall be shall issue before February 4, 2013.

[4] Accordingly, though I am writing my judgment on January 11, 2013 it will not issue until February 4, 2013.

[5] It is also noted that on the lunch break, after argument on the third-party motion was complete and after the plaintiff had commenced argument on its motions for directions, the plaintiff withdrew the motion for directions specifically acknowledging that costs remain in issue.

[6] The third-party (respondent in the motion) did not resist the withdrawal of the motion, agreeing that costs could be addressed at the same time as costs relating to the motion which did proceed. Ms. Church, counsel for defendant Allstate Insurance Company, present to observe the motion, took no position on the withdrawal of the motion for directions.

HISTORY

[7] Belairdirect is the insurer for driver Lapointe and owner Carpino, defendants in the personal injury claim. As insurer they were aware of the claim and responded on behalf of Carpino. However they indicated denial of coverage for Lapointe.

[8] In March 2011, Lapointe and Carpino were noted to default. On July 10, 2012 Healey J. refused Belair's motion to set aside the noting in default of Carpino.

[9] Motions were then served by each party: Belairdirect seeking to be added as a statutory third-party pursuant to section 258 (14 ) of the Insurance Act; and the plaintiff for summary judgment finding Lapointe and Carpino liable with an assessment of damages to follow.

[10] The plaintiff’s motion was scheduled first. Belairdirect was served with the material. Belairdirect declined to appear on the motion on the basis that a motion to be added as a statutory third-party had not yet been heard, that they were not then parties and had no standing on the motion.

[11] Mullins J. heard the plaintiffs motion on August 28, 2012. In her handwritten endorsement she wrote

The evidence before me and the deemed admissions of fact establish that the defendants Lee Lapointe is the operator and 1391061 Ontario LTD (Carpino) as the lessor of the automobile are liable for the motor vehicle collision of April 20, 2009. The defendants owned/operated vehicle collided with the that operated by Nicole Roy, Mr. Lapointe having failed to stop at a red traffic signal, Ms. Roy having the right-of-way. Summary judgment granted in accordance with the evidence at rule 20.04 (2.1). The entered order includes in the preamble:

ON READING the motion record and factum of the plaintiffs and the supplementary affidavit of the plaintiff, nobody appearing for the defendants both of whom are noted in default, counsel for the proposed statutory third-party Belairdirect not attending;

This court orders that summary judgment is granted on the issue of liability as against the defendants leave the point and 1391061 Ontario Ltd. operating as Carpino auto sales.

[12] Belairdirect was added as a third-party on September 18, 2012 pursuant to section 258(14) of the Insurance Act with all the rights conferred upon such party by section 258(15) the said Act:

(15) Upon being made a party, the insurer may,

(a) contest the liability of the insured to any party claiming against the insured;

(b) contest the amount of any claim made against the insured;

(c) deliver any pleadings in respect of the claim of any party claiming against the insured;

(d) have production and discovery from any party adverse in interest; and

(e) examine and cross-examine witnesses at the trial, to the same extent as if it were a defendant in the action. R.S.O. 1990, c. 1.8, s. 258 (15).

ISSUES

[13] The moving party Belairdirect asserts that an insurer, who denies coverage to their insured, the named party in the action, is given rights pursuant to subsection 15 to contest the liability of the insured, contest the amount of any claim, delivery pleadings and respect the claim, have production, discovery, and examine cross-examine witnesses at trial the same as if it were defendant in the action.

[14] Belairdirect submits that if the default judgment with respect the liability of Lee Lapointe operates to limit these rights to contest liability and damages then there is a miscarriage of justice citing Butt v. Hutchings [2001] NJ. No. 261 Newfoundland Supreme Court – Trial Division Dymond J.

33 As a result, the Third Party is given the right to contest the liability, whether or not the insured enters an appearance or defence in the action. In this case, the fact that there is an Interlocutory Judgment entered against the First and Second Defendants, who neither appeared or defended, does not remove the statutory right of the Third Party to defend on liability and quantum. At the time the Default Order was filed against the First and Second Defendants by the Plaintiff, the Plaintiff had to be aware that the Third Party had filed a defence to the action, which defence was filed on November 15,2000.

