SUPERIOR COURT OF JUSTICE - ONTARIO
2014 ONSC 1043
COURT FILE NO.: CV-13-472663
DATE: February 18, 2014
RE: Strong Foundation Inc. v.City of Toronto and ABCO One Corporation
BEFORE: Master C. Albert
COUNSEL:
A. Assuras, for the defendant ABCO, moving party, Fax: 416-601-1462
P. Sutherland, for the plaintiff, responding party, Fax: 905-856-1213
ENDORSEMENT
Strong Foundation Inc. (“Strong”) registered a claim for lien for $78,960.00 on December 14, 2012 and issued an action against ABCO One Corporation (“ABCO”) and City of Toronto on January 24, 2013. The action was discontinued against City of Toronto. Strong noted ABCO in default on April 24, 2013.
Now ABCO moves to set aside the noting in default on grounds that Strong failed to serve the statement of claim in accordance with the rules of civil procedure and that the statement of claim did not come to ABCO’s attention until after the time for delivering a statement of defence had expired.
The motion is refused for the reasons that follow.
The test for setting aside noting in default
The Construction Lien Act (the “Act”) provides at section 54 that a defendant noted in default may not contest the claim or file a defence without leave of the court given only upon satisfying the court that there is evidence to support a defence. The Act further provides at section 67 that where the Rules of Civil Practice and the Act conflict, the Act prevails.
Under the rules the relevant considerations on a motion to set aside the noting of a defendant in default are:
a) Whether the defendant has a good reason for failing to deliver a defence in time; and
b) Whether the defendant had a continuous intention to defend and acted promptly to set aside the default upon learning of it.
- Under the Act the defaulting defendant must meet the additional test of leading evidence to show that the defaulting defendant has a meritorious defence.
Applying the tests
a) Does ABCO have a good reason for failing to file a defence?
Default will not be set aside if a defendant is aware that a lawsuit has been issued against it, has an opportunity to defend it and fails to explain why it did nothing in the face of that knowledge. A conscious decision by a defendant not to participate in an action is a complete bar to setting aside a default judgment: Edwards Builders Hardware (Toronto) Ltd. v Aventura Properties Inc.[^1]
According to ABCO’s notice of motion its reasons for failing to file a defence are that Strong failed to serve the statement of claim in strict compliance with the rules of civil procedure and the statement of claim did not come to ABCO’s attention. ABCO’s evidence is given by its general manager Bogden Tkach (affidavit sworn November 10, 2013) and its counsel’s law clerk Yulian Fu (affidavits sworn November 20 and 26, 2013).
Mr. Tkach deposes that the statement of claim was not served in accordance with the rules. He provides no evidence of ABCO’s second ground for the motion, namely that the statement of claim did not come to ABCO’s attention. Mr. Tkach deposes that ABCO’s registered business address and his personal home address are both 448 Centre Street East, Richmond Hill. The business address is corroborated by a corporate profile report dated July 30, 2013.
Kevin O'Neill, president of Strong and deponent for the plaintiff, in his affidavit sworn November 27, 2013, deposes and attaches as an exhibit the claim for lien for $1,581,508.28 registered by ABCO on November 7, 2012 as instrument AT3171048 in the registry office for Toronto. In that registered instrument ABCO provides as its address for service "8171 Yonge Street, Suite 239, Thornhill, Ontario L3T 2C6". By doing so ABCO represents to the public that 8171 Yonge Street, Suite 239, Thornhill, Ontario L3T 2C6 is a business address for ABCO.
Mr. O’Neill also deposes that ABCO uses the Yonge Street address as a place of business and attaches as exhibits to his affidavit:
a) a copy of a registered letter Strong sent to ABCO on December 17, 2013 at the Yonge Street address giving ABCO notice of Strong's construction lien claim for $78,960.90 and Strong's intention to issue an action if the amount claimed was not paid by December 30, 2012[^2];
b) A copy of a letter on ABCO letterhead showing ABCO’s business address as 8171 Yonge Street, suite 239, Thonhill, Ontario L3T 2C6[^3]; and
c) An email dated October 25, 2012 from ABCO to Strong and identifying the company and business address below the writer’s name as follows:
Ismael Conge
Abco One Corporation
8171 Yonge Street, Suite 239
Thornhill, ON L3T 2C6
- Both Kevin O'Neill, deponent for Strong, and Ms Yu, deponent for ABCO, attach as exhibits to their affidavits the affidavit of service of the Strong statement of claim sworn by John Desimone, process server, which provides that on March 6, 2013 at approximately 2:00 p.m. he served the statement of claim by leaving a copy with:
"Donna, an Agent for the said corporation and an adult person who was in control or management of the said corporation, at the place of business, at the time of service, at 8171 Yonge Street, Suite 239, Thornhill, Ontario. On this occasion, Donna confirmed to me that the said Defendant Corporation conducts business out of the this unit and she could accept the document. I was able to identify the person served by means of her verbal admission to me."
