SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: C-800-07
DATE: 2014/09/12

RE: LAVRIJSEN CAMPGROUNDS LTD., Plaintiff

AND:

EILEEN REVILLE, STEVEN REVILLE and DOUGLAS REVILLE, Defendants

BEFORE: The Honourable Justice D.A. Broad

COUNSEL: Anthony T. Keller, for the Plaintiff

Jay Herbert, for the Defendants

HEARD: July 31, 2014

ENDORSEMENT

Nature of the Proceedings and Motion

[1] This action arises out of the purchase by the plaintiff of all of the issued and outstanding shares in the capital of 1112665 Ontario Inc., carrying on business as the operator of a campground facility known as "Hillbilly Estates” (the “Corporation”), from the defendants pursuant to a Share Purchase Agreement entered into with the defendants by Matthew Lavrijsen and Corine Lavrijsen, the principals of the plaintiff, dated April 8, 2004.

[2] The plaintiff claims that the defendants represented to it that the Corporation had received rental deposits from tenants in the sum of $45,375 for the 2004 camping year and this amount was credited to them on the amended Statement of Adjustments on closing. The plaintiff alleges that the actual amount of deposits which the Corporation had received from tenants for the 2004 camping year totalled $119,231 and this amount ought to have been credited to it. The plaintiff claims from the defendants the difference between the amount of the rental deposits represented to it by the defendants and the actual rental deposits received by the Corporation prior to closing, being the sum of $73,856.

[3] The action was defended by the defendants, represented by counsel and on October 24, 2012 was placed on the trial settings commencing February 4, 2013. At the speak-to court on January 28, 2013 the trial was adjourned to the trial settings commencing June 10, 2013 at the request of the defendants due to illness of a witness.

[4] On May 30, 2013, at the request of the defendants, the trial was adjourned to the trial settings commencing September 16, 2013. On July 11, 2013 the defendants filed a notice of intention to act in person. At the speak-to court on September 9, 2013 the defendants failed to appear and Justice Taylor directed the trial to proceed when called by the trial coordinator.

[5] On December 9, 2013 the action was called for trial and the defendants were not in attendance. As the trial judge assigned to the case, after noting that the endorsement of Justice Taylor at the speak-to court on September 9, 2013 did not address the effect of the failure of the defendants to attend nor the question of notice to the defendants of the trial date, I declined to proceed with the trial in the absence of the defendants and I endorsed the record directing the plaintiff to take steps to bring the matter back on, on notice to the defendants, in whatever fashion the plaintiff determines to be most expedient.

[6] The plaintiff served the defendants with a Motion Record dated April 3, 2014 in respect of a motion to strike out the Statements of Defence of the defendants Eileen Reville and Steven Reville for failing to attend their examination for discovery on June 20, 2012 and for summary judgment against all three defendants. There is a dispute in the material as to when the defendants were served with the Motion Record. The plaintiff states that they were deemed to have been served on April 8, and the defendants state that they did not receive the document until April 14, 2014. On April 16, 2014 the summary judgment motion proceeded before Justice Tucker, in the absence of the defendants, who granted judgment in favor of the plaintiff against the defendants, jointly and severally, in the sum of $73,856 together with prejudgment interest in the sum of $21,961.26 and costs fixed in the sum of $45,730.92.

[7] The plaintiff issued a Writ of Seizure and Sale and filed it with the Sheriff of the District Municipality of Muskoka. On June 6, 2014 the defendants were each served with a Notice of Examination in Aid of Execution for an examination scheduled for June 25, 2014. On June 23, 2014 Mr. Herbert wrote to Mr. Keller requesting that the judgment be set aside, offering an explanation for the failure of the defendants to respond to the motion for summary judgment and requesting that the examinations be adjourned. Mr. Keller responded by advising that the examinations in aid of execution would proceed. The defendants did not attend on the examinations and Mr. Keller obtained Certificates of Non-Attendance in respect of the defendants.