38 To allow the Plaintiffs to enter judgment against the First and Second Defendants so as to prevent the Third Party from defending the action that they have the right to do so by statute, will be a miscarriage of justice. The effect would be to nullify the Order of Mr. Justice Easton, which ordered the Third Party to be joined, allowing the Third Party to file a defence, which has been done.

[15] I inquired of counsel the sequence of events in the Butt case on which he relies. He acknowledged, and it appears, that the statutory third-party was already in place when on consent the plaintiff move for default judgment against the defendants who did not appear.

[16] Belairdirect also submits that the Plaintiff’s motion for Summary Judgment was premature on the basis of Anderson v. Busse and Federation Ins. Co. of Canada [1964] J2 0.R.454 which ruled:

An order will go, setting aside the default judgment, granting leave to the plaintiff to note pleadings closed against the defendant and setting the action down for trial. Both counsel were agreed that this was a novel point, and requested that there be no costs of the motion. The order should contain such a provision.

[17] The master noted:

Section 223 makes an insurer liable to pay a successful plaintiff at least statutory limits under the policy, regardless of what rights may exist between the insured and insurer. Subsection 9 gives to an insurer who is denying liability under the policy the right to dispute the plaintiffs claim. Without the benefits of subsection 9 and insurer would be in the embarrassing position of having to sit on the sidelines in an action brought against the insured, when, in fact, it was denying liability under the policy the right to dispute the plaintiffs claim. Without the benefits of subsection 9, and insurer would be in the embarrassing position of having to sit on the sidelines in an action brought against the insured, when, in fact, it was denying live the liability to indemnify the insured.

In the present situation, the purpose of the subsection has been defeated by the act of the plaintiff in signing judgment. On the motion before me the plaintiff frankly recognized this inconsistency, but pointed out that no other procedure was available to him. His position is that Rules 38(2) and 354 only permit a plaintiff to sign interlocutory judgment against a defaulting defendant when there is a claim for pecuniary damages and he refers to the judgment of the former Senior Master, Marriott, in Kirkwood v. Scott, [1955] O.W.N. 938, which judgment was confirmed by the Honourable Mr. Justice Smily.

[18] Having asserted that the Insurance Act that gives these rights and that the policy of the Act would be defeated by preventing the statutory third part party from contesting liability because of a prior summary judgment against the defaulting insured, Belairdirect suggests that it is not necessary to meet the tests for setting aside a judgment under rule 37 nor the test for setting aside a noting in default under rule 19. Rather, it is asserted that default is effectively set aside by the act of allowing statutory third parties to enter the action. Johnson v. Whitmee, [2006] N.R T Nn. .551; 2006 NBOB 440 (NB Ct. of Queen’s Bench) at para. 16; Schedule B, Tab 3 [2006]N.B.J. No. 551 G.S. Rideout J.

16 While it may be argued that in certain circumstances the following would not be applicable. I believe the statutory interpretation given to subsections 250(14) and (15) in Flanagan, Savidant and Gionet resolve all matters presently before this Court. It follows that if I am satisfied, which I am, that Coachman Insurance Company has denied liability, (see paragraph 37 of the Affidavit of P.A. Demong) I must permit them to become a Third Party. Once that occurs, the authorities have concluded that subsection 250(15) has the effect of setting aside any noting in default and permits the Third Party insurer to contest liability, the quantum of damages, deliver pleadings and the insurer has all the rights and obligations found in the Rules of Court.

17 Therefore, the Noting in Default is to be set aside, without the necessity of proceeding under Rules 21.02(b) and 21.03 which have been superseded by the provisions in subsections 250(14) and (15). As found by Creaghan J. in Savidant, supra, the setting aside of the Noting in Default is applicable to the Defendant and the “defence is to be seen as a defence of the insured defendants”.

[19] Although this was a case of setting aside a noting of default counsel submits the principle is the same as both tests, Rule 19.08 to set aside noting in default and Rule 37.14 to set aside a judgment; as they are both to be granted on such terms as are just.

19.08 (1) A judgment against a defendant who has been noted in default that is signed by the registrar or granted by the court on motion under rule 19.04 may be set aside or varied by the court on such terms as are just. R.R.O. 1990, Reg. 194, r. 19.08 (1).