Mr. Desimone was not cross-examined.
Ms Fu deposes in her November 20, 2013 affidavit that she is advised by Mr. Tkach that there has never been a "Donna" employed by ABCO or as a director, officer or person in control of ABCO. There is no explanation as to why this evidence is submitted through information and belief rather than directly by affidavit of Mr. Tkach. I draw the inference that Mr. Tkach was shielding behind his counsel in submitting this evidence.
Ms Fu further deposes that the 8171 Yonge Street, Suite 239 address is a UPS store address and is not the address that ABCO registered with the Ministry of Government Services. The web page attached to Ms Fu's affidavit corroborates that it is a UPS store owned and operated by Donna Tang.
Rule 16.02(1) provides that a corporation may be served personally by “leaving a copy of the document with an officer, director or agent of the corporation, or with a person at any place of business of the corporation who appears to be in control or management of the place of business.”
I am satisfied on the evidence filed on this motion that for the purposes of receiving mail and other deliveries ABCO uses as a business address 8171 Yonge Street, Suite 239, Thornhill, Ontario L3T 2C6.
I find that Strong's statement of claim was served on ABCO on March 6, 2013 by leaving a copy of the document with Donna, an adult person at the place of business that ABCO registered with a government filing as its address for service.
Having been served with the statement of claim, I find that ABCO was aware that this lawsuit had been issued against it, had an opportunity to defend it and failed to explain why it did nothing in the face of that knowledge. ABCO made a conscious decision not to defend. The Edwards Builders case applies.
In the absence of an agreement or order to extend time ABCO was required to deliver its statement of defence by March 26, 2013 (rule 18.01). ABCO failed to do so and failed to take any steps to respond to the claim for several months thereafter.
Mr. Tkach did not depose that he never received the statement of claim. Nor did he depose as to when it first came to his attention. The absence of such evidence by ABCO is a glaring omission. The only evidence of the reason for ABCO’s failure to defend is Mr. Tkach’s affidavit evidence that the statement of claim was not served “according to the rules”, and the affidavit of Yulian Fu who relies on what Mr. Tkach told her in deposing that “Donna” was not an ABCO employee.
I find that ABCO fails the first test in that it has not adequately explained its failure to deliver a statement of defence prior to May 1, 2013 when it was noted in default.
I find that ABCO has not provided a good reason to explain why it failed to defend the claim in time.
b) Did ABCO have a continuous intention to defend and act promptly?
ABCO provided no evidence as to when the statement of claim first came to its attention. Mr. Tkach, who is in the best position to provide such evidence, failed to provide any evidence of when the time begins to run. ABCO’s only evidence of whether it had a continuous intention to defend is that ABCO’s former lawyer removed himself from the record on May 6, 2013 (coincidentally two weeks after ABCO was noted in default), that ABCO spoke to “various counsel”, including Ms Assuras on July 22, 2013, that ABCO retained Ms Assuras on September 19, 2013 and that after retaining Ms Assuras a burst water pipe kept her from practice until October 22, 2013. The relevant period for consideration ends December 2, 2013, the date originally scheduled for the motion hearing and adjourned at the court’s request[^4].
I am not satisfied that this delay in retaining counsel in an action in which ABCO had already been noted in default meets the test of a continuous intention to defend. Nevertheless, were the period of delay from April 24, 2013 to December 2, 2013 the only difficulty on ABCO’s part in meeting the applicable tests for setting aside a noting in default against it, I would have allowed the motion. But that is not the case.
c) Has ABCO provided evidence of a meritorious defence to the claim?