[8] The defendants have now brought a motion to set aside the summary judgment.

Guiding Principles

[9] Rules 37.14(1) and (2) of the Rules of Civil Procedure provide as follows:

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.

(2) On a motion under subrule (1), the court may set aside or vary the order on such terms as are just.

[10] In the case of Lui v. Daniel Executive (Canada) Holdings Corp 2009 CarswellOnt 5942 (Master), appeal dismissed 2010 ONSC 537 S.C.J., leave to appeal refused 2011 ONSC 379 (Ont. Div. Ct.), Master Glustein, at paras. 9 and 10 observed as follows:

Rule 37.14(1) confers a much wider discretion on the court to set aside the order than would be permitted by way of appeal (Rolling Stone, at para. 11). The matter is discretionary, and requires balancing the interests of the parties involved (John Wheelwright Ltd. (Trustee of) v. Central Transport Inc., 1996 CarswellOnt 3274 (Ont. Div. Ct.) at para. 4). The exercise of discretion depends on the evidence in each particular case (Gerling Global General Insurance Co. v. Siskind, Cromarty, Ivey & Dowler, 2002 CarswellOnt 1730 (Ont. S.C.J.) at para. 4).

The court's discretion is to be exercised taking into account the policy of the Rules which is to facilitate the expeditious resolution of every civil dispute on its merits.

[11] Justice H.J. Wilton-Siegel, in the case of Sabourin & Sun Group of Cos. v. Laiken, [2008] O.J. No. 931 (S.C.J.), citing the case of Gerling Global General Insurance Co. v. Siskind, Cromarty, Ivey & Dowler, 2002 49480 (ON SC), [2002] O.J. No. 2107 (S.C.J.) at para. 12, held that a motion to set aside a summary judgment under rule 37.14(1) is akin to a motion to set aside a default judgment under rule 19.08 and that the court can consider the merits of the applicant's defence.

[12] Nordheimer, J. acknowledged in Gerling at para. 12 that that it is open to the court to consider, in determining whether the summary judgment should be set aside under rule 37.14(1), whether there is any genuine issue for trial regarding the claim or defence of the moving party. However it is clear from a reading of the Gerling decision that the court is not bound to consider the merits of the moving party’s case (see para. 8). The court may consider the evidence in the particular case to determine whether it would be just in all of the circumstances to set aside the summary judgment obtained in one of the circumstances set forth in the rule.

Analysis

[13] In his affidavit in support of the motion Steven Reville deposed that, after filing the defendants' Notice of Intention to Act in Person dated July 11, 2013, he did not receive any further correspondence nor materials from the plaintiff until being served with the motion for summary judgment in April, 2014. He deposed that by that time the defendants had not been in contact with the plaintiff's counsel for approximately one year. Implicit in this is that the defendants, who were self-represented, were unaware of the speak-to court of September 9, 2013 and received no notice that the action had been called for trial for December 9, 2013.

[14] Mr. Reville deposed that upon retrieving the motion record that had been served on his mother Eileen Reville, who is 83 years old, on April 14, 2014 he delivered the materials to his family accountant asking for assistance. The accountant did not review the document until after April 16, 2014 at which time he contacted Mr. Reville to advise that the motion date had passed. As he did not have counsel, Mr. Reville deposed that he did not know what actions were required once the court date was missed. Upon receiving the notice of examination for the examination in aid of execution Mr. Reville immediately began contacting counsel and through that process learned of the judgment against himself, his brother and his mother. He retained counsel on June 19, 2014 and on June 23, 2014 his counsel wrote the letter to counsel for the plaintiff referred to above. The defendants' motion to set aside the summary judgment was served on July 11, 2014.

[15] It is clear from the foregoing that the defendants failed to appear on the motion for summary judgment through accident or mistake. The defendants did not ignore the motion record but rather mistakenly brought it to an accountant, rather than to a lawyer, who failed to review the document prior to the return date of the motion. Accordingly, there are sufficient prima facie grounds pursuant to Rule 37.14(1) to set aside the summary judgment. It is also clear that the defendants moved promptly to seek to have the summary judgment set aside once it came to their attention.