(2) A judgment against a defendant who has been noted in default that is obtained on a motion for judgment on the statement of claim under rule 19.05 or that is obtained after trial may be set aside or varied by a judge on such terms as are just. R.R.O. 1990, Reg. 194, r. 19.08 (2).

(3) On setting aside a judgment under subrule (1) or (2) the court or judge may also set aside the noting of default under rule 19.03. R.R.O. 1990, Reg. 194, r. 19.08 (3).

MOTION TO SET ASIDE OR VARY

37.14 (1) A party or other person who,

(a) is affected by an order obtained on motion without notice;

(b) fails to appear on a motion through accident, mistake or insufficient notice; or

(c) is affected by an order of a registrar,

may move to set aside or vary the order, by a notice of motion that is served forthwith after the order comes to the person’s attention and names the first available hearing date that is at least three days after service of the notice of motion. R.R.O. 1990, Reg. 194, r. 37.14 (1); O. Reg. 132/04, s. 9.

[20] Case law in both rule contexts[^1] is well established that in addition to the requirements of the rule there is an element relating to a good defence on the merits. In the present case it is not necessary for me to consider the extent or quality of such a potential defence as the Moving Party has provided none at all. Reliance is place entirely on the Insurance Act policy trumping the rule and it being a miscarriage of justice not to permit the statutory third party to defend both liability and damages such that it is not necessary to follow the tests set out in the rules because of rights given to statutory third party in S 258(15).

[21] I have no difficulty with the persuasive value of the out of province cases nor do I find distinction based on their statues.

[22] I do have difficulty with the history of this case. I consider the seminal moment was the refusal of Healy J. to set aside the noting in default of Carpino.

[23] To cut to the chase, the developments thereafter have been a collateral attack on that order and effort by Belairdirect to do indirectly what it did not accomplish directly.

[24] I do not go behind the order of Healy J. What was done by Mullins J. in granting Summary Judgment on the issue of liability follows logically.

[25] Belairdirect is not an “insurer would be in the embarrassing position of having to sit on the sidelines in an action brought against the insured, when, in fact, it was denying liability under the policy the right to dispute the plaintiffs claim”.[^2] There is no miscarriage of justice[^3] in preventing a party in its capacity of statutory third party, which it did not seek prior to the refusal of the court to set aside the noting in default of Carpino. Nor is there a party, albeit added later, who did not attend the motion for Summary Judgment because it had no notice nor by mistake. Rather, the potential statutory third party chose not to attend to make Mullins J. aware of its position that the motion was premature, that once they were made statutory third party they would wish to defend the issue of liability, and oh, by the way, here is the grounds upon which the assertion of a defence on the basis of liability has some modicum of merit or even the method by which the statutory third party intended to establish that merit.

[26] There is no suggestion that the Plaintiff has impeded the named Defendants or their insurer from putting forward a defence.

[27] So, the motion of Belairdirect to set aside the judgment of Mullins J. is dismissed. The alternative of leaving the judgment in place as against the named Defendants but permitting the statutory third party to defend liability is dismissed for similar reason.

[28] The judgment will be released February 4, 2013. The Plaintiff may submit two pages of written argument on costs by February 11, 2013 the statutory third party submit two pages of written argument on costs by February 18, 2013 and the Plaintiff rely by February 21, 2013. Parties may attach any offers and a bill of costs. These are all to be delivered to the S.C.J. judicial secretaries in Barrie, to my attention. If I am unable to rule without oral submissions I will convene a conference call through the Trial coordinators.

EBERHARD J.

Date: February 4, 2013

[^1]: Ip v Scottish & York Insurance Co. (2008), 2008 58613 (ON SC), 93 OR (3d) 780; Hill v Forbes, (2007) ONCA 443; Leblanc v York Catholic School Board, (2002),61 0R (3d) 686; Ivandaeva Total Image Salon Inc. v Hlembizky (COB Dermocare) 2003 43168 (ON CA), [2003] O.J. No. 949

[^2]: Anderson v. Busse and Federation Ins. Co. of Canada supra

[^3]: Butt v. Hutchings Supra