- ABCO filed no evidence to persuade me that it has a meritorious defence to Strong's claim against it. The proposed statement of defence filed with the motion materials is nothing more than a bald denial, as follows:
The said Defendant denies it is indebted to the Plaintiff for the amount claimed.
The said Defendant alleges that the Plaintiff failed to preserve tis (sic) lien within the time allowed for doing so under Section 31 of the Construction Lien Act, R.S.O.1990, c. C30, and accordingly, the Plaintiff is not entitled to a lien in respect of the premises.
The said Defendant further alleges that the Plaintiff failed to perfect its lien within the time allowed for doing so under Section 36 of the Construction Lien Act, R.S.O.1990, c. C30, and accordingly, the Plaintiff’s lien has expired.
ABCO filed no evidence of probative value to support the allegations pleaded in paragraphs 4, 5 and 6 of its statement of defence, contrary to the requirements of section 54 of the Act. The Divisional Court in Deman Construction Corporation v 1429036 Ontario Inc. et al[^5] found that a motions judge, in making findings of fact based on evidence filed on such a motion must assess whether there is a meritorious defence.
Master Sandler considered the test for setting aside a default judgment in a construction lien case in St. Clair Roofing & Tinsmithing Inc. v Davidson[^6]. The case is relevant because Master Sandler opines that under the Act the test for setting aside a default judgment is the same as the test for setting aside the noting of a defendant in default and the moving party must provide evidence of a meritorious defence.
ABCO’s first denial is that it is not indebted to the plaintiff in the amount claimed. Strong filed evidence of the amount claimed in the form of purchase orders, invoices and time sheets. ABCO filed no evidence to the contrary. Nor did it file any evidence to support its denial of the debt.
ABCO’s second and third denials in its proposed pleading are that the lien was registered and perfected out of time. ABCO filed no evidence to support these “boilerplate” allegations. On the face of the registered construction lien document it was filed in time and the action was issued in time. The action was set down for trial within the two year limitation period. ABCO filed no evidence to the contrary to support its allegation that the lien has expired.
ABCO’s proposed pleading does not include allegations of set-off for deficiencies or incomplete work. Even if the proposed pleading included allegations of deficiencies or incomplete work, I would find that there is no evidence filed to support them. Ms Fu deposes[^7] that:
"if the defendant Pomerleau asserts that there were either deficiencies or incomplete work by the Plaintiff, ABCO will seek to amend the Statement of defence to allege those particulars and to seek a set-off (sic) any amounts found payable by ABCO to Pomerleau against any monies found owing to the Plaintiff by ABCO."
This evidence is insufficient for two reasons. The first reason is a technical one: it is evidence on information and belief of the counsel appearing on the motion. As such it is the evidence of the counsel appearing on the motion and on that basis it is not properly before the court. The second reason is that Pomerleau is not a party to this action[^8] and there is no evidence on this motion that Pomerleau has asserted any deficiencies or incomplete work by Strong. The affiant does not depose that any such allegations were made.
In any event, ABCO filed no evidence to support a finding that the materials and services supplied by Strong were deficient or incomplete. I find that there is insufficient evidence filed on this motion to conclude that there is any merit to a defence, if pleaded, that the supply of materials and services by Strong was deficient or incomplete.
Claims under the Act are intended to be summary in nature. A party seeking equitable relief from the court must put their best foot forward and present their best evidence. A defendant in default who fails to provide evidence of a meritorious defence should not be permitted to drag construction lien proceedings out unnecessarily.
ABCO has failed to provide evidence of a meritorious defence to Strong's claim against it.
Conclusion
For all of the reasons given I find that ABCO has not met the test for setting aside a noting in default under the Construction Lien Act. The motion is dismissed.
Costs: The parties filed their costs outlines at the conclusion of the motion hearing. Counsel may make brief oral submissions as to costs of this motion at the next or a subsequent hearing for directions on the reference.
Master C. Albert .
DATE: February 18, 2014
Footnotes
[^1]: 2007 37678 (ONSC)
[^2]: Responding motion record exhibit “C”
[^3]: Responding motion record, exhibit “H” page 40
[^4]: To attend a funeral
[^5]: 2004 34928 (ON SCDC)
[^6]: 1992 7660 (ONSC)
[^7]: second supplementary affidavit of Yulian Fu sworn November 26, 2013
[^8]: Although Pomerleau is a party under section 60 of the Act by reason of related lien proceedings