[16] The next question is whether the defendants should be required to demonstrate that they have a meritorious defense on the merits in order to succeed in having the summary judgment set aside pursuant to Rule 37.14(1). As indicated above, the authorities establish that the court can consider the merits of the moving party's defence but is not bound to do so if the circumstances, as disclosed by the evidence, do not warrant it in the interests of justice.

[17] It is noted that Steven Reville, in his affidavit deposed that “it is my intention to continue to defend this matter on the basis that the plaintiff has not proved its case with respect to the financial records that were allegedly discovered and, and further, the plaintiff has experienced no loss or damages in any case has an unexpectedly larger annual revenue would mean that the plaintiff purchased shares that are more valuable than anticipated, in addition to taking a $20,000 discount on the purchase."

[18] Importantly, Mr. Reville went on to depose that "summary judgment was contemplated and discussed by counsel in 2012, and the matter was instead set down for trial in June, 2013. However, the trial was adjourned to due to Douglas’ [i.e. the defendant Douglas Reville] medical condition at that time. I expected to receive notice of another trial date."

[19] No reply affidavit was served responding to Mr. Reville’s affidavit and he was not cross-examined. Accordingly, his evidence in his affidavit is undisputed by the plaintiff.

[20] It is evident from all of the circumstances that the genesis of the granting of summary judgment against the defendants on a default basis was the fact that, for whatever reason, they were not aware of the speak-to court on September 9, 2013, were not informed of endorsement of Justice Taylor made on that occasion and were not informed when the action was called to trial on December 9, 2013. The undisputed evidence is that there was no communication between the plaintiff's counsel and the defendants in the one year period prior to the motion for summary judgment. Summary judgment having been previously discussed between counsel and not pursued by the plaintiff, the defendants were awaiting notification of a new trial date after the adjournment of the trial in June, 2013. There is no evidence that the defendants were deliberately ignoring the legal process or acting in flagrant disregard of their responsibilities in reference to the proceeding. In this connection, with regard to the failure of the defendants Douglas Reville and Eilleen Reville to attend to be examined for discovery, Steven Reville deposed that a reasonable explanation was offered for their non-attendance and was accepted by the plaintiff's counsel, who reserved the right to question them but failed to exercise that right. That evidence was not disputed by the plaintiff, and indeed the plaintiff set the action down for trial without moving for an order requiring Douglas Reville and Eilleen Reville to re-attend to be examined for discovery, or evidently taking any other steps to arrange for their examination.

[21] In the circumstances, I would, as Justice Nordheimer did in Gerling at para. 8, adopt the approach taken by Middleton J. in Russell v. Osler (1921), 20 O.W.N. 178 (Ont. H.C.), at 179-80, aff'd [(1921), 20 O.W.N. 208 (Ont. Div. Ct.)] on a motion to set aside a judgment after a trial where a party failed to attend under what is now rule 52.01(3):

It would not be wise to attempt to place any limitation upon the right of the Court to grant relief under Rule 499 [the predecessor to the present rule 52.01(3)]. The question is one for the exercise of the sound discretion of the Court in each particular case; and where there is any accidental slip or omission or where there has been any miscarriage of justice by reason of misadventure or bungle or mistake upon the part of the litigant, the Court will always be found ready to grant relief upon proper terms.

[22] As indicated in Lui, the exercise of the court’s discretion should take into account the over-arching policy of the Rules which is to facilitate the expeditious resolution of every civil dispute on its merits. Here there has been no adjudication of the plaintiff’s action on its merits. It is not evident from Justice Tucker’s endorsement that she carried out a review and analysis of the evidence presented by the plaintiff in support of its summary judgment motion before granting judgment, but rather granted judgment summarily based upon the defendant’s failure to appear. Her endorsement reads “Mr. Keller for the plaintiff. No one appearing for defendants although served and paged. Order to go. Order signed.” Accordingly, in the exercise of my discretion and in the interests of justice, I find that the summary judgment should be set aside to permit the merits of the plaintiff’s claim to be properly adjudicated.

Terms

[23] The remaining question relates to the terms upon which the summary judgment should be set aside. Rule 37.14(2) provides that a summary judgment may be set aside on “such terms as are just.” It is clear from the authorities that the Court has a wide discretion with respect to terms which may be imposed on the setting aside of a judgment obtained on default, including requiring the defendant to pay into court or otherwise provide security for the full amount of the plaintiff’s claim and/or to post security for the costs of the trial (see for example David Bradshaw Holdings Inc. v. Esmail (2009) 78 C.P.C. 313 (S.C.J.), St. Clair Roofing & Tinsmithing Inc. v Davidson, 1992 7660 (ON SC), [1992] O.J. No. 483 (Master) and McDonald v. United States of America 2014 ONSC 1557 (S.C.J.)) Other cases have limited the terms to requiring the defendant to pay the plaintiff’s costs “thrown away” of obtaining the judgment and/or taking enforcement steps (see D. Crupi & Sons Ltd. v Paveland Paving Ltd., [2009] O.J. No. 4435 (Master)).

[24] Justice Turnbull in David Bradshaw Holdings observed, at para. 44, that terms imposed on the setting aside of a judgment should be crafted to maintain respect for the administration of justice and reflect fairness to both parties. Master Graham in Crupi, at paras. 3 and 19, noted that the authorities establish that the overall issue is the interest of justice having regard to potential prejudice to each party and the overall integrity of the administration of justice.

[25] In the present case, as was the case in Crupi, the only prejudice to the plaintiff is delay in obtaining a judgment which can be compensated by way of pre-judgment interest if it ultimately obtains judgment on the merits.

[26] Two of the cases which have been cited by the plaintiff where the defendant was required to pay into court or post security for the full amount of the claim, David Bradshaw Holdings and St. Clair Roofing, involved claims for payment of liquidated amounts where liability was not in issue, only the amount. In the McDonald case the court held that the defendant failed to move to set aside the default judgment as soon as possible and its explanation for its default was not plausible.

[27] In my view, a term requiring the defendants to pay the full amount of the plaintiff’s claim into court is not required in order to achieve the interests of justice. As indicated, the plaintiff has suffered no prejudice other than delay and the incurring of costs in bringing the motion and in taking enforcement proceedings, and the imposition of such a term is not necessary, given the circumstances giving rise to the summary judgment, to protect the integrity of the administration of justice.

[28] The defendants have indicated that they are prepared to pay reasonable costs thrown away as a term of an order setting aside the judgment. The plaintiff claims costs thrown away totalling $6,661.35 inclusive of fees, disbursements and HST. No serious issue was taken by the defendants to this amount.

Disposition

[29] On the basis of the foregoing, it is ordered as follows:

(a) The summary judgement of April 16, 2014 is hereby set aside;

(b) The Writ of Seizure and Sale issued pursuant to the said judgment and directed to the Sheriff of the District Municipality of Muskoka is hereby set aside and shall be withdrawn from the office of the said Sheriff;

(c) The defendants shall pay to the plaintiff costs thrown away in the sum of $6,661.35 within 30 days of the date hereof;

(d) The action shall be restored to the trial list and shall be spoken to at the Assignment Court on October 31, 2014 at 12:00 noon to set a new date for trial.

[30] On a preliminary basis I am of the view that the plaintiff should be entitled to costs of the motion on a partial indemnity basis, however if counsel are unable to agree on costs, the plaintiff may make written submissions as to costs within 30 days of the release of these reasons for decision. The defendants have 15 days after receipt of the plaintiff’s submissions to respond. All such written submissions are to be forwarded to me at my chambers at 7th floor, 85 Frederick Street, Kitchener, Ontario N2H 0A7. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.

D.A. Broad

Date: September 12, 2014